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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 02549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 17, 1999
PHONETEL TECHNOLOGIES, INC.
---------------------------
(Exact Name of Registrant as Specified in its Charter)
Ohio 0-16715 34-146219
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
North Point Tower, 7th Floor, 1001 Lakeside Avenue, Cleveland, Ohio 44114-1195
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code (216) 241-2555
-----------------------------
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Item 5. Other Events
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On November 17, 1999, the prepackaged plan of reorganization (the "Plan") of
PhoneTel Technologies, Inc. (the "Company") was consummated, thus completing the
Company's financial restructuring. In accordance with the terms of the Plan,
PhoneTel's 12% Senior Notes due in 2006 (the "Senior Notes") have been converted
into approximately 95% of the reorganized Company's common stock, with former
equity holders sharing in the remaining 5%. In addition, the former equity
holders will receive warrants to purchase approximately 1.1 million shares of
the reorganized Company's common stock, at an exercise price of $10.50 per
share, with a term of three years. These equity interests are subject to
dilution by certain other equity issuances, including issuances upon the
exercise of certain options and awards to purchase up to an aggregate of 5% of
the reorganized Company's common stock, to be granted pursuant to the terms of a
new management incentive plan approved as part of the Plan. Claims of employees,
trade and other creditors of the Company, other than holders of the Senior
Notes, will be paid in full by the Company in the ordinary course unless
otherwise agreed, with the Company retaining its rights and defenses with
respect to such claims.
Quotations with respect to the newly issued common stock are expected to be
posted on the OTC Bulletin Board under the ticker symbol PHTE. Quotations with
respect to the warrants will be posted on the National Quotations Service Pink
Sheets under the symbol PHTEW.
In connection with the consummation of the Plan, the Company has also entered
into a new credit agreement (the "Agreement") with Foothill Capital Corporation
("Foothill") which provides for a $46 million revolving credit line. The
proceeds of the facility have been primarily utilized to repay the principal
balance of the prior line of credit with Foothill. The terms of the Agreement
provide for interest on the principal balance at three percent above the base
rate and obligate the Company to pay certain fees which become due and payable
at various intervals throughout the term of the Agreement. Certain fees,
together with interest thereon, may be deferred and added to the then
outstanding principal balance at the option of the Company. Certain fees are
also subject to reductions for early prepayment of the principal balance
outstanding. The Agreement also includes covenants which require the Company to
maintain certain financial ratios and limit the incurrence of additional debt,
capital expenditures and the payment of dividends.
Pursuant to the terms of the Plan, a new Board of Directors has been appointed.
The five member board includes Thomas M. Barnhart, II, John D. Chichester, the
Company's President and Chief Executive Officer, Eugene I. Davis, Peter G. Graf
and Kevin L. P. Schottlaender. Thomas M. Barnhart, II has been elected to serve
as the Company's Chairman of the Board.
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Item 7. Financial Statements and Exhibits
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(c) Exhibits
3.1 Amended and Restated Articles of Incorporation of PhoneTel
Technologies, Inc. dated as of November 17, 1999.
3.2 Amended and Restated Code of Regulations of PhoneTel
Technologies, Inc. dated as of November 17, 1999.
4.1 Warrant Agreement dated as of November 15, 1999 between PhoneTel
Technologies, Inc. and American Securities Transfer and Trust,
Inc. with respect to New Warrants, including the form of Warrant
Certificate.
10.1 Loan and Security Agreement dated as of November 17, 1999, by and
among PhoneTel Technologies, Inc., Cherokee Communications, Inc.,
the financial institutions that are signatories thereto and
Foothill Capital Corporation as agent.
10.2 PhoneTel Technologies, Inc. 1999 Management Incentive Plan.
10.3 Registration Rights Agreement dated November 17, 1999 among
PhoneTel Technologies, Inc. and the parties identified on Exhibit
A thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHONETEL TECHNOLOGIES, INC.
Date: December 7, 1999 By: /s/ Richard P. Kebert
----------------------------
Richard P. Kebert
Chief Financial Officer
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Exhibit 3.1
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AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PHONETEL TECHNOLOGIES, INC.
ARTICLE I.
----------
Name
----
The name of said Corporation shall be PhoneTel Technologies, Inc.
ARTICLE II.
-----------
Principal Place of Business
---------------------------
The place in the State of Ohio where the principal office of the
Corporation is to be located is North Point Tower, 1001 Lakeside Avenue, Seventh
Floor, Cleveland 44114, Cuyahoga County.
ARTICLE III.
------------
Purposes
--------
This Corporation is formed to engage in any lawful act or activity for
which corporations may be formed under Ohio Revised Code Sections 1701.01 to
1701.98, inclusive.
ARTICLE IV.
-----------
Capital Stock
-------------
A. The maximum number of shares which the Corporation is authorized to
have outstanding is Fifteen Million (15,000,000) which shall be common stock,
$.01 par value (hereinafter referred to as "Common Stock");
B. Each share of Common Stock shall be equal to every other share of
Common Stock. The holders of shares of Common Stock shall be entitled to one
vote for each share of such stock upon all matters presented to the
shareholders.
<PAGE> 2
C. Except as otherwise provided herein, the Corporation, by action of
the Board of Directors, shall have the power to create and issue, with or
without any connection to the issue and sale of any shares of stock or other
securities, rights, warrants, or options entitling the holders thereof to
purchase from the Corporation any shares of its capital stock of any class or
classes, upon such terms and conditions and at such times and prices as the
Board of Directors may provide and which shall be incorporated in an instrument
or instruments evidencing such rights. In the absence of fraud, the judgment of
the directors as to the consideration for the issuance of such rights, warrants
or options and the sufficiency thereof shall be conclusive.
D. In accordance with 11 U.S.C. Section 1123 (a)(6), the issuance of
non-voting equity securities by the Corporation is prohibited.
ARTICLE V.
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Minimum Capital
---------------
The minimum amount of capital with which the Corporation shall begin
business is One Thousand Dollars ($1,000.00).
ARTICLE VI.
-----------
Board of Directors
------------------
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and shareholders:
A. The number of directors of the Corporation shall be fixed and may be altered
from time to time in the manner provided in the Code of Regulations, and
vacancies in the Board of Directors and newly created directorships resulting
from any increase in the authorized number of directors may be filled, and
directors may be removed, as provided in the Code of Regulations.
B. The election of directors may be conducted in any manner approved by the
shareholders at the time when the election is held and need not be by written
ballot.
C. All corporate powers and authority of the Corporation (except as at the time
otherwise provided by law, by these Articles of Incorporation or by the Code of
Regulations) shall be vested in and exercised by the Board of Directors.
<PAGE> 3
ARTICLE VII.
------------
Indemnification
---------------
The Corporation shall indemnify each director and officer, each former
director and officer, and each person who is serving or has served at its
request as a director, trustee or officer of another enterprise (and the heirs
and personal representatives of each such director, trustee and officer) and may
indemnify any employee or agent, any former employee or agent, and any person
who is serving or has served at its request as an employee or agent of any other
enterprise (and the heirs and personal representatives of each such employee and
agent) to the fullest extent from time to time permitted by the laws of the
State of Ohio in the event any of such persons shall be made, or be threatened
to be made, a party to any action, suit or proceeding, whether criminal, civil,
administrative or investigative.
ARTICLE VIII.
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Elimination of Preemptive Rights
--------------------------------
No shareholder shall have any preemptive or preferential rights, as
such rights are defined by law, to subscribe for, purchase or acquire shares of
any class, whether now or hereafter authorized.
ARTICLE IX.
-----------
Control Share Acquisition
-------------------------
Section 1701.831 of the Ohio Revised Code captioned "Control share
acquisition; prior shareholder authorization required", shall not apply to
control share acquisitions of the Corporation's shares.
ARTICLE X.
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Special Voting Requirements
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Notwithstanding any provision of the General Corporation Law of Ohio,
now or hereafter in force, requiring for any purpose the vote or consent of the
holders of shares entitling them to exercise in excess of a majority of the
voting power of the Corporation or of any class or classes of shares thereof,
such action, unless otherwise expressly required by statute, may be taken by the
vote or consent of the holders of shares entitling them to exercise a majority
of the voting power of the Corporation or of such class or shares thereof.
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ARTICLE XI.
-----------
Purchase of Corporation's Shares
--------------------------------
The Corporation, by action of its Board of Directors, may purchase
outstanding shares of any class of Capital Stock of the Corporation to the
extent not prohibited by law.
ARTICLE XII.
------------
Amendments
----------
The Corporation reserves the right to amend or repeal any provision
contained in these Amended and Restated Articles of Incorporation in the manner
now or hereafter prescribed by the laws of the State of Ohio, and all rights
herein conferred upon shareholders or directors are granted subject to this
reservation.
ARTICLE XIII.
-------------
Replacement of Prior Articles
-----------------------------
These Amended and Restated Articles of Incorporation shall replace and
supersede any and all preceding articles of incorporation and amendments
thereto.
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EXHIBIT 3.2
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AMENDED AND RESTATED
CODE OF REGULATIONS
FOR
PHONETEL TECHNOLOGIES, INC.
AN OHIO CORPORATION
ARTICLE I
PRINCIPAL OFFICE
The place of the principal office of the Corporation, in the State of Ohio, is
North Point Tower, 7th Floor, 1001 Lakeside Avenue, Cleveland, Ohio, Cuyahoga
County.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the shareholders of the
Corporation shall be held at the principal office of the Corporation in the
State of Ohio or at such other place, within or without the State of Ohio, as
may be determined by the Board of Directors, and as shall be designated in the
notice of said meeting, on such date and at such time as the Board of Directors
shall determine, for the purpose of electing directors, for the consideration of
reports to be laid before the meeting, and for the transaction of such other
business as may properly be brought before the meeting.
If the election of directors is not held at any annual meeting, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as may be
convenient. At such meeting the shareholders may elect the directors and
transact other business with the same force and effect as at an annual meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders shall be held
at the principal office of the Corporation in the State of Ohio or at such other
place, within or without the State of Ohio, as may be designated in the notice
of said meeting.
SECTION 3. CALLING MEETINGS. All meetings of the shareholders shall be called
upon the written request of:
1) the Chairman of the Board, if any, or the President, or in case of the
absence, death or disability of both, the Vice President authorized to
exercise the authority of the President;
2) the directors, by action at a meeting or by a majority of the directors
acting without a meeting; or
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3) shareholders holding at least forty percent (40%) of all shares
entitled to vote at the meeting.
Calls for such meetings shall specify the time, place and purpose thereof. No
business other than that specified in the call shall be considered at any
special meeting.
SECTION 4. NOTICE AND PURPOSE OF MEETINGS. Written notice of the purpose or
purposes and of the day and hour and the place within or without the State of
Ohio of every meeting of shareholders shall be given, by or at the direction of
the President or the Secretary, either personally or by mail, not less than ten
days or more than sixty days before the date of the meeting to each shareholder
of record entitled to notice of such meeting. Such notice shall be directed to
each shareholder at his address as it appears on the records of the Corporation
unless he shall have filed with the secretary of the Corporation a written
request that notices intended for him be sent to some other address, in which
case it shall be mailed or delivered to the address designated in such request.
Notice shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or personally delivered. Such further notice
shall be given as may be required by law. Except as otherwise expressly provided
by statute, no publication of any notice of a meeting of shareholders shall be
required. Notice of any meeting of shareholders may be waived in writing, either
before or after the holding of the meeting, by any shareholder, which writing
shall be filed with the records of the meeting. The attendance of a shareholder
at a meeting without protesting, prior to or at the commencement of the meeting,
the lack of proper notice shall be deemed a waiver by him of notice of the
meeting. Except where otherwise required by law, notice of adjournment of a
meeting of the shareholders of the Corporation need not be given if the time and
place to which it is adjourned are fixed and announced at such meeting.
SECTION 5. QUORUM. Except as otherwise required by the statutes of Ohio,
shareholders in person or by proxy holding a majority of shares entitled to vote
at a meeting of shareholders shall constitute a quorum at any and all meetings
of shareholders, but shareholders holding less than a majority of such shares
present in person or by proxy may adjourn any meeting from time to time.
SECTION 6. ORGANIZATION. Meetings of the shareholders shall be presided over by
the Chairman of the Board, if any, or if he is not present or there is no one
filling that office, by the President, or if the President is not present, by a
Vice President, or if none of the foregoing is present, by a chairman to be
chosen by a majority of the shareholders entitled to vote who are present in
person or by proxy at the meeting. The Secretary of the Corporation, or in the
Secretary's absence, an assistant secretary, shall act as secretary of every
meeting, but if neither the Secretary or assistant secretary is present, the
meeting shall choose any person present to act as secretary of the meeting.
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SECTION 7. VOTING. Except as otherwise provided in the Articles of
Incorporation, this Code of Regulations, or in the laws of the State of Ohio, at
every meeting of the shareholders, each shareholder entitled to vote at such
meeting shall have one vote in person or by proxy for each share of stock held
by him and registered in his name on the books of the Corporation as of the
applicable record date. Any vote may be given by the shareholder in person or by
proxy appointed by an instrument in writing executed by such shareholder or his
duly authorized attorney. A telegram, cablegram, or telex communication
appearing to have been transmitted by such person, or a photographic,
photostatic, or equivalent reproduction of a writing appointing a proxy, is a
sufficient writing. No appointment of a proxy shall be valid after the
expiration of eleven (11) months after it is made unless the writing specifies
the date on which it is to expire or the length of time it is to continue in
force. Except as otherwise required by statute, the Articles of Incorporation,
this Code of Regulations, or in electing directors, all matters coming before
any meeting of the shareholders shall be decided by the vote of a majority in
interest of the shareholders of the Corporation present in person or represented
by proxy at such meeting and entitled to vote thereat, a quorum being present.
At all elections of directors, the candidates receiving the greatest number of
votes shall be elected.
SECTION 8. RECORD DATE OF SHAREHOLDERS. For any lawful purpose, including,
without limitation, the determination of the shareholders who are entitled to:
1) receive notice of or vote at a meeting of shareholders;
2) receive payment of any dividend or distribution;
3) receive or exercise rights of purchase of or subscription for, or
exchange or conversion of, shares or other securities, subject to
contract rights with respect thereto; or
4) participate in the execution of written consents, waivers, or releases;
the board of directors may fix a record date which shall not be a date earlier
than the date on which the record date is fixed and, in the cases provided for
in clauses (1), (2) and (3) above, shall not be more than sixty (60) days
preceding the date of the meeting of the shareholders, or the date fixed for the
payment of any dividend or distribution, or the date fixed for the receipt or
the exercise of rights, as the case may be. The directors may close the share
transfer books against transfers of shares during the whole or any part of the
period provided for in this Section 8, including the date of the meeting of
shareholders and the period ending with the date, if any, to which it is
adjourned.
SECTION 9. REGISTERED SHAREHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Ohio.
<PAGE> 4
SECTION 10. LIST OF SHAREHOLDERS. Upon request of any shareholder at any meeting
of shareholders, there shall be produced at such meeting an alphabetically
arranged list, or classified lists, or the shareholders of record as of the
applicable record date who are entitled to vote, showing their respective
addresses and the number and class of shares held by each. Such list or lists,
when certified by the officer or agent in charge of the transfer of shares,
shall be prima facie evidence of the facts shown therein.
SECTION 11. INSPECTORS OF ELECTION. The directors, in advance of any meeting of
shareholders, may appoint inspectors of election to act at such meeting or any
adjournment thereof. If inspectors are not so appointed, the officer or person
acting as chairman of any such meeting may, and on the request of any
shareholder or his proxy, shall make such appointment. In case any person
appointed as inspector fails to appear or to act, the vacancy may be filled by
appointment made by the officer or person acting as chairman. If there are three
or more inspectors, the decision, act, or certificate of a majority of them
shall be effective in all respects as the decision, act, or certificate of all.
The inspectors shall determine the number of shares outstanding, the voting
rights with respect to each, the shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;
receive votes, ballots, consents, waivers, or releases; hear and determine all
challenges and questions arising in connection with the vote; count and tabulate
all votes, consents, waivers, and releases; determine and announce the result;
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of any director, officer or shareholder of the
Corporation, the inspectors shall make a report in writing of any challenge,
question, or matter determined by them and execute a certificate of any fact
found by them.
SECTION 12. INFORMAL ACTION. Any action which may be authorized or taken at a
meeting of the shareholders may be authorized or taken without a meeting with
the affirmative vote or approval of, and in writing or writings signed by all
the shareholders who would be entitled to notice of a meeting of the
shareholders held for such purpose, which writing or writings shall be filed
with or entered upon the records of the Corporation.
ARTICLE III
DIRECTORS
SECTION 1. POWERS, NUMBER, QUALIFICATION, TERM, QUORUM AND VACANCIES. All of the
authority of the Corporation shall be exercised by or under the direction of the
Board of Directors. For their own government, the directors may adopt bylaws
that are not inconsistent with the Articles of Incorporation or this Code of
Regulations.
The number of directors shall be five. Except as hereinafter provided, directors
shall be elected at the Annual Meeting of the Shareholders and each director
shall be elected to service for one year and until his successor is elected or
until his earlier resignation, removal from office, or death. The number of
directors may be increased or decreased from time to time by the Board of
Directors. The number of directors shall never be less than three except that,
if all of the shares of the Corporation are owned of record by one or two
shareholders, the number of directors may
<PAGE> 5
be less than three but not less than the number of shareholders. No reduction in
the number of directors shall of itself have the effect of shortening the term
of any incumbent director.
Directors need not be shareholders.
A majority of the whole authorized number of directors shall be necessary to
constitute a quorum for a meeting of the directors, except that a majority of
the directors in office shall constitute a quorum for filling a vacancy in the
Board when the Board is authorized to fill a vacancy. The act of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the board.
The office of a director becomes vacant upon the death, resignation or removal
of a director, as provided by Section 1701.58 of the Ohio General Corporation
Law and Section 5 of this Article III. In the event that the shareholders shall
remove a director or directors, they may elect, at the meeting effecting the
removal or the increase, a director to fill the vacancy or vacancies resulting
therefrom. In the event that the shareholders do not fill such vacancy at such
meeting, or an adjournment thereof, the remaining directors, though less than a
majority of their number, shall fill such vacancies. The Board may, in a similar
manner, fill any vacancy not resulting from a removal of a director by the
shareholders or resulting from an increase in the number of directors.
If the membership of the Board of Directors at any time falls below the number
necessary to constitute a quorum, and the remaining directors are unable to
elect a successor or successors to reconstitute such a quorum, a special meeting
of shareholders shall be called and such number of directors shall be elected
thereat as may be necessary to bring the Board of Directors to its full
membership.
SECTION 2. MEETINGS. Meetings of the Board of Directors shall be held at such
place within or without the State of Ohio as may, from time to time, be fixed by
resolution of the Board of Directors, or as may be designated in the notice
calling the meeting. Regular meetings of the Board of Directors shall be held at
such times as may, from time to time, be fixed by resolution of the Board of
Directors and special meetings may be held at any time upon the call of the
Chairman of the Board, if any, the President, any Vice President, or a majority
of the directors then in office, by oral, telegraphed, cabled, telexed or
written notice duly served on or sent or mailed to each director not less than
two days before such meeting. Notices of meetings need not specify the purposes
of the meeting. A meeting of the Board of Directors may be held without notice
immediately after a meeting of shareholders at which the directors are elected.
Notice need not be given of regular meetings of the Board of Directors held at a
time fixed by resolution of the Board of Directors. Notice of adjournment of a
meeting need not be given if the time and place to which it is adjourned are
fixed and announced at such meeting. Notice of the time, place, and purpose of
any meeting may be waived in writing, either before or after the holding of such
meeting, by any director, which writing shall be filed with or entered upon the
records of the meeting. The attendance of any director at any such meeting
without protesting, prior to or at the commencement of the meeting, the lack of
proper notice, shall be deemed to be a waiver by him of notice of such meeting.
<PAGE> 6
Any meeting of the Board of Directors and any committee of directors may be held
through the use of telephone or any other communications equipment if all
persons participating can hear each other. Participation in such a meeting
constitutes presence at a meeting of the Board of Directors or committee of
directors, as the case may be.
SECTION 3. EXECUTIVE AND OTHER COMMITTEES. Whenever the number of directors is
more than three, the Board of Directors, in its discretion, may designate three
or more directors to constitute an executive committee or other committees,
which shall have and may exercise only such powers of the Board of Directors in
the management of the Corporation as may be conferred or authorized by the
resolution appointing them. Such committee or committees shall act only during
the intervals between meetings of the directors and shall not, among other
things, have the power to fill vacancies among the directors or in any such
committee. A majority of the whole of such committee may determine its action
and fix the time and place of its meetings, unless the Board of Directors
otherwise provides. The Board of Directors shall have the power, at any time, to
fill vacancies in, to change the membership of, or to discharge any such
committee and to appoint one or more directors as alternate members of any such
committee, who may take the place of any absent member or members of any meeting
of the particular committee.
SECTION 4. PROVISIONAL DIRECTOR. A provisional director may be appointed by the
appropriate Court of Common Pleas in accordance with the provisions of Section
1701.911 of the Ohio Revised Code, and all provisions of this Code of
Regulations shall be read as being subject to, and qualified by, that Section.
SECTION 5. REMOVAL OF DIRECTOR. All the directors, or all the directors of a
certain class, or any individual director, may be removed from office, without
assigning any cause, by the vote of the holders of a majority of the voting
power entitling them to elect directors in place of those to be removed,
provided that unless all the Directors or all the directors of a particular
class are removed, no individual director shall be removed in case the votes of
a sufficient number of shares are cast against his removal which, if
cumulatively voted at an election of all the directors, or all the directors of
a particular class, as the case may be, would be sufficient to elect at least
one director.
SECTION 6. RESIGNATION OF DIRECTOR. Any director may resign at any time by
delivering a written notice of resignation, signed by such director, to the
President or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
SECTION 7. INFORMAL ACTION. Any action which may be authorized or taken at a
meeting of the directors may be authorized or taken without a meeting with the
affirmative vote or approval of, and in a writing or writings signed by all the
directors, which writing or writings shall be filed with or entered upon the
records of the Corporation.
SECTION 8. RELIANCE ON ACCOUNTS AND REPORTS. A director, or a member of any
committee designated by the Board of Directors, shall in the performance of his
or her duties, be fully protected in relying in good faith upon the records of
the Corporation and upon information, opinions, reports or statements presented
to the Corporation by any of the Corporation's officers
<PAGE> 7
or employees, or committees designated by the Board of Directors, or by any
other person as to the matters the member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The Board of Directors, as soon as feasible after the
election thereof held in each year, shall elect a president, a secretary and a
treasurer, and, from time to time, may elect or appoint a chairman of the board,
one or more vice president and such assistant secretaries, assistant treasurers
and other officers as it may deem necessary. Any two or more offices may be held
by the same person, but no office shall execute, acknowledge, or verify any
instrument in more than one capacity if such instrument is required by law or by
the Articles of Incorporation, this Code of Regulations, or the bylaws, if any,
to be executed, acknowledged, or verified by two or more officers. The chairman
of the board, if any, shall be elected from among the directors.
SECTION 2. TERM AND REMOVAL. The term of office of all officers shall be one
year and until their respective successors are elected and qualify, but any
officer may be removed from office, either with or without cause, at any time by
the Board of Directors. A vacancy in any office arising from any cause may be
filled for the unexpired portion of the term by the Board of Directors.
SECTION 3. POWERS AND DUTIES. The officers of the Corporation shall each have
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as may be conferred from time to time by the Board of
Directors. The vice-president or vice presidents, the assistant secretary or
assistant secretaries and the assistant treasurer or assistant treasurers, in
the order of their respective seniorities, in the absence or disability of the
president, secretary or treasurer, respectively, shall perform the duties of
such officer and shall generally assist the president, secretary or treasurer,
respectively.
ARTICLE V
CERTIFICATES REPRESENTING SHARES
SECTION 1. FORM. Each holder of shares shall be entitled to one or more
certificates signed by the Chairman of the Board, if any, or the President or a
Vice President and by the Secretary, an assistant secretary, the treasurer, or
an assistant treasurer of the Corporation, which shall certify the number and
class of shares held by him in the Corporation and shall contain such special
statements as may be prescribed by the Ohio General Corporation Law. No
certificate for shares shall be executed or delivered until such shares are
fully paid. The signature of any of said officers of the Corporation may be by
facsimile, engraved, stamped, or printed, to the extent permitted by law.
Although any officer of the Corporation whose manual or facsimile signature is
affixed to such a certificate ceases to be such officer before the certificate
is delivered, such certificate, nevertheless, shall be effective in all respects
when delivered.
<PAGE> 8
The Corporation may, but need not, issue a certificate for or including a
fraction of a share or may otherwise act in this regard in accordance with the
terms and conditions of the Ohio General Corporation Law.
SECTION 2. TRANSFER OF SHARES. The shares of the Corporation shall be
transferable only upon its books and by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the Corporation by the delivery
thereof to the person in charge of the share transfer books and ledgers or to
such other person as the Board of Directors may designate for such purpose, and
new certificates shall thereupon be issued.
SECTION 3. LOST, STOLEN AND DESTROYED CERTIFICATES. The Board of Directors may
cause a new certificate of shares to be issued in the place of any lost, stolen
or destroyed certificate but the person seeking to have such new certificate
issued shall furnish proof, by affidavit or otherwise, as the Board may require,
of ownership of the shares represented by such lost, stolen or destroyed
certificate and the facts which tend to prove such loss, theft or destruction.
The Board of Directors may also require such person to execute and deliver to
the Corporation a bond, with or without sureties, in such sum as the Board of
Directors may direct, indemnifying the Corporation against any claim that may be
made against it by reason of the issue of such new certificate. The Board of
Directors may also, in its discretion, refuse to issue such new certificate,
except pursuant to a court order.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one
or more transfer agents and one or more registrars, and may require all
certificates representing shares to bear the signature of any such transfer
agents or registrars.
ARTICLE VI
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of account,
together with minutes of the proceedings of its incorporators, shareholders,
directors, and committees of the directors, and records of its shareholders
showing their names and addresses and the number and class of shares issued or
transferred of record to or by them from time to time.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of January in
each year and shall end on the last day of December next following, unless
otherwise determined by the Board of Directors.
ARTICLE VIII
<PAGE> 9
AMENDMENTS
This Code of Regulations of the Corporation shall be subject to alteration,
amendment or repeal, and any new Code of Regulations not inconsistent with any
provision of the Articles of Incorporation or statute may be made, either by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power of the Corporation, at any annual or special meeting of the
shareholders, or, without such meeting, by the written consent of the holders of
shares entitling them to exercise two-thirds of the voting power of the
Corporation. If this Code of Regulations are amended or new Code of Regulations
are adopted without a meeting of the shareholders, the Secretary of the
Corporation shall mail a copy of the amendment of the new Code of Regulations to
each shareholder who would have been entitled to vote thereon and did not
participate in the adoption thereof.
ARTICLE IX
CONSTRUCTION
In the event of any conflict between the provisions of the Code of
Regulations of the Corporation as in effect from time to time and the provisions
of the Articles of Incorporation of the Corporation as in effect from time to
time, the provisions of such Articles of Incorporation shall be controlling.
ARTICLE X
EMERGENCY REGULATIONS AND BYLAWS
In the event of an emergency, as defined in Revised Code Section 1701.01(U),
directors' meetings may be held and conducted as provided at the time in Revised
Code Section 1701.11(F), and any action so taken shall be the action of the
Corporation. The provisions of that subsection with regard to executives and
other officers shall also apply. The directors operating during an emergency
shall have authority to adopt such bylaws as they deem best for the conduct of
their meetings.
<PAGE> 1
EXHIBIT 4.1
- -----------
WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of November 15, 1999, between
PHONETEL TECHNOLOGIES, INC., an Ohio corporation (the "Company"), and AMERICAN
SECURITIES TRANSFER & TRUST, INC. ("Transfer Agent").
WHEREAS, in connection with the Joint Reorganization Plan of the
Company and Cherokee Communications, Inc. as approved October 22, 1999 (the
"Plan"), the Company has agreed to issue warrants ("Warrants") to purchase up to
1,111,100 shares of common stock, $0.01 par value, of the Company following the
approval and adoption of the Plan ("New Common Stock"); and
WHEREAS, the Company and the Transfer Agent desire to set forth in this
Agreement, among other things, the form and provisions of the certificates
representing Warrants (the "Warrant Certificates") and the terms and conditions
under which they may be issued, transferred, exchanged, replaced and surrendered
and in connection with the exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
ISSUANCE OF WARRANTS; FORM OF WARRANTS
--------------------------------------
Section 1.1 DEFINITIONS. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Corporate Office" shall mean the office of the Transfer
Agent (or its successor) at which at any particular time its principal business
shall be administered, which office is located as of the date hereof at 12039
West Alameda Parkway, Suite Z-2, Lakewood, Colorado 80228-2701.
(b) "Exercise Date" shall mean, as to any Warrant, the date on
which the Transfer Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Transfer Agent as agent for the Company, of an amount in lawful money of the
United States of America equal to the applicable Exercise Price (as defined in
Section 2.1 hereof).
(c) "Initial Warrant Exercise Date" shall mean the date which
is the business day following the date upon which the Warrants are issued
pursuant to the Plan.
(d) "Registered Holder" shall mean the person in whose name
any Warrant Certificates shall be registered on the books maintained by the
Transfer Agent.
(e) "Warrant Expiration Date" shall mean 5:00 p.m. (New York
City time) on November 19, 2002; provided that if such date shall in the State
of New York be a holiday or a day on which banks are authorized to close, then
5:00 p.m. (New York City time) on the next following day which in the State of
New York is not a holiday or a day on which banks are authorized to close. Upon
notice to all holders of Warrants, the Company shall have the right to extend
the Warrant Expiration Date.
<PAGE> 2
Section 1.2 WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A Warrant shall initially entitle the Registered Holder of
the certificate representing such Warrant to purchase one (1) share of New
Common Stock upon the exercise thereof, in accordance with the terms hereof,
subject to modification and adjustment as provided in herein.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants issued pursuant to the Plan shall be
executed by the Company and delivered to the Transfer Agent. Upon written order
of the Company signed by its Chairman or President or a Vice President and by
its Secretary or an Assistant Secretary, the Warrant Certificates shall be
countersigned, issued and delivered by the Transfer Agent in accordance with the
Plan.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 1,111,100 shares
of New Common Stock, subject to adjustment as described herein, upon the
exercise of Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any replacement, transfer, exchange, adjustment or other issuance permitted
under this Agreement; provided that no Warrant Certificates shall be issued
except (i) those initially issued hereunder, (ii) those issued on or after the
Initial Warrant Exercise Date, upon the exercise of fewer than all Warrants
represented by any Warrant Certificate, to evidence any unexercised Warrants
held by the exercising Registered Holder, (iii) those issued upon any transfer
or exchange pursuant to Section 4.2 hereof; (iv) those issued in replacement of
lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section
4.3 hereof; and (v) at the option of the Company, in such form as may be
approved by the Board of Directors, to reflect any reasonable adjustment or
change in the Exercise Price (as defined in Section 2.1 hereof), the number of
shares of Common Stock purchasable upon exercise of the Warrants as provided in
Article III hereof.
Section 1.3 FORM AND EXECUTION OF WARRANT CERTIFICATES.
(a) The Warrant Certificates shall be substantially in the
form attached hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may reasonably deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Warrants may be listed, or to conform to usage. The Warrant Certificates
shall be dated the date of issuance thereof (whether upon initial issuance,
transfer, exchange, adjustment or in replacement of mutilated, lost, stolen, or
destroyed Warrant Certificates) and issued in registered form only. Warrants
shall be numbered serially.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Transfer Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Company before the date of
issuance of the Warrant Certificates or before countersignature by the Transfer
Agent and issue and delivery thereof, such Warrant Certificates may nevertheless
be countersigned by the Transfer Agent, issued and delivered with the same force
and effect as though the person who signed such Warrant Certificates had not
ceased to be such officer of the Company. After countersignature by the Transfer
Agent, Warrant Certificates shall be delivered by the Transfer Agent to the
Registered Holder without further action by the Company, except as otherwise
provided by this Agreement.
<PAGE> 3
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
-----------------------------------------------
Section II.1 EXERCISE PRICE. Each Warrant Certificate shall entitle the
registered holder thereof to purchase from the Company one share of New Common
Stock for each Warrant evidenced thereby, at a purchase price equal to $10.50
per share (the "Exercise Price"), or such adjusted number of shares at such
adjusted purchase price as may be established from time to time pursuant to the
provisions of Article III hereof, payable in full at the time of exercise of the
Warrant. Except as the context otherwise requires, the term "Exercise Price" as
used in this Agreement shall mean the purchase price of one share of New Common
Stock, reflecting all appropriate adjustments made in accordance with the
provisions of Article III hereof.
Section II.2 EXERCISABILITY OF WARRANTS. Each Warrant may be exercised
at any time subsequent to the Initial Warrant Exercise Date and prior to the
Warrant Expiration Date. All outstanding Warrants shall expire on the Warrant
Expiration Date, after which time all Warrants will be wholly void and of no
force or effect.
Section II.3 PROCEDURE FOR EXERCISE OF WARRANTS. During the period
specified in and subject to the provisions of Section 2.2 hereof, Warrants may
be exercised by surrendering the Warrant Certificate representing such Warrants
to the Company, with the Election to Purchase duly completed and executed,
accompanied by payment in full, by certified check or money order, of the
Exercise Price in effect at the time of such exercise, for each share of New
Common Stock with respect to which such Warrants are being exercised.
Section II.4 ISSUANCE OF COMMON STOCK; LISTING. As soon as practicable
after the date of exercise of any Warrants, the Company shall issue a
certificate or certificates for the number of full shares of New Common Stock to
which such holder is entitled, issued and delivered in accordance with the
instructions set forth in the Election to Purchase. In no event shall any
fractional shares be issued. All shares of New Common Stock issued upon the
exercise of any Warrants shall be validly authorized and issued, fully paid and
non-assessable, and free from all liens and charges created by the Company in
respect of the issue thereof. Each person in whose name any such certificate for
shares of New Common Stock is issued shall for all purposes be deemed to have
become the holder of record of the New Common Stock represented thereby on the
date of exercise of the Warrants resulting in the issuance of such shares,
irrespective of the date of issuance or delivery of such certificate for shares
of New Common Stock. The Company will in good faith and as expeditiously as
reasonably possible endeavor to cause such shares of New Common Stock, upon
issuance, to be listed on each national securities exchange, if any, on which
the other outstanding shares of New Common Stock are then listed.
Section II.5 RESERVATION OF SHARES. The Company shall at all times
reserve and keep available for issuance upon the exercise of Warrants a number
of its authorized but unissued shares or treasury shares, or both, of New Common
Stock that will be sufficient to permit the exercise in full of all outstanding
Warrants.
Section 2.6 REGISTRATION. The issuance of the Warrants and the shares
of New Common Stock underlying such Warrants are exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act") pursuant to
Section 3(a)(9) of the Securities Act and similar state law provisions, and
pursuant to Section 1145 of the Bankruptcy Reform Act of 1978, as amended. The
Company covenants that if any securities to be reserved for the purpose of
exercise of Warrants hereunder require registration with, or approval of, any
governmental authority under any federal securities law before such securities
may be validly issued or delivered upon such exercise, then the Company will in
good faith and as expeditiously as reasonably possible, endeavor to secure such
registration or approval. The Company will use reasonable efforts to obtain
appropriate approvals or registrations under state "blue sky" securities laws.
With respect to any such securities, however, Warrants may not be exercised by,
or shares of New Common Stock issued to, any Registered Holder in any state in
which such exercise would be unlawful.
<PAGE> 4
ARTICLE III
ADJUSTMENTS
-----------
Section 3.1 CAPITAL EVENT. If at any time or from time to time the
Company shall by stock dividend, subdivision, combination, or reclassification
of shares or otherwise, change as a whole the outstanding shares of New Common
Stock into a different number or class of shares, the Exercise Price in effect
and the number of shares of New Common Stock purchasable under the Warrants
immediately prior to the date upon which such change shall become effective,
shall be proportionately adjusted. Irrespective of any adjustment or change in
the Exercise Price or the number of shares of New Common Stock actually
purchasable hereunder, this Warrant Agreement may continue to express the
Exercise Price and the number of shares purchasable as were expressed as of the
date of this Agreement without prejudice to the holder of Warrants or the
Company thereby. In the case of the issuance of additional shares of New Common
Stock as a dividend, the aggregate number of shares of New Common Stock issued
in payment of such dividend shall be deemed to have been issued at the close of
business on the record date fixed for the determination of shareholders entitled
to such dividend and shall be deemed to have been issued without consideration;
provided, however, that if the Company, after fixing such record date, shall
legally abandon its plan to so issue New Common Stock as a dividend, no
adjustment of the Exercise Price shall be required by reason of the fixing of
such record date.
Section 3.2 MERGER. If at any time while the Warrants are outstanding
the Company effects any consolidation or merger with any other corporation or
entity, the holder of a Warrant shall thereafter be entitled upon such exercise
of the Warrant to purchase, with respect to each share of New Common Stock
purchasable hereunder immediately prior to the date upon which such
consolidation or merger shall become effective, the securities or property to
which a holder of one share of New Common Stock would have been entitled upon
such consolidation or merger, without any change in, or payment in addition to,
the Exercise Price in effect immediately prior to such merger or consolidation
and the Company shall take such steps in connection with such consolidation or
merger as may be necessary to assure that all of the provisions of the Warrants
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or property thereafter deliverable upon the exercise of the
Warrants. The Company shall not effect any such consolidation or merger unless
prior to the consummation thereof the successor corporation, if other than the
Company, resulting therefrom shall assume by written agreement executed and
mailed to each of the Warrant holders at the address of each such holder shown
on the books of the Company, the obligation to deliver to such holder such
securities or property as in accordance with the foregoing provisions such
holders shall be entitled to purchase. A sale of all or substantially all of the
assets of the Company for a consideration, apart from the assumption of
obligations, consisting primarily of securities shall be deemed a consolidation
or merger for the foregoing purposes.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF
REGISTERED HOLDERS OF WARRANT CERTIFICATES
------------------------------------------
Section 4.1 RIGHTS OF WARRANT HOLDERS. The Warrant Certificate shall
not entitle the Registered Holder thereof to any of the rights of a stockholder
of the Company, including, without limitation, the right to vote, to receive
dividends and other distributions, to receive any notice of, or to attend,
meetings of stockholders or any other proceedings of the Company.
Section 4.2 TRANSFER OF WARRANTS.
(a) After the Initial Warrant Exercise Date, Warrant
Certificates may be exchanged for other Warrant Certificates representing an
equal aggregate number of Warrants of the same class or may be transferred in
whole or in part. Warrant Certificates to be exchanged shall be surrendered to
the Transfer Agent at its Corporate Office and, upon satisfaction of the terms
and provisions hereof with signature guarantees by an acceptable participant in
a recognized Medallion program, the Company shall execute and the Transfer Agent
shall countersign, issue and deliver new Warrant Certificates.
<PAGE> 5
(b) The Transfer Agent shall keep at its office books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof in accordance with its
regular practice. Upon due presentment for registration of transfer of any
Warrant Certificate at such office, the Company shall execute and the Transfer
Agent shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Transfer Agent, duly executed by the Registered Holder or
his or her attorney-in-fact duly authorized in writing with signature guarantees
by an acceptable participant in a recognized Medallion program.
(d) A service charge may be imposed by the Transfer Agent for
any exchange or registration of transfer of Warrant Certificates. In addition,
the Company may require payment by such holder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Transfer Agent and thereafter retained by the Transfer Agent until
termination of this Agreement or its resignation as Transfer Agent, or disposed
of or destroyed, at the direction of the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Transfer Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Transfer Agent) for all purposes and shall not be affected by any
notice to the contrary.
Section 4.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATES.
If any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company in its discretion may execute and deliver a new Warrant Certificate, in
exchange and in substitution for and upon cancellation of a mutilated, lost,
stolen or destroyed Warrant Certificate, but only if the Company receives
evidence of such loss, theft or destruction of such Warrant Certificate and of
the ownership thereof, and, if requested, only if the Company is indemnified for
such mutilated, lost, stolen or destroyed Warrant Certificate, all in such form
that is satisfactory to the Company.
Section 4.4 NOTICE OF ADJUSTMENTS. Upon any adjustment of the Exercise
Price or any increase or decrease in the number of shares of New Common Stock
issuable upon the exercise of a Warrant, pursuant to Article III hereof, and in
the event of any change in the rights of the holder of a Warrant by reason of
any other event herein set forth, then and in each such case, the Company shall
give written notice thereof to the holder of each Warrant at the address of such
holder as shown on the books of the Company, which notice shall state the
Exercise Price as adjusted and the increased or decreased number of shares
issuable upon the exercise of a Warrant, or specify the stock, securities or
assets and the amount thereof receivable as a result of such change in rights,
setting forth in reasonable detail a summary of the method of calculation and
the facts upon which such calculation is based.
Section 4.5. AGREEMENT OF WARRANT HOLDERS. Every holder of a Warrant,
by his acceptance thereof, consents and agrees with the Company, the Transfer
Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books
of the Transfer Agent by the Registered Holder thereof in person or by his or
her attorney duly authorized in writing and only if the Warrant Certificates
representing such Warrants are surrendered at the Corporate Office of the
Transfer Agent, duly endorsed or accompanied by a proper instrument of transfer
satisfactory to the Transfer Agent and the Company in their sole discretion,
together with payment of any applicable transfer taxes; and
<PAGE> 6
(b) The Company and the Transfer Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the holder and as
the absolute, true and lawful owner of the Warrants represented thereby for all
purposes and neither the Company nor the Transfer Agent shall be affected by any
notice or knowledge to the contrary.
ARTICLE V
MISCELLANEOUS MATTERS
---------------------
Section 5.1 ASSIGNMENT. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Transfer Agent or the
Registered Holders shall bind and inure to the benefit of their respective
successors and assigns.
Section 5.2 NOTICES. Any notice, demand or other communication required
by this Agreement shall be sufficiently given or made if sent by registered or
certified mail, postage prepaid, by overnight mail or courier, or by facsimile
transmission with receipt acknowledged, addressed to the Company or the Transfer
Agent, as appropriate, as set forth below:
To the Company:
PhoneTel Technologies, Inc.
1001 Lakeside Avenue, 7th Floor
Cleveland, Ohio 44114
Attn: Corporate Secretary
With a copy to:
Hahn Loeser & Parks LLP
3300 BP Tower
200 Public Square
Cleveland, Ohio 44114
Attn: F. Ronald O'Keefe, Esq.
To the Transfer Agent:
American Securities Transfer & Trust, Inc.
12039 W. Alameda Parkway, Suite Z-2
Lakewood, CO 80228-2701
Any party may change the address or fax number stated herein to which
notices are sent by giving all other parties notice of such change of address or
fax number by notice to their respective addresses stated herein.
Section 5.3 GOVERNING LAW. This Agreement and each Warrant Certificate
issued hereunder shall be governed by the laws of the State of Ohio without
regard to principles of conflicts of laws thereof.
Section 5.4 STANDING. Nothing in this Agreement expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Transfer Agent any right, remedy or claim under or by reason of
this Agreement or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and the Transfer Agent and their successors and assigns.
<PAGE> 7
Section 5.5 HEADINGS. The descriptive headings of the articles and
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 5.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.
Section 5.7 ENTIRE AGREEMENT. All prior contemporaneous agreements,
contracts, promises, representations, warranties or covenants between the
parties hereto, whether written or oral, are merged into this Agreement and
shall hereafter be null and void. This Agreement, including the Exhibits
referred to herein and the other writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings. This Agreement may only be amended by a
written instrument, signed by each of the parties hereto.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By: /s/ John D. Chichester
---------------------------------------
Its: PRESIDENT AND CHIEF EXECUTIVE OFFICER
--------------------------------------
AMERICAN SECURITIES TRANSFER & TRUST, INC.
By: /s/ Laura Sisneros
---------------------------------------
Its: VICE PRESIDENT/TRUST OFFICER
--------------------------------------
<PAGE> 8
EXHIBIT A TO WARRANT AGREEMENT
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED UNDER AND ARE
GOVERNED BY AND ARE SUBJECT TO THAT CERTAIN WARRANT AGREEMENT, DATED AS OF
NOVEMBER 15, 1999. A COPY OF SUCH WARRANT AGREEMENT WILL BE FURNISHED BY THE
ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
No.
------------------
Certificate for _____ Warrants
WARRANT CERTIFICATE
THIS CERTIFIES that ___________________ or its registered assigns is
the registered holder (the "Registered Holder") of the number of Warrants set
forth above, each of which represents the right to purchase one fully paid and
nonassessable share of Common Stock, par value $0.01 per share (the "Common
Stock"), of PhoneTel Technologies, Inc. (the "Company"), at any time after
November 18, 1999 but not after the Warrant Expiration Date hereinafter referred
to, at the initial exercise price of $10.50 per share (the "Exercise Price"), by
surrendering this Warrant Certificate to the Company, with the duly executed
form of election to purchase attached hereto, and by paying in full the Exercise
Price, plus transfer taxes, if any, by certified check or money order payable to
the order of the Company.
No Warrant may be exercised after 5:00 P.M., New York City time, on
November 19, 2002 (the "Warrant Expiration Date"). All Warrants evidenced hereby
shall thereafter become void, subject to the terms of the Warrant Agreement (as
hereinafter defined).
Prior to the Warrant Expiration Date, subject to any applicable laws,
rules or regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate in accordance with
the terms of the Warrant Agreement hereinafter referred to, the Registered
Holder shall be entitled to transfer this Warrant Certificate, in whole or in
part, upon surrender of this Warrant Certificate to the Company, with the form
of assignment set forth hereon duly executed. Upon any such transfer, a new
Warrant Certificate or Warrant Certificates representing the same aggregate
number of Warrants will be issued in accordance with instructions in the form of
assignment.
Upon certain events provided for in the Warrant Agreement hereinafter
referred to, the Exercise Price and the number of shares of Common Stock
issuable upon the exercise of each Warrant are required to be adjusted. No
fractional shares will be issued upon the exercise of Warrants.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement dated as of November 15, 1999 between the Company and American
Securities Transfer & Trust, Inc. (the "Warrant Agreement") and is subject to
the terms and provisions contained in said Warrant Agreement, to all of which
terms and provisions the Registered Holder consents by acceptance hereof. Any
capitalized terms not defined in this Warrant Certificate shall have the
meanings ascribed to them in the Warrant Agreement.
This Warrant Certificate shall not entitle the Registered Holder to any
of the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to attend or
receive any notice of meetings of stockholders or any other proceeding of the
Company.
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed.
PHONETEL TECHNOLOGIES, INC.
By:
--------------------------
Name:
---------------
Title:
--------------
Attest:
----------------------
Name:
---------------
Title:
--------------
Countersigned:
[TRANSFER AGENT]
By:______________________________
Its:_____________________________
<PAGE> 10
[Form of Assignment]
FOR VALUE RECEIVED, the undersigned hereby irrevocably sells, assigns
and transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants set forth below:
Name of Assignee Address No. of Warrants
- ---------------- ------- ---------------
and does hereby irrevocably constitute and appoint __________________, Attorney,
to make such transfer on the books of PhoneTel Technologies, Inc. maintained for
that purpose, with full power of substitution in the premises.
Dated:
-------------- -------------------------------------------------------
Signature
[MEDALLION SIGNATURE GUARANTEE REQUIRED]
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
<PAGE> 11
[Form of Election To Purchase]
The undersigned hereby irrevocably elects to exercise_______________of
the Warrants represented by this Warrant Certificate and to purchase the shares
of Common Stock issuable upon the exercise of said Warrants, and requests that
Certificates for such shares be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
at
------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$________________ by certified check or money order payable to the order of the
Company.
Date:
-------------- ----------------------------------------------------
Signature
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
PLEASE INSERT SOCIAL SECURITY OR TAX I.D. NUMBER OF
HOLDER
----------------------------------------------------
<PAGE> 12
SCHEDULE A
----------
As of the date of this Agreement, the Company had the following classes
and number of shares of stock issued and outstanding (including treasury stock):
<TABLE>
<CAPTION>
# of Shares Issued
Class of Stock # of Shares Authorized and Outstanding
-------------- ---------------------- ---------------
<S> <C> <C>
</TABLE>
As of the date of this Agreement, the ownership of the Warrants, the
number and percentage of the total shares of Common Stock each Warrant holder is
entitled to purchase is as follows:
<TABLE>
<CAPTION>
# of Shares entitled Percentage of Total
Name of Warrant Holder # of Shares Owned to Purchase Shares Outstanding
- ---------------------- ----------------- ----------- ------------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.1
- ------------
================================================================================
LOAN AND SECURITY AGREEMENT
BY AND AMONG
PHONETEL TECHNOLOGIES, INC.
AND
CHEROKEE COMMUNICATIONS, INC.
AS BORROWER,
AND
THE FINANCIAL INSTITUTIONS THAT ARE SIGNATORIES HERETO
AND
FOOTHILL CAPITAL CORPORATION
AS AGENT
DATED AS OF NOVEMBER 17, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND CONSTRUCTION.............................................................................2
1.1 Definitions.....................................................................................2
1.2 Accounting Terms...............................................................................18
1.3 Code...........................................................................................18
1.4 Construction...................................................................................18
1.5 Schedules and Exhibits.........................................................................19
2. LOAN AND TERMS OF PAYMENT...............................................................................19
2.1 Revolver Advances..............................................................................19
2.2 [Intentionally Omitted.].......................................................................19
2.3 Borrowing Procedures and Settlements...........................................................19
2.4 Payments.......................................................................................26
2.5 Overadvances...................................................................................27
2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations.........................28
2.7 Collection of Accounts.........................................................................29
2.8 Crediting Payments; Float Charge...............................................................30
2.9 Designated Account.............................................................................30
2.10 Maintenance of Loan Account; Statements of Obligations.........................................31
2.11 Fees...........................................................................................31
2.12 Letters of Credit..............................................................................33
3. CONDITIONS; TERM OF AGREEMENT...........................................................................35
3.1 Conditions Precedent to the Initial Extension of Credit........................................35
3.2 Conditions Subsequent to the Initial Extension of Credit.......................................37
3.3 Conditions Precedent to all Extensions of Credit...............................................37
3.4 Term...........................................................................................38
3.5 Effect of Termination..........................................................................38
4. CREATION OF SECURITY INTEREST...........................................................................38
4.1 Grant of Security Interest.....................................................................38
4.2 Negotiable Collateral..........................................................................39
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.........................39
4.4 Delivery of Additional Documentation Required..................................................39
4.5 Power of Attorney..............................................................................39
4.6 Right to Inspect...............................................................................40
5. REPRESENTATIONS AND WARRANTIES..........................................................................40
5.1 No Encumbrances................................................................................40
5.2 Eligible Accounts..............................................................................40
5.3 [intentionally omitted]........................................................................40
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
5.4 Equipment......................................................................................41
5.5 Location of Equipment..........................................................................41
5.6 [intentionally omitted]........................................................................41
5.7 Location of Chief Executive Office; FEIN.......................................................41
5.8 Due Organization and Qualification; Subsidiaries...............................................41
5.9 Due Authorization; No Conflict.................................................................41
5.10 Litigation.....................................................................................42
5.11 No Material Adverse Change.....................................................................42
5.12 Fraudulent Transfer............................................................................42
5.13 Employee Benefits..............................................................................43
5.14 Environmental Condition........................................................................43
5.15 Brokerage Fees.................................................................................43
5.16 Year 2000 Compliance...........................................................................43
5.17 Intellectual Property..........................................................................43
5.18 Leases.........................................................................................43
6. AFFIRMATIVE COVENANTS...................................................................................44
6.1 Accounting System..............................................................................44
6.2 Collateral Reporting...........................................................................44
6.3 Financial Statements, Reports, Certificates....................................................44
6.4 [intentionally omitted]........................................................................45
6.5 Telephone Placement Agreements.................................................................46
6.6 Title to Equipment.............................................................................46
6.7 Maintenance of Equipment.......................................................................46
6.8 Taxes..........................................................................................46
6.9 Insurance......................................................................................46
6.10 No Setoffs or Counterclaims....................................................................47
6.11 Location of Equipment..........................................................................47
6.12 Compliance with Laws...........................................................................47
6.13 Employee Benefits..............................................................................47
6.14 Leases.........................................................................................48
6.15 Brokerage Commissions..........................................................................48
6.16 [intentionally omitted]........................................................................48
6.17 [intentionally omitted]........................................................................48
6.18 Corporate Existence, etc.......................................................................48
6.19 Disclosure Updates.............................................................................49
7. NEGATIVE COVENANTS......................................................................................49
7.1 Indebtedness...................................................................................49
7.2 Liens..........................................................................................49
7.3 Restrictions on Fundamental Changes............................................................50
7.4 Disposal of Assets.............................................................................50
7.5 Change Name....................................................................................50
7.6 Guarantee......................................................................................50
7.7 Nature of Business.............................................................................50
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
7.8 Prepayments and Amendments.....................................................................50
7.9 [intentionally omitted]........................................................................51
7.10 [intentionally omitted]........................................................................51
7.11 Distributions..................................................................................51
7.12 Accounting Methods.............................................................................51
7.13 Investments....................................................................................51
7.14 Transactions with Affiliates...................................................................51
7.15 Suspension.....................................................................................51
7.16 Compensation...................................................................................51
7.17 Use of Proceeds................................................................................51
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees.............52
7.19 No Prohibited Transactions Under ERISA.........................................................52
7.20 Financial Covenants............................................................................53
7.21 Capital Expenditures...........................................................................55
8. EVENTS OF DEFAULT.......................................................................................55
9. THE LENDER GROUP'S RIGHTS AND REMEDIES..................................................................57
9.1 Rights and Remedies............................................................................57
9.2 Remedies Cumulative............................................................................59
10. TAXES AND EXPENSES......................................................................................59
11. WAIVERS; INDEMNIFICATION................................................................................60
11.1 Demand; Protest; etc...........................................................................60
11.2 The Lender Group's Liability for Collateral....................................................60
11.3 Indemnification................................................................................60
12. NOTICES.................................................................................................61
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................................................62
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..............................................................62
14.1 Assignments and Participations.................................................................62
14.2 Successors.....................................................................................65
15. AMENDMENTS; WAIVERS.....................................................................................65
15.1 Amendments and Waivers.........................................................................65
15.2 No Waivers; Cumulative Remedies................................................................66
16. AGENT; THE LENDER GROUP.................................................................................66
16.1 Appointment and Authorization of Agent.........................................................66
16.2 Delegation of Duties...........................................................................67
16.3 Liability of Agent.............................................................................67
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
16.4 Reliance by Agent..............................................................................68
16.5 Notice of Default or Event of Default..........................................................68
16.6 Credit Decision................................................................................69
16.7 Costs and Expenses; Indemnification............................................................69
16.8 Agent in Individual Capacity...................................................................70
16.9 Successor Agent................................................................................70
16.10 Lender in Individual Capacity..................................................................70
16.11 Withholding Tax................................................................................71
16.12 Collateral Matters.............................................................................72
16.13 Restrictions on Actions by Lenders; Sharing of Payments........................................73
16.14 Agency for Perfection..........................................................................74
16.15 Payments by Agent to the Lenders...............................................................74
16.16 Concerning the Collateral and Related Loan Documents...........................................74
16.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information........................................................................74
16.18 Several Obligations; No Liability..............................................................76
16.19 Legal Representation of Agent..................................................................76
17. GENERAL PROVISIONS......................................................................................76
17.1 Effectiveness..................................................................................76
17.2 Section Headings...............................................................................76
17.3 Interpretation.................................................................................77
17.4 Severability of Provisions.....................................................................77
17.5 Amendments in Writing..........................................................................77
17.6 Counterparts; Telefacsimile Execution..........................................................77
17.7 [intentionally omitted]........................................................................77
17.8 Integration....................................................................................77
</TABLE>
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<PAGE> 6
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
November 17, 1999, between and among, on the one hand, the lenders identified on
the signature pages hereof (such lenders, together with their respective
successors and assigns, are referred to hereinafter each individually as a
"Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION, a
California corporation, as agent for the Lenders ("Agent"), and, on the other
hand, PHONETEL TECHNOLOGIES, INC., an Ohio corporation, and CHEROKEE
COMMUNICATIONS, INC., a Texas corporation (collectively, "Borrower").
WITNESSETH:
WHEREAS, Original Lenders (as hereinafter defined) and
Borrower are parties to that certain Credit Agreement, dated May 30, 1997, (the
"Original Loan Agreement") as amended by the First Amendment to Credit Agreement
dated as of February 24, 1998, and as further amended by the Second Amendment to
the Credit Agreement and Waiver dated as of March 31, 1998, and further amended
by the Third Amendment to Credit Agreement dated as of May 8, 1998 to include
Agent as the "Agent" and a "Lender" thereunder (said amendments, together with
the Original Loan Agreement and all related documents, the "Pre-Petition Loan
Agreement");
WHEREAS on or about July 14, 1999 (the "Filing Date"),
Borrower filed a voluntary petition for relief under Chapter 11 of Title 11 of
the United States Code in the United States Bankruptcy Court for the Southern
District of New York;
WHEREAS, as of the Filing Date, the amount of the Pre-Petition
Obligations (as hereinafter defined) owing to the Original Lenders by the
Borrower exceeded $42,500,000 plus additional accrued interest, fees and
expenses through the Filing Date;
WHEREAS the Pre-Petition Loan Agreement was secured by a
valid, enforceable first priority security interest in substantially all of
Borrower's property as of the Filing Date;
WHEREAS the DIP Lenders (as hereinafter defined) provided
Borrower with debtor in possession financing during the Chapter 11 case of
Borrower pursuant to the terms of that certain Loan and Security Agreement dated
as of July 14, 1999 among Borrower and the DIP Lenders (together with all
related documents, the "DIP Loan Agreement");
WHEREAS the Court having jurisdiction over Borrower's Chapter
11 case confirmed Borrower's Chapter 11 plan of reorganization by the entry, on
or about October 22, 1999, of its "Findings of Fact, Conclusions of Law and
Order Confirming the Joint
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<PAGE> 7
Reorganization Plan of PhoneTel Technologies, Inc. and Cherokee Communications,
Inc. Dated May 11, 1999" (the "Order"); and
WHEREAS the financing provided by the DIP Loan Agreement
terminates on the effective date of Borrower's Plan of Reorganization and
Lenders have agreed to provide Borrower with the financing required to repay its
obligations under the DIP Loan Agreement and to provide the additional financing
necessary for Borrower's exit from Chapter 11 case, but only for the purposes
and upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of the Borrower, the parties hereto hereby agree as
follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS.
As used in this Agreement, the following terms shall have
the following definitions:
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account, a General
Intangible, Investment Property, or Negotiable Collateral.
"ACCOUNTS" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower,
whether or not yet due and payable, arising out of the sale or lease of goods,
the sale or lease of General Intangibles relating to the provision of
telecommunications services, or the rendition of services by Borrower,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"ADVANCES" has the meaning set forth in SECTION 2.1.
"AFFILIATE" means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to vote 5% or more of the
securities having ordinary voting power for the election of directors or the
direct or indirect power to direct the management and policies of a Person.
"AGENT" means Foothill Capital Corporation, a California
corporation, solely in its capacity as agent for the Lenders, and shall include
any successor agent.
"AGENT ACCOUNT" has the meaning set forth in SECTION 2.7.
"AGENT ADVANCES" has the meaning set forth in SECTION
2.3(e)(i).
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<PAGE> 8
"AGENT'S LIENS" has the meaning set forth in SECTION 4.1.
"AGENT-RELATED PERSONS" means Agent together with its
Affiliates, officers, directors, employees, counsel, and agents.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"ASSIGNEE" has the meaning set forth in SECTION 14.1.
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance
in the form of EXHIBIT A-1 attached hereto.
"AUTHORIZED PERSON" means any officer, other employee of
Borrower, or other person who, in each case, has been authorized by the board of
directors of the Borrower to act for Borrower under this Agreement.
"AVAILABILITY" means the amount that Borrower is entitled to
borrow as Advances under SECTION 2.1, such amount being the Maximum Revolver
Amount minus the sum of the principal amount of Advances (including Agent
Advances and Swing Loans) then outstanding (including any amounts that the
Lender Group may have paid for the account of Borrower pursuant to any of the
Loan Documents and that have not been reimbursed by Borrower).
"BANKRUPTCY CODE" means the United States Bankruptcy Code, as
amended, and any successor statute.
"BASE RATE" means, the rate of interest announced within Wells
Fargo Bank, N.A. as its "prime rate", with the understanding that the "prime
rate" is one of Wells Fargo Bank's base rates (not necessarily the lowest of
such rates) and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto and is evidenced by the
recording thereof after its announcement in such internal publication or
publications as Wells Fargo Bank may designate.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
SECTION 3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate
of Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.
"BOOKS" means all of Borrower's books and records (including
all of its records indicating, summarizing, or evidencing its assets (including
the Collateral) or liabilities, all of its information relating to its business
operations or financial condition, and all of its computer programs, disks,
files, printouts, runs, or other computer prepared information).
"BORROWER" means individually and collectively, jointly and
severally, PhoneTel Technologies, Inc., an Ohio corporation and Cherokee
Communications, Inc., a Texas corporation.
-3-
<PAGE> 9
"BORROWING" means a borrowing hereunder consisting of Advances
made by the Lenders, or Agent on behalf thereof, to Borrower, or by Swing Lender
in the case of a Swing Loan, or by Agent in the case of an Agent Advance.
"BORROWING BASE CERTIFICATE" has the meaning set forth in
SECTION 6.2.
"BUSINESS DAY" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"CAPITAL EXPENDITURES" means, with respect to any Person for
any period, the sum of (i) the aggregate of all expenditures by such Person and
its Subsidiaries during such period that in accordance with GAAP are or should
be included in "property, plant equipment" or similar fixed asset account on its
balance sheet, whether such expenditures are paid in cash or financed and
including all Capitalized Lease Obligations paid or payable during such period,
and (ii) to the extent not covered by clause (i) above, the aggregate of all
expenditures by such Person and its Subsidiaries to acquire by purchase or
otherwise the business or fixed assets of, or the Stock of, any other Person.
"CAPITALIZED LEASE" OR "CAPITAL LEASE" means, with respect to
any Person, any lease of real or personal property by such Person as lessee
which is required under GAAP to be capitalized on the balance sheet of such
Person.
"CAPITALIZED LEASE OBLIGATION" means any Indebtedness
represented by obligations under a Capital Lease.
"CLOSING DATE" means the date of the making of the initial
Advance (or other initial extension of credit) hereunder.
"CODE" means the New York Uniform Commercial Code.
"COLLATERAL" means all of Borrower's right, title, and
interest in and to each of the following:
(a) the Accounts,
(b) the Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
-4-
<PAGE> 10
(h) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books, Equipment, General
Intangibles, Inventory, Investment Property, Negotiable Collateral, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, bailee
letter, or acknowledgement agreement of any lessor, warehouseman, processor,
consignee, or other Person in possession of, having a Lien upon, or having
rights or interests in the Equipment or Inventory, in each case, in form and
substance reasonably satisfactory to Agent.
"COLLECTIONS" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) of Borrower.
"COMMITMENT" means, with respect to each Lender, its Revolving
Credit Commitment or Total Commitment, as the context requires and, with respect
to all Lenders, their Revolving Credit Commitments or Total Commitments, as the
context requires, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on SCHEDULE C-1 attached hereto or on
the signature page of the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder in accordance with the provisions of SECTION
14.1.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT C-2 delivered by an Authorized Person of Borrower to Agent.
"CONCENTRATION ACCOUNT" means a deposit account of Borrower
(located in the United States) into which cash received in the other Lockbox
Accounts is wire transferred as provided in SECTION 2.7.
"CONSOLIDATED CURRENT ASSETS" means, with respect to any
Person at any date, all assets that, as of the date of determination thereof and
in accordance with GAAP, should be classified as current assets on a
consolidated balance sheet of such Person and its Subsidiaries at such date.
"CONSOLIDATED CURRENT LIABILITIES" means, with respect to any
Person at any date, all liabilities that, as of the date of determination
thereof and in accordance with GAAP, should be classified as current liabilities
on a consolidated balance sheet of such Person and its Subsidiaries at such date
including, without limitation, all Indebtedness (excluding the final scheduled
payment of the Obligations at the Maturity Date) payable on demand or within one
year after such date (whether by final maturity, required prepayment or
otherwise) without any option on the part of the obligor to extend or renew
beyond such year.
-5-
<PAGE> 11
"CONSOLIDATED NET INTEREST EXPENSE" means, with respect to any
Person for any period, gross interest expense of such Person and its
Subsidiaries for such period determined in conformity with GAAP (including,
without limitation, interest expense paid to Affiliates of such Person other
than a subsidiary of Borrower), LESS (i) the sum of (A) interest income for such
period and (B) gains for such period on Hedging Agreements (to the extent not
included in interest income above and to the extent not deducted in the
calculation of such gross interest expense), PLUS (ii) the sum of (A) losses for
such period on Hedging Agreements (to the extent not included in such gross
interest expense) and (B) the upfront costs or fees for such period associated
with Hedging Agreements (to the extent not included in gross interest expense),
each determined on a consolidated basis and in accordance with GAAP for such
Person and its Subsidiaries.
"DAILY BALANCE" means, with respect to each day during the
term of this Agreement, the amount of an Obligation owed at the end of such day.
"DEFAULT" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"DEFAULTING LENDER" means any Lender that fails to make any
Advance that it is required to make hereunder on any Funding Date and that has
not cured such failure by making such Advance within 1 Business Day after
written demand upon it by Agent to do so.
"DEFAULTING LENDERS RATE" means the Base Rate for the first 3
days from and after the date the relevant payment is due and, thereafter, at
that interest rate equal to the GREATER OF (a) the interest rate then applicable
to Advances, and (b) the Base Rate.
"DESIGNATED ACCOUNT" means account number 394854091 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) that has been
designated as such, in writing, by Borrower to Agent.
"DESIGNATED ACCOUNT BANK" means National City Bank, N.A.,
whose office is located in Cleveland, Ohio, and whose ABA number is 04100124.
"DISBURSEMENT LETTER" means an instructional letter executed
and delivered by Borrower to Agent regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be reasonably
satisfactory to Agent.
"DISPOSITION" means any transaction, or series of related
transactions, pursuant to which the Borrower sells, assigns, transfers or
otherwise disposes of any property or assets (whether now owned or hereafter
acquired) to any other Person, in each case whether or not the consideration
therefor consists of cash, securities or other assets owned by the acquiring
Person, EXCLUDING any sales of non-operating or non-operative Telephones in the
ordinary course of business on ordinary business terms.
"DOLLARS" or "$" means United States dollars.
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<PAGE> 12
"EBITDA" means, for any period, the sum of the consolidated
Net Income of the Borrower for such period determined in accordance with GAAP
plus (a) the sum of the following amounts for such period determined on a
consolidated basis in conformity with GAAP to the extent included in the
determination of consolidated Net Income and without duplication: (i)
depreciation expense, (ii) amortization expense, (iii) interest expense, (iv)
income tax expense, (v) losses on the sale of fixed assets outside the ordinary
course of business, (vi) losses arising from extraordinary items, as determined
in accordance with GAAP, (vii) non-cash write-downs of fixed assets, (b) less
the sum of the following amounts for such period determined on a consolidated
basis in conformity with GAAP to the extent included in the determination of
consolidated Net Income without duplication: (i) gains from extraordinary items
(ii) gains on the sale of fixed assets outside of the ordinary course of
business, and (iii) non-cash write-ups of fixed assets.
"ELIGIBLE ACCOUNTS" means those Accounts created by Borrower
in the ordinary course of its business, that arise out of Borrower's sale of
goods or rendition of services, that in accordance with GAAP are or should be
included in current assets and/or non-delinquent accounts receivable.
"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, (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).
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $250,000,000, (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country and
which has total assets in excess of $250,000,000, provided that such bank is
acting through a branch or agency located in the United States, (c) a finance
company, insurance company, or other financial institution or fund that is
engaged in making, purchasing, or otherwise investing in commercial loans in the
ordinary course of its business and having (together with its Affiliates) total
assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of
a pre-existing Lender, (e) so long as no Event of Default has occurred and is
continuing, any other Person approved by Agent and Borrower, and (f) during the
continuation of an Event of Default, any other Person approved by Agent.
"EQUIPMENT" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles
-7-
<PAGE> 13
(including motor vehicles and trailers), tools, parts, goods (other than
consumer goods, farm products, or Inventory), wherever located, including all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto.
"ERISA AFFILIATE" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA EVENT" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCESS CASH FLOW" means EBITDA minus Consolidated Net
Interest Expense, minus Capital Expenditures to the extent authorized in this
Agreement, and minus income tax expense to the extent included within the
calculation of consolidated Net Income.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and any successor statute.
"FEIN" means Federal Employer Identification Number.
"FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio
of (i) EBITDA of Borrower for such period, to (ii) the sum of (A) all principal
of Indebtedness of
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Borrower scheduled to be paid or prepaid during such period (not including
prepayments of the Revolving Loans unless such prepayments are accompanied by a
reduction of the Revolving Credit Commitment and not including the final
scheduled payment of the Obligations at the Maturity Date), PLUS (B)
Consolidated Net Interest Expense of Borrower for such period, PLUS (C) income
taxes paid or payable by Borrower during such period, PLUS (D) Capital
Expenditures made by Borrower during such period, PLUS (E) all amounts paid or
payable by Borrower on Operating Lease Obligations having a scheduled due date
during such period. In determining the Fixed Charge Coverage Ratio for a
particular period (A) pro forma effect will be given to: (1) the incurrence,
repayment or retirement of any Indebtedness by Borrower since the first day of
such period as if such Indebtedness was incurred, repaid or retired on the first
day of such period and (2) the acquisition (whether by purchase, merger or
otherwise) or disposition (whether by sale, merger or otherwise) of any property
or assets acquired or disposed of by Borrower since the first day of such
period, as if such acquisition or disposition occurred on the first day of such
period; (B) interest on Indebtedness bearing a floating interest rate will be
computed as if the rate on the date of computation had been the applicable rate
for the entire period; (C) if such Indebtedness bears, at the option of the
Borrower, a fixed or floating rate of interest, interest thereon will be
computed by applying, at the option of the Borrower, either the fixed or
floating rate; and (D) the amount of Indebtedness under a revolving credit
facility will be computed based upon the average daily balance of such
Indebtedness during such period.
"FUNDING DATE" means the date on which a Borrowing occurs.
"FOOTHILL" means Foothill Capital Corporation, a California
corporation.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims), other than goods, Accounts, Investment Property, and
Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, local,
or other governmental or administrative body, instrumentality, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
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"HAZARDOUS MATERIALS" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"HEDGING AGREEMENT" means any interest rate, foreign currency,
commodity or equity swap, collar, cap, floor or forward rate agreement, or other
agreement or arrangement designed to protect against fluctuations in interest
rates or currency, commodity or equity values (including, without limitation,
any option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in
connection with any such agreement or arrangement.
"INDEBTEDNESS" means (a) all obligations of Borrower for
borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrower under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed, and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse by Borrower) any obligation of any other Person, except for
endorsement of instruments or items of payment for deposit to the account of
Borrower or which are transmitted to or turned over to Agent.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION
11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION
11.3.
"INTEREST COVERAGE RATIO" means, as of the last day of any
period, the ratio obtained by dividing (a) EBITDA, by (b) Interest Paid for such
period.
"INTEREST PAID" means, as of the last day of any fiscal
period, the sum of all interest, fees, charges, and related expenses PAID for
that fiscal period to a lender in connection with borrowed money or the deferred
purchase price of assets that is to be treated as interest in accordance with
GAAP.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
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"INVENTORY" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"INVESTMENT PROPERTY" means all of Borrower's "investment
property" as that term is defined in of the Code, whether now owned or hereafter
acquired.
"IRC" means the Internal Revenue Code of 1986, as amended, and
any successor statute.
"L/C" has the meaning set forth in SECTION 2.12(a).
"L/C UNDERTAKING" has the meaning set forth in SECTION
2.12(a).
"LENDER" and "LENDERS" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of SECTION 14.1
hereof.
"LENDER GROUP" means, individually and collectively, each of
the Lenders, and Agent.
"LENDER GROUP EXPENSES" means all (a) costs or expenses
(including taxes, and insurance premiums) required to be paid by Borrower under
any of the Loan Documents that are paid or incurred by the Lender Group, (b)
reasonable fees or charges paid or incurred by the Lender Group in connection
with the Lender Group's transactions with Borrower, including, fees or charges
for photocopying, notarization, couriers and messengers, telecommunication,
public record searches (including tax lien, litigation, and UCC searches and
including searches with the patent and trademark office, the copyright office,
or the department of motor vehicles), filing, recording, publication, appraisal
(including periodic Collateral appraisals), real estate surveys, real estate
title policies and endorsements, and environmental audits, (c) costs and
expenses incurred by Agent in the disbursement of funds to Borrower (by wire
transfer or otherwise), (d) charges paid or incurred by Agent resulting from the
dishonor of checks, (e) reasonable costs and expenses paid or incurred by the
Lender Group to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) reasonable costs and expenses paid or incurred by the Lender
Group in examining the Books, (g) reasonable costs and expenses of third party
claims or any other suit paid or incurred by the Lender Group in enforcing or
defending the Loan Documents or in connection with the transactions contemplated
by the Loan Documents or the Lender Group's relationship with Borrower or any
guarantor, and (h) each of the Lender's reasonable fees and expenses (including
attorneys fees) incurred in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing (including attorneys fees and
expenses incurred in connection with a "workout," a "restructuring," or an
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<PAGE> 17
Insolvency Proceeding concerning Borrower or any guarantor of the Obligations),
defending, or concerning the Loan Documents, irrespective of whether suit is
brought.
"LENDER-RELATED PERSON" means, with respect to any Lender,
such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, counsel, and agents of such Lender.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the
context requires.
"LETTER OF CREDIT USAGE" means, as of any date of
determination the aggregate undrawn amount of all outstanding L/C Undertakings.
"LIEN" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Disbursement
Letter, the Letters of Credit, the Lockbox Agreements, the Stock Pledge
Agreement, the Suretyship Agreement, any note or notes executed by Borrower in
connection with this Agreement and payable to a member of the Lender Group, and
any other agreement entered into, now or in the future, by Borrower and the
Lender Group in connection with this Agreement.
"LOCKBOX ACCOUNT" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
"LOCKBOX AGREEMENTS" means those certain lockbox agreements
and those certain depository agreements, in form and substance reasonably
satisfactory to Agent, each of which is among Borrower, Agent, and one of the
Lockbox Banks.
"LOCKBOX BANKS" means any financial institution approved by
Agent at which Borrower maintains or is required by Agent to maintain a Lockbox
Account.
"LOCKBOXES" has the meaning set forth in SECTION 2.7.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (b) the material
impairment of Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of the Lender Group to
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<PAGE> 18
enforce the Obligations or realize upon the Collateral, (c) a material
impairment of the priority of the Agent's Liens with respect to the Collateral
as a result of an action or failure to act on the part of Borrower, or (d) a
material adverse effect on the value of the Collateral or the amount that the
Lenders would be likely to receive after giving consideration to delays in
payment and costs of enforcement as a result of the liquidation of such
Collateral.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM AMOUNT" initially means $46,000,000, but subject to
downward adjustment from time to time pursuant to the provisions of SECTION
2.4(C).
"MAXIMUM REVOLVER AMOUNT" means the lesser of: (i) the Maximum
Amount, minus the sum of (a) the amount of Other Reserves, and (b) the Letter of
Credit Usage; and (ii) the sum of (a) $1,300 multiplied by the number of
Eligible Pay Telephones, plus (b) 80% of the net amount of Eligible Accounts,
minus the sum of (x) Other Reserves, and (y) the Letter of Credit Usage.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six years.
"NET INCOME" means, with respect to any Person for any period,
the net income (loss) of such Person and its Subsidiaries for such period,
determined in accordance with GAAP, but excluding from the determination of Net
Income (without duplication) (a) any extraordinary or non-recurring gains or
losses or gains or losses from Dispositions, (b) restructuring charges, (c)
effects of discontinued operations and (d) interest income.
"NEGOTIABLE COLLATERAL" means all of Borrower's now owned and
hereafter acquired letters of credit, notes, drafts, instruments, security
certificates, documents and chattel paper.
"OBLIGATIONS" means all loans, Advances, debts, principal,
interest, contingent reimbursement obligations under any outstanding Letters of
Credit, premiums, liabilities (including all amounts charged to Borrower's Loan
Account pursuant hereto), obligations, fees, charges, costs, or Lender Group
Expenses, lease payments, guaranties, covenants, and duties owing by Borrower to
the Lender Group of any kind and description (whether pursuant to or evidenced
by the Loan Documents or pursuant to any other agreement between the Lender
Group and Borrower, and irrespective of whether for the payment of money),
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including all interest not paid when due and
all Lender Group Expenses that Borrower is required to pay or reimburse by the
Loan Documents, by law, or otherwise.
"OPERATING LEASE OBLIGATIONS" means all obligations for the
payment of rent for any real or personal property under leases or agreements to
lease, other than Capitalized Lease Obligations.
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<PAGE> 19
"ORIGINAL LENDERS" means the Persons other than the Borrower
who are parties to the Original Loan Agreement.
"ORIGINAL LOAN AGREEMENT" shall have the meaning set forth in
the preamble to this Agreement.
"OSP AGREEMENT" means any agreement with an operator service
provider pursuant to which commissions, fees or surcharges are to be paid to
Borrower on all or a portion of the long distance traffic relating to any pay
telephones owned or leased by or to Borrower.
"OTHER RESERVES" means such other reserves in such amounts as
Agent may deem necessary or appropriate from time to time in its sole
discretion, reasonably exercised, based upon Agent's customary credit
considerations, and shall also include a reserve in the amount of $400,000 for
the payment of professional fees and expenses that may be awarded by the
Bankruptcy Court having jurisdiction over Borrower's Chapter 11 case, which
reserve will be reduced dollar for dollar to the extent that Borrower makes
payment on account of such professional fees and expenses (and Lenders agree,
subject to the requirements of SECTION 3.3 herein, to make Advances up to the
amount of such reserve upon Borrower's request accompanied by Borrower's
certification that any such Advances will be used to pay such professional fees
and expenses).
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(e).
"PAY-OFF LETTER" means a letter, in form and substance
reasonably satisfactory to Agent, from the DIP Lenders to Agent respecting the
amount necessary to repay in full all of the obligations of Borrower owing under
the DIP Loan Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"PERMITTED DISCRETION", with respect to any determination by a
member of the Lender Group, means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.
"PERMITTED DISPOSITIONS" means (a) sales or other dispositions
of Equipment that is substantially worn, damaged, or obsolete in the ordinary
course of Borrower's business, (b) sales of non-operating or non-operative
Telephones to buyers in the ordinary course of Borrower's business, (c) the use
or transfer of money, or cash equivalents by Borrower in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents, and (d)
the licensing by Borrower, on a non-exclusive basis, of patents, trademarks,
copyrights, and other intellectual property rights in the ordinary course of
Borrower's business.
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<PAGE> 20
"PERMITTED LIENS" means (a) Liens held by Agent for the
benefit of the Lender Group, (b) Liens for unpaid taxes that either (i) are not
yet due and payable or (ii) do not constitute an Event of Default hereunder and
are the subject of Permitted Protests, (c) Liens set forth on SCHEDULE P-1, (d)
the interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Purchase Money Indebtedness permitted under SECTION 7.1 hereof
and so long as the Lien attaches only to the asset purchased or acquired and the
proceeds thereof, (f) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business of Borrower and not in
connection with the borrowing of money, and which Liens (i) are for sums not yet
due and payable, (ii) are for sums which have not been due and payable for more
than thirty (30) days and are not material in amount, or (iii) are the subject
of Permitted Protests, (g) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (h) Liens or
deposits to secure performance of bids, tenders, or leases incurred in the
ordinary course of business of Borrower and not in connection with the borrowing
of money, (i) Liens arising by reason of security for surety or appeal bonds in
the ordinary course of business of Borrower, (j) Liens resulting from any
judgment or award that is not an Event of Default hereunder, and (k) Liens
consented to by Lenders in connection with the settlement of certain claims
asserted by Cerberus Partners, L.P. ("Cerberus") as set forth in the Order (the
"Cerberus Settlement").
"PERMITTED PROTEST" means the right of Borrower to protest any
Lien (other than any such Lien that secures the Obligations), tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the Books in such amount as is required under GAAP,
(b) any such protest is instituted and diligently prosecuted by Borrower in good
faith, and (c) Agent is satisfied that, while any such protest is pending, there
will be no impairment by reason of non-payment of such Lien during such protest
of the enforceability, validity, or priority of any of the Liens of Agent on
behalf of the Lender Group in and to the Collateral subject to the Lien being
protested.
"PERSON" means natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"PLAN" means any employee benefit plan, program, or
arrangement maintained or contributed to by Borrower or with respect to which it
may incur liability.
"POST-TERMINATION OBLIGATIONS" means those Obligations under
SECTION 11.3 which survive the termination of this Agreement, including but not
limited to such Indemnified Liabilities falling within the description contained
in SECTION 11.3, but not including such Indemnified Liabilities which are fixed,
liquidated or matured as of the Maturity Date.
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<PAGE> 21
"PRE-PETITION LOAN AGREEMENT" has the meaning set forth in the
preamble to this Agreement.
"PRE-PETITION OBLIGATIONS" means any and all "Obligations", as
that term is defined in the Pre-Petition Loan Agreement, owing by Borrower to
Original Lenders under the Pre-Petition Loan Agreement.
"PROJECTIONS" means the (a) balance sheets, (b) profit and
loss statements, (c) cash flow statements, and (d) capitalization statements,
all prepared on a consistent basis with Borrower's historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions presented by Borrower to Agent on or about September 22,
1999, as the same may be amended from time to time with the specific written
consent of Agent.
"PRO RATA SHARE" means:
(a) with respect to a Lender's obligation to make Advances
and receive payments of interest, fees, and principal with respect thereto, the
percentage obtained by dividing (i) such Lender's Revolving Credit Commitment,
by (ii) the aggregate amount of all Lenders' Revolving Credit Commitments,
(b) with respect to a Lender's obligation to participate in
Letters of Credit, and receive payments of fees with respect thereto, the
percentage obtained by dividing (i) such Lender's sub-portion of its Revolving
Credit Commitment to participate in Letters of Credit, as set forth on SCHEDULE
C-1, by (ii) the aggregate amount of all Lenders' sub-portions of their
Revolving Credit Commitments to participate in Letters of Credit, as set forth
on SCHEDULE C-1,
(c) [intentionally omitted], and
(d) with respect to all other matters (including the
indemnification obligations arising under SECTION 16.7), the percentage obtained
by dividing (i) such Lender's Total Commitment, by (ii) the aggregate amount of
all Lenders' Total Commitments.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than
the Obligations, but including Capitalized Lease Obligations), incurred at the
time of, or within 20 days after, the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"QUALIFIED LOCAL DEPOSIT ACCOUNT" has the meaning set forth
in SECTION 2.7.
"REQUIRED LENDERS" means, at any time, Lenders whose Pro Rata
Shares aggregate 53% of the Total Commitments, or if the Commitments have been
terminated irrevocably, 53% of the Obligations then outstanding.
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"REPORTABLE EVENT" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"REVOLVING CREDIT COMMITMENT" means, for each Lender, the
Dollar amount of the obligation of such Lender to make Advances (in an aggregate
amount at one time outstanding), as such amount is set forth opposite the name
of such Lender under the caption Revolving Credit Commitment on SCHEDULE C-1.
"REVOLVER USAGE" means, as of any date of determination, the
aggregate amount of Advances outstanding.
"RISK PARTICIPATION LIABILITY" means, as to each Letter of
Credit, all reimbursement obligations of Borrower to the issuer of an L/C or to
the issuer of a letter of credit with respect to the transaction for which an
L/C Undertaking was executed and delivered (to the extent such reimbursement
obligations are subject to such L/C Undertaking), consisting of (a) the amount
available to be drawn or which may become available to be drawn, (b) all amounts
which have been paid and made available by the issuing bank to the extent not
reimbursed by Borrower, whether by the making of an Advance or otherwise, and
(c) all accrued and unpaid interest, fees, and expenses payable with respect
thereto.
"SEC" means the United States Securities and Exchange
Commission and any successor thereto.
"SENIOR PERMITTED LIENS" means Permitted Liens listed on
SCHEDULE P-2.
"SETTLEMENT" has the meaning set forth in SECTION 2.3(f)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION
2.3(f)(i).
"SETTLEMENT REQUEST DATE" has the meaning set forth in SECTION
2.3(f)(i).
"STOCK" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"STOCK PLEDGE AGREEMENT" means a stock pledge agreement, in
form and substance reasonably satisfactory to Agent, executed and delivered by
Borrower to Agent with respect to the pledge of the capital Stock of each of
Borrower's Subsidiaries.
"SUBSIDIARY" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock having ordinary voting power to
elect a majority of the board of directors (or
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appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"SURETYSHIP AGREEMENT" means a suretyship agreement, in form
and substance reasonably satisfactory to Agent, executed and delivered by
Borrower to Agent with respect to the joint and several liabilities of PhoneTel
Technologies, Inc. and Cherokee Communications, Inc., as Borrower hereunder.
"SWING LENDER" means any Lender appointed by the Agent in
writing, and which appointment has been accepted by such Lender in writing, as
the "Swing Lender".
"SWING LOAN" has the meaning set forth in SECTION 2.3(d)(i).
"TELEPHONE" means a microprocessor-based non-cellular
telephone through which a user may initiate a call payable only by coins or by
credit card, collect or third-number billing procedures and which has been
installed for operation.
"TELEPHONE PLACEMENT AGREEMENT" means any agreement between
Borrower and another Person pursuant to which Borrower installs one or more
Telephones on property or properties owned, leased or operated by such Person
and pays such Person a fee or percentage of revenues earned from such
Telephones, and such other compensation as may be provided pursuant thereto, in
return for such installation right.
"TOTAL COMMITMENT" means, for each Lender, the Dollar amount
of the obligation of such Lender to make Advances and to make its portion of the
Advances, as such amount is set forth opposite the name of such Lender under the
caption Total Commitment on SCHEDULE C-1.
1.2 ACCOUNTING TERMS.All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
1.3 CODE.Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 CONSTRUCTION.Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms 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 provision of this Agreement or
such other Loan Document, as the case may be. An Event of Default shall
"continue" or be "continuing" until such Event of Default has been cured or
waived in writing by Agent. Section,
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subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified. Any reference in this Agreement or in the
Loan Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES. Subject to the terms and conditions of this
Agreement, and during the term of this Agreement, each Lender agrees to make
advances ("ADVANCES") to Borrower in an amount at any one time outstanding not
to exceed such Lender's Pro Rata Share of an amount equal to the Maximum
Revolver Amount.
(a) The Lenders shall have no obligation to make further
Advances hereunder to the extent such further Advances would cause the Revolver
Usage to exceed the Maximum Revolver Amount.
(b) Amounts borrowed pursuant to this Section may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
2.2 [INTENTIONALLY OMITTED.]
2.3 BORROWING PROCEDURES AND SETTLEMENTS. PROCEDURE FOR BORROWING. Each
Borrowing shall be made by an irrevocable written request by an Authorized
Person delivered to Agent (which notice must be received by Agent no later than
10:00 a.m. (California time) on the Business Day that is two Business Days prior
to the requested Funding Date) specifying (i) the amount of such Borrowing, and
(ii) the requested Funding Date, which shall be a Business Day; PROVIDED,
HOWEVER, that in the case of a request for Swing Loan in an amount of
$1,000,000, or less, such notice will be timely received if it is received by
Agent no later than 10:00 a.m. (California time) on the Business Day that is the
requested Funding Date specifying (i) the amount of such Borrowing, and (ii) the
requested Funding Date, which shall be a Business Day. At Agent's election, in
lieu of delivering the above-described written request, any Authorized Person
may give Agent telephonic notice of such request by the required time, with such
telephonic notice to be confirmed in writing within 24 hours of the giving of
such notice.
(b) AGENT'S ELECTION. Promptly after receipt of a request for
a Borrowing pursuant to SECTION 2.3(a), Agent shall elect, in its discretion,
(i) to have the terms of SECTION 2.3(c) apply to such requested Borrowing, or
(ii) to request Swing Lender to make a Swing Loan pursuant to the terms of
SECTION 2.3(d) in the amount of the requested Borrowing; provided, however, that
if Swing Lender declines in its sole discretion to make a
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Swing Loan pursuant to SECTION 2.3(d), Agent shall elect to have the terms of
SECTION 2.3(c) apply to such requested Borrowing.
(c) MAKING OF ADVANCES.
(i) In the event that Agent shall elect to have the terms of
this SECTION 2.3(c) apply to a requested Borrowing as described in
SECTION 2.3(b), then promptly after receipt of a request for a
Borrowing pursuant to SECTION 2.3(a), Agent shall notify the Lenders,
not later than 1:00 p.m. (California time) on the Business Day
immediately preceding the Funding Date applicable thereto, by telecopy,
telephone, or other similar form of transmission, of the requested
Borrowing. Each Lender shall make the amount of such Lender's Pro Rata
Share of the requested Borrowing available to Agent in immediately
available funds, to such account of Agent as Agent may designate, not
later than 10:00 a.m. (California time) on the Funding Date applicable
thereto. After Agent's receipt of the proceeds of such Advances, upon
satisfaction of the applicable conditions precedent set forth in
SECTION 3 hereof, Agent shall make the proceeds of such Advances
available to Borrower on the applicable Funding Date by transferring
same day funds equal to the proceeds of such Advances received by Agent
to Borrower's Designated Account; PROVIDED, HOWEVER, that, subject to
the provisions of SECTION 2.3(i), Agent shall not request any Lender to
make, and no Lender shall make, any Advance if Agent shall have
received written notice from any Lender, or otherwise has actual
knowledge, that (1) one or more of the applicable conditions precedent
set forth in SECTION 3 will not be satisfied on the requested Funding
Date for the applicable Borrowing unless such condition has been
waived, or (2) the requested Borrowing would exceed the Availability of
Borrower on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or prior to
the Closing Date or, with respect to any Borrowing after the Closing
Date, at least 1 Business Day prior to the date of such Borrowing, that
such Lender will not make available as and when required hereunder to
Agent for the account of Borrower the amount of that Lender's Pro Rata
Share of the Borrowing, Agent may assume that each Lender has made or
will make such amount available to Agent in immediately available funds
on the Funding Date and Agent may (but shall not be so required), in
reliance upon such assumption, make available to Borrower on such date
a corresponding amount. If and to the extent any Lender shall not have
made its full amount available to Agent in immediately available funds
and Agent in such circumstances has made available to Borrower such
amount, that Lender shall on the Business Day following such Funding
Date make such amount available to Agent, together with interest at the
Defaulting Lenders Rate for each day during such period. A notice
submitted by Agent to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such
amount is so made available, such payment to Agent shall constitute
such Lender's Advance on the date of Borrowing for all purposes of this
Agreement. If such
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amount is not made available to Agent on the Business Day following the
Funding Date, Agent will notify Borrower of such failure to fund and,
upon demand by Agent, Borrower shall pay such amount to Agent for
Agent's account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Advances composing such
Borrowing. The failure of any Lender to make any Advance on any Funding
Date shall not relieve any other Lender of any obligation hereunder to
make an Advance on such Funding Date, but no Lender shall be
responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by Borrower to Agent for the Defaulting
Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder. Amounts payable to a Defaulting
Lender shall instead be paid to or retained by Agent. Agent may hold
and, in its discretion, re-lend to Borrower the amount of all such
payments received or retained by it for the account of such Defaulting
Lender. Solely for the purposes of voting or consenting to matters with
respect to the Loan Documents and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a "Lender" and such
Lender's Commitment shall be deemed to be zero (-0-). This section
shall remain effective with respect to such Lender until (x) the
Obligations under this Agreement shall have been declared or shall have
become immediately due and payable or (y) the requisite non-Defaulting
Lenders and Agent shall have waived such Lender's default in writing.
The operation of this section shall not be construed to increase or
otherwise affect the Commitment of any Lender, or relieve or excuse the
performance by Borrower of its duties and obligations hereunder.
(d) MAKING OF SWING LOANS.
(i) In the event Agent shall elect, with the consent of Swing
Lender, as a Lender, to have the terms of this SECTION 2.3(d) apply to
a requested Borrowing as described in SECTION 2.3(b), Swing Lender as a
Lender shall make an Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to this
SECTION 2.3(d) being referred to as a "SWING LOAN" and such Advances
being referred to collectively as "SWING LOANS") available to Borrower
on the Funding Date applicable thereto by transferring same day funds
to Borrower's Designated Account. Each Swing Loan is an Advance
hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that all payments thereon shall be
payable to Swing Lender as a Lender solely for its
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own account (and for the account of the holder of any participation
interest with respect to such Advance). Subject to the provisions of
SECTION 2.3(i), Agent shall not request Swing Lender as a Lender to
make, and Swing Lender as a Lender shall not make, any Swing Loan if
Agent shall have received written notice from any Lender, or otherwise
has actual knowledge, that (i) one or more of the applicable conditions
precedent set forth in SECTION 3 will not be satisfied on the requested
Funding Date for the applicable Borrowing unless such condition has
been waived, or (ii) the requested Borrowing would exceed the
Availability of Borrower on such Funding Date. Swing Lender as a Lender
shall not otherwise be required to determine whether the applicable
conditions precedent set forth in SECTION 3 have been satisfied on the
Funding Date applicable thereto prior to making, in its sole
discretion, any Swing Loan.
(ii) The Swing Loans shall be secured by the Collateral and
shall constitute Advances and Obligations hereunder, and shall bear
interest at the rate applicable from time to time to Advances pursuant
to SECTION 2.6 hereof.
(e) AGENT ADVANCES.
(i) Subject to the limitations set forth in the proviso
contained in this SECTION 2.3(e), Agent hereby is authorized by
Borrower and the Lenders, from time to time in Agent's sole discretion,
(1) after the occurrence and during the continuance of a Default or an
Event of Default, or (2) at any time that any of the other applicable
conditions precedent set forth in SECTION 3 have not been satisfied, to
make Advances to Borrower on behalf of the Lenders that Agent, in its
reasonable business judgment, deems necessary or desirable, in any
event in an amount not to exceed $100,000 (A) to preserve or protect
the Collateral, or any portion thereof, (B) to enhance the likelihood
of repayment of the Obligations, or (C) to pay any other amount
chargeable to Borrower pursuant to the terms of this Agreement,
including Lender Group Expenses and the costs, fees, and expenses
described in SECTION 10 (any of the Advances described in this SECTION
2.3(e) being hereinafter referred to as "AGENT ADVANCES"); provided,
that the Required Lenders may at any time revoke Agent's authorization
contained in this SECTION 2.3(e) to make Agent Advances, any such
revocation to be in writing and to become effective upon Agent's
receipt thereof.
(ii) Agent Advances shall be repayable on demand and secured
by the Collateral, shall constitute Advances and Obligations hereunder,
and shall bear interest at the rate applicable from time to time to the
Advances pursuant to SECTION 2.6 hereof.
(f) SETTLEMENT. It is agreed that each Lender's funded portion
of the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the outstanding Advances. Such agreement notwithstanding,
Agent, Swing Lender, and the
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other Lenders agree (which agreement shall not be for the benefit of or
enforceable by Borrower) that in order to facilitate the administration of this
Agreement and the other Loan Documents, settlement among them as to the
Advances, the Swing Loans, and the Agent Advances shall take place on a periodic
basis in accordance with the following provisions:
(i) Agent shall request settlement ("SETTLEMENT") with the
Lenders on a weekly basis, or on a more frequent basis if so determined
by Agent, (1) on behalf of Swing Lender, with respect to each
outstanding Swing Loan, (2) for itself, with respect to each Agent
Advance, and (3) with respect to Collections received, as to each by
notifying the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 1:00 p.m.
(California time) on the Business Day that is five Business Days prior
to the date of such requested Settlement (the "SETTLEMENT REQUEST
DATE")(the date of such requested Settlement being the "SETTLEMENT
DATE"). Such notice of a Settlement Date shall include a summary
statement of the amount of outstanding Advances, Swing Loans, and Agent
Advances for the period since the last Settlement Request Date until
the current Settlement Request Date, the amount of repayments received
in such period, and the amounts allocated to each Lender of the
interest, fees, and other charges for such period. Subject to the terms
and conditions contained herein (including SECTION 2.3(c)(iii)): (y) if
a Lender's balance of the Advances, Swing Loans, and Agent Advances
exceeds such Lender's Pro Rata Share of the Advances, Swing Loans, and
Agent Advances as of a Settlement Request Date, then Agent shall by no
later than 1:00 p.m. (California time) on the Settlement Date transfer
in immediately available funds to the account of such Lender as such
Lender may designate, an amount such that each such Lender shall, upon
receipt of such amount, have as of the Settlement Date, its Pro Rata
Share of the Advances, Swing Loans, and Agent Advances; and (z) if a
Lender's balance of the Advances, Swing Loans, and Agent Advances is
less than such Lender's Pro Rata Share of the Advances, Swing Loans,
and Agent Advances as of a Settlement Request Date, such Lender shall
no later than 1:00 p.m. (California time) on the Settlement Date
transfer in immediately available funds to such account of Agent as
Agent may designate, an amount such that each such Lender shall, upon
transfer of such amount, have as of the Settlement Date, its Pro Rata
Share of the Advances, Swing Loans, and Agent Advances. Such amounts
made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Swing
Loan or Agent Advance and, together with the portion of such Swing Loan
or Agent Advance representing Swing Lender's Pro Rata Share thereof,
shall constitute Advances of such Lenders. If any such amount is not
made available to Agent by any Lender on the Settlement Date applicable
thereto to the extent required by the terms hereof, Agent shall be
entitled to recover for its account such amount on demand from such
Lender together with interest thereon at the Defaulting Lenders Rate.
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(ii) In determining whether a Lender's balance of the
Advances, Swing Loans, and Agent Advances is less than, equal to, or
greater than such Lender's Pro Rata Share of the Advances, Swing Loans,
and Agent Advances as of a Settlement Request Date, Agent shall, as
part of the relevant Settlement, apply to such balance the portion of
payments actually received in good funds by Agent or Swing Lender with
respect to principal, interest, fees payable by Borrower and allocable
to the Lenders hereunder, and proceeds of Collateral. To the extent
that a net amount is owed to any such Lender after such application,
such net amount shall be distributed by Agent or Swing Lender to that
Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no Agent
Advances or Swing Loans are outstanding, may pay over to Swing Lender
any payments received by Agent, that in accordance with the terms of
this Agreement would be applied to the reduction of the Advances, for
application to Swing Lender's Pro Rata Share of the Advances. If, as of
any Settlement Date, Collections received since the then immediately
preceding Settlement Date have been applied to Swing Lender's Pro Rata
Share of the Advances other than to Swing Loans or Agent Advances, as
provided for in the previous sentence, Swing Lender shall pay to Agent
for the accounts of the Lenders, and Agent shall pay to the Lenders, to
be applied to the outstanding Advances of such Lenders, an amount such
that each Lender shall, upon receipt of such amount, have, as of such
Settlement Date, its Pro Rata Share of the Advances. During the period
between Settlement Dates, Swing Lender with respect to Swing Loans,
Agent with respect to Agent Advances, and each Lender with respect to
the Advances other than Swing Loans and Agent Advances, shall be
entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing Lender, Agent,
or the Lenders, as applicable.
(g) NOTATION. Agent shall record on its books the principal
amount of the Advances owing to each Lender, including the Swing Loans owing to
Swing Lender, and Agent Advances owing to Agent, and the interests therein of
each Lender, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Advances in its books and records, including computer
records, such books and records constituting rebuttably presumptive evidence,
absent manifest error, of the accuracy of the information contained therein.
(h) LENDERS' FAILURE TO PERFORM. All Advances (other than
Swing Loans and Agent Advances) shall be made by the Lenders simultaneously and
in accordance with their Pro Rata Shares. It is understood that (i) no Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make any Advances hereunder, nor shall any Commitment of any
Lender be increased or decreased as a result of any failure by any other Lender
to perform its obligation to make any Advances hereunder, and (ii) no
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failure by any Lender to perform its obligation to make any Advances hereunder
shall excuse any other Lender from its obligation to make any Advances
hereunder.
(i) OPTIONAL OVERADVANCES. Any contrary provision of this
Agreement notwithstanding, if the condition for borrowing under SECTION 3.3(d)
cannot be fulfilled, the Lenders nonetheless hereby authorize Agent or Swing
Lender, as applicable, and Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally continue to make Advances (including
Swing Loans) to Borrower such failure of condition notwithstanding, so long as,
at any time the outstanding Revolver Usage (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group Expenses) does
not exceed the Maximum Revolver Amount and the aggregate amount of such Advances
does not in any event exceed $100,000. The foregoing provisions are for the sole
and exclusive benefit of Agent, Swing Lender, and the Lenders and are not
intended to benefit Borrower in any way. The Advances and Swing Loans, as
applicable, that are made pursuant to this SECTION 2.3(i) shall be subject to
the same terms and conditions as any other Advance or Swing Loan, as applicable,
except that the rate of interest applicable thereto shall be the rates set forth
in SECTION 2.6(c) hereof without regard to the presence or absence of a Default
or Event of Default; provided, that the Required Lenders may, at any time during
the continuance of an Event of Default or if Borrower fails to satisfy any other
material lending condition, revoke Agent's authorization contained in this
SECTION 2.3(i) to make Overadvances (except for and excluding amounts charged to
the Loan Account for interest, fees, or Lender Group Expenses), any such
revocation to be in writing and to become effective upon Agent's receipt
thereof.
(i) In the event Agent obtains actual knowledge that the
Revolver Usage exceeds the amount permitted by the preceding paragraph,
regardless of the amount of or reason for such excess, Agent shall
notify Lenders as soon as practicable (and prior to making any (or any
further) intentional Overadvances (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group
Expenses) unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value), and the Lenders
thereupon shall, together with Agent, jointly determine the terms of
arrangements that shall be implemented with Borrower intended to
reduce, within a reasonable time, the outstanding principal amount of
the Advances to Borrower to an amount permitted by the preceding
paragraph. In the event any Lender disagrees over the terms of
reduction and/or repayment of any Overadvance, the terms of reduction
and/or repayment thereof shall be implemented according to the
determination of the Required Lenders.
(ii) Each Lender shall be obligated to settle with Agent as
provided in SECTION 2.3(f) for the amount of such Lender's Pro Rata
Share of any unintentional Overadvances by Agent reported to such
Lender, any intentional Overadvances made as permitted under this
SECTION 2.3(i), and any Overadvances resulting from the charging to the
Loan Account of interest, fees, or Lender Group Expenses.
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(j) EFFECT OF BANKRUPTCY. If a case is commenced by or against
Borrower under the Bankruptcy Code, or other statute providing for debtor
relief, then, unless otherwise agreed by all Lenders, the Lender Group shall not
make additional loans or provide additional financial accommodations under the
Loan Documents to Borrower as debtor or debtor-in-possession, or to any trustee
for Borrower, nor consent to the use of cash collateral (provided that the Loan
Account shall continue to be charged, to the fullest extent permitted by law,
for accruing interest, fees, and Lender Group Expenses).
2.4 PAYMENTS.
(a) PAYMENTS BY BORROWER.
(i) All payments to be made by Borrower shall be made
without set-off, recoupment, deduction, or counterclaim,
except as otherwise required by law. Except as otherwise
expressly provided herein, all payments by Borrower shall be
made to Agent for the account of the Lender Group at Agent's
address set forth in SECTION 12, and shall be made in
immediately available funds, no later than 11:00 a.m.
(California time) on the date specified herein. Any payment
received by Agent later than 11:00 a.m. (California time), at
the option of Agent, shall be deemed to have been received on
the following Business Day and any applicable interest or fee
shall continue to accrue until such following Business Day.
(ii) Whenever any payment is due on a day other than
a Business Day, such payment shall be made on the following
Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case
may be.
(iii) Unless Agent receives notice from Borrower
prior to the date on which any payment is due to the Lenders
that Borrower will not make such payment in full as and when
required, Agent may assume that Borrower has made (or will
make) such payment in full to Agent on such date in
immediately available funds and Agent may (but shall not be so
required), in reliance upon such assumption, distribute to
each Lender on such due date an amount equal to the amount
then due such Lender. If and to the extent Borrower does not
make such payment in full to Agent on the date when due, each
Lender severally shall repay to Agent on demand such amount
distributed to such Lender, together with interest thereon at
the Base Rate for each day from the date such amount is
distributed to such Lender until the date repaid.
(b) APPORTIONMENT, APPLICATION, AND REVERSAL OF PAYMENTS.
Except as otherwise provided with respect to Defaulting Lenders, principal and
interest payments shall be apportioned ratably among the Lenders (according to
the unpaid principal balance of the Obligations to which such payments relate
held by each individual Lender) and payments of fees (other than fees designated
for Agent's sole and separate account) shall, as applicable, be apportioned
ratably among the Lenders having a Pro Rata Share of the type of credit
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facility as to which the particular fee is applicable. All payments shall be
remitted to Agent and all such payments not relating to principal or interest of
specific Obligations or not constituting payment of specific fees, and all
proceeds of Collateral received by Agent, shall be applied to amounts due and
owing in the following order:
(i) to pay any fees or expense reimbursements then due to
Agent from Borrower,
(ii) to pay any fees or expense reimbursements then due to the
Lenders from Borrower,
(iii) to pay interest due in respect of all outstanding
Advances (including Swing Loans and Agent Advances),
(iv) to pay fees, charges, commissions, and costs in respect
of all outstanding Letters of Credit,
(v) [intentionally omitted]
(vi) to pay or prepay principal of Swing Loans and Agent
Advances,
(vii) to pay principal of all outstanding Advances (other than
Swing Loans and Agent Advances),
(viii) [intentionally omitted]
(ix) provide, upon an Event of Default, cash collateral to be
held by Agent, for the ratable benefit of those Lenders having a Pro
Rata Share of the Letters of Credit, in an amount equal to 105% of the
maximum amount of the Lender Group's obligations under Letters of
Credit; and
(x) to pay any other Obligations due to Agent, or any Lender
by Borrower.
(c) MANDATORY PREPAYMENTS.
(i) Borrower will, immediately upon delivery of the
calculation, pursuant to Section 6.3, of the Excess Cash Flow, if any,
for each quarter, prepay to Lenders the following amounts from such
quarterly Excess Cash Flow: (x) any and all interest then owing to
Lenders, plus (y) principal equal in amount to all interest and fees
for which Borrower has previously elected payment-in-kind treatment,
minus amounts previously prepaid by Borrower on account of such
payment-in-kind interest and fees, plus (z) 80% of any further
quarterly Excess Cash Flow.
(ii) Immediately upon the receipt of the proceeds of any
Disposition, Borrower will prepay the amounts owing to Lenders by an
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amount equal to the proceeds of such Disposition, net only of the
direct out of pocket costs to Borrower of such Disposition, with such
prepayment to be applied as follows: (x) first, to any and all interest
then owing to Lenders; then (y) second, to principal in an amount equal
to all interest and fees for which Borrower has previously elected
payment-in-kind treatment, minus amounts previously prepaid by Borrower
on account of such payment-in-kind interest and fees, and then (z) to
principal owing as part of the Obligations.
(iii) The Maximum Amount will be permanently reduced by the
amount of principal prepaid pursuant to subsection (ii) above (but not
prepayments of principal owing on account of Borrower's election for
payment-in-kind of certain fees and interest) as a result of any such
Disposition.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to the Lender Group pursuant to SECTIONS 2.1 AND
2.12 is greater than the limitations set forth in SECTIONS 2.1 OR 2.12, (an
"OVERADVANCE"), Borrower immediately shall pay to Agent, in cash, the amount of
such excess, which amount shall be used by Agent to reduce the Obligations in
accordance with the priority set forth in SECTION 2.4(b). In addition, Borrower
hereby promises to pay the Obligations (including principal, interest, fees,
costs, and expenses) in Dollars (except to the extent that Borrower has
exercised its option to make payment in kind of certain interest and fees under
the terms of this Agreement) in full to the Lender Group as and when due and
payable under the terms of this Agreement and the other Loan Documents.
2.6 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below,
all Obligations (except for undrawn Letters of Credit) that have been charged to
the Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate of 3.0 percentage points above the Base
Rate.
(b) LETTER OF CREDIT FEE. Borrower shall pay Agent additional
interest in the form of a fee (in addition to the charges, commissions, fees,
and costs set forth in SECTION 2.12(e)) equal to 2.0% per annum times the
aggregate undrawn amount of all outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default, all Obligations (except for undrawn Letters
of Credit) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to 4 percentage points above the per annum rate otherwise applicable
hereunder.
(d) MINIMUM INTEREST. In no event shall the rate of interest
chargeable against the Daily Balance hereunder for any day be less than 10.75%
per annum. To the extent that interest accrued hereunder at the rate set forth
herein would be less than the
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foregoing minimum daily rate, the interest rate chargeable hereunder for such
day automatically shall be deemed increased to the minimum rate.
(e) PAYMENTS. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Agent, without prior notice
to Borrower, to charge such interest and Letter of Credit fees, all Lender Group
Expenses (as and when incurred), the charges, commissions, fees, and costs
provided for in SECTION 2.12(e) (as and when accrued or incurred), the fees and
charges provided for in SECTION 2.11 (as and when accrued or incurred), and all
installments or other payments due under any Loan Document to Borrower's Loan
Account, which amounts thereafter shall accrue interest at the rate then
applicable to Advances hereunder. Agent shall give written notice to Borrower if
and when Lender charges Lender Group Expenses, or amounts under Sections 2.11
and 2.12(e), to Borrower's Loan Account. Any interest not paid when due shall be
compounded and shall thereafter accrue interest at the rate then applicable to
Advances hereunder.
(f) COMPUTATION. All interest and fees chargeable under the
Loan Documents shall be computed on the basis of a 360 day year for the actual
number of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the applicable rates of interest hereunder automatically and
immediately shall be increased or decreased by an amount equal to such change in
the Base Rate.
(g) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and the Lender Group, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrower is and shall be
liable only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess.
2.7 COLLECTION OF ACCOUNTS. Upon the occurrence and pendancy of an
Event of Default, Agent may require Borrower to maintain lockboxes (the
"Lockboxes") and instruct all Account Debtors to remit all amounts owed by them
to one of such Lockboxes. Borrower, Agent, and the Lockbox Banks shall enter
into the Lockbox Agreements, which among other things shall provide for the
opening of a Lockbox Account for the deposit of Collections at the applicable
Lockbox Bank. Notwithstanding the Borrower's cure of any Events of Default,
Agent may continue to require Borrower to comply with the provisions of this
section. Borrower agrees that all Collections received by Borrower while the
provisions of this section are in effect from any Account Debtor or any other
source immediately upon receipt shall be deposited into a Lockbox Account or
into deposit accounts that are not the
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subject of a Lockbox Agreement and from which Borrower shall remit all funds
contained therein to one of the Lockbox Accounts (any such deposit account, a
"Qualified Local Deposit Account"); PROVIDED, HOWEVER, Borrower shall maintain
no more than 50 Qualified Local Deposit Accounts; PROVIDED FURTHER, HOWEVER,
that all Collections received into such Qualified Local Deposit Accounts shall
be wired directly or indirectly no less frequently than weekly to the
Concentration Account. No Lockbox Agreement or other arrangement contemplated
thereby shall be modified by Borrower without the prior written consent of
Agent. Upon the terms and subject to the conditions set forth in the Lockbox
Agreements, all amounts received in each Lockbox Account shall be wired directly
or indirectly each Business Day into the Concentration Account. All amounts
received in the Concentration Account shall be wired each Business Day into an
account (the "Agent's Account") maintained by Agent at a depository selected by
Agent.
2.8 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any payment by
Agent (whether from transfers to Agent by the Lockbox Banks pursuant to the
Lockbox Agreements or otherwise) shall not be considered a payment on account
unless such payment item is a wire transfer of immediately available federal
funds made to the Agent Account or unless and until such payment item is honored
when presented for payment. Should any payment item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly. Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received by
Agent only if it is received into the Agent Account on a Business Day on or
before 11:00 a.m. (California time). If any Collection item is received into the
Agent Account on a non-Business Day or after 11:00 a.m. (California time) on a
Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day. From and after
the Closing Date, Agent shall be entitled to charge Borrower for two Business
Days of `clearance' or `float' at the rate applicable to Advances set forth in
SECTION 2.6(a)(i) or SECTION 2.6(c)(i), as applicable, on all Collections that
are received by Borrower (regardless of whether forwarded by the Lockbox Banks
to Agent). This across-the-board two Business Day clearance or float charge on
all Collections is acknowledged by the parties to constitute an integral aspect
of the pricing of the financing of Borrower and shall apply irrespective of
whether or not there are any outstanding monetary Obligations; the effect of
such clearance or float charge being the equivalent of charging two Business
Days of interest on such Collections. Anything contained herein to the contrary
notwithstanding, the economic benefit of such clearance or float charge shall be
shared ratably by all Lenders. On a monthly basis, Borrower shall report to
Agent such information as is reasonably required by Agent to enable Agent to
calculate such clearance or float charges payable under this section.
2.9 DESIGNATED ACCOUNT. Agent is authorized to make the Advances and
issue the Letters of Credit under this Agreement based upon telephonic or other
instructions received from an Authorized Person, or without instructions if
pursuant to SECTION 2.6(d). Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrower and made by Agent or the
Lenders hereunder. Unless otherwise agreed in writing by Agent and
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Borrower, any Advance, Agent Advance, or Swing Loan requested by Borrower and
made by Agent or the Lenders hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent
shall maintain an account on its books in the name of Borrower (the "LOAN
ACCOUNT") on which Borrower will be charged with all Advances made by Agent or
the Lenders to Borrower or for Borrower's account, including, accrued interest,
Lender Group Expenses, and any other payment Obligations of Borrower. In
accordance with SECTION 2.8, the Loan Account will be credited with all payments
received by Agent from Borrower or for Borrower's account, including all amounts
received in the Agent Account from any Lockbox Bank. Agent shall render monthly
statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within 45 days after
receipt thereof by Borrower, Borrower shall deliver to Agent written objection
thereto describing the error or errors contained in any such statements.
2.11 FEES. Borrower shall pay to Agent the following fees, which fees
shall be non-refundable when paid:
(a) UNUSED LINE FEE. To the Agent, for the Pro Rata benefit of
each Lender with a Revolving Credit Commitment, on the first day of each month
during the term of this Agreement, an unused line fee calculated on a monthly
basis and in an amount equal to .50% per annum divided by twelve then multiplied
by the result of (a) the Maximum Amount, less (b) the sum of (i) the result of
the total Daily Balances of Advances for each day in the immediately preceding
month divided by the actual number of days in the immediately preceding month,
plus (ii) the result of the total Daily Balances of the Letter of Credit Usage
for each day in the immediately preceding month divided by the actual number of
days in the immediately preceding month,
(b) SERVICING FEE. To the Agent, for the sole and separate
account of Agent, a Servicing Fee of $10,000 per month, payable on the first
Business Day of each month during which any Obligations remain unpaid,
(c) DEFERRED CLOSING FEE. Upon the Closing Date, Lenders will
fully earn additional interest in the form of a fee ("Deferred Closing Fee")
equal to three percent (3%) of the Maximum Amount. So long as no Event of
Default occurs, or an event which, with the giving of notice or passage of time
or both, would become an Event of Default, occurs, the Deferred Closing Fee
would be reduced (and interest accruing thereon would be proportionately
reduced) to: (i) one percent (1%) of the Maximum Amount if all of the
Obligations are paid in full within the first one hundred and eighty (180) days
after the Closing Date; (ii) one and one half of one percent (1.5%) of the
Maximum Amount if all the Obligations are paid in full within the first two
hundred and forty (240) days after the Closing Date; (iii) two percent (2%) of
the Maximum Amount if all the Obligations are paid in full within the first
three hundred days after the Closing Date; and (iv) two and one half
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percent (2.5%) of the Maximum Amount if all the Obligations are paid in full
within the first three hundred and sixty days after the Closing Date. At the
option of Borrower, and in lieu of payment in cash, this additional interest may
be payment-in-kind interest that would be added to principal on the date earned
and thereafter treated as principal for all purposes except: (i) principal owing
on account of such payment-in-kind interest will not be considered in the
calculation of Availability or Indebtedness; and (ii) interest accruing on
principal owing on account of such payment-in-kind interest would also
constitute payment-in-kind interest that would be added to principal on the date
earned and thereafter treated as principal. The Deferred Closing Fee shall be
for the ratable benefit of the Lenders. The Deferred Closing Fee will be fully
due and payable in cash on the Closing Date unless Borrower exercises its option
for payment-in-kind treatment.
(d) FACILITY FEE. So long as any Obligations are outstanding,
Lenders will earn additional interest in the form of a fee ("Facility Fee")
payable in advance on the first day of each month or portion thereof in which
any Obligations are outstanding as follows: one half of one percent (.5%) of the
Maximum Amount each month in months one through eleven after the Closing Date;
three quarters of one percent (.75%) of the Maximum Amount each month in months
sixteen through eighteen after the Closing Date; one percent (1%) of the Maximum
Amount in months nineteen through twenty one after the Closing Date; one and one
quarter percent (1.25%) of the Maximum Amount each month thereafter. No payment
of any Facility Fee will be required in months twelve through fifteen after the
Closing Date. At the option of Borrower, and in lieu of payment in cash, this
additional interest may be payment-in-kind interest that would be added to
principal on the date earned and thereafter treated as principal for all
purposes except: (i) principal owing on account of such payment-in-kind interest
will not be considered in the calculation of Availability or Indebtedness; and
(ii) interest accruing on principal owing on account of such payment-in-kind
interest would also constitute payment-in-kind interest that would be added to
principal on the date earned and thereafter treated as principal. The Facility
Fee shall be for the ratable benefit of the Lenders.
(e) DEFERRED LINE FEE. Upon the Closing Date, Lenders will
fully earn additional interest in the form of a fee ("Deferred Line Fee") equal
to two and one half percent (2.5%) of the Maximum Amount. So long as no Event of
Default occurs, or an event which, with the giving of notice or passage of time
or both, would become an Event of Default, occurs, the Deferred Line Fee would
be reduced (and interest accruing thereon would be proportionately reduced) to:
(i) zero if all of the Obligations are paid in full within the first one hundred
and eighty (180) days after the Closing Date; (ii) one half of one percent (.5%)
of the Maximum Amount if all the Obligations are paid in full within the first
two hundred and forty (240) days after the Closing Date; (iii) one percent (1%)
of the Maximum Amount if all the Obligations are paid in full within the first
three hundred days after the Closing Date; and (iv) two percent (2%) of the
Maximum Amount if all the Obligations are paid in full within the first three
hundred and sixty days after the Closing Date. The Deferred Line Fee shall be
due and payable upon the earlier of the termination of the obligations of
Lenders under this Agreement, after the occurrence of an Event of Default,
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or the first anniversary of the Closing Date. The Deferred Line Fee shall be for
the ratable benefit of the Lenders.
(f) FINANCIAL EXAMINATION, VALUATION, AND APPRAISAL FEES. For
the sole and separate account of Agent, a separate fee of $650 per day, per
examiner, a separate fee of $1500 per day, per appraiser, plus out-of-pocket
expenses for each financial analysis and examination (i.e., audits) of Borrower
performed by personnel employed by Agent; and, in addition the charges actually
paid or actually incurred by Agent or any Lender in its or their sole
discretion, reasonably exercised, of one or more third Persons to perform such
financial analyses and examinations (i.e., audits) of Borrower or to appraise
the Collateral.
2.12 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement,
Agent agrees to issue letters of credit for the account of Borrower (each, an
"L/C") or to purchase participations, or execute indemnities or reimbursement
obligations (each such undertaking, an "L/C UNDERTAKING") with respect to
letters of credit issued by an issuing bank for the account of Borrower. Agent
shall have no obligation to issue a Letter of Credit, Agent shall not request
any Lender to issue a Letter of Credit, and no Lender shall issue a Letter of
Credit if any of the following would result:
(i) the Letter of Credit Usage plus the Revolver Usage would
exceed the Maximum Amount,
(ii) the Letter of Credit Usage would exceed $5,000,000, or
(iii) the Revolver Usage would exceed the Maximum Revolver
Amount.
Borrower and Agent acknowledge and agree that certain of the letters of credit
that are to be the subject of L/C Undertakings may be outstanding on the Closing
Date. Each Letter of Credit shall have an expiry date no later than 30 days
prior to the Maturity Date (without regard to any potential renewal term) and
all such Letters of Credit shall be in form and substance acceptable to Agent
(in the exercise of its Permitted Discretion). If Agent is obligated to advance
funds under a Letter of Credit, Borrower immediately shall reimburse such amount
to Agent and, in the absence of such reimbursement, the amount so advanced
immediately and automatically shall be deemed to be an Advance hereunder and,
thereafter, shall bear interest at the rate then applicable to Advances under
SECTION 2.6. Anything herein to the contrary notwithstanding, Agent shall not
issue a Letter of Credit if Agent shall have received written notice from any
Lender, or otherwise has actual knowledge, that one or more of the applicable
conditions precedent set forth in SECTION 3 will not be satisfied on the
requested date of issuance for the applicable Letter of Credit (unless such
condition has been waived in accordance herewith).
(b) Each Lender agrees to fund its Pro Rata Share of any
Advance deemed made pursuant to the foregoing subsection on the same terms and
conditions as if
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Borrower had requested such Advance. Each Lender with a Pro Rata Share of the
Letters of Credit shall be deemed to have purchased a participation in each
Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit, and each Lender agrees to pay
to Agent such Lender's Pro Rata Share of any payments made by Agent under such
Letter of Credit. The obligation of each Lender to deliver to Agent an amount
equal to its respective Pro Rata Share pursuant to the preceding two sentences
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or Default
or the failure to satisfy any condition set forth in SECTION 3 hereof. If any
Lender fails to make available to Agent the amount of such Lender's Pro Rata
Share of any payments made by Agent in respect of such Letter of Credit as
provided in this Section, Agent shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the Base Rate until
paid in full.
(c) Borrower hereby agrees to indemnify, save, defend, and
hold the Lender Group harmless from any loss, cost, expense, or liability,
expenses, and reasonable attorneys' fees incurred by the Lender Group arising
out of or in connection with any Letter of Credit, except that Borrower shall
have no indemnification obligation to the Lender Group with respect to any of
the foregoing that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of the Lender Group.
Borrower agrees to be bound by the issuing bank's regulations and
interpretations of any letter of credit that is the subject of an L/C
Undertaking and opened to or for Borrower's account or by Agent's
interpretations of any L/C issued by Agent to or for Borrower's account, even
though this interpretation may be different from Borrower's own, and Borrower
understands and agrees that the Lender Group shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Borrower understands that the
L/C Undertakings may require Agent to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify, save, defend, and hold the Lender
Group harmless with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by the Lender Group under any L/C
Undertaking as a result of the Lender Group's indemnification of any such
issuing bank.
(d) Borrower hereby authorizes and directs any bank that
issues a letter of credit that is the subject of an L/C Undertaking to deliver
to Agent all instruments, documents, and other writings and property received by
the issuing bank pursuant to such letter of credit, and to accept and rely upon
Agent's instructions with respect to all matters arising in connection with such
letter of credit and the related application.
(e) Any and all reasonable charges, commissions, fees, and
costs incurred by Agent relating to the letters of credit that are the subject
of an L/C Undertaking shall be considered Lender Group Expenses for purposes of
this Agreement and immediately shall be reimbursable by Borrower to Agent.
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(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by the issuing bank or
the Lender Group with any direction, request, or requirement (irrespective of
whether having the force of law) of any Governmental Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time to
time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letters of Credit issued
hereunder, or
(ii) there shall be imposed on the issuing bank or the Lender
Group any other condition regarding any Letter of Credit issued
pursuant hereto;
and the result of the foregoing is to increase, directly or
indirectly, the cost to the Lender Group of issuing, making, guaranteeing, or
maintaining any Letter of Credit or to reduce the amount receivable in respect
thereof by the Lender Group, then, and in any such case, Agent may, at any time
within a reasonable period after the additional cost is incurred or the amount
received is reduced, notify Borrower, and Borrower shall pay on demand such
amounts Agent may specify to be necessary to compensate the Lender Group for
such additional cost or reduced receipt, together with interest on such amount
from the date of such demand until payment in full thereof at the rate then
applicable to Advances hereunder. The Lender Group shall take such steps as are
commercially reasonable under the circumstances to mitigate such additional
costs or reduced receipts. The determination by Agent of any amount due pursuant
to this Section, as set forth in a certificate setting forth the calculation
thereof in reasonable detail, shall, in the absence of manifest or demonstrable
error, be final and conclusive and binding on all of the parties hereto.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make the initial
Advance (or otherwise to extend any credit provided for hereunder), is subject
to the fulfillment, to the reasonable satisfaction of Agent, of each of
conditions precedent set forth below:
(a) the Closing Date shall occur on or before December 15,
1999;
(b) Agent shall have received each of the following documents,
in form and substance satisfactory to Agent, duly executed, and each such
document shall be in full force and effect:
(i) this Agreement;
(ii) the Disbursement Letter;
(iii) the Pay-Off Letter;
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(iv) the Stock Pledge Agreement;
(v) the Suretyship Agreement;
(c) Agent shall have received a certificate from the Secretary
of Borrower attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same;
(d) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(e) Agent shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(f) Agent shall have received certificates of status with
respect to Borrower, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that Borrower is in good
standing in such jurisdictions;
(g) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.9, the form
and substance of which shall be satisfactory to Agent and its counsel;
(h) Agent shall have received the certified copies of the
policies of insurance, together with the endorsements thereto, as are required
by SECTION 6.9, the form and substance of which shall be satisfactory to Agent
and its counsel;
(i) Agent shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as Agent
may reasonably require;
(j) Agent shall have received an opinion of Borrower's counsel
in form and substance satisfactory to Agent in its Permitted Discretion;
(k) Agent shall have received satisfactory evidence that all
tax returns required to be filed by Borrower have been timely filed and all
taxes upon Borrower or its properties, assets, income, and franchises (including
real property taxes and payroll taxes) have been paid prior to delinquency,
except such taxes that are the subject of a Permitted Protest;
(l) Agent shall have received all financing statements
required by Agent, duly executed by Borrower;
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(m) Borrower shall pay all Lender Group Expenses incurred by
Agent or any other Lender in connection with the entry of Agent and the Lenders
into this Agreement;
(n) all other documents and legal matters in connection with
the transactions contemplated by this Agreement deemed to be necessary in
Agent's sole discretion, reasonably exercised, shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent
and its counsel.
3.2 [INTENTIONALLY OMITTED].
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation of
the Lender Group (or any member thereof) to make all Advances, Swing Loans, or
to issue Letters of Credit (and to make any other extensions of credit provided
for hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date),
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any Governmental Authority against
Borrower, Agent, any Lender, or any of their Affiliates;
(d) the occurrence of the all conditions to the Effective Date
as defined in Borrower's confirmed Chapter 11 Plan of Reorganization other than
the condition requiring Borrower to have credit availability under the Exit
Facility, to the extent that such condition is construed to mean that all
conditions precedent under this Section have been satisfied;
(e) the amount of the Availability is greater than zero (0);
and
(f) in the sole and absolute judgment of the Lenders, no
Material Adverse Change in the condition (financial or otherwise) of Borrower or
the Collateral shall have occurred.
The foregoing conditions precedent are not conditions to each
Lender (i) participating in or reimbursing Agent for such Lenders' Pro Rata
Share of any drawings under Letters of Credit as provided herein, or (ii)
participating in or reimbursing Swing Lender or the Agent for such Lenders' Pro
Rata Share of any Swing Loan or Agent Advance as provided herein.
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3.4 TERM. This Agreement shall continue in full force and effect until
November __, 2001 (the "MATURITY Date"). The foregoing notwithstanding, the
Required Lenders shall have the right to terminate the obligations of the
Lenders under this Agreement immediately and without notice upon the occurrence
and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations, other than Post-Termination Obligations, immediately
shall become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of Borrower's
Obligations, and the security interests in the Collateral for the benefit of the
Lender Group shall remain in effect until all Obligations, except the
Post-Termination Obligations, have been fully and finally paid and the Lender
Group's obligations to provide additional credit under this Agreement have been
terminated. Upon termination of this Agreement and after all Obligations, other
than Post-Termination Obligations, have been fully and finally paid and the
Lender Group's obligations to provide additional credit under the Loan Documents
have been terminated irrevocably, then subject to the provisions of this Section
3.5, Agent will, at Borrower's sole expense, execute and deliver any Uniform
Commercial Code termination statements, lien releases, mortgage releases,
re-assignments of trademarks, discharges of security interests, and other
similar discharge or release documents (and, if applicable, in recordable form)
as are reasonably necessary to release, as of record, the security interests,
financing statements, and all other notices of security interests and liens
previously filed by Agent for the benefit of the Lender Group with respect to
the Obligations. In the event that Agent determines in the exercise of its
reasonable discretion that (i) ongoing events have given, or will give, rise to
a claim for Indemnified Liabilities by an Indemnified Person and (ii) Borrower's
Obligations with respect to such Indemnified Liabilities cannot be discharged
prior to the termination of this Agreement, Agent may require Borrower to secure
the payment of such Indemnified Liabilities with collateral in form and amount
reasonably determined by Agent to be acceptable for such purpose and if Borrower
does not do so prior to termination of this Agreement, Agent may retain such
security interests in the Collateral as it determines in its reasonable
discretion are necessary to secure such Indemnified Liabilities until such time
as Borrower makes available other collateral acceptable to Agent or such
Indemnified Liabilities are fully and finally discharged.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Agent, for
the benefit of the Lender Group, a continuing security interest in all currently
existing and hereafter acquired or arising Collateral in order to secure prompt
repayment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents
("AGENT'S LIENS"). The Agent's Liens in and to the Collateral shall attach to
all Collateral without further act on the part of the Lender Group or Borrower
and the Agent's Liens on the Collateral shall be senior to all other liens and
claims (other than Senior Permitted Liens). Due to the great expense and time
involved in redocumenting the perfection of the security interests in favor of
the Lenders, Borrower and the Lenders have agreed that the financing statements,
fixture filings and the like that have been filed or recorded in connection with
the Pre-Petition Loan Agreement and/or the DIP Loan Agreement may remain in
place and unterminated and shall constitute evidence and notice of
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the perfection of Lenders' liens and security interests in the Collateral
provided hereunder. Notwithstanding such agreement and understanding, as a
precautionary matter only, Agent has determined to file new financing statements
in selected jurisdictions in order to maximize the notice provided of Agent's
Liens, and such precautionary filings of such financing statements is not
intended to be, and should not be construed to be, an admission or
acknowledgement of any nature that the prior filings are in any way ineffective
to fully and properly perfect the Agent's Liens. Anything contained in this
Agreement or any other Loan Document to the contrary notwithstanding, except for
Permitted Dispositions, Borrower has no authority, express or implied, to
dispose of any item or portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower,
immediately upon the request of Agent, shall endorse and deliver physical
possession of such Negotiable Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Agent or Agent's designee may (a) notify customers or Account
Debtors of Borrower that the Accounts, General Intangibles, or Negotiable
Collateral have been assigned to Agent for the benefit of the Lender Group or
that Agent for the benefit of the Lender Group has a security interest therein,
and (b) collect the Accounts, General Intangibles, and Negotiable Collateral
directly and charge the collection costs and expenses to the Loan Account.
Borrower agrees that, in such event, it will hold in trust for the Lender Group,
as the Lender Group's trustee, any Collections that it receives and immediately
will deliver said Collections to Agent in their original form as received by
Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon the
request of Agent, Borrower shall execute and deliver to Agent, all financing
statements, fixture filings, security agreements, pledges, assignments,
endorsements of certificates of title, and all other documents that Agent
reasonably may request, in form and substance reasonably satisfactory to Agent,
to perfect and continue perfected Agent's Liens in the Collateral (whether now
owned or hereafter arising or acquired), and in order to fully consummate all of
the transactions contemplated hereby and under the other the Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes, constitutes,
and appoints Agent (and any of Agent's officers, employees, or agents designated
by Agent) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in SECTION 4.4, sign the name of Borrower on any of the documents
described in SECTION 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign Borrower's name on any invoice or bill of lading
relating to any Account, drafts against Account Debtors, and notices to Account
Debtors, (c) at any time that an Event of Default has occurred and is
continuing, send requests for verification of Accounts, (d) at any time that an
Event of Default has occurred and is continuing, endorse Borrower's name on any
Collection item that may come into the Lender Group's possession, (e) at any
time that an Event of Default has occurred and is
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continuing, notify the post office authorities to change the address for
delivery of Borrower's mail to an address designated by Agent, to receive and
open all mail addressed to Borrower, and to retain all mail relating to the
Collateral and promptly forward all other mail to Borrower, (f) at any time that
an Event of Default has occurred and is continuing, make, settle, and adjust all
claims under Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance, and (g) at any time that
an Event of Default has occurred and is continuing, settle and adjust disputes
and claims respecting the Accounts directly with Account Debtors, for amounts
and upon terms that Agent determines to be reasonable, and Agent may cause to be
executed and delivered any documents and releases that Agent determines to be
necessary in connection therewith. The appointment of Agent as Borrower's
attorney, and each and every one of its rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and the Lender Group's obligations to extend credit
hereunder are terminated.
4.6 RIGHT TO INSPECT. Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, from time to
time hereafter, on reasonable notice and during business hours, to inspect the
Books and to check, test, and appraise the Collateral in order to verify
Borrower's financial condition or the amount, quality, value, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender Group to enter
into this Agreement, Borrower, and each of its Subsidiaries, as applicable,
makes the following representations and warranties to the Lender Group which
shall be true, correct, and complete, in all material respects, as of the date
hereof, and shall be true, correct, and complete in all respects as of the
Closing Date, and at and as of the date of the making of each Advance (or other
extension of credit) made thereafter, as though made on and as of the date of
such Advance (or other extension of credit) (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 NO ENCUMBRANCES. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens and Agent's Liens
on the Telephones are prior to all liens except for Senior Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. Except as set forth on Schedule 5.2, the
Eligible Accounts are bona fide existing payment obligations created by the sale
and delivery of Inventory or the rendition of services to Account Debtors in the
ordinary course of Borrower's business, owed to Borrower without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation. Any goods
or services giving rise to such Eligible Accounts have been provided to the
Account Debtor.
5.3 [INTENTIONALLY OMITTED].
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5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes other than as a result of
ordinary wear and tear and obsolescence.
5.5 LOCATION OF EQUIPMENT. The Equipment not installed and in operation
at a third party location pursuant to a Telephone Placement Agreement is not
stored with a bailee, warehouseman, or similar party and is located only at the
locations identified on SCHEDULE 6.11 permitted by SECTION 6.11.
5.6 [INTENTIONALLY OMITTED].
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in SCHEDULE 5.7 and
Borrower's FEIN is identified in SCHEDULE 5.7.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.Borrower is duly
organized and existing and in good standing under the laws of the jurisdiction
of its organization and qualified to do business in any state where the failure
to be so qualified reasonably could be expected to result in a Material Adverse
Change.
(b) Set forth on SCHEDULE 5.8, is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding. Except as set forth on SCHEDULE 5.8, Borrower is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital Stock or any security convertible
into or exchangeable for any of its capital Stock.
(c) Set forth on SCHEDULE 5.8, is a complete and accurate list
of Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding capital Stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of Borrower.
(b) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
applicable to Borrower, the Governing Documents of Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
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obligation of Borrower, (iii) result in or require the creation or imposition of
any Lien of any nature whatsoever upon any properties or assets of Borrower,
other than Permitted Liens, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation of
Borrower.
(c) The execution, delivery, and performance by Borrower of
this Agreement and the Loan Documents to which Borrower is a party do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any Governmental Authority or other Person.
(d) This Agreement and the other Loan Documents to which
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Agent's Liens granted by Borrower to Agent, for the
benefit of the Lender Group, in and to its assets pursuant to this Agreement and
the other Loan Documents will be validly created and perfected Liens having the
priority provided for in Section 4.1.
5.10 LITIGATION. Other than those matters disclosed on SCHEDULE 5.10,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Borrower, threatened against Borrower, or any of its Subsidiaries, as
applicable, except for matters arising after the Closing Date that, if decided
adversely to Borrower, or any of its Subsidiaries, as applicable, reasonably
could not be expected to result in a Material Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrower or any guarantor of the Obligations that have been delivered by
Borrower to the Lender Group have been prepared in accordance with GAAP (except,
in the case of unaudited financial statements, for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present Borrower's (or
such guarantor's, as applicable) financial condition as of the date thereof and
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to Borrower (or such guarantor, as applicable) since
the date of the May 31st financial statements submitted to the Lender Group.
5.12 FRAUDULENT TRANSFER.
(a) [intentionally omitted.]
(b) No transfer of property is being made by Borrower and no
obligation is being incurred by Borrower in connection with the transactions
contemplated by
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this Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of Borrower.
5.13 EMPLOYEE BENEFITS. Neither Borrower, any of its Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on SCHEDULE 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan which is subject to such standards and
to which it is obligated to contribute, if any. No ERISA Event has occurred nor
has any other event occurred that may result in an ERISA Event that reasonably
could be expected to result in a Material Adverse Change. Neither Borrower nor
any of its Subsidiaries, or any ERISA Affiliate, is currently subject to any
direct or indirect liability with respect to any Plan under any applicable law,
treaty, rule, regulation, or agreement other than liability for contributions in
accordance with the terms of such Plans. Neither Borrower nor any of its
Subsidiaries or any of their ERISA Affiliates is required to provide security to
any Plan under Section 401(a)(29) of the IRC.
5.14 ENVIRONMENTAL CONDITION. None of Borrower's properties or assets
has ever been used by Borrower or, to the best of Borrower's knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials in violation of any
applicable laws or regulations. None of Borrower's properties or assets has ever
been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute. No Lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned or operated by Borrower. Borrower has not received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.15 BROKERAGE FEES. Borrower has not utilized the services of any
broker or finder in connection with Borrower's obtaining financing from the
Lender Group under this Agreement and no brokerage commission or finders fee is
payable in connection herewith.
5.16 YEAR 2000 COMPLIANCE. The Borrower's status and plans concerning
its "Year 2000 Compliance" are accurately described in its Disclosure Statement
dated May 11, 1999, a copy of which has been supplied to Agent. There have been
no material adverse changes in such status and no material changes in such plans
since the date of the Disclosure Statement.
5.17 INTELLECTUAL PROPERTY. Borrower owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted.
5.18 LEASES. Borrower enjoys peaceful and undisturbed possession under
all leases material to the business of Borrower and to which it is a party or
under which it is operating.
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All of such leases are valid and subsisting and no material default by Borrower
exists under any of them.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until full and final payment of the Obligations owing upon, or as
a result of, termination of this Agreement, Borrower or its Subsidiaries, as
applicable, shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Agent.
6.2 COLLATERAL REPORTING. Provide Agent with: (i) the same quantity,
quality and frequency of information with respect to the Collateral and the
business operations of Borrower, as Borrower provided to the Original Lenders
under the Pre-Petition Loan Agreement, including but not limited to, a
"Borrowing Base Certificate" (as defined under the Pre-Petition Loan Agreement),
an Accounts Payable Summary, an Accounts Payable and Accrued Liabilities
Summary, and a Phone Count By State Summary Report, and such other reports as to
the Collateral or the financial condition of Borrower as Agent reasonably may
request from time to time.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent, with
copies to each Lender:
(a) as soon as available, but in any event within 45 days
after the end of each month during each of Borrower's fiscal years,
(i) a company prepared balance sheet, income
statement, and statement of cash flow covering Borrower's
operations during such period,
(ii) a certificate signed by its chief financial
officer to the effect that:
(A) the financial statements delivered
hereunder have been prepared in accordance with GAAP
(except for the lack of footnotes and being subject
to year-end audit adjustments) and fairly present the
financial condition of Borrower,
(B) the representations and warranties of
Borrower contained in this Agreement and the other
Loan Documents are true and correct in all material
respects on and as of the date of such certificate,
as though made on and as of such date (except to the
extent that such representations and warranties
relate solely to an earlier date),
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<PAGE> 50
(C) there does not exist any condition or
event that constitutes a Default or Event of Default
(or, to the extent of any non-compliance, describing
such non-compliance as to which he or she may have
knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto),
(iii) for each month that is the date on which a
financial covenant in SECTION 7.20 is to be tested, a
Compliance Certificate demonstrating, in reasonable detail,
compliance at the end of such period with the applicable
financial covenants contained in SECTION 7.20,
(iv) for each quarter, a certificate signed by its
chief financial officer setting forth, in reasonable detail, a
calculation of Excess Cash Flow, if any, for such quarter,
(b) as soon as available, but in any event within 90 days
after the end of each of Borrower's fiscal years, financial statements
of Borrower for each such fiscal year, audited by independent certified
public accountants reasonably acceptable to Agent (Agent agrees that
BDO Seidman is acceptable) and certified, without any qualifications,
by such accountants to have been prepared in accordance with GAAP (such
audited financial statements to include a balance sheet, income
statement, and statement of cash flow and, if prepared, such
accountants' letter to management),
(c) if and when filed by Borrower,
(i) form 10-Q quarterly reports, Form 10-K annual
reports, and Form 8-K current reports,
(ii) any other filings made by Borrower with the SEC,
and
(iii) any other information that is provided by
Borrower to its shareholders generally,
(d) upon the request of Agent,
(i) any other report reasonably requested relating to
the financial condition of Borrower.
If Borrower is a parent company of one or more Subsidiaries,
then, in addition to the financial statements referred to above, Borrower agrees
to deliver, if requested by Agent, financial statements prepared on both a
consolidated and consolidating basis. Borrower agrees that its independent
certified public accountants are authorized to communicate with Agent and to
release to Agent whatever financial information concerning Borrower that Agent
reasonably may request.
6.4 [INTENTIONALLY OMITTED].
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<PAGE> 51
6.5 TELEPHONE PLACEMENT AGREEMENTS.Cause all Telephone Placement
Agreements entered into, renewed, or extended after the Closing Date to be
substantially in a form approved by Agent.
6.6 TITLE TO EQUIPMENT. Upon Agent's request, immediately deliver to
Agent, properly endorsed, any and all evidences of ownership of, certificates of
title, or applications for title to any items of Equipment.
6.7 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good operating
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Other than those items of Equipment that
constitute fixtures on the Closing Date, Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and such Equipment shall at all times remain personal property.
6.8 TAXES. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrower
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Agent with proof satisfactory to Agent indicating
that Borrower has made such payments or deposits. Upon Agent's request, Borrower
shall deliver satisfactory evidence of payment of applicable excise taxes in
each jurisdictions in which (a) Borrower conducts business or is required to pay
any such excise tax, (b) where Borrower's failure to pay any such applicable
excise tax would result in a Lien on the properties or assets of Borrowers, or
(c) where Borrower's failure to pay any such applicable excise tax would
constitute a Material Adverse Change.
6.9 INSURANCE.
(a) At its expense, maintain insurance respecting the
Collateral wherever located and with respect to Borrower's business, covering
loss or damage by fire, theft, explosion, and all other hazards and risks as
ordinarily are insured against by other Persons engaged in the same or similar
businesses. Borrower also shall maintain business interruption, public
liability, and product liability insurance, as well as insurance against
larceny, embezzlement, and criminal misappropriation All such policies of
insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Agent. Borrower shall deliver the originals of all
such policies to Agent with 438 BFU lender's loss payable endorsements or other
reasonably satisfactory lender's loss payable endorsements, naming Agent as loss
payee or additional insured, as appropriate, as Lenders' interests may appear.
Each policy of insurance or endorsement shall contain a clause requiring the
insurer to give not less than 30 days prior written notice to Agent in the event
of cancellation of the policy for any reason whatsoever. If Borrower fails to
provide and pay
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for such insurance, Agent may, at its option, but shall not be required to,
procure the same and charge Borrower's Loan Account therefor.
(b) Borrower shall give Agent prompt notice of any loss
covered by such insurance. Agent shall have the exclusive right to adjust any
losses payable under any such insurance policies in excess of $500,000, without
any liability to Borrower whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy mentioned above
(other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over to
Agent to be applied at the option of the Required Lenders either to the
prepayment of the Obligations without premium, in such order or manner as the
Required Lenders may elect, or shall be disbursed to Borrower under staged
payment terms reasonably satisfactory to the Required Lenders for application to
the cost of repairs, replacements, or restorations.
6.10 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and under the
other Loan Documents by or on behalf of Borrower without setoff or counterclaim
and free and clear of, and without deduction or withholding for or on account
of, any federal, state, or local taxes, except as required by law.
6.11 LOCATION OF EQUIPMENT. Keep the Equipment not installed and in
operation at a third party location pursuant to a Telephone Placement Agreement
only at one of the locations identified on SCHEDULE 6.11; provided, however,
that Borrower may amend SCHEDULE 6.11 so long as such amendment occurs by
written notice to Agent not less than 30 days prior to the date on which the
Equipment is moved to such new location, so long as such new location is within
the continental United States, and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Agent's Liens on such assets and
also provides to Agent a Collateral Access Agreement.
6.12 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in a Material Adverse Change.
6.13 EMPLOYEE BENEFITS.
(a) Cause to be delivered to Agent, each of the following: (i)
promptly, and in any event within 10 Business Days after Borrower or any of its
Subsidiaries knows or has reason to know that an ERISA Event has occurred that
reasonably could be expected to result in a Material Adverse Change, a written
statement of the chief financial officer of Borrower describing such ERISA Event
and any action that is being taken with respect thereto by Borrower, any such
Subsidiary or ERISA Affiliate, and any action taken or threatened by the IRS,
Department of Labor, or PBGC (Borrower or such Subsidiary, as applicable, shall
be deemed to know all facts known by the administrator of any Benefit Plan of
which it is the plan sponsor), (ii) promptly, and in any event within 3 Business
Days after
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the filing thereof with the IRS, a copy of each funding waiver request filed
with respect to any Benefit Plan and all communications received by Borrower,
any of its Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate
with respect to such request, and (iii) promptly, and in any event within 3
Business Days after receipt by Borrower, any of its Subsidiaries or, to the
knowledge of Borrower, any ERISA Affiliate, of the PBGC's intention to terminate
a Benefit Plan or to have a trustee appointed to administer a Benefit Plan,
copies of each such notice.
(b) Cause to be delivered to Agent, upon Agent's request, each
of the following: (i) a copy of each Plan (or, where any such plan is not in
writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.14 LEASES. Pay when due all rents and other amounts payable under any
leases to which Borrower is a party or by which Borrower's properties and assets
are bound, unless such payments are the subject of a Permitted Protest. To the
extent that Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Agent shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Maximum Amount.
6.15 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Borrower's obtaining
financing from the Lender Group under this Agreement. Borrower agrees and
acknowledges that payment of all such brokerage commissions or finders fees
shall be the sole responsibility of Borrower, and Borrower agrees to indemnify,
defend, and hold Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrower's obtaining financing from the
Lender Group under this Agreement.
6.16 [INTENTIONALLY OMITTED].
6.17 [INTENTIONALLY OMITTED].
6.18 CORPORATE EXISTENCE, ETC. At all times preserve and keep in full
force and effect Borrower's valid corporate existence and good standing and any
rights and franchises material to Borrower's businesses.
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<PAGE> 54
6.19 DISCLOSURE UPDATES. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (i) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (ii) correct any defect or error that may
be discovered therein or in any Loan Document or in the execution,
acknowledgement, filing, or recordation thereof.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall be
available and until full and final payment of the Obligations owing upon, or as
a result of termination of this Agreement, neither Borrower nor any of its
Subsidiaries will do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Undertakings;
(b) Indebtedness set forth on Schedule 7.1;
(c) Purchase Money Indebtedness;
(d) Refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this SECTION 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness;
(e) Obligations that constitute Indebtedness solely by virtue
of being secured by Permitted Liens under clause (f) of the definition of
Permitted Liens; and
(f) Indebtedness incurred by Borrower in connection with the
Cerberus Settlement.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens
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that are replacements of Permitted Liens to the extent that the original
Indebtedness is refinanced under SECTION 7.1(d) and so long as the replacement
Liens only encumber those assets or property that secured the original
Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, assign, lease, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets.
(d) Unless Agent shall have consented in writing, suffer the
loss of the services of John Chichester as President of Borrower and fail to
obtain the services of a replacement acceptable to Agent in its sole discretion
within 60 days of first receiving notice of such resignation.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or otherwise
dispose of any of Borrower's properties or assets, other than pursuant to
Permitted Dispositions.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate structure
(within the meaning of SECTION 9402(7) of the Code), or identity, or add any new
fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Agent and except for Permitted Liens under
clause (f) of the definition of Permitted Liens.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrower's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except for scheduled payments under any Indebtedness
permitted by Section 7.1, and except in connection with a refinancing permitted
by SECTION 7.1(D), prepay, redeem, retire, defease, purchase, or otherwise
acquire any Indebtedness owing to any third Person, other than the Obligations
and Pre-Petition Obligations in accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter or change in
any material way any of the terms or conditions of any agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness
permitted under SECTIONS 7.1(b), (c), or (d).
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7.9 [INTENTIONALLY OMITTED].
7.10 [INTENTIONALLY OMITTED].
7.11 DISTRIBUTIONS. Except as provided under the Plan, make any
distribution or declare or pay any dividends (in cash or other property, other
than Stock) on, or purchase, acquire, redeem, or retire any of Borrower's Stock,
of any class, whether now or hereafter outstanding.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Agent information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Agent pursuant to or in accordance with this Agreement, and agrees that Agent
may contact directly any such accounting firm or service bureau in order to
obtain such information.
7.13 INVESTMENTS. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) or, or other interests
in, a Person, (b) loans, advances, capital contributions, or transfers of
property to a Person, or (c) the acquisition of all or substantially all of the
properties or assets of a Person.
7.14 TRANSACTIONS WITH AFFILIATES. Except for the Cerberus Settlement,
directly or indirectly enter into or permit to exist any material transaction
with any Affiliate of Borrower except for transactions that are in the ordinary
course of Borrower's business, upon fair and reasonable terms, that are fully
disclosed to Agent, and that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 COMPENSATION. Pay annual director fees to outside directors of
more than $20,000 per director (or $24,000 for the Chairman of the Board) for
the year 2000; increase the annual fee or per-meeting fees paid to directors
during any year by more than 15% over the prior year; pay or accrue total cash
compensation, during any year, to officers and senior management employees in an
aggregate amount in excess of 115% of the maximum amount that such employee was
eligible to have earned (including bonus amounts) in the prior year, other than
in connection with the retention by the Borrower of a new chief executive
officer in April of 1999.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, (i) to repay in full the outstanding
principal, accrued interest, and accrued fees and expenses owing to the Lenders
under the DIP Loan Agreement, and
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<PAGE> 57
(ii) to pay transactional fees, costs, and expenses incurred in connection with
this Agreement, and (b) thereafter for its lawful and permitted corporate
purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Agent and so
long as, at the time of such written notification, Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens and also provides to Agent a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Agent's prior written consent.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay
any required installment or any other payment required under Section 412 of the
IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability
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<PAGE> 58
of any such entity under Title IV of ERISA; which, individually or in the
aggregate, results in or reasonably would be expected to result in a claim
against or liability of Borrower, any of its Subsidiaries or any ERISA Affiliate
in excess of $500,000.
7.20 FINANCIAL COVENANTS.FIXED CHARGE COVERAGE RATIO. Borrower will not permit
its Fixed Charge Coverage Ratio on the last day of any fiscal quarter,
cumulative with the fiscal quarters preceding such fiscal quarter (if any) shown
on the chart below, to be less than the ratio set forth opposite such fiscal
quarter (calculated without reference to any interest and fees under this
Agreement as to which Borrower has exercised its option to make payment in
kind):
<TABLE>
<CAPTION>
============================================= ===========================================
FISCAL QUARTER ENDING RATIO
- --------------------------------------------- -------------------------------------------
<S> <C>
December 31, 1999 .70
- --------------------------------------------- -------------------------------------------
March 31, 2000 .75
- --------------------------------------------- -------------------------------------------
June 30, 2000 .85
- --------------------------------------------- -------------------------------------------
September 30, 2000 & after 1.0
============================================= ===========================================
</TABLE>
(b) DEBT TO EBITDA RATIO. Borrower will not permit the ratio
of Indebtedness to EBITDA on the last day of any fiscal quarter, cumulative with
the fiscal quarters preceding such fiscal quarter (if any) shown on the chart
below, to be more than the ratio set forth opposite such fiscal quarter
(calculated without reference to any interest and fees under this Agreement as
to which Borrower has exercised its option to make payment in kind):
<TABLE>
<CAPTION>
============================================= ===========================================
FISCAL QUARTER ENDING RATIO
- --------------------------------------------- -------------------------------------------
<S> <C>
December 31, 1999 40
- --------------------------------------------- -------------------------------------------
March 31, 2000 18
- --------------------------------------------- -------------------------------------------
June 30, 2000 11
- --------------------------------------------- -------------------------------------------
September 30, 2000 & after 7
============================================= ===========================================
</TABLE>
(c) CURRENT RATIO. Borrower will not permit its Current Ratio
(the ratio of Consolidated Current Assets of Borrower to Consolidated Current
Liabilities) on the last day of any month in any fiscal quarter to be less than
the ratio set forth opposite such fiscal quarter (calculated without reference
to any interest and fees under this Agreement as to which Borrower has exercised
its option to make payment in kind):
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<PAGE> 59
<TABLE>
<CAPTION>
============================================= ===========================================
FISCAL QUARTER ENDING RATIO
- --------------------------------------------- -------------------------------------------
<S> <C>
December 31, 1999 1.1
- --------------------------------------------- -------------------------------------------
March 31, 2000 1.1
- --------------------------------------------- -------------------------------------------
June 30, 2000 1.1
- --------------------------------------------- -------------------------------------------
September 30, 2000 1.1
- --------------------------------------------- -------------------------------------------
December 31, 2000 1.1
- --------------------------------------------- -------------------------------------------
March 31, 2001 1.2
- --------------------------------------------- -------------------------------------------
June 30, 2001 & after 1.3
============================================= ===========================================
</TABLE>
(d) INTEREST COVERAGE RATIO. Borrower will not permit its
Interest Coverage Ratio on the last day of any month during any fiscal quarter,
cumulative with the fiscal quarters preceding such fiscal quarter (if any) shown
on the chart below, to be less than the ratio set forth opposite such fiscal
quarter (calculated without reference to any interest and fees under this
Agreement as to which Borrower has exercised its option to make payment in
kind):
<TABLE>
<CAPTION>
============================================= ===========================================
FISCAL QUARTER ENDING RATIO
- --------------------------------------------- -------------------------------------------
<S> <C>
December 31, 1999 .90
- --------------------------------------------- -------------------------------------------
March 31, 2000 .90
- --------------------------------------------- -------------------------------------------
June 30, 2000 1.0
- --------------------------------------------- -------------------------------------------
September 30, 2000 1.1
- --------------------------------------------- -------------------------------------------
December 31, 2000 & after 1.2
============================================= ===========================================
</TABLE>
(e) MINIMUM QUARTERLY EBITDA. Borrower will not permit its
cumulative EBITDA for any fiscal quarter, cumulative with the fiscal quarters
preceding such fiscal quarter (if any) shown on the chart below, to be less than
the amounts set forth opposite such fiscal quarter (calculated without reference
to any interest and fees under this Agreement as to which Borrower has exercised
its option to make payment in kind):
<TABLE>
<CAPTION>
============================================= ===========================================
FISCAL QUARTER ENDING CUMULATIVE EBITDA
- --------------------------------------------- -------------------------------------------
<S> <C>
December 31, 1999 $1.3 mm
- --------------------------------------------- -------------------------------------------
March 31, 2000 $3 mm
- --------------------------------------------- -------------------------------------------
June 30, 2000 $5 mm
</TABLE>
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<PAGE> 60
<TABLE>
<CAPTION>
============================================= ===========================================
FISCAL QUARTER ENDING CUMULATIVE EBITDA
- --------------------------------------------- -------------------------------------------
<S> <C>
September 30, 2000 $7.5 mm
- --------------------------------------------- -------------------------------------------
</TABLE>
Borrower will not permit its cumulative EBITDA on a rolling twelve
month basis for any fiscal quarter to be less than the amounts set forth
opposite such fiscal quarter (calculated without reference to any interest and
fees under this Agreement as to which Borrower has exercised its option to make
payment in kind):
<TABLE>
<CAPTION>
============================================= ===========================================
FISCAL QUARTER ENDING 12 MONTH EBITDA
- --------------------------------------------- -------------------------------------------
<S> <C>
December 31, 2000 $8 mm
- --------------------------------------------- -------------------------------------------
March 31, 2001 $8.5 mm
- --------------------------------------------- -------------------------------------------
June 30, 2001 & after $9 mm
============================================= ===========================================
</TABLE>
(f) MINIMUM NUMBER OF OPERATING TELEPHONES. Borrower will not
permit the number of revenue producing operating Telephones which Agent has
approved as Eligible Pay Telephones at any time to be less than 35,500 such
Telephones.
(g) MINIMUM FOUR MONTH CUMULATIVE OPERATING CASH. Borrower
will not permit its cash available for operations on the last business day of
any given month (calculated in a manner consistent with the calculations of such
amounts in the Projections), together with the cash available for operations on
the last business day of the three preceding months (excluding cash used as
collateral for any letters of credit and excluding cash in Telephone coin
boxes), on the last business day of any month to be less than 80% of the amount
for such month set forth in such Five Year Projections together with the amounts
set forth therein for the preceding three months (without consideration of
Borrower's projections of or receipts of "true-up" of dial around compensation).
Outstanding checks or other similar forms of payment by Borrower as per
Borrower's books and records at any given month end will not exceed 120% of the
amounts reflected in such Projections.
7.21 CAPITAL EXPENDITURES. Borrower will not permit its cumulative
commitments for Capital Expenditures to exceed $475,000 for Borrower's fiscal
quarter ending on December 31, 1999, $2.475 million through and including
Borrower's fiscal years 2000, and $4.475 million through and including
Borrower's fiscal year 2001.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "EVENT OF DEFAULT") under this Agreement:
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<PAGE> 61
8.1 If Borrower fails to pay when due and payable or when declared due
and payable, any portion of the Obligations (whether of principal, interest,
fees and charges due the Lender Group, reimbursement of Lender Group Expenses,
or other amounts constituting Obligations);
8.2 If Borrower (a) fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in Sections 6.1
[Accounting System], 6.2 [Collateral Reporting], 6.3 [Financial Statement,
Reports, Certificates], 6.5 [Telephone Placement Agreements], 6.7 [Maintenance
of Equipment], 6.8 [Taxes], 6.9 [Insurance], 6.11 [Location of Equipment], and
6.14 [Leases] and such failure continues for a period of 10 days after Borrower
receives notice thereof from Agent; or (b) fails to perform, keep, or observe
any other term, provision, condition, covenant, or agreement contained in this
Agreement and any of the Loan Documents or in any other present or future
agreement between Borrower and the Lender Group (giving effect to any such grace
periods, cure periods, or required notices, if any, expressly provided for in
such Loan Documents or agreement); provided that, during any period of time that
any such failure exists, even if such failure is not yet an Event of Default by
virtue of the existence of a grace or cure period or the pre-condition of giving
notice, Agent and Lenders shall not be required during such period to make
Advances to Borrower or issue an L/C or enter into an L/C undertaking for
account of Borrower;
8.3 If there is a Material Adverse Change and, in the case of a
Material Adverse Change which can be cured, such Material Adverse Change
continues uncured for a period of 10 days;
8.4 If Borrower or any of its Subsidiaries is enjoined, restrained, or
in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.5 If a notice of Lien or levy is filed of record with respect to any
of Borrower's or any of its Subsidiaries' properties or assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower's or any of its Subsidiaries'
properties or assets and the same is not paid on the payment date thereof or is
not the subject of a Permitted Protest;
8.6 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of Borrower's or any of its Subsidiaries' properties or assets;
8.7 If there is a default in any material agreement to which Borrower
or any of its Subsidiaries is a party with one or more third Persons and such
default (a) occurs at the final maturity of the obligations thereunder, or (b)
results in a right by such third Person(s), irrespective of whether exercised,
to accelerate the maturity of Borrower's or
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<PAGE> 62
any of its Subsidiaries' obligations thereunder to terminate such agreement, or
to refuse to renew such agreement pursuant to an automatic renewal right
therein;
8.8 If Borrower or any of its Subsidiaries makes any payment on account
of Indebtedness that has been contractually subordinated in right of payment to
the payment of the Obligations, except to the extent such payment is permitted
by the terms of the subordination provisions applicable to such Indebtedness; or
8.9 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by Borrower, its Subsidiaries, or any officer, or director of
Borrower or any of its Subsidiaries, or if any such warranty or representation
is withdrawn.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may, except to the
extent otherwise expressly provided or required below, authorize and instruct
Agent to do any one or more of the following on behalf of the Lender Group (and
Agent, acting upon the instructions of the Required Lenders, shall do the same
on behalf of the Lender Group), all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting Agent's rights and security interests, for the benefit of the
Lender Group, in the Collateral without affecting the Obligations;
(d) Require Borrower to remit all Collections to a Lockbox
Account as provided in SECTION 2.7;
(e) [intentionally omitted];
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Collateral. Borrower agrees
to assemble the Collateral if Agent so requires, and to make the Collateral
available to Agent as Agent may designate. Borrower authorizes Agent to enter
the premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or Lien that in Agent's determination appears to
conflict with the
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<PAGE> 63
Agent's Liens and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned or leased premises, Borrower hereby grants
Agent a license to enter into possession of such premises and to occupy the
same, without charge, for up to 120 days in order to exercise any of the Lender
Group's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Hold, as cash collateral, any and all balances and
deposits of Borrower held by the Lender Group, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(h) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Borrower hereby grants to Agent a license or other right
to use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender Group's benefit;
(i) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Agent
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(j) Agent shall give notice of the disposition of the
Collateral as follows:
(i) Agent shall give Borrower and each holder of a security
interest in the Collateral who has filed with Agent a written request
for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than
a public sale is to be made of the Collateral, then the time on or
after which the private sale or other disposition is to be made;
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in SECTION 12, at least 10
days before the date fixed for the sale, or at least 10 days before the
date on or after which the private sale or other disposition is to be
made; no notice needs to be given prior to the disposition of any
portion of the Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized
market. Notice to Persons other than Borrower claiming an interest in
the Collateral shall be sent to such addresses as they have furnished
to Agent;
(iii) If the sale is to be a public sale, Agent also shall
give notice of the time and place by publishing a notice one time at
least 10 days before the
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<PAGE> 64
date of the sale in a newspaper of general circulation in the county in
which the sale is to be held;
(k) Setoff all amounts received in the Lockbox Accounts
against the Obligations;
(l) The Lender Group may credit bid and purchase at any public
sale; and
(m) The Lender Group shall have all other rights and remedies
available to it at law or in equity pursuant to any other Loan Documents; and
(n) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to Borrower.
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements shall
be cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines in its Permitted Discretion that such failure by Borrower could
result in a Material Adverse Change, and without prior notice to Borrower, Agent
may do any or all of the following: (a) make payment of the same or any part
thereof; (b) set up such reserves in Borrower's Loan Account as Agent deems
necessary to protect the Lender Group from the exposure created by such failure;
or (c) obtain and maintain insurance policies of the type described in SECTION
6.9 and take any action with respect to such policies as Agent deems prudent.
Any such amounts paid by Agent shall constitute Lender Group Expenses. Any such
payments made by Agent shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence (for the
purposes of this Agreement only) that the same was validly due and owing.
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<PAGE> 65
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which Borrower may in any way be liable, provided,
however that Borrower does not hereby waive any notices expressly provided for
in this Agreement.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Borrower hereby
agrees that: (a) so long as the Lender Group complies with its obligations, if
any, under Section 9207 of the Code, the Lender Group shall not in any way or
manner be liable or responsible for: (i) the safekeeping of the Collateral; (ii)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (iii) any diminution in the value thereof; or (iv) any act or default
of any carrier, warehouseman, bailee, forwarding agency, or other Person; and
(b) prior to the Lender Group taking actual physical possession of the
Collateral, all risk of loss, damage, or destruction of the Collateral shall be
borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold
the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "INDEMNIFIED
PERSON") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "INDEMNIFIED LIABILITIES"). Borrower shall have no obligation to any
Indemnified Person under this SECTION 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability for which
Borrower was required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrower with respect thereto.
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<PAGE> 66
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, or telefacsimile to the relevant
party, as the case may be, at its address set forth below:
If to Borrower: PHONETEL TECHNOLOGIES, INC.
North Point Tower, 7th Floor
1001 Lakeside Avenue
Cleveland, Ohio 44114-1195
Mr. John Chichester, President
Fax No. (216) 875-4339
with copies to: Hahn Loeser & Parks LLP
3300 BP Tower
200 Public Square
Cleveland, Ohio 44114-2301
Attn: F. Ronald O'Keefe, Esq.
Fax No. (216) 241-2824
If to Agent: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division
Manager
Fax No. 310.478.9788
with copies to: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Fax No. 213.745.3345
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
all other parties. All notices or demands sent in accordance with this SECTION
12, other than notices by the Lender Group in connection with Sections 9504 or
9505 of the Code, shall be deemed received on the earlier of the date of actual
receipt or 3 days after the deposit thereof in the mail. Borrower acknowledges
and agrees that notices sent by the Lender Group in connection with Sections
9504 or 9505 of the Code shall be deemed sent when deposited in the mail or
personally delivered, or, where permitted by law, transmitted by telefacsimile
or other similar method set forth above.
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<PAGE> 67
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
REQUIRED LENDERS' OPTION, IN THE COURTS OF ANY JURISDICTION WHERE THE REQUIRED
LENDERS ELECT TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY
MAY BE FOUND. BORROWER AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13.
BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of Agent, assign and
delegate to one or more assignees (provided that no written consent of Agent
shall be required in connection with any assignment and delegation by a Lender
to an Eligible Transferee) (each an "ASSIGNEE") all, or any ratable part of all,
of the Obligations, the
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Commitments and the other rights and obligations of such Lender hereunder and
under the other Loan Documents, in a minimum amount of $5,000,000 except that
such minimum amount shall not apply to Affiliates of Lenders; provided, however,
that Borrower and Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have been given to
Borrower and Agent by such Lender and the Assignee; (ii) such Lender and its
Assignee shall have delivered to Borrower and Agent an Assignment and Acceptance
in form and substance satisfactory to Agent; and (iii) the assignor Lender or
Assignee has paid to Agent for Agent's sole and separate account a processing
fee in the amount of $2,500. Anything contained herein to the contrary
notwithstanding, the consent of Agent shall not be required (and payment of any
fees shall not be required) if such assignment is in connection with any merger,
consolidation, sale, transfer, or other disposition of all or any substantial
portion of the business or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the assignor
Lender (with a copy to Agent) that it has received an executed Assignment and
Acceptance and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to SECTION 11.3 hereof) and be released from its obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall effect a novation between
Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any other Loan Document furnished pursuant hereto; (3)
such Assignee confirms that it has received a copy of this Agreement, together
with such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (4) such Assignee will, independently and without reliance upon
Agent, such assigning 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
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taking action under this Agreement; (5) such Assignee appoints and authorizes
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to Agent, by the terms hereof, together
with such powers as are reasonably incidental thereto; and (6) such Assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance and receipt and acknowledgment by
Agent of such fully executed Assignment and Acceptance, this Agreement shall be
deemed to be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "PARTICIPANT") participating interests
in the Obligations, the Commitment, and the other rights and interests of that
Lender (the "ORIGINATING LENDER") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); provided, however, that (i) the Originating Lender's obligations
under this Agreement shall remain unchanged, (ii) the Originating Lender shall
remain solely responsible for the performance of such obligations, (iii)
Borrower, Agent, and Agent shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating; (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating; (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating; (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender; or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums; and (v) all amounts payable by Borrower hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and 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 set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through the Originating Lender with whom such
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Participant participates and no Participant shall have any direct rights as to
the other Lenders, Agent, Borrower, the Collections, the Collateral, or
otherwise in respect of the Obligations. No Participant shall have the right to
participate directly in the making of decisions by the Lenders among themselves.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrower or
Borrower's business.
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties; PROVIDED, HOWEVER,
that Borrower may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release Borrower from its Obligations. A Lender may assign this Agreement and
the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to SECTION 14.1 hereof and, except as expressly required pursuant to
SECTION 14.1 hereof, no consent or approval by Borrower is required in
connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by Agent at the written request
of the Required Lenders) and Borrower and then any such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; PROVIDED, HOWEVER, that no such waiver, amendment, or consent
shall, unless in writing and signed by all the Lenders and Borrower and
acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
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(d) change the percentage of the Commitments that is required
for the Lenders or any of them to take any action hereunder;
(e) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(f) release Collateral other than as permitted by SECTION
16.12;
(g) change the definition of "Required Lenders";
(h) release Borrower from any Obligation for the payment of
money; or
(i) amend any of the provisions of SECTION 16.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other Loan Document. The foregoing notwithstanding,
any amendment, modification, waiver, consent, termination, or release of or with
respect to any provision of this Agreement or any other Loan Document that
relates only to the relationship of the Lender Group among themselves, and that
does not affect the rights or obligations of Borrower, shall not require consent
by or the agreement of Borrower.
15.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any Lender
to exercise any right, remedy, or option under this Agreement, any other Loan
Document, or any present or future supplement hereto or thereto, or in any other
agreement between or among Borrower and Agent or any Lender, or delay by Agent
or any Lender in exercising the same, will operate as a waiver thereof. No
waiver by Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by Agent or the Lenders
on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Agent's and each Lender's rights under this Agreement and the other
Loan Documents will be cumulative and not exclusive of any other right or remedy
which Agent or any Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
designates and appoints Foothill as its agent under this Agreement and the other
Loan Documents and each Lender hereby irrevocably authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Agent agrees to
act as such on the express conditions contained in this SECTION 16. The
provisions of this SECTION 16 are solely for the benefit of Agent, and the
Lenders, and Borrower shall have no rights as a third party beneficiary of any
of the provisions contained herein; provided, however, that certain of the
provisions of SECTION 16.10 hereof also shall be
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for the benefit of Borrower. Any provision to the contrary contained elsewhere
in this Agreement or in any other Loan Document notwithstanding, Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
nor shall Agent have or be deemed to have any fiduciary relationship with each
other or any Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Loan Document or otherwise exist against Agent; it being expressly
understood and agreed that the use of the word "Agent" is for convenience only,
that Foothill is merely the representatives of the Lenders, and has only the
contractual duties set forth herein. Except as expressly otherwise provided in
this Agreement, Agent shall have and may use its sole discretion with respect to
exercising or refraining from exercising any discretionary rights or taking or
refraining from taking any actions which Agent is expressly entitled to take or
assert under or pursuant to this Agreement and the other Loan Documents. Without
limiting the generality of the foregoing, or of any other provision of the Loan
Documents that provides rights or powers to Agent, Lenders agree that Agent
shall have the right to exercise the following powers as long as this Agreement
remains in effect: (a) maintain, in accordance with its customary business
practices, ledgers and records reflecting the status of the Advances, the
Collateral, the Collections, and related matters; (b) execute or file any and
all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to the Loan Documents; (c) make Advances, for itself or
on behalf of Lenders as provided in the Loan Documents; (d) exclusively receive,
apply, and distribute the Collections as provided in the Loan Documents; (e)
open and maintain such bank accounts and lock boxes as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections; (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Obligations, the Collateral, the Collections, or otherwise
related to any of same as provided in the Loan Documents; and (g) incur and pay
such Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents.
16.2 DELEGATION OF DUTIES. Except as otherwise provided in this
section, Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects as long as such selection was made in
compliance with this section and without gross negligence or willful misconduct.
16.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrower or any Subsidiary or
Affiliate of Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other
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document referred to or provided for in, or received by Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of Borrower or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the Books or properties of Borrower or the books or records or
properties of any of Borrower's Subsidiaries or Affiliates.
16.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of the Lenders,
except with respect to Events of Default of which Agent has actual knowledge,
unless Agent shall have received written notice from a Lender or Borrower
referring to this Agreement, describing such Default or Event of Default, and
stating that such notice is a "notice of default." Agent promptly will notify
the Lenders of its receipt of any such notice or of any Event of Default of
which Agent has actual knowledge. If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and Agent
of such Event of Default. Each Lender shall be solely responsible for giving any
notices to its Participants, if any. Subject to SECTION 16.4, Agent shall take
such action with respect to such Default or Event of Default as may be requested
by the Required Lenders in accordance with SECTION 9; provided, however, that
unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.
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16.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrower and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay
Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer fees
and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrower is obligated to reimburse Agent or Lenders
for such expenses pursuant to the Loan Agreement or otherwise. Agent is
authorized and directed to deduct and retain sufficient amounts from Collections
to reimburse Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. In the event Agent is not reimbursed for
such costs and expenses from Collections, each Lender hereby agrees that it is
and shall be obligated to pay to or reimburse Agent for the amount of such
Lender's Pro Rata Share thereof. Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrower
and without limiting the obligation of Borrower to do so), according to their
Pro Rata Shares, from and against any and all Indemnified Liabilities; provided,
however, that no Lender shall be liable for the payment to any Agent-Related
Person of any portion of such Indemnified Liabilities resulting solely from such
Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for such Lender's
ratable share of any costs or out-of-pocket expenses (including attorneys fees
and expenses) incurred by
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Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Agent is not
reimbursed for such expenses by or on behalf of Borrower. The undertaking in
this section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.
16.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with Borrower and its
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though Foothill were not Agent hereunder, and, in
each case, without notice to or consent of the Lenders. The Lenders acknowledge
that, pursuant to such activities, Foothill or its Affiliates may receive
information regarding Borrower or its Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents that is subject to
confidentiality obligations in favor of Borrower or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver Agent will use its reasonable best
efforts to obtain), Agent shall not be under any obligation to provide such
information to them. The terms "Lender" and "Lenders" include Foothill in its
individual capacity.
16.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days notice to
the Lenders. If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders. If no successor Agent is appointed
prior to the effective date of the resignation of Agent, Agent may appoint,
after consulting with the Lenders, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor Agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this SECTION 16 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
Agent hereunder until such time, if any, as the Lenders appoint a successor
Agent as provided for above.
16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory,
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underwriting or other business with Borrower and its Subsidiaries and Affiliates
and any other Person (other than the Lender Group) party to any Loan Documents
as though such Lender were not the agent of Agent hereunder without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding Borrower or its Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender shall not be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of the
Agent.
16.11 WITHHOLDING TAX.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in
the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under
this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Lender and in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells,
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assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of Borrower to such Lender, such Lender agrees to notify Agent of
the percentage amount in which it is no longer the beneficial owner of
Obligations of Borrower to such Lender. To the extent of such percentage amount,
Agent will treat such Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify Agent fully for all amounts paid, directly
or indirectly, by Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
Agent under this Section, together with all costs and expenses (including
attorneys fees and expenses). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.
16.12 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, at its
option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full by
Borrower of all Obligations other than Post-Termination Obligations; (ii)
constituting property being sold or disposed of if a release is required or
desirable in connection therewith and if Borrower certifies to Agent that the
sale or disposition is permitted under SECTION 7.4 of this Agreement or the
other Loan Documents (and Agent may rely conclusively on any such certificate,
without further inquiry); (iii) constituting property in which Borrower owned no
interest at the time the security interest was granted or at any time
thereafter; or (iv) constituting property leased to Borrower under a lease that
has expired or is terminated in a transaction permitted under this Agreement.
Except as provided above, Agent will not execute and deliver a release of any
Lien on any Collateral without the prior written authorization of (y) if the
release is of all or a
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material portion of the Collateral, all of the Lenders, or (z) otherwise, the
Required Lenders. Upon request by Agent or Borrower at any time, the Lenders
will confirm in writing Agent's authority to release any such Liens on
particular types or items of Collateral pursuant to this SECTION 16.12;
provided, however, that (1) Agent shall not be required to execute any document
necessary to evidence such release on terms that, in Agent's opinion, would
expose Agent to liability or create any obligation or entail any consequence
other than the release of such Lien without recourse, representation, or
warranty, and (2) such release shall not in any manner discharge, affect, or
impair the Obligations or any Liens (other than those expressly being released)
upon (or obligations of Borrower in respect of) all interests retained by
Borrower, including, the proceeds of any sale, all of which shall continue to
constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrower or is cared
for, protected, or insured or has been encumbered, or that the Agent's Liens
have been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission or event
related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, in its sole discretion given Agent's
own interest in the Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing, except as otherwise provided herein.
16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the
express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations,
any amounts owing by such Lender to Borrower or any accounts of Borrower now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so by Agent, take or cause to
be taken any action, including, the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral the purpose of which is, or could be, to give
such Lender any preference or priority against the other Lenders with respect to
the Collateral.
(b) If, at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender's ratable portion of all such
distributions by Agent, such Lender promptly shall (1) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in same day funds, as applicable, for the account of all of
the Lenders and for
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application to the Obligations in accordance with the applicable provisions of
this Agreement, or (2) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
16.14 AGENCY FOR PERFECTION. Agent and each Lender hereby appoints each
other Lender as agent for the purpose of perfecting the Agent's Liens in assets
which, in accordance with Article 9 of the Code can be perfected only by
possession. Should any Lender obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefor
shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium or interest on Advances or otherwise.
16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each member
of the Lender Group authorizes and directs Agent to enter into this Agreement
and the other Loan Documents relating to the Collateral, for the benefit of the
Lender Group. Each member of the Lender Group agrees that any action taken by
Agent or all Lenders, as applicable, in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent or all Lenders, as applicable, of their respective powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.
16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION.
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "REPORT" and collectively, "REPORTS") prepared by
Agent, and Agent shall so furnish each Lender with such Reports;
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(b) expressly agrees and acknowledges that Agent does not (i)
make any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrower
and will rely significantly upon the Books, as well as on representations of
Borrower's personnel;
(d) agrees to keep all Reports and other material, non-public
information regarding Borrower and its Subsidiaries and their operations,
assets, and existing and contemplated business plans in a confidential manner;
it being understood and agreed by Borrower that in any event such Lender may
make disclosures (a) to counsel for and other advisors, accountants, and
auditors to such Lender, (b) reasonably required by any bona fide potential or
actual Assignee, transferee, or Participant in connection with any contemplated
or actual assignment or transfer by such Lender of an interest herein or any
participation interest in such Lender's rights hereunder, provided that
potential or actual Assignee, transferee or Participant agrees to be subject to
the same confidentiality provisions as Lender, (c) of information that has
become public by disclosures made by Persons other than such Lender, its
Affiliates, assignees, transferees, or participants, or (d) as required or
requested by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; provided, however, that, unless prohibited by applicable law, statute,
regulation, or court order, such Lender shall notify Borrower of any request by
any court, governmental or administrative agency, or pursuant to any subpoena or
other legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of Borrower; and (ii) to pay and protect, and indemnify,
defend and hold Agent, and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses and
other amounts (including, attorney costs) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof from
Borrower; (y) To the extent that Agent is entitled, under
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any provision of the Loan Documents, to request additional reports or
information from Borrower, any Lender may, from time to time, reasonably request
Agent to exercise such right as specified in such Lender's notice to Agent,
whereupon Agent promptly shall request of Borrower the additional reports or
information specified by such Lender, and, upon receipt thereof from Borrower,
Agent promptly shall provide a copy of same to such Lender; and (z) Any time
that Agent renders to Borrower a statement regarding the Loan Account, Agent
shall send a copy of such statement to each Lender.
16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that certain
of the Loan Documents now or hereafter may have been or will be executed only by
or in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in SECTION 16.7, no member of the Lender Group shall
have any liability for the acts of any other member of the Lender Group. No
Lender shall be responsible to Borrower or any other Person for any failure by
any other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for it or on its behalf in connection with its Commitment, nor to
take any other action on its behalf hereunder or in connection with the
financing contemplated herein.
16.19 LEGAL REPRESENTATION OF AGENT. In connection with the
negotiation, drafting, and execution of this Agreement and the other Loan
Documents, or in connection with future legal representation relating to loan
administration, amendments, modifications, waivers, or enforcement of remedies,
Brobeck, Phleger & Harrison LLP ("BROBECK") only has represented and only shall
represent Foothill in its capacity as Agent and as a Lender. Each other Lender
hereby acknowledges that Brobeck does not represent any other Lender in
connection with any such matters.
17. GENERAL PROVISIONS.
17.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and each member of the Lender Group whose
signature is provided for on the signature pages hereof.
17.2 SECTION HEADINGS. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
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17.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
17.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
17.5 AMENDMENTS IN WRITING. This Agreement can only be amended by a
writing signed by Agent, the Required Lenders, and Borrower.
17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
17.7 [INTENTIONALLY OMITTED].
17.8 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
PHONETEL TECHNOLOGIES, INC.,
an Ohio corporation
By: /s/ John D. Chichester
-----------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHEROKEE COMMUNICATIONS, INC.,
a Texas corporation
By: /s/ John D. Chichester
-----------------------------------------
Title: PRESIDENT
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Thomas Sigurdson
-----------------------------------------
Title: VICE PRESIDENT
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EXHIBIT 10.2
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PHONETEL TECHNOLOGIES, INC.
1999 MANAGEMENT INCENTIVE PLAN
1. PURPOSE
This Plan is intended to encourage the managers of PhoneTel
Technologies, Inc. (the "Company") to think and act as owners and, as a result,
to foster and promote the long term growth and performance of the Company and
increase the market price of its Shares. To achieve this purpose, this Plan
provides authority for the grant of stock and other performance-based
incentives.
2. DEFINITIONS
(1) "Affiliate and Associate" -- These terms have the meanings
given to them in Rule 12b-2 under the Exchange Act.
(2) "Award" -- A grant of Stock Options, or other stock and
performance-based incentives under this Plan.
(c) "Beneficial Owner"-- This term has the meaning given to it
in Rule 13d-3 under the Exchange Act.
(d) "Board of Directors" -- The Board of Directors of the
Company.
(e) "Change in Control" -- A "Change in Control" will be
deemed to occur if at any time after the date of the adoption of this
Plan:
(1) Any Person (other than the Company, any
subsidiary of the Company, any employee benefit plan or
employee share ownership plan of the Company or any subsidiary
of the Company, or any Person organized, appointed, or
established by the Company or any subsidiary of the Company
for or pursuant to the terms of any such plan), alone or
together with any of its Affiliates or Associates, becomes the
Beneficial Owner of 50% or more of the Shares then
outstanding.
(2) At any time during a period of 24 consecutive
months, individuals who were Directors at the beginning of the
period no longer constitute a majority of the members of the
Board of Directors unless the election, or the nomination for
election by the Company's shareholders, of each Director who
was not a Director at the beginning of the period is approved
by at least a majority of the Directors who are in office at
the time of the election or nomination and were Directors at
the beginning of the period.
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(3) The date that the shareholders of the Company
affirmatively vote to approve (A) a merger or consolidation of
the Company with another corporation, partnership, business
trust, real estate investment trust or other entity in which
the Company is not the surviving or continuing entity or in
which all or part of the outstanding Shares are to be
converted into or exchanged for cash, securities, or other
property, (B) a sale or other disposition of all or
substantially all of the assets of the Company, or (C) the
dissolution of the Company.
(f) "Code" -- The Internal Revenue Code of 1986, or any law
that supersedes or replaces it, as amended from time to time.
(g) "Committee" -- The Compensation Committee of the Board of
Directors, or any other committee of the Board of Directors that the
Board of Directors authorizes to administer this Plan. The Committee
will be constituted in a manner that satisfies all applicable legal
requirements, including satisfying the non-employee director standard
set forth in Rule 16b-3 under the Exchange Act and the outside director
requirement under Section 162(m) of the Code.
(h) "Covered Employee" -- An officer of the Company whose
compensation is subject to the $1,000,000 limit on deductibility under
Section 162(m) of the Code, or any provision that supersedes or
replaces Section 162(m) of the Code, as amended from time to time.
(i) "Exchange Act" -- Securities Exchange Act of 1934, and any
law that supersedes or replaces it, as amended from time to time.
(j) "Fair Market Value" of Shares -- The value of Shares
determined by the Committee, or pursuant to rules established by the
Committee, on a basis consistent with regulations under the Code.
(k) "Incentive Stock Option" -- A Stock Option that meets the
requirements of Section 422 of the Code, or any provision that
supersedes or replaces Section 422 of the Code, as amended from time to
time.
(l) "Participant" -- Any person to whom an Award has been
granted under this Plan.
(m) "Performance Goal" -- Such goal or goals for a Participant
as the Committee may from time to time determine, and subject to
shareholder approval as necessary to comply with Section 162(m) of the
Code.
(n) "Restricted Stock" -- An Award of Shares that are
subject to restrictions or risk of forfeiture.
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(o) "Rule 16b-3" -- Rule 16b-3 under the Exchange Act, or any
rule that supersedes or replaces it, as amended from time to time.
(p) "Shares" -- Shares of Common Stock, $0.01 par value, of
the Company or any equity security or securities of the Company that
are issued in substitution or exchange therefor in a recapitalization
of the Company.
3. ELIGIBILITY
All employees of the Company or any of its Affiliates who, in the
judgment of the Committee, have responsibilities that affect the performance of
the Company and the market price of its Shares over the long term, are eligible
for the grant of Awards.
4. SHARES AVAILABLE UNDER PLAN; ADJUSTMENT
(1) NUMBER OF SHARES. The number of Shares that may be subject
to Awards granted under this Plan is subject to the following
limitations:
(1) The maximum number of Shares that may be subject
to Awards granted throughout the term of this Plan is 391,647.
(ii) The Committee shall determine, from time to time
the maximum number of Shares that may be issued upon exercise
of Incentive Stock Options.
The assumption of awards granted by an organization acquired
by the Company or any of its Affiliates, or the grant of Awards under
this Plan in substitution for any such awards, will not reduce the
number of Shares available for the grant of Awards under this Plan.
Shares subject to an Award that is forfeited, terminated,
canceled, or surrendered without having been exercised (other than
Shares subject to an Award that is surrendered in payment of the
exercise price of a Stock Option) will again be available for grant
under this plan, without reducing the number of Shares that may be
subject to Awards or that are available for the grant of Awards in any
fiscal year.
(2) NO FRACTIONAL SHARES. No fractional Shares will be
distributed under this Plan; the Committee will determine the manner in
which fractional Shares will be treated.
(3) ADJUSTMENT. In the event of any change in the Shares by
reason of a merger, consolidation, reorganization, recapitalization, or
similar transaction, or in the event of a stock dividend, stock split,
distribution to shareholders (other than normal cash dividends), or
rights offering or similar sale of Shares for less than their Fair
Market Value at the time of sale, the Committee will adjust the number
and class of shares that may be issued under
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this Plan, the number and class of shares subject to outstanding
Awards, the exercise price applicable to outstanding Awards, and any
value determinations applicable to outstanding Awards.
5. ADMINISTRATION
(1) COMMITTEE. This Plan will be administered by the
Committee. The Committee will, subject to the terms of this Plan, have
the authority to (i) select the eligible employees who will receive
Awards, (ii) determine the number and types of Awards to be granted,
(iii) determine the terms, conditions, vesting periods, and
restrictions applicable to the Awards, (iv) prescribe the forms of any
notices, agreements, or other instruments relating to the Awards, (v)
grant the Awards, (vi) adopt, alter, and repeal administrative rules
and practices governing this Plan, (vii) interpret the terms and
provisions of this Plan and Awards granted under this Plan, and (viii)
otherwise supervise the administration of this Plan. All decisions by
the Committee will be made with the approval of not less than a
majority of its members.
(2) DELEGATION. The Committee may delegate any of its
authority to any other person or persons that it deems appropriate,
provided the delegation does not (i) cause this Plan, or any Awards
granted under this Plan, to fail to qualify for the exemption provided
by Rule 16b-3 under the Exchange Act or (ii) result in a reduction in
the amount of compensation associated with any Award that is deductible
for federal income tax purposes under Section 162(m) of the Code.
(3) DECISIONS FINAL. All decisions by the Committee, and by
any other person or persons to whom the Committee has delegated
authority, will be final and binding on all persons.
6. AWARDS
(1) GRANT OF AWARDS. The Committee will determine the type or
types of Awards to be granted to each employee and the terms,
conditions, vesting periods, and restrictions applicable to each Award,
which terms shall be set forth in an Award Agreement to be in
substantially the form attached hereto as Exhibit A. More than one
Award may be granted to the same employee. Awards may be granted singly
or in combination or tandem with other Awards. The Company may assume
awards granted by an organization acquired by the Company or may grant
Awards in replacement of, or in substitution for, any such awards.
(2) TYPES OF AWARDS. Awards may include, but are not limited
to, the following:
(1) Stock Appreciation Right -- A right to receive a
payment, in cash or Shares, equal to the excess of (A) the
Fair Market Value of a specified number of Shares on the date
the right is exercised over (B) the Fair Market Value of the
Shares
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on the date the right is granted, all as determined by the
Committee. The right may be conditioned upon the occurrence of
certain events, such as a Change in Control of the Company, or
may be unconditional, as determined by the Committee.
(2) Stock Award -- An Award that is made in Shares,
Restricted Stock, or Stock Equivalent Units. The grant or
vesting of any Stock Award made to a Covered Employee (other
than Stock Equivalent Units representing deferred amounts
under Section 7) must be contingent upon the achievement of a
Performance Goal or Performance Goals established by the
Committee at or before the time of grant; the grant or vesting
of any Stock Award made to a Participant other than a Covered
Employee may, in the discretion of the Committee, be
contingent upon the achievement of Performance Goals or other
objectives established by the Committee.
(3) Stock Option -- A right to purchase a specified
number of Shares, during a specified period, and at a
specified exercise price, all as determined by the Committee.
A Stock Option may be an Incentive Stock Option or a Stock
Option that does not qualify as an Incentive Stock Option. In
addition to the terms, conditions, vesting periods, and
restrictions established by the Committee, Incentive Stock
Options must comply with the requirements of Section 422 of
the Code. The exercise price of a Stock Option granted to a
Covered Employee must be at least the Fair Market Value of the
Shares on the date the Stock Option is granted, unless the
grant or vesting of the Stock Option is contingent upon the
achievement of a Performance Goal or Performance Goals
established by the Committee at or before the time of grant.
(4) Cash Award -- An Award denominated in cash. The
grant or vesting of any Cash Award made to a Covered Employee
must be contingent upon the achievement of a Performance Goal
or Performance Goals established by the Committee at or before
the time of grant. The grant or vesting of any Cash Award made
to Participants other than Covered Employees may, in the
discretion of the Committee, be contingent upon continued
service or the achievement of Performance Goals or other
objectives established by the Committee.
7. DEFERRAL OF PAYMENT
The Committee may, in its discretion, permit Participants to defer the
payment of some or all of the Shares, cash, or other consideration subject to
their Awards, as well as other compensation, in accordance with procedures
established by the Committee to ensure that the recognition of taxable income is
deferred under the Code. Deferred amounts may, to the extent permitted by the
Committee, be credited as cash or in units valued by reference to the Fair
Market Value of the Shares. The Committee may also establish rules and
procedures for the crediting of interest on deferred cash payments and dividend
equivalents on Stock Equivalent Units.
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8. PAYMENT OF EXERCISE PRICE
The exercise price of a Stock Option (other than an Incentive Stock
Option) and any other Stock Award for which the Committee has established an
exercise price, may be paid in cash, by the transfer of Shares, by the surrender
of all or part of an Award (including the Award being exercised), or by a
combination of these methods, as and to the extent permitted by the Committee.
The exercise price of an Incentive Stock Option may be paid in cash, by the
transfer of Shares, or by a combination of these methods, as and to the extent
permitted by the Committee at the time of grant, but may not be paid by the
surrender of all or part of an Award. The Committee may prescribe any other
method of paying the exercise price that it determines to be consistent with
applicable law and the purpose of this Plan, including loans by the Company.
In the event shares of Restricted Stock are used to pay the exercise
price of a Stock Option, a number of the Shares issued upon the exercise of the
Stock Option equal to the number of shares of Restricted Stock used to pay the
exercise price will be subject to the same restrictions as the Restricted Stock.
9. TAXES ASSOCIATED WITH AWARD
Prior to the payment of an Award, the Company may withhold, or require
a Participant to remit to the Company, an amount sufficient to pay any federal,
state, and local taxes associated with the Award. The Committee may, in its
discretion and subject to such rules as the Committee may adopt, permit a
Participant to pay any or all taxes associated with the Award (other than an
Incentive Stock Option) in cash, by the transfer of Shares, by the surrender of
all or part of an Award (including the Award being exercised), or by a
combination of these methods. The Committee may permit a Participant to pay any
or all taxes associated with an Incentive Stock Option in cash, by the transfer
of Shares, or by a combination of these methods, but not by the surrender of all
or part of an Award.
10. TERMINATION OF EMPLOYMENT
If the employment of a Participant terminates for any reason, all
unexercised, deferred, and unpaid Awards may be exercisable or paid only in
accordance with rules established by the Committee.
11. TERMINATION OF AWARDS UNDER CERTAIN CONDITIONS
The Committee may cancel any unexpired, unpaid, or deferred Award at
any time if the Participant is not in compliance with all applicable provisions
of this Plan or with the terms or conditions of the Award or if the Participant,
without the prior written consent of the Company, engages in any of the
following activities:
(i) Renders services for an organization, or engages in a
business that is, in the judgment of the Committee, in competition with
the Company.
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(ii) Discloses to anyone outside of the Company, or uses for
any purpose other than the Company's business, any confidential
information or material relating to the Company, whether acquired by
the Participant during or after employment with the Company.
The Committee may, in its discretion and as a condition to the exercise
of Award, require a Participant to acknowledge in writing that he or she is in
compliance with all applicable provisions of this Plan and with the terms and
conditions of the Award and has not engaged in any activities referred to in
clauses (i) and (ii) above.
12. CHANGE IN CONTROL
(a) EFFECT ON AWARDS. In the event of a Change in Control of the
Company, (i) all Stock Appreciation Rights and Stock Options then outstanding
will become fully exercisable as of the date of the Change in Control, (ii) all
restrictions and conditions applicable to Restricted Stock and other Stock
Awards will be deemed to have been satisfied as of the date of the Change in
Control, and (iii) all Cash Awards will be deemed to have been fully earned as
of the date of the Change in Control.
(b) SECTION 280G. Notwithstanding anything contained in this Plan to
the contrary, to the extent that any acceleration of exercisability,
satisfaction of restrictions or conditions, deemed earnings of an Award or
acceleration of vesting of any payment, Award or distribution of any type to or
for a Participant under the Plan, either in and of itself or when aggregated
with any payment or distribution of any type to or for the Participant by the
Company, any Affiliate of the Company, any person who acquires ownership or
effective control of the Company or ownership of a substantial portion of the
Company's assets (within the meaning of Section 280G of the Code and the
regulations thereunder), or any Affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Plan or
otherwise (the "Total Payments") is or will be subject to the excise tax imposed
under Section 4999 of the Code (the "Excise Tax"), then the Total Payments shall
be reduced (but not below zero) if and to the extent that a reduction in the
Total Payments will result in the Participant retaining a larger amount, on an
after-tax basis (taking into account federal, state and local income taxes and
the Excise Tax), than if the Participant received the entire amount of such
Total Payments. The Participant shall have the right to specify the order in
which the Total Payments shall be reduced hereunder in order to effectuate the
foregoing.
13. AMENDMENT OR SUSPENSION OF THIS PLAN; AMENDMENT OF OUTSTANDING AWARDS
(1) AMENDMENT OR SUSPENSION OF THIS PLAN. The Board of
Directors may amend or suspend this Plan at any time; however, no
amendment may be adopted without the consent of the Company's
shareholders that would:
(i) increase the aggregate number of Shares that may be
issued under this Plan;
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(ii) modify the requirements affecting eligibility to
participate in this Plan; or
(iii) materially increase the benefits accruing to
corporate insiders under this Plan.
The preceding sentence is intended solely to satisfy the requirements
of Code Section 422, and it is not intended to confer upon Participants
any rights to have this Plan continued without amendment.
Shareholder approval for any such amendment will also be
required only to the extent necessary (i) to preserve the deductibility
of compensation associated with any Award for federal income tax
purposes under Section 162(m) of the Code and (ii) to comply with any
limitations upon amendments as may be imposed by an stock exchange on
which the Shares are then traded.
(2) AMENDMENT OF OUTSTANDING AWARDS. The Committee may, in its
discretion, amend the terms of any Award, prospectively or
retroactively, but no such amendment may impair the rights of any
Participant without his or her consent. The Committee may, in whole or
in part, waive any restrictions or conditions applicable to, or
accelerate the vesting of, any Award.
14. NONASSIGNABILITY
Unless otherwise determined by the Committee, (i) no Award granted
under this Plan may be transferred or assigned by the Participant to whom it is
granted other than by will, pursuant to the laws of descent and distribution, or
pursuant to a qualified domestic relations order and (ii) an Award granted under
this Plan may be exercised, during the Participant's lifetime, only by the
Participant or by the Participant's guardian or legal representative.
15. GOVERNING LAW
The interpretation, validity, and enforcement of this Plan will, to the
extent not otherwise governed by the Code or the securities laws of the United
States, be governed by the laws of the State of Ohio.
16. RIGHTS OF EMPLOYEES
Nothing in this Plan will confer upon any Participant the right to
continued employment by the Company or limit in any way the Company's right to
terminate any Participant's employment at will.
17. TERMINATION DATE
This Plan will continue in effect until December 31, 2009.
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EXHIBIT A
---------
PHONETEL TECHNOLOGIES, INC.
---------------------------
AWARD AGREEMENT
Date of Grant: _____________________
THIS AWARD AGREEMENT, dated as of the date of grant stated above (the
"Date of Grant"), is delivered by PhoneTel Technologies, Inc., an Ohio
corporation (the "Company"), to ______________________ (the "Grantee"), who is
an employee of the Company. (This instrument is sometimes hereinafter referred
to as this "Award" or this "Award Agreement".)
WHEREAS, the Company has adopted PhoneTel Technologies, Inc. 1999
Management Incentive Plan (the "Plan") effective ____________, 1999;
WHEREAS, the Plan provides, among other things, for the granting of
stock options by the Compensation Committee of the Board of Directors of the
Company (the "Committee") to certain employees of the Company. Options issued
pursuant to the Plan entitle the holder thereof to purchase shares of common
stock, $_____ par value, of the Company (the "Common Stock"), in accordance with
the terms and provisions thereof; and
WHEREAS, the Committee considers the Grantee to be a person who is
eligible for a grant of stock options under the Plan and has determined that it
would be in the best interest of the Company to grant the stock options
documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions hereinafter set forth,
the Company, with the approval and at the direction of the Committee, hereby
grants to the Grantee, as of the Date of Grant, an option (the "Option") to
purchase up to ______________ shares of Common Stock at a price of
________________ per share (the "Option Price"). The "Date of Grant" shall mean
the effective date of the grant under the Plan. The shares of Common Stock
purchasable upon exercise of the Option are hereinafter sometimes referred to as
the "Option Shares."
2. TERMINATION OF OPTION.
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of
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<PAGE> 10
______ years from the Date of Grant (such period is sometimes hereinafter
referred to as the "Option Term") or such earlier date as shall be provided in
this Award Agreement or the Plan.
(b) Upon the Grantee's ceasing for any reason to be employed by the
Company (such occurrence being a "termination of the Grantee's employment"),
this Option, to the extent not previously exercised, shall terminate upon and
not be exercisable at any time after, the earlier of (i) the expiration of the
Option Term, or (ii) the expiration of three (3) months after the termination of
the Grantee's employment. Notwithstanding the foregoing, if the termination of
the Grantee's employment is by reason of disability (for purposes of this Award
Agreement, the Grantee shall be deemed to be disabled if he is "permanently and
totally disabled" as defined in Section 22(e)(3) of the Internal Revenue Code of
1986, as amended (the "Code")) or death, this Option, to the extent not
previously exercised, shall terminate upon and not be exercisable at any time
after, the first anniversary of the date of the termination of the Grantee's
employment by reason of disability or death. In no event, however, shall this
Option be exercisable after the termination of the Option Term. For purposes of
the Award Agreement, the determination of whether a termination of employment
has been on account of disability shall be made by the Committee in its sole and
absolute discretion.
(c) In the event of the death of the Grantee, the Option may be
exercised by the personal representative of the Grantee's estate or by the
person or persons to whom the option is transferred pursuant to the Grantee's
will or in accordance with the laws of descent and distribution. In no event,
however, shall this Option be exercisable after the termination of the Option
Term.
(d) A transfer of the Grantee's employment between the Company and any
subsidiary of the Company, or between any subsidiaries of the Company, shall not
be deemed to be a termination of the Grantee's employment.
(e) Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall:
(i) commit a fraud upon or embezzle from the Company,
(ii) commit a felony involving moral turpitude or be
convicted for any other felony,
(iii) act recklessly or with malfeasance in a manner that
would have the effect of materially harming the
Company's relationships with its employees, customers
or suppliers (provided, however, that acts undertaken
in good faith and in the exercise of the Grantee's
reasonable business judgment shall not be deemed to
be within this clause (iii)), or
(iv) as determined by the Committee in its discretion,
violate any confidentiality, non-competition or
non-disparagement covenant to which he is subject
(including, without
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limitation, any such covenant contained in his
employment agreement with the Company), THEN
any unexercised portion of the Option immediately shall terminate, be void and
may not at any time thereafter be exercised.
3. EXERCISE OF OPTIONS.
(a) The notice of exercise shall specify the number of Option Shares as
to which the Option then is to be exercised and the date of exercise thereof,
which date shall be at least five days after the giving of such notice unless an
earlier date shall have been mutually agreed upon.
(b) The exercise price shall become immediately due upon exercise of
the Option and shall be payable either in cash or by check made payable to the
Company's order or by the delivery by the Grantee to the Company of shares of
Common Stock that have been endorsed over to the Company having a Fair Market
Value (as determined by the Committee in accordance with Section 5 hereof) on
the date of delivery equal to the exercise price or by a combination of any of
the foregoing.
(c) On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued shares or treasury shares, as the Company
may elect) upon full payment for such Option Shares. The obligation of the
Company to deliver certificates for the Option Shares then being purchased
shall, however, be subject to the condition that if at any time the Committee
shall determine in its discretion that the listing, registration or
qualification of the Option or the Option Shares upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the Option or the issuance or purchase of Option Shares thereunder, the
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
(d) If the Grantee fails to pay for any of the Option Shares specified
in the Grantee's notice of exercise or fails to accept delivery thereof, the
Grantee's right to purchase such Option Shares may be terminated by the Company.
The date specified in the Grantee's notice as the date of exercise shall be
deemed the date of exercise of the Option, provided that payment in full for the
Option Shares to be purchased upon such exercise shall have been received by
such date.
4. ADJUSTMENT OF AND CHANGES IN SHARES OF COMMON STOCK OF THE COMPANY.
(a) In the event that at any time prior to the expiration of the Option
Term each of the outstanding shares of Common Stock of the Company (except
shares held by dissenting shareholders) shall be changed to or exchanged for a
different number or kind of shares of Common Stock or other securities of the
Company or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, merger, consolidation
or otherwise, then for all purposes of this Option there shall be substituted
for each share of Common Stock purchasable hereunder the number and kind of
shares of Common Stock or other securities into which each such share shall be
so changed, or for which each such share shall be so exchanged, and the
Committee shall make such adjustment in the Option Price as the Committee, in
its sole discretion, may determine is equitably required by such change or
exchange, and such adjustment so made shall be effective and binding for all
purposes under this Option Agreement.
(b) In the event that the Company shall issue a stock dividend in
shares of stock with respect to the shares of Common Stock of the Company, the
number of shares then purchasable hereunder shall be adjusted by adding to each
such share the number of shares which would have been distributed as a stock
dividend thereon had such share been outstanding on the record date for payment
of the stock dividend, and each such share together with said additional shares
shall be purchasable at the Option Price as provided in this Award Agreement.
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<PAGE> 12
(c) In the event that there shall be any other change in the number or
kind of outstanding shares of Common Stock or other securities of the Company,
or of any shares of stock or other securities into which such shares shall have
been changed or for which they shall have been exchanged, then the Committee
shall make such adjustment in the number or kind of shares of Common Stock or
other securities subject to purchase hereunder at the Option Price as provided
in this Award Agreement, as the Committee, in its sole discretion, may determine
is equitably required by such change, and such adjustment so made shall be
effective and binding for all purposes under this Award Agreement.
(d) Anything to the contrary in this Section 4 notwithstanding, the
Grantee shall not be entitled to purchase a fraction of a share of Common Stock
or of any other share of stock or other security under this Award Agreement.
5. FAIR MARKET VALUE.
The Fair Market Value of a share of the Common Stock shall be
determined by the Committee in good faith without regard to any restriction
other than a restriction which, by its terms, will never lapse. The
determination of the Committee shall be final and binding on all persons.
6. NO RIGHTS OF STOCKHOLDER.
Neither the Grantee nor any personal representative shall be or shall
have any of the rights and privileges of a stockholder of the Company with
respect to any shares of Common Stock purchasable or issuable upon the exercise
of the Option, in whole or in part, prior to the date of purchase of such
shares.
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<PAGE> 13
7. NON-TRANSFERABILITY OF OPTION.
During the Grantee's lifetime, the Option shall be exercisable only by
the Grantee or, in the event of the disability of the Grantee, by any guardian
or legal representative of the Grantee, and the Option shall not be transferable
except, in case of the Grantee's death, by will or the laws of descent and
distribution, nor shall the Option be subject to attachment, execution or other
similar process. In the event of (a) any attempt by the Grantee to alienate,
assign, pledge, hypothecate or otherwise dispose of the Option, except as
provided for herein, or (b) the levy of any attachment, execution or similar
process upon the rights or interest hereby conferred, the Option automatically
shall terminate and be null and void.
8. EMPLOYMENT NOT AFFECTED.
Neither the granting of the Option nor its exercise shall be construed
as granting to the Grantee any right with respect to continuance of employment
with the Company. Except as may otherwise be limited by a written agreement
between the Company and the Grantee, the right of the Company to terminate at
will the Grantee's employment with it at any time (whether by dismissal,
discharge, retirement or otherwise) is specifically reserved by the Company and
acknowledged by the Grantee.
9. AMENDMENT.
This Award Agreement may be amended by the Company only with the
written consent of the Grantee.
10. NOTICE.
Any notice to the Company provided for in this Award Agreement shall be
addressed to it in care of its President at its executive offices at 1001
Lakeside Avenue, Seventh Floor, Cleveland, Ohio 44114, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
payroll records of the Company. Any notice shall be deemed to be duly given if
and when properly addressed and posted by registered or certified mail, postage
prepaid.
11. INCORPORATION OF PLAN BY REFERENCE.
This Award has been granted pursuant to the terms of the Plan, the
terms of which are incorporated herein by reference, and this Award Agreement
shall in all respects be interpreted in accordance with the Plan. In furtherance
of the foregoing, this Award Agreement shall be subject to all of the provisions
of the Plan as from time to time in force, and in the event of any inconsistency
between this Award Agreement and the Plan, the Plan shall control. Unless the
context clearly requires otherwise, any capitalized term used in this Award
Agreement, but not defined herein, shall have the meaning given to such term in
the Plan.
12. MISCELLANEOUS.
(a) Notwithstanding any contrary provision in any employment agreement
or other agreement between the Company and the Grantee, all provisions in the
Grantee's employment agreement or any other agreement with the Company dealing
with performance units shall be null and void and of no force or effect.
(b) The validity, construction, interpretation and effect of this Award
Agreement shall exclusively be governed by and determined in accordance with the
laws of the State of Ohio, except to the extent preempted by federal law, and to
the extent so preempted, shall be governed by and determined in accordance with
federal law.
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IN WITNESS WHEREOF, the Company has caused its duly authorized officers
to execute this Award Agreement, and the Grantee has placed his or her signature
hereon, effective as of the Date of Grant.
PHONETEL TECHNOLOGIES, INC.
By: ________________________________
Its: _______________________________
- ------------------------------------
Grantee
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EXHIBIT B
ANTICIPATED INCOME TAX TREATMENT OF AWARDS
GRANTED UNDER
1999 MANAGEMENT INCENTIVE PLAN
Incentive Stock Options
- -----------------------
In general, an employee will not recognize taxable income at the time
an Incentive Stock Option is granted or exercised. However, the excess of the
Fair Market Value of the Shares acquired upon exercise of the Incentive Stock
Option over the exercise price is potentially subject to the alternative minimum
tax. Upon disposition of the Shares, capital gain or capital loss will be
recognized in an amount equal to the difference between the sale price and the
exercise price, provided that (1) the employee has not disposed of the Shares
within two years of the date of grant or within one year from the date of
exercise and (2) the employee has been employed by the Company or one of its
subsidiaries at all times from the date of grant until the date three months
before the date of exercise (one year in the case of permanent disability). If
the employee disposes of the Shares without satisfying both the holding period
and employment requirements (a "Disqualifying Disposition"), the employee will
recognize ordinary income at the time of the Disqualifying Disposition to the
extent of the difference between the exercise price and the lesser of the Fair
Market Value of the Shares on the date the Incentive Stock Option is exercised
or the amount realized in the Disqualifying Disposition. Any remaining gain or
loss is treated as a capital gain or capital loss.
The Company is not entitled to a tax deduction either upon the exercise
of an Incentive Stock Option or upon the disposition of the Shares acquired
thereby, except to the extent that the employee recognizes ordinary income in a
Disqualifying Disposition.
Non-Qualified Stock Options
- ---------------------------
In general, an employee will not recognize taxable income at the time a
stock option, that does not qualify as an Incentive Stock Option (a
"Non-Qualified Stock Option"), is granted. An amount equal to the difference
between the exercise price and the Fair Market Value, on the date of exercise,
of the Shares acquired upon exercise of the Non-Qualified Stock Option will be
included in the employee's ordinary income in the taxable year in which the
Non-Qualified Stock Option is exercised. Upon disposition of the Shares acquired
upon exercise of the Non-Qualified Stock Option, appreciation or depreciation
after the date of exercise will be treated as either capital gain or capital
loss.
Generally, the Company will be entitled to a tax deduction in the
amount of the ordinary income realized by the employee in the year the
Non-Qualified Stock Option is exercised.
Stock Appreciation Rights
- -------------------------
The grant of Stock Appreciation Rights will have no immediate tax
consequences to the Company or the employee receiving the grant. The amount
received by the employee upon the exercise of the Stock Appreciation Rights will
be included in the employee's ordinary income in the taxable year in which the
Stock Appreciation Rights are exercised. The Company will be entitled to a
deduction in the same amount in that year.
Restricted Stock
- ----------------
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Unless an employee makes an election under Section 83(b) of the Code,
the employee will recognize no income, and the Company will be entitled to no
deduction, at the time Restricted Stock is awarded to the employee. When the
restrictions on Restricted Stock lapse or are otherwise removed, the employee
will recognize compensation income equal to the excess of the Fair Market Value
of the Restricted Stock on the date the restrictions lapse or are otherwise
removed over the amount, if any, paid by the employee for the Restricted Stock,
and the Company will be entitled to a deduction in the same amount if it
satisfies applicable withholding requirements. Dividends paid on Restricted
Stock during any restriction period will constitute income to the employee
receiving the dividends, and the Company will be entitled to a deduction in the
same amount. Upon disposition of Shares after the restrictions lapse or are
otherwise removed, any gain or loss realized by an employee will be treated as
short term or long term capital gain or loss depending upon the period of time
between the disposition and the earlier lapse or removal of the restrictions on
those Shares.
If an employee files an election under Section 83(b) with the Internal
Revenue Service within 30 days after the grant of Restricted Stock, the employee
will, on the date of the grant, recognize compensation income equal to the
excess of the Fair Market Value of the Shares on that date over the price paid
for those Shares, and the Company will be entitled to a deduction in the same
amount if it satisfies applicable withholding requirements.
The Company believes that, under the terms of the Plan, any Award of
Restricted Stock will constitute performance-based compensation and, as such,
will not be subject to the $1 million limit under 162(m) of the Internal Revenue
Code of 1986.
Stock Equivalent Units
- ----------------------
The grant of Stock Equivalent Units will not have any immediate tax
consequences to the employee receiving the Stock Equivalent Units or to the
Company. In general, at the time the Company pays any amount to the employee
with respect to the Stock Equivalent Units, the employee will recognize
compensation income equal to the amount of that payment, and the Company will be
entitled to a deduction in that amount.
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Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT ("Agreement") dated as of November 17,
1999, among PHONETEL TECHNOLOGIES, INC., an Ohio corporation (the "Company"),
and the parties hereto identified on Exhibit A, as may be amended from time to
time (the "Shareholders").
WHEREAS, in connection with the proposed Joint Reorganization Plan of
the Company and Cherokee Communications, Inc. (the "Plan"), the Company has
agreed to issue, upon confirmation of the Plan, to the holders of its 12% Senior
Notes due 2003 (the "Note Holders") shares of its common stock, $0.01 par value
per share ("Common Stock");
WHEREAS, certain of the Note Holders are anticipated to be Shareholders
following the issuance to them of Common Stock as referenced above;
WHEREAS, as an inducement to approve the Plan the Shareholders have
required, and the Company has agreed to grant, registration rights with respect
to those shares of Common Stock to be issued in connection with the Plan; and
WHEREAS, the parties hereto deem it to be in their respective best
interest to set forth the respective rights and obligations of the parties in
connection with public offerings and sales of the Common Stock held by the
Shareholders.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other successor federal agency having similar powers.
"Effective Date" shall mean the date of Plan confirmation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"Other Shares" shall mean at any time those shares of Common Stock
which do not constitute Primary Shares or Registrable Shares.
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<PAGE> 2
"Primary Shares" shall mean at any time the authorized but unissued
shares of Common Stock or shares of Common Stock held by the Company in its
treasury.
"Registrable Shares" shall mean the shares of Common Stock held by the
Shareholders which constitute Restricted Shares.
"Restricted Shares" shall mean the shares of Common Stock which are
held by a Shareholder and which have not theretofore been sold to the public
pursuant to a registration statement under the Securities Act or sold pursuant
to Rule 144 or an exemption from registration under the Securities Act.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act or
any successor rule thereto.
"Securities Act" shall mean the Securities Act of 1933 or any successor
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect from time to time.
"Transfer" shall mean any disposition of any Restricted Shares or of
any interest therein which would constitute a sale thereof within the meaning of
the Securities Act other than any such disposition pursuant to an effective
registration statement under the Securities Act and complying with all
applicable state securities and blue sky laws.
SECTION 2. DEMAND REGISTRATION. On and after the Effective Date, if the
Company shall be requested by holders of at least five percent (5%) of the
outstanding Common Stock of the Company to effect the registration under the
Securities Act of all or a part of their Registrable Shares, then the Company
shall, within 10 days of such request, deliver a written notice of such proposed
registration to all holders of outstanding Registrable Shares and shall offer to
include in such proposed registration any Registrable Shares requested to be
included in such proposed registration by the holders of Registrable Shares who
or which shall respond in writing to the Company's notice within 15 days after
delivery thereof. The Company shall promptly thereafter use its best efforts to
effect such registration under the Securities Act of the Registrable Shares
which the Company has been so requested to register; provided, however, that the
Company shall not be obligated to effect any registration under the Securities
Act except in accordance with the following provisions:
(a) The Company shall not be obligated to use its best efforts
to file and cause to become effective (i) more than two (2)
registration statements initiated pursuant to this Section 2 or (ii)
any registration statement during any period in which any other
registration statement (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto) pursuant to
which Primary Shares are to be or were sold has been filed and not
withdrawn or has been declared effective within the prior 90 days;
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<PAGE> 3
(b) With respect to any registration pursuant to this Section
2, the Company may include in such registration any Primary Shares or
Other Shares; provided, however, that if the managing underwriter, in
consultation with a majority-in-interest of the Shareholders, advises
the Company, in writing, that the inclusion of all Registrable Shares,
Primary Shares and Other Shares proposed to be included in such
registration would interfere with the successful marketing (including
pricing) of the Registrable Shares proposed to be included in such
registration, then the number of Registrable Shares, Primary Shares
and/or Other Shares proposed to be included in such registration shall
be included in the following order:
(i) first, the Registrable Shares requested to be
included in such registration by the Shareholders (in such
proportion as such participating Shareholders shall agree);
(ii) second, the Primary Shares; and
(iii) third, the Other Shares, in such proportion as
shall be determined by the Company.
(c) REGISTRATION STATEMENT FORM. Each registration requested
pursuant to this Section shall be effected by the filing of a
registration statement on Form S-1, Form S-2 or Form S-3 (or any other
form which includes substantially the same information as would be
required to be included in a registration statement on such forms as
presently constituted), unless the use of a different form is (i)
required by law or (ii) permitted by law and agreed to in writing by
holders holding at least a majority (by number of shares) of the
Registrable Securities as to which registration has been requested
pursuant to this Section. At any time after the Company has issued and
sold any shares of its capital stock registered under an effective
registration statement under the Securities Act, or after the Company
shall have registered any class of equity securities pursuant to
Section 12 of the Exchange Act, it will use its best efforts to qualify
for registration on Form S-2 or Form S-3 (or any other comparable form
hereinafter adopted).
SECTION 3. PIGGYBACK REGISTRATION. On and after the Effective Date, if
the Company at any time proposes for any reason to register Primary Shares or
Other Shares under the Securities Act (other than on Form S-4 or Form S-8
promulgated under the Securities Act or any successor forms thereto), then each
such time it shall promptly give written notice to all holders of outstanding
Registrable Shares of its intention so to register the Primary Shares or Other
Shares and, upon the written request, given within 30 days after receipt of any
such notice by the Company, of the holders of Registrable Shares to include in
such registration Registrable Shares held by such holders (which request shall
specify the number of Registrable Shares proposed to be included in such
registration), the Company shall use its best efforts to cause all such
Registrable Shares to be included in such registration on the same terms and
conditions as the securities otherwise being sold in such registration;
provided, however that if the managing underwriter, in consultation with a
majority of in-interest of the Shareholders, advises the Company, in writing,
that the inclusion of all such Registrable Shares, or Other Shares proposed to
be included in such registration would interfere with the successful marketing
(including pricing) of Primary Shares proposed to be registered by the
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<PAGE> 4
Company, then the number of Primary Shares, Registrable Shares, and Other Shares
proposed to be included in such registration shall be included in the following
order:
(i) first, the Primary Shares; and
(ii) second, the Registrable Shares requested to be
included in such registration by the Shareholders (pro rata
based upon the number of Registrable Shares requested to be
included in such registration by each such Shareholder); and
(iii) third, the Other Shares in such proportion as
shall be determined by the Company.
SECTION 4. HOLDBACK AGREEMENT. On and after the Effective Date , if the
Company at any time shall register shares of Common Stock under the Securities
Act (including any registration pursuant to Sections 2 or 3) for sale to the
public, the Shareholders shall not sell publicly, make any short sale of, grant
any option for the purchase of, or otherwise dispose publicly of, any Restricted
Shares (other than those shares of Common Stock included in such registration
pursuant to Sections 2 or 3) without the prior written consent of the Company
for a period designated by the Company in writing to the holders of Registrable
Shares, which period shall not begin more than ten (10) days prior to the
effectiveness of the registration statement pursuant to which such public
offering shall be made and shall not last more than 180 days after the effective
date of such registration statement.
SECTION 5. PREPARATION AND FILING. If and whenever the Company is under
an obligation pursuant to the provisions of this Agreement to use its best
efforts to effect the registration of any Registrable Shares, the Company shall,
as expeditiously as practicable:
(a) Prepare and file with the Commission as soon as
practicable, but not later than ninety (90) days after receipt of a
request pursuant to Section 2 or Section 3 of this Agreement, as the
case may be, use its best efforts to cause a registration statement
that registers such Registrable Shares to become and remain effective
for a period of 180 days or until all of such Registrable Shares have
been disposed of (if earlier);
(b) furnish, at least ten business days before filing a
registration statement that registers such Registrable Shares, a
prospectus relating thereto or any amendments or supplements relating
to such a registration statement or prospectus (including any documents
proposed to be incorporated by reference and any exhibits thereto), to
one counsel selected by the holders of a majority in interest of
Registrable Shares (the "Shareholders' Counsel"), copies for review and
comment during such ten days of all such documents proposed to be filed
(it being understood that such ten-business-day period need not apply
to successive drafts of the same document proposed to be filed so long
as such successive drafts are supplied to the Shareholders' Counsel in
advance of the proposed filing by a period of time that is customary
and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith and such other
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<PAGE> 5
documents as may be necessary to keep such registration statement
effective for at least a period of 180 days or until all of such
Registrable Shares have been disposed of (if earlier) and to comply
with the provisions of the Securities Act with respect to the sale or
other disposition of such Registrable Shares and promptly furnish
copies, without charge, of all such amendments, supplements and other
related documents to Shareholders' Counsel;
(d) notify in writing the Shareholders' Counsel promptly (i)
of the receipt by the Company of any notification with respect to any
comments by the Commission relating to such registration statement or
prospectus or any amendment or supplement thereto or any request by the
Commission for the amendment or supplement thereof or for additional
information with respect thereto, (ii) of the receipt by the Company of
any notification with respect to the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement
or prospectus or any amendment or supplement thereto or the initiation
or threatening of any proceeding for that purpose and (iii) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of such Registrable Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purposes and furnish copies of all such notices to Shareholders'
Counsel;
(e) use all reasonable efforts to cause the Commission to
terminate any stop order as soon as possible;
(f) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the Stockholders reasonably request and do any and all
other acts and things which may be reasonably necessary or advisable to
enable the holders of Registrable Shares to consummate the disposition
in such jurisdictions of such Registrable Shares; provided, however,
that the Company will not be required to qualify generally to do
business, subject itself to general taxation or consent to general
service of process in any jurisdiction where it would not otherwise be
required to do so but for this paragraph (f);
(g) furnish to the holders of Registrable Shares such number
of copies of a registration statement, summary prospectus or other
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the
holders of Registrable Shares may reasonably request in order to
facilitate the public sale or other disposition of such Registrable
Shares;
(h) use its best efforts to cause such Registrable Shares to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable the holders of Registrable Shares
to consummate the disposition of such Registrable Shares;
(i) notify each holder of Registrable Securities covered by
such registration statement (i) if such registration statement, at the
time it or any amendment thereto became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and,
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<PAGE> 6
as promptly as practicable, prepare and file with the Commission a
post-effective amendment to such registration statement and use best
efforts to cause such post-effective amendment to become effective such
that such registration statement, as so amended, shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (ii) at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, if the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and, as promptly as is practicable, prepare and
furnish to such holder a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(j) make available for inspection by the holders of
Registrable Shares, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or
other agent retained by the holders of Registrable Shares or any
underwriter (collectively, the "Inspectors"), all pertinent financial
and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information , whether in writing or by consultation, (together with the
Records, the "Information") reasonably requested by any such holders of
Registrable Shares or the Inspectors in connection with such
registration statement. Any of the Information which the Company
determines in good faith to be confidential, and of which determination
the Inspectors are so notified, shall not be disclosed by the
Inspectors unless (i) the disclosure of such Information is necessary
to avoid or correct a misstatement or omission in the registration
statement, (ii) the release of such Information is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction or
(iii) such Information has been made generally available to the public.
The holders of Registrable Shares agree that they will, upon learning
that disclosure of such Information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent
disclosure of the Information deemed confidential;
(k) use its best efforts to obtain from its independent
certified public accountants who issued an audit report on the
Company's financial statements included the registration statement
comfort letters, addressed to the Shareholders, in customary form and
at customary times and covering matters of the type customarily covered
by comfort letters;
(l) use its best efforts to obtain from counsel experienced in
securities laws matters an opinion or opinions in customary form, dated
as of the effective date and addressed to the Shareholders;
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<PAGE> 7
(m) provide a transfer agent and registrar (which may be the
same entity and which may be the Company) for such Registrable Shares;
(n) issue to any underwriter to which the holders of
Registrable Shares may sell shares in such offering certificates
evidencing such Registrable Shares;
(o) list such Registrable Shares on the national securities
exchange, if any on which any shares of the Common Stock are listed;
(p) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available
to its securityholders, as soon as reasonably practicable, earnings
statements (which need not be audited) covering a period of 12 months
beginning within three months after the effective date of the
registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 under
the Securities Act; and
(q) use its best efforts to take all other steps necessary to
effect the registration of such Registrable Shares contemplated hereby.
SECTION 6. EXPENSES. All expenses incurred by the Company in complying
with Section 5, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Associations of
Securities Dealers, Inc.), fees and expenses of complying with securities and
blue sky laws, printing expenses, fees and expenses of the Company's counsel and
accountants and fees and expenses of the Shareholders' Counsel, shall be paid by
the Company; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Shares shall not be borne by the
Company but shall be borne by the holders of Registrable Shares in proportion to
the number of Registrable Shares sold by each of them.
SECTION 7. INDEMNIFICATION. In connection with any registration of any
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company shall indemnify and hold harmless the holders of Registrable Shares,
their directors, officers and employees each underwriter, broker or any other
person acting on behalf of the holders of Registrable Shares and each other
person, if any, who controls any of the foregoing persons within the meaning of
the Securities Act against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which any of the foregoing persons
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon: (i) an untrue statement or alleged untrue statement of a
material fact contained in the registration statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares, or
(ii) arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated in any such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement or any documents incident to registration or
qualification of any Registrable Shares or necessary to make the statements
therein not misleading or, with respect to any prospectus,
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<PAGE> 8
necessary to make the statements therein in light of the circumstances under
which they were made not misleading, or (iii) any violation by the Company of
the Securities Act or state securities or blue sky laws applicable to the
Company and relating to action or inaction required of the Company in connection
with such registration or qualification under such state securities or blue sky
laws; and shall reimburse the holders of Registrable Shares, such underwriter,
such broker or such other person acting on behalf of the holders of Registrable
Shares and each such controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Shares in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
holders of Registrable Shares or underwriter. specifically for use in the
preparation thereof.
In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, each holder of Registrable Shares
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in the preceding paragraph of this Section 7) the Company, each
director of the Company, each officer of the Company who shall sign such
registration statement, each underwriter, broker or other person acting on
behalf of the holders of Registrable Shares and each person who controls any of
the foregoing persons within the meaning of the Securities Act with respect to
any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company or such underwriter through an instrument duly executed
by such holder of Registrable Shares specifically for use in connection with the
preparation of such registration statement, preliminary prospectus, final
prospectus, amendment, supplement or document; provided, however, that the
maximum amount of liability in respect of such indemnification shall be limited,
in the case of each seller of Registrable Shares, to an amount equal to the net
proceeds actually received by such seller from the sale of Registrable Shares
effected pursuant to such registration.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 7, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that if any indemnified party shall have
reasonably concluded that there may be one or more legal or equitable
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<PAGE> 9
defenses available to such indemnified party which are additional to or conflict
with those available to the indemnifying party, or that such claim or litigation
involves or could have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section 7, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion of the fees and
expenses of any counsel retained by the indemnified party which is reasonably
related to the matters covered by the indemnity agreement provided in this
Section 7. The indemnifying party shall not be liable to indemnify any
indemnified party for any settlement or consent to judgment effected without the
indemnifying party's consent (but such consent will not be unreasonably
withheld).
If the indemnification provided for in this Section 7 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
SECTION 8. UNDERWRITING AGREEMENT. Notwithstanding the provisions of
Sections 4, 5, 6 and 7 to the extent that the holders of Registrable Shares
shall enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such Sections, the
provisions contained in such Sections addressing such issue or issues shall be
of no force or effect with respect to such registration.
SECTION 9. INFORMATION BY HOLDER. Each of the holders of Registrable
Shares proposing to sell the same pursuant to a registration to which this
Agreement relates shall furnish to the Company such written information
regarding the holders of Registrable Shares and the distribution proposed by
such holders of Registrable Shares as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
SECTION 10. RULE 144; LEGENDED SECURITIES; ETC. If the company shall
have filed a registration statement pursuant to Section 12 of the Exchange Act
or a registration statement pursuant to the Securities Act relating to any class
of equity securities, the Company will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to file
such reports, it will, upon the request of any holder of Registrable Shares,
make publicly available such information as necessary to permit sales pursuant
to Rule 144), and will take such further action as
9
<PAGE> 10
any holder of Registrable Shares may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144. The Company will issue new certificates for
Registrable Shares with a legend restricting further transfer unless such shares
have been (i) sold to the public pursuant to an effective registration statement
under the Securities Act or sold to a non-affiliate pursuant to Rule 144, or
(ii) the transferee or holder of the shares has expressly requested in writing
the removal of the legend and such removal is otherwise permitted under the
Securities Act.
SECTION 11. NO CONFLICT OF RIGHTS. The Company represents and warrants
to the holders of Registrable Shares that the registration rights granted
hereunder to the holders of Registrable Shares do not conflict with any other
registration rights granted by the Company. The Company shall not, after the
date hereof, grant any registration rights which conflict with or impair the
registration rights granted hereby.
SECTION 12. TERMINATION. The registration rights provided in Section 2
hereof shall expire at the earlier of (i) three (3) years following the
Effective Date or (ii) such time as the Registrable Shares may be freely sold by
the Shareholders in compliance with the Securities Act without registration
thereunder and without restriction, including pursuant to the provisions of
Section 4(1) of the Securities Act or Rule 144 promulgated thereunder or any
successor exemption.
SECTION 13. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the Company and the holders of Registrable Shares and, subject
to Section 14, the respective successors and assigns of the Company and holders
of Registrable Shares.
SECTION 14. ASSIGNMENT. Each holder of Registrable Shares may assign
its rights hereunder to any purchaser or transferee of Restricted Shares holding
at least 1% or more of all outstanding Common Stock at the date of assignment;
PROVIDED, HOWEVER, that such purchaser or transferee shall, as a condition to
the effectiveness of such assignment, be required to execute a counterpart to
this Agreement agreeing to be treated as a seller or transferor hereunder
whereupon such purchaser or transferee shall have the benefits of, and shall be
subject to the restrictions contained in, this Agreement.
SECTION 15. ENTIRE AGREEMENT. This Agreement, and the other writings
referred to therein or delivered pursuant thereto, contain the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior and contemporaneous arrangements or understandings with respect thereto.
SECTION 16. NOTICES. All notices and other communications in connection
with this Agreement shall be in writing. Any notice or other communication in
connection herewith shall be deemed duly given to any party (a) two business
days after it is sent by express, registered or certified mail, return receipt
requested, postage prepaid or (b) one business day after it is sent by overnight
courier, in each case, to the address of such party set forth beneath its name
on Schedule A hereto, or to such other address as such party may have designated
to the company in writing, and if to the Company to the following address:
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<PAGE> 11
PhoneTel Technologies, Inc.
1001 Lakeside Avenue, 7th Floor
Cleveland, Ohio 44114
Attn: Corporate Secretary
With a copy to:
Hahn Loeser & Parks LLP
3300 BP Tower
200 Public Square
Cleveland, Ohio 44114
Attn: F. Ronald O'Keefe, Esq.
or at such other address or addresses as the Company may have designated in
writing to each holder of Registrable Securities at the time outstanding. Copies
of any notice or other communication given under the Agreement shall also be
given to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: Steven R. Gross, Esq.
Any party may give any notice or other communication in connection herewith
using any other means (including, but not limited to, personal delivery,
messenger service, telecopy, telex or ordinary mail), but no such notice or
other communication shall be deemed to have been duly given unless and until it
is actually received by the individual for whom it is intended.
SECTION 17. MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and
provisions of this Agreement may not be modified or amended, nor may any
provision be waived, except pursuant to a writing signed by (i) the Company and
(ii) the holders of at least a majority of the Registrable Shares then issued
and outstanding.
SECTION 18. COUNTERPARTS. This Agreement-may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts taken together shall constitute
one and the same agreement.
SECTION 19. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement.
SECTION 20. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Ohio without
giving effect to any choice or conflict of law provision or rule (whether in the
State of Ohio or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Ohio.
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<PAGE> 12
SECTION 21. SEVERABILITY. If any provision of this Agreement is
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences, clauses,
Sections or subsections of this Agreement shall not affect the remaining
portions of this Agreement.
SECTION 22. CONSENT TO JURISDICTION. Each party irrevocably submits to
the exclusive jurisdiction of (a) the Court of Common Pleas of Cuyahoga County,
Ohio, and (b) the United States District Court for the Northern District of
Ohio, for the purposes of any suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby (and agrees not to
commence any such suit, action or proceeding except in such courts). Each party
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any such suit, action or proceeding. Each party
irrevocably and unconditionally waives any objection to the laying of venue of
any such suit, action or proceeding in (i) the Court of Common Pleas of Cuyahoga
County, Ohio, and (ii) the United States District Court for the Northern
District of Ohio, that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
SECTION 23. WAIVER OF JURY TRIAL. Each party hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any suit, action or proceeding arising out of this Agreement
or any transaction contemplated hereby. Each party (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties have been induced to enter into the Agreement by, among other things,
the mutual waivers and certifications in this Section.
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<PAGE> 13
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
PHONETEL TECHNOLOGIES, INC.
By: /s/ T. Martin
-------------------------------------
Its: SECRETARY
-----------------------------------
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<PAGE> 14
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
/s/ Peter G. Graf
------------------------------------
Peter G. Graf, an individual
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<PAGE> 15
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
AXP Bond Fund, Inc.
By: /s/ Frederick C. Quirsfeld
-----------------------------
Its: Vice President
----------------------------
15
<PAGE> 16
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
High Yield Portfolio
By: /s/ Frederick C. Quirsfeld
-----------------------------
Its: Vice President
---------------------------
16
<PAGE> 17
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
AXP Variable Portfolio - Bond Fund
By: /s/ Frederick C. Quirsfeld
-------------------------------
Its: Vice President
-----------------------------
17
<PAGE> 18
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
AXP Variable Portfolio - Managed Fund
By: /s/ Frederick C. Quirsfeld
----------------------------------
Its: Vice President
--------------------------------
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<PAGE> 19
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
IDS Life Series Fund, Inc. - Income Portfolio
By: /s/ Frederick C. Quirsfeld
-----------------------------------------
Its: Vice President
----------------------------------------
19
<PAGE> 20
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
IDS Life Series Fund, Inc.-Managed Portfolio
By: /s/ Frederick C. Quirsfeld
-----------------------------------------
Its: Vice President
---------------------------------------
20
<PAGE> 21
IN WITNESS WHEREOF, the undersigned parties hereto hereby agree to the
terms and conditions of this Registration Rights Agreement as of the date first
written above.
AXP Variable Portfolio - Extra Income Fund
By: /s/ FREDERICK C. QUIRSFELD
---------------------------------------
Its: Vice President
-------------------------------------
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EXHIBIT A
---------
SHAREHOLDERS
------------
Peter G. Graf
AXP Bond Fund, Inc.
High Yield Portfolio
AXP Variable Portfolio - Bond Fund
AXP Variable Portfolio - Managed Fund
IDS Life Series Fund, Inc. - Income Portfolio
IDS Life Series Fund, Inc. - Managed Portfolio
AXP Variable Portfolio - Extra Income Fund
22
