UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee
Required) For the fiscal year ended October 31, 1996
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required) For the transition period from ____________ to
____________________.
Commission file number 0-21986
ABLE TELCOM HOLDING CORP.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0013218
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 688-0400
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Act: Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of January 29, 1997, 6,097,621 shares of the registrant's Common Stock
were held by non-affiliates of the registrant (assuming, solely for these
purposes, such persons to be all persons other than (i) current directors and
executive officers off the registrant and (ii) persons believed by the
registrant to beneficially own more than 10% of the registrant's outstanding
Common Stock, based on reports, if any, submitted to the registrant by such
persons). As of such date, the aggregate market value of the voting stock of the
registrant held by non-affiliates, computed by reference to the average closing
bid and asked prices on that date, was $53,902,970.
There were 8,311,701 shares of Common Stock outstanding as of January 29,
1997.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART 1
ITEM 1. BUSINESS
OVERVIEW
Able Telcom Holding Corp. ("Able Telcom" or the "Company") specializes in
the design, installation, maintenance and systems integration of advanced
communication networks for voice, data, and video systems. These services are
provided for an array of complementary applications, presently those for
telecommunications infrastructure, traffic management systems, automated
manufacturing systems and utility networks. The Company is currently organized
into four operating groups: telecommunication services, cable television
services, traffic management services and communications development. Each
group, excluding cable television services, is comprised of subsidiaries of the
Company with each having local executive management functioning under a
decentralized operating environment. The Company formed the cable television
services group to facilitate planned expansion during 1997.
STRATEGY
The Company's overall strategy is to capture an increased share of the
market for outsourced network installation, maintenance and system integration
services. The Company believes that customers will continue to require such
services to deploy and upgrade the fiber optic, coaxial and digital network
infrastructure associated with advancements in technology and the competition
created by the convergence of the telecommunications, computer and media
industries. The Company intends to accomplish this objective primarily through
continued strategic acquisitions and internal growth of existing and
complementary lines of business. The Company believes that the communication
services industry is highly fragmented, consisting of a large number of smaller,
regional businesses, and presents significant opportunities for consolidation.
The Company plans to target those businesses with high quality management and
strong performance records and to integrate such acquired operations into the
Company's operating groups.
Additionally, the Company intends to expand its businesses through
increased marketing efforts by broadening the range of services it offers to
customers. The Company believes its current expertise in telecommunications,
traffic management and systems integration services can be expanded to cable
television and other cable and wireless communication systems and is actively
seeking acquisition candidates in areas that complement its existing strengths.
The Company expects to achieve margin improvement through cross-utilization
among operating groups of people, equipment and technologies and through the
centralization of certain financial controls, cash and risk management.
HISTORICAL DEVELOPMENT OF BUSINESS
The Company was incorporated in 1987 as "Delta Venture Fund, Inc.," a
Colorado corporation. The Company adopted its current name in 1989 and changed
its corporate domicile to Florida in 1991.
Commencing in mid-1992 until mid-1994, 95% of the Company's revenues and
profits were derived from telecommunication services provided primarily through
two majority owned subsidiaries located in Caracus, Venezuela. Such services
were provided to one customer, CANTV, the Venezuelan national telephone company.
During the second half of the fiscal year ended October 31, 1994, Venezuelan
operations decreased dramatically due to the economic climate in that country
and other factors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 15 to the Company's Consolidated
Financial Statements, included elsewhere in this report, for additional
information concerning Latin American operations.
To reduce the effect of conditions outside the Company's control in its
Latin American operations, the Company expanded its business focus to include
marketing its services in the United States. The Company commenced this process
in June 1994, with the acquisition of Transportation Safety Contractors, Inc.
and its affiliates ("Transportation Safety" or "TSCI"), an established Tampa,
Florida based group of companies that install and maintain traffic control
signage, signalization and lighting systems and that perform outside plant
telecommunication services. The majority of TSCI's business is conducted in
Florida and Virginia with the state departments of transportation and various
city and county municipalities.
In anticipation of further expansion in the domestic market, during the
fourth quarter of fiscal 1995, the Company reorganized its management and
operational structure into four operating groups, each consisting of
subsidiaries of the Company, and embarked on a series of acquisitions. On
December 8, 1995, the Company acquired the common stock of H.C. Connell, Inc.
("Connell"). Connell, a twenty year old business, performs primarily outside
plant telecommunication and electric power services for local telephone and
utility companies in central Florida providing the Company expanded market share
and a significant new customer. On October 12, 1996, the Company acquired the
common stock of Georgia Electric Company ("GEC"), a forty-five year old business
headquartered in Albany, Georgia. GEC operates in eight southeastern states
specializing in the installation, testing and maintenance of intelligent highway
and communication systems including computerized traffic management, wireless
and fiber optic data networks, weather sensors, voice data and video systems and
computerized manufacturing and control systems. Subsequent to the fiscal year
ended October 31, 1996, the Company acquired the common stock of Dial
Communications, Inc. ("Dial") of Tallahassee, Florida. Operating in northern
Florida, Alabama and Georgia for more than twenty five years, Dial provides
outside and inside plant telecommunication services to the regional Bell
operating company, other local and long distance phone companies , private
businesses and universities. Reference is made to Note 3 to the Company's
Consolidated Financial Statements, "Acquisitions", included elsewhere in this
report for additional information.
SERVICES, MARKETS AND CUSTOMERS
Telecommunication service activities, presently performed through three
subsidiaries, include a full line of network technical services for building
both `outside plant' and `inside plant' telecommunication systems. Outside plant
services consist principally of the large scale installation and maintenance of
coaxial and fiber optic cable and ancillary equipment for digital voice, data
and video transmissions installed aerially or underground to upgrade or replace
existing telephone networks. During fiscal year 1996, through an acquisition in
December 1995, the Company expanded its outside plant services to include the
maintenance and installation of electric utility grids and water and sewer
utilities. The Company provides such services primarily under hourly and per
unit basis contracts to local telephone companies including Bell South
Telecommunications, Inc., U.S. West, Inc., United Telephone Company, GTE Corp.
and Sprint Corp. The Company also provides these services to long distance
telephone companies such as AT&T, electric utility companies, local
municipalities and cable television multiple system operators in the United
States.
Inside plant services, developed through internal expansion during fiscal
1996, consist of the engineering, design, installation and integration of
telecommunication networks and delivery systems for voice, data and video
providing connectivity and networking to offices for large private businesses
including banks, universities and hospitals. The Company's inside plant services
tend to be less capital intensive, but requires a more technically skilled
workforce.
<PAGE>
Presently, the Company's telecommunication service activities are primarily
focused in the southeastern United States. Telecommunication services and
related activities accounted for 50%, 35% and 62% of the Company's consolidated
revenues for fiscal years 1996, 1995 and 1994, respectively. Revenues from
telecommunication services are expected to increase in 1997 as a result of the
acquisition of Dial in December 1996.
During fiscal year 1996, the Company formed a cable television services
group in anticipation of internal expansion and planned acquisitions during
1997. This group presently has no material operations.
Traffic Management Services. The Company's traffic management services are
provided through its TSCI and GEC subsidiaries, acquired in June 1994 and
October 1996, respectively. The Company's traffic management group installs and
maintains traffic control and signalization devices. These services include the
design and installation of signal devices (such as stoplights, crosswalk signals
and other traffic control devices) for rural and urban traffic intersections,
drawbridge and railroad track signals and gate systems, and traffic detection
and data gathering devices. The Company also designs, installs and maintains
"intelligent highway" communication systems that involve the interconnection of
data and video systems, fog detection devices, remote signalization or
computerized signage. These systems monitor traffic conditions, communicate such
conditions to central traffic control computers, and provide real-time responses
to dynamic changes in traffic patterns and climate conditions by changing speed
limit display devices, lowering traffic control gates, or changing the text on
remote signs and signals. Through GEC, the Company also installs and maintains
computerized manufacturing systems for various industrial businesses. Many of
the functions of the traffic management group, particularly those involved in
intelligent highway systems, complement those of the telecommunications services
group.
The Company's traffic management services are provided primarily to state
and local governments, in six southeastern states. Beginning with the
acquisition of TSCI in the third quarter of fiscal 1994, traffic management
services accounted for 50%, 65% and 38% of the Company's consolidated revenues
during fiscal years 1996, 1995 and 1994, respectively. The Company expects
revenues from traffic management services to increase in fiscal 1997 due to the
operations of GEC, which the Company acquired during the last month of fiscal
1996.
In October 1996, the Company placed Gerry Hall, a former principal of GEC,
in charge of its traffic management group and replaced certain management of its
TSCI operations with experienced managers from GEC. These personnel changes were
initiated with a view towards increasing revenues, improving productivity and
reducing overhead costs at TSCI and as part of the integration of the business
operations of GEC into the Company's existing traffic management operations.
(See "Management's Discussion and Analysis of Financial Condition and Results of
Operations-Overview"). Mr. Hall managed GEC, as well as other companies in a
similar line of business, for more than 20 years prior to the Company's
acquisition of GEC and Mr. Hall's employment with the Company. Mr. Hall has also
been appointed to the Company's board of directors.
Communications Development Group. The Company's communications development
group manages the Company's joint venture arrangements in Latin America,
primarily Venezuela, which were formed to provide telecommunication installation
and maintenance services to privatized local phone companies. During fiscal
years 1996, 1995 and 1994, the Company's Latin American operations accounted for
8%, 9% and 53% of the Company's revenues on a consolidated basis.
<PAGE>
During fiscal year 1996, the Company's communications development group
expanded its business to include the marketing to Latin American telephone
companies of "Neurolama", an internally developed proprietary telephone call
record and data collection system. The Company also began to acquire and upgrade
existing mobile radio networks to provide a localized wireless communication
service in the southeastern United States. To date, both such business ventures
have incurred only start-up and marketing costs with no corresponding revenues
and there can be no assurance that either business will develop revenues
sufficient to offset such costs.
The Company's statement of its expectations of future revenues is a
"forward-looking" statement based on the past financial performance of recent
acquisitions. The Company knows of no presently existing factors that would
cause such company's revenues to decrease from historical levels. Still, there
can be no assurance that past performance is indicative of future results.
Should revenues decline substantially due to foreseen or unforeseen factors,
such as failures in the integration of recent acquisitions into the Company's
operations, losses of significant customers, changes in the overall economic
climate in the areas in which such company does business, loss of key employees,
or other factors, such decline in revenues could cause the Company's
expectations to differ materially from those stated.
CONTRACTS
TELECOMMUNICATION AND RELATED SERVICES
The Company generally provides telecommunication, cable television,
electric utility and manufacturing system services (i.e., non-governmental
business) under comprehensive master service contracts that either give the
Company the right to perform certain services at negotiated prices in a
specified geographic area during the contract period or pre-qualify the Company
to bid on projects being offered by a customer. Contracts for projects are
awarded based on a number of factors such as price competitiveness, quality of
work, on-time completion and the ability to mobilize equipment and personnel
efficiently. The Company is typically compensated on an hourly or per unit basis
or, less frequently, at a fixed price for services performed. Contract duration
either is for a specified term, usually one to three years, or is dependent on
the size and scope of the project. In most cases, the Company's customers supply
most of the materials required for a particular project, generally consisting of
cable, equipment and hardware and the Company supplies the expertise, personnel,
tools and equipment necessary to perform its services.
TRAFFIC MANAGEMENT AND GENERAL UTILITY SERVICES
For traffic management and general utility services (i.e., government
funded business) the Company generally obtains fixed price contracts for
projects, either as a prime or, more often, as a subcontractor, on a competitive
bid basis. Typically, for prime contracts, a state department of transportation
("DOT") or other governmental body provides to qualified contractors a set of
specifications for the project. The company then estimates the total project
cost based on input from engineering, production and materials procurement
personnel. A bid is then submitted by the Company along with a bid bond. For
most government funded projects, the scope of work extends across many industry
segments. In such cases, the Company subcontracts its expertise to a prime
contractor. The Company must submit performance bonds on substantially all
contracts obtained. The Company believes its relations with its bonding company
are good and that its bonding capacity is adequate. However, the financial
viability of the Company is dependent on maintaining adequate bonding capacity
and any loss of such would have a material adverse effect on the Company.
Contract duration is dependent on the size and scope of the project but
typically is from six to nine months. Contracts generally set forth
date-specific milestones and provide for severe liquidated damages for failure
to meet the milestone by the specified dates. At January 29, 1997, the Company
<PAGE>
was not aware of any contracts for which it may be subject to significant
liquidated damages. The failure to complete the contract backlog on time could
have a material adverse impact on the financial condition of the Company. The
Company is typically paid based on "completed units". Retainage is normally held
on contracts (usually 5% to 10% of the contract amount), until approximately 90
days after the services are rendered and accepted by the customer. The majority
of the contracts are bonded/guaranteed as to payment by the DOT upon performance
by the Company.
In addition to generating revenues from the installation of traffic
management systems under fixed price contracts, the Company performs under
maintenance contracts with the DOT obtained through competitive bidding.
Maintenance contracts are normally for a renewable one to three year term. Under
such contracts, the Company generally is assigned a section of highway along
which to maintain traffic control devices and is paid on a per unit basis.
In most cases, the Company must supply the materials required for a
particular project, including materials and component parts required for the
production of highway signage and guardrails and the assembly of various
electrical and computerized systems. Aluminum sheeting, steel poles, concrete,
reflective adhesive, wood products, cabling and electrical components are the
principal materials purchased domestically for the production of highway signage
and guardrailing. Generally, the supply and costs of these materials has been
and is expected to continue to be stable, and the Company is not dependent upon
any one supplier for these materials. The Company also purchases various
components for the assembly of various electrical, lighting and computerized
traffic control systems. Many of these materials must be certified as meeting
specifications established by the DOT and are generally only supplied by a
limited number of vendors. The unavailability of those components could have an
adverse impact on meeting deadlines for the completion of projects which may
subject the Company to liquidated damages. However, the availability of these
materials, generally, has been adequate.
COMPETITION
The market for communication network and related services is characterized
by a large number of smaller size private companies that compete for business
generally in a limited geographic area or with a few principal customers.
However, there are also several competitors which compete with the Company on a
much larger scale, some of which are larger in size and have greater financial
resources than the Company. There are no competitors controlling substantial
market share either domestically or in the countries in which the Company
operates in Latin America. The Company's ability to assemble a large, trained
work force, offer a turnkey service mix and satisfy the requirements for
capital, bonding, technical, administrative and financial pre-qualifications
allows it to bid on larger projects and to compete on a national and
international level. Management believes that the factors required for continued
success with a limited number of key customers include financial ability,
quality and breadth of services, reliability and the ability to mobilize a
competent work force promptly for large projects.
Changes in the level of customer capital expenditures, customers utilizing
their own personnel to perform services, technological advancement, federal
funding and state spending may affect the volume of work available to the
Company as well as the Company's profitability.
BACKLOG
As of January 29, 1997, the Company had a total backlog of business, giving
effect to the acquisition of Dial and including estimates related to "per unit
basis" contracts, of approximately $105 million compared to $44 million on
February 1, 1996. Approximately 70% of the total backlog is expected to be
completed within the next fiscal year. Contract backlog of $24 million relating
<PAGE>
to the installation of traffic management systems is under performance bonds and
the Company may be subject to liquidated damages for failure to perform in a
timely manner.
SEASONALITY
Operations of the Company are seasonal, resulting in reduced revenues and
profits during the first quarter (November, December and January) relative to
other quarters. Factors affecting the seasonality of the Company's business are
holiday season shut-downs, winter weather and capital expenditure patterns by
telephone companies that can impede outside plant construction activities. The
impact of seasonality is mitigated somewhat by the presence of Company's
operations primarily in the southern United States.
EMPLOYEES
At January 29, 1997, the Company and its subsidiaries had approximately
1,510 employees of which approximately 93 represents a nucleus of senior
executive, technical and managerial personnel. Approximately 366 of the total
employees are affiliated with Latin American operations. The number of employees
considered as laborers can vary significantly according to contracts in
progress. Such employees are generally available to the Company through an
extensive network of contacts within the communications industry.
No employees of the Company are represented by a labor union and the
Company considers relations with key and other employees to be good.
ITEM 2. PROPERTIES
The Company leases 3,349 square feet for its corporate offices in West Palm
Beach, Florida. The Company also leases regional offices in Albany and Norcross,
Georgia and several cities in Florida including Tampa, Tallahassee, Leesburg and
Ft. Lauderdale. The regional office located in Albany, Georgia is leased from
shareholders/directors of the Company. See "Committee Interlocks and Insider
Participation", for additional information. The Company also leases numerous
smaller offices, temporary equipment yards or storage locations in various areas
as necessary to enable it to efficiently perform its service contracts which are
generally subject to short-term or cancelable leases.
The Company owns and operates a 10,000 square foot facility for operations
based in Chesapeake, Virginia. Such facility is encumbered pursuant to a loan
agreement. The Company's Venezuelan subsidiaries own and operate from a 33,000
square foot floor of an office building located in Caracas, Venezuela and leases
an additional 50,000 square feet of covered parking and shop facilities to store
tools, equipment and approximately 120 licensed vehicles, substantially all of
which are owned. The Company also owns two small condominiums near Maracaibo,
Venezuela, utilized principally for housing non-Venezuelan personnel.
The Company believes that its properties are in good condition and adequate
for current operations and, if additional capacity becomes necessary due to
growth, other suitable locations are available in all areas where it currently
does business. See "Commitments and Contingencies" in the Notes to the
Consolidated Financial Statements for additional information relating to leased
facilities. Certain of the Company's properties are subject to federal, state
and local provisions involving the protection of the environment. Compliance
with these provisions has not has and is not expected to have a material effect
upon the Company's financial position.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal proceedings, including suits
involving certain acquisition agreements and notes payable relating to TSCI. The
notes payable, including accrued interest, are classified as current in the
accompanying balance sheet. In the opinion of management, the ultimate outcome
of the legal proceedings will not have a material adverse effect on the
financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to shareholders for a vote during Fiscal
Year 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDERS MATTERS
The Company's Common Stock, par value $.001 per share, began trading on
NASDAQ on February 24, 1994 under the symbol "ABTE." Prior to the NASDAQ
listing, the Company's Common Stock was sporadically traded over-the-counter,
under the same symbol, since September 15, 1988, the date of the Company's
initial public offering. Set forth below is the range of the high and low
closing bid quotations of the Company's Common Stock for each quarter within the
last three fiscal years as reported by one of the Company's principal market
makers in the over-the-counter market through February 24, 1994 and as reported
by NASDAQ thereafter.
The quotations set forth below through February 24, 1994 are interdealer
prices and do not reflect retail markups, markdowns or commission and may not
necessarily represent actual transactions. Because of the sporadic trading in
the Company's Common Stock prior to February 24, 1994, the quotation through
February 24, 1994 may not reflect prices that would be obtained in an
established public trading market.
<TABLE>
<CAPTION>
Fiscal Year: 1996 1995 1994
---- ---- ----
High Low High Low High Low
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First Quarter 7 3/8 5 8 15/16 5 4/8 13 1/4 8 1/8
Second Quarter 6 3/4 5 8 3/4 4 1/16 15 7/8 10
Third Quarter 7 3/4 4 7/8 7 1/2 5 13 1/4 7 1/2
Fourth Quarter 9 7/8 5 1/4 7 5 9 3/4 6 13/16
</TABLE>
At January 29, 1997, there were 478 shareholders of record of the Company's
Common Stock. No cash dividends have been declared by the Company since its
inception and the Company has no present intention to declare or pay cash
dividends on the Common Stock in the foreseeable future. The Company intends to
retain any earnings which it may realize in the foreseeable future to finance
its operations. Except for certain provisions relating to the Company's
convertible preferred stock offering in December 1996, there are no restrictions
that prohibit the payment of cash dividends on the Company's Common Stock. See
"Management Discussion and Analysis of Financial Condition and Result of
Operations" for a further discussion.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected consolidated financial
data of the Company for the five years ended October 31, 1996 which has been
derived from the audited consolidated financial statements of the Company and
its subsidiaries. Financial data includes the results of operations and
<PAGE>
financial position relating to the commencement of Venezuela operations in
August of 1992 and the impact of adverse economic events occurring in Venezuela
since mid-1994. This data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere in this report.
<TABLE>
<CAPTION>
Years Ended October 31,
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Revenues $48,906 $35,408 $25,784 $20,048 $1,889
Net (loss) income (5,910) (281) 946 4,558 (606)
Average shares
outstanding 8,361 8,284 7,736 6,907 3,482
(Loss) earnings per
share (.71) (.03) .12 .66 (.17)
Current assets 21,449 18,573 18,635 9.487 1,414
Current liabilities 17,155 11,175 9,942 1,163 1,255
Property and equipment,
net 10,667 6,120 5,314 1,447 914
Total assets 38,918 32,482 36,604 11,571 3,256
Long-term debt 8,150 3,033 6,768 261 473
Shareholders equity $11,598 $17,467 $15,832 $7,346 $1,086
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis relates to the financial condition
and results of operations of the Company for the three years ended October 31,
1996. This information should be read in conjunction with the Company's
Consolidated Financial Statements appearing elsewhere in this document. Except
for historical information contained herein, the matters discussed below contain
forward looking statements that involve risks and uncertainties, including but
not limited to economic, competitive, governmental and technological factors
affecting the Company's operations, markets and profitability. In addition,
expectations are based on certain assumptions, among them that revenues from the
acquired businesses will not decline materially from prior years and that the
Company's contract backlog will not be materially adversely impacted by
unforeseen events. Should these assumptions prove to be in error, the Company's
results could differ materially from those expected.
OVERVIEW
GENERAL
The Company's strategy is to capture an increased share of the market for
outsourced network installation, maintenance and system integration services
related to fiber optic, coaxial and digital network infrastructure. The Company
believes that customers will continue to require such services due to
advancements in technology and developments in the telecommunications, computer
and media industries. This strategy includes plans to grow existing and
complimentary lines of business and to acquire other communication services
companies with high quality management and strong performance records and to
integrate such acquired operations into the Company's existing operations.
Management believes that such acquisitions will enable the Company to improve
economies of scale, increase gross margins, and become a leading provider of
communications infrastructure services.
<PAGE>
During fiscal 1996, the Company implemented a number of strategic
initiatives to achieve growth and improve operating efficiencies and
profitability. Such initiatives commenced with the reorganization of the
Company's corporate structure into operational groups and was followed by the
completion of several strategic acquisitions and the integration of those
businesses into the Company's operations. For fiscal year 1997, the Company
expects to continue an aggressive growth strategy with a portfolio of profitable
core and complementary businesses.
The success of the Company's growth strategy will depend in part upon the
Company's obtaining an expanded debt facility, which it is currently seeking,
and additional equity capital. In December 1996, the Company raised $6,000,000
through the issuance of convertible preferred equity securities effected through
a private placement and $3,000,000 from a bank loan in connection with an
acquisition, both of which are more fully described below. Although the Company
believes that additional financing will be obtained, there can be no assurance
that such can be obtained or obtained on terms favorable to the Company. In
addition, the Company's growth strategy contains certain inherent risks
including maintaining the organizational infrastructure to support rapid growth
and the integration and management of new acquisitions. There can be no
assurance that the Company's growth strategy will be successful.
ACQUISITIONS
In December 1995, the Company acquired the common stock of Connell for
approximately $2,300,000 (book-value). Connell, operating for over twenty years,
provides outside plant telecommunication, electric power and other utility
services in central Florida. The purchase price was paid with seller notes and
loans from two directors of the Company aggregating $500,000. The seller notes
and the loans from directors were repaid as of January 2, 1997, through the
proceeds of the private placement.
In October 1996, the Company acquired the common stock of GEC for a
$3,000,000 initial cash purchase price and a five year earn-out arrangement to
be paid in a number of common shares of the Company to be determined at the end
of each of the respective years based on actual pretax earnings. The cash
portion of the purchase price was funded from a term loan with a bank. There was
no material goodwill recorded in connection with the payment of the initial
purchase price. GEC, in business for over forty-five years installs and
maintains intelligent highway, computerized manufacturing and voice, data and
video communication systems throughout the southeastern United States.
In December 1996, the Company acquired the common stock of Dial for
approximately $4,600,000, paid through the Company's existing line of credit, a
$1,900,000 term loan with a bank, 108,489 shares of the Company's common stock
and a promissory note in the amount of $892,000. The Company expects to record
approximately $1,500,000 of goodwill in connection with the transaction which
will be amortized over twenty years. Dial provides inside and outside plant
telecommunication services in Florida, Georgia and Alabama and has been in
business over twenty-five years.
See Note 3 to the Company's Consolidated Financial Statements,
"Acquisitions."
LATIN AMERICAN OPERATIONS
Historically, the Company has experienced severe earnings volatility
relating to its Latin American operations, primarily as a result of foreign
currency devaluations and currency exchange controls. To mitigate future
earnings risk, the Company recorded significant charges during fiscal year 1996
totaling $3,553,373 to write down certain assets and to establish appropriate
reserves. Such charges include a $920,551 non-cash charge relating to the
write-off of certain goodwill, a $1,179,769 foreign currency loss relating to
Venezuelan operations, provisions totaling $353,053 to write down various
<PAGE>
investments, accounts receivables and deferred tax assets to net realizable
value and $1.1 million of marketing expense relating to a proprietary product,
discussed below.
Revenues and net (loss) income pertaining to Latin American operations are
presented below for the years ended October 31, 1996, 1995, and 1994:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Revenues 3,745,858 3,227,750 13,782,986
Net (loss)income (3,628,503) (54,835) 3,746,578
</TABLE>
The Company's net assets of Latin American subsidiaries totaled $2,080,053 and
$5,150,292 at October 31, 1996 and 1995, respectively.
RESTRUCTURING OF TRAFFIC MANAGEMENT OPERATIONS
During fiscal 1996, a decline in revenues, labor productivity and
profitability at TSCI resulted in the replacement of all its senior operating
and financial management. This was accomplished in connection with the
acquisition of GEC. This further culminated into the Company substantially
revising its estimates of reserves required for TSCI's accounts receivable,
inventories and contracts in progress. Such revisions resulted in a pretax loss
relating to TSCI of $3,679,594 during the fourth quarter. In addition, the
Company restructured TSCI's operations during the fourth quarter and the
accompanying change in group management. Such restructuring included the
centralization of purchasing, job estimating, certain administrative functions
and various productivity enhancing measures which are expected to result in a
significant reduction of general and administrative expenses and improved gross
margins for the traffic management group in 1997.
PRODUCT DEVELOPMENT EXPENDITURES
During fiscal year 1996, the Company began to market to Latin American
telephone companies an internally developed proprietary telephone call record
and data collection system, termed "Neurolama". To date, the business has
incurred only start-up and marketing costs aggregating $1.1 million with no
corresponding revenues. Such costs are primarily included in "Charges and
transaction/translation losses related to Latin American operations" in the
accompanying Consolidated Statements of Operations. Also, the Company began to
acquire and upgrade existing mobile radio networks to provide a localized
wireless communication service with only immaterial costs incurred through
October 31, 1996. There can be no assurance that the Company will generate
sufficient revenues from either business to offset its startup costs.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
elements of the Company's Consolidated Statements of Operations as a percentage
of its revenues.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Revenues 100.0% 100.0% 100.0%
Cost of revenues 82.8 78.3 63.6
General and administrative 17.2 15.4 16.2
Depreciation and amortization 5.6 5.4 3.3
Charges and transaction/translation
losses related to Latin American
operations 7.3 0.3 9.3
Operating (loss) income (12.9) 0.6 7.7
Interest expense 2.8 3.2 1.5
Interest and dividend income 0.5 1.6 1.6
(Loss) income before income taxes
and minority interest (15.1) (0.9) 7.8
Income tax (benefit) expense (1.8) (1.0) 2.4
Minority interest 1.2 0.9 1.7
Net (loss) income (12.1) (0.8) 3.7
</TABLE>
YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995.
The Company reported a net loss of ($5,910,248) or ($.71) per share for the
year ended October 31, 1996 compared to a net loss of ($281,166) or ($.03) per
share for 1995. The net loss for fiscal 1996 is attributable primarily to
charges recorded in connection with Latin American operations, including costs
associated with marketing the Company's proprietary telephone billing system,
and with the restructuring of TSCI. See "Latin American Operations" and
"Restructuring of Traffic Management Operations".
Revenues and Gross Margins
The Company's revenues are derived primarily from hourly or per unit basis
contracts for telecommunication and related services. For products and services
performed relating to the installation of traffic management and certain general
utility services, the Company is compensated largely under competitively bid
fixed price contracts with time of performance dependent upon the size of the
project, normally three months to one year. The Company's profitability on fixed
price contracts is partially dependent upon its ability to control material, and
particularly, labor costs incurred under such contracts. The award of fixed
price contracts are often accompanied by one to three year maintenance contracts
which compensate on a per unit basis and typically provide higher margins.
Revenues for the year ended October 31, 1996, were $48,906,170 representing
an increase of $13,498,589 or 38% compared to revenues for the year ended
October 31, 1995 of $35,407,581. The overall increase in total revenues is
primarily a result of the acquisition of Connell which provided $12,138,224 of
revenues since the acquisition date of December 8, 1995. The decrease in
revenues from existing businesses is primarily attributable to TSCI which
provided revenues of $21,181,435 for fiscal year 1996 compared to revenues of
$22,872,331 for fiscal 1995. Revenues from Latin American operations totaled
$3,745,858 and $3,227,750 in 1996 and 1995, respectively.
The Company expects revenues to continue to increase in fiscal year 1997 as
a result of recent acquisitions, internal growth, and the completion of its
current contract backlog. The Company had a contract backlog at January 29,
1997, giving effect to the acquisition of Dial and including estimates related
to "per unit" basis contracts, of approximately $105 million compared with a
contract backlog of $44 million at February 1, 1996.
Costs of revenues increased to $40,486,018 in 1996 from $27,719,750 for the
year ended October 31, 1995 and was 82.8% and 78.3% of revenues for the years
ended October 31, 1996 and 1995, respectively. The decline in gross margin
percentage in fiscal year 1996 is primarily attributable to a significant
decline in labor productivity at TSCI. The Company has put in place measures
that are designed to improve labor productivity, control costs and generate
other operational efficiencies from the assimilation of recent acquisitions. See
"Restructuring of Traffic Management Operations". If these measures are
successful, the Company's gross margins are expected to improve during fiscal
year 1997. Cost of revenues for Latin American operations totaled $2,130,683 and
$1,636,009 in 1996 and 1995, respectively.
<PAGE>
OPERATING EXPENSES AND OTHER
General and administrative expenses for the year ended October 31, 1996
were $8,403,491 or 17.2% of revenues compared to $5,464,338 or 15.4% of revenues
for 1995. The increase in general and administrative expenses in fiscal 1996 is
primarily attributable to the acquisition of Connell which accounted for
$800,000 of such expenses and the inclusion of $900,000 of charges representing
the write-off of various assets at TSCI, primarily accounts receivable. General
and administrative expenses for Latin America were $1,613,569 in 1996 and
$1,175,811 in 1995.
Depreciation and amortization expense was $2,749,804 for the year ended
October 31, 1996 or 5.6% of revenues compared to $1,914,064 or 5.4% of revenues
for 1995. The increase in such expenses is primarily attributable the
acquisition of Connell and additional depreciation resulting from the purchase
during 1996 of $2,557,258 of equipment required to meet growth primarily in the
Company's telecommunication services group. Depreciation and amortization
expense relating to Latin American operations totaled $498,589 in 1996 and
$465,492 in 1995.
Charges and transaction/translation losses related to Latin American
operations includes charges and costs totaling $3,553,373 for fiscal year 1996.
Such amounts includes a $920,551 non-cash charge relating to the write-off of
certain goodwill, a $1,179,769 foreign currency loss relating to Venezuelan
operations, a provision of $353,053 which consists of a write-down of various
investments, accounts receivable and other assets to net realizable value and
$1,100,000 of marketing expense associated with the Company's proprietary
billing system.
Interest expense was $1,350,440 for 1996 or 2.8% of revenues compared to
$1,117,932 or 3.2% of revenues for 1995. This increase is due primarily to
approximately $2,300,000 of debt incurred in connection with the acquisition of
Connell and additional equipment debt of $600,000.
For fiscal year 1996, the Company recorded a benefit for income taxes of
$890,695 on a pretax loss of $7,398,826 or an effective income tax rate of (12)%
compared to an income tax benefit of $368,105 on pretax loss of $332,082 or an
effective tax rate of (111)% in 1995. The rate in 1995 results primarily from
the reduction in taxes provided on foreign operations.
Minority interest, prior to August 1, 1995, represents a shareholder's 20%
share of the earnings of the Company's Venezuelan corporations. On August 1,
1995, the Company entered into an agreement whereby the shareholder's
proportionate share of any future earnings increased from 20% to 50%. For fiscal
year 1996, losses were allocated to minority interest to the extent of its
invested capital.
YEAR ENDED OCTOBER 31, 1995 COMPARED TO YEAR ENDED OCTOBER 31, 1994
The Company reported a net loss of ($281,166) or ($.03) per share for the
year ended October 31, 1995 compared to net income of $946,013 or $.12 per share
for 1994. The net operating loss for fiscal 1995 is primarily attributable to
gross margins which were lower than expectations relating to TSCI.
REVENUES AND GROSS MARGINS
For the year ended October 31, 1995, consolidated revenues were
$35,407,581, representing an increase of $9,623,431 or 37% compared to revenues
for the year ended October 31, 1994 of $25,784,150. The overall increase in
total revenues is primarily a result of increased revenue from the Company's
<PAGE>
domestic telecommunication services business from $2,250,618 in 1994 to
$8,992,454 in 1995 and the inclusion of a full year's revenues from the June 22,
1994 acquisition of TSCI. The acquisition of TSCI accounted for $31,864,785 or
90% of consolidated revenues in 1995 compared with $11,028,673 or 43% of
consolidated revenues in 1994. These increases in revenues were offset by the
significant decline in revenues from the Company's Latin American operations,
from $13,782,986 in 1994 to $3,227,750 in 1995. The significant decline in
revenues was primarily attributable to the severe economic conditions
experienced in Venezuela commencing in July, 1994.
Costs of revenues increased to $27,719,750 in 1995 from $16,395,098 for the
year ended October 31, 1994 and was 78.3% and 63.6% of revenues for the years
ended October 31, 1995 and 1994, respectively. The decline in gross margin
percentage in fiscal year 1995 is primarily attributable to the change in
business mix from the relatively high profits associated with Latin American
operations to more competitive domestic work. Additionally, in fiscal 1995,
margins continued to be lower than expectations on certain fixed price contracts
relating to TSCI.
OPERATING EXPENSES AND OTHER
General and administrative expenses for the year ended October 31, 1995
were $5,464,338 or 15.4% of revenues compared to $4,166,694 or 16.2% of revenues
for 1994. Included in general and administrative expenses for fiscal 1995 were
various overhead costs, aggregating approximately $350,000 incurred to maintain
operations in Venezuela during a period for which there were no material
corresponding revenues. In addition, non-recurring legal expenses associated
with various capital raising efforts in fiscal 1995 totaled approximately
$90,000. The Company also incurred $300,000 of costs in 1995 relating to a joint
venture arrangement established to pursue the development and marketing of
certain telecommunication equipment (Neurolama) in Latin America. General and
administrative expenses for 1995 reflect a full year inclusion of costs relating
to the mid-1994 acquisition of TSCI.
Depreciation and amortization expenses were $1,914,064 for the year ended
October 31, 1995 or 5.4% of revenues compared to $854,251 or 3.3% of revenues
for 1994. The increase in such expenses is primarily attributable to a full
year's inclusion of the acquisition of TSCI and additional depreciation
resulting from $2,250,904 of equipment acquired during fiscal 1995 to meet
growth in the Company's domestic telecommunication services business.
For fiscal year 1995, charges and transaction/translation losses related to
Latin American operations of $95,798 represents foreign currency
translation/transaction losses. For the year ended October 31, 1994, the
Company's Venezuelan operations incurred certain charges totaling $2,381,515 of
which $858,326 represents translation/transaction losses, and $1,523,189
represents severance and certain bad debt charges.
In the third quarter of fiscal 1995, the Company incurred a $100,379 loss
on the sale of its investment in certain municipal bond fund units that had a
carrying value of $1,408,000.
Interest expense was $1,117,932 for 1995 or 3.2% of revenues compared to
$397,167 or 1.5% of revenues for 1994. This increase is due primarily to a full
year's inclusion of debt assumed and incurred in connection with the acquisition
of TSCI.
For fiscal year 1995, the Company recorded a benefit for income taxes of
$368,105 on a pretax loss of $332,082 or an effective income tax credit of
(111)% compared to income tax expense of $632,384 on pretax income of $2,007,727
or an effective tax rate of 40% in 1994. The rate in 1995 results primarily from
the reduction in taxes provided on undistributed earnings of foreign
subsidiaries.
<PAGE>
Minority interest in the Company's Venezuelan corporations, decreased from
$429,330 in 1994 to $317,189 in 1995, reflecting, in part, the dramatic decline
in business in Venezuela.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1996, the Company's net working capital totaled $4,294,080
compared to $7,397,897 at year-end 1995. Cash and equivalents were $ 3,267,161
at October 31, 1996 compared to $2,952,239 at October 31, 1995. Cash was
impacted during 1996 primarily by cash acquired through acquisitions, a
reduction of accounts receivable and inventories, capital expenditures and the
repayment of debt.
In 1996, cash of $3,322,242 was generated from operations compared to
$473,795 in 1995. The positive cash flow from operations for fiscal year 1996 is
primarily attributable to a $3,725,739 decrease in accounts receivable and
inventories. Losses relating to Latin American operations and TSCI, were largely
of a non-cash nature.
Net cash of $2,606,060 was used in investing and financing activities
during 1996 which represents primarily the addition of $2,557,258 of equipment,
primarily purchased to meet growth in the Company's domestic telecommunication
operations, cash acquired through acquisitions of $1,760,970 and the repayment
of $1,954,192 of long-term debt, net of additional borrowings for acquisitions
of $3,500,000. The cash portion of the purchase price relating to the
acquisitions of Connell and GEC during fiscal year 1996 were funded entirely
through the proceeds of bank loans totaling $3 million and loans from two
directors totaling $500,000.
On November 29, 1995, the Company entered into a $12.5 million credit
facility (the "Credit Facility") comprised of a $6,000,000 revolving line of
credit collateralized by receivables and inventory, a $2,500,000 equipment loan
facility to be secured by new or used equipment purchased, a 60-month Term A
loan in the amount of $2,750,000 secured by equipment, and a 36-month Term B
loan in the amount of $1,250,000. Each loan accrues interest at either the prime
rate or, at the Company's election, the one month LIBOR rate, plus two and seven
tenths percent. The Credit Facility contains covenants, which require among
other conditions, that the Company maintain certain tangible net worth, funded
debt and debt service amounts. At October 31, 1996, the Company was in
non-compliance with such covenants ; however, the Company obtained a waiver and
amended covenants from the lender effective as of October 31, 1996 and for
fiscal year 1997. The Company anticipates that it will be in compliance with the
modified covenants.
On December 2, 1996 the Company entered into a $3,000,000 Term Loan (the
Term Loan) with a bank in connection with refinancing the acquisition of GEC on
October 12, 1996. The Term Loan is payable in sixty monthly installments of
$50,000 plus interest at prime. Excess cash flow of GEC, as defined, is to be
paid to the Bank. The Term Loan contains covenants, which require among other
conditions, that the Company maintain certain tangible net worth, working
capital and debt service amounts. The Term Loan is collateralized by all real
and personal property of GEC. Proceeds from the term loan were partially used to
repay a $1,500,000 note payable to a bank, outstanding at October 31, 1996 and
due on December 2, 1996. The remaining proceeds were used to repay the Company's
lines of credit.
Effective December 20, 1996 the Company completed a private placement
transaction of 1,000 shares of $.10 par value, Series A Convertible Preferred
Stock (the Preferred Stock) and warrants to purchase 200,000 shares of the
Company's common stock. Gross proceeds from the offering totaled $6,000,000.
Each share of Preferred Stock is convertible to shares of the Company's common
stock after April 30, 1997 at the lesser of $9.82 per share or at a discount
(ranging from 10% to 20% depending upon the date of conversion) of the average
closing bid price of a share of common stock for three days proceeding the date
of conversion. The Preferred Stock accrues dividends at an annual rate of 5% and
<PAGE>
is payable quarterly in arrears in cash or through a dividend of additional
shares of Preferred Stock. The warrants are exercisable at $9.82 per share after
one year provided that the Preferred Stock is not converted to common stock
prior to the first anniversary of the private placement. Upon the occurrence of
certain events, including failure to effect a timely registration statement, the
Company may be required to redeem the preferred stock at a price equal to the
liquidation preference, plus any accrued and unpaid dividends plus an amount
determined by formula. The proceeds from the private placement were used to
repay a $1,869,050 note payable to the sellers of Connell, a $250,000 note
payable to a director in connection with the acquisition of Connell, and
$2,015,895 due the former principals of GEC by GEC at the date of acquisition,
all of which were outstanding at October 31, 1996.
Accordingly, certain borrowings have been reclassified in the October 31,
1996 balance sheet to reflect the refinancing of such debt with proceeds from
the preferred stock and the term loan. See Notes 3 and 8 of the Notes to the
Consolidated Financial Statements.
In addition, on December 2, 1996, the Company acquired all the outstanding
common stock of Dial. As consideration, the Company paid $3,000,000 in cash,
issued 108,489 shares of common stock (fair value of $620,421) and issued an
$892,000 promissory note with a three year term bearing interest at prime plus
1/2%. The cash component of the purchase was funded in part from the Company's
line of credit and the remainder through a $1,900,000 term loan from a bank with
interest at prime plus 1/2%. The principal balance of this note, plus accrued
interest, is due March 2, 1997.
The success of the Company's growth strategy will depend, in part, on the
Company's obtaining an expanded debt facility and refinancing certain
acquisition related debt, as well as, obtaining additional equity capital.
Although the Company believes that additional financing will be obtained, there
can be no assurance that such can be obtained or obtained on terms favorable to
the Company. However, the Company believes that its operations will generate
sufficient cash flow to service debt and maintain existing businesses.
Nevertheless increased interest rates or other adverse developments could impair
the Company's ability to service its indebtedness, which in turn, may reduce its
ability to fund internal growth and capital expenditures.
RECENTLY ISSUED ACCOUNTING STANDARDS
During 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock Based Compensation," which is effective for fiscal
years beginning after December 15, 1995. The Company believes that the adoption
of this standard will not have a material effect on the Company's consolidated
results of operations or financial position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and related notes and
independent auditors' reports are included herein under Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company's former independent accountant, KPMG Peat Marwick LLP, who had
been engaged by the Company to audit its consolidated financial statements for
the fiscal year ended October 31, 1994, was dismissed by the Company on October
9, 1995. The report of KPMG Peat Marwick LLP on the Consolidated Financial
Statements of the Company contained no adverse opinion or disclaimer of opinion,
nor was the report qualified or modified as to uncertainty, audit scope, or
accounting principles used, with the exception of the adoption of Financial
<PAGE>
Accounting Standards No. 109, "Accounting for Income Tax". The decision by the
Company to change accountants was recommended by the audit committee and
approved by its Board of Directors. From their appointment to the dismissal of
the former accountants there were no disagreements on any matters of accounting
principles or practice, financial statement disclosure, or auditing scope or
procedure in connection with their reports.
The Board of Directors of the Company approved the appointment of Ernst &
Young LLP as its principal accountant to audit the Company's Consolidated
Financial Statements for the years ended October 31, 1995 and 1996.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
Certain biographical information concerning the Company's executive
officers and directors is presented below. Name Age Position
<TABLE>
<S> <C>
William J. Mercurio........... 55 President, Chief Executive Officer,
Chief Financial Officer and
Director
Joseph P. Powers.............. 51 President, Telecommunication
Services Group, Inc
Gerry W. Hall................. 51 President, Traffic Management
Group, Inc. and Director
Frazier L. Gaines............. 57 President, Able Telcom International,
Inc. ("ATI") and Director
Daniel L. Osborne............. 39 Chief Accounting Officer and
Assistant Secretary
William D. Callahan........... 61 Acting Secretary and Director
Billy B. Caudill.............. 50 Director
Robert C. Nelles.............. 58 Director
Gideon D. Taylor.............. 54 Director
</TABLE>
William J. Mercurio has been the President and Chief Executive Officer of
the Company since June 29, 1995 and the Chief Financial Officer since March 26,
1996. Mr. Mercurio was Sr. Vice President and Director of Burnup & Sims, Inc.
(n/k/a Mastec, Inc.), a telecommunication and utility service company, where he
served from 1971 until 1986. From 1986 until June 1995, he was the Managing
Partner of Mercurio & Associates, P.A., Certified Public Accountants.
Joseph P. Powers has been President of the Company's Telecommunication
Services Group ("TSG") since November 1995. From January 1990 to October 1995,
Mr. Powers was Director of Operations for Volt Information Sciences, Inc. From
1979 to 1990 he held various management positions with Burnup & Sims, Inc.
(n/k/a Mastec, Inc.).
Gerry W. Hall has been a Director and President of the Company's Traffic
Management Group ("TMG") since October 1996. He also has been President of
Georgia Electric Company since 1983. GEC installs and maintains traffic
management systems primarily in the Southeast United States. The Company
acquired GEC in October 1996.
Frazier L. Gaines has been a Director of the Company since August 1992 and
President of ATI since June 22, 1994. From August of 1992 to June 22, 1994, Mr.
Gaines was Chief Operating Officer of the Company. Mr. Gaines developed and is
in charge of the Company's Latin American Operations. From 1987 to 1992, Mr.
Gaines was vice President of Judycom, Inc. and Judycom Construction Corporation,
both of which were located in Lexington, Kentucky and engaged in fiber optic
installation.
<PAGE>
Daniel L. Osborne has been the Chief Accounting Officer of the Company
since January 1993. From January 1993 to March 26, 1996 he was also Chief
Financial Officer and Secretary. From February 1991 to December 1992, Mr.
Osborne was an operations analyst for BTR P.L.C.
William D. Callahan has been a Director since September, 1995 and Acting
Secretary since October 1996. Mr. Callahan retired from Deloitte & Touche, LLP,
as an audit partner where he served for more than 23 years, having SEC reporting
responsibility for a variety of publicly-traded companies
Billy B. Caudill has been a Director since August 1992. Mr. Caudill
resigned as President of Telecommunications Technologies, Inc. (a former
subsidiary of the Company) in July 1995. He was President and Chief Executive
Officer of the Company from August 1992 to June 22, 1994. From 1988 to 1992, Mr.
Caudill was the President of Teletronics Technologies, Inc., a
telecommunications engineering, maintenance and installation company located in
Lexington, Kentucky.
Robert C. Nelles was elected to the Board of Directors in February 1995. Mr.
Nelles is the President and owner of Nelles & Associates, Inc., an international
telecommunications consulting company he founded in 1991. Prior to founding this
company, Mr. Nelles held senior executive positions both domestically and
internationally for Northern Telcom for over 35 years.
Gideon D. Taylor was Chairman of the Board of the Company from 1988 until
May 1995. From October 1988 to August 1992, Mr. Taylor was also President and
Chief Executive Officer of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's Chief Executive Officer and
the Company's other executive officers for the fiscal years ended October 31,
1996, 1995, and 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation Awards
<S> <C> <C> <C> <C> <C>
Restricted Securities
Name and Stock Underlying
Principal Fiscal Other Annual Awards Options
Position Year Salary Compensation (#)
------------------------------ ------ -------- ------------- -------- ----------
William J. Mercurio 1996 $204,000 $6,000 20,000
President and Chief 1995 66,600 2,000 100,000
Executive Officer
Joseph P. Powers 1996 115,000 5,125 20,000
President of TSG
Gerry W. Hall 1996 5,770
President of TMG and
Director
Frazier L. Gaines 1996 110,000 34,000
President of ATI and 1995 104,000 35,000
Director 1994 104,000 62,125 $75,000
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Restricted Securities
Name and Stock Underlying
Principal Fiscal Other Annual Awards Options
Position Year Salary Compensation (#)
------------------------------ ------ -------- ------------- -------- ----------
Daniel L. Osborne 1996 66,000
Chief Accounting Officer 1995 60,000 25,000
and Asst. Secretary 1994 60,000 9,000
Clark W. Barlow(1) 1996 10,154
Former Chairman of the 1995 117,185 2,954
Board 1994 81,731 4,057
Douglas Hubbard 1996 57,700
Former President of 1995 150,000 3,048
TSCI and Director (2) 1994 54,814 4,186
</TABLE>
(1) Resigned effective March 1, 1996.
(2) Mr. Hubbard resigned as a Director effective March 26, 1996 and as
President of TSCI on May 1, 1996.
<TABLE>
<CAPTION>
OPTIONS GRANTED TABLE
Potential
% of Realized Value
Total at Assumed Annual
Options Rates
Granted of Stock Price
No. of to Appreciation
Securities Employees Exercise Market for Option Term(2)
Underlying in Fiscal Or Base Price/Date
Name Granted Year Price of Grant Expiration
Date 5% 10%
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William J.
Mercurio 20,000 7.4% $6.375 $6.375 06/11/06 $80,184 $203,202
Joseph P. Powers 15,000 5.5% 6.875 6.875 11/27/05 64,855 164,355
5,000 1.9% 7.813 7.813 12/19/06 24,568 62,260
</TABLE>
(1) Options vest ratably over a three year period.
(2) The potential realizable values set forth under these columns result
from calculations assuming 5% and 10% annualized stock price growth rates from
grant dates to expiration dates as set by the Commission and are not intended to
forecast future price appreciation of the Company's Common Stock based upon
growth at these prescribed rates. The Company is not aware of any formula which
will determine with reasonable accuracy a present value based on future unknown
factors. Actual gains, if any, on stock option exercises are dependent on the
future performance of the Company. There can be no assurance that the amounts
reflected in this table will be achieved. Options vest ratably over a three year
period.
AGGREGATED OPTION EXERCISES AND OPTION VALUE TABLE
The following table provides information on options exercised in the fiscal
year ended October 31, 1996 by the executive officers named in the "Summary
Compensation Table" above, the number of unexercised options each of them held
at October 31, 1996 and the value of the unexercised "in-the-money" options each
of them held as of that date.
<PAGE>
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercisable In-the-Money
Acquired Value Options at Fiscal Options at Fiscal
Name on Realized Year-End(#) Year-End($) (1)
Exercise Exercisable/ Exercisable/
Unexercisable Unexercisable
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William J. Mercurio -0- -0- 50,000/70,000 189,750/234,750
Joseph P. Powers -0- -0- 5,000/15,000 8,750/21,560
Frazier L. Gaines -0- -0- 110,000/-0- 943,250/ -0-
Daniel L. Osborne -0- -0- 33,833/16,667 225,396/36,447
</TABLE>
(1)Options are "in-the-money" at the fiscal year-end if the fair market value
of the underlying securities on such date exceeds the exercise price of the
option. The amounts set forth represent the difference between the fair
market value of the securities underlying the options at the close of trading
on October 31, 1996, based on the average of the bid and the asked price of
$8.625 per share of Common Stock on that date (as quoted on NASDAQ) and the
exercise price of the options, multiplied by the applicable number of
options.
COMPENSATION OF EXECUTIVE OFFICERS
The Compensation of the Company's executive officers is determined by the
Board of Directors. The Company has not established a formal sitting
Compensation Committee. The Board also reviews the grant of stock options and
compensation for all officers of the Company. See "Committee Interlocks and
Insider Participation."
William J. Mercurio, the Company's President, Chief Executive Officer and
Chief Financial Officer, is party to an employment agreement dated June 29, 1995
(the "Mercurio Employment Agreement") with the Company. The Mercurio Employment
Agreement expires on June 28, 1998 and is renewable for an additional one-year
term at the option of Mr. Mercurio. The Mercurio Employment Agreement provides
for Mr. Mercurio to be paid a base salary of at least $200,000 per year, to be
increased by at least 5% per year. Mr. Mercurio also receives insurance and
other benefits. The Mercurio Employment Agreement also provides for Mr. Mercurio
to be granted options to purchase 100,000 shares of the Company's common stock
at a price equal to 90% of the fair market value for such stock at the date of
the grant, 50,000 of which become exercisable on the first anniversary of the
Mercurio Employment Agreement and the remainder become exercisable in equal
installments on the second and third anniversary, respectively.
Gerry W. Hall, who serves as President of the Company's Traffic Management
Group (which consists of Transportation Safety Contractors, Inc., Transportation
Safety Contractors of Virginia, Inc., and Georgia Electric Company ("GEC")), is
party to an employment agreement (the "Hall Employment Agreement") dated October
12, 1996 with GEC. The Hall Employment Agreement terminates on October 11, 2001
and provides for Mr. Hall to be paid a salary of $150,000 per year, plus
insurance and other benefits. The Hall Employment Agreement also contains a
covenant by Mr. Hall not to compete with the Company for a period of two years
following his employment with the Company, unless the Company terminates Hall
Employment Agreement for cause or Mr. Hall terminates the agreement with good
reason, in which case the non-competition period will terminate after six months
(which period may be extended by the Company up to one year in exchange for
additional compensation).
<PAGE>
None of the Company's executive officers are parties to any agreements that
are triggered upon a "change of control" of the Company.
STOCK INCENTIVE PLAN
The Company has adopted the 1996 Stock Option Plan ("the Plan"), as
amended, pursuant to which 550,000 shares of Common Stock have been authorized
for issuance. The primary purpose of the Plan is to attract and retain capable
executives and employees by offering them a greater personal interest in the
Company's business through stock ownership, The Plan is administered by those
members of the Board of Directors of the Company who are "disinterested persons"
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended, which committee selects the persons who will be granted
options under the Plan, prescribes the terms and provisions of each option
granted(which need not be identical), specifies the number of shares subject to
each option, sets the option price and determines the maximum period which
options may be exercised.
Options granted under the Plan may either be options qualifying as
incentive stock options (the "Incentive Options") under Section 422(a) of the
Internal Revenue Code of 1986, as amended, or non-qualifying options
("Nonqualified Options"). Any Incentive Option granted under the Plan must
provide for an exercise price of not less than 100% of the fair market value of
the underlying shares on the date of such grant; provided, however, that the
exercise price of any Incentive Option granted to an eligible employee owning
more than 10% of the outstanding Common Stock of the Company must not be less
than 110% of such fair market value as determined on the date of the grant. The
term of each option and the manner in which it may be exercised is determined by
the Board of Directors, provided that no option may be exercisable more that ten
years after the date of its grant and, in the case of an Incentive Option
granted to an eligible employee owning more than 10% of the Common Stock, no
more than five years after the date of the grant.
The individuals eligible to receive options under the Plan are employees,
non-employee directors, advisors and consultants of the Company and its
subsidiaries. Non-employee directors, advisors and consultants shall only be
eligible to receive Nonqualified Options. Employees are eligible to receive both
Incentive Options and Nonqualified Options. The Company currently has five
non-employee directors and approximately 930 employees who are eligible to
participate in the Plan. In the event that an outstanding option terminates for
any reason, the shares of Common Stock subject to the unexercised portion of
such option shall again be available for grants under the Plan.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid $12,000 annually
and are reimbursed for expenses associated with Board responsibilities. In
addition, non-employee directors were granted 5,000 stock options each, with an
exercise price of fair market value at the date of grant.
Directors who also serve as executive officers receive no fees or
remuneration for acting in their capacity as a Director of the Company.
Directors who serve on Board committees receive $750 per committee meeting.
<PAGE>
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation for the Company's officers is determined by the entirety of
the Company's Board of Directors. Of the members of the Board of Directors,
Messrs. Mercurio, Gaines and Hall also serve as executive officers of the
Company.
On December 8, 1995, the Company acquired the issued and outstanding stock
of Connell for an aggregate purchase price of approximately $2.2 million,
consisting of $500,000 in cash and approximately $1.8 million in promissory
notes. The Company obtained the cash portion of the purchase price through the
issuance of two promissory notes in the amount of $250,000 each to Messrs. Billy
B. Caudill and Frazier L. Gaines, both of whom are members of the Board of
Directors of the Company. These notes, which bore interest at the prime rate
plus 1%, became due and were paid by the Company prior to December 31, 1996. As
additional consideration for their agreeing to lend $500,000 to the Company, the
Company issued to each of Messrs. Caudill and Gaines 5,000 shares of the
Company's common stock for $.001 per share. The closing market price for the
Registrant's common stock on the Nasdaq National Market System on December 8,
1995 was $7.187 per share.
On October 12, 1996, the Company, acquired all the issued and outstanding
capital stock of GEC, which prior to the acquisition was owned equally by Gerry
W. and J. Barry Hall (collectively, the "Halls"). Following the acquisition, the
Halls were employed by the Company and Gerry W. Hall was appointed to the
Company's Board of Directors. The purchase price for the GEC acquisition was
$3,000,000 to be paid in cash, plus the issuance at the end of each of the next
five years of a number of shares of common stock of the Registrant having a then
discounted current market value of $1,000,000, subject to adjustment, based on
the pretax earnings performance of GEC. In connection with the acquisition of
GEC, the Company entered into employment agreements with the Halls, each of
which expires on October 11, 2001, that provide for the Halls to serve,
respectively, as President of the Company's traffic management group and of
TSCI.
GEC operates in an Albany, Georgia facility leased from the Halls for an
aggregate annual rent of $60,000. The Company has agreed to purchase the
facility from the Hall's for $350,000, which the Company believes represents
fair market value for the property. The purchase is subject to the Company
obtaining acceptable financing and other factors. The Company expects to
complete the purchase of the facility by June 1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
To the Company's knowledge, and based on a review of available forms and
reports filed with the Company by the Company's directors and officers, such
officers and directors complied with the filing requirements of Section 16(a)
during fiscal year 1996.
ITEM 12. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth, as of January 29, 1997 information with respect
to the beneficial ownership of the Company's common stock by: (i) each person
known by the Company to beneficially own more than 5% of the outstanding shares
of the Company's Common Stock; (ii) each director of the Company; (iii) each of
the Company's named executive officers (excluding those executive officers who
resigned during fiscal year 1996); and (iv) all directors and executive officers
as a group. Unless otherwise indicated, each of the shareholders named in this
table: (a) has sole voting and investment power with respect to all shares of
common stock beneficially owned and (b) has the same address as the Company.
<PAGE>
<TABLE>
<S> <C> <C>
Number of Percent
Name/Address Shares of Class
William J. Mercurio(1).......................... 52,000 *
Joseph P. Powers................................ 5,000 *
Gerry W. Hall................................... 0 *
Frazier L. Gaines(2)............................ 681,912 8%
Daniel L. Osborne(3)............................ 33,833 *
William D. Callahan............................. 0 *
Billy B. Caudill................................ 421,983 5%
Robert C. Nelles................................ 0 *
Gideon D. Taylor(4)............................. 827,352 10%
All directors and officers as a group
(9) persons ............................... 2,022,080 24%
</TABLE>
(1)Includes options that are currently exercisable to purchase 50,000 shares of
common stock.
(2)Includes the options that are currently exercisable to purchase
110,000 shares of common stock. Does not include an aggregate of 9,000
shares held as trustee for four minors and as to which Mr. Gaines
disclaims beneficial ownership.
(3)Represents options that are currently exercisable to purchase common
stock.
(4)Includes 21,619 shares owned by Mr. Taylor's wife.
* Less than 1%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Item 11--Committee Interlocks and Insider Participation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON
FORM 8-K
(a)1. The following consolidated financial statements of Able Telcom
Holding Corp. and subsidiaries are included as part of this report.
Reports of Independent Certified Public Accountants
Consolidated Financial Statements
Consolidated Balance Sheets - October 31, 1996 and 1995
Consolidated Statements of Operations - Years ended October
31, 1996, 1995 and 994
Consolidated Statements of Shareholders' Equity - Years ended
October 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended October 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements - October 31, 1996
(a)2. The financial statement schedule for the years ended October 31,
1996, 1995 and 1994 is filed as part of this report and should be
read in conjunction with the Consolidated Financial Statements of
the Company.
Schedule II-Valuation and Qualifying Accounts ............... F- 24
Schedules not listed above have been omitted because they are not
applicable or not required or the information required to be set
forth therein is included in the Consolidated Financial Statements
or Notes thereto.
(a)3. The exhibits listed on the accompanying Index to Exhibits
immediately following the Financial Statement Schedules are
filed as part of, or incorporated by reference into, this Report.
<PAGE>
<TABLE>
<S> <C>
No. Description
3.1 Articles of Incorporation of the Registrant, as amended
to date(1)
3.2 Amendment to Articles of Incorporation of the
Registrant, as filed with the Secretary of the State of
Florida on December 20, 1996(7)
3.3 Bylaws of the Registrant, as amended to date(1)
4.1 Articles of Incorporation (incorporated by reference to
Exhibit 3.2)(7)
4.2 Specimen Common Stock Certificate(1)
4.3 Specimen Series A Preferred Stock Certificate
4.4 Forms of Warrant issued to Credit Suisse First Boston
Corporation and Silverton International Fund Limited(7)
4.5 Gaines Option(1)
4.6 Osborne Option(1)
4.7 Able Telcom Holding Corp. 1995 Stock Option Plan(8)
10.2 Stock Option Agreement with Daniel L. Osborne(1)
10.3 Stock Option Agreement with Frazier L. Gaines(1)
10.8 Employment Agreement with Gerry W. Hall(5)
10.9 Employment Agreement with William J. Mercurio(3)
10.10 Master Agreement with AT&T(1)
10.11 Master Agreement with GTE(1)
10.13 Note restructuring agreements with former principals of
TSCI(2)
10.14 Stock Purchase Agreement between the Registrant and H.C.
and Lois A. Connell, dated November 6, 1995(4)
10.15 Amendment to Stock Purchase Agreement between the
Registrant and H.C. and Lois A. Connell, dated December
8, 1995(4)
10.16 Consulting Agreement between the Registrant and H.C.
Connell, dated November 6, 1995(4)
10.17 Stock Purchase Agreement between the Registrant, Traffic
Management Group, Inc., Georgia Electric Company, Gerry
W. Hall and J. Barry Hall(5)
10.18 Stock Purchase Agreement between the Registrant,
Telecommunications Services Group, Inc., Dial
Communications, Inc., William E. Newton and Sybil C.
Newton(6)
10.19 Promissory Note of the Registrant payable to William E.
and Sybil C. Newton(6)
10.20 Term Loan and Revolving Line of Credit Facility between
the Registrant and SunTrust Bank, South Florida N.A.
effective as of November 29, 1995(4)
10.21 First Modification to Term Loan and Revolving Line of
Credit Facility between the Registrant and SunTrust
Bank, South Florida N.A. effective as of May 20, 1996.
10.22 Second Modification to Term Loan and Revolving Line of
Credit Facility between the Registrant and SunTrust,
South Florida N.A. effective as of October 30, 1996
10.23 Third Modification to Term Loan and Revolving Line of
Credit Facility between the Registrant and SunTrust
Bank, South Florida N.A. effective as of December 2,
1996.
10.24 Term Loan and Security Agreement between Able Telcom
Holding Corp., Georgia Electric Company, Inc., Traffic
Management Group, Inc., Transportation Safety
Contractors, Inc., Transportation Safety Contractors of
Virginia, Inc. and SunTrust Bank South Florida N.A.,
effective December 2, 1996
10.25 Stock Purchase Agreement(7)
11 Computation of Per Share Earnings
23.1 Consent of Ernst and Young, LLP
21 List of subsidiaries as of October 31, 1996
27 Financial Data Schedule (for SEC use only)
</TABLE>
(1) Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form S-1 (Registration #33-65854) ordered effective
by the Commission on February 26, 1994, as a amended.
(2) Previously filed with the Commission as an exhibit to the
Company's Annual Report on Form 10-K filed for fiscal year 1994.
(3) Previously filed with the Commission as an exhibit to the
Company's Annual Report on Form 10-K filed for fiscal year 1995.
(4) Previously filed with the Commission as an exhibit to the Company's Current
Report Form 8-K dated December 22, 1995.
(5) Previously filed with the Commission as an exhibit to the Company's Current
Report Form 8-K as filed with the Commission on October 25, 1996.
(6) Previously filed with the Commission as an exhibit to the Company's Current
Report Form 8-K as filed with the Commission on December 13, 1996.
(7) Previously filed with the Commission as an exhibit to the Company's Current
Report Form 8-K as filed with the Commission on December 31, 1996.
(8) Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form S-8 (Registration #333-04377) ordered effective
by the Commission: June, 1996.
(b) Reports on Form 8-K
A Current Report on Form 8-K dated October 25, 1996 was filed on such date;
under Item 2 thereof, the Company reported the acquisition of Georgia Electric
Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ABLE TELCOM HOLDING CORP.
By: /s/ William J. Mercurio February 12, 1997
------------------------------------------
WILLIAM J. MERCURIO, President and CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
Signatures Title Date Signed
/s/ William J. Mercurio President and Chief
- ------------------------ Executive and Financial
WILLIAM J. MERCURIO Officer and Director February 12, 1997
/s/ Daniel L. Osborne Chief Accounting Officer,
- ------------------------ and Assistant Secretary February 12, 1997
DANIEL L. OSBORNE
/s/ William D. Callahan Secretary and Director
- ------------------------ February 12, 1997
WILLIAM D. CALLAHAN
/s/ Frazier L. Gaines Director February 12, 1997
- ------------------------
FRAZIER L. GAINES
/s/ Billy B. Caudill Director
- ------------------------ February 12, 1997
BILLY B. CAUDILL
/s/ Robert Nelles Director February 12, 1997
- ------------------------
ROBERT NELLES
/s/ Gideon Taylor Director February 12, 1997
- ------------------------
GIDEON TAYLOR
/s/ Gerry W. Hall Director February 12, 1997
- ------------------------
GERRY W. HALL
</TABLE>
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
PAGE
----
Reports of Independent Certified Public Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheets - October 31, 1996 and 1995 F-4
Consolidated Statements of Operations - Years ended October 31,
1996, 1995 and 1994 F-6
Consolidated Statements of Shareholders' Equity - Years ended
October 31, 1996, 1995 and 1994 F-7
Consolidated Statements of Cash Flows - Years ended October 31,
1996, 1995 and 1994 F-8
Notes to Consolidated Financial Statements - October 31, 1996 F-10
Financial Statement Schedule:
II. Valuation and Qualifying Accounts - Years ended October
31, 1996, 1995, and 1994 F-24
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
Able Telcom Holding Corp.:
We have audited the accompanying consolidated balance sheets of Able Telcom
Holding Corp. and subsidiaries (the "Company") as of October 31, 1996 and 1995,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for the two years in the period ended October 31, 1996. Our audits
also included the financial statement schedule listed in the Index at Item 14(a)
for the years ended October 31, 1996 and 1995. These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express and opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Able
Telcom Holding Corp. and subsidiaries at October 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended October 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule for the years ended October 31, 1996 and 1995, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
West Palm Beach, Florida
January 22, 1997, except for the last
paragraph of Note 8,as to which the
date is January 31, 1997
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
Able Telcom Holding Corp.:
We have audited the accompanying consolidated statements of operations,
shareholders' equity, and cash flows of Able Telcom Holding Corp. and
subsidiaries (the "Company") for the year ended October 31, 1994. In connection
with our audit of the consolidated financial statements, we also have audited
the 1994 financial statement schedule as listed in the Item 14(a). These
consolidated financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provided a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Able Telcom Holding Corp. and subsidiaries for the year ended October 31, 1994
in conformity with generally accepted accounting principles. Also, in our
opinion, the related 1994 financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
The Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", effective as of November 1, 1993.
/s/ KMPG Peat Marwick LLP
-------------------------
KMPG Peat Marwick LLP
Tampa, Florida
February 16, 1995
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31,
ASSETS 1996 1995
- ------ ---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $3 ,267,161 $ 2,952,239
Investments 571,010 571,875
Accounts receivable, net 13,617,792 10,529,124
Inventories 1,374,698 3,535,622
Costs and profits in excess of billings on uncompleted
contracts 954,269 ---
Prepaid expenses and other 757,883 831,908
Deferred income taxes 905,898 151,879
----------- -----------
Total current assets 21,448,711 18,572,647
Property and equipment, net 10,667,357 6,119,608
Other assets:
Deferred income taxes 269,942 331,739
Goodwill, net 5,919,880 7,203,761
Other 612,941 254,461
----------- -----------
Total other assets 6,802,763 7,789,961
----------- -----------
Total assets $38,918,831 $32,482,216
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
- ------------------------------------ ---- ----
Current liabilities:
<S> <C> <C>
Current portion of long-term debt $ 1,965,611 $ 2,222,369
Notes payable - shareholders 1,307,976 1,557,976
Lines of credit 4,626,178 3,220,000
Accounts payable and accrued liabilities 8,036,142 4,174,405
Billings in excess of costs and profits on uncompleted
contracts 1,218,724 ---
----------- -----------
Total current liabilities 17,154,631 11,174,750
Long-term debt, excluding current portion 8,149,807 3,033,000
Other liabilities 2,015,895 ---
----------- -----------
Total liabilities 27,320,333 14,207,750
Minority interest --- 807,955
Commitments and contingencies --- ---
Shareholders' equity:
Common stock, $.001 par value, authorized 25,000,000
shares; 8,203,212 and 8,193,212 shares issued and
outstanding in 1996 and 1995, respectively 8,203 8,193
Additional paid-in capital 12,833,286 12,790,196
Unrealized loss on investments, net of tax (53,990) (53,125)
(Deficit) retained earnings (1,189,001) 4,721,247
----------- -----------
Total shareholders' equity 11,598,498 17,466,511
----------- -----------
Total liabilities and shareholders' equity $38,918,831 $32,482,216
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues $ 48,906,170 $35,407,581 $ 25,784,150
---------- ---------- -----------
Costs and expenses:
Costs of revenues 40,486,018 27,719,750 16,395,098
General and administrative 8,403,491 5,464,338 4,166,694
Depreciation and amortization 2,749,804 1,914,064 854,251
Charges and transaction/translation
losses related to Latin American
operations 3,553,373 95,798 2,381,515
----------- ----------- ------------
Total costs and expenses 55,192,686 35,193,950 23,797,558
----------- ----------- ------------
(Loss) income from operations (6,286,516) 213,631 1,986,592
----------- ----------- ------------
Other expense (income):
Loss on sale of investments --- 100,379 ---
Interest expense 1,350,440 1,117,932 397,167
Interest and dividend income (270,163) (672,598) (418,302)
Other expenses 32,033 --- ---
----------- ----------- ------------
Total other expense (income) 1,112,310 545,713 (21,135)
----------- ----------- ------------
(Loss) income before income taxes and
minority interest (7,398,826) (332,082) 2,007,727
Income tax (benefit) expense (890,695) (368,105) 632,384
----------- ----------- ------------
(Loss) income before minority interest (6,508,131) 36,023 1,375,343
Minority interest (597,883) 317,189 429,330
----------- ----------- ------------
Net (loss) income $(5,910,248) $ (281,166) $ 946,013
=========== =========== ============
(Loss) income per common share: $ (.71) $ (.03) $ .12
=========== =========== ============
Weighted average common shares and
common stock equivalents outstanding 8,361,458 8,283,668 7,736,122
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Unrealized
Additional Loss on (Deficit)
Paid-in Investments, Retained
-----------------------
----------- -----------
Shares Amount Capital Net of Earnings Total
Taxes
------------------------- ---------- ----------
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at October
31, 1993 6,176,548 $ 6,177 $ 3,283,576 $ --- $4,056,400 $ 7,346,153
Issuance of common
stock for
exercise of stock
options 199,500 199 32,051 --- --- 32,250
Tax benefit for
exercise of stock
options --- --- 812,525 --- --- 812,525
Issuance of common
stock for
services rendered 30,000 30 29,970 --- --- 30,000
Tax benefit on
issuance of
common stock for
services rendered --- --- 116,889 --- --- 116,889
Issuance of common
stock for
exercise of
warrants 1,192,993 1,193 4,364,129 --- --- 4,365,322
Issuance of common
stock for
acquisition 272,730 273 2,249,720 --- --- 2,249,993
Remittance by
officer relating
to profits on
stock transactions --- --- 80,261 --- --- 80,261
Unrealized loss on
investments,
restricted --- --- --- (146,950) --- (146,950)
Net income --- --- --- --- 946,013 946,013
----------- ----------- ----------- ------------- ---------- -----------
Balance at October 7,871,771 7,872 10,969,121 (146,950) 5,002,413 15,832,456
31, 1994
Issuance of common
stock to
liquidate notes
payable to
shareholders /
directors 259,434 259 1,499,741 --- --- 1,500,000
Issuance of common
stock for
exercise of
warrants 67,007 67 334,829 --- --- 334,896
Cancellation of
common stock
previously issued
for acquisition (5,000) (5) (13,495) --- --- (13,500)
Change in
unrealized loss
on investments --- --- --- 93,825 --- 93,825
Net loss --- --- --- --- (281,166) (281,166)
----------- ----------- ----------- ------------- ---------- -----------
Balance at October 8,193,212 8,193 12,790,196 (53,125) 4,721,247 17,466,511
31, 1995
Issuance of common
stock to
directors in
connection with
acquisition 10,000 10 43,090 --- --- 43,100
Change in
unrealized loss
on investments --- --- --- (865) --- (865)
Net loss --- --- --- --- (5,910,248) (5,910,248)
=========== =========== =========== ============= ========== ===========
Balance at October
31, 1996 8,203,212 $ 8,203 $12,833,286 $ (53,990) $(1,189,00) $11,598,498
=========== =========== =========== ============= ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended October 31,
1996 1995 1994
---- ---- ----
Operating Activities:
<S> <C> <C> <C>
Net (loss) income $ (5,910,248) $ (281,166) $ 946,013
Adjustments to reconcile net (loss)
income to net cash provided by operating
activities, net of effects of acquisitions:
Depreciation and amortization 2,749,804 1,914,064 854,251
Bad debt expense 1,094,503 86,593 1,012,202
Provision for inventory losses 290,500 --- ---
Write down of Latin American assets 1,593,480 --- ---
Deferred income taxes (890,695) (439,341) (1,423,195)
Loss on sale of equipment 21,805 --- ---
Loss on sale of investments --- 100,379 ---
Translation/transaction losses 1,179,769 95,798 858,326
Minority interest (597,883) 317,189 429,330
Common stock issued for services --- --- 30,000
Changes in assets and liabilities, net
of effects from acquisitions:
Decrease in accounts receivable 1,854,735 796,530 1,474,805
Decrease (increase) in inventories 1,871,004 (353,318) 448,597
Increase in costs and profits in excess
of billings on uncompleted contracts (828,553) --- ---
Decrease (increase) in prepaid expenses
and other 339,711 (223,811) (8,692)
Increase in other assets (286,996) (24,373) (3,873)
Increase (decrease) in accounts payable
and accrued expenses 159,861 (1,514,749) (423,423)
Increase in billings in excess of costs
and estimated profits on uncompleted
contracts 681,446 --- ---
----------- ----------- -----------
Net cash provided by operating
activities 3,322,242 473,795 4,194,341
----------- ----------- -----------
Investing Activities:
Purchases of property and equipment (2,557,258) (2,250,904) (1,835,377)
Proceeds from the sale of equipment 128,823 --- ---
Purchases of investments --- (350,000) (4,972,920)
Sales of investments --- 4,418,233 ---
Investments under the equity method --- --- 50,000
Cash acquired in acquisitions 1,760,970 --- ---
Cash paid in acquisitions (3,500,000) --- (6,422,610)
----------- ----------- ----------
Net cash (used in)provided by
investing activities (4,167,465) 1,817,329 (13,280,907)
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Financing Activities:
<S> <C> <C> <C>
Net borrowing under lines of credit 1,254,178 378,000 495,999
Payment of shareholders/directors loans (500,000) --- (260,846)
Borrowings from shareholders/directors 500,000 57,976 ---
Proceeds from long-term debt 4,547,148 737,758 7,954,175
Proceeds from debt to finance
acquisition 3,000,000 --- ---
Payments on long-term debt (6,251,340) (3,775,168) (1,610,346)
Distributions to minority interests (210,072) (500,795) (745,962)
Foreign currency translation adjustment (778,509) --- (277,764)
Tax benefit for exercise of stock
options and issuance of common stock
for services rendered --- --- 929,414
Proceeds from exercise of warrants and
options --- 334,896 4,397,572
Proceeds from officer relating to
profits on stock transactions --- --- 80,261
----------- ----------- -----------
Net cash provided by (used in)
financing activities 1,561,405 (2,767,333) 10,962,503
Effect of exchange rate changes on cash and
equivalents (401,260) (3,901) (580,562)
----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents 314,922 (480,110) 1,295,375
Cash and cash equivalents at beginning of
year 2,952,239 3,432,349 2,136,974
----------- ----------- -----------
Cash and cash equivalents at end of year $ 3,267,161 $ 2,952,239 $ 3,432,349
=========== =========== ===========
Supplemental disclosures of cash flow
information:
Non-cash transactions affecting
operating, investing and financing
activities:
Operating activities:
Issuance of common stock for services $ --- $ --- $ 30,000
=========== =========== ===========
Financing activities:
Issuance of common stock for --- --- 2,249,993
acquisition
common stock issued to repay
shareholders/directors loans --- (1,500,000) ---
Issuance of notes payable to
shareholders/directors --- --- 3,000,000
=========== =========== ===========
Total financing activities $ --- $(1,500,000) $ 5,249,993
=========== =========== ===========
See Note 3 for information on non-cash
investing and financing activities
associated with acquisitions
Interest paid $ 1,120,465 $ 933,302 $ 322,167
=========== =========== ===========
Income taxes paid, net of refunds $ --- $ 168,460 $ 816,143
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
(1) THE COMPANY
Able Telcom Holding Corp. ("Able Telcom" or the "Company") specializes
in the design, installation, maintenance and system integration of
advanced communication networks for voice, data, and video systems.
These services are provided for an array of complimentary applications,
including telecommunications infrastructure, traffic management systems,
automated manufacturing systems and utility networks. The Company is
currently organized into four operating groups: telecommunication
services, cable television services, traffic management services and
communications development. Each group, excluding cable television
services, is comprised of subsidiaries of the Company with each having
local executive management functioning under a decentralized operating
environment. The Company formed the cable televisions services group to
facilitate planned expansion during 1997.
Able is headquartered in West Palm Beach, Florida, and operates its
subsidiaries throughout the Southeastern United States, as well as in
areas of South America.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the Company and its
subsidiaries. All material intercompany accounts and transactions
have been eliminated. Operations for subsidiaries acquired are
included in the consolidated results of operations since the date
of acquisition.
.
(B) REVENUE RECOGNITION
Revenues from "per unit basis" contracts are recognized at the
time services are rendered and accepted by the customer. Revenues
from installation contracts are recognized as contract costs are
incurred under the percentage-of-completion method measured on
the cost to cost basis. Contract costs include all direct
material and labor costs as well as those indirect costs relating
to the contract such as indirect labor, supplies and equipment
costs. The balance sheet was reclassified at October 31, 1996 to
present under separate headings "Costs and profits in excess of
billings on uncompleted contracts" and "Billings in excess of
costs and profits on uncompleted contracts". At October 31, 1995
and 1994 such amounts were included in accounts receivable and
inventory.
Changes in job performance, condition and the estimated
profitability may result in revisions to costs and profits which
are recognized in the period in which the changes are determined.
(C) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
(D) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is
provided for using the straight-line method over the estimated
useful lives of the assets.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
(E) INCOME TAXES
Income taxes have been provided using the asset and liability
method in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (Statement 109).
(F) GOODWILL
Goodwill represents the amount by which the purchase price of
businesses acquired exceeds the fair market value of their net
assets under the purchase method of accounting. Goodwill is being
amortized on a straight-line basis over 10-20 years. The Company
periodically evaluates the realizability of goodwill and other
intangible assets to determine whether any impairment has
occurred in the value of such assets based on the provisions of
Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" (Statement No. 121). The initial adoption of
Statement No. 121 in 1996 did not have a material impact on the
Company's financial condition or results of operations. See Note
15 regarding certain impairment writedowns that were recorded
during 1996 as a result of applying the provisions of Statement
No. 121.
Goodwill is net of accumulated amortization of $791,329 and
$733,934 at October 31, 1996 and 1995, respectively. Amortization
expense for the years ended October 31, 1996, 1995 and 1994 was
$338,859, $468,684 and $188,894, respectively.
(G) CASH AND CASH EQUIVALENTS
The Company considers all unrestricted highly liquid securities
(consisting principally of short-term money market investments
and treasury notes) with a maturity or redemption option of three
months or less at the date of purchase to be cash equivalents.
(H) FOREIGN CURRENCY TRANSLATION
In accordance with Statement of Financial Accounting Standards
No. 52,"Foreign Currency Translation", the financial statements
of the Company's Latin American subsidiaries are remeasured
using the U.S. dollar as the functional currency. Monetary assets
and liabilities denominated in a foreign currency are remeasured
into U.S. dollars at the year end exchange rate. Non-monetary
assets and liabilities, and related income statement amounts
are remeasured at historical exchange rates.
(I) INVESTMENTS
As of November 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under this statement,
the Company's investments are classified as "available for sale"
and, accordingly, are recorded at the quoted market value as of
the fiscal year end with an offsetting adjustment to
shareholders' equity, net of tax.
(J) STOCK COMPENSATION
The Company currently follows Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", in
accounting for employee stock options. During October 1995, the
Financial Accounting Standards Board issued Statement No. 123,
"Accounting for Stock Based Compensation", which is effective
for fiscal years beginning after December 15, 1995.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
The adoption of this statement is not expected to have a material
impact on the financial condition or results of operations of the
Company.
(K) FINANCIAL STATEMENTS
The carrying amounts of cash and cash equivalents, accounts
receivable (generally unsecured), accounts payable and notes
payable approximate fair value due to the short maturity of the
instruments and the provision for what management believes to be
adequate reserves for potential losses. The fair value of
long-term debt is estimated using quoted market prices, whenever
available, or an appropriate valuation method. The carrying value
of long-term debt approximates its fair value due to the variable
interest rates associated with the debt.
(L) RECLASSIFICATION
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(M) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles require management to
make certain estimates and assumptions that affect the reported
amounts of assets and liabilities, revenues and costs. Actual
results could differ from those estimates.
(3) ACQUISITIONS
On October 12, 1996, the Company, through a wholly owned subsidiary,
acquired all of the outstanding common stock of Georgia Electric Company
(GEC). As initial consideration, the Company paid $3,000,000 in cash. As
subsequent consideration, the Company will issue shares of common stock
over the next five years beginning in fiscal 1997, contingent upon the
operating performance of GEC and the market value of the Company's
stock. The acquisition was accounted for using the purchase method of
accounting. The results of operations are included in the consolidated
statements of operations since the date of acquisition.
The following summarizes the fair values of the assets of GEC acquired
and the liabilities of GEC assumed:
<TABLE>
<S> <C>
Cash and cash equivalents $1,366,619
Accounts receivable 4,422,983
Costs and profits in excess of billings on 27,645
uncompleted contracts
Prepaid expenses 221,105
Property and equipment 2,258,672
Other assets 44,258
Accounts payable and accrued liabilities (2,095,942)
Billings in excess of costs and profits on (529,445)
uncompleted contracts
Undistributed S Corp earnings due to former owners (2,715,895)
---------
Net assets $3,000,000
=========
</TABLE>
On December 8, 1995, the Company, through a wholly owned subsidiary,
acquired all of the outstanding common stock of H.C. Connell, Inc.
("Connell"). As consideration, the Company paid $500,000 in cash and
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
issued a $1,869,049 promissory note. The acquisition was accounted for
using the purchase method of accounting. The results of operations of
Connell are included in the consolidated statements of operations since
the date of the acquisition.
The following summarized the fair values of the assets of Connell
acquired and the liabilities of Connell assumed:
<TABLE>
<S> <C>
Cash and cash equivalents $ 394,351
Accounts receivable 1,614,923
Costs and profits in excess of billings on
uncompleted contracts 98,071
Prepaid expenses 109,661
Property and equipment 1,957,195
Other assets 27,226
Accounts payable and accrued expenses (847,928)
Billings in excess of costs and profits on
uncompleted contracts (7,833)
Borrowings (663,017)
Other liabilities (313,600)
=========
Net assets $2,369,049
=========
</TABLE>
On June 22, 1994, the Company acquired all of the outstanding common
stock of Transportation Safety Contractors, Inc. and its affiliates
("TSCI"). As consideration, the Company paid $6,000,000 in cash, issued
$3,000,000 in promissory notes and issued 272,300 shares of restricted
common stock of the Company. In November 1994, the $3,000,000 in
promissory notes were renegotiated resulting in $1,500,000 of the
promissory notes being converted to 259,434 shares of restricted common
stock of the Company with no gain or loss recognized on the conversion.
The acquisition was accounted for using the purchase method of
accounting and $6,777,017 in goodwill was recorded which is being
amortized over 20 years under the straight-line method. Amortization
expense amounted to approximately $339,000 in 1996 and 1995 and $102,408
in 1994. The results of operations are included in the consolidated
statements of operations since the date of the acquisition.
In June 1994, the Company acquired a 75% interest in a Brazilian
telecommunications company for $144,000 plus $356,000 in working capital
contributions. The acquisition was accounted for using the purchase
method and $496,606 in goodwill was recorded and is being amortized over
10 years using the straight-line method. The results of operations are
included in the consolidated statements of operations since the date of
acquisition. During fiscal year 1996, the Company reduced the carrying
value of the goodwill of $447,010 to zero in accordance with provisions
of Statement no. 121. Such charge is reflected in "Charges and
transaction/translation losses related to Latin American operations" in
the Consolidated Statements of Operations for fiscal year 1996. The
acquisition did not have a material impact on 1994 operations.
Unaudited pro forma financial information for the Company is presented
as if the Company's acquisitions of GEC, Connell and TSCI had taken
place as of November 1, for each of the respective years.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
Revenues $75,174,571 $69,833,590 $69,196,722
Net (loss) income (1,391,59) 2,332,280 2,197,673
Net (loss) income per
share (.17) .28 .28
</TABLE>
This unaudited pro forma information does not purport to be indicative
of the results of operations which would have resulted had the
acquisitions been consummated at the dates assumed.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
(4) INVESTMENTS
At October 31, 1996 and 1995, investments consisted of preferred stock.
These securities are classified as available-for-sale and have a cost
basis of $625,000. The fair market value as determined by the quoted
market prices, at October 31, 1996 and 1995 was $571,010 and $571,875,
respectively. The unrealized losses on these investments of $53,990 and
$53,125, net of tax, is included as a separate component of
shareholders' equity.
Investment income consisted of dividends and interest income which
amounted to $180,015, $263,502 and $187,724 for the years ended October
31, 1996, 1995 and 1994, respectively. During the year ended October 31,
1995, the Company sold investment securities; the proceeds and realized
loss on the sale totaled $4,418,233 and $100,379, respectively.
(5) ACCOUNTS RECEIVABLE
Accounts receivable are recorded net of an allowance for doubtful
accounts of $828,186 and $535,914 at October 31, 1996 and 1995,
respectively. Accounts receivable includes retainage which has been
billed but is not due until approximately 90 days after the services are
rendered and accepted by the customer. Retainage totaled $1,675,698 and
$1,410,832 at October 31, 1996 and 1995, respectively. A significant
portion of accounts receivable is derived from several major customers.
(See Note 11)
(6) UNCOMPLETED CONTRACTS
Uncompleted contracts consist of the following at October 31, 1996:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts $15,989,067
Earnings recognized on uncompleted contracts
2,706,996
----------
Total 18,696,063
Billings to date
18,960,518
==========
Net $ 264,455
==========
</TABLE>
Included in the accompanying balance sheets under the following
headings:
<TABLE>
<S> <C>
Costs and profits in excess of billings on
uncompleted contracts $ 954,269
Billings in excess of costs and profits on
uncompleted contracts 1,218,724
==========
Net $ 264,455
==========
</TABLE>
(7) PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consists of the following at October 31,
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land and buildings $ 1,398,884 $ 1,367,121
Equipment, furniture and fixtures 13,493,828 7,204,304
Equipment under capital lease 637,407 ---
---------- ----------
15,530,119 8,571,425
Less accumulated depreciation (4,862,762) (2,451,817)
---------- -----------
Property and equipment, net $10,667,357 $ 6,119,608
========== ===========
</TABLE>
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
Depreciation and amortization expense relating to property and equipment
amounted to $2,410,945, $1,445,380 and $665,357 in 1996, 1995 and 1994,
respectively.
(8) BORROWINGS
The Company's borrowings consist of the following at October 31, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
LINES OF CREDIT:
<S> <C> <C>
Bank lines of credit ($6,600,000 aggregate maximum limit at October
31, 1996) $6,200,000 maturing on February 28, 1997; $400,000
maturing on September 30, 1997, interest payable monthly at prime
(8.25% at October 31, 1996) to prime plus 1/2%, secured
by substantially all the assets of the Company $ 6,126,178 $ 3,220,000
Less effect of December 2, 1996 refinancing
transaction (1,500,000) ---
----------- -----------
$ 4,626,178 $ 3,220,000
=========== ===========
NOTES PAYABLE TO SHAREHOLDERS/DIRECTORS:
Notes payable to shareholders, principal and interest due on
demand at 18%, unsecured, personally guaranteed by a shareholder/
director of the Company $ 1,307,976 $ 1,307,976
Note payable to a director, principal due on demand, interest due
quarterly at prime (8.25% at October 31, 1996), unsecured 250,000 250,000
----------- -----------
1,557,976 1,557,976
Less effect of December 20, 1996 private
placement of preferred stock (250,000) ---
----------- -----------
$ 1,307,976 $ 1,557,976
=========== ===========
LONG-TERM DEBT:
Notes payable to a bank, payable in monthly installments
aggregating approximately $158,000, interest payable monthly
ranging from prime (8.25% at October 31, 1996) to prime plus1/2%,
secured by substantially all the assets of the Company $ 4,061,987 $ ---
Note payable to a bank, principal and interest due December 2,
1996, at prime (8.25% at October 31, 1996), secured by
substantially all the assets of the Company 1,500,000 ---
Note payable to the sellers of Connell, principle and accrued
interest due January 2, 1997, interest at 9%, secured by certain
accounts receivable and all property and equipment of Connell
not otherwise pledged to a bank 1,869,049 ---
</TABLE>
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(CONTINUED)
<S> <C> <C>
Mortgage note payable to a bank, payable in monthly installments
of $1,604 plus interest at prime (8.25% at October 31, 1996) plus
1/2%, secured by land and building with a carrying value of
approximately $425,000 as of October 31, 1996 288,750 308,000
Notes payable to banks, payable in monthly installments of
principal and interest ranging from 8.25% to 14.9% at October
31, 1996, secured by related equipment 91,477 92,828
Notes payable to a bank, payable in monthly installments
aggregating approximately $133,000, interest payable monthly
ranging from the 30 day commercial paper rate (5.25% at October
31, 1995) plus 3% to prime (8.75% at October 31, 1995),
secured by certain investments and Company common shares owned
by two shareholders/directors --- 3,618,710
Term loan payable to a bank, interest based on LIBOR (5.94% at
October 31, 1995) plus 3/4%, secured by certain investments and
Company common shares owned by two shareholders/directors --- 1,235,831
---------- ----------
7,811,263 5,255,369
Plus effect of December 1996 refinancing and
private placement of preferred stock 1,750,000 ---
Capital leases (see Note 14) 554,155 ---
---------- ----------
Total long-term debt 10,115,418 5,255,369
Less current portion, giving effect to the December 1996
refinancing and private placement of preferred stock (1,965,611) (2,222,369)
========== ==========
Long-term debt, excluding current portion $ 8,149,807 $ 3,033,000
========== ==========
</TABLE>
Effective December 2, 1996 the Company entered into a $3,000,000 Term
Loan Credit Facility (the Term Loan) with a bank. The Term Loan is
payable in sixty monthly installments of $50,000 plus interest at prime.
Additionally, excess cash flow of GEC, as defined, is to be paid to the
bank. The Term Loan contains covenants, which require among other
conditions, that the Company maintain certain tangible net worth,
working capital and debt service amounts. The Term Loan is
collateralized by all real and personal property of GEC which was
acquired on October 12, 1996. Proceeds from the term loan were used to
repay $1,500,000 of a bank line of credit outstanding at October 31,
1996 and to repay the $1,500,000 note payable to a bank due on December
2, 1996.
Effective December 20, 1996 the Company completed a private placement
transaction of 1,000 shares of $.10 par value, Series A Convertible
Preferred Stock (the Preferred Stock) and warrants to purchase 200,000
shares of the Company's common stock at $9.82 per share. Proceeds from
the offering totaled $6,000,000. Each share of Preferred Stock is
convertible to shares of the Company's common stock after April 30, 1997
at the lesser of $9.82 per share or at a discount (ranging from 10% to
20% depending upon the date of conversion) of the average closing bid
price of a share of common stock for three days proceeding the date of
conversion. The Preferred Stock accrues dividends at an annual rate of
5% and is payable quarterly in arrears in cash or through a dividend of
additional shares of
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
Preferred Stock. The warrants are exercisable after one year provided
that the Preferred Stock is not converted to common stock prior to the
first anniversary date of the private placement. Upon the occurrence of
certain events, including failure to effect a timely registration
statement related to the conversion features and warrants associated
with the preferred stock, the Company may be required to redeem the
Preferred Stock at a price equal to the liquidation preference, plus any
accrued and unpaid dividends plus an amount determined by formula.
Proceeds from the private placement were used to repay a $1,869,050 note
payable to the sellers of Connell, a $250,000 note payable to a
director, and $2,015,895 due the former principals of GEC. The amount
due to the former principals of GEC represented undistributed S
corporation profits existing at the date of acquisition, and is
presented as "Other liabilities" in the accompanying Consolidated
Balance Sheet at October 31, 1996.
The aggregate maturities of long-term debt and capital leases for years
subsequent to October 31, 1996, giving effect to the December 1996
refinancing and private placement, are as follows:
<TABLE>
<S> <C> <C>
1997 $1,965,611
1998 1,945,387
1999 1,593,910
2000 1,372,192
2001 779,024
Thereafter 340,244
----------
7,996,368
Proceeds from the December 20, 1996
private placement used to repay debt 2,119,050
==========
$10,115,418
==========
</TABLE>
At October 31, 1996, the Company was in non-compliance with various
financial loan convenants relating to its credit facility with a bank.
The Company obtained amended covenants from the lender effective October
31, 1996 and through fiscal year 1997. The Company anticipates that it
will be in compliance with the modified covenants in 1997.
(9) STOCK OPTIONS
During 1996, the Company's shareholders adopted a stock option plan
comprised of incentive stock options for employees and non-qualified
stock options for non-affiliated directors (the "Plan"). The Plan
provides for the issuance of up to 550,000 options to employees and
non-affiliated directors. The exercise price for incentive options under
the Plan will not be less than the fair value of the Company's common
stock on the date of the grant. The purchase price for grants of
non-qualified stock options will be determined by the Company's Board of
Directors. At October 31, 1996, a total of 186,000 options, net of
canceled shares, have been granted under the Plan. Incentive options
granted to employees generally become exercisable over a three year
period in equal installments beginning the year after the date of the
grant. Non-qualified options granted to non-affiliated directors become
exercisable one year after the date of the grant.
In addition, specific stock options have been granted to certain
officers prior to or outside the Plan, a portion of which remain
unexercised at October 31, 1996. During the fiscal year ended October
31, 1992, an option to purchase 260,000 shares of Common Stock at $.05
per share was granted to a director of the Company. In addition, in
fiscal 1993 an officer was granted an option to purchase 100,000 shares
of common stock at $.50 per share. For the years ended October 31, 1996,
1995 and 1994, 160,500 of these options remained outstanding and
available for exercise.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996
During 1995, options to purchase 100,000 shares at $4.83 per share were
granted to an officer, pursuant to employment agreement. All such
options were granted at the fair market value on the date of grant and
are outstanding as of October 31, 1996.
(10) INCOME TAXES
An analysis of the components of (loss) income before income taxes and
minority interest and the related income tax (benefit) expense is
presented below:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Domestic $ (3,770,323) $ (817,790) $ 1,693,176
Foreign (3,628,503 485,708 314,551
---------- ---------- ----------
$ (7,398,826) $ (332,082) $ 2,007,727
========== ========== ==========
Provision for income
taxes:
Federal
Current $ --- $ --- $ 792,440
Deferred (969,353) (202,074) (252,402)
State
Current --- --- 153,142
Deferred (165,934) --- (60,796)
Foreign --- --- ---
Current --- 71,236 1,027,689
Deferred 244,592 (237,267) (1,027,689)
========= ========= ==========
Provision for income tax
(benefit) expense $ (890,695) $ (368,105) $ 632,384
========= ========= ==========
</TABLE>
Reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
---- ---- ----
(Benefit) tax at
federal statutory rate (34)% (34)% 34%
State income tax, net (4) --- 4
Non-deductible goodwill 2 35 2
Reduction in
valuation allowance (1) (7) ---
Reduction in (benefit)
tax provided on
foreign operations 22 (92) ---
Other 3 (13) ---
------ ------ ------
Effective income tax rate (12)% (111)% 40%
====== ====== ======
</TABLE>
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
<TABLE>
<CAPTION>
1996 1995
---- ----
Deferred tax assets:
<S> <C> <C>
Unrealized loss on investments $ 18,388 $ 18,063
Reserve for bad debts 295,804 148,382
Net operating loss carry forward 1,452,313 460,270
Foreign tax credit carryforwards --- 423,914
Other
55,281 10,297
---------- ----------
1,821,786 1,060,926
Less valuation allowance --- (44,989)
---------- ----------
1,821,786 1,015,937
Deferred tax liabilities:
Plant, property and equipment (645,946) (195,939)
Investment in foreign subsidiaries --- (329,580)
Other --- (6,800)
---------- ----------
(645,946) (532,319)
---------- ----------
Net deferred tax asset $1,175,840 $ 483,618
========== ==========
</TABLE>
The Company has not provided deferred taxes for tax that could result
from the remittance of $999,115 of undistributed earnings of foreign
subsidiaries since the Company has sufficient foreign tax credits to
offset any taxes related to these undistributed earnings. It is not
practical to estimate the amount of taxes that might be payable on the
eventual remittance of such earnings. If the foreign subsidiaries were
to remit the above amount, the taxes withheld would approximate $89,000.
At October 31, 1996, the Company has Federal net operating loss
carryforwards of approximately $3,990,043. These net operating loss
carryforwards begin to expire at the end of the fiscal year ending
October 31, 2009..
The valuation allowance decreased by $44,989 during 1996.
(11) MAJOR CUSTOMERS/CONCENTRATION OF CREDIT RISK
A significant portion of the Company's business is derived from three
major customers including a governmental agency, a telephone company and
an industrial manufacturer. At October 31, 1996 and 1995, the Company
had accounts receivable from these customers of $5,453,885 and
$1,543,514 or 42% and 15% of total accounts receivable, respectively.
Revenues from these customers totaled $22,786,000, $9,498,000 and
$6,044,000 or 50%, 27% and 23% of consolidated revenues in fiscal years
1996, 1995 and 1994, respectively.
Approximately 60% of the Company's Latin American revenues are derived
from one customer in Venezuela. Revenues from this customer were
approximately 4% of consolidated revenues in 1996 (6% in 1995; 53% in
1994). Accounts receivable outstanding for this customer were $257,994
and $1,483,630 at October 31, 1996 and 1995, respectively.
(12) INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION
The Company currently operates primarily in two industry segments:
telecommunication network services for the years ended October 31, 1996,
1995 and 1994, and traffic management systems and devices for the years
ended October 31, 1996, 1995 and the period from June 22, 1994
(acquisition date of TSCI) through October 31, 1994.
Traffic management operations are conducted in the United
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996.
States while telecommunication network services are conducted both in
the United States and Latin America (mainly in Venezuela and Brazil).
Revenues, (loss) income from operations, identifiable assets, capital
expenditures and depreciation and amortization pertaining to the
industries and geographic areas in which the Company operates are
presented below.
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS 1996 1995 1994
---- ---- ----
Revenues:
<S> <C> <C> <C>
Traffic management operations $ 22,661,644 $ 22,872,331 $ 9,750,546
Telecommunication network services 26,244,526 12,535,250 16,033,604
---------- ---------- ----------
Total $ 48,906,170 $ 35,407,581 $ 25,784,150
========== ========== ==========
(Loss) income from operations:
Traffic management operations $ (3,454,076) $ 286,149 $ 531,401
Telecommunication network services (2,832,440) 23,280 2,313,517
---------- ---------- ----------
Total $ (6,286,516) 309,429 2,844,918
========== ========== ==========
Identifiable Assets:
Traffic management operations $ 25,099,066 $ 21,701,922 $ 20,480,935
Telecommunication network services 13,819,765 10,780,294 16,122,137
---------- ---------- ----------
Total $ 38,918,831 $ 32,482,216 $ 36,603,072
========== ========== ==========
Capital Expenditures:
Traffic management operations $ 1,275,451 $ 353,148 $ 160,000
Telecommunication network services 2,216,097 1,897,756 1,675,377
---------- ---------- ----------
Total $ 3,491,548 $ 2,250,904 $ 1,835,377
========== ========== ==========
Depreciation and amortization:
Traffic management operations $ 1,228,647 $ 996,249 $ 218,550
Telecommunication network services 1,521,157 917,815 635,701
---------- ---------- ----------
Total $ 2,749,804 $ 1,914,064 $ 854,251
========== ========== ==========
GEOGRAPHIC AREAS
Revenues:
United States $ 45,160,312 $ 32,179,831 $ 12,001,164
Latin America 3,745,858 3,227,750 13,782,986
---------- ---------- ----------
Total $ 48,906,170 $ 35,407,581 $ 25,784,150
========== ========== ==========
(Loss) income from operations:
United States $ (2,072,678) $ 364,264 $ (901,660)
Latin America (4,213,838) (54,835) 3,746,578
---------- ---------- ----------
Total $ (6,286,516) $ 309,429 $ 2,844,918
========== ========== ==========
Identifiable assets:
United States $ 36,409,993 $ 26,955,667 $ 28,847,774
Latin America 2,508,838 5,526,549 7,755,898
---------- ---------- ----------
Total $ 38,918,831 $ 32,482,216 $ 36,603,672
========== ========== ==========
</TABLE>
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996.
(13) QUARTERLY FINANCIAL DATA (UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- ------- ------- -------
1996
<S> <C> <C> <C> <C>
Revenues $ 11,578 $12,592 $11,860 $12,876
Operating (loss) income (1,036) (2,095) 199 (3,355)
Net (loss) income (533) (2,562) 137 (2,952)
(Loss) income per share $ (.06) $ (.31) $ .02 $ (.35)
1995
Revenues $ 7,625 $ 8,234 $ 9,014 $10,535
Operating (loss) income (793) 139 231 637
Net (loss) income (842) 68 160 333
(Loss)income per share $ (.10) $ .01 $ .02 $ .04
</TABLE>
Certain adjustments were recorded in the fourth quarter of 1996 which included
adjustments to provide allowances for uncollectible accounts receivable and
obsolete inventory. These adjustments resulted in charges against operations
aggregating approximately $1,351,000.
(14) COMMITMENTS AND CONTINGENCIES
(A) LEASED PROPERTIES
As of October 31, 1996, the Company leased office space and
equipment under various non-cancelable long-term operating lease
arrangements.
During fiscal year 1996, the Company leased certain equipment
under an agreement which is classified as a capital lease. Cost
and accumulated amortization of such assets as of October 31,
1996 totaled $637,407 and $90,308.
Future minimum lease payments required under operating and
capital leases with initial terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
Capital Operating
YEARS ENDING OCTOBER 31, Leases Leases
---------- ----------
<S> <C> <C>
1997 $ 155,825 $ 361,370
1998 155,825 273,303
1999 155,825 83,903
2000 155,825 45,103
2001 38,937 1,800
---------- ----------
Total minimum lease payments 662,237 $ 765,479
==========
Less amount representing
interest 108,082
----------
Present value of net minimum
lease payments 554,155
Less current installments of
obligations under capital
leases 113,059
----------
Obligations under capital
leases, excluding current
installments $ 441,096
==========
</TABLE>
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996.
Rental expense for operating leases amounted to $631,706,
$323,180 and $168,000 for the years ended October 31, 1996, 1995
and 1994, respectively. The Company paid rent to former directors
of the Company totaling $89,460 for fiscal years 1996, 1995 and
1994. In addition, the Company has entered into an agreement with
the former principals of GEC to purchase, by June 1997, a
facility for $350,000 subject to the Company obtaining favorable
financing and other terms.
(B) LITIGATION
The Company is involved in various claims and legal actions
arising in the ordinary course of business including claims
relating to notes payable to the former owners of TSCI. These
notes payable and related accrued interest are classified as
current in the accompanying balance sheets. In the opinion of
management, the ultimate disposition of these matters will not
have a material adverse effect on the Company's consolidated
financial position or results of operations.
(15) LATIN AMERICAN OPERATIONS
Revenues, costs and expenses and net (loss) income from Latin American
operations for the years ended October 31, 1996, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
Years ended October 31,
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
Revenues $3,745,858 $3,227,750 $13,782,986
Costs and expenses 7,374,361 3,282,585 10,036,408
Net (loss) income (3,628,503) (54,835) 3,746,578
</TABLE>
Included in the net loss for fiscal year 1996 are charges and costs
totaling $3,553,373. Such amount includes a $920,551 non-cash charge
relating to the write-off of certain goodwill and contractual rights, a
$1,179,769 foreign currency loss relating to Venezuelan operations, a
$353,053 provision to write down of other assets to net realizable value
and $1,100,000 of marketing expense relating to a proprietary product.
As a result of such changes, the Company expects to mitigate any further
earnings risks associated with Latin American operations. In addition,
effective August 1, 1995 the Company reached an agreement with the
shareholders of its Venezuelan subsidiaries to increase their
proportionate share of (losses) earnings from 20% to 50%. In April 1996,
the Venezuelan government ended foreign currency exchange control
restrictions and the fixing of statutory exchange rates.
During the year ended October 31, 1994, the Company incurred a total of
$1,523,189 in severance and bad debt expenses related to the Venezuelan
operations. The personnel severance costs were $693,189 and bad debt
expense was $830,000. During fiscal year ending 1995, the Company
recovered approximately $350,000 in accounts receivable that were
written off in 1994.
The Company's investment in Latin American entities, which primarily
consist of property and equipment, totaled $2,080,053 and $5,150,292 at
October 31, 1996 and 1995. respectively.
(16) OTHER SUBSEQUENT EVENTS
On December 2, 1996, the Company, through a wholly owned subsidiary,
acquired all the outstanding
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1996.
common stock of Dial Communications, Inc. (Dial). As consideration, the
Company paid $3,000,000 in cash, issued 108,489 shares of common stock
and issued an $892,000 promissory note. The acquisition was accounted
for using the purchase method of accounting and approximately $1,500,000
of goodwill was recorded. The cash component of the purchase was funded
in part from the Company's line of credit and the remainder through a
$1,900,000 term loan from a bank with interest at prime plus 1/2 %
(8.75% at December 2, 1996) with a balloon payment for the outstanding
principal balance plus accrued interest due March 2, 1997.
In addition, in December 1996, the Company completed a private placement
transaction issuing $6,000,000 of preferred stock and obtaining a
$3,000,000 term debt facility with a bank. Proceeds from the
transactions were used to refinance certain of the Company's debt at
October 31, 1996. See Note 8.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
SCHEDULE II
Valuation and Qualifying Accounts
Years ended October 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Balance Charged Balance at
at to end of
beginning Acquisitions costs Deductions period
of period and
expenses
---------- ---------- ---------- --------- -----------
Allowance for doubtful
accounts:
<S> <C> <C> <C> <C> <C>
October 31, 1996 $ 535,914 $ 2,882 $ 746,283 $ 456,893 $ 828,186
October 31, 1995 $1,278,933 $ --- $ 86,593 $ 829,612 $ 535,914
October 31, 1994 $ 32,894 $ 233,837 $1,012,202 $ --- $1,278,933
</TABLE>
EXHIBIT 4.3 SPECIMIN SERIES A PREFERRED STOCK CERTIFICATE
SEE RESTRICTIVE LEDGEND ON REVERSE
***************************************************************************
***Number*** INCORPORATED UNDER THE LAWS OF ***Shares***
************ THE STATE OF FLORIDA ************
** ** ** **
** 2-A-1 ** ** -500- **
************ ************
*** ***
*** ***
***---------------------------------------------------------------------***
***#####################################################################***
*** ABLE TELCOM HOLDING CORP. ***
*** AUTHORIZED CAPITAL STOCK ***
*** 25,000,000 Shares of Common Stock, Par Value $.001 ***
***---------------------------------------------------------------------***
*** 1,000,000 Shares of Preferred Stock, Par Value $.10 ***
*** Including 1,200 Shares of Series A Preferred Stock ***
***---------------------------------------------------------------------***
*** ***
*** This Certifies That CREDIT SUISSE FIRST BOSTON CORPORATION ***
*** is the registered holder of ***FIVE HUNDRED (500)*** shares ***
*** of the Series A Preferred Stock, fully paid and non-assesable ***
*** transferable only on the books of the Corporation by the ***
*** holder hereof in person or by Attorney upon surrender of ***
*** this Certificate properly endorsed. ***
*** ***
*** In Witness Whereof, the said Corporation has caused this ***
*** Certificate to be signed by its duly authorized officers ***
*** and its Corporate Seal to be hereunto affixed ***
*** this 28 day of December A.D. 1996 ***
*** /****\ ***
*** /******\ ***
*** /s/Daniel L. Osborne |**seal**| /s/ William J. Mercurio ***
*** __________________ \******/ _______________________ ***
*** Secretary \****/ President ***
***************************************************************************
<PAGE>
(REVERSE SIDE)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM AND WITH THE CONSENT OF THE ISSUER. iNVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
For Value Received_____hereby sell, assign and transfer unto
_______________________________________
|Please Insert Social Security or other|
| Identifying Number or Assignee |
|_____________________________________________________________________________
_______________________________________________________________________shares
represented by the within Certificate and do hereby irrevocably constitute and
appoint_________________________________________________________ Attorney to
transfer the said Shares on the books of the within named Corporation with full
power of subsitution in the premisies
Dated ________________ 19___
in presence of ___________________________________________________
***Notice the signature of this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
affermation or enlargement or any change whatever.***
EXHIBIT 10.21 MODIFICATION OF TERM LOAN
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT is made as of the 30 day of May, 1996, by and between
SUNTRUST BANK, SOUTH FLORIDA, N.A., a national banking association (the
"Lender"), ABLE TELCOM HOLDING CORPORATION, a Florida corporation (the
"Borrower") and TRANSPORTATION SAFETY CONTRACTORS, INC., a Florida corporation,
TRANSPORTATION SAFETY CONTRACTORS OF VIRGINIA, INC., a Virginia corporation, BCD
COMMUNICATIONS, INC., a Florida corporation and TIPCO, INC., a Florida
corporation (singularly a "Guarantor" and collectively the "Guarantors").
WITNESSETH:
WHEREAS, Lender, Borrower and Guarantors entered into a Term Loan,
Revolving Credit and Security Agreement dated as of November 29, 1995 (the "Loan
Agreement") in connection with which Lender made available to Borrower certain
Loans as defined in the Loan Agreement, which are evidenced and secured by the
Loan Documents, as defined in the Loan Agreement; and
WHEREAS, Lender and Borrower have agreed to amend the Loan Agreement to
revise certain financial covenants; and
WHEREAS, the Guarantors have agreed to execute this Agreement to
evidence their consent to the amendments to the Loan Agreement contained herein
and to affirm the continuing validity of the Guaranty Agreements, after the
amendments contained herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants of
this agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lender, Borrower and Guarantors
agree as follows:
1. RECITALS/TERMS. All of the recitals set forth above are true and
correct and by this reference are made a material part of this Agreement. All
capitalized terms used herein which are defined in the Loan Agreement shall have
the same meaning when used herein unless the context herein shall require
otherwise.
2. DEFINITIONS.
(a) The definition of "Debt Service" is hereby amended to read
as follows:
"DEBT SERVICE" is defined as the current portion of all
long term debt, as calculated in accordance with generally
accepted accounting principles and reflected in the
consolidated financial statement of Borrower and the
Subsidiaries, excluding the promissory note(s) from
Borrowers to (i) H.C. Connell in the original principal
amount of $1,869,049.00 dated December 7, 1995; (ii) Bill
Caudill in the original principal amount of $250,000.00
dated December 7, 1995; (iii) Frazer Gaines in the
original principal amount of $250,000.00 dated December 7,
1995; and (iv) the three promissory notes from the
Borrower to the prior principal shareholders of
<PAGE>
Transportation Safety Contractors, Inc. in the original
aggregate principal amount of $1,307,967.00 dated June
1994, plus all interest payments due on Borrower's Debt
during the period in question.
(b) The definition of "Funded Debt" is hereby amended to read
as follows:
"FUNDED DEBT" is defined as total liabilities, as
calculated in accordance with generally accepted
accounting principles and reflected in the consolidated
financial statement of Borrower and the Subsidiaries, less
(i) accounts payable; (ii) income taxes payable; (iii)
accrued expenses; (iv) the promissory notes(s) from
Borrowers to (a) H.C. Connell in the original principal
amount of $1,869,049.00 dated December 7, 1995; (b) Bill
Caudill in the original principal amount of $250,000.00
dated December 7, 1995; (c) Frazer Gaines in the original
principal amount of $250,000.00 dated December 7, 1995;
(v) the three promissory notes from the Borrower to the
prior principal shareholders of Transportation Safety
Contractors, Inc. in the original aggregate principal
amount of $1,307,967.00 dated June 1994; and (vi) the
equipment and revolving loan from SunTrust Bank,
Mid-Florida, N.A. in the principal amount of $340,000.00
and $200,000.00, respectively. Funded Debt shall also
include the redemption amount with respect to any stock of
the Borrower or the Subsidiaries required to be redeemed
within the next twelve months.
(c) The following definition is added to Article 1 of the Loan
Agreement:
"NONRECURRING WRITE OFF" means the loss from Latin
American operations ($3,308,149.00) charged to Borrower's
second quarter 1996 earnings taken in connection with the
restructuring of Borrower's Latin American operations.
3. REVISIONS TO FINANCIAL COVENANTS.
(a) Section 6.20 is hereby amended to read as follows:
6.20 SUBSIDIARIES. The Borrower and/or its Subsidiaries
will not be permitted to make acquisitions or enter into
joint venture agreements without the prior written consent
of the Lender until Borrower and Guarantors achieve
compliance with the financial covenant ratio(s) required
to be achieved by July 31, 1997, under Sections 6.21, 6.22
and 6.23 of the Loan Agreement, as modified by this
Agreement. Thereafter new Subsidiaries may be acquired
without the prior written consent of the Bank provided
Borrower provides prior written notice to the Bank
containing a certification that the terms of this
Agreement and the special terms outlined below will be
complied with after said acquisition. The special terms
are:
(a) The Subsidiary to be acquired is engaged in one of
the three primary lines of business for the
Borrower -- highway signage, telecommunications or
utility installation;
<PAGE>
(b) The ratio of the combined earnings before
deduction of interest, taxes, depreciation,
amortization and lease payments of Borrower and the
Subsidiary to be acquired calculated on a
trailing four quarters basis for both the Borrower
and the Subsidiary to be acquired, divided by the
combined projected interest, principal and lease
payments of Borrower and the Subsidiary to be
acquired, calculated for the four quarters
after acquisition shall be greater than 1.75X; and
(c) The total value of the consideration to be given,
debt to be assumed and expenses to be incurred by
Borrower and the Subsidiaries in connection with
such acquisition shall not exceed $1,000,000.00.
(b) Section 6.21 is hereby amended to read as follows:
6.21. NET WORTH. Shall maintain Borrower's Tangible Net
Worth to be not less than $8,300,000.00 as of April 30,
1996, $8,500,000.00 as of July 31, 1996, $8,700,000.00 as
of October 31, 1996, $8,900,00000 as of January 31, 1997,
$9,100,000.00 as of April 30, 1997 and $9,300,000.00 at
all times after July 31, 1997.
(c) Section 6.22 is hereby amended to read as follows:
6.22 FUNDED DEBT/TANGIBLE NET WORTH. Shall assure that the
ratio of Borrower's Funded Debt to Borrower's Tangible Net
Worth shall be less than: 1.60X as of July 31, and October
31, 1996; 1.50X as of January 31 and April 30, 1997; and
1.40x at the end of each fiscal quarter beginning July 31,
1997.
(d) Section 6.23 is hereby amended to read as follows:
6.23 DEBT SERVICE. Shall assure that the ratio of
Borrower's earnings before deduction of interest payments,
taxes, depreciation, amortization and the Nonrecurring
Write Off shall be greater than 1.20X Debt Service
measured quarterly beginning April 30, 1996 for the
trailing four quarters.
4. WAIVER OF DEFAULTS. Lender agrees that Lender waives any default in
Borrower's compliance with the covenants in Section 6.21, 6.22 and 6.23, which
occurred prior to the date of this Agreement. Lender hereby reserves any and all
rights and remedies exercisable on the occurrence of an existing or future Event
of Default other than those expressly waived above.
5. GUARANTY AGREEMENTS. Guarantors hereby ratify and confirm the
continuing validity of the Guaranty Agreements and any other documents or
agreements given by any Guarantor in connection with the Loan Documents
notwithstanding the amendments to the Loan Agreement contained herein and hereby
further consent to such amendments.
<PAGE>
6. NO DEFAULT. Borrower and Guarantors hereby warrant and represent to Lender
that, after giving effect to this Modification, Borrower and Guarantors are in
compliance with all provisions of the Loan Agreement and all other Loan
Documents and that no default or Event of Default has occurred thereunder nor
has any event occurred or failed to occur which with the passage of time or the
giving of notice or both would comprise such a default or Event of Default.
7. MISCELLANEOUS.
(a) This agreement shall be governed by and construed in
accordance with the law of the State of Florida. In the event of any
dispute hereunder, the prevailing party shall be entitled to recover all
costs and attorney's fees from the non-prevailing party. Paragraph
headings used herein are for convenience only and shall not be used to
interpret any term hereof. The Loan Agreement shall continue in full
force and effect as modified by this Modification. In the event the
terms of this Modification conflict with the terms of the Loan
Agreement, the terms of this Modification shall control.
(b) This Modification constitutes the entire agreement among the
parties hereto and supersedes all prior agreements, understandings,
negotiations and discussions, both written and oral among the parties
hereto with respect to the subject matter hereof, all of which prior
agreements, understanding, negotiations and discussions, both written
and oral, are merged into this Modification. Except as hereinabove
specifically amended, all other provisions of the Loan Agreement and
each of the other Loan Documents amended hereby shall remain unchanged
and in full force and effect. Without limiting the generality of any of
the provisions of this Modification, nothing herein or in any instrument
or agreement shall be deemed or construed to constitute a novation,
satisfaction or refinancing of all or any portion of the Loan or in any
manner affect or impair the lien or priority of the Loan Agreement or
any of the Loan Documents as amended hereby.
(c) This Modification may be executed in any number of
counterparts with each executed counterpart constituting an original,
but altogether constituting but one and the same instrument.
(d) This Modification shall be binding upon and inure to the
benefit of the Borrower, the Guarantors and the Lender and their
respective heirs, legal representatives, executors, successors and
assigns.
8. RELEASE. IN CONSIDERATION OF THE ACCOMMODATIONS PROVIDED HEREIN, EACH
OF THE BORROWER AND THE GUARANTORS HEREBY UNCONDITIONALLY, IRREVOCABLY AND
FOREVER RELEASES, ACQUITS AND DISCHARGES THE LENDER AND EACH OF THE LENDER'S
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND COUNSEL FROM ANY AND ALL
<PAGE>
CLAIMS, DEMANDS AND CAUSES OF ACTION THAT ANY OF THEM HAD, NOW HAS OR MAY IN THE
FUTURE HAVE AGAINST ANY ONE OR MORE OF THE LENDER OR ANY ONE OR MORE OF THE
LENDER'S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR COUNSEL FOR THE ACTS OR
OMISSIONS OF ANY OF THE FOREGOING PARTIES FROM THE BEGINNING OF TIME THROUGH, TO
AND INCLUDING THE DATE OF THE EFFECTIVENESS OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS ARISING OUT OF OR CONNECTED IN ANY MANNER WITH
THE TRANSACTIONS CONTEMPLATED HEREIN OR IN THE LOAN AGREEMENT, AS AMENDED HEREBY
OR ANY OTHER LOAN DOCUMENTS, AS THE SAME MAY BE AMENDED HEREBY, AS THE CASE MAY
BE.
9. WAIVER OF JURY TRIAL. THE BORROWER, THE GUARANTORS AND THE LENDER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS,
(WHETHER VERBAL OR WRITTEN) OR ACTIONS BY ANY PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE LENDER ENTERING INTO THIS AGREEMENT AND MAKING ANY
LOAN, ADVANCE OR OTHER EXTENSION OF CREDIT TO THE BORROWER. FURTHER, EACH OF THE
BORROWER AND THE GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
THE LENDER, NOR THE LENDER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE LENDERS WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE
THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO
<PAGE>
REPRESENTATIVE OR AGENT OF THE LENDER, NOR THE LENDER'S COUNSEL HAS THE
AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.
IN WITNESS WHEREOF, Borrower, Lender and Guarantor have caused this
agreement to be executed as of the day and year set forth above.
Witnesses: LENDER:
SUNTRUST BANK, SOUTH FLORIDA, N.A.,
a national banking association
/S/GRETCHEN W. SOLAR By /S/PAUL BERRYMAN
- ------------------------------------ ---------------------------------------
Print Name: GRETCHEN W. SOLAR Print Name: PAUL R. BERRYMAN
------------------------ --------------------------
Its: SENIOR VICE PRESIDENT
----------------------------------
/S/MERCEDES ALVAREZ
- ------------------------------------
Print Name: MERCEDES ALVAREZ
------------------------
BORROWER:
ABLE TELCOM HOLDING CORPORATION, a
Florida corporation
/S/DANIEL L. OSBORNE
- ------------------------------------ By: /S/WILLIAM J. MERCURIO
Print Name: DANIEL L. OSBORNE -----------------------------------
------------------------ Print Name: WILLIAM J. MERCURIO
---------------------------
Its: CHIEF EXECUTIVE OFFICER
----------------------------------
/S/ROSEMARIE MULHOLLAND
- ------------------------------------
Print Name: ROSEMARIE MULHOLLAND
------------------------
GUARANTORS:
TRANSPORTATION SAFETY CONTRACTORS,
INC., a Florida corporation
/S/DANIEL L. OSBORNE
- ----------------------------------- By: /S/WILLIAM J. MERCURIO
Print Name: DANIEL L. OSBORNE ---------------------------------------
Print Name: WILLIAM J. MERCURIO
---------------------------
Its: CHAIRMAN
/S/ROSEMARIE MULHOLLAND ----------------------------------
- -----------------------------------
Print Name: ROSEMARIE MULHOLLAND
-----------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
TRANSPORTATION SAFETY CONTRACTORS OF
VIRGINIA, a Virginia corporation
/S/DANIEL L. OSBORNE
- ------------------------------------
Print Name: DANIEL L. OSBORNE By:/S/WILLIAM J. MERCURIO
----------------------- ---------------------------------
Print Name: WILLIAM J. MERCURIO
---------------------
Its: CHAIRMAN
----------------------------
/S/ROSEMARIE MULHOLLAND
- ------------------------------------
Print Name: ROSEMARIE MULHOLLAND
------------------------
BCD COMMUNICATIONS, INC., a Florida
corporation
/S/DANIEL L. OSBORNE
- ------------------------------------ By:/S/ WILLIAM J. MERCURIO
Print Name: DANIEL L. OSBORNE ---------------------------------
Print Name: WILLIAM J. MERCURIO
--------------------
Its:CHAIRMAN
-----------------------------
/S/ROSEMARIE MULHOLLAND
- -----------------------------------
Print Name: ROSEMARIE MULHOLLAND
-----------------------
TIPCO, INC., a Florida corporation
/S/ DANIEL L. OSBORNE
- ----------------------------------- By: /S/ WILLIAM J. MERCURIO
Print Name: DANIEL L. OSBORNE -------------------------------
Print Name: WILLIAM J. MERCURIO
-------------------
Its:CHAIRMAN
---------------------------
/S/ROSEMARIE MULHOLLAND
- ----------------------------------
Print Name: ROSEMARIE MULHOLLAND
----------------------
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 8 day of JULY,
1996, by PAUL R. BERRYMAN as SENIOR VICE PRESIDENT of SUNTRUST BANK, SOUTH
FLORIDA, N.A., a national banking association, on behalf of the bank. HE/She IS
PERSONALLY KNOWN TO ME or has produced _________________________ as
identification.
/S/ MINDY J. GABRIEL...........................
MINDY J. GABRIEL..................Printed Name:
Notary Public
CC497982........................Commission No.:
My Commission Expires: NOV. 02, 1999
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 30TH day of
MAY, 1996, by WILLIAM J. MERCURIO as CHIEF EXEC. OFFICER of ABLE TELCOM HOLDING
CORPORATION, a Florida corporation, on behalf of the corporation. He/She is
personally known to me or has produced _________________________ as
identification.
/S/ STACEY C. MCKISSICK........................
STACEY C. MCKISSICK...............Printed Name:
Notary Public
CC555959........................Commission No.:
My Commission Expires: MAY 19, 2000
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 30TH day of
MAY, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TRANSPORTATION SAFETY
CONTRACTORS, INC., a Florida corporation, on behalf of the corporation. He/She
is personally known to me or has produced _________________________ as
identification.
/S/ STACEY C. MCKISSICK.......................
STACEY C. MCKISSICK..............Printed Name:
Notary Public
CC555959........................Commission No.:
My Commission Expires: MAY 19, 2000
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 30TH day of
MAY, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TRANSPORTATION SAFETY
CONTRACTORS OF VIRGINIA, INC., a Virginia corporation, on behalf of the
corporation. He/She is personally known to me or has produced
_________________________ as identification.
/S/STACEY C. MCKISSICK.........................
STACEY C. MCKISSICK...............Printed Name:
Notary Public
CC555959........................Commission No.:
My Commission Expires: MAY 19, 2000
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 30TH day of
MAY, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of BCD COMMUNICATIONS, INC., a
Florida corporation, on behalf of the corporation. He/She is personally known to
me or has produced _________________________ as identification.
/S/STACEY C. MCKISSICK..........................
STACEY C. MCKISSICK................Printed Name:
Notary Public
CC555959......................Commission No.:
My Commission Expires: MAY 19, 2000
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 30TH day of
MAY, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TIPCO, INC., a Florida
corporation, on behalf of the corporation. He/She is personally known to me or
has produced _________________________ as identification.
/S/STACEY C. MCKISSICK..........................
STACEY C. MCKISSICK................Printed Name:
Notary Public
CC555959......................Commission No.:
My Commission Expires: MAY 19, 2000
WPALM/41434_1.DOC
WPALM/47867_1.DOC
EXHIBIT 10.22 SECOND MODIFICATION OF TERM LOAN
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT is made as of the 30TH day of October, 1996, by and
between SUNTRUST BANK, SOUTH FLORIDA, N.A., a national banking association (the
"Lender"), ABLE TELCOM HOLDING CORP., a Florida corporation (the "Borrower") ,
TRANSPORTATION SAFETY CONTRACTORS, INC., a Florida corporation, TRANSPORTATION
SAFETY CONTRACTORS OF VIRGINIA, INC., a Virginia corporation, ABLE
COMMUNICATIONS SERVICES, INC., formerly known as BCD COMMUNICATIONS, INC., a
Florida corporation and TIPCO, INC., a Florida corporation (singularly an
"Existing Guarantor" and collectively the "Existing Guarantors"), and
TELECOMMUNICATIONS SERVICES GROUP, INC., a Florida corporation, TRAFFIC
MANAGEMENT GROUP, INC., a Florida corporation, and GEORGIA ELECTRIC COMPANY, a
Georgia corporation, (singularly a "New Guarantor" and collectively the "New
Guarantors" and collectively with the Existing Guarantors the "Guarantors"),
CABLE COMMUNICATIONS GROUP, INC., a Florida corporation, COMMUNICATIONS
DEVELOPMENT GROUP, INC., a Florida corporation, ABLE WIRELESS, INC., a Florida
corporation, NEUROTECHNOLOGY, INC., a Florida corporation and H.C. CONNELL,
INC., a Florida corporation (singularly a "New Subsidiary" and collectively the
"New Subsidiaries").
WITNESSETH:
WHEREAS, Lender, Borrower and Existing Guarantors entered into a Term
Loan, Revolving Credit and Security Agreement dated as of November 29, 1995, as
amended by Modification of Term Loan Revolving Credit and Security Agreement
dated as of May 30, 1996 (the "Loan Agreement") in connection with which Lender
made available to Borrower the Loans which are evidenced and secured by the Loan
Documents; and
WHEREAS, the Loan Agreement provides that all Subsidiaries of Borrower
will join in the Loan Agreement as Guarantors and to pledge the Collateral owned
by those Subsidiaries to the Lender as security for the Loans and Borrower has
acquired or created the New Guarantors and the New Subsidiaries and Lender has
required that the New Guarantors join in the Loan Agreement as Guarantors and
the New Subsidiaries join to acknowledge their agreement to join the Loan
Agreement as Guarantors if required by Lender; and
WHEREAS, Borrower has requested an additional $1,500,000 loan from
Lender (the "New Loan") which is to be evidenced by a new $1,500,000 promissory
note (the "New Note") which is to be secured by the Loan Agreement and a lien on
the Collateral, including, without limitation, the Collateral owned by the New
Guarantors; and
WHEREAS, Lender, Borrower and the Guarantors have agreed to amend the
Loan Agreement to evidence the New Guarantors' joinder in the Loan Agreement, to
evidence the pledge of the Collateral owned by the New Guarantors, to
acknowledge that the New Loan is secured by the Loan Documents and to otherwise
ratify and confirm the terms of the Loan Agreement; and
NOW, THEREFORE, in consideration of the mutual promises and covenants of
this agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lender, Borrower and Guarantors
agree as follows:
<PAGE>
1. RECITALS/TERMS. All of the recitals set forth above are true and
correct and by this reference are made a material part of this Agreement. All
capitalized terms used herein which are defined in the Loan Agreement shall have
the same meaning when used herein unless the context herein shall require
otherwise.
2. JOINDER. The New Guarantors execute this Agreement to evidence their
joinder in the Loan Agreement as Guarantors subject to all the terms and
obligations of a Guarantor under the Loan Agreement, including, without
limitation, the imposition of the liens and security interests created by the
Loan Documents on the Collateral now or hereafter owned by the New Guarantors.
The New Subsidiaries join in this Agreement to acknowledge their obligation and
agreement to join in the Loan Agreement as Guarantors and to provide Guarantees
if and when required by Lender.
3. SUBSIDIARIES. Section 6.20 is hereby amended by addition of the
following:
In no event shall Borrower or any Guarantor advance any funds to
any New Subsidiary, including, without limitation, funding the
operations of any New Subsidiary or directly or indirectly
guarantee any indebtedness of any New Guarantor without the prior
written consent of Lender.
4. ADDITIONAL DEBT. The Borrower and the Guarantors hereby acknowledge
that the New Loan is included in the Indebtedness secured by the Loan Documents,
the New Loan is included in the Loans and that the New Note, this Agreement and
any documents executed in connection therewith are included in the Loan
Documents.
5. GUARANTY AGREEMENTS. Existing Guarantors hereby ratify and confirm
the continuing validity of the Guaranty Agreements and any other documents or
agreements given by any Existing Guarantor in connection with the Loan Documents
notwithstanding the amendments to the Loan Agreement contained herein and hereby
further consent to such amendments.
6. NO DEFAULT. Borrower and Guarantors hereby warrant and represent to
Lender that, after giving effect to this Agreement, Borrower and Guarantors are
in compliance with all provisions of the Loan Agreement and all other Loan
Documents and that no default or Event of Default has occurred thereunder nor
has any event occurred or failed to occur which with the passage of time or the
giving of notice or both would comprise such a default or Event of Default.
<PAGE>
7. MISCELLANEOUS.
(a) This agreement shall be governed by and construed in
accordance with the law of the State of Florida. In the event of any
dispute hereunder, the prevailing party shall be entitled to recover all
costs and attorney's fees from the non-prevailing party. Paragraph
headings used herein are for convenience only and shall not be used to
interpret any term hereof. The Loan Agreement shall continue in full
force and effect as modified by this Agreement. In the event the terms
of this Agreement conflict with the terms of the Loan Agreement, the
terms of this Agreement shall control.
(b) This Agreement constitutes the entire agreement among the
parties hereto concerning the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, both
written and oral among the parties hereto with respect to the subject
matter hereof, all of which prior agreements, understandings,
negotiations and discussions, both written and oral, are merged into
this Agreement. Except as hereinabove specifically amended, all other
provisions of the Loan Agreement and each of the other Loan Documents
amended hereby shall remain unchanged and in full force and effect.
Without limiting the generality of any of the provisions of this
Agreement, nothing herein or in any instrument or agreement shall be
deemed or construed to constitute a novation, satisfaction or
refinancing of all or any portion of the Loan or in any manner affect or
impair the lien or priority of the Loan Agreement or any of the Loan
Documents as amended hereby.
(c) This Agreement may be executed in any number of counterparts
with each executed counterpart constituting an original, but altogether
constituting but one and the same instrument.
(d) This Agreement shall be binding upon and inure to the benefit
of the Borrower, the Guarantors and the Lender and their respective
heirs, legal representatives, executors, successors and assigns.
8. RELEASE. IN CONSIDERATION OF THE ACCOMMODATIONS PROVIDED HEREIN, EACH
OF THE BORROWER AND THE GUARANTORS HEREBY UNCONDITIONALLY, IRREVOCABLY AND
FOREVER RELEASES, ACQUITS AND DISCHARGES THE LENDER AND EACH OF THE LENDER'S
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND COUNSEL FROM ANY AND ALL
CLAIMS, DEMANDS AND CAUSES OF ACTION THAT ANY OF THEM HAD, NOW HAS OR MAY IN THE
FUTURE HAVE AGAINST ANY ONE OR MORE OF THE LENDER OR ANY ONE OR MORE OF THE
LENDER'S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR COUNSEL FOR THE ACTS OR
OMISSIONS OF ANY OF THE FOREGOING PARTIES FROM THE BEGINNING OF TIME THROUGH, TO
AND INCLUDING THE DATE OF THE EFFECTIVENESS OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS ARISING OUT OF OR CONNECTED IN ANY MANNER WITH
THE TRANSACTIONS CONTEMPLATED HEREIN OR IN THE LOAN AGREEMENT, AS AMENDED HEREBY
OR ANY OTHER LOAN DOCUMENTS, AS THE SAME MAY BE AMENDED HEREBY, AS THE CASE MAY
BE.
<PAGE>
9. WAIVER OF JURY TRIAL. THE BORROWER, THE GUARANTORS AND THE LENDER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS,
(WHETHER VERBAL OR WRITTEN) OR ACTIONS BY ANY PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE LENDER ENTERING INTO THIS AGREEMENT AND MAKING ANY
LOAN, ADVANCE OR OTHER EXTENSION OF CREDIT TO THE BORROWER. FURTHER, EACH OF THE
BORROWER AND THE GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
THE LENDER, NOR THE LENDER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE LENDERS WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE
THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO REPRESENTATIVE OR AGENT OF THE
LENDER, NOR THE LENDER'S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR
MODIFY THIS PROVISION.
IN WITNESS WHEREOF, Borrower, Lender and Guarantor have caused this
agreement to be executed as of the day and year set forth above.
Witnesses: LENDER:
SUNTRUST BANK, SOUTH
FLORIDA, N.A., a national banking
association
/s/ DANIEL OSBORNE By: /S/ JEFFREY WOLFE
- ------------------ ----------------------
Print Name: DANIEL OSBORNE Print Name: Jeffrey Wolfe
Its: VICE PRESIDENT
/S/ROSEMARIE MULHOLLAND
- -----------------------
Print Name: ROSEMARIE MULHOLLAND
BORROWER:
ABLE TELCOM HOLDING CORP., a Florida
corporation
/S/SUSAN C. PILCHER
- -------------------
Print Name: SUSAN C. PILCHER By: /S/WILLIAM J. MERCURIO
--------------------------
Print Name: WILLIAM J. MERCURIO
Its: PRESIDENT
/S/BARBARA E HUDSON
- -------------------
Print Name: BARBARA E. HUDSON
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
GUARANTORS:
TRANSPORTATION SAFETY CONTRACTORS,
INC., a Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
--------------------------
Print Name: SUSAN C. PILCHER Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
TRANSPORTATION SAFETY CONTRACTORS OF
VIRGINIA, a Virginia corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- ---------------------
Print Name: BARBARA E. HUDSON
ABLE COMMUNICATIONS SERVICES, INC.,
formerly known as BCD
COMMUNICATIONS, INC., a
Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
TIPCO, INC., a Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER -----------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
GUARANTORS:
TELECOMMUNICATIONS SERVICES GROUP,
INC., a Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
GUARANTORS
TRAFFIC MANAGEMENT GROUP, INC., a
Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
GEORGIA ELECTRIC COMPANY, a Georgia
corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
NEW SUBSIDIARIES:
CABLE COMMUNICATIONS GROUP, INC., a
Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/ WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER ---------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
COMMUNICATIONS DEVELOPMENT GROUP,
INC., a Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/ WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER ---------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
NEW SUBSIDIARIES:
ABLE WIRELESS, INC., a Florida
corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/ WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER ---------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
NEUROTECHNOLOGY, INC., a Florida
corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/ WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER ---------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
H.C. CONNELL, INC., a Florida
corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/ WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER ---------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/BARBARA E. HUDSON
- --------------------
Print Name: BARBARA E. HUDSON
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 30 day of
OCTOBER 1996, by JEFFREY WOLFE as VICE PRESIDENT of SUNTRUST BANK, SOUTH
FLORIDA, N.A., a national banking association, on behalf of the bank. He/She is
personally known to me or has produced _________________________ as
identification.
/s/ RUTH A. DARLING
------------------------------------
RUTH A. DARLING... Printed Name:
Notary Public
______________.....Commission No.:
My Commission Expires:
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as PRESIDENT of ABLE TELCOM HOLDING CORP.,
a Florida corporation, on behalf of the corporation. He/She is personally known
to me or has produced FL/DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TRANSPORTATION SAFETY
CONTRACTORS, INC., a Florida corporation, on behalf of the corporation. He/She
is personally known to me or has produced _________________________ as
identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TRANSPORTATION SAFETY
CONTRACTORS OF VIRGINIA, INC., a Virginia corporation, on behalf of the
corporation. He/She is personally known to me or has produced FL DL as
identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of ABLE COMMUNICATIONS
SERVICES, INC., formerly known as BCD COMMUNICATIONS, INC., a Florida
corporation, on behalf of the corporation. He/She is personally known to me or
has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TIPCO, INC., a Florida
corporation, on behalf of the corporation. He/She is personally known to me or
has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TELECOMMUNICATIONS SERVICES
GROUP, INC., a Florida corporation, on behalf of the corporation. He/She is
personally known to me or has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TRAFFIC MANAGEMENT GROUP,
INC., a Florida corporation, on behalf of the corporation. He/She is personally
known to me or has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of GEORGIA ELECTRIC COMPANY, a
Georgia corporation, on behalf of the corporation. He/She is personally known to
me or has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of CABLE COMMUNICATIONS GROUP,
INC., a Florida corporation, on behalf of the corporation. He/She is personally
known to me or has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of COMMUNICATIONS DEVELOPMENT
GROUP, INC., a Florida corporation, on behalf of the corporation. He/She is
personally known to me or has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FLORIDA )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of ABLE WIRELESS, INC., a
Florida corporation, on behalf of the corporation. He/She is personally known to
me or has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of NEUROTECHNOLOGY, INC., a
Florida corporation, on behalf of the corporation. He/She is personally known to
me or has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FLORIDA )
The foregoing instrument was acknowledged before me this 30TH day of
OCTOBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of H.C. CONNELL, a Florida
corporation, on behalf of the corporation. He/She is personally known to me or
has produced FL DL as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
WPALM/49251_1.DOC
EXHIBIT 10.23 THIRD MODIFICATION OF TERM LOAN
- ------------- -------------------------------
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AGREEMENT is made as of the 2nd day of December, 1996, by and
between SUNTRUST BANK, SOUTH FLORIDA, N.A., a national banking association (the
"Lender"), ABLE TELCOM HOLDING CORP., a Florida corporation (the "Borrower") ,
TRANSPORTATION SAFETY CONTRACTORS, INC., a Florida corporation, TRANSPORTATION
SAFETY CONTRACTORS OF VIRGINIA, INC., a Virginia corporation, ABLE
COMMUNICATIONS SERVICES, INC., formerly known as BCD COMMUNICATIONS, INC., a
Florida corporation, TIPCO, INC., a Florida corporation, TELECOMMUNICATIONS
SERVICES GROUP, INC., a Florida corporation, TRAFFIC MANAGEMENT GROUP, INC., a
Florida corporation, and GEORGIA ELECTRIC COMPANY, a Georgia corporation,
(singularly an "Existing Guarantor" and collectively the "Existing Guarantors"),
DIAL COMMUNICATIONS,, INC., a Florida corporation and H.C. CONNELL, INC., a
Florida corporation (singularly a "New Guarantor" and collectively the "New
Guarantors" and collectively with the Existing Guarantors the "Guarantors"), .
WITNESSETH:
WHEREAS, Lender, Borrower and Existing Guarantors entered into a Term
Loan, Revolving Credit and Security Agreement dated as of November 29, 1995, as
amended by Modification of Term Loan Revolving Credit and Security Agreement
dated as of May 30, 1996 and as further amended by Second Modification of Term
Loan Revolving Credit and Security Agreement dated as of October 30, 1996 (the
"Loan Agreement") in connection with which Lender made available to Borrower the
Loans which are evidenced and secured by the Loan Documents; and
WHEREAS, the Loan Agreement provides that all Subsidiaries of Borrower
will join in the Loan Agreement as Guarantors and to pledge the Collateral owned
by those Subsidiaries to the Lender as security for the Loans and Lender has
required that the New Guarantors join in the Loan Agreement as Guarantors; and
WHEREAS, Borrower has requested an additional $1,900,000 loan from
Lender (the "New Loan") which is to be evidenced by a new $1,900,000 promissory
note (the "New Note") which is to be secured by the Loan Agreement and a lien on
the Collateral, including, without limitation, the Collateral owned by the New
Guarantors; and
WHEREAS, Lender, Borrower and the Guarantors have agreed to amend the
Loan Agreement to evidence the New Guarantors' joinder in the Loan Agreement, to
evidence the pledge of the Collateral owned by the New Guarantors, to
acknowledge that the New Loan is secured by the Loan Documents and to otherwise
ratify and confirm the terms of the Loan Agreement; and
NOW, THEREFORE, in consideration of the mutual promises and covenants of
this agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lender, Borrower and Guarantors
agree as follows:
1. RECITALS/TERMS. All of the recitals set forth above are true and
correct and by this reference are made a material part of this Agreement. All
capitalized terms used herein which are defined in the Loan Agreement shall have
the same meaning when used herein unless the context herein shall require
otherwise.
<PAGE>
2. JOINDER. The New Guarantors execute this Agreement to evidence their
joinder in the Loan Agreement as Guarantors subject to all the terms and
obligations of a Guarantor under the Loan Agreement, including, without
limitation, the imposition of the liens and security interests created by the
Loan Documents on the Collateral now or hereafter owned by the New Guarantors.
The New Subsidiaries join in this Agreement to acknowledge their obligation and
agreement to join in the Loan Agreement as Guarantors and to provide Guarantees
if and when required by Lender.
3. Section 6.27 is hereby added to the Loan Agreement to read as
follows:
6.27 DIAL COMMUNICATIONS INC. NET WORTH. Shall
maintain the tangible net worth of Dial Communications, Inc.
(stockholders' equity in Dial Communications, Inc. less any
tangible assets of Dial Communications, Inc.) at not less
than One Million Seven Hundred Thousand and no/100s Dollars
($1,700,000).
4. ADDITIONAL DEBT. The Borrower and the Guarantors hereby acknowledge
that the New Loan is included in the Indebtedness secured by the Loan Documents,
the New Loan is included in the Loans and that the New Note, this Agreement, the
new guarantees executed by the New Guarantors and any documents executed in
connection therewith are included in the Loan Documents. Borrower agrees that no
further advances will be requested or made under the Equipment Facility until
the New Loan has been repaid, refinanced or otherwise resolved to the
satisfaction of Lender in its sole discretion.
5. GUARANTY AGREEMENTS. Existing Guarantors hereby ratify and confirm
the continuing validity of the Guaranty Agreements and any other documents or
agreements given by any Existing Guarantor in connection with the Loan Documents
notwithstanding the amendments to the Loan Agreement contained herein and hereby
further consent to such amendments.
6. NO DEFAULT. Borrower and Guarantors hereby warrant and represent to
Lender that, after giving effect to this Agreement, Borrower and Guarantors are
in compliance with all provisions of the Loan Agreement and all other Loan
Documents and that no default or Event of Default has occurred thereunder nor
has any event occurred or failed to occur which with the passage of time or the
giving of notice or both would comprise such a default or Event of Default.
<PAGE>
7. MISCELLANEOUS.
(a) This agreement shall be governed by and construed in
accordance with the law of the State of Florida. In the event of any
dispute hereunder, the prevailing party shall be entitled to recover all
costs and attorney's fees from the non-prevailing party. Paragraph
headings used herein are for convenience only and shall not be used to
interpret any term hereof. The Loan Agreement shall continue in full
force and effect as modified by this Agreement. In the event the terms
of this Agreement conflict with the terms of the Loan Agreement, the
terms of this Agreement shall control.
(b) This Agreement constitutes the entire agreement among the
parties hereto concerning the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, both
written and oral among the parties hereto with respect to the subject
matter hereof, all of which prior agreements, understandings,
negotiations and discussions, both written and oral, are merged into
this Agreement. Except as hereinabove specifically amended, all other
provisions of the Loan Agreement and each of the other Loan Documents
amended hereby shall remain unchanged and in full force and effect.
Without limiting the generality of any of the provisions of this
Agreement, nothing herein or in any instrument or agreement shall be
deemed or construed to constitute a novation, satisfaction or
refinancing of all or any portion of the Loan or in any manner affect or
impair the lien or priority of the Loan Agreement or any of the Loan
Documents as amended hereby.
(c) This Agreement may be executed in any number of counterparts
with each executed counterpart constituting an original, but altogether
constituting but one and the same instrument.
(d) This Agreement shall be binding upon and inure to the benefit
of the Borrower, the Guarantors and the Lender and their respective
heirs, legal representatives, executors, successors and assigns.
8. RELEASE. IN CONSIDERATION OF THE ACCOMMODATIONS PROVIDED HEREIN, EACH
OF THE BORROWER AND THE GUARANTORS HEREBY UNCONDITIONALLY, IRREVOCABLY AND
FOREVER RELEASES, ACQUITS AND DISCHARGES THE LENDER AND EACH OF THE LENDER'S
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND COUNSEL FROM ANY AND ALL
CLAIMS, DEMANDS AND CAUSES OF ACTION THAT ANY OF THEM HAD, NOW HAS OR MAY IN THE
FUTURE HAVE AGAINST ANY ONE OR MORE OF THE LENDER OR ANY ONE OR MORE OF THE
LENDER'S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR COUNSEL FOR THE ACTS OR
OMISSIONS OF ANY OF THE FOREGOING PARTIES FROM THE BEGINNING OF TIME THROUGH, TO
AND INCLUDING THE DATE OF THE EFFECTIVENESS OF THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS ARISING OUT OF OR CONNECTED IN ANY MANNER WITH
THE TRANSACTIONS CONTEMPLATED HEREIN OR IN THE LOAN AGREEMENT, AS AMENDED HEREBY
OR ANY OTHER LOAN DOCUMENTS, AS THE SAME MAY BE AMENDED HEREBY, AS THE CASE MAY
BE.
<PAGE>
9. WAIVER OF JURY TRIAL. THE BORROWER, THE GUARANTORS AND THE LENDER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS,
(WHETHER VERBAL OR WRITTEN) OR ACTIONS BY ANY PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE LENDER ENTERING INTO THIS AGREEMENT AND MAKING ANY
LOAN, ADVANCE OR OTHER EXTENSION OF CREDIT TO THE BORROWER. FURTHER, EACH OF THE
BORROWER AND THE GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
THE LENDER, NOR THE LENDER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE LENDERS WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE
THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO REPRESENTATIVE OR AGENT OF THE
LENDER, NOR THE LENDER'S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR
MODIFY THIS PROVISION.
IN WITNESS WHEREOF, Borrower, Lender and Guarantor have caused this
agreement to be executed as of the day and year set forth above.
Witnesses: LENDER:
SUNTRUST BANK, SOUTH
FLORIDA, N.A., a national banking
association
/s/ DANIEL OSBORNE By: /S/ JEFFREY WOLFE
- ------------------ ----------------------
Print Name: DANIEL OSBORNE Print Name: Jeffrey Wolfe
Its: VICE PRESIDENT
/S/ROSEMARIE MULHOLLAND
- -----------------------
Print Name: ROSEMARIE MULHOLLAND
BORROWER:
ABLE TELCOM HOLDING CORP., a Florida
corporation
/S/SUSAN C. PILCHER
- -------------------
Print Name: SUSAN C. PILCHER By: /S/WILLIAM J. MERCURIO
--------------------------
Print Name: WILLIAM J. MERCURIO
Its: PRESIDENT
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
<PAGE>
EXISTING GUARANTORS:
TRANSPORTATION SAFETY CONTRACTORS,
INC., a Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
TRANSPORTATION SAFETY CONTRACTORS OF
VIRGINIA, INC. a Virginia
corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
EXISTING GUARANTORS:
ABLE COMMUNICATIONS SERVICES, INC.,
formerly known as BCD
COMMUNICATIONS, INC., a
Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
TIPCO, INC., a Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
<PAGE>
TELECOMMUNICATIONS SERVICES GROUP,
INC., a Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
EXISTING GUARANTORS:
TRAFFIC MANAGEMENT GROUP, INC., a
Florida corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
GEORGIA ELECTRIC COMPANY, a Georgia
corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
NEW GUARANTORS:
DIAL COMMUNICATIONS, INC., a Florida
corporation
/S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
H.C. CONNELL, INC., a Florida
corporation
/S/SUSAN C. PILCHER /S/SUSAN C. PILCHER
- ------------------- By: /S/WILLIAM J. MERCURIO
Print Name: SUSAN C. PILCHER --------------------------
Print Name: WILLIAM J. MERCURIO
Its: CHAIRMAN
/S/KATHRYN B. HARBER
- --------------------
Print Name: KATHRYN B. HARBER
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
The foregoing instrument was acknowledged before me this 2 day of
DECEMBER, 1996, by JEFFREY WOLFE as VICE PRESIDENT of SUNTRUST BANK, SOUTH
FLORIDA, N.A., a national banking association, on behalf of the bank. He/She is
personally known to me or has produced _________________________ as
identification.
/s/ RUTH A. DARLING
------------------------------------
RUTH A. DARLING... Printed Name:
Notary Public
______________.....Commission No.:
My Commission Expires:
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as PRESIDENT of ABLE TELCOM HOLDING
CORP., a Florida corporation, on behalf of the corporation. HE/She IS PERSONALLY
known to me or has produced _________________________ as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TRANSPORTATION SAFETY
CONTRACTORS, INC., a Florida corporation, on behalf of the corporation. HE/She
IS PERSONALLY KNOWN to me or has produced _________________________ as
identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCCURIO as CHAIRMAN of TRANSPORTATION SAFETY
CONTRACTORS OF VIRGINIA, INC., a Virginia corporation, on behalf of the
corporation. HE/She is PERSONALLY KNOWN to me or has produced
_________________________ as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of ABLE COMMUNICATIONS
SERVICES, INC., formerly known as BCD COMMUNICATIONS, INC., a Florida
corporation, on behalf of the corporation. HE/She is PERSONALLY KNOWN to me or
has produced _________________________ as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TIPCO, INC., a Florida
corporation, on behalf of the corporation. HE/She is PERSONALLY KNOWN to me or
has produced _________________________ as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TELECOMMUNICATIONS
SERVICES GROUP, INC., a Florida corporation, on behalf of the corporation.
HE/She is PERSONALLY KNOWN to me or has produced _________________________ as
identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of TRAFFIC MANAGEMENT GROUP,
INC., a Florida corporation, on behalf of the corporation. He/She is personally
known to me or has produced _________________________ as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of GEORGIA ELECTRIC COMPANY,
a Georgia corporation, on behalf of the corporation. HE/She is PERSONALLY known
to me or has produced _________________________ as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of DIAL COMMUNICATIONS, INC.,
a Florida corporation, on behalf of the corporation. HE/She is PERSONALLY KNOWN
to me or has produced _________________________ as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
<PAGE>
STATE OF GEORGIA )
) SS:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 2ND day of
DECEMBER, 1996, by WILLIAM J. MERCURIO as CHAIRMAN of H.C. CONNELL, a Florida
corporation, on behalf of the corporation. HE/She is PERSONALLY KNOWN to me or
has produced _________________________ as identification.
/S/SUSAN C. PILCHER
------------------------------------------
SUSAN C. PILCHER....Printed Name:
Notary Public
______________....Commission No.:
My Commission Expires: SEPTEMBER 16, 2000
EXHIBIT 10.24 TERM LOAN AND SECURITY AGREEMENT
- -------------
BETWEEN
ABLE TELCOM HOLDING CORP.
"BORROWER"
GEORGIA ELECTRIC COMPANY, INC.
TRAFFIC MANAGEMENT GROUP, INC.
TRANSPORTATION SAFETY CONTRACTORS OF VIRGINIA, INC.
TRANSPORTATION SAFETY CONTRACTORS, INC.
"GUARANTORS"
AND
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION
"BANK"
DATED AS OF DECEMBER 2, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
1. Definitions............................................................ 1
Defined Terms...................................................... 1
Financial Terms.................................................... 6
2. Representations and Warranties......................................... 6
Valid Existence and Power.......................................... 6
Authority.......................................................... 6
Financial Condition................................................ 6
Litigation......................................................... 7
Agreements, Etc.................................................... 7
Authorizations..................................................... 7
Title.............................................................. 7
Collateral......................................................... 7
Location........................................................... 7
Taxes.............................................................. 8
Withholding Taxes.................................................. 8
Labor Law Matters.................................................. 8
Accounts........................................................... 8
Use and Location of Collateral..................................... 8
Judgment Liens..................................................... 8
Intent and Effect of Transactions.................................. 8
Subsidiaries....................................................... 8
Hazardous Materials................................................ 9
ERISA.............................................................. 9
Guarantors......................................................... 9
3. The Loan............................................................... 9
Loan............................................................... 9
Interest Rate...................................................... 9
Net Payments....................................................... 9
Calculation of Interest............................................ 10
Special Loan Account............................................... 10
Prepayment......................................................... 10
Overdue Amounts.................................................... 10
Sales Tax.......................................................... 10
Cross Collateralization............................................ 11
5. Conditions Precedent to Borrowing...................................... 11
6. Covenants of the Borrower.............................................. 12
Use of Loan Proceeds............................................... 12
Maintenance of Business and Properties............................. 12
Insurance.......................................................... 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Notice of Default.................................................. 13
Inspections........................................................ 13
Financial Information.............................................. 13
Debt............................................................... 14
Liens.............................................................. 14
Merger, Sale, Etc.................................................. 14
Loans and Other Investments........................................ 15
Change in Business................................................. 15
Accounts........................................................... 15
Transactions with Affiliates....................................... 15
No Change in Name, Offices; Removal of Collateral.................. 15
No Sale, Leaseback................................................. 15
Margin Stock....................................................... 15
Payment of Taxes, Etc.............................................. 16
Subordination...................................................... 16
Compliance; Hazardous Materials.................................... 16
Subsidiaries....................................................... 16
Net Worth.......................................................... 17
Working Capital.................................................... 17
Debt Service....................................................... 17
Further Assurances................................................. 17
Withholding Taxes.................................................. 17
Depository Accounts................................................ 17
Confirmation of Collateral......................................... 17
7. Default................................................................ 17
Events of Default.................................................. 17
Remedies........................................................... 19
Receiver........................................................... 19
8. Security Agreement..................................................... 20
Security Interest.................................................. 20
Remedies........................................................... 20
Entry.............................................................. 21
Deposits; Insurance................................................ 21
Other Rights....................................................... 21
Accounts........................................................... 21
Tangible Collateral................................................ 22
Waiver of Marshalling.............................................. 22
9. Miscellaneous.......................................................... 22
No Waiver, Remedies Cumulative..................................... 22
Survival of Representations........................................ 22
Expenses........................................................... 22
Notices............................................................ 23
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Governing Law...................................................... 23
Successors and Assigns............................................. 23
Counterparts....................................................... 24
No Usury........................................................... 24
Powers............................................................. 24
Approvals.......................................................... 24
Jurisdiction, Service of Process................................... 24
Multiple Borrowers................................................. 25
Waiver of Jury Trial............................................... 25
</TABLE>
<PAGE>
WPALM/48480_1.DOC
TERM LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of December __, 1996 between ABLE
TELCOM HOLDING CORP., a Florida corporation (the "Borrower"), GEORGIA ELECTRIC
COMPANY, a Georgia corporation, TRAFFIC MANAGEMENT GROUP, INC., a Florida
corporation, TRANSPORTATION SAFETY CONTRACTORS OF VIRGINIA, INC., a Virginia
corporation, TRANSPORTATION SAFETY CONTRACTORS, INC., a Florida corporation,
(singularly a "Guarantor" and collectively the "Guarantors") and SUNTRUST BANK,
SOUTH FLORIDA, NATIONAL ASSOCIATION, (the "Bank");
W I T N E S S E T H
In consideration of the premises and of the mutual covenants herein contained
and to induce the Bank to extend credit to the Borrower, the parties agree as
follows:
1. DEFINITIONS. In addition to terms defined elsewhere in this Agreement,
the following terms have the meanings indicated:
1.1 DEFINED TERMS.
"ACCOUNT" shall mean any account receivable, including any rights
of payment for goods sold or leased or for services rendered, which is not
evidenced by an Instrument or Chattel Paper, whether or not it has been earned
by performance, and in addition includes all property included in the definition
of "accounts" as used in the Code, together with any guaranties, letters of
credit and other security therefor.
"ACCOUNT DEBTOR" shall mean a Person who is obligated under any
Account, Chattel Paper, General Intangible or Instrument.
"AFFILIATE" of a named Person shall mean (a) any Person owning 5%
or more of the voting stock or rights of such named Person or of which the named
Person owns 5% or more of such voting stock or rights; (b) any Person
controlling, controlled by or under common control with such named Person; (c)
any officer or director of such named Person or any Affiliates of the named
Person; and (d) any family member of the named Person or any Affiliate of such
named Person.
"BUSINESS DAY" shall mean a weekday on which commercial banks are
open for business in Palm Beach County, Florida.
"CHATTEL PAPER" shall mean all writing or writings which evidence
both a monetary obligation and a security interest in or the lease of specific
goods and in addition includes all property included in the definition of
"chattel paper" as used in the Code, together with any guaranties, letters of
credit and other security therefor.
"CODE" shall mean the Uniform Commercial Code, as in effect in
Florida from time to time.
"COLLATERAL" means the property described in the Loan Documents,
and, if not described in the Loan Documents, the following property of any
Obligors, wherever located and whether now owned by an Obligor or hereafter
acquired: (a) all real property owned by any Obligor, including, without
limitation, any interest an Obligor may have in any real property including,
without limitation, any leasehold or easement interests; (b) all Inventory; (c)
all General Intangibles; (d) all Accounts and Chattel Paper and any other
<PAGE>
instrument or intangible representing payment for goods or services; (e) all
Equipment; (f) all Instruments (g) any other collateral in which the Bank may be
hereafter granted a security interest or Lien; (h) all funds on deposit with or
under the control of the Bank or its agents or correspondents; and (i) all
parts, replacements, substitutions, profits, products and cash and non-cash
proceeds of any of the foregoing (including insurance proceeds payable by reason
of loss or damage thereto) in any form and wherever located. Collateral shall
include all written or electronically recorded records relating to any such
Collateral and other rights relating thereto.
"DEBT" shall mean all liabilities of a Person as determined under
generally accepted accounting principles and all obligations which such Person
has guaranteed or endorsed or is otherwise secondarily or jointly liable, and
shall include, without limitation (a) all obligations for borrowed money or
purchased assets, (b) obligations secured by assets whether or not any personal
liability exists, (c) the capitalized amount of any capital or finance lease
obligations, (d) the unfunded portion of pension or benefit plans or other
similar liabilities, (e) obligations as a general partner, (f) contingent
obligations pursuant to guaranties, endorsements, letters of credit and other
secondary liabilities, and (g) obligations for deposits.
"DEBT SERVICE" means all scheduled principal and interest
payments under the Loan and all other loans now or hereafter outstanding to
Georgia Electric Company from any lender during the period in question.
"DEFAULT RATE" shall mean the highest lawful rate of interest per
annum specified in any Note to apply after a default under such Note or, if no
such rate is specified, the highest rate of interest allowed by law.
"EQUIPMENT" shall mean all furniture, fixtures, equipment, motor
vehicles, rolling stock and other tangible property of a Person of every
description, except Inventory and in addition includes all property included in
the definition of "equipment" as used in the Code.
"EXCESS CASH FLOW" shall mean fifty percent (50%) of the net
income of Georgia Electric Company in the fiscal year of Georgia Electric
Company in question plus depreciation for such year and less Funded Debt due and
payable in such fiscal year and all computed in accordance with generally
accepted accounting principals consistently applied.
"EXISTING LOAN AGREEMENT" means the Term Loan, Revolving Credit
and Security Agreement dated as of November 29, 1995 by and between the Bank,
Borrower, Transportation Safety Contractors of Virginia, Inc., Transportation
Safety Contractors, Inc., BCD Communications, Inc., n/k/a Able Communications
Services, Inc., Tipco, Inc., Telecommunications Services Group, Inc., Traffic
Management Group, Inc., and Georgia Electric Company, as amended by Modification
of Term Loan Revolving Credit and Security Agreement dated as of May 30, 1996
and Second Modification of Term Loan, Revolving Credit and Security Agreement
dated as of October 30, 1996.
"EXISTING LOAN DOCUMENTS" means the Existing Loan Agreement
and the Loan Documents as defined in the Existing Loan Agreement.
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"EVENT OF DEFAULT" shall mean any event specified as such in
Section 7.1 hereof ("EVENTS OF DEFAULT"), provided that there shall have been
satisfied any requirement in connection with such event for the giving of notice
or the lapse of time, or both; "DEFAULT" or "default" shall mean any of such
events, whether or not any such requirement for the giving of notice or the
lapse of time or the happening of any further condition, event or act shall have
been satisfied.
"FUNDED DEBT" means all indebtedness for money borrowed, purchase
money mortgages, capitalized leases, conditional sales contracts and similar
title retention debt instruments, including any current maturities of such
indebtedness, which by its terms matures more than one year from the date of any
calculation thereof and/or which is renewable or extendible at the option of the
obligor to a date beyond one year from such date. The calculation of Funded Debt
shall include all Funded Debt of Georgia Electric Company, plus all Funded Debt
of other entities or persons, other than subsidiaries, which has been guaranteed
by Georgia Electric Company. Funded Debt shall also include the redemption
amount with respect to any stock of Georgia Electric Company required to be
redeemed within the next twelve months.
"GENERAL INTANGIBLES" shall mean all intangible personal property
(including things in action) except Accounts, Chattel Paper and Instruments,
including all contract rights, copyrights, trademarks, trade names, service
marks, patents, patent drawings, designs, formulas, rights to a Person's name
itself, customer lists, rights to all prepaid expenses, marketing expenses,
rights to receive future contracts, fees, commissions and orders relating in any
respect to any business of a Person, all licenses and permits, all computer
programs and other software owned by a Person, or which a Person has the right
to use, and all rights for breach of warranty or other claims for funds to which
a Person may be entitled, and in addition includes all property included in the
definition of "general intangibles" as used in the Code.
"GUARANTOR" shall mean Georgia Electric Company, Inc.,
Traffic Management Group, Inc., Transportation Safety Contractors of
Virginia, Inc., Transportation Safety Contractors, Inc. and any other person
now or hereafter guaranteeing the Loan.
"GUARANTY AGREEMENT" shall mean any guaranty instrument now or
hereafter executed and delivered by any Guarantor to the Bank, as it may be
modified.
"INDEBTEDNESS" shall mean all obligations now or hereafter owed
to the Bank by an Obligor, including, without limitation, amounts owed or to be
owed under the terms of the Loan Documents, or arising out of the transactions
described therein, including, without limitation, the Loan, sums advanced to pay
overdrafts on any account maintained by an Obligor with the Bank, reimbursement
obligations for outstanding letters of credit or banker's acceptances issued to
the account of an Obligor, amounts paid by the Bank under letters of credit or
drafts accepted by the Bank for the account of an Obligor, together with all
interest accruing thereon, all fees, all costs of collection, attorneys' fees
and expenses of or advances by the Bank which the Bank pays or incurs in
discharge of obligations of an Obligor or to repossess, protect, preserve, store
or dispose of any Collateral, whether such amounts are now due or hereafter
become due, direct or indirect and whether such amounts due are from time to
time reduced or entirely extinguished and thereafter re-incurred.
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"INSTRUMENTS" means all promissory notes, letters of credit,
guarantees, securities, and other items constituting "instruments" (as defined
in the Code) owned or held by an Obligor, whether or not in negotiable form, and
all collateral and other security therefor, whether now or hereafter existing or
acquired, and all proceeds thereof and all substitutions and replacements
therefor.
"INVENTORY" means all goods, merchandise and other personal
property of a Person which is held for sale or lease or furnished or to be
furnished under a contract for services or raw materials, and all work in
process and materials used or consumed or to be used or consumed in a Person's
business, and in addition, includes all property included in the definition of
"inventory" as used in the Code.
"LIEN" (collectively "LIENS") shall mean any mortgage, pledge,
statutory lien or other lien arising by operation of law, security interest,
trust arrangement, financing lease, collateral assignment or other encumbrance,
or any segregation of assets or revenues (whether or not constituting a security
interest) with respect to any present or future assets, revenues or rights to
the receipt of income of the Person referred to in the context in which the term
is used.
"LOAN" means the loan from Bank to Borrower evidenced by the Term
Note and all renewals, modifications, amendments and extensions thereof.
"LOAN DOCUMENTS" shall mean the Existing Loan Documents, this
Agreement, any other Security Agreement, the Note, the Guaranty Agreements, and
all other documents and instruments now or hereafter evidencing, describing,
guaranteeing or securing the Indebtedness or delivered in connection therewith,
as they may be modified.
"MATURITY DATE" means December 2, 2001.
"OBLIGORS" means the Borrower and the Guarantors.
"PERMITTED DEBT" shall mean (a) the Indebtedness; and (b) any
other Debt listed on Exhibit 1.1D hereto (if any) and any extensions, renewals,
replacements, modifications and refundings of any such Debt if, and to the
extent, permitted by Exhibit 1.1D; provided, however, that the principal amount
of such Debt may not be increased from the amount shown as outstanding on such
exhibit; and (c) such other Debt as the Bank may consent to in writing from time
to time.
"PERMITTED LIENS" shall mean (a) Liens securing the Indebtedness;
(b) Liens for taxes and other statutory Liens, landlord's Liens and similar
Liens arising out of operation of law (provided they are subordinate to the
Bank's Liens on Collateral) so long as the obligations secured thereby are not
past due or are being contested as permitted herein; (c) Liens described on
Exhibit 1.1E hereto (if any), provided, however, that no debt not now secured by
such Liens shall become secured by such Liens hereafter; and (d) such other
Liens as the Bank may consent to in writing from time to time.
"PERSON" shall mean any natural person, corporation,
unincorporated organization, trust, joint-stock company, joint venture,
association, company, limited or general partnership, any government, or any
agency or political subdivision of any government.
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"PRIME RATE" shall mean the annual interest rate announced by
SunTrust Banks, Inc., from time to time, as its Prime Rate (which interest rate
is only a bench mark, is purely discretionary and is not necessarily the best or
lowest rate charged borrowing customers of any subsidiary bank of SunTrust
Banks, Inc.). A change in the Prime Rate shall become effective from the
beginning of the day on which such change is determined by the Bank.
"SECURITY AGREEMENT" shall mean this Agreement as it relates to a
security interest in the Collateral, and any other mortgage, security agreement
or similar instrument now or hereafter executed by an Obligor or other Person
granting the Bank a security interest in any Collateral to secure the
Indebtedness.
"SPECIAL LOAN ACCOUNT" shall mean the demand deposit account
established pursuant to Section 3.8 hereof ("SPECIAL LOAN ACCOUNT").
"SUBSIDIARY" shall mean any corporation, partnership or other
Person in which the Borrower, now or hereafter, directly or indirectly, owns
more than fifty percent (50%) of the stock, capital or income interests, or
other beneficial interests, or which is effectively controlled by the Borrower.
"TANGIBLE NET WORTH" means the stockholders equity of
Borrower in Georgia Electric Company as reported in Borrowers financial
statements less any intangible assets all computed in accordance with generally
accepted accounting principles consistently applied.
1.2. FINANCIAL TERMS. All financial terms used herein
shall have the meanings assigned to them under generally accepted
accounting principles unless another meanings shall be specified.
2. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Agreement and to make the Loan provided for herein, Obligors make the
following representations and warranties, all of which shall survive the
execution and delivery of the Loan Documents.
2.1. VALID EXISTENCE AND POWER. The Borrower is a corporation and
each Subsidiary is a corporation or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and is duly qualified or licensed to transact business in all
places where the failure to be so qualified would have a material adverse effect
on it. Each of the Obligors and each other Person which is a party to any Loan
Documents (other than the Bank) has the power to make and perform the Loan
Documents executed by it and all such instruments will constitute the legal,
valid and binding obligations of such Person, enforceable in accordance with
their respective terms, subject only to bankruptcy and similar laws affecting
creditors' rights generally.
2.2. AUTHORITY. The execution, delivery and performance thereof
by Obligors and each other Person (other than the Bank) executing any Loan
Document have been duly authorized by all necessary action of each Obligor and
its shareholders and by such other Person, and do not and will not violate any
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provision of law or regulation, or any writ, order or decree of any court or
governmental or regulatory authority or agency or any provision of the governing
instruments of such Person, and do not and will not, with the passage of time or
the giving of notice, result in a breach of, or constitute a default or require
any consent under, or result in the creation of any Lien upon any property or
assets of such Person pursuant to, any law, regulation, instrument or agreement
to which any such Person is a party or by which any such Person or its
respective properties may be subject, bound or affected other than the Loan
Documents.
2.3. FINANCIAL CONDITION. Other than as disclosed in the
projected consolidated financial results for the Obligors' fiscal year ending
October 31, 1996 delivered to the Bank on or prior to the date hereof, the
Obligors have no direct or contingent obligations or liabilities (including any
guarantees or leases) or any material unrealized or anticipated losses from any
commitments except as described on Exhibit 2.3 (if any). Obligors are not aware
of any material adverse fact (other than facts which are generally available to
the public and not particular to the Obligors, such as general economic or
industry trends) concerning the conditions or future prospects of the Obligors
which has not been fully disclosed to the Bank, including any material adverse
change in the operations or financial condition of Obligors since the date of
the most recent financial statements delivered to the Bank.
2.4. LITIGATION. Except as disclosed on Exhibit 2.4 (if any),
there are no suits or proceedings pending, or to the knowledge of the Obligors
threatened, before any court or by or before any governmental or regulatory
authority, commission, bureau of agency or public regulatory body against or
affecting the Obligors or their assets, which if adversely determined would have
a material adverse effect on the financial condition or business of the
Obligors.
2.5. AGREEMENTS, ETC. None of Obligors is a party to any
agreement or instrument or subject to any court order, governmental decree or
any charter or other corporate restriction, adversely affecting its business,
properties or assets, operations or condition (financial or otherwise) nor is
any Obligor in default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any agreement or
instrument to which it is a party, or any law, regulation, decree, order or the
like.
2.6. AUTHORIZATIONS. All authorizations, consents, approvals and
licenses required under applicable law or regulation for the ownership or
operation of the property owned or operated by any Obligor or for the conduct of
any business in which it is engaged have been duly issued and are in full force
and effect, and it is not in default, nor has any event occurred which with the
passage of time or the giving of notice, or both, would constitute a default,
under any of the terms or provisions of any part thereof, or under any order,
decree, ruling, regulation, closing agreement or other decision or instrument of
any governmental commission, bureau or other administrative agency or public
regulatory body having jurisdiction over such person, which default would have a
material adverse effect on such Person. Except as noted herein, no approval,
consent or authorization of, or filing or registration with, any governmental
commission, bureau or other regulatory authority or agency is required with
respect to the execution, delivery or performance of any Loan Document.
<PAGE>
2.7. TITLE. One of the Obligors has good title to all of the
assets shown in the consolidated financial statements of Obligors free and
clear of all Liens, except Permitted Liens. One of the Obligor's alone has
full ownership rights in all Collateral.
2.8. COLLATERAL. The security interests granted to the Bank
herein and pursuant to any other Loan Document (a) constitute and, as to
subsequently acquired property included in the Collateral will constitute,
security interests under Florida law (including the Code) entitled to all of the
rights, benefits and priorities provided by Florida law (including the Code) and
the Loan Documents, and (b) are, and as to subsequently acquired Collateral will
be fully perfected, superior and prior to the rights of all third persons, now
existing or hereafter arising, subject only to Permitted Liens.
2.9. LOCATION. The chief executive office of the Obligors where the
Obligors' business records are located is the address designated for notices in
Section 9.4 ("NOTICES") and the Obligors' other places of business are listed on
Exhibit 2.9 attached hereto.
2.10. TAXES. Obligors have filed all federal and state income and
other tax returns which, to the best knowledge of the Obligors, are required to
be filed, and have paid all taxes as shown on said returns and all taxes,
including AD VALOREM taxes, shown on all assessments received by it to the
extent that such taxes have become due. Obligors are not subject to any federal,
state or local tax Liens nor has such Person received any notice of deficiency
or other official notice to pay any taxes. Each of Obligors have paid all sales
and excise taxes payable by it.
2.11. WITHHOLDING TAXES. Each of the Obligors has paid all withholding,
FICA and other payments required by federal, state or local governments with
respect to any wages paid to employees.
2.12. LABOR LAW MATTERS. No goods or services have been or will
be produced by the Obligors in violation of any applicable labor laws or
regulations or any collective bargaining agreement or other labor agreements or
in violation of any minimum wage, wage-and-hour or other similar laws or
regulations.
2.13. ACCOUNTS. Each Account, Instrument, Chattel Paper and other
writing constituting any portion of the Collateral is (a) genuine and
enforceable in accordance with its terms except for such limits thereon arising
from bankruptcy and similar laws relating to creditors' rights; (b) to the best
of the Obligor's knowledge are not subject to any defense, setoff, claim or
counterclaim of a material nature against the Obligors except as to which the
Obligors have notified the Bank in writing; and (c) not subject to any other
circumstances that would impair the validity, enforceability or amount of such
Collateral except as to which the Obligors have notified the Bank in writing.
2.14. USE AND LOCATION OF COLLATERAL. The Collateral is located only, and
shall at all times be kept and maintained only, at the Obligors' location or
locations as described herein.
2.15. JUDGMENT LIENS. Neither Obligors, nor any of their assets, are
subject to any unpaid judgments (whether or not stayed) or any judgment liens in
any jurisdiction.
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2.16. INTENT AND EFFECT OF TRANSACTIONS. This Agreement and
the transactions contemplated herein (a) are not made or incurred with intent to
hinder, delay or defraud any person to whom the Obligors have been, are now, or
may hereafter become indebted; (b) do not render any Obligor insolvent nor is
the Obligor insolvent on the date of this Agreement; (c) do not leave the
Obligor with an unreasonably small capital with which to engage in its business
or in any business or transaction in which it intends to engage; and (d) are not
entered into with the intent to incur, or with the belief that any Obligor would
incur, debts that would be beyond its ability to pay as such debts mature.
2.17. SUBSIDIARIES. All of the Subsidiaries are listed on Exhibit 2.17
attached hereto.
2.18. HAZARDOUS MATERIALS. The Obligors' and Subsidiaries'
property and improvements thereon have not in the past been used, are not
presently being used, and will not in the future be used for, nor do any of such
persons engage in, the handling, storage, manufacture, disposition, processing,
transportation, use or disposal of hazardous or toxic materials other than
vehicle fuel and lubricants used in the ordinary course of the operation of such
person's business, all of which are stored, applied, disposed of and otherwise
handled in accordance with applicable laws, rules and regulations.
2.19. ERISA. Obligors have no pension, profit-sharing or other
benefit plan subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or the Obligors have furnished to the Bank true and complete
copies of the latest annual report required to be filed pursuant to Section 104
of ERISA, with respect to each employee benefit plan or other plan maintained
for employees of the Obligors and covered by Title IV of ERISA (a "PLAN"), and
no Termination Event (as hereinafter defined) with respect to any Plan has
occurred and is continuing. For the purposes of this Agreement, a "TERMINATION
EVENT" shall mean a "reportable event" as defined in Section 4043(b) of ERISA
("REPORTABLE EVENT"), or the filing of a notice of intent to terminate under
Section 4041 of ERISA. Obligors have no unfunded liability with respect to any
such plan.
2.20. GUARANTORS. Each of the Guarantors will derive substantial financial
benefit from the making of the Loan to Borrower by reason of the interrelation
of businesses of the Obligors.
3. THE LOAN
3.1. LOAN. On satisfaction of the terms and conditions of this
Agreement, the Bank shall lend to the Borrower the principal amount of the Loan
for the purpose of refinancing the purchase price for the capital stock of
Georgia Electric Company. The Term Note shall evidence the outstanding principal
balance of the Loan.
3.2. INTEREST RATE. The outstanding principal balance of the
Loan outstanding from time to time shall accrue interest at the Prime Rate.
3.3. NET PAYMENTS. All payments by the Borrower under this
Agreement and the Note shall be made without setoff or counterclaim and in such
amounts as may be necessary in order that all payments, after deduction or
withholding for or on account of any present or future taxes, levies, imposts,
duties or other charges of whatsoever nature imposed by any government or any
<PAGE>
political subdivision or taxing authority thereof (collectively the "Taxes"),
shall not be less than the amounts otherwise specified to be paid under this
Agreement and the Note. Notwithstanding anything to the contrary contained in
this Section, the Borrower shall not be liable for the payment of any tax on or
measured by net income or portion thereof of the Bank pursuant to the income tax
laws of the United States, the State of Florida or the jurisdiction where the
office making or carrying the Loan is located. The Borrower shall pay all Taxes
when due (and indemnify the Bank against any liability therefor) and shall
promptly (and in any event not later than 30 days thereafter) furnish to the
Bank any certificates, receipts and other documents which may be required (in
the judgment of the Bank) to establish any tax credit to which Bank may be
entitled. The obligations of the Borrower under this Section shall survive the
termination of this Agreement and the repayment of the Loan, but such
obligations shall terminate as to any claim or liability for which the Borrower
is responsible pursuant to this Section on the same date that any such claim or
liability is barred by any applicable statute of limitations.
3.4. CALCULATION OF INTEREST. All interest under the Note or
hereunder shall be calculated on the basis of a 360-day year for the actual
number of days elapsed in an interest period (actual/360 method), unless the
Bank shall otherwise elect.
3.5. SPECIAL LOAN ACCOUNT. Upon the occurrence of an Event of
Default and demand by Bank, the Borrower shall establish and maintain with the
Bank, during the term of the Loan, a demand deposit account (the "Special Loan
Account"). From and after occurrence of an Event of Default, the Borrower shall
deposit in the Special Loan Account, as received, all proceeds from the sale of
Inventory and collection of Accounts and other Collateral in the form of checks,
drafts, cash or the like, and all such proceeds shall constitute Collateral.
Upon receipt of written instructions from the Bank after an Event of Default,
the Borrower shall direct (by instruction on invoices and otherwise) all Account
Debtors to make payments to a designated post office box under the control of
the Bank, which payments shall be deposited directly into the Special Loan
Account. The Borrower shall pay the Bank's reasonable fees and charges in
connection with such lock-box arrangement.
3.6. PREPAYMENT. Borrower shall have the right to prepay the
Loan, in whole or in part, at any time and from time to time. Within thirty (30)
days after the delivery of fiscal year end financial statements of Georgia
Electric Company during the term of the Loan, Borrower shall prepay that portion
of the principal balance of the Loan equal to the Excess Cash Flow for the
fiscal year of Georgia Electric Company most recently ended. In no event shall
the required prepayment by reason of the Excess Cash Flow in any fiscal year of
Georgia Electric Company exceed One Million Nine Hundred Thirty Thousand and
no/100s Dollars (1,930,000.00). Each notice of prepayment shall specify the
prepayment date and the principal amount to be prepaid. All prepayments of a
Loan shall include accrued interest upon the principal amount being prepaid to
the date of the payment.
3.7. OVERDUE AMOUNTS. Any payments not made as and when due
shall bear interest from the date due until paid at the Default Rate.
<PAGE>
3.8. SALES TAX. The Borrower shall notify the Bank if any Account
includes any sales or other similar tax and the Bank may at Bank's option either
disburse amounts to Borrower from the Special Loan Accounts for payment to the
taxing authority if the Special Loan Account contains sufficient amounts to pay
or remit any such taxes directly to the taxing authority and make Advances or
charge the Special Loan Account therefor. In no event shall the Bank be liable
for any such taxes.
3.9. CROSS COLLATERALIZATION. Obligors agree that,
notwithstanding the provisions of any of the Loan Documents and further
notwithstanding the existence of separate notes or any other separate expression
of or security for the Indebtedness, all of the Collateral is encumbered as
security for all of the Indebtedness by this Agreement or by other Loan
Documents. It is the intention of Obligors and Bank that the liens and security
interests created by the Loan Documents encumber all of the Collateral to secure
all of the Indebtedness. Bank shall have the right to proceed against any of the
Collateral to collect any or all of the Indebtedness in such order as Bank shall
deem proper. Bank shall not be obligated to proceed against or to release any
particular portion of the Collateral because the Collateral is described in one
of the Loan Documents creating a lien or security interest but not in others.
4. CONDITIONS PRECEDENT TO BORROWING. Prior to any disbursement
of the proceeds of the Loan, the following conditions shall have been
satisfied, in the sole opinion of the Bank and its counsel:
(a) LOAN DOCUMENTS. The Borrower and each other party to any Loan
Documents, as applicable, shall have executed and delivered this Agreement, the
Note, and other Loan Documents required by Bank, all in form and substance
reasonably satisfactory to the Bank.
(b) SUPPORTING DOCUMENTS. The Borrower shall cause to be
delivered to the Bank the following documents:
(i) A copy of the governing instruments of the Borrower
and each Guarantor and a good standing certificate
of the Borrower and each Guarantor certified by the
appropriate official of the State in which the
Obligor is incorporated; and
(ii) Incumbency certificates and certified resolutions
of the boards of directors (or other appropriate
Persons) of the Borrower and each other Person
executing any Loan Documents authorizing the
execution, delivery and performance of the Loan
Documents.
(c) UCC SEARCHES. UCC-11 searches and other Lien searches showing
no existing security interests in or Liens on the Collateral which is personal
property other than the security interests of the Bank.
<PAGE>
(d) OPINION OF OBLIGORS' COUNSEL: Obligors shall cause to be
addressed and delivered to Bank an opinion of counsel for Obligors, in
form and content reasonably satisfactory to Bank.
(e) INSURANCE. The Borrower shall have delivered to the Bank
satisfactory evidence of insurance meeting the requirements of Section 5.3
("INSURANCE").
(f) PERFECTION OF LIENS. The UCC-1 financing statements and, if
applicable, certificates of title covering the Collateral executed by the
Obligors shall duly have been recorded or filed in the manner and places
required by law to establish, preserve, protect and perfect the interests and
rights created or intended to be created by this Agreement and any other Loan
Document; and all taxes, fees and other charges in connection with the
execution, delivery and filing of this Agreement, the Note and the other Loan
Documents shall have been paid.
(g) ADDITIONAL DOCUMENTS. The Obligors shall have
delivered to the Bank all additional opinions, documents, certificates and
other assurances that the Bank or its counsel may reasonably require.
(h) FURTHER ASSURANCES. The Obligors shall have delivered
such further documentation or assurances as the Bank may reasonably require.
5. COVENANTS OF THE BORROWER. Obligors covenant and agree that from the
date hereof and until payment in full of the Indebtedness and the formal
termination of this Agreement, unless the Bank shall otherwise consent in
writing, the Obligors:
5.1. USE OF LOAN PROCEEDS. Shall use the proceeds of the
Loan only for the commercial purposes permitted herein or otherwise permitted
by the Bank and furnish the Bank all evidence that it may reasonably require
with respect to such use.
5.2. MAINTENANCE OF BUSINESS AND PROPERTIES. Shall at all times
maintain, preserve and protect all of its property used or useful in the conduct
of its business, including, without limitation, the Collateral, and keep the
same in good repair, working order and condition, and from time to time make, or
cause to be made, all material, needful and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be conducted properly and in accordance with
standards generally accepted in businesses of a similar type and size at all
times, and maintain and keep in full force and effect all licenses and permits
necessary to the proper conduct of its business.
5.3. INSURANCE. Shall maintain such liability insurance, workers'
compensation insurance, business interruption insurance and casualty insurance
as may be required by law or customary and usual for prudent businesses in its
industry or as may be reasonably required by the Bank and shall insure and keep
insured all Collateral and other properties in good and responsible insurance
companies satisfactory to the Bank. All liability policies shall name Bank as an
additional named insured, as its interests may appear. The hazard insurance
covering Collateral shall be in amounts and shall contain co-insurance and
<PAGE>
deductible provisions approved by the Bank; and shall name and directly insure
the Bank its successors and assigns as secured party and loss payee under an
endorsement acceptable to Bank. Each policy must contain a provision that Bank
will receive 30 days' prior written notice of expiration, cancellation,
termination or modification of such policy.
5.4. NOTICE OF DEFAULT. Shall provide to the Bank immediate
notice of (a) the occurrence of a Default, (b) any material litigation or
material changes in existing litigation or any judgment against it or its
assets, (c) any material damage or loss to property, (d) any notice from taxing
authorities as to claimed deficiencies or any tax lien or any notice relating to
alleged ERISA violations, (e) any Reportable Event, as defined in ERISA, (f) any
rejection, return, offset, dispute, loss or other circumstance having a material
adverse effect on any Collateral, and (g) any loss or threatened loss of
material licenses or permits.
5.5. INSPECTIONS. Shall permit inspections of the Collateral and
the records of such Person pertaining thereto, at such times and in such manner
as may be reasonably required by the Bank and shall further permit such
inspection, review and audits of its other records and its properties (with such
reasonable frequency and at such reasonable times as the Bank may desire) by the
Bank as the Bank may deem necessary or desirable from time to time. The cost of
such audits, reviews and inspections shall be borne by the Bank.
5.6. FINANCIAL INFORMATION. Shall maintain books and records
in accordance with generally accepted accounting principles and shall
furnish to the Bank the following periodic financial information:
(a) MONTHLY REPORTS. Within 20 days after the end of each month
reports of the results of Borrower's domestic operations for such month and
within 30 days after the end of each month a consolidated income statement and a
consolidated balance sheet for the operation of Borrower and the Subsidiaries
prepared in accordance with generally accepted accounting principles, as at the
end of such month and year to date, each certified by the Chief Executive
Officer or the Chief Financial Officer of Borrower as being accurate and
complete.
(b) QUARTERLY REPORTS. Within 60 days after the end of each
calendar quarter, a consolidated income statement and a balance sheet for the
operation of Borrower and the Subsidiaries prepared in accordance with generally
accepted accounting principles, as at the end of such quarter and year-to-date,
each certified by the Chief Executive Officer or the Chief Financial Officer of
the Borrower as being accurate and complete;
(c) ANNUAL REPORTS. Within 120 days after the end of each fiscal
year, a consolidated income statement and a reconciliation of capital accounts
of the Borrower and its Subsidiaries for such year, a statement of sources and
application of funds of Borrower for such year and a consolidated balance sheet
of Borrower and its Subsidiaries as of the end of such year, prepared in
accordance with generally accepted accounting principles and audited by
independent certified public accountants of recognized standing selected by the
Borrower and reasonably satisfactory to the Bank; and
<PAGE>
(d) INCOME STATEMENTS. Within 120 days after the end of each
fiscal year of Georgia Electric Company, an income statement for Georgia
Electric Company for such fiscal year prepared by Borrower in accordance with
generally accepted principles and certified by the Chief Executive Officer or
the Chief Financial Officer of Borrower as being accurate and complete.
(e) NO DEFAULT CERTIFICATES. Together with each report required
by Subsection (b) and (c), shall submit a certificate of its Chief Executive
Officer or Chief Financial Officer that no Default or Event of Default then
exists or if a Default or Event of Default exists, the nature and duration
thereof and the Borrower's intention with respect thereto, and in addition,
shall cause the Borrower's independent auditors to submit to the Bank, together
with its audit report, a statement that, in the course of such audit, it
discovered no circumstances which it believes would result in a Default or Event
of Default or if it discovered any such circumstances, the nature and duration
thereof; and shall also cause each Guarantor to submit a financial statement not
less frequently than annually, in a form reasonably satisfactory to the Bank. In
addition to the financial statements required herein, the Bank reserves the
right to require other or additional financial or other information concerning
the Borrower, the Guarantors and/or the Collateral as Bank may reasonably
require.
(f) SECURITIES FILINGS. Shall provide Bank with copies of all
form 10-K, 10-Q or other filings or information relating to the Obligors
immediately after filing with the SEC or any state securities regulator.
5.7. DEBT. Shall not create or permit to exist any Debt of
any Obligor, including any guaranties or other contingent obligations, except
Permitted Debt.
5.8. LIENS. Shall not create or permit to exist any Liens
on any of its property except Permitted Liens.
5.9. MERGER, SALE, ETC. Shall maintain its corporate
existence, good standing and necessary qualifications to do business and, except
as provided in Section 5.20, shall not merge or consolidate with any Person or
acquire all or substantially all of the assets of, or 50% or more of any class
of equity interest of, any Person or sell, lease, assign or otherwise dispose of
any Collateral or substantial portion of its other assets (other than sales of
obsolete or worn-out equipment and sales of Inventory in the ordinary course of
business).
5.10. LOANS AND OTHER INVESTMENTS. Shall not make or permit to
exist any advances or loans to, or guarantee or become contingently liable,
directly or indirectly, in connection with the obligations, leases, stock or
dividends of, or own, purchase or make any commitment to purchase any stock,
bonds, notes, debentures or other securities of, or any interest in, or make any
capital contributions to (all of which are sometimes collectively referred to
herein as "Investments") any Person except for (a) purchases of direct
obligations of the federal government, (b) deposits in commercial banks, (c)
commercial paper of any U.S. corporation having the highest ratings then given
by Moody's Investors Service, Inc. or Standard & Poor's Corporation, (d)
investments in Subsidiaries existing on the date hereof, and (e) endorsement of
negotiable instruments for collection in the ordinary course of business.
<PAGE>
5.11. CHANGE IN BUSINESS. Shall not enter into any
business which is substantially different from the business or businesses in
which it is presently engaged.
5.12. ACCOUNTS. (a) shall not sell, assign or discount any of its
Accounts, Chattel Paper or any promissory notes held by it other than the
discount of such notes in the ordinary course of business for collection; and
(b) shall notify the Bank promptly in writing with any discount, offset or other
deductions not shown on the face of an Account invoice and any dispute over an
Account, and any information relating to an adverse change in any Account
Debtor's financial condition or ability to pay its obligations.
5.13. TRANSACTIONS WITH AFFILIATES. Shall not directly
or indirectly purchase, acquire or lease any property from, or sell, transfer
or lease any property to, or otherwise deal with, except in the ordinary course
of business, any Affiliate.
5.14. NO CHANGE IN NAME, OFFICES; REMOVAL OF COLLATERAL.Shall not,
unless it shall have given 60 days' advance written notice thereof to the
Bank, (a) change its name or the location of its chief executive office or
other office where books or records are kept or (b) permit any Inventory or
other tangible Collateral to be located at any location other than as specified
in Section 2.9. ("LOCATION").
5.15. NO SALE, LEASEBACK. Shall not enter into any sale-
and-leaseback or similar transaction.
5.16. MARGIN STOCK. Shall not use any proceeds of the Loan
to purchase or carry any margin stock (within the meaning of Regulation U
of the Board of Governors of Federal Reserve System) or extend credit to
others for the purpose of purchasing or carrying any margin stock.
5.17. PAYMENT OF TAXES, ETC. Shall pay before delinquent all of
its debts and taxes except that the Bank shall not unreasonably withhold its
consent to nonpayment of taxes being actively contested in accordance with law
(provided that the Bank may require bonding or other assurances).
5.18. SUBORDINATION. Shall cause all debt and other
obligations now or hereafter owed to any Guarantor or Affiliate to be
subordinated in right of payment and security to the Indebtedness in accordance
with subordination agreements satisfactory to the Bank.
5.19. COMPLIANCE; HAZARDOUS MATERIALS. Shall strictly comply with
all laws, regulations, ordinances and other legal requirements, specifically
including, without limitation, ERISA, all securities laws and all laws relating
to hazardous materials and the environment. Except as otherwise provided in this
Agreement, unless approved in writing by the Bank, Obligors shall not engage in
the storage, manufacture, disposition, processing, handling, use or
transportation of any hazardous or toxic materials, whether or not in compliance
with applicable laws and regulations.
<PAGE>
5.20. SUBSIDIARIES. The Borrower and/or its Subsidiaries will not
be permitted to make acquisitions or enter into joint venture agreements without
the prior written consent of the Lender until Borrower and Guarantors achieve
compliance with the financial covenant ratio(s) required to be achieved by July
31, 1997, under Sections 6.21, 6.22 and 6.23 of the Existing Loan Agreement.
Thereafter new Subsidiaries may be acquired without the prior written consent of
the Bank provided Borrower provides prior written notice to the Bank containing
a certification that the terms of the Loan Documents and the special terms
outlined below will be complied with after said acquisition. The special terms
are:
(a). The Subsidiary to be acquired is engaged in one of the
three primary lines of business for the Borrower -- highway signage,
telecommunications or utility installation;
(b) The ratio of the combined earnings before deduction of
interest, taxes, depreciation, amortization and lease payments of Borrower and
the Subsidiary to be acquired calculated on a trailing four quarters basis for
both the Borrower and the Subsidiary to be acquired, divided by the combined
projected interest, principal and lease payments of Borrower and the Subsidiary
to be acquired, calculated for the four quarters after acquisition shall be
greater than 1.75X; and
(c) The total value of the consideration to be given, debt to be
assumed and expenses to be incurred by Borrower and the Subsidiaries in
connection with such acquisition shall not exceed $1,000,000.00.
(d) In no event shall Borrower or any Guarantor advance any funds
to any New Subsidiary, as defined in the Existing Loan Agreement, including,
without limitation, funding the operations of any New Subsidiary or directly or
indirectly guarantee any indebtedness of any New Subsidiary without the prior
written consent of Lender.
5.21. NET WORTH. Shall maintain Tangible Net Worth at the
end of each quarter beginning with the quarter ending October 31, 1996, at
not less than Two Million and no/100 Dollars ($2,000,000.00).
5.22. WORKING CAPITAL. Shall assure that the current assets less
the current liabilities of Georgia Electric Company determined in accordance
with generally accepted accounting principles consistently applied is not less
than Seven Hundred Thousand and no/100s Dollars ($700,000.00). Compliance shall
be tested on a quarterly basis beginning October 31, 1996.
5.23. DEBT SERVICE. Shall assure that Georgia Electric Company's
earnings before deduction of interest payments, taxes, depreciation and
amortization shall be greater than 1.20 x Debt Service measured quarterly
beginning October 31, 1996 for the trailing four quarters.
5.24. FURTHER ASSURANCES. Shall take such further action and
provide to the Bank such further assurances as may be reasonably requested to
ensure compliance with the intent of this Agreement and the other Loan
Documents.
<PAGE>
5.25. WITHHOLDING TAXES. Shall pay as and when due all employee
withholding, FICA and other payments required by federal, state and local
governments with respect to wages paid to employees.
5.26. DEPOSITORY ACCOUNTS. Shall at all times when any Indebtedness is
outstanding cause the primary operating accounts of Borrower and the
Subsidiaries to be established and maintained at the Bank.
5.27. CONFIRMATION OF COLLATERAL. At any time during the term hereof, Bank
may require an audit of the Accounts and an appraisal of the Equipment and
Inventory of Georgia Electric Company by independent third parties acceptable to
Bank and at Borrower's expense which must disclose that the value and condition
of such Accounts, Equipment and Inventory are acceptable to Bank.
6. DEFAULT.
6.1 EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default:
(a) Any material representation or warranty made by the Borrower
or any other party to any Loan Document (other than the Bank) herein or therein
or in any certificate or report furnished in connection herewith or therewith
shall prove to have been untrue or incorrect in any material and adverse respect
when made; or
(b) There shall occur any default by the Borrower in the payment,
when due, of any principal of or interest on the Note, any amounts due hereunder
or any other Loan Document or any other Indebtedness (not cured within any grace
period provided in such Note or in the document or instrument evidencing such
Indebtedness); or
(c) There shall occur any default by the Borrower or any other
party to any Loan Document (other than the Bank) in the performance of any
agreement, covenant or obligation contained in this Agreement or such Loan
Document not provided for elsewhere in this Section 7 and such default is not
cured within fifteen (15) days after Bank gives Borrower written notice of such
default unless a different grace period is provided in this Agreement or another
Loan Document; or
(d) Any other obligation now or hereafter owed by the Borrower or
any Guarantor to the Bank shall be in default and not cured within any period of
grace provided therein or any such Person shall be in default under any
obligation in excess of $50,000 owed to any other obligee, which default
entitles the obligee to accelerate any such obligations or exercise other
remedies with respect thereto; or
(e) The Borrower or any Guarantor shall (i) voluntarily liquidate
or terminate operations or apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of such
Person or of all or of a substantial part of its assets, (ii) admit in writing
its inability, or be generally unable, to pay its debts as the debts become due,
(iii) make a general assignment for the benefit of its creditors, (iv) commence
<PAGE>
a voluntary case under the federal Bankruptcy Code (as now or hereafter in
effect), (v) file a petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, (vi) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
under the Bankruptcy Code, or (vii) take any corporate action for the purpose of
effecting any of the foregoing; or
(f) without its application, approval or consent, a proceeding
shall be commenced, in any court of competent jurisdiction, seeking in respect
of Borrower or any Guarantor any remedy under the federal Bankruptcy Code, the
liquidation, reorganization, dissolution, winding-up, or composition or
readjustment of debt, the appointment of a trustee, receiver, liquidator or the
like of Borrower or any Guarantor, or of all or any substantial part of the
assets of Borrower or any Guarantor, or other like relief under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts and such action shall not be dismissed within sixty (60)
days after filing; or
(g) Any security interest or Lien of the Bank hereunder or under
any other Loan Document shall not constitute a perfected security interest of
first priority in the Collateral thereby encumbered, subject only to Permitted
Liens; or
(h) There shall occur any material loss, theft, damage or
destruction of any of the Collateral in excess of $100,000, which loss is not
fully insured; or
(i) A judgment in excess of $50,000 shall be rendered against the
Borrower or any Guarantor and shall remain undischarged, undismissed and
unstayed for more than ten days (except judgments validly covered by insurance
with a deductible of not more than $50,000) or there shall occur any levy upon,
or attachment, garnishment or other seizure of, any material portion of the
Collateral or other assets of the Borrower, or any Guarantor by reason of the
issuance of any tax levy, judicial attachment or garnishment or levy of
execution; or
(j) Any Guarantor shall repudiate or revoke any Guaranty
Agreement.
6.2. REMEDIES. If any Event of Default shall occur, the Bank may,
without notice to the Borrower, at its option, declare any or all Indebtedness
to be immediately due and payable (if not earlier demanded), bring suit against
the Borrower and/or any Guarantor to collect the Indebtedness, exercise any
remedy available to the Bank hereunder and take any action or exercise any
remedy provided herein or in any other Loan Document or under applicable law. No
remedy shall be exclusive of other remedies or impair the right of the Bank to
exercise any other remedies.
6.3. RECEIVER. In addition to any other remedy available to it,
the Bank shall have the absolute right, upon the occurrence of an Event of
Default, to seek and obtain the appointment of a receiver to take possession of
and operate and/or dispose of the business and assets of the Obligors and any
costs and expenses incurred by the Bank in connection with such receivership
shall bear interest at the Default Rate and shall be secured by all Collateral.
<PAGE>
7. SECURITY AGREEMENT.
7.1. SECURITY INTEREST.
(a) As security for the payment and performance of any and all of
the Indebtedness and the performance of all other obligations and covenants of
the Obligors hereunder and under the other Loan Documents, certain or
contingent, now existing or hereafter arising, which are now, or may at any time
or times hereafter be owing by the Obligors to the Bank, the Obligors hereby
pledge to the Bank and give the Bank a continuing security interest in and
general Lien upon and right of set-off against, all right, title and interest of
the Obligors in and to the Collateral, whether now owned or hereafter acquired
by the Obligors. Obligors and Bank acknowledge that the security interest and
Lien created in the Collateral by this Agreement is of equal priority with and
shall not supersede or affect the security interests and Liens created by the
Existing Loan Documents.
(b) Except as herein or by applicable law otherwise expressly
provided, the Bank shall not be obligated to exercise any degree of care in
connection with any Collateral in its possession, to take any steps necessary to
preserve any rights in any of the Collateral or to preserve any rights therein
against prior parties, and the Obligors agree to take such steps. In any case
the Bank shall be deemed to have exercised reasonable care if it shall have
taken such steps for the care and preservation of the Collateral or rights
therein as the Borrower may have reasonably requested the Bank to take and the
Bank's omission to take any action not requested by the Borrower shall not be
deemed a failure to exercise reasonable care. No segregation or specific
allocation by the Bank of specified items of Collateral against any liability of
the Obligors shall waive or affect any security interest in or Lien against
other items of Collateral or any of the Bank's options, powers or rights under
this Agreement or otherwise arising.
(c) At any time and from time to time after an Event of Default,
Bank may, with or without notice to the Obligors, (i) transfer into the name of
the Bank or the name of the Bank's nominee any of the Collateral, (ii) notify
any Account Debtor or other obligor of any Collateral to make payment thereon
direct to the Bank of any amounts due or to become due thereon and (iii) receive
and after an Event of Default direct the disposition of any proceeds of any
Collateral.
7.2. REMEDIES.
(a) If an Event of Default shall have occurred and be continuing,
without waiving any of its other rights hereunder or under any other Loan
Documents, the Bank shall have all rights and remedies of a secured party under
the Code (and the Uniform Commercial Code of any other applicable jurisdiction)
and such other rights and remedies as may be available hereunder, under other
applicable law or pursuant to contract. If requested by the Bank, the Obligors
will promptly assemble the Collateral and make it available to the Bank at a
place to be designated by the Bank. The Obligors agree that any notice by the
Bank of the sale or disposition of the Collateral or any other intended action
hereunder, whether required by the Code or otherwise, shall constitute
reasonable notice to the Obligors if the notice is mailed to the Borrower by
regular or certified mail, postage prepaid, at least ten days before the action
to be taken. The Obligors shall be liable for any deficiencies in the event the
proceeds of the disposition of the Collateral do not satisfy the Indebtedness in
full.
<PAGE>
(b) If an Event of Default shall have occurred and be continuing,
the Bank may demand, collect and sue for all amounts owed pursuant to Accounts,
General Intangibles, Chattel Paper or for proceeds of any Collateral (either in
an Obligors' name or the Bank's name at the latter's option), with the right to
enforce, compromise, settle or discharge any such amounts. The Obligors appoint
the Bank as the Obligors' attorney-in-fact to endorse any Obligors' name on all
checks, commercial paper and other instruments pertaining to Collateral or
proceeds after an Event of Default.
7.3. ENTRY. Obligors hereby irrevocably consent to any act by the
Bank or its agents in entering upon any premises for the purposes of either (i)
inspecting the Collateral or (ii) taking possession of the Collateral after an
Event of Default and each Obligor hereby waives its right to assert against the
Bank or its agents any claim based upon trespass or any similar cause of action
for entering upon any premises where the Collateral may be located.
7.4. DEPOSITS; INSURANCE. Upon the occurrence and continuance of
an Event of Default, Obligors authorize the Bank to collect and apply against
the Indebtedness when due any cash or deposit accounts in its possession, and
any refund of insurance premiums or any insurance proceeds payable on account of
the loss or damage to any of the Collateral and irrevocably appoints the Bank as
its attorney-in-fact to endorse any check or draft or take other action
necessary to obtain such funds after an Event of Default.
7.5. OTHER RIGHTS. Obligors authorize the Bank without affecting
the Obligors' obligations hereunder or under any other Loan Document from time
to time (i) to take from any party and hold additional Collateral or guaranties
for the payment of the Indebtedness or any part thereof, and to exchange,
enforce or release such collateral or guaranty of payment of the Indebtedness or
any part thereof and to release or substitute any endorser or guarantor or any
party who has given any security interest in any collateral as security for the
payment of the Indebtedness or any part thereof or any party in any way
obligated to pay the Indebtedness or any part thereof; and (ii) upon the
occurrence of any Event of Default to direct the manner of the disposition of
the Collateral and the enforcement of any endorsements, guaranties, letters of
credit or other security relating to the Indebtedness or any part thereof as the
Bank in its sole discretion may determine.
7.6. ACCOUNTS. After an Event of Default, the Bank may notify any
Account Debtor of the Bank's security interest and may direct such Account
Debtor to make payment directly to the Bank for application against the
Indebtedness. Any such payments received by or on behalf of an Obligor at any
time, after an Event of Default, shall be the property of the Bank, shall be
held in trust for the Bank and not commingled with any other assets of any
Person (except to the extent they may be commingled with other assets of an
Obligor in an account with the Bank) and shall be immediately delivered to the
Bank in the form received. The Bank shall have the right to apply any proceeds
of Collateral to such of the Indebtedness as it may determine.
7.7. TANGIBLE COLLATERAL. Except as otherwise provided herein or
agreed to in writing by the Bank, no Inventory or other tangible collateral
shall be commingled with, or become an accession to or part of, any property of
<PAGE>
any other Person so long as such property is Collateral. Upon the occurrence of
any Event of Default, the Borrower shall, upon the request of the Bank, promptly
assemble all tangible Collateral for delivery to the Bank or its agents. No
tangible Collateral shall be allowed to become a fixture unless the Bank shall
have given its prior written authorization.
7.8. WAIVER OF MARSHALLING. Each Obligor hereby waives any
right it may have to require marshalling of its assets.
8. MISCELLANEOUS.
8.1. NO WAIVER, REMEDIES CUMULATIVE. No failure on the part of
the Bank to exercise, and no delay in exercising, any right hereunder or under
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and are in addition to any other remedies provided by
law, any Loan Document or otherwise.
8.2. SURVIVAL OF REPRESENTATIONS. All representations and
warranties made herein shall survive the making of the Loan and the delivery of
the Note, and shall continue in full force and effect so long as any
Indebtedness is outstanding, there exists any commitment by the Bank to an
Obligor, and until this Agreement is formally terminated in writing.
8.3. EXPENSES. Whether or not the Loan herein provided for shall
be made, the Borrower shall pay all reasonable costs and expenses in connection
with the preparation, execution, delivery, amendment and enforcement of this
Agreement and any Loan Document, including the reasonable fees and disbursements
of counsel for the Bank in connection therewith, whether suit be brought or not
and whether incurred at trial or on appeal, and all costs of repossession,
storage, disposition, protection and collection of Collateral. If the Borrower
should fail to pay any tax or other amount required by this Agreement to be paid
or which may be reasonably necessary to protect or preserve any Collateral or an
Obligors' or Bank's interests therein, the Bank may make such payment and the
amount thereof shall be payable on demand, shall bear interest at the Default
Rate from the date of demand until paid and shall be deemed to be Indebtedness
entitled to the benefit and security of the Loan Documents. In addition,
Obligors agree to pay and save the Bank harmless against any liability for
payment of any state documentary stamp taxes, intangible taxes or similar taxes
(including interest or penalties, if any) which may now or hereafter be
determined to be payable in respect to the execution, delivery or recording of
any Loan Document or the making of any Advance, whether originally thought to be
due or not, and regardless of any mistake of fact or law on the part of the Bank
or the Borrower with respect to the applicability of such tax. The provisions of
this section shall survive payment in full of the Loan and termination of this
Agreement.
8.4. NOTICES. Any notice or other communication hereunder to any
party hereto shall be by hand delivery, overnight delivery, facsimile, telegram,
telex or registered or certified mail provided such delivery is evidenced by a
receipt or other written proof of delivery or refusal of delivery or inability
to deliver and unless otherwise provided herein shall be deemed to have been
<PAGE>
given or made when delivered, telegraphed, telexed, faxed or deposited in the
mails, postage prepaid, addressed to the party at its address specified below
(or at any other address that the party may hereafter specify to the other
parties in writing):
The Bank: SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION
501 EAST LAS OLAS BOULEVARD
FT. LAUDERDALE, FLORIDA 33301
ATTN: CORPORATE BANKING DEPARTMENT 7TH FLOOR
The Obligors: ABLE TELCOM HOLDING CORPORATION
1601 FORUM PLACE, SUITE 1110
WEST PALM BEACH, FLORIDA 33401
ATTN: MR. WILLIAM J. MERCURIO
Copy to: DONN A. BELOFF, ESQ.
HOLLAND & KNIGHT
P.O. BOX 14070
FT. LAUDERDALE, FL 33302-4070
--------------------------------------
Delivery of notice to Borrower's counsel shall be a courtesy copy only and
failure to deliver to Borrower's counsel shall not affect the effectiveness of
delivery to Borrower.
8.5. GOVERNING LAW. This Agreement and the Loan Documents shall
be deemed contracts made under the laws of the State of Florida and shall be
governed by and construed in accordance with the laws of said state except
insofar as the laws of another jurisdiction may govern the perfection, priority
and enforcement of security interests in Collateral located in another
jurisdiction.
8.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the Obligors and the Bank, and their
respective successors and assigns; provided, that the Obligors may not assign
any of their rights hereunder without the prior written consent of the Bank, and
any such assignment made without such consent will be void.
8.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which when taken together shall constitute but one and the same instrument.
8.8. NO USURY. Notwithstanding anything contained in this
Agreement, the Note, or in any other Loan Document to the contrary, in no event
will interest or other charges deemed to be interest be chargeable against the
Obligors if such amount (combined with any other amounts considered to be in the
nature of interest) would exceed the maximum amount permitted by law from time
<PAGE>
to time while any of the Indebtedness is outstanding, and in the event any
amount in excess of the lawful maximum is charged or collected by the Bank or
paid by an Obligor, the Obligor shall be entitled to the reimbursement of such
excess.
8.9. POWERS. All powers of attorney granted to the Bank are
coupled with an interest and are irrevocable.
8.10. APPROVALS. If this Agreement calls for the approval or
consent of the Bank, such approval or consent may be given or withheld in the
reasonable discretion of the Bank unless otherwise specified herein.
8.11. JURISDICTION, SERVICE OF PROCESS.
(a) Any suit, action or proceeding against the Borrower with
respect to this Agreement, the Collateral or any Loan Document or any judgment
entered by any. court in respect thereof may be brought in the courts of Palm
Beach County, Florida, and the Borrower hereby accepts the nonexclusive
jurisdiction of those courts for the purpose of any suit, action or proceeding.
Service of process in any such case may be had against the Obligors by delivery
in accordance with the notice provisions herein or as otherwise permitted by
law, and the Obligors agree that such service shall be valid in all respects for
establishing personal jurisdiction over it.
(b) In addition, the Obligors hereby irrevocably waive, to the
fullest extent permitted by law, any objection which they may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement, the Loan Documents, the Collateral or any judgment
entered by any court in respect thereof brought in Palm Beach County, Florida,
and hereby further irrevocably waives any claim that any suit, action or
proceedings brought in Palm Beach County, Florida or in such District Court has
been brought in an inconvenient forum.
8.12. MULTIPLE BORROWERS. If more than one Person is named
herein as the Borrower, all obligations, representations and covenants herein
and in other Loan Documents to which the Borrower is a party shall be joint and
several.
8.13. WAIVER OF JURY TRIAL. THE OBLIGORS AND THE BANK HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED UPON THIS AGREEMENT OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER LOAN
DOCUMENT AND ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
<PAGE>
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION
By: /S/JEFFREY WOLFE
--------------------------------------------------
Print Name: JEFFREY WOLFE
Title: VICE PRESIDENT
ABLE TELCOM HOLDING CORP., a
Florida corporation
By: /S/WILLIAM J. MERCURIO
--------------------------------------------------
Print Name: WILLIAM J. MERCURIO
Title: PRESIDENT
TRANSPORTATION SAFETY CONTRACTORS
OF VIRGINIA, INC., a Virginia corporation
By:/S/WILLIAM J. MERCURIO_
--------------------------------------------------
Print Name: WILLIAM J. MERCURIO
Title: CHAIRMAN
TRANSPORTATION SAFETY CONTRACTORS,
INC., a Florida corporation
By: /S/WILLIAM J. MERCURIO
--------------------------------------------------
Print Name: WILLIAM J. MERCURIO
Title: CHAIRMAN
GEORGIA ELECTRIC COMPANY, INC.,
a Georgia corporation
By:/S/WILLIAM J. MERCURIO
--------------------------------------------------
Print Name: WILLIAM J. MERCURIO
Title: CHAIRMAN
TRAFFIC MANAGEMENT GROUP, INC.,
a Florida corporation
By:/S/WILLIAM J. MERCURIO
--------------------------------------------------
Print Name: WILLIAM J. MERCURIO
Title: CHAIRMAN
<PAGE>
EXHIBIT 1.1E
SCHEDULE OF LIENS
SunTrust Bank, South FL, NA (ATHC)
$2,750,000 five year note payable maturing on December 1,
2000
collaterized by related
equipment
$1,250,000 three year note payable maturing on December 1, 1998
collaterized by related
equipment
$148,733 note payable maturing on October 15, 2001
collaterized
by related
equipment
$287,512 note payable maturing on October 15, 1999
collaterized
by related
equipment
$3,000,000 note payable maturing on December 2, 2001 collaterized
by related
equipment
Central Fidelity Bank (TSCI-Va)
$293,500 mortgage note payable collaterized by land and
building
located at 925 Professional Place, Chesapeake, VA
U.S. Bancorp (TSCI)
$48,810 note payable maturing on March 15, 1999 collaterized by two 1992
John Deere model 310 backhoes
The Associates (TSCI)
$86,637 note payable maturing on April 16, 1999 collaterized by 71 Motorola
Maxtrac 800 radios and 5 bases
SunBank, NA (HCC)
$195,000 note payable maturing on May 17, 1997 collaterized
by related
equipment
$300,000 note payable maturing on March 16, 1997
collaterized
by related
equipment
$301,075 note payable maturing on July 31, 2000 collaterized
by related
equipment
Citizens National Bank of Leesburg (HCC)
$74,762 note payable maturing on July 31, 2000 collaterized
by related
equipment
<PAGE>
EXHIBIT 2.3
SCHEDULE OF MATERIAL UNREALIZED OR ANTICIPATED LOSSES
NONE
<PAGE>
EXHIBIT 2.4
SCHEDULE OF LITIGATION
William E. Barlow vs. Able Telcom Holding Corp., etc., et
al.
D & D Utilities, Inc. vs. Transportation Safety Contractors, Inc.,
etc., et al.
<PAGE>
EXHIBIT 2.9
SCHEDULE OF LOCATIONS
TRANSPORTATION SAFETY CONTRACTORS, INC. H. C. CONNELL, INC
7750 Professional Place 250 West Ponkan Road
Tampa, FL 33637 Apopka, FL 32712
4001 North 30th Avenue 355 1/2 West 7th Street
Hollywood, FL 33020 Taft, FL 32809
TRANSPORTATION SAFETY CONTRACTORS OF VIRGINIA, INC. 6450 University
Blvd.
Orlando, FL 32802
925 Professional Place
Chesapeake, VA 23320 ABLE COMMUNICATIONS
SERVICES, INC.
--------------------------
14475 Telegraph Road 4524 North 56th Street
Woodbridge, VA 22192 Tampa, FL 33610
9630 Northeast Drive 1938 Old Norcross Road
Fredericksburg, VA 22408 Lawrenceville, Georgia 30244
1060 Belle Avenue
TIPCO, Inc. Casselberry, FL 32708
100-2 South Jackson Avenue
Jacksonville, FL 32220 4971 Capital Circle S.E.
Tallahassee, FL 32311
GEORGIA ELECTRIC COMPANY
Able Telcom International,
Inc.
1412 West Oak Ridge Drive 800 West Cypress Creek Road
Albany, GA 31706 Ft. Lauderdale, FL 33309
Able Telcom C.A./TTI C.A.
Caracas, Venezuela 1070
Seima Telecommunications,
Ltda.
Rio de Janiero,
Brazil
<PAGE>
EXHIBIT 2.17
SCHEDULE OF SUBSIDIARIES
Transportation Safety Contractors, Inc.
Transportation Safety Contractors of Virginia, Inc.
TIPCO, Inc.
Able Communications Services, Inc.
H. C. Connell, Inc.
Georgia Electric Company
Seima Telecommunications, Ltda.
Able Telcom/TTI C.A.
Able Telcom International,
Inc.
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11 Computation of Per Share Earnings
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net (Loss) income $ (5,910,248) $ (281,166) $ 946,013
============== =========== ==========
Weighted average shares outstanding
Primary and fully diluted 8,361,458 8,283,668 7,736,122
============== =========== ==========
(Loss) income per share
Primary and fully diluted $ (.71) $ (.03) $ .12
===== ===== ====
</TABLE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
LIST OF SUBSIDIARIES
EXHIBIT 21 List of Subsidiaries as of October 31, 1996
- ----------
The following is a listing of all subsidiaries of Able Telcom Holding Corp. as
of October 31, 1996:
Traffic Management Group, Inc.
Transportation Safety Contractors, Inc.
Transportation Safety Contractors of Virginia, Inc.
Tipco, Inc.
Georgia Electric Company
Telecommunication Services Group, Inc.
Able Communication Services Inc.
H. C. Connell, Inc.
Communications Development Group, Inc.
Able Telcom/TTI C.A.
Able Telcom International, Inc.
Seima Telecommunications, Ltda.
Neurotechnology, Inc.
Able Wireless, Inc.
Cable Communications Group, Inc.
Exhibit 23.1 Consent of Ernst and Young, LLP
Consent of Independent Certified Public Accountants
We consent to the incorporation by reference in the Registration Statement
(Form S-8, No. 333-04377)pertaining to the 1995 Stock Option Plan of Able Telcom
Holding Corp. of our report dated January 22, 1997, except for the last
paragraph of Note 8 as to which the date is January 31, 1997, with respect to
the consolidated financial statements and schendule of Able Telcom Holding Corp.
included in the Annual Report (Form 10-K) for the year ended October 31, 1996.
/s/ Ernst and Young LLP
-----------------------
West Palm Beach, Florida Ernst and Young LLP
February 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ABLE TELCOM HOLDING CORP. FOR THE YEAR ENDED OCTOBER 31,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 3,267,161
<SECURITIES> 571,010
<RECEIVABLES> 13,617,792
<ALLOWANCES> 828,186
<INVENTORY> 3,535,622
<CURRENT-ASSETS> 21,448,711
<PP&E> 10,667,357
<DEPRECIATION> 2,749,804
<TOTAL-ASSETS> 38,918,831
<CURRENT-LIABILITIES> 17,154,631
<BONDS> 0
0
0
<COMMON> 8,203
<OTHER-SE> 11,598,498
<TOTAL-LIABILITY-AND-EQUITY> 38,918,831
<SALES> 0
<TOTAL-REVENUES> 48,906,170
<CGS> 0
<TOTAL-COSTS> 40,486,018
<OTHER-EXPENSES> 14,706,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,350,440
<INCOME-PRETAX> (7,398,826)
<INCOME-TAX> (890,695)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,910,248)
<EPS-PRIMARY> (.71)
<EPS-DILUTED> (.71)
</TABLE>
