EXPLANATORY NOTE
The purpose of this Amendment No. 1 is to amend and restate the Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1998 in its
entirety, including by filing information responsive to Part III of Form 10-K in
that the Registrant does not anticipate filing definitive proxy material within
120 days of the end of its fiscal year. The Registrant has refiled all exhibits
previously filed with its Form 10-K for the fiscal year ended October 31, 1998
and has included additional exhibits not previously filed.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K/A
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended October 31, 1998
OR
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
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 not 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. [ ]
As of February 19, 1999, 8,649,590 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 $74,602,714.
There were 11,747,593 shares of Common Stock outstanding as of February 19,
1999.
1
<PAGE>
PART 1
ITEM 1. BUSINESS
OVERVIEW
Able Telcom Holding Corp. ( the "Company") is a contractor for the construction
and maintenance of facilities-based communications systems for both public and
private sector customers in the United States and South America. The Company has
three operating groups: (i) Network Services, (ii) Transportation Services, and
(iii) Communications Development. Through the Company's Network Services Group,
it provides development, design, engineering, project management, installation,
construction, operation and maintenance services for telecommunications systems.
In addition, the Company's Transportation Services Group provides services for
the design, development, integration, installation, construction, project
management, maintenance and operation of advanced intelligent transportation
systems, automated toll collection systems and electronic traffic management and
control systems. The Company's Communication Development Group provides
communications design, installation and maintenance services to foreign
telephone companies.
In the discussion below regarding the Company's business, any statement of its
future expectations, including without limitation, future revenues and earnings,
plans and objectives for future operations, future agreements, future economic
performance or expected operational developments and all other statements
regarding the future are "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, Section 21E of the
Securities Exchange Act of 1934, as amended, and as that term is defined in the
Private Securities Litigation Reform Act of 1995. The Company intends that the
forward-looking statements be subject to the safe harbors created thereby. These
forward-looking statements are based on the past financial performance of recent
acquisitions and the Company's strategic plans. The Company knows of no
presently existing factors that would cause the Company's revenues to decrease
from historical levels. Although the Company believes that its expectations are
based on reasonable assumptions, it can give no assurance that its expectations
will be achieved. The important factors, risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements herein (the "Cautionary Statements") include, without limitation, the
Company's reliance on third parties to complete the transactions contemplated by
the Company, the Company's degree of financial leverage, risks associated with
debt services requirements and interest rate fluctuations, risks associated with
acquisitions and the integration thereof, risks of international business,
dependence on availability of transmission facilities, regulations risks
including the impact of the Telecom Act, contingent liabilities and the impact
of competitive services and pricing, as well as other risks referenced from time
to time in the Company's filings with the Securities and Exchange Commission.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements. The Company does not undertake any
obligations to release publicly any revisions to such forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
STRATEGY
The Company's 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 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
Caracas, Venezuela. Such services were provided to one customer, CANTV, the
Venezuelan national telephone
2
<PAGE>
company. To decrease its exposure to foreign markets, in 1994, the Company
expanded its business focus by marketing its services in the southeastern United
States, with the acquisition of Florida based Transportation Safety Contractors,
Inc. and its affiliates (collectively "TSCI"). TSCI installs and maintains
traffic control signage, signalization and lighting systems and performs outside
plant telecommunication services. The majority of TSCI's business is conducted
in Florida and Virginia with these states' respective departments of
transportation and various city and county municipalities.
To further expand in the domestic market and to facilitate a continued
acquisition program, during the fourth quarter of fiscal 1995 the Company
reorganized its management and operational structure into three operating groups
described above 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. The Connell acquisition provided the Company
expanded market share and a significant number of new customers. 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 and specializes 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. On December 2, 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.
Substantially all of the Company's assets and operations are held by or
conducted through domestic and foreign subsidiaries. Each of TSCI, Connell, GEC,
Dial, Patton Management Corporation and MFS Network Technologies ("MFSNT") (See
"Fiscal Year 1998 and Recent Developments") continue to operate as wholly-owned
subsidiaries of the Company.
FISCAL YEAR 1998 AND RECENT DEVELOPMENTS
MFSNT ACQUISITION. On July 2, 1998, the Company acquired the network
construction and transportation systems business of MFS Network Technologies,
Inc. ("MFSNT") from WorldCom, Inc. ("WorldCom") pursuant to a merger agreement
dated April 26, 1998 ("Plan of Merger"). On September 9, 1998, the Company and
WorldCom finalized the terms of the Plan of Merger through the execution of an
amended agreement, which agreement was subsequently amended on January 26, 1999
(as amended, the "September Agreement"). The acquisition of MFSNT was accounted
for using the purchase method of accounting at a total price of approximately
$67.5 million comprised of a $58.8 million contract price, costs associated with
the acquisition and the value attributed to options and equity awards described
below. $38.8 million of the purchase price was paid in cash and the remainder
was paid by the issuance of a promissory note as described below (the "WorldCom
Note"). The MFSNT purchase price is subject to additional amounts payable as
contingent consideration on December 29, 2000, which relate to the resolution of
certain pre-acquisition contingencies for pending litigation, claims,
assessments and losses on certain projects.
In conjunction with the acquisition of MFSNT, the Company granted an option to
WorldCom (the "WorldCom Option") to purchase up to 2,000,000 shares of the
Company's common stock, at an exercise price of $7.00 per share, but subject to
a 1,817,941 share limitation, and the right to receive upon satisfaction of
certain conditions phantom stock awards (the "Phantom Stock Awards") equivalent
to 600,000 shares of common stock, payable in cash, stock, or a combination of
both at the Company's option. The WorldCom Phantom Stock Awards are exercisable
only on the following three days: July 2, 1999, July 2, 2000, or July 2, 2001.
WorldCom will be entitled to receive any appreciation of the Common Stock over a
base price of $5 3/32 per share, but in no event shall the maximum payment
exceed $25.00 per share. The fair values of the WorldCom Option and Phantom
Stock Awards were estimated at the date of grant at $3.5 million and $0.6
million, respectively, and are included as a component of the total
consideration paid for the acquisition of MFSNT.
On January 8, 1999, the Company and WorldCom entered into a modification to the
WorldCom Option (the "WorldCom Modification") which modified the WorldCom Option
into a stock appreciation right (an "SAR") unless and until such time as
shareholder approval is obtained by the Company (if ever), pursuant to the
Nasdaq Stock Market, Inc. ("Nasdaq") Marketplace Rule 4460(i)(1)(C) ("Rule
4460(i)(1)(C)"), to approve the issuance of 20% or more of the Common Stock in
connection with the MFSNT Acquisition. Rule 4460(i)(1)(C) addresses the issuance
of securities in connection with the acquisition of stock or assets of another
company if, due to the present or potential issuance of common stock, or
securities convertible into or exercisable for common stock, the aggregate
number of shares of common stock which may be issued is or may be equal to or
in excess of 20% of the number of shares of common stock outstanding before the
issuance of the stock or securities.
Under the WorldCom Modification, WorldCom is entitled to participate in an
increase in the value of an aggregate of 2,000,000 shares of Common Stock. For
each SAR exercised, WorldCom is entitled to receive an amount equal to the
excess of the fair market value of the Common Stock as of the applicable
exercise date over $7.00 (the "Appreciation Amount"). The Appreciation Amount
will be paid in cash within fifteen days of receipt of an exercise notice;
provided, however, that to the extent that the Company would be required to pay
in excess of $10 million in any twelve month period as a result of any exercises
of any SARs, then the amount of such excess shall be represented by a promissory
note with quarterly payments amortized ratably over a period of six months at
10% per annum. The exercise period for the SAR grants commences on the earlier
of: (i) one (1) business day after the date upon which the potential issuance of
Common Stock under this Agreement is voted upon by the shareholders of the
Company and (ii) May 1, 1999 (the "Commencement Date"), and ending on January 2,
2002. Payment of any SARs in cash only could materially and adversely affect the
Company's cash flow because (i) of the short time frame to pay for any SARs
exercised (between 15 and 30 days from the date notice is received by the
Company), and (ii) the payment owed could be a signiificant amount depending on
the number of SARs exercised and the then fair market value of the Company's
Common Stock.
The Company intends to submit a proposal to the Company's shareholders at the
1998 Annual Meeting of Shareholders to approve the issuance of more than 20% of
the outstanding Common Stock in connection with the MFSNT acquisition. If the
Company's shareholders approve such issuance (taking into account the issuances
pursuant to the Series B Offering, the WorldCom Equity Award, and the WorldCom
Options), as described below, the SAR grant automatically reverts back to the
WorldCom Option and the holder will have the right to purchase an aggregate of
2,000,000 shares of Common Stock at $7.00 per share through Januay 2, 2002.
As of January 26, 1999, approximately $30.0 million of principal and
approximately $1.4 million of accrued and unpaid interest were outstanding under
the WorldCom Note. The Company must repay the WorldCom Note in full on December
15, 2000. The WorldCom Note is dated September 1, 1998 and bears interest at
11.5% per year, payable every three months commencing February 28, 1999. The
principal amount of the WorldCom Note is to be prepaid in part by applying a
portion of certain fees (i) due to the Company by WorldCom and (ii) received by
the Company in connection with the sale and installation of certain conduit
projects. The Company pledged all of the shares of capital stock in MFSNT to
WorldCom and MFSCC to secure its obligations under the WorldCom Note. Other than
the pledge of the Company's stock in MFSNT, the obligations under the WorldCom
Note are junior to those under the Secured Credit Facility (as defined below)
and the Company's 12% Senior Subordinated Notes originally due January 6, 2005
(the "Senior Notes"). If the Company defaults on the obligations under the
WorldCom Note, it is expected that WorldCom will be able to do any or all of the
following:
/bullet/ Accelerate all principal and interest the Company owes
WorldCom under the WorldCom Note
/bullet/ Acquire all of the Company's stock in MFSNT
/bullet/ Keep all principal and interest the Company may have already
paid on the WorldCom Note
/bullet/ Require the Company to pay an 13.5% annual default rate of
interest as long as the Company is in default
/bullet/ Cause WorldCom Network to apply 12% of the payment WorldCom
Network owes the Company at the time of default under the
WorldCom Master Services Agreement, described below, to the
outstanding principal and interest under the WorldCom Note
In addition, if the Company, does not repay the WorldCom note in full by
December 15, 2000, it is anticipated that WorldCom also
3
<PAGE>
will be able to:
/bullet/ Reduce the minimum yearly and aggregate revenues the Company
would otherwise receive under the WorldCom Master Services
Agreement
/bullet/ Refuse to give the Company additional work under the WorldCom
Master Services Agreement while the Company is in default
As part of the MFSNT acquisition, the Company, WorldCom Network and MFSNT
entered into a Master Services Agreement, the "WorldCom Master Services
Agreement," pursuant to which the Company has agreed to provide
telecommunication infrastructure services to WorldCom Network on a cost-plus 12%
basis for a minimum of $40 million per year, and the aggregate sum payable to
the Company for the five-year contract is guaranteed to be no less than $325.0
million, subject to certain adjustments if the Company defaults on the WorldCom
Note. To achieve these established minimums, WorldCom Network has agreed to
award the Company at least 75% of all WorldCom Network's outside plant work
related to its local network projects up to $500 million and the Company has
agreed to accept and perform work orders from WorldCom Network for as much as
$130 million of services during each year of the five-year contract. The Company
has also agreed that WorldCom Network will have met all of its commitments to
the Company, to the extent that payments made to the Company reach an aggregate
of $500 million at any time during the five-year term of the contract.
Pursuant to the terms of the WorldCom Master Services Agreement, if the Company
is in default under the WorldCom Note, WorldCom Network will apply 12% of the
sums due from WorldCom Network to MFSNT toward partial prepayment of the
principal first and then to all other amounts owing under the WorldCom Note
until the it is paid in full. In addition, if the WorldCom Note is not paid in
full by December 15, 2000, WorldCom Network will not be obligated to execute
work orders and agreements for other work as provided for therein during the
period the WorldCom Note remains unpaid.
The Company is permitted to use the trade name "MFSNT" during the 18-month
transition period immediately following the MFSNT acquisition but will not be
entitled to use it after such 18-month period.
As part of the MFSNT Acquisition, the Company has agreed that MFSCC may
designate a representative to the Company's Board of Directors if it exercises
the WorldCom Option, as described below, for so long as MFSCC retains at least
5% of the Company's outstanding common stock, par value $.001 ("Common Stock").
4
<PAGE>
ACQUISITION OF PATTON MANAGEMENT CORPORATION. On April 1, 1998 the Company
purchased all of the outstanding common stock of Patton Management Corporation
("Patton") for approximately $4.0 million cash and the assumption of $3.6
million in debt which was repaid by the Company. Patton provides advanced
telecommunication network services to upgrade existing networks and to provide
connectivity to office buildings, local and wide area networks.
ACQUISITION OF COMSAT CONTRACTS. On February 25, 1998, the Company, through a
wholly owned subsidiary, GEC, acquired 12 contracts ("COMSAT Contracts") with
the Texas Department of Transportation from CRSI Acquisition Inc., a subsidiary
of COMSAT Corporation ("COMSAT"). The COMSAT Contracts are for the installation
of intelligent traffic management systems and the design and construction of
wireless communication networks. In exchange for assuming the obligations to
perform under the COMSAT Contracts, GEC received consideration from COMSAT of
approximately $15.0 million.
JOINT VENTURE WITH CLARION RESOURCES COMMUNICATION CORP. On September 23, 1997,
the Company entered into a five-year joint venture with Clarion Resources
Communication Corp. ("Clarion"). Clarion is principally owned by Telenor, the
telephone company of Norway. The Company has agreed with Clarion to jointly
market, manufacture and license its proprietary telephone call record and data
collection technology, called NeuroLAMA, in Europe and Asia. Clarion has agreed
to provide international sales force and to obtain suitable financing to
purchase and install NeuroLAMA. The venture will not require a capital
investment from the Company but should provide a stable royalty stream if the
venture is successful. No material progress has been made in implementing this
joint venture.
SENIOR NOTES
Effective January 6, 1998, the Company issued $10.0 million of unsecured 12
percent Senior Notes originally due January 6, 2005 with detachable warrants to
purchase 409,505 shares of common stock at a price of $8.25 per share, which
were valued at approximately $1.2 million. The agreement pursuant to which the
Senior Notes were issued, contains covenants which require, among other things,
that the Company maintain certain tangible net worth, minimum fixed charge
coverage and limitations on total debt and which limit the Company's ability to
pay dividends and make certain other payments, make investments and sell assets
or subsidiaries. At October 31, 1998, the Company was in violation of certain of
the covenants and other terms in the Senior Note agreement, the maturity date of
which had been reduced first to August 31, 1998 and subsequently to November 30,
1998. These Senior Notes were purchased from the holder of these notes
subsequent to October 31, 1998, which will be accounted for by the Company as a
redemption. See "Sale of Senior Notes and Series B Preferred Stock."
5
<PAGE>
SECURED CREDIT FACILITY. In June 1998, the Company replaced its previous bank
credit agreement with a new $35 million three year senior secured revolving
credit facility with a syndicate of lenders (the "Secured Credit Facility"). The
Secured Credit Facility has a letter of credit sublimit of $5 million. The
Company used a portion of the proceeds from the Secured Credit Facility to repay
the previous credit facility and to finance $10 million of the MFSNT acquisition
purchase price. On June 30, 1998, the Secured Credit Facility was amended to
permit (i) the Company's acquisition of MFSNT and the related financing of such
transaction, (ii) changes in financial covenants related thereto, and (iii)
other amendments relating to investments, pledging and intercompany matters.
The Company has granted a security interest in certain of its assets to the
lenders under the Secured Credit Facility, including:
/bullet/ All of the stock in its existing and future Restricted
Subsidiaries (as defined in the Pledge Agreement with respect
to the Secured Credit Facility); and
/bullet/ A pledge of all existing intercompany notes issued to any
Restricted Subsidiary by any of its subsidiaries
The Secured Credit Facility also includes covenants which, among other things,
restrict the Company's ability to:
/bullet/ Incur additional debt
/bullet/ Declare dividends or redeem or repurchase capital stock
/bullet/ Prepay, redeem or purchase debt
6
<PAGE>
/bullet/ Incur liens
/bullet/ Make loans and investments
/bullet/ Make capital expenditures
/bullet/ Engage in mergers, acquisitions and asset sales, and
/bullet/ Engage in transactions with affiliates.
The Company is also required to comply with financial covenants with respect to
certain minimum ratios, including debt covenants, interest, fixed charges and
current ratio.
The Company is in technical violation of certain provisions of the Secured
Credit Facility, including, without limitation, certain covenants related to the
delivery of financial statements and certain covenants which required consent
for the Company to enter into the September Agreement, issue the SAR to WorldCom
and enter into the related WorldCom Modification and engage in certain of the
transactions effected in connection with the third party's purchase of the
Senior Notes and the Series B Preferred Stock. The Company has received
waivers of all existing violations.
SERIES B PREFERRED STOCK
Effective June 30, 1998 (the "Closing"), the Company completed a private
offering (the "Offering") of 4,000 shares of $0.10 par value, nonvoting Series B
Convertible Preferred Stock (the "Series B Preferred Stock") which bear annual
dividends of 4 percent, and warrants to purchase 1,000,000 shares of the
Company's common stock at $19.80 per share for a period of five years from the
date of grant (the "Warrants"). Net proceeds from the Offering totaled $18.1
million. In general, the conversion amount of each share of Series B Preferred
Stock is convertible into shares of the Company's common stock commencing on
June 30, 1998, at 97 percent of the lesser of the (i) average of the low trading
prices for any three days during the twenty-two (22) trading days immediately
preceding the conversion date, or (ii) the low trading price on the day
immediately preceding the conversion date, subject to a minimum equal to 95
percent of such conversion price. The conversion amount of each share of Series
B Preferred Stock is equal to $5,000 plus any unpaid dividends thereon. Unless
waived by a holder on not less than 61 days prior written notice, no holder may
convert an amount which would result in such holders and its affiliates'
beneficial ownership exceeding 4.99 percent of the then outstanding common stock
of the Company.
Of the $18.1 million of proceeds, $5.4 million was assigned to the value of the
warrants and $12.7 million was assigned as the Series B Preferred Stock. The
warrants are exercisable for a five-year period commencing June 30, 1998. In
addition, approximately $7.9 million was assigned to the beneficial conversion
privilege and has been reflected as a reduction in income available to common
stock for the fiscal year ended October 31, 1998.
The Warrants, which are generally exercisable through June 30, 2003, may be
exercised, in whole or in part, on a "cashless" basis. Subject to certain
adjustments, the Company may, at its option, repurchase the Warrants at a
purchase price per share of (a) $35.00 multiplied by (b) the number of Warrant
shares remaining exercisable, subject to adjustment.
The Company granted the holders of the Series B Preferred Stock and the Warrants
(the "Series B Securities") certain rights to cause the Company to register the
Common Stock underlying the Series B Securities. Under certain circumstances,
including if the registration statement that includes the shares of common stock
to be issued upon conversion of the Series B Securities is not declared
effective by December 27, 1998, or if the Company is delisted under certain
circumstances from any securities exchange, or any representation or warranty
made by the Company to holders of the Series B Securities was not true, then the
holders of the Series B Securities, in whole or part, have the option to require
the Company to redeem their securities at premium prices. Furthermore, so long
as any of the Series B Securities is outstanding, the Company is prohibited from
declaring or paying any dividends (other than to holders of Series B Preferred
Stock) or purchasing any of the Company's equity securities.
The Company filed a registration statement with the Securities and Exchange
Commission on October 22, 1998 to register the common stock underlying the
Series B Securities. The Company was not able to have a registration statement
declared effective by December 27, 1998. The holders of the Series B Preferred
Stock subsequently notified the Company to redeem the shares of Preferred Stock.
As a result of discussion between the holders of the Series B Preferred Stock,
the Company and a third party, the redemption notice was deferred from time to
time and in connection with the sale of a portion of the Series B Preferred
Stock, has been withdrawn. To the extent the holders of the Series B Securities
again become entitled to exercise a redemption right and seek to require the
redemption of their shares, such exercise could materially increase the
Company's cash requirements, would likely result in a default under the terms of
the Secured Credit Facility and, to the extent replacement financing is not
available on commercially reasonable terms (if at all), would likely have a
material adverse impact on the Company.
On February 17, 1999, a related entity purchased an aggregate of approximately
78 percent of the currently outstanding Series B Preferred Stock. The purchaser
did not acquire the Series B Preferred Stock Warrants. See "Sale of Senior
Notes and Series B Preferred Stock."
As of October 31, 1998, 436 shares of the Series B Preferred Stock were
converted into 1,007,927 shares of common stock at a price of $2.17 per share.
SALE OF SENIOR NOTES AND SERIES B PREFERRED STOCK
Subsequent to October 31, 1998, WorldCom advanced the Company $32.0 million for
purposes of facilitating the purchase of 2,785 shares, or approximately 78
percent, of the Series B Preferred Stock and the purchase of the outstanding
$10.0 million principal amount of Senior Notes. The advance accrues interest at
11.5 percent and is repayable on the earlier of (i) October 31, 2000 or (ii) the
dates of redemption and/or conversion of the Series B Preferred Stock or the
Senior Subordinated Notes.
In connection with these transactions and as a result of the loan of the
WorldCom funds to the Purchaser, as explained below, the Company expects to
recognize an extraordinary loss in the second quarter of fiscal year 1999 on the
purchase of the Senior Notes of approximately $3.3 million and a reduction in
income applicable to common stock of approximately $10.0 million on the purchase
of the Series B Preferred Stock.
In addition, the Company agreed to modify the terms of the existing Series B
Preferred Stock conversion and warrant agreements, as explained below, which
will result in a reduction in income applicable to common stock of approximately
$6.0 million during the second quarter of fiscal year 1999.
WorldCom also agreed to make available additional advances to the Company of up
to $15.0 million against amounts otherwise payable pursuant to the WorldCom
Master Services Agreement. These additional advances accrue interest at 11.5
percent and are repayable to WorldCom on October 31, 2000.
The funds advanced by WorldCom were loaned by the Company to Cotton
Communications, Inc. (the "Purchaser"), which may be deemed an affiliate of the
Company, and on February 17, 1999, the holders of all of the Senior Notes and
the holders of 78 percent of the Series B Preferred Stock transferred their
holdings to the Purchaser. In connection with the transfer of the Senior Notes
and the Series B Preferred Stock, the Purchaser and the remaining holders of the
Series B Preferred Stock agreed to either waive all outstanding defaults under
such securities or refrain from exercising any remedies with respect to any such
outstanding defaults for a period of 90 days from February 17, 1999. During such
period of time, the Company has agreed to use its best efforts to have declared
effective a registration statement covering the resale of shares of common stock
underlying the Series B Preferred Stock and the Warrants.
The Purchaser also agreed (i) not to exercise any default remedy until March 1,
2000, (ii) to extend the maturity date of the Senior Notes until March 1, 2000
and (iii) to establish a floor conversion price of $8.25 per share applicable in
all circumstances for all shares of Series B Preferred Stock held by the
Purchaser. In exchange for these additional agreements, the Company agreed to
reduce the conversion price of any Warrants subsequently purchased by the
Purchaser from the current holders thereof upon such purchase to a price per
share equal to the lesser of: (i) 85 percent of the closing price of the
Company's common stock on the date prior to such purchase or (ii) a price per
share equal to such closing price minus $3.00.
In connection with the sale of the Series B Preferred Stock, the Company agreed
with the original holders thereof to certain modifications in the conversion
price of the related warrants. The conversion price of (i) warrants to purchase
a total of 375,000 shares of the Company's common stock has been reduced to
$13.25 per share and (ii) warrants to purchase a total of 625,000 shares of
common stock has been reduced to $13.50 per share.
SERVICES, MARKETS AND CUSTOMERS
The Company conducts three distinct types of business activities, two of which
are primarily conducted in the United States and one of which is conducted
abroad. Domestically, the Company provides telecommunication services and
traffic management services. Abroad, principally in Venezuela, the Company
conducts communication development activities. Each of these activities is
discussed in more detail below.
NETWORK SERVICES GROUP. The Network Services Group provides telecommunications
network services through two divisions: (i) the Telecommunications Systems
Integration division that provides general contracting services for large-scale
telecommunications projects, and (ii) the Telecommunications Construction
division that specializes in the construction of network projects or project
phases.
7
<PAGE>
The Company provides turn-key telecommunications infrastructure solutions
through the Telecommunications Systems Integration division. As a
telecommunications systems integrator, the Company provides "one-stop"
capabilities that include project development, procurement, design, engineering,
construction management, and on going maintenance and operations services for
telecommunications networks. The projects include the construction of fiber
networks that provide advanced digital voice, data and video communications and
wireless infrastructure deployment.
The Telecommunications Construction division provides construction and technical
services for building both outside plant and inside plant telecommunications
systems. Outside plant services are large-scale installation and maintenance of
coaxial and fiber optic cable (installed either aerially or underground) and
ancillary equipment for digital voice, data and video transmissions. These
installations are most often undertaken to upgrade or replace existing
communications networks. Inside plant services, also known as premise wiring,
include design, engineering, installation and integration of telecommunications
networks for voice, video and data inside customers' facilities. Additionally,
the Company provides maintenance and installation of electric utility grids and
water and sewer utilities. The Company provides outside plant telecommunications
services primarily under hourly and per unit basis contracts to local telephone
companies. The Company also provides these services to long distance telephone
companies, electric utility companies, local municipalities and cable television
multiple system operators.
Network Services Group accounted for 59%, 41% and 42% of the Company's
consolidated revenues during the fiscal years 1998, 1997 and 1996, respectively.
TRANSPORTATION SERVICES GROUP. Similar to the Telecommunications Systems
Integration division, the Transportation Services Group provides intelligent
transportation and traffic management services through two divisions: (i) the
Transportation Systems Integration division, that provides full-service general
contracting services for large-scale projects, and (ii) the Transportation
Construction division that specializes in the construction of network projects
phases.
The Transportation Systems Integration division provides "one-stop" electronic
toll and traffic management solutions for intelligent transportation system
infrastructure projects, including project development and management, design,
development, integration, installation, engineering, construction, and systems
operation and maintenance. Additionally, the Company developed proprietary
software and applications designed to support these systems. The electronic toll
and traffic management segment of the intelligent transportation system industry
uses technology to automate toll collection for bridges and highways allowing
for "non-stop" toll collection. Electronic toll and traffic management systems
use advanced scanning devices to identify a vehicle's type, combined with the
user's account information, as the vehicle passes a tolling station and
immediately debits the appropriate toll from the user's account. In addition,
significant support systems must be developed to maintain electronic toll and
traffic management accounts, and process violations. The Company developed
Automatic Vehicle Identification technology jointly with Texas Instruments and
used it in many of its electronic toll and traffic management projects. The
Transportation Systems Integration division markets its services to state and
local government transportation departments.
The Company's Transportation Construction division 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, develops, installs, maintains and
operates "intelligent highway" communications 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. 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. Traffic Management Group, Inc. accounted for 39%, 54% and 50%
of the Company's consolidated revenues during fiscal years 1998, 1997 and 1996,
respectively.
In October 1996, the Company placed Gerry W. 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. In June 1997, James B. Hall,
also a former owner of GEC, succeeded Gerry Hall as President of the Traffic
Management Group.
COMMUNICATIONS DEVELOPMENT GROUP. The Company's Communications Development Group
operates in Latin America, primarily Venezuela. These activities consist of
management of the joint venture arrangements, which were formed to provide
telecommunication installation and maintenance services to privatized local
phone companies. These joint ventures are in the form of subsidiaries in which
the Company has an 80% voting and ownership interest and a 50% share of profits
and losses. In 1996, the Company expanded its communication development
activities to include the marketing to Latin American telephone companies of
NeuroLAMA, an internally developed proprietary telephone call record and data
collection system. Significant capital expenditures will be required to install
NeuroLAMA in South America. During fiscal years 1998, 1997 and 1996, the
Company's Latin American operations accounted for 2%, 5% and 8% of the
Company's revenues on a consolidated basis, respectively.
8
<PAGE>
Certain risks are inherent in international operations, including exposure to
currency fluctuations, the imposition of government controls, restrictions on
the export of critical technology, political and economic instability, trade
restrictions, changes in tariffs, taxes and freight rates, generally longer
payment cycles, difficulties in staffing and managing international operations
and general economic conditions. From time to time in the past, the Company's
financial results have been affected both favorably and unfavorably by
fluctuations in currency exchange rates. Unfavorable fluctuations in currency
exchange rates could have an adverse impact on the Company's revenues and
operating results.
9
<PAGE>
INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION
The Company currently operates primarily in two industry segments:
network services and transportation services. Transportation services
are conducted primarily in the United States with small projects in
South America, Canada, and Asia while telecommunication network services
are conducted both in the United States and Latin America. Revenues,
income (loss) 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 (in
thousands).
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS 1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Transportation services $ 84,022 $46,795 $22,661
Network services 133,459 39,539 26,245
-------- ------- -------
Total $217,481 $86,334 $48,906
======== ======= =======
Income (loss) from operations:
Transportation services $ 8,220 $3,772 $(3,454)
Network services 3,189 1,069 (2,833)
-------- ------- -------
Total $ 11,409 $4,841 $(6,287)
======== ======= =======
Identifiable assets:
Transportation services $ 88,340 $28,884 $25,099
Network services 202,420 21,462 13,820
-------- ------- -------
Total $290,760 $50,346 $38,919
======== ======= =======
Capital expenditures:
Transportation services $ 3,238 $1,635 $1,275
Network services 6,728 2,852 2,216
-------- ------- ------
Total $ 9,966 $4,487 $3,491
======== ====== ======
Depreciation and amortization:
Transportation services $ 2,824 $1,710 $1,229
Network services 4,776 2,822 1,521
-------- ------- ------
Total $ 7,600 $4,532 $2,750
======== ====== ======
GEOGRAPHIC AREAS
Revenues:
United States $212,152 $82,171 $45,160
Latin America 5,329 4,163 3,746
-------- ------- -------
Total $217,481 $86,334 $48,906
======== ======= =======
Income (loss) from operations:
United States $ 11,310 $ 4,824 $(2,073)
Latin America 99 17 (4,214)
-------- ------- --------
Total $ 11,409 $ 4,841 $(6,287)
======== ======= ========
Identifiable assets:
United States $287,569 $47,781 $36,410
Latin America 3,191 2,565 2,509
-------- ------- -------
Total $290,760 $50,346 $38,919
======== ======= =======
</TABLE>
10
<PAGE>
SIGNIFICANT CUSTOMERS
The Company derives a significant portion of its revenues from a few large
customers. The percentage of revenues derived from the Company's largest
customers are presented as follows:
31-OCT-98
1996 1997 1998
---- ---- ----
Cooper Tire --% 15% 6%
Florida Department of Transportation 12 6 2
BellSouth -- 12 8
United Telephone of Florida 20 9 2
Florida Power Corp. 13 7 4
WorldCom -- -- 14
11
<PAGE>
CONTRACTS
The Company has and will continue to execute various construction and other
contracts which may require the Company to, among other items, maintain specific
financial parameters, meet specific milestones and post adequate collateral
generally in the form of performance bonds. Failure by the Company to meet its
obligation under these contracts may result in the loss of the contract and
subject the Company to litigation and various claims, including liquidated
damages.
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 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.
The Company derived approximately 29% of its total revenues for the fiscal year
ended October 31, 1998 from contracts with state and local governments. No
individual government customer accounted for more than 6% of the Company's total
consolidated revenues. Government business is, in general, subject to special
risks, such as delays in funding, termination of contracts or subcontracts for
the convenience of the government or for the default by a contractor, reduction
or modification or contracts or subcontracts, changes in governmental policies,
and the imposition of budgetary constraints. The Company's contracts with
governmental agencies provide specifically that such contracts are cancelable
for the convenience of the government. Historically, the Company has not
experienced cancellations or renegotiations of its contracts in any material
amounts.
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 31, 1999, the Company
has one contract for which it is subject to liquidated damages at a rate of
$25,000 per day associated with obtaining an extension of time for completing a
phase of the project. Company management anticipates that this default will be
cured no later than March 31, 1999, resulting in total liquidated damages
associated with the violation of approximately $1.5 million.
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 guard
railing. 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.
12
<PAGE>
COMPETITION
NETWORK SERVICES GROUP. The Telecommunications Systems Integration division of
the Network Services Group competes for business in two segments: the
traditional request for proposal ("RFP")/bid based segment for the installation
and integration of infrastructure projects and a less traditional "project
development" segment. The Company's largest competitors in the traditional
RFP/bid based segment are telecommunications service providers. The
Telecommunications Systems Integration division has identified and pursued the
"project development" segment as a "niche" market for its services, providing
network alternatives to large public agencies, utilities and telecommunications
service providers through the use of public-private memberships and other
financing models unique to the industry. These customers often must choose
between building their own networks or using an existing telecommunication
service provider's network. Once a customer has decided to build its own
network, the Company assists the customer in preparing a viable and customized
project business plan that addresses the customer's specific telecommunications
needs, including budgetary and other concerns. The Company also has focused on
"project development" opportunities presenting ownership or participation
opportunities that can generate recurring revenues. The Company believes that no
other company presently provides these kind of complete, turnkey project
development services for these customers. There can, however, be no assurance
that other systems integration companies will not develop the expertise,
experience and resources to provide services that achieve greater market
acceptance or that are superior in both price and quality to the Company's
services, or that it will be able to maintain its competitive position.
The Telecommunications Construction division competes for business with several
competitors on a much larger scale. In addition, the Telecommunications
Construction division also competes in a market characterized by a large number
of smaller size private companies that compete for business generally in a
limited geographic area or with few principal customers. The Telecommunications
Construction division's largest competitors are MasTec, Inc. and Dycom, Inc.
TRANSPORTATION SERVICES GROUP. The Transportation Systems Integration division
believes its major competitors in the North American market are Lockheed
Information Management Co., a division of Lockheed Martin, and Syntonic
Technology, Inc., doing business as Transcore ("Transcore"), a division of SAIC
Corporation.
The market in which the Transportation Construction division competes is
characterized by large competitors who meet the experience, bonding and
licensure requirements for larger projects and by small private companies
competing for projects of $3 million or less in limited geographic areas. The
Transportation Construction division's large competitors include Lockheed
Martin, Traffic Control Devices of Florida and MasTec, Inc. The Transportation
Construction division's smaller competitors are High Power of Florida, MICA
Corporation of Texas and Fishback & Moore.
COMMUNICATION DEVELOPMENT GROUP. The Communications Development Group competes
for business in the international market, primarily in Latin America. Presently,
the operations of Communications Development Group are in Venezuela and Brazil.
In Venezuela, the market is characterized by a single customer, CANTV, the
telephone company of Venezuela, and a large number of smaller sized private
companies that compete for business generally in a limited geographic area. In
Brazil, the market consists of a myriad of smaller companies competing for a
growing but limited market, which forces margins down. There are also several
products similar to the NeuroLAMA call data collection system for billing
purposes, which compete for the very large analog market, although the Company
is not aware of any that can produce the same results.
BACKLOG
As of January 31, 1999, backlog was approximately $1.0 billion, approximately
31% of which was attributable to WorldCom Network. The Company expects to
complete approximately 45% of the total backlog within the next fiscal year. Due
to the nature of the Company's contractual commitments, in many instances its
customers do not commit to the volume of services to be purchased under the
contract, but rather commit the Company to perform these services if requested
by the customer and commit to obtain these services from it if they are not
performed internally. Many of the contracts are multi-year agreements, and the
Company includes the full amount of services projected to be performed over the
life of the contract in backlog due to its historical relationships with its
customers and experience in the procurements of this nature. Contract backlog of
$549 million is under performance bonds and the Company may be subject to
liquidated damages for failure to perform in a timely manner. The Company's
backlog may fluctuate and does not necessarily indicate the amount of future
sales. A substantial amount of its order backlog can be canceled at any time
without penalty, except, in some cases, the Company can recover actual committed
costs and profit on work performed up to the date of cancellation. Cancellations
of pending purchase orders or termination or reductions of purchase orders in
progress from its customers could have a material adverse effect on its
business, operating results and financial condition. In addition, there can be
no assurance as to the customer's requirements during a particular period or
that such estimates at any point in time are accurate.
13
<PAGE>
RESEARCH AND DEVELOPMENT; PROPRIETARY TECHNOLOGY AND RIGHTS
The Company acquired proprietary software from MFSNT in the MFSNT Acquisition
including applications at the lane, plaza, host, and customer service center
levels within a sophisticated electronic toll collection system architecture.
Prior to the MFSNT Acquisition, MFSNT had also developed a proprietary video and
data multiplexing system used for surveillance, monitoring, and system audit
purposes. The benefits of this proprietary software include reduced operating
costs, non-stop tolling, reduce traffic congestion, efficient traffic
management, and increase revenue accountability.
LANE SYSTEM APPLICATIONS. The lane system application is designed to be modular
in nature to allow and accommodate tolling operations in various configurations
in accordance with a customer's specific needs and operational requirements. The
lane controller application is the heart of the lane system. It runs on a
standard PC and under a real-time operating environment. The lane controller
controls the various in-lane equipment items and gathers data from the in-lane
sensors to provide transaction records for each vehicle that travels through a
toll lane. The lane controller coordinates and controls revenue collection
events and transactions. The lane controller also interacts with and can
recognize individual vehicles as well as cars that evade toll collection. The
transaction data created at the lane level is sent to the plaza computer system
for further processing. The lane controller also has the unique capability of
operating in a completely autonomous mode if communications to the plaza system
are disrupted.
PLAZA SYSTEM APPLICATIONS. The plaza system is the central repository of the
transaction data received from each toll lane. The data is stored in a
relational database and is then used for reporting and tracking purposes.
Traffic reports, revenue reports, and collector performance reports are among
several reports that can be generated from the plaza system. A real-time plaza
supervisor system allows client personnel to monitor traffic and collection
events (as well as equipment and security status) as each event actually occurs.
The data received at the lane plaza system level is forwarded to the host system
for further processing and review.
HOST SYSTEM APPLICATIONS. The primary role of the host application is to provide
the client with the capability to generate system-wide reports for traffic and
revenue, as well as audit and reconciliation capabilities. The host system also
acts as the primary interface to the customer service center ("CSC") system and
is the "conduit" for electronic toll transactions and patron account
information. The host application also controls the download of information to
the plaza and lane systems, such as toll schedules, employee identification
information, patron account status, time synchronization, and other information
required for daily operation of the system.
CSC SYSTEM APPLICATIONS AND SERVICES. The Company provides numerous CSC systems
and services, including hardware and software system applications and CSC
staffing, operations and management. The CSC application is highly reliable and
robust, user friendly, efficient and fully auditable software application. The
system incorporates automated internal controls for audit and reconciliation
purposes and also employs a flexible design to accommodate potential changes to
customer policies, procedures, and/or operations.
VIDEO TRANSPORTATION DATA MULTIPLEXER ("VTDM") PRODUCT. The VTDM system is a
patented product that compiles video and data based records for every vehicle
that travels through a monitored lane. The VTDM provides auditors, toll
supervisors and other Customer personnel with the unique capability to record,
review, and analyze lane event data in an efficient and cost-effective manner.
This system can also be used for problem resolution relating to system and/or
toll collector performance. The VTDM system provides information (lane event
data) in the form of video and transaction event text (text-over-video display).
Cameras and VCRs are used to visually record lane activity on a 24-hour basis.
The Company has spent an aggregate of approximately $1.0 million on research and
development activities during the prior three fiscal years, primarily in
connection with its development of NeuroLAMA. Management believes that the
acquisition of MFSNT will result in an increase in the Company's future research
and development expenditures.
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 the Company's
operations primarily in the southern United States.
EMPLOYEES
At January 31, 1999, the Company and its subsidiaries had approximately 2,200
employees. 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.
14
<PAGE>
PROPERTIES
The Company's corporate offices are in West Palm Beach, Florida, where it
occupies 5,110 square feet under a lease that expires January 31, 2004. The
Company leases 33,571 square feet of office space in Omaha, Nebraska under a
lease that expires September 30, 1999, and which houses MFSNT's network
operations, and 40,111 square feet in Mt. Laurel, New Jersey under a lease that
expires February 28, 2003 and which houses MFSNT's transportation operations.
The Company leases 6,400 square feet of space in Fairbanks, Alaska for a network
operations center. The Company leases 6,800 square feet of space in Fort
Lauderdale, Florida under a lease, which expires September 30, 2003, which
facility houses the Company's corporate accounting offices and the general and
administrative offices for the Network Services Group. The Company leases
several field offices and numerous smaller offices. The Company also leases on a
short-term or cancelable basis temporary equipment yards or storage locations in
various areas as necessary to enable it to efficiently perform its service
contracts.
The Company owns (subject to a mortgage) and operates a 10,000 square foot
facility for operations based in Chesapeake, Virginia. The Company's Venezuelan
subsidiaries own and operate from a 33,000 square foot floor of an office
building located in Caracas, Venezuela, and lease an additional 50,000 square
feet of covered parking and shop facilities. The Company also owns a 15,000
square foot facility located on approximately three acres of land for operations
in Tampa, Florida.
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 had and is not expected to have a material effect upon the
Company's financial position.
LEGAL PROCEEDINGS
On May 21, 1998 SIRIT Technologies, Inc., ("SIRIT") filed a lawsuit in the
United States District Court for the Southern District of Florida, against the
Company and Thomas M. Davidson, who has since become a member of the Company's
Board of Directors. SIRIT asserts claims against the Company for tortuous
interference, fradulent inducement, negligent misrepresentation and breach of
contract in connection with the Company's agreement to purchase the shares of
MFSNT and seeks injunction relief and compensatory damages in excess of $100.0
million. At present, the parties are conducting discovery in this case. The
Company is vigorously defending the action and will continue to do so. The
Company does not believe that SIRIT's claims are well-founded.
On or about September 10, 1998, Shipping Financial Services Corp. ("SFSC") filed
a lawsuit in the United States District Court for the Southern District of
Florida against the Company, and former officers Gideon Taylor, Frazier L.
Gaines, Jesus Dominguez, and Mark A. Shain (collectively, the "Defendants"). At
or near that time, five additional plaintiffs filed substantially similar
lawsuits. By order dated December 30, 1998, all of these cases have been
consolidated with the SFCS case. Plaintiffs have not yet filed their
consolidated amended complaint. The Company expects the consolidated amended
complaint will be substantially similar to that filed by SFCS, and will assert
claims under the Federal Securities Laws against the Company and certain of its
former officers alleging that the Defendants caused the Company to falsely
represent and mislead the public with respect to two acquisitions, COMSAT and
MFSNT, and the ongoing financial condition of the Company as a result of the
acquisitions and the related financing of those acquisitions. Additionally,
plaintiffs are expected to seek certification of a class action on behalf of all
similarly situated investors and seek unspecified damages and attorneys' fees.
Management is currently assessing the allegations set forth in the lawsuits and
the Company intends to vigorously defend this matter.
The Company is aware that an additional shareholder lawsuit has been filed. To
date, this lawsuit has not been served on the Defendants. The allegations in
this lawsuit appear to be based on the same facts and circumstances as those
set forth in the SFCS lawsuit. The Company is currently assessing the
allegations in this lawsuit and intends to defend this matter vigorously when
and if the Defendants are served.
The Company is subject to a number of shareholder and other lawsuits and claims
for various amounts which arise out of the normal course of its business. The
Company intends to vigorously defend itself in these matters. The disposition of
all pending lawsuits and claims is not determinable and may have a material
adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year covered by this report, no matters were
submitted to a vote of the Company's security holders.
15
<PAGE>
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 two
fiscal years as reported by NASDAQ.
FISCAL QUARTER: 1998 1997
HIGH LOW HIGH LOW
First Quarter 9 13/16 9 5/8 9 5/8 7 3/8
Second Quarter 12 7/16 7 5/16 8 3/4 7 3/8
Third Quarter 20 5/16 9 3/8 9 7 3/8
Fourth Quarter 10 5/8 1 3/4 10 5/8 7 9/16
At February 19, 1999, there were approximately 400 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. The terms of the Company's Series B Preferred Stock and
the Secured Credit Facility restrict the payment of cash dividends on the
Company's Common Stock.
SERIES A CONVERTIBLE PREFERRED STOCK CONVERSIONS. During the year ended October
31, 1998, the Company received conversion notices from the holders of the
Company's Series A Preferred Stock and converted 995 Series A Preferred Shares,
as defined below, into 920,946 shares of Common Stock. In addition, 30,000
warrants related to the Series A Preferred Stock were exercised during the year
ended October 31, 1998. In each case, the issuance of the common stock was
undertaken upon conversion of Series A Preferred Stock then held by the
purchaser and was issued pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933. The resale of such common stock by
the purchaser is registered on a Registration Statement of Form S-3 (No.
333-22105).
The Series A Preferred Stock that was converted, as set forth above, was issued
on December 20, 1996 in a private placement transaction (the "Private
Placement"), exempt from registration, pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act") for a total of 1,000 shares (the
"Series A Preferred Shares") of the Company's Series A Preferred Stock, par
value $.10 per share. In connection with the Private Placement, the Company also
issued warrants totaling 200,000 shares of the Company's Common Stock (the
"Warrants"). The number of shares purchasable pursuant to the Warrants was
subsequently reduced pursuant to its terms to an aggregate of 62,000 shares at
October 31, 1998. The purchasers paid the Company $6.0 million for the Series A
Preferred Shares and the Warrants. The Private Placement was effected pursuant
to a Series A Preferred Stock Agreement by and among the purchasers and the
Company dated December 20, 1996 (the "Agreement"). The Warrants became
exercisable on December 20, 1997. No Series A Preferred Shares remain
outstanding following the conversions effected during fiscal 1998.
The Warrants are exercisable at a purchase price per share equal to $9.82;
provided, however, if there is an effective registration statement covering the
shares issuable upon the exercise of the Warrants, the purchasers may exercise
the Warrants in whole or in part in exchange for the number of shares of Common
Stock equal to the product of (i) the number of shares as to which the Warrants
are being exercised multiplied by (ii) a fraction, the numerator of which is the
"Market Price" (as defined in the Warrants) less $9.82, and the denominator of
which is the Market Price.
SERIES B CONVERTIBLE PREFERRED STOCK CONVERSIONS. During the fiscal year ended
October 31, 1998, the Company received conversion notices from certain holders
of the Company's Series B Preferred Stock to convert an aggregate of 436 shares
of Series B Preferred Stock. In connection with the conversion of such shares,
the Company issued an aggregate 1,007,927 shares of Common Stock, pursuant to an
exemption from registration under Section 4(2) of the Act. The conversion price
per share of Series B Preferred Stock was approximately $2.18. The shares of
Series B Preferred Stock were converted between September 14, 1998 and October
2, 1998.
Pursuant to the original terms of the Series B Offering, holders of the Series B
Preferred Stock have the right to convert their shares at any time into shares
of Common Stock at a conversion rate equal to 97% of the "market value" of the
Common Stock (the "Conversion Rate"). However, each holder of the Series B
Preferred Stock has agreed that it will convert its shares of Series B Preferred
Stock into Common Stock only to the extent that, after the conversion, the
holder and its affiliates would beneficially own 4.99% or less of the Common
Stock. This limitation may be waived, however, upon 61 days prior written
notice, at which time the Company may be required to seek shareholder approval
to issue additional shares of Common Stock, as required by certain rules and
regulations, including The Nasdaq Stock Market, Inc. Marketplace Rule 4460(i).
For these purposes, "market value" equals the lesser of: (i) the average of the
lowest intraday trading price of the Common Stock for any three trading days
within the 22 trading days prior to the
16
<PAGE>
date of conversion; or (ii) the lowest intraday trading price of the Common
Stock on the trading day immediately prior to the date of conversion; however,
this latter amount cannot be less than 95% of the lowest intraday trading price
of the Common Stock on the date of conversion. The Conversion Rate may be
further reduced to the extent the Company does not meet certain requirements or
is in default of certain terms of the agreements evidencing the Series B
Offering. See "Item 1. Business - Series B Preferred Stock and - Sale of Senior
Notes and Series B Preferred Stock."
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, 1998 which has been derived
from the audited consolidated financial statements of the Company and its
subsidiaries. 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 share and per share amounts)
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Revenues $217,481 $86,334 $48,906 $35,408 $25,784
Net income (loss) 2,514 2,857 (5,910) (281) 946
Average shares outstanding 9,907 8,505 8,361 8,284 7,736
Income (loss) per share
from operations - basic and diluted (.59) .16 (.71) (.03) .12
Current assets 185,822 27,010 21,449 18,573 18,635
Current liabilities 160,434 12,969 17,155 11,175 9,942
Property and equipment, net 32,074 13,114 10,667 6,120 5,314
Total assets 290,760 50,346 38,919 32,482 36,604
Long-term debt 91,094 17,294 10,115 5,255 8,293
Shareholders equity 40,217 15,247 11,598 17,467 15,832
</TABLE>
17
<PAGE>
PART II
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, 1998.
This information should be read in conjunction with the Company's Consolidated
Financial Statements appearing elsewhere in this document.
OVERVIEW
The Company specializes in the design, installation, maintenance, and system
integration services for advanced voice, data and video communication networks
which includes services within the telecommunication infrastructure, traffic
management systems, automated manufacturing systems and utility network areas.
Currently, the Company conducts business through three operating groups: The
Network Services Group, The Transportation Services Group, and The
Communications Development Group.
The Company was originally incorporated in 1987 as "Delta Venture Fund, Inc."
and changed its name to Able Telcom Holding Corp. in 1989. From 1992 to 1994,
the majority of the Company's operations were in the Venezuelan
telecommunications business. Beginning in 1994, the Company began expanding its
operations in other industries by implementing a plan of growth through
acquisition. This plan is ongoing and has resulted in several acquisitions over
the past four years. These acquisitions include operations relating to the
installation and maintenance of traffic control signage, signalization and
lighting systems, performance of outside plant telecommunication and electrical
power services, the installation, testing and maintenance of intelligent highway
and communication systems, as well as the erection of towers for wireless and
cellular service providers.
The following table sets forth, for the years ended October 31, selected
elements of the Company's condensed consolidated statements of operations as a
percentage of its revenues:
YEAR ENDED OCTOBER 31,
1998 1997 1996
---- ---- ----
Revenues: 100.00% 100.00% 100.00%
Cost of revenues........................ 82.54 78.95 82.78
General and administrative.............. 8.59 10.17 17.18
Depreciation and amortization........... 3.49 5.25 5.62
Income (loss) from operations........... 5.25 5.60 (12.85)
Other expenses, net..................... 2.24 1.12 2.27
Net income (loss)....................... 1.16 3.31 (12.08)
The Company's results of operations reflect the operating results of
MFSNT and other acquired businesses only from the respective dates of
acquisition. Accordingly, the Company's results are not necessarily comparable
on a period-to-period basis. As a result of these acquisitions, the results of
Latin American operations for the fiscal year ended October 31, 1998 are no
longer significant to the consolidated results of operations.
<PAGE>
FISCAL YEAR ENDED OCTOBER 31, 1998 COMPARED WITH FISCAL YEAR ENDED
OCTOBER 31, 1997.
RESULTS OF OPERATIONS. The following discussion and analysis relates to the
financial condition and results of operations of the Company for the fiscal
years ended October 31, 1998 and 1997. This information should be read in
conjunction with the Company's condensed consolidated financial statements
appearing elsewhere in this document.
REVENUES. For the fiscal year ended December 31, 1998 revenues increased $131.2
million, from $86.3 million through October 31, 1997 to $217.5 million, for the
fiscal year ended October 31, 1998. This increase in revenues is due primarily
to growth in the Company's operations through the acquisition of MFSNT in the
third quarter and the acquisition of Patton and the COMSAT Contracts in the
second quarter of fiscal 1998, as well as increased demands for services in the
traffic management and telecommunications industry. For the fiscal year ended
October 31, 1998, revenues increased approximately $87.0 million, $17.6 million
and $17.4 million related to the acquisition of MFSNT, COMSAT and Patton
respectively.
COST OF REVENUES. For the fiscal year ended October 31, 1998 and 1997, cost of
revenues as a percentage of revenues increased from 78.95% to 82.54%. The
increase was due to increased costs related to the Network Services Group
resulting from tighter margins and competition in the telecommunications
industry, as well as inclement weather which restricted some work during the
winter months and extended completion dates into later periods, offset by
decreased costs as a result of COMSAT Contracts included in the Transportation
Services Group's operations.
GENERAL AND ADMINISTRATIVE EXPENSES. For the fiscal year ended October 31, 1998
general and administrative expenses were $18.7 million, an increase of $9.9
million over the same period in the prior year. This increase was due to the
overall increase in the management structure at the corporate level, as well as
the division offices, necessary to support the Company's increased revenue in
accordance with the Company's strategic objective of growth through acquisition,
and an increase in costs resulting from the acquisition of MFSNT. For the fiscal
year ended October 31, 1998, general and administrative expenses relating to the
operations of MFSNT were approximately $5.1 million.
DEPRECIATION AND AMORTIZATION. For the fiscal year period ended October 31,
1998, depreciation and amortization expense as a percentage of revenue decreased
from 5.25% to 3.49% as compared to the same period in 1997. This decrease as a
percentage of revenue, is due to the significant increase in revenues which did
not require the same percentage increase in capital assets to support the
operations of the Company.
INCOME FROM OPERATIONS. For the fiscal year ended October 31, 1998, income from
operations was $11.4 million compared to $4.8 million for the same period in the
prior year, primarily as a result of the Company's growth through acquisitions.
OTHER EXPENSE, NET. Other expense net increased by $3.9 million to $4.9 million
for the fiscal year ended October 31, 1998 as compared to $1.0 million for the
comparable period in 1997. This increase is due primarily to increased interest
costs related to the acquisition of MFSNT. Other expense, net was also impacted
by non-cash charges associated with stock options granted below market prices,
and amortization of loan costs associated with the Secured Credit Facility.
Income taxes increased from $0.7 million in fiscal 1997 to $3.4 million in
fiscal 1998. This increase is due to increased income from operations, state
taxes provided in the State of Georgia, and the write-off of foreign tax
credits.
<PAGE>
NET INCOME. For the fiscal year ended October 31, 1998, net income was $2.5
million compared to net income of $2.9 million for the comparable period in 1997
for the reasons described above. For the year ended October 31, 1998, the loss
applicable to common stock of $(5.8) million, or $(0.59) per share, is a result
of an $8.0 million charge associated with the beneficial conversion privileges
on the Series B Preferred Stock, other non-recurring adjustments associated with
the Company's obtaining financing for a portion of the purchase price of MFSNT
and preferred stock dividends. For the year ended October 31, 1997, income
applicable to common stock was $1.3 million, or $0.16 per share.
FISCAL YEAR ENDED OCTOBER 31, 1997 COMPARED TO FISCAL YEAR ENDED OCTOBER 31,
1996.
REVENUES. Revenues for the year ended October 31, 1997 increased $37.4 million
over the year prior period, from $48.9 million to $86.3 million, an increase of
76.5%. The acquisition of Georgia Electric Company ("GEC") in October 1996 and
Dial Communications, Inc. ("Dial") in December 1996 accounted for approximately
$35.0 million of the revenue increase between the 1996 and 1997 fiscal years.
The remaining increases in revenue for fiscal year 1997 over fiscal year 1996
were generated from increased demand for services from the other subsidiaries.
Revenue for Latin American operations totaled $4.2 million and $3.7 million in
the years ended October 31, 1997 and 1996, respectively.
COSTS OF REVENUES. Costs of revenues increased $27.7 million, from $40.5 million
for the 1996 fiscal year to $68.2 million for the 1997 fiscal year. Costs of
revenues as a percentage of revenues decreased from 82.8% in 1996 to 78.9% in
1997. The assimilation of GEC and Dial accounted for approximately $27.4 million
of the increase in costs of revenues. The increase in gross margin from 17.2% in
1996 to 21.1% in 1997 is due primarily to the increase in profitability in the
transportation services industry as a result of measures implemented during
fiscal year 1997 to improve labor productivity, control costs, and generate
other operational efficiencies as well as the assimilation of GEC. Costs of
revenues for Latin American operations totaled $2.2 million and $2.1 million in
1997 and 1996, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
year ended October 31, 1997, were $8.8 million, or 10.2% of revenues, compared
to $8.4 million, or 17.2% of revenues, in 1996. The increase in general and
administrative expenses for the fiscal year 1997 can be attributed to the
assimilation of GEC and Dial which accounted for $1.0 million and $1.5 million,
respectively, of the total increase for 1997. This increase was partially offset
by a decline in general and administrative expenses from the implementation of
cost cutting and containment strategies at the subsidiary level. These expense
totals represent a significant decline as a percentage of revenues from prior
years as a result of the Company's efforts to enhance financial controls and the
implementation of its cost-containment program. General and administrative
expenses for Latin America were $1.3 million and $1.6 million in 1997 and 1996,
respectively.
<PAGE>
In 1997 and 1996, the Company incurred approximately $.2 million and $1.1
million, respectively, of start-up and marketing costs related to NeuroLAMA,
Able's proprietary telephone call data and billing system, with no corresponding
revenues. These amounts have been included in general and administrative
expenses for both 1997 and 1996. There can be no assurance that the Company will
generate sufficient revenues from this business to offset its start up costs.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expense was
$4.5 million for the year ended October 31, 1997, or 5.2% of revenues, compared
to $2.7 million or 5.6% of revenues for 1996. The GEC and Dial acquisitions
accounted for $.6 million and $.8 million, respectively, of the total increase
in depreciation and amortization expense for 1997. The remaining increase
resulted from the continuing improvement and updating of the Company's
equipment. Depreciation and amortization expense relating to Latin American
operations totaled approximately $.5 million in both 1997 and 1996.
INTEREST EXPENSE. Interest expense was $1.6 million for 1997, or 1.8% of
revenues, compared to $1.4 million, or 2.8% of revenues, for 1996. This increase
in interest expense is a result of acquisition-related debt and the financing of
equipment purchases, which was partially offset by the payment of debt with the
proceeds from the issuance of the Series A Preferred Stock.
OTHER (INCOME) EXPENSE, NET. Other (income) expense, net decreased to $1.0
million in 1997 from $1.1 million in 1996. These changes reflect the $.3 million
non-cash charge for compensation recognized on stock options granted to certain
officers and directors at a discount to market during the year ended October 31,
1997. Additional income and expense items for fiscal year 1997 include a
reduction in reserves for settlement of litigation of $.5 million and interest
and dividend income of $.4 million.
NET INCOME. The Company reported a net income of $2.9 million, or $.34 per share
of Common Stock for both basic and diluted, for the year ended October 31, 1997,
compared to a net loss of $5.9 million, or a loss of $.71 per share of Common
Stock for both basic and diluted for 1996, before taking into account the
non-cash charge for a discounted conversion feature associated with the Series A
Preferred Stock (the "Accretive Dividend"). For fiscal 1997, the Accretive
Dividend was $1.3 million which resulted in income applicable to common stock of
$1.3 million, or $.16 per share of common stock for both basic and diluted.
The increase in net income for the fiscal year ended October 31, 1997, compared
to the previous year is due to the assimilation of GEC, the continued
improvement in margins within the Transportation Services Group, and the
improvement in margins within the Latin American operations coupled with a
reduction in special charges relating to these operations.
Revenues and net income (loss) from the Company's international operating
subsidiaries are presented below for the fiscal years ended October 31, 1997,
and 1996. These figures exclude costs associated with the continued marketing
and development cost of NeuroLAMA and general and administrative costs of the
international management group.
LATIN AMERICAN OPERATIONS. For the year ended October 31, 1997, Able's net
income from Latin American operations increased by $3.5 million over the year
ended October 31, 1996. In 1996, the Latin American operations incurred losses
of $2.8 million relating to the write-down of goodwill and other assets.
Additionally, costs associated with marketing NeuroLAMA decreased from $1.1
million in 1996 to $.2 million in 1997.
For the year ended October 31, 1997, Latin American revenues increased $.5
million as compared to the year ended October 31, 1996. Revenues generated by
the Company's Venezuelan operations are largely dependent upon one customer. In
the fiscal year ended October 31, 1997, the Company's Venezuelan operations were
expanded to include a reclamation project that was responsible for approximately
$1.0 million of the increase in revenues which was offset by a decrease in
activity under the existing contracts in Latin America.
Revenues and net income (loss) pertaining to Latin American operations are
presented below for the years ended October 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------- ---------------
<S> <C> <C>
Revenues ................... $4,163,317 $ 3,745,858
Net income (loss) .......... 16,556 (3,628,503)
</TABLE>
The Company's net assets of Latin American subsidiaries totaled $2.6 million and
$2.1 million at October 31, 1997 and 1996, respectively. In addition, the
Company's net equity in Latin American operations totaled $1.8 million and $1.6
million at October 31, 1997 and 1996, respectively.
<PAGE>
The foreign currency translation and transaction losses improved during fiscal
year 1997. The stabilization of the Venezuelan Bolivar resulted in a decrease in
foreign currency losses of $.9 million for the fiscal year ended October 31,
1997, as compared to 1996.
INCOME TAXES. Income tax expense (benefit) for the year ended October 31, 1997
and 1996, differs from the amounts that would result from applying federal and
state statutory tax rates to pre-tax income (loss) primarily due to
non-deductible goodwill and losses from foreign operations.
MINORITY INTEREST. Minority interest represents a shareholder's 50% interest in
the earnings of the Company's Venezuelan corporations for the fiscal year ended
October 31, 1997. For fiscal year 1996, losses were allocated to minority
interest to the extent of its invested capital.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1998, cash and cash equivalents totaled $13.5 million, which
represents an increase of approximately $7.3 million from October 31, 1997. Cash
provided by operating activities of approximately $6.9 million is a result of
net income of $2.5 million, increased primarily by non-cash charges relating to
depreciation, amortization, deferred income taxes and minority interest of
approximately $8.9 million, decreases in receivables, inventory, other current
assets and other assets of approximately $6.3 million and increases in accounts
payable, accrued expenses, billings in excess of costs and estimated profits on
uncommitted contracts and other liabilities of approximately $5.6 million due to
the reduction of cash payments associated with operations, offset by an increase
in costs and profit in excess of billings on uncompleted contracts related to
work acquired in connection with the MFSNT acquisition of approximately $17.0
million.
Cash used in investing activities of $14.0 million is due to capital
expenditures of approximately $10.0 million made in order to support increased
operations as well as the replacement of existing equipment and approximately
$4.0 million in net expenditures for the acquisitions of businesses during the
fiscal year ended October 31, 1998.
Cash provided by financing activities of $14.3 million is a result of borrowings
under various financing sources of approximately $70.5 million used to fund
acquisitions and operations of the Company, net proceeds from the issuance of
the Series B Preferred Stock of approximately $18.1 million and approximately
$2.1 million in proceeds from the exercise of stock options, offset by
repayments of debt and other borrowings of approximately $74.4 million, of which
$38.8 million relates to payments made for the acquisition of MFSNT, and other
items.
In February 1999, WorldCom advanced the Company $32.0 million for the purposes
of arranging the purchase of 2,785 shares, or approximately 78% of the Series B
Preferred Stock and the purchase of the outstanding $10.0 million of Senior
Notes. This advance is due the earlier of (i) October 31, 2000 or (ii) the dates
of redemption and/or conversion of the Series B Preferred Stock or the Senior
Subordinated Notes.
In connection with this advance, the Company expects to recognize an
extraordinary loss on the purchase of the Senior Notes of approximately $3.3
million and a reduction in the income applicable to common stock of
approximately $10.0 million related to the purchase of the Series B Preferred
Stock. In addition, the Company agreed to modify the terms of the existing
Series B Preferred Stock conversion and warrant agreements which may have a
significant effect on the underlying value of these securities and result in a
material charge to income applicable to common stock in 1999.
WorldCom has also agreed to make available additional advances to the Company of
up to $15.0 million against amounts otherwise payable pursuant to the WorldCom
Master Services Agreement, which, if advanced, would be due on October 31, 2000.
At the date of this filing, the Company has obtained all necessary waivers which
cover various defaults under the Company's financing and preferred stock
agreements.
The Company believes that it has available cash, from operations as well as from
the additional advance available from WorldCom described above, sufficient to
meet the Company's operating and capital requirements for the next twelve
months. Nonetheless, pursuant to the terms of the documents relating to the
Series B Preferred Stock, under certain circumstances, including without
limitation, if the registration statement that includes the shares of common
stock underlying the Series B Securities is not declared effective on or before
May 18, 1999, the Company is delisted under certain circumstances from any
securities exchange, or any representation or warranty by the Company to the
holders is not true and correct, then the holders of certain outstanding shares
of Series B Preferred Stock, in whole or in part, have the option to require the
Company to redeem their securities at premium prices. Although the Company
intends to use its best efforts to comply with the provisions in the documents
relating to the Series B Preferred Stock, the failure of which would provide the
holder the right to exercise such redemption option, there can be no assurance
that the Company will be able to do so, in part, because certain of such matters
are dependent upon the efforts or approval of others (such as the Securities and
Exchange Commission with respect to the effectiveness of the aforementioned
registration statement). In addition, there can be no assurance that the Company
will not experience adverse operating results or other factors which could
materially increase its cash requirements or adversely affect its liquidity
position.
CAUTIONARY STATEMENTS
Certain of the information contained herein may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, as the same may be amended from time to time ("the Act") and in
releases made by the Securities and Exchange Commission ("SEC") from time to
time. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance,
or achievements expressed or implied by such forward-looking statements. The
words "estimate," "believes," "project," "intend," "expect" and similar
expressions when used in connection with the Company, are intended to identify
forward-looking statements. Any such forward-looking statements are based on
various factors and derived utilizing numerous important assumptions and other
important factors that could cause actual results to differ materially from
those on the forward-looking statements. These cautionary statements are being
made pursuant to the Act, with the intention of obtaining benefits of the "Safe
Harbor" provisions of the Act. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those in the
forward-looking statements as a result of various factors, including but not
limited to those set forth below. Important assumptions and other important
factors that could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to: (i) risks associated
with leverage, including cost increases due to rising interest rates: (ii) risks
associated with the Company's ability to continue its strategy of growth through
acquisitions; (iii) risks associated with the Company's ability to successfully
integrate all of its recent acquisitions; (iv) the Company's ability to make
effective acquisitions in the future and to successfully integrate newly
acquired businesses into existing operations and the risks associated with such
newly acquired businesses; (v)) changes in laws and regulations, including
changes in tax rates, accounting standards, environmental laws, occupational,
health and safety laws; (vi) access to foreign markets together with foreign
economic conditions, including currency fluctuations; (vii) the effect of, or
changes in, general economic conditions; (viii) economic uncertainty in
Venezuela; (ix) weather conditions that are adverse to the specific businesses
of the Company, and (x) the outcome of litigation, claims and assessments
involving the Company. Other factors and assumptions not identified above may
also be involved in the derivation of forward-looking statements, and the
failure of such other assumptions to be realized as well as other factors may
also cause actual results to differ materially from those projected. The Company
assumes no obligation to update these forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
such forward-looking statements.
YEAR 2000
The Company's business is dependent upon various computer software programs and
operating systems that utilize dates and process data beyond the year 2000. The
Company's actions to address the risks associated with the year 2000 are as
follows:
THE COMPANY'S STATE OF READINESS. The Company has established programs to
coordinate its year 2000 (Y2K) compliance efforts across all business functions
and geographic areas. The scope of the programs include addressing the risks
associated with the Company's i) information technology (IT) systems (including
the Company's products and services), ii) non-IT systems that include embedded
technology (e.g., equipment and other infrastructure), and iii) significant
vendors and their Y2K readiness. The Company is utilizing the following steps in
executing its Y2K compliance program: 1) awareness, 2) assessment, 3)
renovation, 4) validation and testing, and 5) implementation. The Company has
completed the awareness and assessment steps for all areas.
IT Systems. The Company's most significant renovation effort involves the
conversion of substantially all of MFSNT's IT Systems. The Company believes it
will be substantially completed with its testing and implementation for all IT
Systems by October 31, 1999.
Non-IT Systems. The Company expects to have all of its mission critical non-IT
systems Y2K compliant by October 31, 1999. The Company is currently formulating
its testing and implementation plans for its mission critical non-IT systems.
Significant Vendors. As part of the Company's Y2K compliance program, the
Company has contacted its significant vendors to assess their Y2K readiness. For
all mission critical third party software embedded in or specified for use in
conjunction with the Company's IT systems and products, the Company's
communications with the vendors indicates that the vendors believe they will be
Y2K compliant by October 31, 1999. Such third party software is being tested in
conjunction with the testing of the IT systems and products discussed above.
There can be no assurance that i) the Company's significant vendors will succeed
in their Y2K compliance efforts, or ii) the failure of vendors to address year
2000 compliance will not have a material adverse effect on the Company's
business or results of operations.
THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES. Since inception of its
program through October 31, 1998, the costs related to the Company's Y2K
compliance efforts were not material. The total estimated costs to complete the
Company's Y2K compliance effort are approximately $2.0 million. The estimated
costs to complete, which does not include any costs which may be incurred by the
Company if its significant vendors fail to timely address Y2K compliance, is
based on currently known circumstances and various assumptions regarding future
events. However, there can be no assurance that these estimates will be achieved
and actual results could differ materially from those anticipated.
THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES. The Company's failure to timely
resolve the Y2K risks could result in system failures, the generation of
erroneous information, and other significant disruptions of business activities.
Although the Company believes it will be successful in its Y2K compliance
efforts, there can be no assurance that the Company's systems and products
contain all necessary date code changes. In addition, the Company's operations
may be at risk if its vendors and other third parties fail to adequately address
the Y2K issue or if software conversions result in system incompatibilities with
these third parties. To the extent that either the Company or a third-party
vendor or service provider on which the Company relies does not achieve Y2K
compliance, the Company's results of operations could be materially adversely
affected. Furthermore, it has been widely reported that a significant amount of
litigation surrounding business interruption will arise out of Y2K issues. It is
uncertain whether, or to what extent, the Company may be affected by such
litigation.
THE COMPANY'S CONTINGENCY PLAN. The Company has not yet developed a
comprehensive contingency plan to address the situation that may result if the
Company or its vendors are unable to achieve Y2K compliance for its critical
operations. During fiscal 1999, based upon the status of the Company's Y2K
compliance efforts at that time and the Company's perceived risks to critical
business operations, the Company plans to evaluate what areas the Company
believes a contingency plan may be necessary, and execute such contingency plan
if warranted. The i) inability to timely implement a contingency plan, if deemed
necessary, and ii) the cost to develop and implement such a plan, may have a
material adverse effect on the Company's results of operations.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS. Except for
statements of existing or historical facts, the foregoing discussion of Y2K
consists of forward-looking statements and assumptions relating to
forward-looking statements, including without limitation the statements relating
to future costs, the timetable for completion of Y2K compliance efforts,
potential problems relating to Y2K, the Company's state of readiness, third
party representations, and the Company's plans and objectives for addressing Y2K
problems. Certain factors could cause actual results to differ materially from
the Company's expectations, including without limitation i) the failure of
vendors and service providers to timely achieve Y2K compliance, ii) system
incompatibilities with third parties resulting from software conversions, iii)
the Company's systems and products not containing all necessary date code
changes, iv) the failure of existing or future clients to achieve Y2K
compliance, v) potential litigation arising out of Y2K issues, the risk of which
may be greater for information technology based service providers such as the
Company, vi) the failure of the Company's validation and testing phase to detect
operational problems internal to the Company, in the Company's products or
services or in the Company's interface with service providers, vendors or
clients, whether such failure results from the technical inadequacy of the
Company's validation and testing efforts, the technological infeasibility of
testing certain non-IT systems, the perceived cost-benefit constraints against
conducting all available testing, or the unavailability of third parties to
participate in testing, or vii) the failure to timely implement a contingency
plan to the extent Y2K compliance is not achieved.
ITEM 7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on debt
obligations that impact the fair value of these obligations. The Company's
policy is to manage interest rates through a combination of fixed and variable
rate debt. Currently, the Company does not use derivative financial instruments
to manage its interest rate risk. The table below provides information about
the Company's risk exposure associated with changing interest rates (amounts in
thousands):
EXPECTED MATURITY
------------------------------------------------------
1999 2000 2001 2002 2003 THEREAFTER
------------------------------------------------------
Fixed rate debt $15,047 $18,225 $ 1,021 $935 $872 $21,081
Average interest rate 12.40% 13.00% 13.64% 13.61% 13.57% 13.54%
Variable rate debt $ - $ - $35,000 $ - $ - $ -
Average interest rate -% -% 7.69% -% -% -%
The Company has no cash flow exposure due to interest rate changes for its fixed
debt obligations. All of the Company's debt is non-trading. The fair value of
the Company's debt approximates its carrying value.
Although the Company conducts business in foreign countries, the international
operations were not material to the Company's consolidated financial position,
results of operations or cash flows as of October 31, 1998. Additionally,
foreign currency transaction gains and losses were not material to the Company's
results of operation for the fiscal year ended October 31, 1998. Accordingly,
the Company was not subject to material foreign currency exchange rate risk from
the effects that exchange rate movements of foreign currencies would have on the
Company's future costs or on future cash flows it would receive from its foreign
subsidiaries. To date, the Company has not entered into any significant foreign
currency forward exchange contracts or other derivative financial instruments to
hedge the effects of adverse fluctuations in foreign currency exchange rates.
24
<PAGE>
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
In October 1998, the Board of Directors of the Company approved the appointment
of Arthur Andersen LLP as its principal accountant to audit the Company's
Consolidated Financial Statements. Information regarding the resignation of the
Company's previous principal accountant and the engagement of Arthur Andersen
LLP was previously reported by the Company on Current Reports on Form 8-K filed
September 14, 1998 and October 16, 1998, respectively.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of Able Telcom Holding Corp. as of January 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
C. Frank Swartz (1)(2)(3) 60 Chairman of the Board of Directors
Gideon D. Taylor (2)(3) 56 Director and Vice President of Special Projects
Frazier L. Gaines (3) 59 Director and President of Able Telcom International
Jonathan A. Bratt 46 Director
Thomas M. Davidson (1)(2) 62 Director
Gerald Pye 54 Director
Robert Young 72 Director
Billy V. Ray, Jr. 40 President, Chief Executive Officer and Acting Chief
Financial Officer
Jesus G. Dominguez 54 Chief Accounting Officer
Michael Arp 52 Financial Vice President
Curtis A. "Butch" Dale 51 Chief Operating Officer
Edward Z. Pollock 59 In-House Counsel
Stacy Jenkins 42 President - MFS Network Technologies
G. Vance Cartee 56 President - MFS Transportation Systems
J. Barry Hall 50 President - Traffic Management Group
Ralph Ouimette 45 President - Able Telecommunications and Power Group
Richard A. Boyle 44 President - Patton Management Group
</TABLE>
- ------------
(1) Member of the Audit Committee. Mr. C. Frank Swartz is the Chairman of the
Audit Committee.
(2) Member of the Compensation Committee. Mr. Davidson is the Chairman of the
Compensation Committee.
(3) Member of the Nominating Committee. Mr. Gaines is the Chairman of the
Nominating Committee.
All directors are elected annually at the annual meeting of the stockholders of
Able Telcom Holding Corp. and hold office following election or until their
successors are elected and qualified. The chief executive officer is elected by
and serves at the discretion of the Company's Board of Directors. All other
executive officers are appointed by the Chief Executive Officer.
C. Frank Swartz has served as a Director of the Company since August 1998 and as
Chairman of the Board since November 30, 1998. Mr. Swartz has been retired since
November 1994. For the five (5) years prior to November 1994, Mr. Swartz was
employed by GTE as the Director of Internal Support, based in Caracas,
Venezuela.
GIDEON D. TAYLOR has served as a Director of the Company since its inception and
served as Chairman of the Board of the Company from March 25, 1997 through
November 30, 1998. In addition, Mr. Taylor has served as the Company's Chief
Administrative Officer from March 25, 1997 through November 30, 1998 and the
Company's Vice President of Special Projects since December 1998. From October
1988 to August 1992, Mr. Taylor was also President and Chief Executive Officer
of the Company. Mr. Taylor has also served in various executive capacities with
the Company for the past ten years.
FRAZIER L. GAINES has served as a Director of the Company since August 1992 and
served as Interim President and Chief Executive Officer of the Company from
March 6, 1998 to November 30, 1998. Mr. Gaines has also
<PAGE>
served as the President of the Company's subsidiary, Able Telcom International,
Inc. ("ATI") since June 1994. From 1992-1994, Mr. Gaines was Chief Operating
Officer of the Company. 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.
THOMAS M. DAVIDSON has served as a Director of the Company since August 1998.
Mr. Davidson was an investment banker with Washington Equity Partners from July
1997 to April 1998. From February 1997 to July 1997, Mr. Davidson practiced law
at Reed, Smith, Shaw and McClay, located in Washington, D.C. Prior to that, Mr.
Davidson practiced law at Coffield, Ungaretti and Harris, in Washington, D.C.
from April 1995 to January 1997 and at Verner, Liipfert, Bernhard, McPherson and
Hand, in Washington, D.C. from April 1993 to April 1995.
JONATHAN A. BRATT has served as a Director of the Company since June 1997. Mr.
Bratt, a Venezuelan businessman, is on the boards of several Venezuelan
companies in the oil and gas and telecommunications industries. Mr. Bratt is a
Director of BFGP Ingenieros, C.A., a software engineering firm ("BGFP") (from
January 1980 until the present); Infotrol, C.A., an engineering integration firm
(from January 1987 until the present); Cybertrol, C.A., a petroleum engineering
firm; Inversiones Tocolicao, D.A., a construction firm (from January 1986 until
the present); I.T.S., an engineering consulting joint venture; and Inacom, an
IBM wholesale dealer. He is also Managing Director of Able Telcom, C.A., a joint
venture of BFGP and the Company.
DR. GERALD PYE has served as a Director of the Company since January 1999. Mr.
Pye is a partner with Interfiducia, AG, a European investment firm.
ROBERT H. YOUNG has served as a Director of the Company since January 1999. Mr.
Young is a principal in the firm of Neos Communications, Inc. in Dallas, Texas.
Mr. Young is also a principal of Interfiducia Partners, LLC in Dallas, Texas.
BILLY V. RAY, JR. has been the Company's President, Chief Executive Officer and
acting Chief Financial Officer since November 30, 1998. From October 1, 1998 to
November 30, 1998, Mr. Ray was the Company's Executive Vice President of Mergers
and Acquisitions and Treasurer. From May 1998 to October 1998 and from January
1997 to June 1997, Mr. Ray served as a consultant to the Company. Mr. Ray served
as the Chief Financial Officer of the Company from June 1997 to April 1998. From
December 1995 to January 1997 and from April 1997 to July 1997, Mr. Ray was the
President of Ten-Ray Utility Construction, Inc., a utility construction company.
During a part of that period, he also served as a consultant to Alcatel, a maker
of intelligent highway systems. From September 1994 to November 1995, Mr. Ray
was the Controller of Tri-Duct, a utility construction company, and served as a
consultant to such company from November 1995 to March 1996. From March 1994 to
September 1994, Mr. Ray was the staff manager at Mastec, Inc. a utility
construction company and he was assistant to the president at Burnup & Sims, a
utility construction company, from January 1993 to March 1994.
EDWARD Z. POLLOCK has been the Company's In-House Counsel since November 1998.
From 1963 to 1998, Mr. Pollock was a sole practitioner at the law firm of Edward
Z. Pollock.
CURTIS A. "BUTCH" DALE has served as Chief Operating Officer of the Company
since August 1998. Prior to that time, from March 1998 until his appointment as
Chief Operating Officer, Mr. Dale was Vice President of Operations for the
Company. From March 1970 to October 1997, Mr. Dale was a Project/Staff Manager -
Support for Network Operations for GTE, a telecommunications company.
JESUS G. "JAY" DOMINGUEZ has been the Chief Accounting Officer since April 1998.
Mr. Dominguez has served as Vice President - Finance of Able Telcom
International since May 1995 and controller of the Company from October 1993 to
May 1995. From April 1993 to October 1993, Mr. Dominguez served as Vice
President - Finance of Novatek International Inc., a construction company. Mr.
Dominguez is a licensed certified public accountant.
MICHAEL ARP became the Company's Financial Vice President and principal
accounting officer in January 1999. From February 1997 through December 1998,
Mr. Arp was the group controller of the Company's Traffic Management Group. From
January 1994 to February 1997, Mr. Arp was President of American Turf
Manufacturing.
<PAGE>
STACY JENKINS was named President of MFS Network Technologies, Inc. ("MFSNT") in
July 1998. From 1990 to July 1996, Mr. Jenkins served as the Senior Vice
President, Operations Vice President, Engineering and Estimating; and as Project
Manager for the nationally recognized Iowa Communications Network. During this
time, he directed operations for more than 40 projects, with a combined value in
excess of $300 million, in the United States and abroad.
G. VANCE CARTEE has been the President of MFS Transportation Systems since
January 1999. From June 1998 to December 1998, Mr. Cartee served as a
telecommunications consultant, including performing consulting services for the
Company. From January 1996 to June 1998, Mr. Cartee was a business unit director
for Loral/Lockheed Martin Corp. From March 1993 to January 1996, Mr. Cartee was
Vice President and General Manager of Alcatel Contracting, N.A.
J. BARRY HALL has been the President of Georgia Electric Company, a subsidiary
of the Company, since October 1996. From 1990 to October 1996, Mr. Hall was
Vice President of Georgia Electric Company.
FRAZIER L. GAINES has been a Director of the Company since August 1992 and has
served as President of Able Telcom International, Inc., a wholly owned
subsidiary of the Company, since June 1994. Mr. Gaines served as President and
Chief Executive Officer of the Company from March 1998 to November 1998. From
1992 to 1994, Mr. Gaines was Chief Operating Officer of the Company. 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.
RALPH OUIMETTE has been the President of Able Telecommunications and Power, Inc.
(formerly H.C. Connell, Inc.), a subsidiary of the Company, since February 1996.
From 1988 to February 1996, Mr. Ouimette was a project manager for Conklin
Porter and Holmes, Inc.
RICHARD A. BOYLE has been the President of Patton Management Corp. and
subsidiaries, a subsidiary of the Company since April 1998, since March 1996.
From May 1991 to March 1996, Mr. Boyle was Vice President and General Manager
of Wright & Lopez, Inc. and Pressure Concrete Construction Co. From
January 1990 to May 1991, Mr. Boyle was Vice President and General Manager
of Pressure Concrete Construction Company, a division of South Eastern Public
Services Co.
COMPLIANCE WITH SECtiON 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and 10% stockholders to file reports regarding
initial ownership and changes in ownership with the Securities and Exchange
Commission and the Nasdaq Stock Market. Executive officers, directors and 10%
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. The
Company's information regarding compliance with Section 16(a) is based solely on
a review of the copies of such reports furnished to the Company by the Company's
executive officers, directors and 10% stockholders. The Company believes that
the majority of the Company's executive officers and directors were delinquent
in filing one or more Section 16(a) forms and may have failed to file certain
forms during the fiscal year ended October 31, 1998. The Company is currently
investigating such delinquent filings and failures to file and is verifying that
all forms that have been filed have been provided to the Company. Once the
Company's review is complete, a complete list of executive officers and
directors with Section 16(a) compliance violations will be provided in the
Company's proxy materials for its annual meeting to be held during 1999.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain summary information for the years
indicated concerning the compensation awarded to, earned by, or paid to (i)
those persons serving as the Chief Executive Officer during the 1998 fiscal
year, (ii) the other four most highly compensated Executive Officers of the
Company who were serving as such at October 31, 1998, and (iii) up to two
additional individuals who had served as an Executive Officer of the Company
during the 1998 fiscal year but who were not Executive Officers at October 31,
1998, except that persons referred to in clauses (ii) and (iii) above generally
are not included in the table if they received total annual salary and bonus of
$100,000 or less for the 1998 fiscal year end. The persons named in this table
shall be collectively referred to as the "Named Executive Officers."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- -------------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND COMPEN- OPTIONS/ COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION ($) SARS (#) SATION ($)
- ------------------ ---- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frazier L. Gaines (1) 1998 153,986 210,000 31,809
Chief Executive Officer; 1997 110,000 5,000 1,024,375
Current President - Able 1996 110,000 36,000
Telcom International
Robert DuPuis (2) 1998 6,058
Former Chief Executive
Officer
Gerry W. Hall (3) 1998 103,846 4,787
Former Chief Executive 1997 180,769 75,000 27,500 3,200
Officer
Billy V. Ray, Jr. (4) 1998 48,462 35,000 110,818
Executive Vice President of 1997 34,615 40,000 56,961
Mergers and Acquisitions
and Treasurer; promoted to
Chief Executive Officer on
December 1, 1998
J. Barry Hall (5) 1998 209,173 75,000 33,906
President - Traffic 1997 161,538 27,500
Management Group
Gideon D. Taylor (6) 1998 133,846 750 220,000 37,398
Chairman of the Board and 1997 45,308
Chief Administrative
Officer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- -------------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND COMPEN- OPTIONS/ COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION ($) SARS (#) SATION ($)
- ------------------ ---- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ralph Ouimette (7) 1998 93,267 48,000 6,500
President - Able 1997 59,452 40,000
Telecommunications and
Power Group
Richard J. Sandulli (8) 1998 134,615 30,000 12,078
Former Vice President - 1997 71,000 3,750
Finance
</TABLE>
- ------------
(1) Mr. Gaines served as the President and Chief Executive Officer of the
Company from March 1998 through November 30, 1998. Prior thereto, Mr. Gaines
was President of Able Telcom International, Inc. (a position which he
continues to hold). For 1998, other compensation includes an automobile
allowance of $4,500 and health insurance premiums paid by the Company on Mr.
Gaines behalf in the amount of $109. For 1997, other compensation consists
of an automobile allowance, a housing allowance and an amount of $991,375,
which represents the difference between the price paid by Mr. Gaines upon
the exercise of certain stock options and the fair market value of the
underlying Common Stock on the date of exercise. For 1996, other
compensation includes an automobile allowance and a housing allowance.
(2) Mr. DuPuis was appointed President and Chief Executive Officer of the
Company on August 19, 1998 and resigned on August 31, 1998.
(3) Mr. Hall was President and Chief Executive Officer of the Company from June
1997 to March 1998 at an annual salary of $200,000. Mr. Hall also served as
President of Georgia Electric Company during the fiscal year ended October
31, 1997. In 1998, other compensation consists of a living allowance of
$3,000, a car allowance of $1,000, health insurance premiums paid on Mr.
Hall's behalf of $227 and contributions of $560 to the Company's 401(k)
plan. In 1997, other compensation consists of an automobile allowance.
(4) In 1998, other compensation includes consulting fees in the amount of
$92,099, an automobile allowance of $5,400, a housing allowance of $12,600
and health insurance premiums paid on Mr. Ray's behalf of $719. In 1997,
other annual compensation includes compensation for consulting services
rendered prior to Mr. Ray's appointment in June 1997 as the Company's Chief
Financial Officer, and a travel and housing allowance.
(5) In 1998, other compensation includes a housing allowance of $24,000, an
automobile allowance of $7,800 and contributions of $2,106 to the Company's
401(k) plan.
(6) In 1998, other compensation includes a housing allowance of $6,000, use of a
company vehicle estimated at $3,633 and health insurance premiums paid on
Mr. Taylor's behalf of $565.
(7) In 1998, other compensation includes an automobile allowance.
DIRECTOR COMPENSATION
Directors who are not employees of the Company are paid $12,000 annually plus
$750 for each committee meeting attended and are reimbursed for expenses
associated with Board responsibilities. In addition, pursuant to the Company's
1995 Stock Option Plan, as amended, non-employee Directors receive one-time
automatic grants of options to purchase 5,000 shares of Common Stock having an
exercise price equal to the fair market value at the date of grant. To date, the
Company has not made any of these grants. However, in April 1998, the Company
granted an option to purchase 10,000 shares of the Company's common stock to all
Directors. Directors who are also employed by the Company receive no additional
fees or remuneration for acting in their capacity as a Director of the Company.
<PAGE>
THE ABLE TELCOM HOLDING CORP. 1995 STOCK OPTION PLAN, AS AMENDED
The Company has adopted the 1995 Stock Option Plan (the "Plan") pursuant to
which 550,000 shares of Common Stock were originally authorized for issuance. In
April 1998, the shareholders of the Company approved the amendment of the Plan
to increase the number of shares outstanding under the Plan to 1,300,000. The
Company intends to amend its registration statement on Form S-8 to register the
additional 750,000 shares of Common Stock reserved for issuance under the Plan.
The Company may grant stock options (both Nonqualified Stock Options and
Incentive Stock Options, as defined in the Plan) and restricted stock under the
Plan to Non-Affiliate Directors (as defined in the Plan), key employees,
advisors and consultants (the "Participants"). The Plan also provides for the
automatic grant to Non-Affiliate Directors, at such time as an individual
becomes a Non-Affiliate Director of the Company, of Nonqualified Stock Options
to purchase 5,000 shares of Common Stock at an exercise price per share equal to
100% of the fair market value of the shares on the date of grant.
With respect to the grant of awards under the Plan to persons other than
Non-Affiliate Directors, the Board of Directors, or a committee appointed by the
Board of Directors (in either case, the "Plan Administrators"), will determine
persons to be granted stock options and restricted stock, the amount of stock to
be optioned or granted to each such person, and the terms and conditions of any
stock options and restricted stock. Both Incentive Stock Options and
Nonqualified Stock Options may be granted under the Plan. An Incentive Option is
intended to qualify as an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). Any Incentive
Stock Option granted under the Plan will have an exercise price of not less than
100% of the fair market value of the shares on the date on which such option is
granted. With respect to an Incentive Stock Option granted to a Participant who
owns more than 10% of the total combined voting stock of the Company or any
parent or subsidiary of the Company, the exercise price for such option must be
at least 110% of the fair market value of the shares subject to the option on
the date the option is granted. A Nonqualified Stock Option granted under the
Plan (i.e., an option to purchase the Common Stock that does not meet the Code's
requirements for Incentive Options) shall be as determined by the Plan
Administrators.
Subject to the terms of the Plan, the Plan Administrators may award shares of
restricted stock to the Participants. Generally, a restricted stock award will
not require the payment of any option price by the Participant but will call for
the transfer of shares to the Participant subject to forfeiture, without payment
of any consideration by the Company, if the Participant's employment terminates
during a "restricted" period (which must be at least six months) specified in
the award of the restricted stock.
STOCK OPTIONS ISSUED OUTSIDE THE PLAN DURING FISCAL YEAR 1998
During the fiscal year ended 1998, the Company issued options to purchase an
aggregate of 892,000 shares of Common Stock to employees, Officers and Directors
of the Company and its subsidiaries at exercise prices ranging from $6.20 to
$14.00 per share. On December 31, 1998, all of these options were rescinded.
Immediately thereafter, the same number of options were issued on December 31,
1998 at an exercise price of $5.75, which was the average of the ten-day closing
market price for the Company's Common Stock for the period from December
16-December 30, 1998. The expiration for the exercise period for these options
range from December 31, 2000 to April 24, 2005. Of the 892,000 options granted
in the fiscal year ended October 31, 1998, all were immediately vested as of
December 31, 1998.
OPTION GRANTS DURING THE FISCAL YEAR ENDED OCTOBER 31, 1998
During the fiscal year ended October 31, 1998, the following options were
granted to the following Named Executive Officers:
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
% OF
TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT
GRANTED MARKET ASSUMED ANNUAL RATES
NUMBER OF TO EXERCISE PRICE OF STOCK PRICE
SHARES EMPLOYEES OR BASE ON APPRECIATION
UNDERLYING IN FISCAL PRICE DATE OF EXPIRATION FOR OPTION TERM (2)
NAME OPTIONS(# ) YEAR(4) ($/SH) (1) GRANT DATE 5% ($) 10% ($)
---- ----------- --------- ---------- ------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frazier L. Gaines 10,000 28% 6.20 7.75 4/24/05 $ 47,100 $ 89,000
20,000 11.9375 7.9375 7/3/04 - 47,600
80,000 14.00 14.00 7/8/00 114,400 235,200
100,000 6.00 11.1875 12/31/00 661,000 813,000
Gideon D. Taylor 10,000 29% 6.20 7.75 4/24/05 47,100 89,000
20,000 11.9375 7.9375 7/3/04 - 47,600
120,000 14.00 14.00 7/8/00 171,600 352,800
70,000 6.00 11.1875 12/31/00 462,700 569,100
Billy V. Ray (3) 10,000 5% 14.00 14.00 7/8/00 14,300 29,400
25,000 7.75 7.75 9/19/05 90,250 215,000
Richard J. Sandulli 10,000 7% 6.20 7.75 4/24/05 47,100 89,000
20,000 11.9375 7.9375 7/3/04 - 47,600
</TABLE>
- ------------
Note: Mr. Robert DuPuis was also granted an option to purchase 125,000 shares of
the Company's common stock on August 19, 1998. Due to the fact that Mr.
DuPuis' employment with the Company was less than two weeks, the Company
has not included a valuation of those options in the above table. At the
time of Mr. DuPuis' separation from the Company, this option had not
vested and the option was forfeited.
(1) On December 31, 1998, in an effort to clear up a large number of
ambiguities in the minutes of Board of Director meetings and in order to
maintain compliance with various debtor documents as well as to keep the
Company in substantial compliance with certain rules of the Securities and
Exchange Commission and The Nasdaq Stock Market, Inc. ("Nasdaq") the Board
of Directors rescinded all of the above options grants and reissued new
options in the amounts set forth above at the then fair market value per
share on December 31, 1998, which was $5.75.
(2) The potential realizable values are based upon assumed 5% and 10%
annualized stock price growth rates and are not intended to forecast
future price appreciation of the Company's Common Stock. Actual gains, if
any, on stock option exercises will depend on the amount, if any, by which
the fair market value exceeds the option exercise price on the date the
option is exercised. There is no assurance that the amounts reflected in
this table will be achieved.
(3) The option to purchase 25,000 shares of the Company's common stock were
cancelled in August 1998 pursuant to the 1995 Stock Option Plan, as
amended.
(4) There were option grants to purchase 892,000 shares of the Company's
Common Stock during the fiscal year ended October 31, 1998, of which
762,000 related to employees of the Company. The percentage of total
options granted to employees is based upon grants of options to
purchase 762,000 shares.
OPTION EXERCISES AND PERIOD-END VALUES
The following table provides information on options exercised in the fiscal year
ended October 31, 1998 by the persons named in the "Summary Compensation Table"
above, the number of unexercised options each of them held at October 31, 1998
and the value of the unexercised "in-the-money" options each of them held as of
that date.
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS/AT FYE (#) AT FYE ($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE(1) (2)
---- ------------- --------- --------------------- --------------------
<S> <C> <C> <C> <C>
Frazier L. Gaines --- --- 210,000/--- $804,375/---
Gideon D. Taylor --- --- 220,000/--- $585,000/---
Billy V. Ray --- --- 100,000/10,000 $0/$0
Richard J. Sandulli --- --- 30,000/--- $73,125/---
</TABLE>
- ------------
(1) On December 31, 1998, in an effort to clear up a large number of ambiguities
in the minutes of Board of Director meetings and in order to maintain
compliance with various debtor documents as well as to keep the Company in
substantial compliance with certain rules of the Securities and Exchange
Commission and The Nasdaq Stock Market, Inc. ("Nasdaq") the Board of
Directors rescinded all of the above options grants and reissued new options
in the amounts set forth above at the then fair market value per share on
December 31, 1998, which was $5.75.
(2) For those options which were "In-the-Money" at October 31, 1998, the
valuation is based on the closing price of the common stock of Able Telcom
Holding Corp. of $ 7 5/16.
EMPLOYMENT AND CONSULTING AGREEMENTS
BILLY V. RAY, JR., President and Chief Executive Officer, is party to an
employment agreement, dated December 1, 1998 with the Company (the "Ray
Employment Agreement"). The Ray Employment Agreement terminates on November 30,
2000, and provides that Mr. Ray is to be paid a salary of $180,000 per year,
plus a monthly housing allowance of $1,500 per month and automobile allowance of
$500 per month, plus health insurance and other benefits. The Ray Employment
Agreement may be extended for an additional two year period. The Ray Employment
Agreement also contains a covenant by Mr. Ray not to compete with the Company
for a period of three years following his employment. The Ray Employment
Agreement also provides that if Mr. Ray's employment is terminated with cause,
Mr. Ray would be entitled to 90 days prior notice. However, should Mr. Ray be
terminated without cause, Mr. Ray would be paid out the remainder of his
contract, or for 90 days, whichever is greater. In addition, the Ray Employment
Agreement provides for the grant of 100,000 options to purchase 100,000 shares
of the Company's common stock, as approved by the Company's Board of Directors,
which vest immediately. On December 31, 1998, the Company's Board of Directors
rescinded the above grant of options and issued new options to purchase 100,000
shares through December 31, 2001 at an exercise price of $5.75 per share.
EDWARD POLLOCK, In-House Counsel, is party to an employment agreement, dated
January 1, 1999 with the Company (the "Pollock Employment Agreement"). The
Pollock Employment Agreement terminates on December 31, 2000 and provides that
Mr. Pollock is to be paid an initial salary of $10,000 per month for the period
from January 1, 1999 to June 30, 1999, increased to $11,000 per month for the
period from July 1, 1999-December 31, 1999, increased to $12,000 monthly for the
period from January 1, 2000 to June 30, 2000, and increased to $12,500 monthly
for the period from July 1, 2000 to December 31, 2000. In addition, the Pollock
Employment Agreement provides an automobile allowance of $300 per month, plus
health insurance and other benefits. The Pollock Employment Agreement may be
extended for an additional two year period. The Pollock Employment Agreement
also contains a covenant by Mr. Pollock not to compete with the Company for a
period of three years following his employment. The Pollock Employment Agreement
also provides that if Mr. Pollock is terminated with cause, Mr. Pollock would be
entitled to 90 days prior notice. However, should Mr. Pollock be terminated
<PAGE>
without cause, Pollock would be paid out the remainder of his contract. In
addition, the Pollock Employment Agreement provides for the grant of options to
purchase 40,000 shares of the Company's common stock, as approved by the
Company's Board of Directors, which vest over a three year period (15,000
options vested on January 1, 1999, 15,000 options will vest on January 1, 2000
and 10,000 options will vest on January 2, 2001), unless there is a change in
control/ownership of the Company, in which case, the options will vest
immediately.
CURTIS A. "BUTCH" DALE, Chief Operating Officer, is party to an employment
agreement, dated August 17, 1998 with the Company (the "Dale Employment
Agreement"). The Dale Employment Agreement terminates on August 16, 2001, and
provides that Mr. Dale is to be paid a salary of $150,000 per year, an
automobile allowance of $500 per month, plus health insurance and other
benefits. The Dale Employment Agreement also contains a covenant by Mr. Dale not
to compete with the Company for a period of one year following his employment.
The Dale Employment Agreement also provides that if Mr. Dale is terminated with
cause that Mr. Dale would be entitled to 90 days prior notice. However, should
Mr. Dale be terminated without cause, Mr. Dale would be paid out the remainder
of his contract, or for 180 days, whichever is greater. In addition, the Dale
Employment Agreement provides for the grant of options to purchase 100,000
shares of the Company's Common Stock, as approved by the Company's Board of
Directors, which vests after one year of employment, or immediately upon either
a change in control/ownership of the Company or Mr. Dale is terminated without
cause, in which case, the options will vest immediately. On December 31, 1998,
the Company's Board of Directors rescinded the above grant of options and issued
new options to purchase 100,000 shares, which options are fully vested and are
exercisable at $5.75 per share through December 31, 2004.
JESUS G. DOMINGUEZ, Chief Accounting Officer, is party to an employment
agreement, dated April 27, 1998 with the Company (the "Dominguez Employment
Agreement"). The Dominguez Employment Agreement terminates on April 26, 2001,
and provides that Mr. Dominguez is to be paid a salary of $125,000 per year,
plus an automobile allowance of $500 per month, plus health insurance and other
benefits. The Dominguez Employment Agreement also contains a covenant by Mr.
Dominguez not to compete with the Company for a period of one year following his
employment. The Dominguez Employment Agreement also provides that if Mr.
Dominguez is terminated with cause that Mr. Dominguez would be entitled to 90
days prior notice. However, should Mr. Dominguez be terminated without cause,
Mr. Dominguez would be paid out the remainder of his annual contract salary, or
for 180 days, whichever is greater. In addition, the Dominguez Employment
Agreement provides for the grant of options to purchase 50,000 shares of the
Company's common stock, as approved by the Company's Board of Directors, which
vests after one year of employment, or immediately upon either a change in
control/ownership of the Company or Mr. Dominguez is terminated without cause,
in which case, the options will vest immediately. On December 31, 1998, the
Company's Board of Directors rescinded the above grant of options and issued new
options to purchase 50,000 shares at an exercise price of $5.75 per share
through December 31, 2004.
GIDEON D. TAYLOR, Vice President of Special Projects, is party to an employment
agreement, dated December 7, 1998 with the Company (the "Taylor Employment
Agreement"). The Taylor Employment Agreeement terminates on June 6, 1999 and may
be extended for a one year term at the option of the Company, and provides that
Mr. Taylor is to be paid at a rate of $15,000 per month, plus an automobile
allowance of $500 per month, health and life insurance and other benefits. The
Taylor Employment Agreement also provides that the Company will also pay all
fringe benefits plus $75,000 per year for the number of years equal to Mr.
Taylor years of service, subject to a minimum of ten (10) years, and will
payable beginning at Mr. Taylor termination date. The Taylor Employment
Agreement also contains a covenant by Mr. Taylor not to compete with the Company
for a period of three years following his employment. The Taylor Employment
Agreement also provides that if Mr. Taylor is terminated with cause that Mr.
Taylor would be entitled to 30 days prior notice. However, should Mr. Taylor be
terminated without cause which can only be effected by a majority vote of the
Company's Board of Directors, Mr. Taylor would be paid one-year's severance of
the remaining balance on the employment contract plus regular Company fringe
benefits for a period of one year from the date of termination.
STACY JENKINS, President of MFS Network Technologies, Inc., is party to an
employment agreement, dated July
<PAGE>
16, 1998 with the Company (the "Jenkins Employment Agreement"). The Jenkins
Employment Agreement terminates on July 15, 2001, and provides that Mr. Jenkins
is to be paid a salary of $200,000 per year, an automobile allowance of $500 per
month, plus health insurance and other benefits. The Jenkins Employment
Agreement also contains a covenant by Mr. Jenkins not to compete with the
Company for a period of two years following his employment. The Jenkins
Employment Agreement also provides that if Mr. Jenkins is terminated with cause
that Mr. Jenkins would be entitled to 30 days prior notice. However, should Mr.
Jenkins be terminated without cause, Mr. Jenkins would be paid out the remainder
of his annual salary contract rate, or for 90 days, whichever is greater. In
addition, the Jenkins Employment Agreement provides for the grant of options to
purchase 100,000 shares of the Company's common stock, as approved by the
Company's Board of Directors, which vest after one year of employment, or
immediately upon either a change in control/ownership of the Company or Mr.
Jenkins is terminated without cause, in which case, the options will vest
immediately. On December 31, 1998, the Company's Board of Directors rescinded
the above grant of options and issued new options to purchase 100,000 shares at
$5.75 per share through December 31, 2000 or 90 days after termination of
employment, whichever is earlier.
G. VANCE CARTEE, President of MFS Transportation Systems, Inc., is party to an
employment agreement, dated January 4, 1999 with the Company (the "Cartee
Employment Agreement"). The Cartee Employment Agreement terminates on January 3,
1999, and provides that Mr. Cartee is to be paid a salary of $150,000 per year,
plus insurance and other benefits. The Cartee Employment Agreement also contains
a covenant by Mr. Cartee not to compete with the Company for a period of one
year following his employment. The Cartee Employment Agreement also provides
that if Mr. Cartee is terminated with cause that Mr. Cartee would be entitled to
90 days prior notice. However, should Mr. Cartee be terminated without cause,
Mr. Cartee would be paid out the remainder of his contract, or for 180 days,
whichever is greater. In addition, the Cartee Employment Agreement provides for
the grant of options to purchase 40,000 shares of the Company's common stock,
as approved by the Company's Board of Directors, which vest on January 1, 2000,
or immediately upon either a change in control/ownership of the Company or Mr.
Cartee is terminated without cause, in which case, the options will vest
immediately. On December 31, 1998, the Company's Board of Directors rescinded
the above grant of options and issued new options to purchase 40,000 shares at
$5.75 per share, all of which are fully vested, through December 31, 2001.
J. BARRY HALL, President of the Transportation Services Group, which includes
both Transportation Safety Contractors, Inc. ("TSCI") and Georgia Electric
Company, is party to an employment agreement dated October 12, 1996 with TSCI
(the "Hall Employment Agreement"). The Hall Employment Agreement terminates on
October 11, 2001, and provides that Mr. Hall is 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, unless the Company terminates the Hall
Employment Agreement for cause of if Mr. Hall terminates the agreement with good
reason, in which case the non-competition period will terminate after six (6)
months (which period may be extended by the Company up to one year in exchange
for additional compensation). In addition, an additional $100,000 in annual
salary has been assigned to J. Barry Hall from Gerry Hall, a former Chief
Executive Officer of the Company currently under contract.
FRAZIER L. GAINES, President of Able Telcom International, is party to an
employment agreement, dated November 12, 1998 with the Company (the "Gaines
Employment Agreement"). The Gaines Employment Agreement terminates on November
11, 2001, may be extended for one additional year, allows for a consulting
agreement to be signed at the end of the initial three year term, and provides
that Mr. Gaines is to be paid a salary of $200,000 per year, health and life
insurance, other fringe benefits, and a monthly automobile allowance of $500.
The Gaines Employment Agreement also provides that the Company will also pay all
fringe benefits plus $60,000 per year for the number of years equal to Mr.
Gaines years of service and will payable beginning at Mr. Gaines termination
date. The Gaines Employment Agreement also contains a covenant by Mr. Gaines not
to compete with the Company for a period of three years following his
employment. The Gaines Employment Agreement also provides that if Mr. Gaines is
terminated with cause that Mr. Gaines would be entitled to 30 days prior notice.
However, should Mr. Gaines be terminated without cause, Mr. Gaines would be paid
one-year's severance plus regular Company fringe benefits. $100,000 of this
amount would be payable immediately upon termination with the
<PAGE>
remainder of $100,000 payable within 45 days from termination. In addition, the
Gaines Employment Agreement provides for the grant of options to purchase
100,000 shares of the Company's common stock, subject to approval by the
Company's Board of Directors, which vest over a three year period, or
immediately upon either a change in control/ownership of the Company. To date,
these options have not been approved by the Company's Board of Directors.
RICHARD A. BOYLE, President of the Patton Management Group, is party to an
employment agreement, dated April 1, 1998 with the Company (the "Boyle
Employment Agreement"). The Boyle Employment Agreement terminates on March 31,
2000, and provides that Mr. Boyle is to be paid a salary of $159,000 per year,
plus insurance and other benefits. The Boyle Employment Agreement also contains
a covenant by Mr. Boyle not to compete with the Company for a period of two
years following his employment. Also, per the terms of the Patton Management
Corporation acquisition, Mr. Boyle's non-competition agreement has been extended
for one additional year. The Boyle Employment Agreement also provides that if
Mr. Boyle is terminated with cause that Mr. Boyle would not be entitled to any
notice.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of January 31, 1999, the Common Stock owned
beneficially by (i) Each Director of the Company, (ii) each Executive Officer,
(iii) all Directors and Executive Officers as a group, and (iv) each person
known by the Company to be the "beneficial owner" of more than five percent (5%)
of such Common Stock. "Beneficial ownership" is a technical term broadly defined
by the Securities and Exchange Commission to mean more than ownership in the
usual sense. For example, you "beneficially" own Common Stock not only if you
hold it directly, but also if you indirectly (through a relationship, a position
as a director or trustee, or a contract or understanding), have (or share the
power to vote the stock, or sell it) the right to acquire it within 60 days.
Except as disclosed in the footnotes below, each of the Directors and Executive
Officers listed have sole voting and investment power over his or her shares. As
of January 31, 1999, there were 11,065,670 shares of Common Stock issued and
outstanding and approximately 395 holders of record.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME (1) TITLE OWNED OWNED
-------- ----- ------------- ------------
<S> <C> <C> <C>
C. Frank Swartz (2) Chairman of the Board of Directors 20,000 *
Gideon D. Taylor (3) Director and Vice President of Special Projects 946,638 8.4%
Frazier L. Gaines (4) Director 684,430 6.1%
Jonathan A. Bratt (5) Director 36,500 *
Thomas M. Davidson (2) Director 20,000 *
Gerald Pye Director --- ---
Robert Young Director --- ---
Billy V. Ray, Jr. (2) President, Chief Executive Officer and Acting
Chief Financial Officer 110,000 *
Jesus G. Dominguez (2) Chief Accounting Officer 97,000 *
Michael Arp (2) Financial Vice President 20,000 *
Curtis A. "Butch" Dale (6) Chief Operating Officer 103,300 *
Edward Z. Pollock (2) In-House Counsel 15,000 *
Stacy Jenkins (2) President - MFS Network Technologies 100,000 *
G. Vance Cartee President - MFS Transportation Systems --- ---
J. Barry Hall (7) President - Traffic Management Group 433,500 3.9%
Ralph Ouimette (2) President - Able Telecommunications and
Power Group 3,317 *
Richard A. Boyle President - Patton Management Group --- ---
All Directors and
Executive Officers as a
group (17 persons) 2,589,685 28.4%
</TABLE>
- ------------
*Less than 1%.
<PAGE>
(1) The address for each of Able's Directors and Executive Officers is 1601
Forum Place, Suite 1110, West Palm Beach, Florida 33401.
(2) These represent stock options that are immediately exercisable.
(3) These include (i) 21,619 shares owned by Mr. Taylor's wife, and (ii) 220,000
shares underlying stock options which are immediately exercisable at $5.75
per share.
(4) These include 210,000 shares underlying stock options are immediately
exercisable at $5.75 per share and 474,430 shares held in a trust controlled
by Mr. Gaines. These do not include an aggregate of 9,000 shares held by Mr.
Gaines as trustee to four minor children and for which Mr. Gaines disclaims
any beneficial ownership.
(5) Includes 30,000 shares underlying options which are immediately exercisable
at $5.75 per share and 6,500 shares owned by Mr. Bratt.
(6) Includes 3,300 shares owned by Mr. Dale and 100,000 shares underlying stock
options which are immediately exercisable at $5.75 per share.
(7) Includes 107,500 shares owned by Mr. Hall, and 326,000 shares issued to
Mr. Hall in February 1999 related to consideration on the Company's
acquisition of Georgia Electric Company from Mr. Hall and his brother,
Gerry W. Hall.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended October 31, 1998, compensation for the Company's
Officers was determined by the Company's Compensation Committee, consisting of
Messrs. C. Frank Swartz, Thomas Davidson and Gideon Taylor, of which Messrs.
Swartz and Davidson are non-employee members of the Board of Directors. Mr.
Taylor was Chairman of the Compensation Committee from November 1, 1997 through
August 18, 1998. On August 18, 1998, Mr. Davidson became the Chairman of the
Company's Compensation Committee. During the year, Mr. Taylor was Chairman of
the Company's Board of Directors and the Company's Chief Administrative Officer.
In April 1998, the Company engaged Washington Equity Partners ("WEP") as an
advisor in connection with the acquisition of MFS Network Technologies, Inc., a
division of WorldCom, Inc. ("MFSNT Acquisition"), including the financing
thereof. At the time of the engagement, Mr. Thomas M. Davidson, a member of the
Company's Board of Directors and a member of the Compensation Committee, was
Managing Director of WEP. In connection with the engagement, the Company agreed
to pay WEP a fee if the Company consummated the financing of the MFSNT
Acquisition through an investor contacted by WEP. Such fee equals 2% of the
gross proceeds of any senior indebtedness issued by the Company, 3% of the gross
proceeds of any subordinated indebtedness issued by the Company, and 4% of the
gross proceeds of any equity securities issued by the Company. In addition, the
Company agreed to pay WEP, upon the consummation of the MFSNT Acquisition, a fee
of 2% of the aggregate purchase price paid by the Company for this acquisition
up to $50 million, and 1-1/2% of the aggregate purchase price in excess of $50
million. The Company also committed to reimburse WEP for its reasonable travel
and out-of-pocket expenses (up to a maximum of $20,000 without prior approval)
incurred in connection with its engagement. Under the agreement, the Company
agreed indemnify WEP and its permitted assigns against all losses and expenses,
including reasonable counsel fees and expenses, arising out of the MFSNT
Acquisition or the financing, except any losses or expenses found in a final
judgment by a court of competent jurisdiction to have resulted from WEP's bad
faith, gross negligence or breach of its agreement with the Company. Mr.
Davidson subsequently left his position as Managing Director of WEP in April
1998 and WEP assigned its rights in the agreement to Mr. Davidson, who became a
Director of the Company in June 1998. On October 21, 1998, Mr. Davidson and the
Company executed a letter agreement pursuant to which the Company agreed to pay
Mr. Davidson $1,332,000 in satisfaction of amounts owing under the agreement
with WEP with respect to the MFSNT Acquisition and the related financing.
On April 24, 1998, to finance part of the non-refundable deposit for the MFSNT
Acquisition, Frazier L. Gaines, the Company's then President and Chief Executive
Officer, and Gideon D. Taylor, the Company's then Chairman of the Board of
Directors, borrowed $5.0 million from a bank on an unsecured basis. This loan
was secured by a pledge of 1,047,000 shares of Common Stock owned by Messrs.
Taylor and Gaines. On July 2, 1998, to finance an additional non-refundable
deposit on the MFSNT Acquisition purchase price, Messrs. Taylor and Gaines
borrowed an additional $4.2 million. This loan was also secured by a pledge of
1,047,009 shares of Common Stock owned by Messrs. Taylor and Gaines. On June 11,
1998, the Company repaid both of these loans as well as agreed to pay Messrs.
Taylor and Gaines $25,000 each for interest related to the loans. On July 8,
1998, Messrs. Taylor and Gaines were granted two year options to purchase
120,000 and 80,000, respectively, of the Company's Common Stock, at an exercise
price of $14.00 per share, as compensation for providing the capital necessary
to fund the initial deposits required to consummate the MFSNT Acquisition.
<PAGE>
On August 11, 1998, Messrs. Taylor and Gaines each loaned the Company $1.0
million on an unsecured basis to cover certain expenses associated with the
MFSNT Acquisition. These loans were repaid in full on August 17, 1998 and
interest of $2,200 was paid to each Messrs. Taylor and Gaines.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On October 12, 1996, the Company acquired all of the issued and outstanding
capital stock of Georgia Electric Company ("GEC"), which prior to the
acquisition was owned equally by Gerry W. and J. Barry Hall (collectively, the
"Halls"). Following the acquisition, Gerry Hall was elected to the board of
directors of the Company, and on June 12, 1997, was elected President and Chief
Executive Officer of the Company. Gerry Hall resigned as President, Chief
Executive Officer and a director of the Company on March 2, 1998. The purchase
price for the GEC acquisition was $3 million in cash, plus the issuance at the
end of each of the next five fiscal years of a number of shares of Common Stock
to be determined pursuant to a formula contained in the acquisition agreement by
dividing a dollar figure derived from GEC's actual pre-tax profits and operating
margins compared with target profits and margins for each such fiscal year by a
discounted per share price. In the event that GEC is sold by the Company prior
to the end of fiscal year 2001, the Company is obligated to issue to Gerry Hall
and Barry Hall a number of shares of Common Stock having a market value (as
determined in accordance with the contract) of $1 million for each year that
earn-out consideration remains payable. The GEC acquisition agreement was
amended in February 1998 to increase the percentage discount applicable to the
price of the Common Stock for purposes of determining the number of shares to be
issued with respect to each fiscal year and to limit the total market value of
the shares of Common Stock which could be issued under the agreement.
In November 1997, a subsidiary of the Company assumed the obligations of Ten-Ray
Utility Construction, Inc. ("Ten-Ray"), a North Carolina corporation, as
contractor under two network construction contracts and paid the costs Ten-Ray
had accrued under the contracts of approximately $131,000. On January 30, 1998,
the Company purchased from Ten-Ray certain construction equipment used in
connection with the contracts. The purchase price for the equipment was the
satisfaction of Ten-Ray's bank loans secured by the equipment in the amount of
$330,188, including principal and interest, which in the opinion of the
executives of the subsidiary was not more than the fair market value of the
equipment. Billy V. Ray, Jr., then the Company's Chief Financial Officer and
currently, the Company's Chief Executive Officer, President and Acting Chief
Financial Officer, beneficially owned approximately 7.7% of the voting stock of
Ten-Ray and had personally guaranteed the equipment loans to the bank.
On July 1, 1997, the Company entered into a six month consulting agreement with
Nelles & Associates, Inc. ("NAI"), an international telecommunications
consulting firm founded by Robert C. Nelles, a Director of the Company. The
consulting agreement provides for NAI to be paid $6,000 per month to provide
consulting services in support of the Company's business activities for eight
days per month and for Mr. Nelles to be granted options to purchase 15,000
shares of Common Stock. On January 1, 1998, the Company entered into a three
month consulting agreement with NAI which provides for NAI to be paid $2,000 per
month to provide consulting services in support of the Company's business
activities for up to three days per month and an hourly fee for additional
services. On March 6, 1998, the Company entered into a four month consulting
agreement with NAI, pursuant to which Mr. Nelles served as the interim Chief
Operating Officer of the Company for which the Company paid him consulting fees
of $12,500 per month, provided Mr. Nelles with the use of a leased automobile
and reimbursed NAI for temporary living, travel and related expenses incurred in
connection with Mr. Nelles' performance of services as interim Chief Operating
Officer.
See also "Compensation Committee Interlocks and Insider Participation" regarding
certain related party transactions with between the Company, members of the
Compensation Committee and with Mr. Frazier Gaines, the former President and
Chief Executive Officer of the Company and a Director of the Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT 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, 1998 and 1997
Consolidated Statements of Operations - Years ended October 31,
1998, 1997 and 1997
Consolidated Statements of Shareholders' Equity - Years ended October 31,
1998, 1997 and 1996
Consolidated Statements of Cash Flows - Years ended October 31,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
(a) 2. The financial statement schedule for the years ended October 31,
1998, 1997 and 1996 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
Schedules not listed above have been omitted because they are not
applicable or not required or the information required to be
25
<PAGE>
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.
EXHIBIT
NO. DESCRIPTION
-------- -----------
2.1 Asset Purchase Agreement, dated November 26, 1997, among Able
Telcom Holding Corp., Georgia Electric Company, Transportation
Safety Contractors, Inc., COMSAT RSI Acquisitions, Inc. and
COMSAT Corporation (l)
2.2 Indemnification Agreement, dated February 25, 1998, among Able
Telcom Holding Corp., Georgia Electric Company, Transportation
Safety Contractors, Inc., COMSAT RSI Acquisitions, Inc. and
COMSAT Corporation (l)
2.3 Stock Purchase Agreement, dated as of April 1, 1998, among
Able Telcom Holding Corp., James P. Patton, Rick Boyle and
Claiborne K. McLemore III (2)
2.4 Closing Memorandum and Schedule, dated April 1, 1998, among
Able Telcom Holding Corp., James P Patton, Rick Boyle and
Claiborne K. McLemore III (2)
2.5 Agreement and Plan of Merger by and among MFS Acquisition
Corp., Able Telcom Holding Corp., MFS Network Technologies,
Inc. and MFS Communications Company, Inc. dated as of April
22,1998 (9)
2.5.1 Amendment to Agreement and Plan of Merger among MFS
Acquisition Corp., Able Telcom Holding Corp., MFS Network
Technologies, Inc. and MFS Communications Company, Inc. dated
as of July 2, 1998 (10)
2.5.1.1 Amendment No. 2 dated as of July 21, 1998 to Agreement and
Plan of Merger among WS Acquisition Corp., Able Telcom Holding
Corp., MFS Network Technologies, Inc. and MFS Communications
Company, Inc. (11)
2.5.1.2 Agreement between WorldCom Network Services, Inc. and Able
Telcom Holding Corp. dated as of September 9, 1998 (13)
2.5.1.3 Agreement between WorldCom Network Services, Inc. and Able
Telcom Holding Corp. dated January 26, 1999
2.5.2 Promissory Note of Able Telcom Holding Corp. dated July 2,
1998 to MFS Communications Company, Inc. (10)
2.5.2.1 11.5% Promissory Note between Able Telcom Holding Corp. and
WorldCom Network Services, Inc. dated as of September 1, 1998
2.5.3 Stock Pledge Agreement dated as of July 2, 1998 by Able Telcom
Holding Corp. in favor of WorldCom, Inc. (10)
2.5.4 Master Services Agreement between WorldCom Network Services,
Inc. and NIFS Network Technologies, Inc. dated as of July 2,
199 8 (exhibits omitted) (11)
2.5.5 Assumption and Indemnity Agreement dated as of July 2, 1998
among Able Telcom Holding Corp., WorldCom, Inc., MFS
Communications Company, Inc., MFS Intelenet, Inc.,
MFS Datanet, Inc., MFS Telcom, Inc. and MFS Communications,
Ltd. (schedule omitted) (10)
2.5.6 License Agreement between MFS Communications Company, Inc. and
Able Telcom Holding Corp. dated as of July 2, 1998 (10)
2.5.7 Modification to Stock Option Agreement between the Company and
WorldCom, Inc. dated January 8, 1999
2.5.8 Agreement to Enter Into Stock Appreciation Rights Agreement
between the Company and WorldCom, Inc. dated January 8, 1999
2.5.9 Financing Agreement between WorldCom Network Services, Inc.
and Able Telcom Holding Corp. dated February 16, 1999
3.1 Articles of Incorporation of the Able Telcom Holding Corp., as
amended (3)(4)
3.1.1 Articles of Amendment to the Articles of Incorporation of Able
Telcom Holding Corp. (13)
3.2 Bylaws of the Able Telcom Holding Corp., as amended (3)
4.2 Specimen Common Stock Certificate (3)
4.3 Specimen Series A Preferred Stock Certificate (6)
4.4 Form of Warrant issued to Credit Suisse, First Boston and
Silverton International Fund Limited (4)
4.6 Able Telcom Holding Corp. 1995 Stock Option Plan (13)
4.7 Amendment to Able Telcom Holding Corp. 1995 Stock Option Plan,
dated April 24, 1998 (13)
4.8 Series B Convertible Preferred Stock Purchase Agreement (13)
4.9 Registration Rights Agreement for Series B Convertible
Preferred Stock Purchase Agreement and 350,000 Warrants (13)
4.10 Registration Rights Agreement for 650,000 Warrants associated
with Series B Convertible Preferred Stock Purchase Agreement
(13)
4.11 Form of Common Stock Purchase Warrants for 350,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement (13)
4.12 Form of Common Stock Purchase Warrants for 650,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement (13)
4.13 Preferred Stock Purchase Agreement by and among Able Telcom
Holding Corp., RGC International Investors, LDC, and Cotton
Communications, Inc. dated February 17, 1999
4.14 Warrant Amendment between Able Telcom Holding Corp. and
Purchasers (as defined) dated February 17, 1999
4.15 Securities Purchase Agreement by and between the Sellers, as
defined, and Cotton Communications, Inc. dated February 17,
1999
10.15 Stock Purchase Agreement between Able Telcom Holding Corp.,
Traffic Management Group, Inc., Georgia Electric Company,
Gerry W. Hall and J. Barry Hall (5)
10.16 Stock Purchase Agreement between Able Telcom Holding Corp.,
Telecommunications Services Group, Inc., Dial Communications,
Inc., William E. Newton and Sybil C. Newton (8)
10.17 Promissory Note of Able Telcom Holding Corp. Payable to
William E. Newton and Sybil C. Newton (8)
10.23 Form of Stock Purchase Agreement among Able Telcom Holding
Corp., Traffic Management Group, Inc., Georgia Electric
Company, Gerry W. Hall and Barry Hall (5)
10.25 Securities Purchase Agreements, dated as of January 6, 1998,
between Able Telcom Holding Corp. and each of the Purchasers
named therein (6)
26
<PAGE>
10.25.1 Letter Agreement dated July 2, 1998 related to Securities
Purchase Agreements dated as of January 6, 1998 (13)
10.26 Senior Secured Revolving Credit Agreement dated as of April
6,1998, between Able Telcom Holding Corp. and Suntrust Bank,
South Florida, N.A. and Bank of America, FSB (9)
10.27 Credit Agreement among Able Telcom Holding Corp., NationsBank,
N.A. and The Several Lenders from Time to Time Parties Hereto
dated as of June 11, 1998 (exhibits and schedules omitted)
(13)
10.29 Employment Agreement with Jesus G. Dominguez, dated April 27,
1998 (13)
10.30 Employment Agreement with Stacy Jenkins, dated July 16, 1998
(13)
10.32 Amendment to June 11, 1998 Credit Agreement among Able Telcom
Holding Corp., NationsBank N.A., and the Several Lenders from
Time to Time Parties thereto, dated as of June 30, 1998 (13)
10.33 Employment Agreement with Billy V Ray, Jr., dated October 1,
1998
10.34 Employment Agreement with Curtis A. "Butch" Dale, dated August
17, 1998 (14)
10.35 Financial Advisor and Placement Engagement Letter, dated April
3, 1998, between Washington Equity Partners and Able Telcom
Holding Corp. (14)
10.36 Employment Agreement with G. Vance Cartee, dated January 4,
1999
10.37 Employment Agreement with Edward Pollock, dated January 1,
1999
10.38 Employment Agreement with Frazier L. Gaines, dated November
12, 1998
10.39 Employment Agreement with Gideon D. Taylor, dated December 7,
1998
10.40 Employment Agreement with Rick Boyle, dated April 1, 1998
10.41 Financing Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999 (without
exhibits)
10.42 11.5% Non-Recourse Promissory Note between Cotton
Communications, Inc. and Able Telcom Holding Corp. dated
February 17, 1999
10.43 Stock Pledge Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999
16.1 Letter regarding change in certifying accountant (12)
21 Subsidiaries of Able Telcom Holding Corp. (13)
23.1 Consent of Ernst & Young LLP
27 Financial Data Schedule
- -------------------
(1) Incorporated by reference from an exhibit to the Company's
Current Report on Form 8-K (File No. 0-21986), dated February
25, 1998, as filed with the Commission on March 12, 1998, as
amended by Form S-KIA-1, dated May 11, 1998, as filed with the
Commission on May 11, 1998.
(2) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), dated April 1, 1998, as filed
with the Commission on April 14, 1998.
(3) Incorporated by reference from an exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-65854), as declared effective by the
Commission on February 26,1994.
(4) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), dated December 20, 1996, as
filed with the Commission on December 31, 1996.
(5) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), dated October 12, 1996, as filed
with the Commission on October 25, 1996.
(6) Incorporated by reference from an exhibit to the Company's Annual
Report on Form 10-K (File No. 0-21986) for the fiscal year ended
October 31,1997, as filed with the Commission on February 13,1998, as
amended by Form 10-KIA, as filed with the Commission on March 20,1998.
(7) Not used.
(8) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), dated December 2, 1996, as filed
with the Commission on December 13, 1996, as amended by Form 8-K/A-1,
dated February 11, 1997, as filed with the Commission on February 11,
1997.
(9) Incorporated by reference from an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended April 30,
1998, as filed with the Commission on June 14, 1998.
(10) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-K (File No. 0-21986), dated July 2, 1998, as filed
with the Commission on July 16, 1998.
(11) Incorporated by reference from an exhibit to the Company's Current
Report on Form 8-KIA (File No. 0-21986), dated July 2, 1998, as filed
with the Commission on August 3, 1998.
(12) Incorporated by reference to Exhibit I to the Company's Current Report
on Form 8-K (File No. 0-21986), dated September 7, 1998, as filed with
the Commission on September 14, 1998.
(13) Incorporated by reference to an exhibit to the Company's Quarterly
Report on Form 10-Q (File No. 0-21986), for the quarter ended July 31,
1998, as filed with the Commission on September 21, 1998, as amended by
Form 10-Q/A, as filed with the Commission on October 13,1998.
(14) Incorporated by reference to an exhibit to the Company's Form S-1 (file
no. 333-65991), as filed with the commission of October 22, 1998.
27
<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/ BILLY V. RAY, JR. March 1, 1999
----------------------------
BILLY V. RAY, JR., President and Chief Executive Officer
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>
<CAPTION>
<S> <C> <C>
SIGNATURES TITLE DATE SIGNED
/s/ BILLY V. RAY, JR. President, Chief Executive Officer and March 1, 1999
----------------------- Director (Principal Executive Officer and
BILLY V. RAY, JR. Acting Principal Financial Officer)
/s/ MICHAEL ARP Financial Vice President March 1, 1999
---------------------- (Principal Accounting Officer)
MICHAEL ARP
/s/ C. FRANK SWARTZ Chairman and Director March 1, 1999
-----------------------
C. FRANK SWARTZ
/s/ FRAZIER L. GAINES Director March 1, 1999
----------------------
FRAZIER L. GAINES
/s/ THOMAS M. DAVIDSON Director March 1, 1999
----------------------
THOMAS M. DAVIDSON
Director
----------------------
GIDEON D. TAYLOR
Director
-----------------------
JONATHAN A. BRATT
/s/ ROBERT H. YOUNG Director March 1, 1999
-----------------------
ROBERT H. YOUNG
Director
-----------------------
GERALD PYE
</TABLE>
28
<PAGE>
ABLE TELCOM HOLDING CORP.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Reports of Independent Certified Public Accountants
Consolidated Financial Statements:
Consolidated Balance Sheets - October 31, 1998 and 1997
Consolidated Statements of Operations -
Years Ended October 31, 1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity -
Years ended October 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows - Years Ended
October 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements - October 31, 1998
Financial Statement Schedule:
II. Valuation and Qualifying Accounts - Years ended
October 31, 1998, 1997, and 1996
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Able Telcom Holding Corp.:
We have audited the accompanying consolidated balance sheet of Able Telcom
Holding Corp. (a Florida Corporation) and subsidiaries as of October 31, 1998,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 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 provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Able Telcom
Holding Corp. and subsidiaries as of October 31, 1998, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The financial statement schedule listed in the
Index at Item 14(a) is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not part of the basic financial
statements. The schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Omaha, Nebraska
February 17, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
Able Telcom Holding Corp.:
We have audited the accompanying consolidated balance sheet of Able Telcom
Holding Corp. and subsidiaries (the "Company") as of October 31, 1997, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the two years in the period ended October 31, 1997. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). 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, 1997, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended October 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, 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
West Palm Beach, Florida
January 19, 1998
F-3
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--OCTOBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS 1998 1997
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,544 $ 6,230
Accounts receivable, net of allowances for bad debts of $866
and $686 at October 31, 1998 and 1997, respectively 64,159 13,399
Costs and profits in excess of billings on uncompleted contracts 105,478 5,615
Prepaid expenses and other 2,641 1,766
------- -------
Total current assets 185,822 27,010
------- -------
PROPERTY AND EQUIPMENT:
Land and buildings 4,473 1,415
Equipment, furniture and fixtures 42,522 19,982
------- -------
46,995 21,397
Less- Accumulated depreciation (14,921) (8,283)
------- ------
Property and equipment, net 32,074 13,114
------- ------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $2,162 and $1,200
at October 31, 1998 and 1997, respectively 31,374 8,341
Assets held for sale 38,750 -
Other 2,740 1,881
------- ------
Total other assets 72,864 10,222
------- -------
Total assets $ 290,760 $ 50,346
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 15,047 $ 3,154
Accounts payable and accrued liabilities 61,376 8,649
Billings in excess of costs and profits on uncompleted contracts 57,439 291
Reserves for losses on uncompleted contracts 25,390 -
Notes payable shareholders/directors 1,182 875
------- ------
Total current liabilities 160,434 12,969
Long-term debt, excluding current portion 76,047 14,140
Other 2,737 1,277
------- ------
Total liabilities 239,218 28,386
------- ------
COMMITMENTS AND CONTINGENCIES (Note 8)
CONVERTIBLE PREFERRED STOCK
Series A redeemable preferred stock, $.10 par value, 995 shares issued and
outstanding in 1997 - 6,713
Series B preferred stock, $.10 par value, (aggregate liquidation
value of $17,820,000), 4,000 shares authorized; 3,564 shares issued
and outstanding in 1998 11,325 -
------- ------
Total convertible preferred stock 11,325 6,713
------- ------
SHAREHOLDERS' EQUITY:
Preferred stock, 1,000,000 shares authorized, 5,200 shares issued - -
Common stock, $.001 par value, authorized 25,000,000 shares;
11,065,670 and 8,580,422 shares issued and outstanding at
October 31, 1998 and 1997, respectively 11 9
Additional paid-in-capital 40,564 15,096
Senior Subordinated Note warrants 1,244 -
WorldCom stock options 3,490 -
WorldCom phantom stock 606 -
Retained earnings (deficit) (5,698) 142
------- ------
Total shareholders' equity 40,217 15,247
------- ------
Total liabilities and shareholders' equity $ 290,760 $ 50,346
======== =======
</TABLE>
The accompanying notes are an integral part to these consolidated financial
statements
F-4
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- -----
<S> <C> <C> <C>
REVENUES $ 217,481 $ 86,334 $ 48,906
COSTS AND EXPENSES:
Cost of revenues 179,505 68,164 40,486
General and administrative 18,692 8,780 8,404
Depreciation 6,638 4,124 2,411
Amortization 962 408 339
Charges and transaction/translation losses related to
Latin American operations 275 17 3,553
------- ------ ------
Total costs and expenses 206,072 81,493 55,193
------- ------ ------
INCOME (LOSS) FROM OPERATIONS 11,409 4,841 (6,287)
OTHER (INCOME) EXPENSE, NET:
Interest expense, including amortization of discount of $157
in 1998 5,534 1,565 1,350
Interest and dividend income (342) (449) (270)
Other (320) (152) 32
----- ----- ------
Total other expense, net 4,872 964 1,112
----- ----- -----
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST 6,537 3,877 (7,399)
PROVISION (BENEFIT) FOR INCOME TAXES 3,405 727 (891)
----- ----- ------
INCOME (LOSS) BEFORE MINORITY INTEREST 3,132 3,150 (6,508)
MINORITY INTEREST 618 293 (598)
----- ----- ------
NET INCOME (LOSS) 2,514 2,857 (5,910)
PREFERRED DIVIDENDS (341) (260) -
BENEFICIAL CONVERSION PRIVILEGE OF PREFERRED STOCK (8,013) (1,266) -
------- ------ ------
INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (5,840) $ 1,331 $(5,910)
====== ===== =====
INCOME (LOSS) PER COMMON SHARE:
Basic $ (0.59) $ 0.16 $ (0.71)
=========== ========= ==========
Diluted $ (0.59) $ 0.16 $ (0.71)
=========== ========= ==========
WEIGHTED AVERAGE SHARES OUTSTANDING - basic 9,907,060 8,504,972 8,361,458
=========== ========= ==========
</TABLE>
The accompanying notes are an integral part to these consolidated financial
statements
F-5
<PAGE>
<TABLE>
<CAPTION>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
(in thousands, except common stock shares and amounts)
Common Stock Additional Subordinated
------------------------ Paid-In Notes
Shares Amount Capital Warrants
------------ -------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCE, November 1, 1995 8,193,212 $ 8,193 $ 12,790 $ -
Issuance of common stock to
directors in connection with acquisition 10,000 10 43 -
Change in unrealized loss on investments - - - -
Net loss - - - -
------------ -------- -------- -------
BALANCE, October 31, 1996 8,203,212 8,203 12,833 -
Issuance of common stock in connection with acquisition 108,489 108 620 -
Issuance of common stock for services 2,000 2 12 -
Issuance of common stock for exercise of options 262,240 262 732 -
Compensation recognized on stock options - - 338 -
Issuance of common stock for conversion of
convertible preferred shares 4,481 4 34 -
Changes in unrealized loss on investments - - - -
Convertible preferred dividends paid - - - -
Embedded dividend recognized on convertible
preferred shares - - - -
Tax benefit from exercise of options - - 527 -
Net income - - - -
------------ -------- -------- -------
BALANCE, October 31, 1997 8,580,422 8,579 15,096 -
Issuance of common stock for GEC earnout 204,440 204 1,278 -
Compensation expense for below market options - - 93 -
Issuance of common stock for exercise of options 351,935 352 2,071 -
Dividends on Series A preferred stock - - - -
Embedded dividend recognized on Series A
convertible preferred shares - - - -
Issuance of common stock for conversion of
Series A convertible preferred shares 920,946 921 6,817 -
Valuation of subordinated note warrants - - - 1,244
Valuation of Series B Preferred Stock warrants - - 5,400 -
Beneficial conversion privilege applicable to Series B Preferred Stock - - 7,909 -
Valuation of WorldCom options - - - -
Valuation of WorldCom phantom stock awards - - - -
Issuance of common stock for conversion of
Series B Preferred Stock 1,007,927 1,008 1,384 -
Dividends on Series B preferred stock - - - -
Tax benefit from exercise of options - - 516 -
Net income - - - -
------------ -------- -------- -------
BALANCE, October 31, 1998 11,065,670 $ 11,064 $ 40,564 $ 1,244
============ ======== ======== =======
<CAPTION>
Unrealized
Loss on Retained
WorldCom WorldCom Investments Earnings
Stock Options Phantom Stock Net of Taxes (Deficit)
------------- ------------- ------------ --------
<S> <C> <C> <C> <C>
BALANCE, November 1, 1995 $ - $ - $ (53) $ 4,721
Issuance of common stock to
directors in connection with acquisition - - - -
Change in unrealized loss on investments - - (1) -
Net loss - - - (5,910)
------- ----- ----- --------
BALANCE, October 31, 1996 - - (54) (1,189)
Issuance of common stock in connection with acquisition - - - -
Issuance of common stock for services - - - -
Issuance of common stock for exercise of options - - - -
Compensation recognized on stock options - - - -
Issuance of common stock for conversion of
convertible preferred shares - - - -
Changes in unrealized loss on investments - - 54 -
Convertible preferred dividends paid - - - (260)
Embedded dividend recognized on convertible
preferred shares - - - (1,266)
Tax benefit from exercise of options - - - -
Net income - - - 2,857
------- ----- ----- --------
BALANCE, October 31, 1997 - - - 142
Issuance of common stock for GEC earnout - - - -
Compensation expense for below market options - - - -
Issuance of common stock for exercise of options, net of tax benefit - - - -
Dividends on Series A preferred stock - - - (79)
Embedded dividend recognized on Series A
convertible preferred shares - - - (104)
Issuance of common stock for conversion of
Series A convertible preferred shares - - - -
Valuation of subordinated note warrants - - - -
Valuation of Series B Preferred Stock warrants - - - -
Beneficial conversion privilege applicable to Series B Preferred Stock - - - (7,909)
Valuation of WorldCom options 3,490 - -
Valuation of WorldCom phantom stock awards - 606 -
Issuance of common stock for conversion of
Series B Preferred Stock - - - -
Dividends on Series B preferred stock - - - (262)
Net income - - 2,514
------- ----- ----- --------
BALANCE, October 31, 1998 $ 3,490 $ 606 $ - $ (5,698)
======= ===== ===== ========
<CAPTION>
Total
--------
<S> <C>
BALANCE, November 1, 1995 $ 17,466
Issuance of common stock to
directors in connection with acquisition 43
Change in unrealized loss on investments (1)
Net loss (5,910)
--------
BALANCE, October 31, 1996 11,598
Issuance of common stock in connection with acquisition 621
Issuance of common stock for services 12
Issuance of common stock for exercise of options 732
Compensation recognized on stock options 338
Issuance of common stock for conversion of
convertible preferred shares 34
Changes in unrealized loss on investments 54
Convertible preferred dividends paid (260)
Embedded dividend recognized on convertible
preferred shares (1,266)
Tax benefit from exercise of options 527
Net income 2,857
--------
BALANCE, October 31, 1997 15,247
Issuance of common stock for GEC earnout 1,278
Compensation expense for below market options 93
Issuance of common stock for exercise of options 2,071
Dividends on Series A preferred stock (79)
Embedded dividend recognized on Series A
convertible preferred shares (104)
Issuance of common stock for conversion of
Series A convertible preferred shares 6,818
Valuation of subordinated note warrants 1,244
Valuation of Series B Preferred Stock warrants 5,400
Beneficial conversion privilege applicable to Series B Preferred Stock -
Valuation of WorldCom options 3,490
Valuation of WorldCom phantom stock awards 606
Issuance of common stock for conversion of
Series B Preferred Stock 1,385
Dividends on Series B preferred stock (262)
Tax benefit from exercise of options 516
Net income 2,514
--------
BALANCE, October 31, 1998 $ 40,217
========
</TABLE>
The accompanying notes are an integral part to these consolidated financial
statements
F-6
<PAGE>
<TABLE>
<CAPTION>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED (IN THOUSANDS):
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,514 $2,857 $(5,910)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities,
net of effects of acquisitions:
Depreciation 6,638 4,532 2,750
Amortization 962
Bad debt expense -- 160 1,094
Translation/transaction Losses 275 17 1,180
Deferred income taxes 717 727 (891)
Minority interest 618 293 (598)
Write down of Latin American assets -- -- 1,593
Compensation recognized for conversion
of stock options 93 338 --
Reduction in revenue for litigation -- (433) --
Other - net 156 10 313
------- ------ ------
11,973 8,501 (469)
Changes in assets and liabilities,
net of effects from acquisitions:
Decrease in accounts receivable 2,694 842 1,855
Increase in costs and profits in
excess of billings on
uncompleted contracts (16,987) (4,661) (829)
Decrease in inventory 2,602 118 1,871
Decrease (increase) in other current assets (268) 313 340
Decrease (increase) in other assets 1,247 (280) (287)
Increase (decrease) in accounts payable
and accrued expenses 2,273 (199) 160
Increase (decrease) in billings
in excess of costs and estimated
profits on uncompleted contracts 569 (927) 681
Increase in other liabilities 2,789 230 --
------- ------ ------
Cash Provided by Operating Activities 6,892 3,937 3,322
------- ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (9,966) (4,487) (2,557)
Net proceeds from sale of assets 90 96 129
Sales of investments 0 567 --
Cash acquired in acquisitions 4,661 404 1,761
Cash paid for acquisitions (8,681) (3,000) (3,500)
------- ------ ------
Net cash used in investing activities (13,896) (6,420) (4,167)
------- ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under lines of credit 50,518 (4,626) 1,254
Payment of shareholder/directors loans (2,925) (250) (500)
Borrowings from shareholder/directors 2,050 -- 500
Proceeds from long-term debt 10,000 11,014 4,547
Proceeds from debt to finance acquisition 10,000 3,000 3,000
Repayments on long-term debt (74,388) (9,272) (6,251)
Distributions to minority interests (502) (293) (210)
Foreign currency translation adjustment (275) (17) (779)
Proceeds from the issuance of preferred
stock, net 18,110 5,418 --
Proceeds from the exercise of stock options 2,071 732 --
Dividends paid (341) (260) --
------- ------ ------
Net cash provided by financing activities 14,318 5,446 1,561
------- ------ ------
Effect of exchange rate changes on cash
and cash equivalents -- -- (401)
Increase in cash and cash equivalents 7,314 2,963 315
Cash and cash equivalents at beginning of year 6,230 3,267 2,952
------- ------ ------
Cash and cash equivalents at end of year $13,544 $6,230 $3,267
======= ====== ======
Supplemental disclosures of cash flow information:
Valuation of warrants $ 6,644 $ -- $ --
Discount on preferred stock 7,909 -- --
Conversion of Series B Preferred Stock 1,385 -- --
Conversion of Series A Preferred Stock 6,818 -- --
Issuance of common stock for acquisition 1,278 621 43
Issuance of common stock for services -- 11 --
GEC earnout (4,595) (1,278) --
Compensation recognized on below market options 93 338 --
Valuation of below market options on acquisition 4,096 -- --
Cash paid for:
Interest 4,226 1,684 1,120
Income taxes 29 -- --
</TABLE>
F-7
<PAGE>
ABLE TELCOM HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1998
1. THE COMPANY:
Able Telcom Holding Corp. ("Able Telcom" or the "Company") develops, builds and
maintains communications systems for companies and governmental authorities. The
Company is headquartered in West Palm Beach, Florida, and operates its
subsidiaries throughout the United States, as well as in areas of South America.
The Company has three main organizational groups:
ORGANIZATIONAL GROUP SERVICES PROVIDED
Network Services Group Design, development, engineering,
installation, construction, operation and
maintenance services for telecommunications
systems
Transportation Services Group Design, development, integration,
installation, construction, project
management, maintenance and operation of
automated toll collection systems,
electronic traffic management and control
systems, and computerized manufacturing
systems
Communications Development Group Design, installation and maintenance
(Latin America) services to foreign telephone companies
Each group is comprised of subsidiaries of the Company with each having local
executive management functioning under a decentralized operating environment.
The Company's customers include local and long distance telephone companies,
utilities, cable television operators, financial institutions, universities,
medical facilities, correctional facilities and local, state and federal
governments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements are prepared on an accrual
basis and include the accounts of the Company and its subsidiaries. A
substantial portion of consolidated total assets, liabilities and revenues are
generated by one subsidiary of the Company, MFS Network Technologies, Inc.
(MFSNT) which was acquired during the fiscal year ended October 31, 1998.
Operations for subsidiaries acquired in purchase business combinations are
included in the consolidated results of operations since the date of
acquisition. All material intercompany accounts and
F-8
<PAGE>
transactions have been eliminated. Certain items in the 1997 and 1996
consolidated financial statements have been reclassified to conform to the 1998
presentation.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all unrestricted highly liquid investments with original
maturities of three months or less to be cash equivalents.
ASSETS HELD FOR SALE
Assets held for sale represent certain assets acquired in connection with the
acquisition of MFSNT which are held for sale and are reported at the estimated
fair value less costs to sell.
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 which
generally range from five to ten years.
GOODWILL
Goodwill represents the amount by which the purchase price of businesses
acquired exceeds the fair market value of the net assets acquired under the
purchase method of accounting. Goodwill is being amortized on a straight-line
basis over 20 years.
The Company, at each balance sheet date, evaluates the recoverability of the
carrying amount of goodwill if circumstances suggest that it has been impaired.
If this review indicates that goodwill is not recoverable, as principally
determined based on the estimated undiscounted cash flows of the entity which
gave rise to the goodwill, over the remaining amortization period, then the
Company's carrying value of the goodwill is reduced by the estimated shortfall
in cash flows.
F-9
<PAGE>
STOCK BASED COMPENSATION
The Company accounts for its stock based compensation plan under Accounting
Principle Board Opinion No. 25, ("APB No. 25")"Accounting for Stock Issued to
Employees," and relating interpretations, and follows the disclosure provisions
of Statement of Financial Accounting Standards ("SFAS") No. 123, "Acounting for
Stock-Based Compensation." See Note 12.
REVENUE RECOGNITION
Revenues from "per unit basis" contracts are recognized at the time services are
rendered and accepted by the customer. Revenues from construction contracts and
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. Generally, the determination of substantial contract completion is made
by the project owner.
Changes in job performance, condition and the estimated profitability may result
in changes in the estimates for project costs and profits. Revised estimates are
recognized in the period in which the changes are determined.
When the current estimates of total contract revenue and contract cost indicates
a loss ("loss jobs"), a provision for the entire loss on the contract is made.
During the fiscal year ended October 31, 1998, costs on loss jobs of
approximately $15.1 million were charged to reserves for losses on uncompleted
contracts which relate primarily to loss contracts acquired in connection with
the acquisition of MFSNT.
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. Nonmonetary assets and liabilities, and related
income statement amounts are remeasured at historical exchange rates.
INCOME TAXES
The Company files consolidated federal income tax returns. The Company
recognizes deferred tax assets and liabilities based on the difference between
the financial statement and tax bases of assets and liabilities using estimated
tax rates in effect for the year in which the differences are expected to
reverse.
F-10
<PAGE>
INCOME (LOSS) PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share" ("SFAS No. 128"), which specifies the computation,
presentation and disclosure requirements for earnings per share (EPS). SFAS No.
128 is effective for periods ending after December 15, 1997, and requires
retroactive restatement of EPS for all prior periods presented. The statement
replaces the previous "primary earnings per share" computation with a "basic
earnings per share" and redefines the "diluted earnings per share" computation.
The difference between the Company's weighted average shares outstanding and
diluted shares outstanding is due to the dilutive effect of stock options and
convertible securities. There are no significant differences in the numerator of
the Company's computations of basic and diluted earnings per share for any
period presented. The effect of securities that could dilute basic earnings per
share would be antidilutive for all periods presented. The Company has
potentially dilutive securities that could have a dilutive effect in the future.
Those securities include warrants related to the Series A Preferred Stock,
Series B Preferred Stock, stock options, warrants and phantom stock awards.
FAIR VALUE FINANCIAL INSTRUMENTS
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
values of lines-of-credit and long-term debt approximate their carrying amount
since the currently effective rates reflect market rates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 130 - In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes standards for reporting and
display of comprehensive income and its components in a full set of financial
statements. This statement is effective for fiscal years beginning after
December 15, 1997. Companies are also required to report comparative totals for
comprehensive income in interim reports. The Company will report comprehensive
income commencing in fiscal year 1999.
SFAS No. 131 - In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information". This
statement requires disclosures for each segment that are similar to those
required under current standards with the addition of quarterly disclosure
requirements and more specific and detailed geographic disclosures especially by
countries as opposed to broad geographic regions. The provisions of SFAS No. 131
are effective for fiscal years beginning after December 15, 1997. The Company
will adopt this statement in the fiscal year 1999.
SFAS No. 133 - In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and for Hedging Activities." This statement revises the
accounting for the recognition and measurement of derivatives and hedging
transactions and is effective for fiscal years beginning after June 15, 1999.
The Company does not anticipate the early adoption of this statement and has not
determined the impact it will have on the consolidated financial statements.
3. ACQUISITIONS
On July 2, 1998, the Company acquired the network construction and
transportation systems business of MFSNT from WorldCom, Inc. ("WorldCom")
pursuant to a merger agreement dated April 26, 1998 ("Plan of Merger"). On
September 9, 1998, the Company and WorldCom finalized the terms of the Plan of
Merger through the execution of an amended agreement. The acquisition of MFSNT
was accounted for using the purchase method of accounting at a total price of
approximately $67.5 million, as described below.
In conjunction with the acquisition of MFSNT, the Company granted an option to
WorldCom (the "WorldCom Option") to purchase up to 2,000,000 shares of the
Company's common stock, at an exercise price of $7.00 per share, but subject to
a 1,817,941 share maximum limitation, and the right to receive upon satisfaction
of certain conditions phantom stock awards (the "Phantom Stock Awards")
equivalent to 600,000 shares of common stock, payable in cash, stock, or a
combination of both at the Company's option. The WorldCom Phantom Stock Awards
are exercisable only on the following three days: July 2, 1999, July 2, 2000, or
July 2, 2001. WorldCom will be entitled to receive any appreciation of the
Common Stock over a base price of $5 3/32 per share, but in no event shall the
maximum payment exceed $25.00 per share. The fair values of the WorldCom Option
and Phantom Stock Awards were estimated at the date of grant at $3.5 million and
$0.6 million, respectively, and are included as a component of the total
consideration paid for the acquisition of MFSNT.
Subsequent to October 31, 1998, the Company and WorldCom agreed to convert the
WorldCom Option to stock appreciation rights with similar terms and provisions,
except that the stock appreciation rights provide for the payment of cash to
WorldCom based upon the appreciation of the Company's common stock over a base
price of $7.00 per share. The stock appreciation rights may revert back to the
Option if certain shareholder approvals are received.
The purchase price for MFSNT was determined as follows (in millions):
Contract price $58.8
Transaction related costs 4.6
WorldCom Option 3.5
WorldCom Phantom Stock Awards .6
-----
Total Purchase Price $67.5
=====
F-11
<PAGE>
The Company allocated the purchase price to the assets acquired and the
liabilities assumed based on the fair value of those assets and liabilities as
follows (in millions):
Cash and accounts receivable $47.0
Costs and profits in excess billing on
uncompleted contracts 93.7
Assets held for sale 38.8
Prepaid expenses 1.0
Property 5.7
Goodwill(1) 16.5
Accounts payable (13.7)
Billings in excess of costs and profits
on uncompleted contracts (56.6)
Reserve for losses on uncompleted contracts (40.5)
Accrued restructuring costs(2) (2.0)
Property taxes payable (15.0)
Other accrued liabilities(3) (7.4)
-----
Total allocated purchase price $67.5
=====
- -------------
(1) Goodwill is being amortized on a straight-line basis over 20 years.
(2) Accrued restructuring costs related primarily to severance and benefit costs
associated with the involuntary termination of employees pursuant to an
approved restructuring plan. During the fiscal year ended October 31, 1998,
approximately $1.7 million was charged against this reserve.
(3) Includes allowances for costs related to litigation and claims of $5.0
million which, according to the Plan of Merger, is payable to WorldCom in
the event specified litigation costs and claims are not paid by the Company.
In conjunction with the acquisition of MFSNT, the Company entered into a
five-year agreement with WorldCom to provide telecommunications infrastructure
services to WorldCom (the "WorldCom Master Services Agreement") for a minimum of
$40.0 million per year, provided that the aggregate sum payable to MFSNT shall
be not less than $325.0 million, including a fee of 12 percent of reimbursable
costs under the agreement ("Aggregate Sum"). If MFSNT declines any of the first
$130.0 million of contract work in any year of the agreement, the value of the
declined work reduces the Aggregate Sum. MFSNT has agreed that WorldCom Network
will have met all of its obligations to MFSNT to the extent that payments to
MFSNT reach an aggregate of $500.0 million at any time during the five-year
term. During the fiscal year ended October 31, 1998, the Company recognized
revenues of approximately $30.3 million from the WorldCom Master Services
Agreement.
F-12
<PAGE>
The Company is entitled to use the name "MFSNT" during the 18-month transition
period commencing July 2, 1998.
PATTON MANAGEMENT CORPORATION
On April 1, 1998, the Company purchased all of the outstanding common stock of
Patton Management Corporation ("Patton") for a total purchase price of
approximately $4.0 million. The acquisition was accounted for using the purchase
method of accounting. Goodwill of approximately $2.8 million was recorded and is
being amortized on a straight-line basis over 20 years.
DIAL COMMUNICATIONS, INC.
On December 2, 1996, Able acquired all the outstanding common stock of Dial
Communications, Inc. (Dial). As consideration, the Company paid $3.0 million in
cash, issued 108,489 shares of common stock (fair value of $0.6 million) and
issued a $0.9 million promissory note with a three year term bearing interest
at Prime plus 1/2 percent. 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. Goodwill of $1.5 million
was recorded in this transaction which is being amortized over 20 years using
the straight-line method.
F-13
<PAGE>
GEORGIA ELECTRIC COMPANY
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 $3.0 million in cash. Under the terms of
the earn-out provision of the acquisition agreement, the Company will issue
shares of common stock over a five year period beginning in fiscal 1997,
contingent upon the operating performance of GEC and the market value of the
Company's stock. Such amounts will be accounted for as purchase price
adjustments. 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 Company recorded goodwill of $1.3 million at October 31, 1997 and additional
goodwill of $4.6 million at October 31, 1998 as a result of additional purchase
price due to the former owner of GEC under the terms of the earn-out provisions
of the acquisition agreement. The goodwill is being amortized over 20 years
using the straight-line method. Corresponding amounts are reflected as accounts
payable and accrued liabilities in the consolidated balance sheets pending the
issuance of the Company's common stock.
F-14
<PAGE>
H. C. CONNELL, INC.
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 $0.5 million in cash and issued a $1.9 million
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.
F-15
<PAGE>
Pro Forma Financial Information (Unaudited)
Unaudited pro forma financial information for the Company is presented below as
if the Company's acquisitions had taken place as of November 1, for each of the
respective years (in thousands, except per share amounts):
Years Ended October 31,
------------------------
1998 1997 1996
---- ---- ----
Revenues $401,400 $457,820 $85,095
Net loss (29,993) (14,127) (1,346)
Loss applicable to common
stock (38,347) (15,653) (1,346)
Loss applicable to common
stock per share (3.87) (1.84) (.17)
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.
4. ACQUISITION OF COMSAT CONTRACTS:
On February 25, 1998, GEC acquired 12 contracts (the "COMSAT Contracts") with
the Texas Department of Transportation from CRSI Acquisition, Inc., a subsidiary
of COMSAT Corporation ("COMSAT"). The COMSAT Contracts are for the installation
of intelligent traffic management systems and the design and construction of
wireless communication networks. In exchange for assuming the obligations to
perform under the COMSAT Contracts, GEC received consideration from COMSAT of
approximately $15.0 million.
During the fiscal year ended October 31, 1998, the Company recognized revenues
and cost of revenues related to the COMSAT contracts of $19.8 million and $10.7
million, respectively. At October 31, 1998, seven of the COMSAT Contracts were
substantially complete.
F-16
<PAGE>
5. UNCOMPLETED CONTRACTS:
Uncompleted contracts consist of the following at October 31, (in thousands):
1998 1997
----- ----
Costs incurred on uncompleted contracts $116,073 $43,237
Earnings recognized on uncompleted contracts 29,086 7,361
------ ------
Total 145,159 50,598
Less billings to date (97,120) (45,274)
------- ------
Net $ 48,039 $ 5,324
======== ========
Included in the accompanying balance sheets under the following headings at
October 31, (in thousands):
1998 1997
---- ----
Costs and profits in excess of billings on
uncompleted contracts $105,478 $5,615
Billings in excess of costs and profits on
uncompleted contracts 57,439 291
-------- ------
Net $ 48,039 $5,324
======== ======
6. ASSETS HELD FOR SALE:
Assets held for sale consist of certain fiber optic conduit and an interest in
Kanas Telcom, Inc. ("Kanas") whose primary asset is a telecommunications network
along the Alaskan pipeline (the "Alyeska Project"). These assets were acquired
in connection with the acquisition of MFSNT and are reflected in the
accompanying October 31, 1998 consolidated balance sheet at their estimated fair
value less costs to sell. Subsequent to October 31, 1998, the Company negotiated
the sale of the fiber optic conduit for approximately $26.0 million which
approximated the October 31, 1998 carrying value.
F-17
<PAGE>
7. DEBT:
The Company's debt consist of the following at October 31, (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ---
<S> <C> <C>
Note payable to bank under Revolving Credit Facility, maturing on
June 20, 2001, interest payment dates and rates vary (7.69 percent
at October 31, 1998), secured by the Company's existing and future
restricted subsidiaries, excluding MFSNT $ 35,000 $ -
Note payable to WorldCom maturing on December 15, 2000, interest is
payable quarterly at an annual rate of 11.5 percent 30,000 -
Senior Subordinated Notes, annual payments of $5.0 million on January 6,
2004 and 2005, 12 percent interest per annum, in arrears, paid
semi-annually 10,000 -
Notes payable to a bank, payable in monthly installments aggregating
approximately $47,161, interest payable monthly ranging from
2.0 to 8.75 percent secured by substantially all the assets of
the Company 491 3,560
Notes payable to former owner of Dial payable in monthly installments
of principal and interest of 8.75 percent at October 31, 1998 369 669
Bank lines of credit, $6.0 million maturing on March 1, 1998, interest
payable monthly at prime (8.75 percent at October 31, 1997) secured
by substantially all the assets of the Company - 6,000
Notes payable to banks, payable in monthly installments of principal and
interest of 8.5 percent at October 31, 1997, secured by real and
personal property of GEC - 2,500
Mortgage note payable to a bank, payable in monthly installments
of $1,604 plus interest at prime (8.75 percent at October 31, 1997) - 269
Notes payable to bank, payable in monthly installments
of principal and interest at prime (8.75 percent at October 31,
1997), secured by real and personal property of Dial - 2,876
Notes payable to banks, payable in monthly installments of
principal and interest at prime (8.75 percent at
October 31, 1997), secured by related equipment - 385
Notes payable to bank, payable in monthly installments of
principal and interest at prime (8.75 percent at October 31,
1997), secured by related equipment - 511
------ -------
75,860 16,770
Property taxes payable under certain contractual agreements at the
present value of estimated amounts payable over 20 years discounted
at 15 percent, payments to commence in fiscal year 1999 15,000 -
Capital leases 1,321 524
------ -------
92,181 17,294
Less- Discount on Senior Subordinated Notes (1,087) -
------ -------
91,094 17,294
Less- Current portion (15,047) (3,154)
------ -------
Long-term debt, excluding current portion $ 76,047 $14,140
====== =======
</TABLE>
F-18
<PAGE>
CREDIT FACILITIES
On April 6, 1998, the Company obtained a $25.0 million three-year senior secured
revolving credit facility (the "Credit Facility") with a $2.0 million sub-limit
for the issuance of standby letter(s) of credit. The Credit Facility allowed the
Company to select an interest rate based upon the prime rate or on a short-term
LIBOR, in each case, plus an applicable margin, with respect to each draw the
Company made thereunder. Interest was payable monthly in arrears on base rate
advances and at the expiration of each interest period for LIBOR advances. The
Credit Facility contained certain covenants which required, among other
conditions, that the Company maintain certain net worth, minimum fixed charge
coverage and limitations on total debt, and was secured by a perfected first
priority security interest on all tangible assets of the Company. The proceeds
of the Credit Facility were used to finance working capital requirements and for
other general corporate purposes, including acquisitions and capital
expenditures, not to exceed $15.0 million, associated with the Company's overall
strategic plan. On June 11, 1998, this amount was repaid with proceeds from the
Company's New Credit Facility defined below.
On June 11, 1998, the Company replaced the Credit Facility with a new $35.0
million three-year senior secured revolving credit facility ("New Credit
Facility") with a $5.0 million sub-limit for the issuance of standby letter(s)
of credit. The New Credit Facility allows the Company to select an interest rate
based upon the prime rate or on a short-term LIBOR, in each case plus an
applicable margin, with respect to each draw the Company makes thereunder.
Interest is payable monthly in arrears on base rate advances and at the
expiration of each interest period for LIBOR advances. The New Credit Facility
contains certain financial covenants which require, among other conditions, that
the Company maintain certain minimum ratios, including current and debt
leverage, minimum fixed charge coverage, interest coverage, as well as
limitations on total debt. The New Credit Facility is secured by a perfected
first priority security interest on all tangible assets of the Company and a
pledge of the shares of stock of each of the Company's subsidiaries operating in
the United States. On June 30, 1998, the New Credit Facility was amended to
include (i) the Company's acquisition of MFSNT and the related financing of such
transaction, (ii) changes in financial covenants related thereto, and (iii)
other amendments relating to investments, pledging and intercompany matters. At
October 31, 1998 and thereafter, the Company was in violation of certain of the
covenants in the New Credit Facility which were subsequently waived through
November 1, 1999.
WORLDCOM NOTE:
In conjunction with the acquisition of MFSNT, the Company executed a $30.0
million promissory note to WorldCom bearing interest of 11.5 percent per year
(the "WorldCom Note").
The principal amount of the WorldCom Note is to be repaid in part by applying a
portion of certain fees (i) due under the WorldCom Master Services Agreement and
(ii) received by the Company in connection with the sale and installation of
certain fiber optic conduit projects. Pursuant to an agreement, the Company has
pledged all of the shares of capital stock in MFSNT to WorldCom to secure the
Company's obligations under the WorldCom Note.
The Company has classified $13.2 million of the WorldCom Note as a current
liability based upon the estimates of the fiscal year 1999 repayments resulting
from proceeds under the WorldCom Master Services Agreement and the sale of the
fiber optic conduit.
The WorldCom Note provides for covenants of which the Company was in compliance
at October 31, 1998. Upon noncompliance or an event of default, the entire
balance of the WorldCom Note shall automatically become due and payable, subject
to certain subordination provisions. In addition, remedies available to WorldCom
include the following:
/bullet/ Acquire all of the stock in MFSNT.
/bullet/ Keep all principal and interest already paid under the WorldCom Note.
/bullet/ Require an 18 percent annual default rate of interest.
/bullet/ Cause WorldCom to apply 12 percent of the payment it owes to the
Company at the time of default under the WorldCom Master Services
Agreement to the outstanding principal and interest due under the
WorldCom Note.
In addition, if the WorldCom Note is not repaid in full by December 15, 2000,
it is anticipated that WorldCom will be able to:
/bullet/ Reduce the minimum yearly and aggregate revenues under the WorldCom
Master Services Agreement.
/bullet/ Refuse to give additional work under the WorldCom Master Service
Agreement while in default.
SENIOR SUBORDINATED NOTES
Effective January 6, 1998, the Company issued $10.0 million of unsecured 12
percent Senior Subordinated Notes due January 6, 2005 (the "Senior Subordinated
Notes") with detachable warrants to purchase 409,505 shares of common stock at a
price of $8.25 per share, which were valued at approximately $1.2 million
resulting in a corresponding discount applicable to the Senior Subordinated
Notes which is being amortized to interest expense over the life of such notes.
The agreement, pursuant to which the Senior Subordinated Notes were issued,
contains covenants which require, among other conditions, that the Company
maintain certain tangible net worth, minimum fixed charge coverage and
limitations on total debt and which limit the Company's ability to pay dividends
and make certain other payments, make investments and sell assets or
subsidiaries. At October 31, 1998, the Company was in violation of certain of
the covenants in the Senior Subordinated Note agreement. These notes were
purchased from the holder of these notes subsequent to October 31, 1998, which
will be accounted for as a redemption by the Company. See Note 17.
OTHER BORROWINGS
On June 1, 1997, the Company entered into a $6.0 million Line of Credit Facility
(the "Line of Credit"). The Line of Credit was due March 1, 1998 and was repaid
in 1998.
AGGREGATE MATURITIES
The aggregate maturities of long-term debt and capital leases for years
subsequent to October 31, 1998, are as follows:
1999 $ 15,047
2000 18,225
2001 36,021
2002 935
2003 872
Thereafter 21,081
--------
$92,181
========
F-19
<PAGE>
8. COMMITMENTS AND CONTINGENCIES:
F-20
<PAGE>
LITIGATION
On May 21, 1998, SIRIT Technologies, Inc. ("SIRIT") filed a lawsuit in the
United States District Court for the Southern District of Florida, against the
Company and Thomas M. Davidson, who has since become a member of the Company's
Board of Directors. SIRIT asserts claims against the Company for tortuous
interference, fraudulent inducement, negligent misrepresentation and breach of
contract in connection with the Company's agreement to purchase the shares of
MFSNT and seeks injunction relief and compensatory damages in excess of $100.0
million.
On September 10, 1998, Shipping Financial Services Corp. ("SFSC") filed a
lawsuit in the United States District Court for the Southern District of Florida
against the Company, and certain of its officers. SFSC asserts claims under the
federal securities laws against the Company and four of its officers that the
defendants allegedly caused the Company to falsely represent and mislead the
public with respect to two acquisitions, COMSAT and MFSNT, and the ongoing
financial condition of the Company as a result of the acquisitions and the
related financing of those acquisitions. SFSC seeks certification as a class
action on behalf of itself and all others similarly situated and seeks
unspecified damages and attorneys' fees.
The Company is subject to a number of shareholder and other lawsuits and claims
for various amounts which arise out of the normal course of its business. The
Company intends to vigorously defend itself in these matters. The disposition of
all pending lawsuits and claims is not determinable and may have a material
adverse effect on the Company's financial position.
KANAS GUARANTY AGREEMENT
In conjunction with the acquisition of MFSNT, the Company has agreed to
guarantee the payment obligations of Kanas under its credit agreement. The
aggregate commitment of the lenders under this agreement is $85.4 million, and
the purpose of the Kanas Credit Agreement is to provide the funds necessary to
complete the Alyeska Project.
CONTRACTS
The Company has and will continue to execute various construction and other
contracts which may require the Company to, among other items, maintain specific
financial parameters, meet specific milestones and post adequate collateral
generally in the form of performance bonds. Failure by the Company to meet its
obligation under these contracts may result in the loss of the contract and
subject the Company to litigation and various claims, including liquidated
damages.
F-21
<PAGE>
LEASED PROPERTIES
As of October 31, 1998, the Company leased office space and equipment under
various noncancelable long-term operating lease arrangements.
Rental expense for operating leases amounted to $2.4 million, $0.8 million and
$0.6 million for the fiscal years ended October 31, 1998, 1997 and 1996,
respectively.
During fiscal year 1998, the Company leased certain equipment under capitalized
lease agreements which have been included in Property and Equipment. Cost
and accumulated amortization of such assets as of October 31, 1998, totaled $3.2
million and $1.8 million, respectively.
Future minimum lease payments required under operating and capital leases with
initial terms in excess of one year are as follows (in thousands):
CAPITAL OPERATING
YEARS ENDING OCTOBER 31, LEASES LEASES
-------- ----------
1999 $ 788 $3,177
2000 454 1,738
2001 149 1,238
2002 64 1,125
2003 - 625
Thereafter - 416
------ ------
Total minimum lease payments $1,455 $8,319
====== ======
Present value of net minimum lease
payments $1,321
Less current installments of
obligations under capital leases 706
------
Obligations under capital leases,
excluding current installments $ 615
======
F-22
<PAGE>
9. PREFERRED STOCK:
SERIES A PREFERRED
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 "Series A 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 $6.0 million. Each share of Series A Preferred Stock was convertible
into shares of the Company's common stock after April 30, 1997, at the lesser of
$9.82 per share or at a discount (increased to a maximum of 20 percent for
conversions after December 20, 1997) of the average closing bid price of a share
of common stock for three days proceeding the date of conversion. The Company
recognized the discount attributable to the beneficial conversion privilege of
approximately $1.3 million by accreting the amount from the date of issuance,
December 20, 1996, through the last date the discount rate increase can occur,
December 20, 1997, as an adjustment of net income attributable to common
shareholders. This accretion adjustment, which also represents the adjustment
needed to accrete to the redemption value of the Preferred Stock, resulted in a
charge to retained earnings and accompanying credit to the Preferred Stock. The
Preferred Stock accrues dividends at an annual rate of five percent and is
payable quarterly in arrears in cash or through a dividend of additional shares
of Preferred Stock.
During fiscal 1998, all remaining Series A Preferred Stock was converted into
common stock pursuant to the terms thereof and the related number of warrants
was reduced to 62,000, due to either conversion or forfeiture.
SERIES B PREFERRED
Effective June 30, 1998 (the "Closing"), the Company completed a private
offering (the "Offering") of 4,000 shares of $0.10 par value, nonvoting Series B
Convertible Preferred Stock (the "Series B Preferred Stock") which bear annual
dividends of 4 percent, and warrants to purchase 1,000,000 shares of the
Company's common stock at $19.80 per share for a period of five years from the
date of grant (the "Warrants"). Net proceeds from the Offering totaled $18.1
million. In general, the conversion amount of each share of Series B Preferred
Stock is convertible into shares of the Company's common stock commencing on
June 30, 1998, at 97 percent of the lesser of the (i) average of the low trading
prices for any three days during the twenty-two (22) trading days immediately
preceding the conversion date, or (ii) the low trading price on the day
immediately preceding the conversion date, subject to a minimum equal to 95
percent of such conversion price. The conversion amount of each share of Series
B Preferred Stock is equal to $5,000 plus any unpaid dividends thereon. Unless
waived by a holder on not less than 61 days prior written notice, no holder may
convert an amount which would result in such holders and its affiliates'
beneficial ownership exceeding 4.99 percent of the then outstanding common stock
of the Company.
F-23
<PAGE>
Of the $18.1 million of proceeds $5.4 million was assigned to the value of the
warrants and $12.7 million was assigned as the Series B Preferred Stock. The
warrants are exercisable for a five-year period commencing June 30, 1998. In
addition, approximately $7.9 million was assigned to the beneficial conversion
privilege and has been reflected as a reduction in income available to common
stock for the fiscal year ended October 31, 1998.
As of October 31, 1998, 436 shares of the Series B Preferred Stock were
converted into 1,007,927 shares of common stock at a price of $2.17 per share.
Subsequent to October 31, 1998, 2,785 shares were acquired from the holders of
this stock by an affiliate of the Company. See Note 17.
The Series B Preferred Stock agreements contain certain covenants including
registration rights and limitations on common stock dividends. Subsequent to
October 31, 1998, the Company was in violation of certain of the covenants
related primarily to registration rights and intends to complete the required
registration statement in the fiscal year 1999. The Series B Preferred Stock
agreements provide for mandatory redemption at amounts up to 130% of the
liquidation value under certain circumstances.
10. IMPAIRMENT OF LATIN AMERICAN OPERATIONS
During the second quarter of fiscal 1996, the Company identified circumstances
that suggested the carrying value of goodwill related to its Brazilian
telecommunications company had been impaired. These included continuing losses
from operations, consistent failure to meet budgeted operating results despite
the Company's attempts to improve performance and the Company's resulting
decision during the second quarter of 1996 to substantially curtail its
telecommunications maintenance and construction operations. As a result, the
Company estimated the expected income to be derived in future periods and the
expected undiscounted future cash flows of the Brazilian telecommunications
company. The results indicated that goodwill would not be recovered.
Accordingly, during the second quarter, the carrying value of goodwill related
to this acquisition was reduced from $447,010 to zero. This charge is included
in "Charges and transaction/translation losses related to Latin American
operations" in the Consolidated Statement of Operations for fiscal year 1997.
11. INCOME TAXES:
An analysis of the components of income (loss) before income taxes and minority
interest and the related provision (benefit) for income taxes is presented below
(in thousands):
1998 1997 1996
------ ------- -------
Domestic $6,084 $3,304 $(3,770)
Foreign 453 573 (3,629)
------ ------ -------
$6,537 $3,877 $(7,399)
====== ====== ========
Provision (benefit) for
income taxes:
Federal
Current $1,937 $ - $ -
Deferred 792 657 (969)
State
Current 751 - -
Deferred (75) 70 (167)
Foreign
Current - - -
Deferred - - 245
------ ------ -------
Provision (benefit) for income
taxes $3,405 $ 727 $ (891)
====== ====== ========
Reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate is as follows:
1998 1997 1996
---- ---- ----
Provision (benefit) tax at
federal statutory rate 34% 34% (34)%
State income tax, net 7 .2 4
Non-deductible goodwill 4 4 2
Reduction in valuation
Allowance - - (1)
Foreign operations, net 4 (20) 22
Other items, net 3 3.8 (5)
-- --- ---
Effective income tax rate 52% 22% (12)%
== === ===
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
1998 1997
------ ------
Deferred tax assets-
Reserve for bad debts $ 312 $ 135
Net operating loss carryforward - 1,143
Foreign tax credit carryforwards - 424
Other 747 69
------ ------
1,059 1,771
------ ------
Deferred tax liabilities-
Plant, property and equipment (755) (660)
Investment in foreign subsidiaries - (129)
Other (39) -
------ ------
(794) (789)
------ ------
Net deferred tax asset $ 265 $ 982
====== ======
On October 31, 1997, the Company had Federal net operating loss carryforwards
of approximately $3.3 million which were fully utilized in 1998.
F-24
<PAGE>
12. STOCK OPTIONS:
In fiscal 1996, the Company's shareholders adopted a stock option plan for the
issuance of up to 550,000 shares which included provisions for both incentive
and nonqualified stock options (the Plan) and which expires on September 19,
2005. Salaried employees are eligible to receive both incentive and nonqualified
stock options, except that employees of the Company may not receive incentive
stock options if at the date of grant they own more than ten percent (10%) of
the Company's outstanding stock, unless (i) the incentive stock options are
granted at an option price at least equal to 110 percent of the fair market
value of the Company's common stock at the date of grant, and (ii) the options
are not exercisable after five years from the date of the grant. Grants of
incentive stock options are also limited under the Plan to the extent that the
aggregate fair market value at the date of grant is exercisable for the first
time by an employee of the Company during any calendar year in an amount which
exceeds $100,000. Nonemployee directors who do not own more than five percent
(5%) of any class of the Company's outstanding stock, consultants and advisors
are eligible to receive nonqualified stock options under the Plan.
The Plan specifies that all options must be granted at a price which is equal to
or in excess of the fair market value of the Company's common stock, determined
in accordance with the Plan (the average closing price of the Company's common
stock for the ten (10) business days immediately preceding the date of grant)
and are not transferable other than at the death of the optionee. Incentive
stock options generally become exercisable over a three-year period in equal
installments beginning in the year
F-25
<PAGE>
after the date of grant, while nonqualified stock options are exercisable, as
determined by the plan administrator described below. The Plan is currently
administered by the Company's Board of Directors, although the Plan provides
that a committee of disinterested persons appointed by the Board of Directors
may also administer the Plan.
On April 24, 1998, the shareholders increased the number of shares issuable
under the Plan to 1,300,000 and made certain other amendments to the Plan which
relate primarily to the issuance of restricted stock awards.
A summary of the Company's stock option activity under the Plan, and related
information for the period from October 31, 1996, through October 31, 1998,
follows:
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ----------
Options Outstanding at
October 31, 1996 160,000 $5.75 - $6.875
Grants 323,500 6.00 - 7.813
Exercises (71,740) 6.00 - 6.875
Cancellations (39,320) 5.875 - 7.813
Option Outstanding at
October 31, 1997 372,440 6.00 - 7.813
Grants 592,000 5.34 - 14.00
Exercises (211,935) 5.34 - 7.813
Cancellations (88,030) 6.375 - 7.813
--------------------------------
Options Outstanding at
October 31, 1998 664,475 6.20 - 14.00
================================
In addition, stock options have been granted to certain officers prior to the
adoption of the Plan and to certain employees of the Company outside of the
Plan. During fiscal 1992, an option to purchase 260,000 shares of the Company's
common stock at $0.05 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 $0.50 per share and a financial consultant for the
Company was granted a total of 200,000 shares at an average price of $3.38 per
option, all of which were exercised prior to October 31, 1996. During fiscal
1995, options to purchase 100,000 shares at the fair market value of $4.83 per
share were granted to an officer, pursuant to an employment agreement. During
fiscal 1996, options to purchase 40,000 were granted to an employee at an option
price of $6.44 per share, which was above the fair market value at the date of
grant ($6.00). During fiscal 1998, options to purchase 160,000 shares of the
Company's common stock were granted to members of the Company's Board of
Directors at option prices of $6.20 or $11 15/16 per share, and 150,000 options
were granted to certain employees of the Company at an option price of $14.00
per share.
F-26
<PAGE>
A summary of the Company's stock option activity outside the Plan, and related
information for the period from October 31, 1996, through October 31, 1998,
follows:
NUMBER OF OPTION PRICE
SHARES PER SHARE
-------- -----------
Options Outstanding at
October 31, 1996 300,500 $0.05 - $6.44
Grants - -
Exercises (190,500) 0.05 - 4.83
Cancellations - -
Option Outstanding at
October 31, 1997 110,000 0.05 - 6.44
Grants 310,000 6.20 - 14.00
Exercises (110,000) 0.05 - 6.44
Cancellations - -
--------------------------------
Options Outstanding at
October 31, 1998 310,000 6.20 - 14.00
================================
The estimated average remaining life of the stock options in the Plan and
outside the Plan is approximately 3.5 years and 6 years, respectively.
Subsequent to October 31, 1998, in an effort to correct certain of the actions
taken by the Company's Board of Directors in order to maintain compliance with
the Plan, as amended, the Board of Director's rescinded certain of the above
stock option grants, or 530,000 options under the Plan and 310,000 options
outside the Plan, and reissued these options at the calculated fair market value
on December 31, 1998, as well as shortened certain of the expiration dates of
the options. In addition, subsequent to October 31, 1998, the Board of Directors
of the Company granted an additional 162,500 stock options under the Plan and
1,050,000 options outside the Plan to employees of the Company.
Compensation expense associated with options issued at an option price less than
fair market value for the fiscal year ended October 31, 1998 totaled $0.1
million. For the fiscal years ended October 31, 1997 and 1996, the Company did
not have any compensation expense associated with stock options.
FASB issued SFAS No. 123 in 1995, which requires expanded disclosures of stock
based compensation arrangements with employees and encourages compensation cost
to be measured based on the fair value of the equity instrument. Under SFAS No.
123, companies are permitted to apply APB No. 25 which recognizes compensation
cost based on the intrinsic value of the equity instrument awarded. The Company
has elected to continue to apply APB No. 25. Under APB No. 25, to the extent the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized. The following is the pro forma effect on net income (loss) and
earnings (loss) per share as if the Company had adopted the expense recognition
requirement of SFAS No. 123:
YEAR ENDED OCTOBER 31,
1998 1997 1996
Proforma income (loss) applicable
to common stock $ (7,303) $ 1,121 $ (5,760)
Proforma income (loss) applicable
to common stock per share:
Basic (0.74) .13 (0.69)
13. MAJOR CUSTOMERS/CONCENTRATION OF CREDIT RISK
In fiscal years 1997 and 1996, a significant portion of the Company's business
is derived from four major customers including a governmental agency, two
telephone companies and an industrial manufacturer. At October 31, 1997, the
Company had accounts receivable from these customers of $3.1 million or 48% of
total accounts receivable. Revenues from these customers totaled approximately
$30.9 million and $22.8 million or 36% and 50% of consolidated revenues in
fiscal years 1997 and 1996, respectively.
Approximately 50% of the Company's Latin American revenues are derived from one
customer in Venezuela. Revenues from this customer were approximately 2% of
consolidated revenues in 1997 and 4% in 1996. Accounts receivable outstanding
for this customer were $0.8 million at October 31, 1997.
During fiscal year 1998, only one customer, WorldCom, accounted for ten percent
or more of the Company's consolidated revenues. Revenues from WorldCom during
the fiscal year ended October 31, 1998 totaled approximately $30.3 million, and
receivables from WorldCom at October 31, 1998 totaled $11.8 million.
14. RELATED-PARTY TRANSACTIONS:
In conjunction with certain finders fees associated with the acquisition of
MFSNT, the Company entered into three-year, 10 percent note for $1.3 million
with a third party who subsequently became a member of the Company's Board of
Directors. At October 31, 1998, the outstanding balance of this note was $1.2
million and is reflected in current liabilities in the accompanying consolidated
balance sheet.
At various times in the past, certain of the Company's directors have loaned the
Company money for a variety of purposes. Generally these loans are unsecured at
market rates of interest. Other than the note described above, there were no
notes to directors at October 31, 1998 and $0.9 million outstanding under such
notes at October 31, 1997.
F-27
<PAGE>
In November 1997, a subsidiary of the Company assumed the obligations of Ten-Ray
Utility Construction, Inc. ("Ten-Ray"), a North Carolina corporation, as
contractor under two network construction contracts and paid the costs Ten-Ray
had accrued under the contracts of approximately $0.1 million. On January 30,
1998, the Company purchased from Ten-Ray certain construction equipment used in
connection with the contracts. The purchase price for the equipment was the
satisfaction of Ten-Ray's bank loans secured by the equipment in the amount of
$0.3 million, including principal and interest, which in the opinion of the
executives of the subsidiary was not more than the fair market value of the
equipment and at the time of this transaction. The Company's Chief Financial
Officer, beneficially owned approximately 7.7 percent of the voting stock of
Ten-Ray and had personally guaranteed the equipment loans to the bank.
F-28
<PAGE>
15. INDUSTRY AND GEOGRAPHIC AREA SEGMENT INFORMATION:
The Company currently operates primarily in two industry segments: network
services and transportation services. Transportation services are conducted
primarily in the United States with small projects in South America, Canada and
Asia, while telecommunication network services are conducted both in the United
States and Latin America. Revenues, income (loss) 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 (in thousands):
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS 1998 1997 1996
----------------- ---- ---- ----
<S> <C> <C> <C>
Sales to unaffiliated customers:
Transportation services $ 84,022 $46,795 $22,661
Network services 133,459 39,539 26,245
-------- ------- -------
Total $217,481 $86,334 $48,906
======== ======= =======
Income (loss) from operations:
Transportation services $ 8,220 $3,772 $(3,454)
Network services 3,189 1,069 (2,833)
-------- ------- -------
Total $ 11,409 $4,841 $(6,287)
======== ======= =======
Identifiable assets:
Transportation services $ 88,340 $28,884 $25,099
Network services 202,420 21,462 13,820
-------- ------- -------
Total $290,760 $50,346 $38,919
======== ======= =======
Capital expenditures:
Transportation services $ 3,238 $1,635 $1,275
Network services 6,728 2,852 2,216
-------- ------- ------
Total $ 9,966 $4,487 $3,491
======== ====== ======
Depreciation and amortization:
Transportation services $ 2,824 $1,710 $1,229
Network services 4,776 2,822 1,521
-------- ------- ------
Total $ 7,600 $4,532 $2,750
======== ====== ======
GEOGRAPHIC AREAS
Revenues:
United States $212,152 $82,171 $45,160
Latin America 5,329 4,163 3,746
-------- ------- -------
Total $217,481 $86,334 $48,906
======== ======= =======
Income (loss) from operations:
United States $ 11,310 $ 4,824 $(2,073)
Latin America 99 17 (4,214)
-------- ------- --------
Total $ 11,409 $ 4,841 $(6,287)
======== ======= ========
Identifiable assets:
United States $287,569 $47,781 $36,410
Latin America 3,191 2,565 2,509
-------- ------- -------
Total $290,760 $50,346 $38,919
======== ======= =======
</TABLE>
F-29
<PAGE>
16. QUARTERLY FINANCIAL DATA (UNAUDITED):
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------ ------- ------- -------
<S> <C> <C> <C> <C>
1998(1)
Revenues $22,268 $34,552 $58,305 $102,356
Operating income (loss) (1,261) 2,083 4,032 5,156
Net income (loss) (927) 867 790 1,785
Income (loss) applicable to
common stock (1,081) 838 (7,186) 1,589
1997(2)
Revenues $18,326 $20,871 $21,984 $25,153
Operating income (loss) 1,142 1,785 1,024 888
Net income (loss) 505 851 932 567
Income (loss) applicable to
common stock 470 337 491 33
</TABLE>
- -----------
(1) Quarterly amounts have been adjusted from amounts previously reported by the
Company in their quarterly filings with the SEC for adjustments related to
a) the beneficial conversion feature associated with the Series B Preferred
Stock; b) the recognition of certain contract revenues; and c) several
adjustments for depreciation and miscellaneous accruals.
(2) Certain adjustments were made in the fourth quarter of 1997 which included a
reduction in reserves associated with litigation between the Company and
former owners of TSCI of $0.2 million.
The previously reported financial data are as follows (amounts in thousands):
FIRST SECOND THIRD
QUARTER QUARTER QUARTER
------- ------- -------
1998
----
Revenues $22,268 $34,552 $57,705
Operating income (loss) (776) 3,725 4,763
Net income (loss) (670) 1,835 1,464
Income (loss) applicable
to common stock (824) 1,792 824
17. SUBSEQUENT EVENT:
Subsequent to October 31, 1998, WorldCom advanced the Company $32.0 million for
purposes of arranging the purchase of 2,785 shares, or approximately 78 percent,
of the Series B Preferred Stock and the purchase of the outstanding $10.0
million of Senior Subordinated Notes. The advance accrues interest at 11.5
percent and is repayable on the earlier of (i) October 31, 2000 or (ii) the
dates of redemption and/or conversion of the Series B Preferred Stock or the
Senior Subordinated Notes.
In connection with these transactions, the Company expects to recognize an
extraordinary loss in the second quarter of fiscal year 1999 on the purchase of
the Senior Subordinated Notes of approximately $3.3 million and a reduction in
income applicable to common stock of approximately $10.0 million on the purchase
of the Series B Preferred Stock.
In addition, the Company agreed to modify the terms of the existing Series B
Preferred Stock conversion and warrant agreements which will result in a
reduction in income applicable to common stock of approximately $6.0 million
during the second quarter of fiscal year 1999.
WorldCom also agreed to make available additional advances to the Company of up
to $15.0 million against amounts otherwise payable pursuant to the WorldCom
Master Services Agreement. These additional advances accrue interest at 11.5
percent and are repayable to WorldCom on October 31, 2000.
Had these transactions occurred in fiscal year 1998, convertible preferred
stock and selected components of shareholders' equity at October 31, 1998
would have been as follows (in thousands):
UNAUDITED
AS REPORTED PRO FORMA
----------- ---------
Convertible Preferred Stock $11,325 $ 2,475
Additional paid-in capital 40,564 50,564
Retained deficit (5,698) (24,998)
Total shareholders' equity 40,217 30,917
Additionally, had the transaction occurred in fiscal year 1998, basic earnings
per share would have been reduced by $1.95 per common share.
F-30
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
SCHEDULE II
Valuation and Qualifying Accounts
Years ended October 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD ACQUISITIONS EXPENSES DEDUCTIONS PERIOD
--------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
October 31, 1998 $ 686 $ 75 $ 782 $ 677 $ 866
October 31, 1997 828 - 160 302 686
October 31, 1996 536 2 746 456 828
Restructuring charges:
October 31, 1998 - 2,227 - 1,720 507
October 31, 1997 - - - - -
October 31, 1996 - - - - -
Reserves for litigation and claims
October 31, 1998 - 5,000 - 986 4,014
Reserves for losses on uncompleted contracts
October 31, 1998 - 40,500 - 15,110 25,390
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- -------- -----------
2.5.1.3 Agreement between WorldCom Network Services, Inc. and Able
Telcom Holding Corp. dated January 26, 1999
2.5.2.1 11.5% Promissory Note between Able Telcom Holding Corp. and
WorldCom Network Services, Inc. dated as of September 1, 1998
2.5.7 Modification to Stock Option Agreement between the Company and
WorldCom, Inc. dated January 8, 1999
2.5.8 Agreement to Enter Into Stock Appreciation Rights Agreement
between the Company and WorldCom, Inc. dated January 8, 1999
2.5.9 Financing Agreement between WorldCom Network Services, Inc.
and Able Telcom Holding Corp. dated February 16, 1999
4.13 Preferred Stock Purchase Agreement by and among Able Telcom
Holding Corp. RGC International Investors, LDC, and Cotton
Communications, Inc. dated February 17, 1999
4.14 Warrant Amendment between Able Telcom Holding Corp. and
Purchasers (as defined) dated February 17, 1999
4.15 Securities Purchase Agreement by and between the Sellers, as
defined, and Cotton Communications, Inc. dated February 17,
1999
10.33 Employment Agreement with Billy V Ray, Jr., dated October 1,
1998
10.36 Employment Agreement with G. Vance Cartee, dated January 4,
1999
10.37 Employment Agreement with Edward Pollock, dated January 1,
1999
10.38 Employment Agreement with Frazier L. Gaines, dated November
12, 1998
10.39 Employment Agreement with Gideon D. Taylor, dated December 7,
1998
10.40 Employment Agreement with Rick Boyle, dated April 1, 1998
10.41 Financing Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999 (without
exhibits)
10.42 11.5% Non-Recourse Promissory Note between Cotton
Communications, Inc. and Able Telcom Holding Corp. dated
February 17, 1999
10.43 Stock Pledge Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999
23.1 Consent of Ernst & Young
27 Financial Data Schedule
EXHIBIT 2.5.1.3
AGREEMENT BETWEEN WORLDCOM NETWORK SERVICES INC.
AND ABLE TELCOM HOLDING CORP.
JANUARY 26, 1999
This Agreement ("Agreement") is the definitive agreement referred to in
paragraph 7 of an agreement between the parties dated September 9, 1998 (the
"September Agreement") and supersedes the September Agreement. The parties
agrees as follows:
1. NOTE TERMS. The existing Promissory Note with Able Telcom Holding
Corp. ("Able") as the maker and MFS Communications Company, Inc. ("MFS") as the
payee shall be assigned to WorldCom Network Services, Inc. ("WorldCom") and
shall be replaced by a promissory note of Able payable to WorldCom in the
principal amount of $30,000,000 bearing interest at 11.5% from September 1,
1998.
The Maturity Date of the Note will be December 15, 2000 (the "Maturity
Date"). Interest shall accrue and be payable on February 28, 1999 and quarterly
thereafter and on the Maturity Date.
The Note may be prepaid in part or in total without penalty.
The principal amount of the Note shall be prepaid as follows:
a. Subject to the consent of NationsBank, N.A., after the date
hereof, by applying as a credit thereto an amount equal to 8%
of the amount otherwise payable by WorldCom, or any affiliate
thereof, to Able, or any affiliate thereof, under any
"Management Services Agreement" ("MSA"), including, without
limitation, the MSA dated July 2, 1998;
b. By Able paying WorldCom on the first business day after Able
receives the proceeds of any of the following:
i. $7,000,000 upon the sale of NYSTA conduit;
ii. $1,500,000 upon payment by The Williams Companies of
a fee for the installation of conduit; and
<PAGE>
iii. The greater of 50% of the net profits or 25% of the
proceeds received from time to time under any
maintenance agreement associated with the sale of
NYSTA conduit.
2. ADDITIONAL PAYMENTS. On December 29, 2000, Able shall pay to
WorldCom the following amounts, if positive:
a. The difference between $12,000,000 related to losses
on MFS Network Technologies, Inc. ("MFSNT") projects
in existence on March 31, 1998 and recorded by MFSNT
as of June 30, 1998 and the amount of the actual
losses recorded as of the Maturity Date; and
b. The difference between $5,000,000 recorded as
reserves for the litigation described on SCHEDULE 1
attached hereto (the "Litigation") and the aggregate
costs of Able in defending the Litigation, and
payments made in settlement or in payment of
judgments with respect to the Litigation, as of the
Maturity Date.
3. OTHER DOCUMENTS. The Stock Pledge Agreement and the stock options
dated July 2, 1998, shall remain outstanding and in full force and effect,
except that the exercise and registration periods of each shall be extended one
year and except that the lien is subordinated to NationsBank, N.A.
4. EQUITY AWARD. The Equity Award referred to in paragraph 4 of the
September Agreement has been effected by the execution and delivery of Stock
Appreciation Rights Agreements dated on or about January 8, 1999.
5. INDEMNIFICATION. Able will indemnify and hold harmless WorldCom, and
its affiliates, and each of their respective employees, representatives,
officers and directors (the "Indemnified Parties") from and against any and all
claims, liabilities, losses, damages, actions, attorneys' fees and demands (the
"Indemnified Losses") resulting from the claims, demands, investigations,
proceedings or lawsuits of or by any person arising out of the business
operations acquired in the MFSNT acquisition EXCEPT for Michigan township for
access rights and the Sirit litigation.
Able shall pay for or reimburse an Indemnified Party for any
ascertained Indemnified Loss in advance of a final disposition of the matter as
to which indemnification is sought within ten (10) days after submission of a
claim for Indemnified Losses by an Indemnified Party.
-2-
<PAGE>
6. PERFORMANCE BONDS. Promptly after the closing of the transactions
contemplated by this Agreement, Able shall cause WorldCom to be released from
any and all liability on existing performance bonds and reimbursement agreements
(other than bond E-470 Project) relating to any project to which MFSNT is or was
a party.
7. MUTUAL RELEASES The parties shall enter into mutual releases in
customary form with respect to matters arising before the date hereof, but
excluding obligations hereunder and other outstanding documentation between
WorldCom, Able and their affiliates.
8. LEGAL INTENT. The Parties intend to be legally bound by this
Agreement and agree that this Agreement contains the necessary material items to
be considered a contract.
9. REMEDIES. The parties agree that in addition to all other remedies
which an aggrieved party may have, this Agreement may be enforced by either
party by an action for specific performance in any court of competent
jurisdiction.
This Agreement is entered into this 26th day of January, 1999.
WORLDCOM NETWORK ABLE TELCOM HOLDING CORP.
SERVICES INC.
By: /s/ DAVID E. MEYERS By: /s/ BILLY V. RAY
-------------------------- ------------------------------
Name: DAVID E. MEYERS Name: BILLY V. RAY
------------------------ ----------------------------
Title: V.P. and Controller Title: CEO and President
----------------------- ---------------------------
-3-
EXHIBIT 2.5.2.1
11.5%
PROMISSORY NOTE
Amount: $30,000,000 September 1, 1998
For value received, Able Telcom Holding Corp. ("Able") hereby agrees to
pay to the order of WorldCom Network Services, Inc., its successors or assigns
("WorldCom"), in lawful money of the United States of America and immediately
available funds, at its offices in Tulsa, Oklahoma (or at such other place or
places as WorldCom may designate) the principal amount of Thirty Million and
No/100 Dollars ($30,000,000) on December 15, 2000 ("Maturity Date").
INTEREST. Interest on the unpaid principal amount hereof from time to
time shall accrue at an annual rate of 11.5% from the date hereof. Accrued
interest shall be payable on February 28, 1999 and on May 31, August 31,
November 30 and February 28 thereafter and on the Maturity Date.
VOLUNTARY PREPAYMENTS. All or any portion of the unpaid principal
balance of this Note, together with all accrued interest thereon, may be prepaid
by Able at any time without penalty. Partial repayments of principal shall be
made in tranches of $3,000,000.
MANDATORY PREPAYMENTS.
The principal amount of the Note shall be prepaid as follows:
a. Subject to the consent of NationsBank, N.A., by applying as a
credit thereto an amount equal to 8% of the amount otherwise
payable by WorldCom, or any affiliate thereof, to Able, or any
affiliate thereof, under any "Management Services Agreement"
("MSA"), including, without limitation, the MSA dated July 2,
1998; such credit to be made as of the date any payment is due
by WorldCom to Able under an MSA;
b. By Able paying WorldCom on the first business day after Able
receives the proceeds of any of the following:
i. $7,000,000 upon the sale of NYSTA conduit;
ii. $1,500,000 upon payment by The Williams Companies of
a fee for the installation of conduit; and
iii. The greater of 50% of the net profits or 25% of the
proceeds received from time to time under any
maintenance agreement associated with the sale of
NYSTA conduit.
<PAGE>
Whenever a payment on this Note is stated to be due on a day which is
not a business day, such payment shall be made on the next succeeding business
day with interest accruing to the date of payment. Interest hereunder shall be
computed on the basis of the actual number of days elapsed over a year of 360
days.
If any amount owed by Able hereunder is not paid when due, Able shall
pay interest on all such past due amounts at a rate equal to 13.5% per annum
(the "Default Rate"), payable on demand of WorldCom. Nothing herein contained
shall be construed or so operate as to require Able to pay any interest, fees,
costs or charges at a rate or in an amount greater than is permitted by
applicable law.
Upon the occurrence of a default in payment of principal, interest or
other amounts owing hereunder when due, the unpaid principal amount of this
Note, together with all accrued but unpaid interest thereon, may become, or may
be declared to be, (or in the case of bankruptcy or insolvency of Able, shall,
without action on the part of WorldCom, become), immediately due and payable,
without presentation, demand, protest or notice of any kind, all of which are
hereby waived by Able. Failure of the holder of this Note to assert any right
herein shall not be a waiver thereof.
Able agrees to pay on demand all direct out-of-pocket losses, and
reasonable out-of-pocket costs and expenses, if any (including reasonable fees
and expenses of outside counsel), of WorldCom in connection with the enforcement
(whether by legal proceedings, negotiation or otherwise) of this Note and other
documents delivered hereunder.
Upon the occurrence and during the continuance of any default, WorldCom
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all amounts or other indebtedness
at any time owing by WorldCom to or for the credit or the account of Able
against any and all of the obligations of Able now or hereafter existing under
this Note, irrespective of whether or not WorldCom shall have made any demand
under this Note and of whether or not such obligations may be matured. WorldCom
agrees promptly to notify Able after any such set-off and application made by
WorldCom, but the failure to give such notice shall not affect the validity of
such set-off and application. The rights of WorldCom under this paragraph
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which WorldCom may have.
In the event that this Note is transferred, assigned or pledged, Able
hereby waives, as against such transferee, assignee or pledgee, any defenses and
counterclaims that Able may have against the holder hereof.
This Note shall be governed by and construed in accordance with the
laws of the state of New York without regard to conflicts of law provisions
thereof.
2
<PAGE>
If any provision or obligation of the Note shall be determined to be
invalid, ineffective or unenforceable, the validity, effectiveness and
enforceability of the remaining provisions or obligations shall not in any way
be affected or impaired thereby.
IN WITNESS WHEREOF, Able has caused this Note to be executed under seal
and delivered by their respective duly authorized officers as of the date first
above written.
ABLE TELCOM HOLDING CORP.
By: /s/ BILLY V. RAY
--------------------------------------
Title: CEO and PRESIDENT
-----------------------------------
3
EXHIBIT 2.5.7
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of the 8th day of
January, 1999 (the "Effective Date"), by and among Able Telcom Holding Corp., a
Florida corporation (the "Company"), MFS Communications Company, Inc., a
Delaware corporation ("MFS"), and WorldCom, Inc., a Georgia corporation
("WorldCom" and, collectively with MFS, "Holder").
RECITALS
A. The Company's common stock, par value $.001 (the "Common Stock") is listed
for trading on the Nasdaq National Market System and in connection therewith, is
subject to certain rules and regulations promulgated by the Nasdaq Stock Market,
Inc., including, among others, the Nasdaq Marketplace Rules.
B. Nasdaq Marketplace Rule 4460(i)(C) ("Rule 4460(i)(C)") provides, among other
things, that in connection with the acquisition of stock or assets of another
company, if the number of shares of common stock to be issued is or will be
equal to or in excess of 20% of the number of shares of common stock outstanding
before the issuance of such stock or securities, shareholder approval is
required.
C. On April 26, 1998, the Company, MFS, WorldCom, and certain other related
parties entered into an Agreement and Plan of Merger, as amended on July 2,
1998, and further amended, on September 9, 1998 (collectively the "Merger
Agreement"), whereby, among other things, the Company (i) acquired MFS Network
Technologies, Inc. ("MFSNT") and (ii) agreed to grant to MFS an option (the
"Option") to purchase 2,000,000 shares of the Common Stock, pursuant to which
the Option may be exercised by MFS in whole or in part at $7.00 per share.
D. As of April 24, 1998, there were 9,379,824 shares of Common Stock
outstanding, of which approximately 1,875,960 shares represented just less than
20% of the Common Stock outstanding prior to the issuance of any securities in
connection with the MFSNT acquisition (the "MFSNT Transaction").
E. As of the Effective Date, no Options were exercised by MFS.
F. On or about June 30, 1998, the Company completed an offering of certain of
its securities to investors (the "Series B Offering"), the proceeds of which
were used in connection with the MFSNT Transaction.
G. The parties to this Agreement wish to modify and replace the terms and
conditions of the Option with those set forth in this Agreement, in conformity
with Rule 4460(i)(C).
<PAGE>
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. RECITALS. The above recitals are true, complete and are herein incorporated
by reference.
2. MODIFICATION TO THE GRANT OF THE OPTION. Unless and until such time as
shareholder approval is obtained by the Company (if ever) pursuant to Rule
4460(i)(C) to approve the issuance of 20% or more of the Common Stock in
connection with the MFSNT Transaction (taking into account the issuances
pursuant to the Series B Offering and the Options) (the "Approval Date"), the
Option shall be modified to a stock appreciation rights award (the "SAR") on the
following terms:
a. GRANT OF SARS. Each SAR shall represent the right to participate in
an increase in the value of one (1) share of Common Stock and all of the SARs in
the aggregate shall represent the right to participate in an increase in the
value of an aggregate of two million (2,000,000) shares of Common Stock (the
"Aggregate Base Common Stock"). Holder shall be entitled to receive, for each
SAR exercised, an amount equal to the excess (the "Appreciation Amount"),
payable as set forth in Section 2.e.iii. hereof, of the "Fair Market Value", as
hereinafter defined, of the Common Stock as of the applicable exercise date (as
provided in Section 2.e.ii hereof) over $7.00 (the "Strike Price") during the
exercise period, as described in Section 2.b below. For purposes of this
Agreement, "Fair Market Value" shall mean the average on the last three (3)
trading days immediately preceding the applicable exercise date of (i) the last
closing bid price for the Common Stock on the Nasdaq National Market ("NASDAQ"),
as reported by Bloomberg Financial Markets or its successors ("Bloomberg") or,
(ii) if NASDAQ is not the principal trading market for the Common Stock, the
last closing bid price of the Common Stock on the principal securities exchange
or trading market where the Common Stock is listed or traded as reported by
Bloomberg, or (iii) if the foregoing do not apply, the last closing bid price of
the Common Stock in the over-the-counter market on the electronic bulletin board
for the Common Stock reported by Bloomberg, or (iv) if no closing bid price is
reported for the Common Stock by Bloomberg, the last closing trade price of the
Common Stock by Bloomberg, or (v) if no closing bid price is reported for the
Common Stock by Bloomberg, the average of the bid prices of any market makers
for the Common Stock as reported in the "pink sheets" by the National Quotation
Bureau, Inc.
b. EXERCISE PERIOD. The SARs shall be exercisable, in whole or in part,
at the times and in the manner specified by Section 2.e. below commencing on the
earlier of: (i) one (1) business day after the date upon which the potential
issuance of Common Stock under this Agreement is voted upon by the shareholders
of the Company and (ii) May 1, 1999 (the "Commencement Date"), and ending on
January 2, 2002 (the "Termination Date"). All rights with respect to any
unexercised SARs shall expire, and these SARs shall become null and void, at
5:00 on the Termination Date.
c. CERTAIN ADJUSTMENTS.
<PAGE>
i. In the event of any change in the capital structure or
business of the Company by reason of any stock dividend or extraordinary
dividend, stock split or reverse stock split, recapitalization, or
reclassification of its capital stock, or any similar change affecting the
Company's capital structure and the Company determines an adjustment is
appropriate under this Section 2, then the number of shares constituting the
Aggregate Base Common Stock and the Strike Price shall be appropriately adjusted
consistent with such change.
ii. In the event of a merger or consolidation in which the
Company is not the surviving entity or in the event of any transaction that
results in the acquisition of all or substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or in the event of the sale or transfer of
all or substantially all of the Company's assets (all of the foregoing being
referred to as "Acquisition Events"), then the Company may, in its sole
discretion, terminate all outstanding SARs, effective as of the date of the
Acquisition Event, by delivering notice of termination to Holder at least thirty
(30) days prior to the date of consummation of the Acquisition Event; provided,
that during the period from the date on which such notice of termination is
delivered to the consummation of the Acquisition Event, Holder shall have the
right to exercise in full, subject to the limitations in Section 2.a., all of
the SARs that are then outstanding as of the date immediately preceding the date
of the Acquisition Event but contingent on the occurrence of the Acquisition
Event, and further provided that, if the Acquisition Event does not take place
within a specified period after giving such notice for any reason whatsoever,
the notice and exercise shall be null and void.
d. PRIVILEGE OF STOCK OWNERSHIP. Holder shall not be deemed to be the
holder of, or to have any of the rights of a holder of Common Stock with respect
to, any SARs.
e. MANNER OF EXERCISING SARS.
i. The SARs may be exercised in whole or in part after the
Commencement Date, only by written notice signed by Holder and mailed or
delivered to the President or Secretary of the Company at its principal office,
which notice shall: (i) specify the number of SARs which are being exercised;
(ii) the federal identification number of Holder (or transferee); (iii) if an
SAR is being exercised by any party or parties other than Holder, be accompanied
by proof satisfactory to the Company and its counsel, that such party or parties
have the right to exercise the SAR, and (iv) such other documentation and
representations as may be reasonably requested by the Company in connection with
such exercise (an "SAR Exercise Notice"). Once exercised a particular SAR may
not be further exercised.
ii. An SAR shall be deemed to have been exercised with respect
to the SARs specified in said notice at the time of timely receipt by the
Company of an SAR Exercise Notice as specified in Section 2.e.i. above.
iii. The Appreciation Amount shall be paid in cash or other
immediately available funds within fifteen (15) days of receipt of an SAR
Exercise Notice; provided, however, that to the extent that the Company would be
required to pay in excess of $10 million in any twelve (12) month period as a
result of any exercise(s) of the SARs, then the amount of such excess shall
3
<PAGE>
be represented by a promissory note with quarterly payments amortized ratably
over a period of six (6) months and bearing interest at ten percent (10%) per
annum.
3. EFFECT ON SAR UPON SHAREHOLDER APPROVAL. In the event that shareholder
approval is obtained to issue shares of common stock in connection with the
MFSNT Transaction in accordance with Rule 4460(i)(C) then, after the Approval
Date the provisions of Section 2 hereof (other than defined terms used herein
from such Section) shall be void and of no further force or effect and any
unexercised SARs shall revert back to Options on the following terms:
a. GRANT OF THE OPTIONS. Subject to and upon the terms and conditions
set forth in this Agreement, Holder shall have the right to purchase an
aggregate of two million (2,000,000) shares of Common Stock (the "Option
Shares") (less any number of SARs that Holder exercised pursuant to Section 2
hereof, if any) at $7.00 per share (the "Exercise Price") during the exercise
period, as described in Section 3.b. below.
b. EXERCISE PERIOD. The Options shall be exercisable, in whole or in
part, at the times and in the manner specified by Section 3.e.i. below
commencing on the Approval Date and ending on Termination Date. All rights with
respect to any unexercised Option Shares shall expire, and the Option shall
become null and void at 5:00 on the Termination Date.
c. CERTAIN ADJUSTMENTS.
i. In the event of any change in the capital structure or business
of the Company by reason of any stock dividend or extraordinary dividend, stock
split or reverse stock split, recapitalization or reclassification of its
capital stock, any sale or transfer of all or substantially all of the Company's
assets or business, or any similar change affecting the Company's capital
structure and the Company determines an adjustment is appropriate under this
Agreement, then the aggregate number of shares which thereafter may be issued
and the Exercise Price of such shares pursuant to this Section 3 shall be
appropriately adjusted consistent with such change.
ii. In the event of a merger or consolidation or similar event in
which the Company is not the surviving entity or in the event of any transaction
that results in the acquisition of all or substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert (an "Acquisition Event"), then the Holder
shall thereafter upon exercise of an Option be entitled to receive the number of
shares of capital stock or other securities or property of the successor
corporation resulting from such Acquisition Event to which the Common Stock of
the Company, deliverable upon the exercise of this Option, would have been
entitled upon such Acquisition Event if this Option had been exercised
immediately prior to such Acquisition Event. In any such case, appropriate
adjustment (as reasonably determined in good faith by the Board of Directors of
the Company) shall be made in the application of the provisions set forth in
this Option with respect to the rights and interests thereafter of the Holder
such that the provisions set forth in this Option (including those relating to
adjustments of the Exercise Price and the number of shares issuable upon the
exercise of this Option) shall thereafter be applicable, as near as reasonably
may be, in relation to any shares or other property thereafter deliverable upon
the exercise hereof as if this Option had been exercised immediately prior to
such
4
<PAGE>
Acquisition Event and the Holder hereof had carried out the terms of the
exchange as provided for by such Acquisition Event.
d. PRIVILEGE OF STOCK OWNERSHIP. Holder shall not be deemed to be the
holder of, or to have any of the rights of a holder of Common Stock with respect
to, any Option Shares.
e. MANNER OF EXERCISING OPTIONS.
i. The Option may be exercised in whole or in part, only by written
notice signed by Holder and mailed or delivered to the President or Secretary of
the Company at its principal office, which notice shall: (i) specify the number
of Options which are being exercised; (ii) the federal identification number of
Holder (or transferee); (iii) if the Option is being exercised by any party or
parties other than Holder, be accompanied by proof satisfactory to the Company
and its counsel, that such party or parties have the right to exercise the
Option; and (iv) be accompanied by payment in full of the applicable Exercise
Price in cash or other immediately available funds. Prior to issuance of any
Option Shares, however, Holder shall execute and deliver such other
documentation and representations as may be reasonably requested by the Company
in connection with such exercise, including for purposes of applicable state and
federal securities laws.
ii. This Option shall be deemed to have been exercised with respect
to the Option Shares specified in said notice at the time of timely receipt by
the Company of: (i) the notice specified in Section 3.e.i. hereof; (ii) any
other documentation or representation reasonably required by the Company
pursuant to Section 3.e.i. hereof; and (iii) the payment required in Section
3.e.i. hereof.
iii. Unless a Registration Statement with respect to the Option
Shares is effective at the time of issuance, the certificates representing the
Option Shares issued or to be issued hereunder shall be stamped or otherwise
imprinted with legends substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR
AN INVESTMENT AND NOT BE SOLD, TRANSFERRED, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPTION OF COUNSEL ACCEPTABLE TO COUNSEL FOR THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH LAWS.
iv. Upon satisfaction of the provisions of Section 3.e.ii., the
Company shall have up to five (5) days to issue to Holder stock certificates
representing the Option Shares so exercised.
f. REGISTRATION RIGHTS. The Company will, on or before June 30, 1999,
file with the Securities and Exchange Commission ("SEC") a registration
statement to register on a "shelf" basis
5
<PAGE>
the resale by Holder of any Option Shares purchased by it pursuant to the Option
until they could be sold by Holder on an unrestricted basis under Rule 144
without regard to volume limitations (the "Registration Term"). The Company will
use its best efforts to have such registration statement declared effective by
the SEC as promptly as possible and to maintain the effectiveness of such
registration statement throughout the Registration Term.
4. AMENDMENTS. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, except by a writing signed by the party
as to whom enforcement of any such amendment, supplement, waiver or modification
is sought and making specific reference to this Agreement.
5. TRANSFERS. The SARs or Options, as the case may be, may not be transferred
other than to an affiliate of Holder without the Company's prior written
consent.
6. FURTHER ASSURANCES. The parties hereby agree from time to time to execute and
deliver such further and other transfers, assignments and documents and do all
matters and things which may be convenient or necessary to more effectively and
completely carry out the intentions of this Agreement.
7. BINDING EFFECT. All of the terms and provisions of this Agreement, whether so
expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns.
8. GOVERNING LAW. This Agreement and all transactions contemplated by this
Agreement shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Florida without regard to principles of
conflicts of laws.
9. ENTIRE AGREEMENT. This Agreement represents the entire understanding and
agreement among the parties with respect to the subject matter hereof, and
supersedes all other agreements, negotiations, understandings and
representations (if any) made by and among such parties, including without
limitation, the terms of the Option as described in the Merger Agreement.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE COMPANY:
ABLE TELCOM HOLDING CORP.
By: /s/ BILLY V. RAY, JR.
-----------------------------------
Name: BILLY V. RAY, JR.
---------------------------------
Its: CEO and PRESIDENT
----------------------------------
MFS:
MFS COMMUNICATIONS COMPANY, INC.
By: /s/ DAVID E. MEYERS
-----------------------------------
Name: DAVID E. MEYERS
---------------------------------
Its: VP and CONTROLLER
----------------------------------
WORLDCOM:
WORLDCOM NETWORK SERVICES, INC.
By: /s/ DAVID E. MEYERS
-----------------------------------
Name: DAVID E. MEYERS
---------------------------------
Its: VP and CONTROLLER
----------------------------------
7
EXHIBIT 2.5.8
AGREEMENT
THIS AGREEMENT (the "Agreement") is dated as of the 8th day of January, 1999
(the "Effective Date") by and between Able Telcom Holding Corp. (the "Company")
and WorldCom Network Services, Inc. (the "WorldCom"). (The Company and WorldCom
are sometimes individually referred to as a "Party" and collectively as the
"Parties").
RECITALS
A. Pursuant to the terms of the September 9, 1998 Agreement (the
"September Agreement") between the Company and WorldCom, the Company agreed that
it will grant to WorldCom certain stock appreciation or other rights (the
"SARs") whereby WorldCom shall have the right to participate in an increase in
the value of the Company's common stock, par value $.001 (the "Common Stock").
B. The Parties acknowledge that certain agreements of the Company with
other third parties may restrict the ability of the Company to issue equity
securities and/or other rights relating to the Company's capital stock (a
"Restrictive Agreement"), which Restrictive Agreements include (i) a Credit
Agreement dated June 11, 1998, as amended, with the Company's senior lenders
(the "Credit Agreement") and (ii) a Stock Purchase Agreement dated June 26, 1998
("Purchase Agreement") with certain purchasers of the Company's Series B
Convertible Preferred Stock.
C. The Parties intend that the SARs shall be issued promptly after the
"Conditions to Issuance," as defined in Section 2.b. below, are satisfied.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged thereof, the parties hereto agree as follows:
1. INCORPORATION BY REFERENCE. The above recitals are true, correct and
are incorporated herein by reference.
2. CONDITIONS TO ISSUANCE.
a. The Company shall issue to WorldCom a Stock Appreciation Agreement
("SAR Agreement") in substantially the form attached hereto as Exhibit "A"
promptly upon the satisfaction of the Conditions to Issuance as set forth in
Section 2.b. below; provided that to the extent (i) that the issuance of such
SAR Agreement would otherwise cause a default in connection with any agreement
or arrangement with any other third parties, including any of the Restrictive
Agreements, or (ii) if the Conditions to Issuance have not been satisfied on or
before February 28, 1999, then in either of such events the Parties shall use
their respective good faith efforts to agree upon such modifications to the
terms of the SAR Agreement so that such SAR Agreement would not cause such a
default or require a consent from a third party.
<PAGE>
b. Unless waived by the Company, the Conditions to Issuance are as
follows:
i. Although the Company does not believe that the issuance of
the SAR Agreement is restricted by the terms of the Purchase Agreement because
the SARs granted thereunder do not constitute equity securities or instruments
convertible or exercisable for equity securities, the SAR Agreement will
nonetheless not be issued until the restriction on the issuance of equity
securities set forth in Section 3.13(a) of the Purchase Agreement (which
restriction in pertinent part, provides that no equity securities will be issued
by the Company until the "Registration Statement" has been declared effective by
the "SEC" and the "Common Shares" are subject to "Effective Registration" (as
such terms are defined in the Purchase Agreement)) is satisfied; and
ii. The Company shall have obtained the consent or waiver of
the senior lenders under the Credit Agreement to issue the SARs pursuant to the
SAR Agreement.
3. FURTHER ASSURANCES. The Parties hereby agree from time to time to
execute and deliver such further and other transfers, assignments and documents
and do all matters and things which may be convenient or necessary to more
effectively and completely carry out the intentions of this Agreement.
4. BINDING EFFECT. All of the terms and provisions of this Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the Parties and their respective administrators, executors,
legal representatives, heirs, successors and permitted assigns.
5. GOVERNING LAW. This Agreement and all transactions contemplated by this
Agreement shall be governed by, and construed and enforced in accordance with,
the internal laws of the State of Florida without regard to principles of
conflicts of laws.
6. ENTIRE AGREEMENT. This Agreement represents the entire understanding
and agreement among the Parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and among such Parties.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
THE COMPANY:
ABLE TELCOM HOLDING CORP.
By: /s/ BILLY V. RAY, JR.
-----------------------------------
Name: BILLY V. RAY, JR.
---------------------------------
Its: CEO and PRESIDENT
----------------------------------
WORLDCOM:
WORLDCOM NETWORK SERVICES, INC.
By: /s/ DAVID E. MEYERS
-----------------------------------
Name: DAVID E. MEYERS
---------------------------------
Its: VP and CONTROLLER
----------------------------------
<PAGE>
EXHIBIT A
STOCK APPRECIATION RIGHTS AGREEMENT
THIS STOCK APPRECIATION RIGHTS AGREEMENT (the "SAR Agreement") is
effective as of the ___ day of _______, ____ (the "Issue Date") by and between
Able Telcom Holding Corp., a Florida corporation (the "Company") and WorldCom
Network Services, Inc. (the "Optionee").
RECITALS
A. Pursuant to the terms of the September 9, 1998, Agreement (the
"September Agreement") between the Company and the Optionee, the Company agreed
that it will grant to the Optionee certain Stock Appreciation Rights whereby the
Optionee shall have the right to participate in an increase in the value of the
Company's common stock, par value $.001 (the "Common Stock") (individually as to
an increase in value for each share of Common Stock, an "SAR" and collectively
"SARs"); and
B. Optionee and the Company desire to establish the terms and conditions
of such SARs in this SAR Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged thereof, the parties hereto agree as follows:
1. RECITALS. The above recitals are true, correct, and are incorporated
herein by reference.
2. GRANT OF SARS. Subject to and upon the terms and conditions set forth
in this SAR Agreement, the Company hereby grants and issues to Optionee, as of
the Issue Date, the right to participate in an increase in the value of an
aggregate of Six Hundred Thousand (600,000) shares of Common Stock (the
"Aggregate Base Common Stock"). Each SAR shall represent the right to
participate in an increase in the value of one (1) share of Common Stock. The
Optionee shall be entitled to receive, for each SAR exercised, an amount payable
in cash, Common Stock, or a combination thereof, at the Company's election (as
hereinafter provided), equal to the excess of the "Fair Market Value", as
hereinafter defined, of the Common Stock over $5-3/32, as of the applicable
"Exercise Day(s)", as hereinafter defined; and provided that in no event shall
the maximum amount payable hereunder, whether in cash, Common Stock or a
combination thereof, exceed $25.00 per SAR. Without limiting the generality of
the foregoing, it is the intent of the parties that Optionee shall not share in
any appreciation in the Fair Market Value of the Common Stock over $30-3/32 per
share. The foregoing $5-3/32 and $30-3/32 figures are sometimes referred to
herein as the "Collar Prices." For purposes of this SAR Agreement, "Fair Market
Value" shall mean the average in the last three (3) trading days immediately
preceding the applicable Exercise Day of (i) the last closing bid price for the
Common Stock on the Nasdaq National Market ("NASDAQ"), as reported by Bloomberg
Financial Markets or its successors
<PAGE>
("Bloomberg") or, (ii) if NASDAQ is not the principal trading market for the
Common Stock, the last closing bid price of the Common Stock on the principal
securities exchange or trading market where the Common Stock is listed or traded
as reported by Bloomberg, or (iii) if the foregoing do not apply, the last
closing bid price of the Common Stock in the over-the-counter market on the
electronic bulletin board for the Common Stock reported by Bloomberg, or (iv) if
no closing bid price is reported for the Common Stock by Bloomberg, the last
closing trade price of the Common Stock by Bloomberg, or (v) if no closing bid
price is reported for the Common Stock by Bloomberg, the average of the bid
prices of any market makers for the Common Stock as reported in the "pink
sheets" by the National Quotation Bureau, Inc.
3. SPECIFIED TERM; TIME OF EXERCISE. The SARs shall vest as of the Issue
Date and shall be exercisable, in whole or in part, at the times and in the
manner specified by Section 6.A. below solely with respect to the following
days: (i) July 2, 1999, (ii) July 2, 2000, or (iii) July 2, 2001 (each an
"Exercise Day" and collectively "Exercise Days"); provided that the
determination of the Fair Market Value shall be determined only for the amount
of SARs being exercised on such Exercise Day. All rights with respect to any
unexercised SARs shall expire, and these SARs shall become null and void at 5:00
on July 7, 2001, or as otherwise provided in Section 4.B. hereof.
4. CERTAIN ADJUSTMENTS.
A. In the event of any change in the capital structure or business of
the Company by reason of any stock dividend or extraordinary dividend, stock
split or reverse stock split, recapitalization or reclassification of its
capital stock, or any similar change affecting the Company's capital structure
and the Company determines an adjustment is appropriate under this SAR
Agreement, then the aggregate number and kind of shares which thereafter may be
issued under this SAR Agreement, the number and kind of shares or other property
(including cash) to be issued upon exercise of an outstanding SAR granted under
this SAR Agreement, the number of shares constituting the Aggregate Base Common
Stock, and the Collar Prices thereof shall be appropriately adjusted consistent
with such change.
B. In the event of a merger or consolidation in which the Company is
not the surviving entity or in the event of any transaction that results in the
acquisition of all or substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all or
substantially all of the Company's assets (all of the foregoing being referred
to as "Acquisition Events"), then the Company may, in its sole discretion,
terminate all outstanding SARs, effective as of the date of the Acquisition
Event, by delivering notice of termination to each such Participant at least
thirty (30) days prior to the date of consummation of the Acquisition Event;
provided, that during the period from the date on which such notice of
termination is delivered to the consummation of the Acquisition Event, the
Optionee shall have the right to exercise in full, subject to the limitations in
Section 2, all of the SARs that are then outstanding as of the date immediately
preceding the date of the Acquisition Event (such date to be an additional
Exercise Day within the meaning of this SAR Agreement) but contingent on the
occurrence of the Acquisition Event, and further provided that, if the
Acquisition Event does not take place within a specified period after giving
such notice for any reason whatsoever, the notice and exercise shall be null and
void.
2
<PAGE>
5. PRIVILEGE OF STOCK OWNERSHIP. Optionee shall not be deemed to be the
holder of, or to have any of the rights of a holder of Common Stock with respect
to, any SARs.
6. MANNER OF EXERCISING SARS.
A. The SARs may be exercised in whole or in part, only by written
notice signed by Optionee and mailed or delivered to the President or Secretary
of the Company at its principal office, within five (5) days following any
Exercise Day that the Optionee shall have elected to exercise any or all of its
SARs, which notice shall: (i) specify the number of SARs which are being
exercised; (ii) the federal identification number of the Optionee (or
transferee); and (iii) if the Option is being exercised by any party or parties
other than Optionee, be accompanied by proof satisfactory to the Company and its
counsel, that such party or parties have the right to exercise the Option and
(iv) such other documentation and representations as may be reasonably requested
by the Company in connection with such exercise. Once exercised a particular SAR
may not be further exercised.
B. This Option shall be deemed to have been exercised with respect to
the SARs specified in said notice at the time of timely receipt by the Company
of the notice specified in Section 5(A) hereof.
C. Upon receipt of such notice, the Company shall have up to thirty
(30) days to pay the Optionee the value of any SARs so exercised. Such payment
may, at the Company's election, be either in (i) cash or other immediately
available funds; (ii) shares of Common Stock; or (iii) a combination thereof. To
the extent that the Company elects to make any or all payments in the form of
Common Stock, such shares of Common Stock shall be valued for purposes of this
SAR Agreement, at the Fair Market Value of the Common Stock as of the
corresponding Exercise Day for which Optionee has exercised such SARs. To the
extent the shares of Common Stock are not then registered pursuant to the
Securities Act of 1933, as amended (the "Act"), the Optionee acknowledges and
agrees that it shall make such representations and warranties that the Company
may reasonable request to support an exemption pursuant to Section 4(2) of such
Act, including with respect to Optionee's investment intent, accredited investor
status and restrictions on transfer.
D. Notwithstanding anything to the contrary contained in this Agreement
and specifically in Section 6.C., the parties to this Agreement acknowledge and
agree that to the extent that the Company elects to make payments described in
this Agreement to the Optionee in the form of shares of Common Stock (or a
combination of shares of Common Stock or cash), the Company shall not issue any
shares of Common Stock to the Optionee to the extent that such issuance(s) (i)
is prohibited by any rule, regulation or policy of the Securities and Exchange
Commission or of The Nasdaq Stock Market, Inc., or any exchange or market upon
which the Common Stock may then be traded or (ii) whether alone, or in
connection with any other issuance(s) in the past that may be deemed to be
integrated with any such issuance(s) contemplated herein, would require
shareholder approval as contemplated by the Nasdaq Marketplace Rules and
specifically Rule 4460, as determined as of any Exercise Day; PROVIDED FURTHER,
that this subsection (ii) shall not be applicable if the Company has previously
sought and obtained shareholder approval for such issuance(s).
3
<PAGE>
7. ADJUSTMENT OF SARS AND COLLAR PRICES; MAXIMUM PROCEEDS.
A. Notwithstanding anything contained in this SAR Agreement to the
contrary (subject to the limitation set forth in Section 7.B. below and subject
to adjustment pursuant to Section 4 hereof), to the extent that the Fair Market
Value of a share of common stock as of the date immediately preceding the
executing of this SAR Agreement is greater than the floor Collar Price of
$5-3/32 then:
(i) the floor Collar Price shall be adjusted to the then Fair Market
Value, and the ceiling Collar Price shall be adjusted to a dollar amount equal
to the then Fair Market Value plus $25.00; and
(ii) the Aggregate Base Common Stock shall be adjusted (the
"Adjusted Aggregate Base Common Stock") by multiplying 600,000 by a fraction,
(x) the numerator of which shall be the adjusted floor Collar Price and (y) the
denominator of which shall be $5-3/32; provided that the Adjusted Aggregate Base
Common Stock shall in no event exceed a maximum of Seven Hundred Thousand
(700,000) shares of Common Stock.
B. Notwithstanding anything contained in this SAR Agreement to the
contrary, the maximum aggregate proceeds (whether in cash, stock or a
combination thereof) that may be received by the Optionee from the Company from
the exercise of the SAR rights issued pursuant to this SAR Agreement shall not
exceed Fifteen Million Dollars ($15,000,000).
8. REGISTRATION RIGHTS. If shares of Common Stock are to be delivered,
then (i) such shares must either be registered, or (ii) the Company will as soon
as practicable thereafter, file with the Securities and Exchange Commission (the
"SEC") under the Act a registration statement to register such shares of Common
Stock and will use its reasonable best efforts to have such registration
statement declared effective by the SEC as promptly as possible. In either
event, the Company shall use its reasonable best efforts to maintain the
effectiveness of such registration statement until such shares could be sold by
Optionee on an unrestricted basis under Rule 144.
9. AMENDMENTS. The provisions of this SAR Agreement may not be amended,
supplemented, waived or changed orally, except by a writing signed by the party
as to whom enforcement of any such amendment, supplement, waiver or modification
is sought and making specific reference to this SAR Agreement.
10. TRANSFERS. The SARs may not be transferred other than to an affiliate
of the Optionee without the Company's consent.
11. FURTHER ASSURANCES. The parties hereby agree from time to time to
execute and deliver such further and other transfers, assignments and documents
and do all matters and things which may be convenient or necessary to more
effectively and completely carry out the intentions of this SAR Agreement.
4
<PAGE>
12. BINDING EFFECT. All of the terms and provisions of this SAR Agreement,
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective administrators, executors,
legal representatives, heirs, successors and permitted assigns.
13. GOVERNING LAW. This SAR Agreement and all transactions contemplated by
this SAR Agreement shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Florida without regard to
principles of conflicts of laws.
14. ENTIRE AGREEMENT. This SAR Agreement represents the entire
understanding and agreement among the parties with respect to the subject matter
hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and among such parties.
IN WITNESS WHEREOF, the undersigned have executed this SAR Agreement as
of the date first above written.
THE COMPANY:
ABLE TELCOM HOLDING CORP.
By: /s/ BILLY V. RAY, JR.
-----------------------------------
Name: BILLY V. RAY, JR.
---------------------------------
Its: CEO and PRESIDENT
----------------------------------
OPTIONEE:
WORLDCOM NETWORK SERVICES, INC.
By: /s/ DAVID E. MEYERS
-----------------------------------
Name: DAVID E. MEYERS
---------------------------------
Its: VP and CONTROLLER
----------------------------------
5
EXHIBIT 2.5.9
FINANCING AGREEMENT BETWEEN
WORLDCOM NETWORK SERVICES INC.
AND ABLE TELCOM HOLDING CORP.
FEBRUARY 16, 1999
THIS AGREEMENT ("Agreement") confirms our discussion with respect to
the subject matter hereof and the parties agree as follows:
1. DEFINITIONS.
a. "Able" means Able Telcom Holding Corp.
b. "Additional Advances" means the aggregate of up to
$15,000,000 in advances paid by WorldCom to Able pursuant to paragraph 3 of this
Agreement, or so much thereof as may be outstanding from time to time.
c. "Advance" means the $32,000,000 advance paid by WorldCom to
Able pursuant to paragraph 2 of this Agreement, or so much thereof as may be
outstanding from time to time.
d. "Master Services Agreement" means the Master Services
Agreement between Able and WorldCom dated July 2, 1998.
e. "Senior Notes" means the 12% Senior Subordinated Notes of
Able initially due January 6, 2005, in the aggregate amount of $10,000,000.
f. "Series B Preferred Stock" means up to 4,000 shares of
Series B Convertible Preferred Stock of Able issued as of June 30, 1998 in the
original aggregate amount of $20,000,000.
g. "WorldCom" means WorldCom Network Services Inc.
2. ADVANCE. At the signing of this Agreement by WorldCom and
Able, WorldCom agrees to pay Able $32,000,000 as an advance against amounts
otherwise payable by WorldCom to Able pursuant to the Master Services Agreement.
The Advance will be made by WorldCom by means of wire transfer of $32,000,000 to
an account designated by Able.
<PAGE>
The Advance will accrue interest at the rate of 11.5% per annum from
the date of this Agreement, which interest will be paid upon the repayment of
the Advance from time to time.
The Advance will be prepayable and repayable in whole or in part, as
applicable, to WorldCom on the earlier of (i) October 31, 2000 or (ii) the dates
on which (A) Able consummates the redemption of all or any part of the Series B
Preferred Stock, (B) the holder of the Series B Preferred Stock sells all or any
portion of such stock or all or any portion of shares of Common Stock of Able
issued upon conversion of the Series B Preferred Stock or (c) pays in whole or
in part the Senior Notes.
Able will pay WorldCom the proceeds from any of the above events within
one (1) business day after Able receives the proceeds.
3. ADDITIONAL ADVANCES. During the period from the date hereof
through March 31, 2000, WorldCom will make available to Able an additional
$15,000,000 in Additional Advances against amounts otherwise payable by WorldCom
to Able pursuant to the Master Services Agreement. WorldCom agrees to make Able
an Additional Advance in tranches of $5,000,000 each by wire transfer to an
account designated by Able within five (5) business days after the request for
an Additional Advance is made by Able.
All Additional Advances are repayable to WorldCom on October 31, 2000.
All Additional Advances accrue interest at the rate of 11.5% per annum
from the date of the Additional Advance to the date paid.
4. NATURE OF AGREEMENT. This Agreement does not constitute a
revolving line of credit. Accordingly, WorldCom's financial obligation hereunder
to provide the Advance and Additional Advances shall terminate on a dollar for
dollar basis as WorldCom is repaid for such Advances in whole or in part, as
provided herein.
5. USE OF PROCEEDS. The proceeds of the Advance will be used to
make a loan to an entity unaffiliated with Able which will purchase the Series B
Preferred Stock and the Senior Notes.
6. OTHER DOCUMENTS. Able and WorldCom agree to act in good faith
and to negotiate, prepare and sign such other documents as shall be reasonably
required to further evidence the intent of this Agreement.
2
<PAGE>
7. LEGAL INTENT. The parties intend to be legally bound by this
Agreement and agree that this Agreement contains the necessary material items to
be considered a contract.
This Agreement is entered into this 16th day of February, 1999.
WORLDCOM NETWORK SERVICES ABLE TELCOM HOLDING CORP.
INC.
By: /s/ DAVID E. MEYERS By: /s/ BILLY V. RAY, JR.
------------------------------- --------------------------
Name: DAVID E. MEYERS Name: BILLY V. RAY, JR.
----------------------------- ------------------------
Title: VP and CONTROLLER Title: CEO and PRESIDENT
---------------------------- -----------------------
3
EXHIBIT 4.13
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 17, 1999, by and among Able Telcom Holding Corp., a Florida
corporation (the "COMPANY"), RGC International Investors, LDC, a Cayman Islands
Limited duration company ("RGC"), and Cotton Communications, Inc., a Georgia
corporation ("PURCHASER").
WHEREAS:
A. The Company and RGC entered into a Convertible Preferred Stock
Purchase Agreement, dated as of June 26, 1998 (the "PURCHASE AGREEMENT"),
pursuant to which RGC (i) purchased shares of the Company's Series B Convertible
Preferred Stock (the "SERIES B PREFERRED SHARES"), which are convertible into
Common Stock, $.001 par value per share, of the Company (the "COMMON STOCK"),
upon the terms and subject to the limitations and conditions set forth in the
Articles of Amendment to the Articles of Incorporation of the Company (the
"SERIES B CERTIFICATE OF DESIGNATION") and (ii) in consideration for the
purchase of the Series B Preferred Shares, received a Common Stock Purchase
Warrant to purchase 175,000 shares of Common Stock (the "SERIES B WARRANTS");
B. Contemporaneously with the issuance of the Series B Warrants, the
Company issued to RGC an additional Common Stock Purchase Warrant to purchase
195,000 shares of Common Stock (the "ADDITIONAL WARRANTS" and together with the
Series B Warrants, the "WARRANTS");
C. In connection with the Purchase Agreement, the Company and RGC
entered into two Registration Rights Agreements, dated as of June 30, 1998 (the
"REGISTRATION RIGHTS AGREEMENTS"), pursuant to which the Company was obligated
to file and obtain effectiveness with the Securities and Exchange Commission
(the "SEC"), on or before October 28, 1998, of a Registration Statement (as
defined in the Registration Rights Agreements) (the "REGISTRATION STATEMENT")
registering the resale by RGC of the Registrable Securities (as defined in
Registration Rights Agreements). The Company is in breach of its obligations
under the Registration Rights Agreements because, among other things, it failed
to obtain effectiveness of such Registration Statement. The Company desires to
comply with the provisions of the Registration Rights Agreements by registering
for resale the Retained Conversion Shares (as defined below), Warrant Shares (as
defined below) and Restricted Conversion Shares (as defined below);
D. RGC has converted a portion of the Series B Preferred Shares into
461,907 shares of Common Stock which RGC presently is holding and which shares
have not been registered for resale as required by the Registration Rights
Agreements (the "RESTRICTED CONVERSION SHARES");
<PAGE>
E. (i) Purchaser desires to purchase and RGC desires to sell 1,425 of
the outstanding Series B Preferred Shares held by RGC for a purchase price of
$11,000,000 (the "TRANSFERRED SERIES B PREFERRED SHARES") and (ii) RGC desires
to retain 375 of the outstanding Series B Preferred Shares held by RGC (the
"RETAINED SERIES B PREFERRED SHARES"). The shares of Common Stock issuable upon
conversion of the Retained Series B Preferred Shares are referred to herein as
the "RETAINED CONVERSION SHARES";
F. The Company desires to amend the terms of the Warrants in accordance
with the terms of this Agreement. The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "WARRANT SHARES";
G. All capitalized terms used but not defined in this Agreement shall
have the meanings ascribed to them in either the Purchase Agreement, the Series
B Certificate of Designation or the Registration Rights Agreements. The Series B
Preferred Shares, the Transferred Series B Preferred Shares, the Retained Series
B Preferred Shares, the Warrants, the Retained Conversion Shares, the Restricted
Conversion Shares and the Warrant Shares are collectively referred to herein as
the "SECURITIES".
NOW THEREFORE, the Company, RGC and Purchaser severally (and not
jointly) hereby agree as follows:
1. PURCHASE OF SERIES B PREFERRED SHARES; AMENDMENT OF
WARRANTS AND GRANT OF PROXY.
a. PURCHASE OF SERIES B PREFERRED SHARES. On the Closing
Date (as defined below), (i) Purchaser shall purchase from RGC all of its
rights, title and interest in the Transferred Series B Preferred Shares for an
aggregate purchase price of $11,000,000 (the "PURCHASE PRICE"); PROVIDED,
HOWEVER, that Purchaser and the Company acknowledge that notwithstanding RGC's
transfer of the Transferred Series B Preferred Shares to Purchaser and
notwithstanding anything contained in the Series B Certificate of Designation to
the contrary, RGC shall retain the portion of the Cap Allowance Amount
attributable to the Transferred Series B Preferred Shares and that the retained
portion of the Cap Allocation Amount shall be allocated to the Retained Series B
Preferred Shares held by RGC until such time as RGC has converted all of the
Retained Series B Preferred Shares, whereupon the remainder of such portion of
the Cap Allocation Amount originally attributable to the Transferred Series B
Preferred Shares shall transfer to Purchaser, and (ii) RGC shall deliver the
Transferred Series B Preferred Shares along with duly executed stock powers to
Purchaser in exchange for the Purchase Price.
b. AMENDMENT OF THE WARRANTS. On the Closing Date (as
defined below), the Company hereby amends the outstanding Warrants held by RGC
in the following manner:
-2-
<PAGE>
(i) The Conversion Price (as defined in the Warrants)
shall be reduced from $19.80 to $13.25; and
(ii) The Company shall be entitled, on any
day following the Closing Date on which the Closing Bid Price (as defined in the
Series B Certificate of Designation) of the Common Stock for each trading day
during the three (3) consecutive trading day period ending on the trading day
immediately preceding such date (the "CALCULATION PERIOD") is equal to or
greater than 150% of the then applicable Conversion Price (as defined in the
Warrants and as amended hereby), to deliver a written notice to the Holder
requiring such Holder to exercise the Warrants in accordance with the terms
thereof on the date which is ten (10) trading days following the date of such
notice (the "EXERCISE DATE"); PROVIDED, HOWEVER, that the Company shall have
such right if and only if for a period of thirty (30) consecutive trading days
prior to the beginning of such Calculation Period and at all times during such
Calculation Period and continuing through the Exercise Date, the Warrant Shares
are (1) authorized and reserved for issuance, (2) listed for trading on each
principal exchange or market on which the shares of Common Stock of the Company
were then traded and (3) registered for resale pursuant to an effective
registration statement under the 1933 Act; PROVIDED, FURTHER, HOWEVER, that the
Holder shall not be required to exercise the Warrants with respect to any such
notice unless the Closing Bid Price of the Common Stock on the trading day
immediately preceding the Exercise Date is at least equal to 145% of the
Conversion Price.
c. GRANT OF PROXY. Beginning on the Closing Date and ending
on the date on which RGC no longer holds any Retained Series B Preferred Shares,
Restricted Conversion Shares, Retained Conversion Shares, Warrant Shares or
Warrants (the "PROXY PERIOD"), RGC hereby appoints Purchaser the true and lawful
attorneys in fact and proxies of RGC to vote all shares of Common Stock held by
RGC during the Proxy Period with the same force and effect as RGC would be
entitled to vote if personally present at any meeting in which such shares may
be voted (the "PROXY").
d. CLOSING DATE. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Sections 7, 8 and 9 below, the date and time
of the purchase of the Transferred Series B Preferred Shares, the amendment of
the Warrants and the commencement of the Proxy Period pursuant to this Agreement
(the "CLOSING DATE") shall be 12:00 noon Eastern Standard Time on February 17,
1999. The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall occur on the Closing Date at the offices of Morgan, Lewis &
Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania 19103, or at such
other location as may be agreed to by the parties.
2. REPRESENTATIONS AND WARRANTIES OF RGC. RGC represents and warrants
to Purchaser and the Company that:
-3-
<PAGE>
a. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly
and validly authorized. This Agreement has been duly executed and delivered on
behalf of RGC, and this Agreement constitutes a valid and binding agreement of
RGC enforceable in accordance with its terms.
b. OWNERSHIP OF PREFERRED SHARES. RGC is the beneficial and
record owner of the Transferred Series B Preferred Shares to be sold to
Purchaser pursuant to this Agreement and RGC has good and valid title to the
shares free from all taxes, liens, claims and encumbrances.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to RGC and Purchaser that:
a. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
b. AUTHORIZATION; ENFORCEMENT. (i) the Company has all
requisite corporate power and authority to enter into and perform this
Agreement, to amend the Warrants and to consummate the transactions contemplated
hereby and thereby in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement by the Company and the consummation by
it of the transactions contemplated hereby (including, without limitation, the
amendment of the Warrants and the issuance and reservation for issuance of the
Warrant Shares issuable upon exercise of the Warrants and the Retained
Conversion Shares issuable upon conversion of the Retained Series B Preferred
Shares) have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board of Directors, or its
stockholders is required, (iii) this Agreement has been duly executed and
delivered by the Company, and (iv) this Agreement constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
c. NO CONFLICTS. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby (including, without limitation, the amendment
of the Warrants and the issuance and reservation for issuance of the Warrant
Shares issuable upon exercise of the Warrants and the Retained Conversion Shares
issuable upon conversion of the Retained Series B Preferred Shares) will not (i)
conflict with or result in a violation of any provision of the Certificate of
Incorporation or By-laws (each as defined in the Purchase Agreement) or (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or
-4-
<PAGE>
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self
regulatory organizations to which the Company or its securities are subject)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court, governmental agency, regulatory agency, self-regulatory organization
or stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Series B Certificate of
Designation, the Registration Rights Agreements or the Warrants in accordance
with the terms hereof or thereof, to amend the Warrants in accordance with the
terms hereof and to issue the Warrant Shares upon exercise of the Warrants and
to issue the Retained Conversion Shares upon conversion of the Retained Series B
Preferred Shares. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to RGC and the Company that:
a. ORGANIZATION AND QUALIFICATION. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
b. AUTHORIZATION; ENFORCEMENT. (i) Purchaser has all
requisite corporate power and authority to enter into and perform this Agreement
and to consummate the transactions contemplated hereby in accordance with the
terms hereof, (ii) the execution and delivery of this Agreement by Purchaser and
the consummation by it of the transactions contemplated hereby have been duly
authorized by Purchaser's board of directors and no further consent or
authorization of Purchaser, its board of directors, or its stockholders is
required, (iii) this Agreement has been duly executed and delivered by
Purchaser, and (iv) this Agreement constitutes a legal, valid and binding
obligation of Purchaser enforceable against Purchaser in accordance with its
terms.
5. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts
to satisfy timely each of the conditions described in Sections 7, 8 and 9 of
this Agreement.
-5-
<PAGE>
b. EXPENSES. Each of the parties to this Agreement shall
bear their own expenses.
c. AGREEMENTS AS TO SERIES B PREFERRED SHARES.
(i) Purchaser covenants and agrees that, until the
earlier of (a) the date on which RGC shall have converted all of the Retained
Series B Preferred Shares held by RGC and (b) the date the Company has obtained
the approval of its stockholders as required by applicable rules and regulations
of Nasdaq for issuances of Common Stock in excess of the Exchange Cap, (the
earlier of such dates being hereafter referred to as the "Conversion Restriction
Release Date"), Purchaser (or any successors or assigns of the Transferred
Series B Preferred Shares) will not convert any of the Transferred Series B
Preferred Shares into shares of Common Stock. The Company covenants and agrees
that until the Conversion Restriction Release Date, it will not honor any
conversion notices submitted by Purchaser (or any successors or assigns of the
Transferred Series B Preferred Shares) or issue any shares of Common Stock upon
conversion of the Transferred Series B Preferred Shares.
(ii) The Company hereby acknowledges RGC's right to
fully convert the Retained Series B Preferred Shares in accordance with the
terms of the Series B Certificate of Designation into an aggregate of up to
534,981 shares of Common Stock based on the Exchange Cap. The Company further
acknowledges that the Conversion Price under the Series B Certificate of
Designation is $3.5075 as of the date of this Agreement.
(iii) RGC agrees to convert the Retained Series B
Preferred Shares in accordance with the Series B Certificate of Designation
within 30 days after the date on which the Registration Statement is declared
effective by the SEC (provided such Registration Statement remains in effect at
all times during such 30-day period).
d. ACKNOWLEDGMENT OF OBLIGATIONS UNDER THE PURCHASE
AGREEMENT, SERIES B CERTIFICATE OF DESIGNATION, WARRANTS AND REGISTRATION RIGHTS
AGREEMENTS. The Company hereby acknowledges its obligations and the rights of
RGC under the Purchase Agreement, the Series B Certificate of Designation, the
Warrants and the Registration Rights Agreements and, except to the extent those
agreements are expressly modified by the provisions of this Agreement, such
agreements and instruments shall remain in full force and effect.
e. CONSENT TO AMENDMENTS OF PURCHASE AGREEMENT, SERIES B
CERTIFICATE OF DESIGNATION AND REGISTRATION RIGHTS AGREEMENT. The Company and,
to the extent Purchaser has rights under the Purchase Agreement, Series B
Certificate of Designation and Registration Rights Agreements, Purchaser
covenant and agree that they will not amend or agree to amend any of the terms
of the Purchase Agreement, Series B Certificate of Designation or the
Registration Rights Agreements without the consent of RGC; PROVIDED, HOWEVER,
the Company and
-6-
<PAGE>
Purchaser may amend the Series B Certificate of Designation without RGC's
consent after the date on which RGC has converted all of the Retained Series B
Preferred Shares in accordance with the terms of the Series B Certificate of
Designation.
f. RECISSION OF REDEMPTION NOTICE. RGC agrees that its
Notice of Redemption at Option of Holder Upon Triggering Event (the "REDEMPTION
NOTICE") contained in that certain letter to Edward Pollock, Esquire, dated
January 19, 1999, shall be rescinded effective as of the Closing Date. RGC
further agrees that it will not, within 90 days of the date of this Agreement,
deliver a Notice of Redemption at Option of Holder Upon Triggering Event based
upon any event or condition in existence as of the Closing Date; PROVIDED,
HOWEVER, that notwithstanding anything contained herein to the contrary, nothing
herein shall be construed to waive RGC's right to deliver a Notice of Redemption
at Option of Holder Upon Triggering Event or Notice of Redemption at Option of
Holder Upon Major Transaction for any event or condition giving rise to such
right occurring after the Closing Date.
g. NO DELIVERY OF NOTICE OF REDEMPTION AT OPTION OF HOLDER
UPON TRIGGERING EVENT OR NOTICE OF REDEMPTION AT OPTION OF HOLDER UPON MAJOR
TRANSACTION. Purchaser covenants and agrees that it will not deliver a Notice of
Redemption at Option of Holder Upon Triggering Event or Notice of Redemption at
Option of Holder Upon Major Transaction to the Company for any reason so long as
RGC holds any of the Retained Series B Preferred Shares or Warrants.
6. REGISTRATION RIGHTS.
a. REGISTRATION RIGHTS. The Company acknowledges its
obligations under the Registration Rights Agreements including its obligation to
cause the Registration Statement to become effective and that the Company is in
breach of such obligations. The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the SEC as soon as possible.
Such Registration Statement shall cover the resale by RGC of (i) the Restricted
Conversion Shares, (ii) the Warrant Shares issuable upon exercise of the
Warrants and (iii) the Retained Conversion Shares issuable upon exercise of the
Retained Series B Preferred Shares.
7. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligation of the
Company hereunder to amend the Warrants is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
a. RGC and Purchaser shall have executed this Agreement and
delivered the same to the Company.
b. Purchaser shall have delivered the Purchase Price to
RGC.
-7-
<PAGE>
c. RGC shall have delivered the Transferred Series B
Preferred Shares to Purchaser.
d. The representations and warranties of each of RGC and
Purchaser shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time, and each of RGC and
Purchaser shall have performed, satisfied and complied in all material respects
with their respective covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by RGC or Purchaser at or
prior to the Closing Date.
e. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
8. CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligation of
Purchaser hereunder to purchase the Transferred Series B Preferred Shares at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for Purchaser's
sole benefit and may be waived by Purchaser at any time in its sole discretion:
a. The Company and RGC shall have executed this Agreement
and delivered the same to Purchaser.
b. RGC shall have delivered to Purchaser certificates
representing the Transferred Series B Preferred Shares along with duly executed
stock powers for such certificates in accordance with Section 1(a) above.
c. The representations and warranties of the Company and
RGC set forth in this Agreement shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at
such time and the Company and RGC shall have performed, satisfied and complied
in all material respects with their respective covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company and RGC at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
-8-
<PAGE>
9. CONDITIONS TO RGC'S OBLIGATIONS. The obligation of RGC
hereunder to sell the Transferred Series B Preferred Shares to Purchaser, grant
Purchaser the Proxy at the Closing and rescind the Redemption Notice is subject
to the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for RGC's sole benefit and may be
waived by RGC at any time in its sole discretion:
a. The Company and Purchaser shall have executed this
Agreement and delivered the same to RGC.
b. Purchaser shall have delivered to RGC the Purchase Price
for the Transferred Series B Preferred Shares in accordance with Section 1(a)
above.
c. The representations and warranties of the Company and
Purchaser set forth in this Agreement shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at
such time and the Company and Purchaser shall have performed, satisfied and
complied in all material respects with their respective covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
e. All of the holders of Series B Preferred Shares for
which The Palladin Group signed the Purchase Agreement as attorney-in-fact (the
"PALLADIN GROUP") shall have rescinded their Notice of Redemption at Option of
Holder Upon Triggering Event sent to Edward Pollock, Esquire on or about January
19, 1999. The Palladin Group shall have also agreed that they will not, within
90 days of the date of this Agreement, deliver a Notice of Redemption at Option
of Holder Upon Triggering Event based upon any event or condition in existence
as of the Closing Date; PROVIDED, HOWEVER, that notwithstanding anything
contained herein to the contrary, the Palladin Group may retain the right to
deliver a Notice of Redemption at Option of Holder Upon Triggering Event or
Notice of Redemption at Option of Holder Upon Major Transaction for any event or
condition giving rise to such right occurring after the Closing Date.
f. Purchaser shall have purchased 1,360 Series B Preferred
Shares held by the Palladin Group.
10. GOVERNING LAW; MISCELLANEOUS.
-9-
<PAGE>
a. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in the
Borough of Manhattan in the State of New York with respect to any dispute
arising under this Agreement, the agreements entered into in connection herewith
or the transactions contemplated hereby or thereby.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement
may be executed in one or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
other agreements, documents and instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, none of the
parties makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
f. NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five (5) days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
-10-
<PAGE>
If to the Company:
Able Telcom Holding Corp.
1601 Forum Place, Suite 1110
West Palm Beach, FL 33401
Attention: Chief Executive Officer
Facsimile: (561) 688-0455
With a copy to:
Able Telcom Holding Corp.
1601 Forum Place, Suite 1110
West Palm Beach, FL 33401
Attention: Edward Pollock, Esquire
Facsimile: (561) 688-0455
If to RGC:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza - East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attention: Wayne D. Bloch
Facsimile: (610) 617-0570
With a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: Keith S. Marlowe, Esquire
Facsimile: (215) 963-5299
If to Purchaser:
Cotton Communications, Inc.
120 Allen Road
Atlanta, GA 30328
Attention: Tyler Dixon, Esquire
Facsimile:
-11-
<PAGE>
Each party shall provide notice to the other party of any change of address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company, RGC nor Purchaser shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, RGC may assign its rights hereunder to any person
that purchases the Retained Series B Preferred Shares or the Warrants in a
private transaction from RGC or to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of the Company or Purchaser.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. SURVIVAL. The representations and warranties of the
Company and Purchaser and the agreements and covenants set forth in Sections
1(a), 1(b), 1(c), 1(d), 3, 4, 5, 6 and 10 shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of
RGC.
j. PUBLICITY. The Company, Purchaser and RGC shall have the
right to review a reasonable period of time before issuance of any press
releases, SEC, NASDAQ or NASD filings, or any other public statements with
respect to the transactions contemplated hereby; PROVIDED, HOWEVER, that the
Company shall be entitled, without the prior approval of each of RGC and
Purchaser, to make any press release or SEC, NASDAQ or NASD filings with respect
to such transactions as is required by applicable law and regulations (although
each of RGC and Purchaser shall be consulted by the Company in connection with
any such press release prior to its release and shall be provided with a copy
thereof and be given an opportunity to comment thereon).
k. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. REMEDIES. The Company and Purchaser acknowledge that a
breach by them of their respective obligations hereunder will cause irreparable
harm to RGC, by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company and Purchaser acknowledge that the
remedy at law for a breach of their respective obligations under this Agreement
will be inadequate and agree, in the event of a breach or threatened breach by
the Company and/or Purchaser of the provisions of this Agreement, that RGC shall
be entitled, in addition to all other available remedies in law or in equity, to
an injunction or injunctions to prevent
-12-
<PAGE>
or cure any breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions of this Agreement, without the necessity
of showing economic loss and without any bond or other security being required.
m. NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-13-
<PAGE>
IN WITNESS WHEREOF, Purchaser, RGC and the Company have caused
this Agreement to be duly executed as of the date first above written.
ABLE TELCOM HOLDING CORP.
By: /s/ BILLY V. RAY
------------------------------------
Name: Billy V. Ray
Title: President & CEO
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By: /s/ GARY S. CAMINSKY
------------------------------------
Name: Gary S. Caminsky
Title: Managing Director
COTTON COMMUNICATIONS, INC.
By: /s/ TYLER DIXON
------------------------------------
Name: Tyler Dixon
Title: President
-14-
EXHIBIT 4.14
WARRANT AMENDMENT
This WARRANT AMENDMENT (the "Warrant Amendment") is made and entered
into as of February 17, 1999, by and between Able Telcom Holding Corp., a
Florida corporation (the "Company") and Halifax Fund L.P., The Gleneagles Fund
Company, Palladin Overseas Fund Limited, Colonial Penn Life Insurance Company,
Palladin Securities L.L.C. and Palladin Partners I, L.P. (collectively, together
with their successors, assigns and transferees, the "Purchasers").
WHEREAS, the Company and the Purchasers have entered into that certain
Convertible Preferred Stock Purchase Agreement, dated June 26, 1998, including
all exhibits thereto (the "Purchase Agreement"), pursuant to which Common Stock
Purchase Warrants, dated June 30, 1998 for an aggregate of 625,000 shares of the
Company's common stock, par value $0.001 per share (the "Common Stock") were
issued to the Purchasers (the "Warrants"); capitalized terms used herein but not
defined herein shall have the meanings assigned thereto in the Purchase
Agreement;
WHEREAS, in consideration of the mutual promises set forth herein, the
Company and Purchasers have agreed to amend the Warrants on the terms and
conditions set forth herein.
NOW, THEREFORE, the Company and the Purchasers agree as follows:
Section 1. AMENDMENT OF THE CONVERSION PRICE. The Company and the
Purchasers hereby agree that the Conversion Price set forth in the Warrants
shall be amended to be $13.50.
Section 2. COMPANY CALL FOR REDEMPTION OF WARRANTS.
(a) The Company and the Purchasers hereby agree that on any
date on or before April 30, 1999 (a "Call Date"), in the event (i) that the
Closing Bid Price of the Company's Common Stock is above $17.00 per share for
five (5) consecutive Trading Days preceding the Call Date and (ii) there is on
the Call Date Effective Registration, which shall remain in effect for thirty
(30) days after the Call Date, then the Company shall, if the below conditions
are satisfied, be deemed to have called for the redemption of the Warrants.
(b) In the event that there is a call for the redemption of
the Warrants pursuant to Section 2(a) above, the Company will provide to the
Purchasers thirty (30) days from the date on which the condition described in
Section 2(a) is first met in which to exercise the Warrants prior to the
effectiveness of the call for redemption and the retirement of the Warrants.
(c) In the event that there is a call for redemption of the
Warrants pursuant
<PAGE>
to this Section 2, the Company and the Purchasers hereby agree to waive, upon
the Purchasers' receipt of the notice pursuant to Section 2(b) above, the
restrictions on the Purchasers' ability to exercise the Warrants as set forth in
Section 10 of the Warrants so as to permit their immediate exercise up to the
limit referred to in this Section 2(c); provided, that Palladin's Restricted
Ownership Percentage as set forth in Section 10 of the Warrants shall be
increased from 4.9% to 9.9%, and Palladin shall not be permitted to exercise the
Warrants as provided in Section 10 thereof, to the extent that it would be the
Beneficial Owner of more than 9.9% of the Common Stock.
(d) After the period referred to in Section 2(b) hereof, the
Warrants shall, to the extent not exercised, be retired and redeemed by the
Company without any payment by the Company and shall no longer be exercisable by
the Purchasers or any other person.
(e) Effective immediately, the fourth sentence of Section 10
of the Warrants, which reads "The term 'deemed beneficially owned' as used in
this Warrant shall exclude shares that might otherwise be deemed beneficially
owned by reason of the convertibility of the Preferred Shares." shall be deleted
from Section 10.
Section 3. CONTINUING EFFECTIVENESS OF THE WARRANT. Except as expressly
provided herein, no other provision of the Warrants is amended hereby and the
Warrants shall remain in full force and effect.
Section 4. ATTACHMENT TO WARRANTS. This Warrant Amendment shall be
considered as part of the Warrants as if incorporated therein by reference as if
made part thereof.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
HALIFAX FUND, L.P.
THE GLENEAGLES FUND COMPANY
PALLADIN OVERSEAS FUND LIMITED
COLONIAL PENN LIFE INSURANCE COMPANY
By: /s/ [ILLIGIBLE]
---------------------------------
By: The Palladin Group, L.P., as
Attorney-in-Fact and
Investment Advisor
By:
Title:
PALLADIN SECURITIES L.L.C.
By: /s/ ROBERT CHENDER
---------------------------------
Name:
Title:
PALLADIN PARTNERS I, L.P.
By: /s/ JEFFREY DEVERS
---------------------------------
By: The Palladin Group, L.P., as
Attorney-in-Fact and
Investment Advisor
By:
Title:
Accepted and Agreed to:
ABLE TELCOM HOLDING CORP.
By: /s/ BILLY V. RAY
--------------------------------
Billy V. Ray
Title: President & CEO
[CORPORATE SEAL]
Attest:
By: __________________________________
Name: Elizabeth Terrero
Title: Corporate Secretary
- 3 -
EXHIBIT 4.15
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT dated as of February 17, 1999 (the
"Agreement") by and between Halifax Fund L.P., The Gleneagles Fund Company,
Palladin Overseas Fund Limited, Colonial Penn Life Insurance Company, Palladin
Securities L.L.C. and Palladin Partners I, L.P. (collectively "Sellers") and
Cotton Communications, Inc. ("Purchaser").
WHEREAS the Sellers have entered into that certain Convertible
Preferred Stock Purchase Agreement with Able Telcom Holding Corp. (the
"Company"), dated June 26, 1998, including all exhibits thereto (the "Purchase
Agreement"); and pursuant thereto, on June 30, 1998, the Sellers acquired 2,000
shares of Series B Preferred Stock (the "Preferred Shares") as well as warrants
(the "Warrants") to purchase up to 625,000 shares of Able Telcom Holding Corp.
common stock, par value $0.001 per share (the "Common Stock"), and currently own
1,764 Preferred Shares;
WHEREAS, immediately after consummation of the transactions
contemplated hereby, Sellers may convert 404 Preferred Shares at a conversion
price of $3.5138 or such lesser price, if any, as may be in effect at the time
of conversion;
WHEREAS, the Purchaser desires to purchase 1360 Preferred Shares; and
WHEREAS, the Sellers desire to sell 1360 Preferred Shares to Purchaser;
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF THE PREFERRED SHARES
1.1 PURCHASE AND SALE OF THE SHARES. At the Preferred Closing (as
defined below):
(a) The Purchaser will purchase from the Sellers, and the
Sellers will sell to the Purchaser, the 1360 Preferred Shares for a purchase
price of $5772.56 per Preferred Share for a total purchase price of
$7,850,681.60 (the "Purchase Price");
(b) The Sellers will deliver to the Purchaser the Preferred
Shares;
(c) The Purchaser will deliver to an account designated by the
Sellers, in immediately available funds, the amount of the Purchase Price; and
(d) The Sellers will provide the Purchasers with a proxy to
vote all shares of Common Stock Beneficially Owned by the Sellers.
The closing of the purchase and sale of the Preferred Shares (the
"Preferred Closing"), shall
<PAGE>
take place at the offices of Paul, Hastings, Janofsky & Walker LLP, 600
Peachtree Street, Suite 2400, Atlanta, Georgia, at 10:00 a.m., local time on
February 17, 1999; or such other time and place and/or on such other date as the
Sellers and the Purchaser may agree. As a condition to the Preferred Closing,
all of the representations and warranties contained in Sections 1.3 and 1.4
hereof shall be true and correct as of the Preferred Closing as certified by
both the Purchaser and Sellers at the Preferred Closing.
1.2 PURCHASE AND SALE OF PREFERRED WARRANTS. If there has not been an
effective call for redemption pursuant to Section 2(a) of the Warrant Amendment
dated of even date herewith between the Company and Sellers (I.E., the
conditions contained in said Section 2(a) have not been satisfied), at a Warrant
Closing (as defined below) to take place on April 30, 1999:
(a) The Purchaser will purchase from the Sellers, and the
Sellers will sell to the Purchaser, any and all Warrants the Sellers then hold
so unredeemed and unexercised for a purchase price equal to $3.00 per share of
Common Stock subject to such Warrants (the "Warrant Purchase Price").
(b) The Sellers will deliver to the Purchaser such Warrants;
and
(c) The Purchaser will deliver to an account designated by the
Sellers, in immediately available funds, the amount of the Warrant Purchase
Price.
(d) The closing of the purchase and sale of the Warrants (the
"Warrant Closing"), shall take place at the offices of Arnold & Porter, 555 12th
Street N.W., Washington, D.C., at 10:00 a.m., local time on April 30, 1999; or
such other time and place and/or on such other date as the Sellers and the
Purchaser may agree. As a condition to the Warrant Closing, all of the
representations and warranties contained in Sections 1.3 and 1.4 hereof shall be
true and correct as of the Warrant Closing as certified by both the Purchaser
and Sellers at the Warrant Closing.
1.3 PURCHASER REPRESENTATIONS AND WARRANTIES.
In connection with the purchase and sale of the Preferred Shares and
the Warrants hereunder, the Purchaser represents and warrants to the Sellers
that:
(a) The Purchaser is acquiring the Preferred Shares and the
Warrants for its own account for investment purposes only and not with a view
to, or intention of, making a distribution thereof within the meaning of the
Securities Act of 1933, as amended (the "Act"), or any applicable state
securities laws, and the Preferred Shares and the Warrants will not be
transferred or disposed of in contravention of the Act or any applicable state
securities laws.
(b) The Purchaser understands (i) that the Preferred Shares
and the Warrants have not been registered under the Act by reason of their
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Act pursuant to Section 4(2) thereof and have not been
registered under any state or other jurisdiction's securities laws, and (ii) the
Sellers' reliance on such exceptions is predicated on the Purchaser's
representations set forth herein, and (iii)
-2-
<PAGE>
that the Preferred Shares and the Warrants must be held indefinitely unless the
sale or other transfer thereof is subsequently registered or exemptions from
such registration requirements are available. The Purchaser is further aware
that the Sellers are under no obligation to register the Preferred Shares or the
Warrants under the Act or any state or other jurisdiction's securities laws or
to assist the Purchaser in complying with any exemption from such registration
requirements.
(c) The Purchaser acknowledges that investment in the
Preferred Shares and the Warrants involves substantial risks, including the risk
of total loss of its investment in the Preferred Shares and the Warrants. The
Purchaser (i) is able to bear the economic risk of its investment in the
Preferred Shares and the Warrants for an indefinite period of time; (ii) has
adequate means, other than the Preferred Shares, the Warrants or funds invested
therein, of providing for its current and foreseeable needs; (iii) has no
foreseeable need to sell or otherwise dispose of any of the Preferred Shares or
the Warrants; and (iv) has sufficient net worth to sustain a loss of its entire
investment in the Preferred Shares and in the Warrants in the event such loss
should occur.
(d) The Purchaser is an "accredited investor," as such term is
defined in Rule 501 of Regulation D promulgated under the Act. The Purchaser and
its agents and representatives have such knowledge and experience in financial
and business matters as to enable them to utilize the information made available
to them in connection with the transactions contemplated hereby to evaluate the
merits and risks of an investment in the Preferred Shares and the Warrants and
to make an informed decision with respect thereto, and such an evaluation and
informed decision have been made.
(e) The Purchaser has the legal capacity and authority to
enter into and perform all of its obligations under this Agreement. This
Agreement constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms. The execution,
delivery and performance of this Agreement does not and will not conflict with,
violate, cause a breach of or constitute a default under (i) any agreement,
contract or other instrument or obligation to which the Purchaser is a party or
by which the Purchaser is bound or (ii) any judgment, order, decree, statute,
rule or regulation to which the Purchaser is subject.
(f) The Purchaser understands that the Preferred Shares and
the Warrants it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the issuer
in a transaction not involving a public offering and that under such laws and
applicable regulations such Preferred Shares and such Warrants may be resold
without registration under the Act, only in certain limited circumstances. In
this connection, such Purchaser represents that it is familiar with SEC Rule
144, as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
(g) The Purchaser acknowledges that the Sellers may, between
the date hereof and the Warrant Closing, exercise some or all of the Warrants
and under such circumstances, Sellers shall have no obligations to the Purchaser
to sell any Warrants to the extent so exercised, and, further, shall have no
obligation to sell to the Purchaser any shares of Common Stock acquired by the
Sellers pursuant to such exercise.
-3-
<PAGE>
1.4 SELLERS' REPRESENTATIONS AND WARRANTIES
In connection with the purchase and sale of the Preferred Shares and
the Warrants hereunder, the Sellers' represent and warrant to the Purchaser
that:
(a) The Preferred Shares and the Warrants to be sold at the
Preferred Closing and the Warrant Closing are lawfully held by the Sellers and
are free and clear of any and all taxes, liens, claims and encumbrances.
(b) The Sellers have the legal capacity and authority to enter
into and perform all of its obligations under this Agreement. This Agreement
constitutes the legal, valid and binding obligation of the Sellers, enforceable
against the Sellers in accordance with its terms. The execution, delivery and
performance of this Agreement does not and will not conflict with, violate,
cause a breach of or constitute a default under (i) any agreement, contract or
other instrument or obligation to which the Purchaser is a party or by which the
Sellers are bound or (ii) any judgment, order, decree, statute, rule or
regulation to which the Sellers are subject.
ARTICLE 2.
GENERAL PROVISIONS
2.1 LEGENDS. The Purchaser understands and agrees that, in addition to
any other legends required by applicable law, the certificate or certificates
representing the Preferred Shares and the Warrants will bear legends
substantially to the effect set forth below and that a stop transfer order may
be placed with respect thereto.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
2.2 SURVIVAL. The representations, warranties and covenants contained
in this Agreement shall survive the purchase and sale of the Preferred Shares
and the Warrants pursuant to this Agreement.
2.3 AMENDMENT. This Agreement may be amended, or any provision hereof
may be waived, at any time by an agreement in writing of the parties hereto.
2.4 ENTIRE AGREEMENT; SUCCESSORS. This Agreement contains the entire
agreement among the parties hereto with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral, other than documents referred to herein. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
-4-
<PAGE>
2.5 NO ASSIGNMENT. No party hereto may assign any of its rights or
obligations under this Agreement to any other person without the written consent
of the other party.
2.6 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
by facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
The Sellers:
c/o The Palladin Group, L.P.
195 Maplewood Avenue
Maplewood NJ 07040
Attn: Robert L. Chender
Facsimile: (973) 313-6491
If to the Purchaser, to the address or facsimile set forth beneath the
signature of the Purchaser on the signature page hereof.
All such deliveries shall be deemed effective when received by the
person entitled to such receipt or when delivery has been attempted but refused
by such person. Any party may change the person or address to which such
deliveries shall be made with respect to such party by delivering notice thereof
to the other party hereto in accordance with this Section.
2.7 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
2.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
2.9 GOVERNING LAW AND VENUE. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New York applicable to agreements made and entirely to be performed within such
jurisdiction. The party bringing any action under this Agreement shall only be
entitled to choose the federal or state courts in the State of New York as the
venue for such action, and each party consents to the jurisdiction of the court
chosen in such manner for such action.
2.10 FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties hereto shall use reasonable efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement.
-5-
<PAGE>
2.11 CONVERSION OF PREFERRED SHARES BY THE PURCHASER. The Purchaser
agrees not to convert any Preferred Shares until 30 days after the Sellers have
converted all Preferred Shares held by the Sellers provided, however, that this
Section 2.11 shall not apply if the condition described in Section 12(a)(i) of
the Articles of Amendment (providing for shareholder approval) is fulfilled. The
Purchaser further agrees not to sell or transfer any of the Preferred Shares
without first obtaining an obligation from any proposed purchaser or transferee
of the Preferred Shares to agree to the restrictions set forth in this Section
2.11.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
HALIFAX FUND, L.P.
THE GLENEAGLES FUND COMPANY
PALLADIN OVERSEAS FUND LIMITED
COLONIAL PENN LIFE INSURANCE COMPANY
By: /s/ Robert Chender
------------------------------------------------
By: The Palladin Group, L.P., as
Attorney-in-Fact and Investment
Advisor
By: /s/ Robert Chender
------------------------------------------------
Title: Partner
---------------------------------------------
PALLADIN SECURITIES L.L.C.
By: /s/ Robert Chender
------------------------------------------------
Name: Robert Chender
----------------------------------------------
Title: Partner
---------------------------------------------
PALLADIN PARTNERS I, L.P.
By: /s/ Robert Chender
------------------------------------------------
By: The Palladin Group, L.P., as
Attorney-in-Fact and Investment Advisor
By: /s/ Robert Chender
------------------------------------------------
Title: Partner
---------------------------------------------
Accepted and Agreed to:
COTTON COMMUNICATIONS, INC.
Tyler Dixon
- ---------------------------
By: Tyler Dixon
Title: President
-6-
<PAGE>
Address: 120 Allen Road
Atlanta, Georgia 30328
EXHIBIT 10.33
[LOGO]
EMPLOYMENT AGREEMENT
Agreement dated this 1st day of December, 1998, by and between Able Telcom
Holding Corp., with its address at 1601 Forum Place, Suite 1110, West Palm
Beach, Florida, 33401, ("Employer"), and Billy V. Ray 2919 Truitt Drive
Burlington, NC 27215 ("Employee").
WITNESSETH:
WHEREAS, Employer is engaged in the telephone and telecommunication installation
and service, business and manufacture, sale and installation of highway signs
and traffic control products, and
WHEREAS, Employer desires to employ Employee as the Interim Chief Executive
Officer and President; and
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of Employer; and
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, is consideration of the foregoing and mutual promises and
covenants herein contained, it is agree as follows:
1. EMPLOYMENT: DUTIES
Employer hereby Employs the employee as the Interim Chief Executive Officer and
Interim President. Subject at all times to the direction of the Board of
Directors, the Employee shall be in charge of the overall business operations of
Employer and of such other services and duties as the Board of Directors shall
determine. However, the duties and responsibilities assigned to the employee
during the term of employment shall be substantially similar in type and
character to those ordinarily assigned to and performed by persons employed as
high level executives by corporations carrying on a business similar to
Employer.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agrees that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
<PAGE>
3. TERM
Employee's employment hereunder shall be for a term of two (2) years to commence
on the date hereof. This Agreement may be extended for an additional two year
term after the initial term of two (2) years. The Employee/Employer must give a
minimum of ninety (90) days prior written notice to the Employee/Employer that
either party elects to have the Agreement terminate effective at the end of any
term. If Employer violates a major provision of this Agreement, Employee may
terminate this Agreement and receive an amount equal to the provisions under
paragraph 5 of this agreement titled " Termination without Cause". At the end of
the two-year period, the Employee may sign a consulting agreement. The terms of
either an extension of this Agreement or of a consulting agreement will be
negotiated not later than the 20th month of this Agreement.
4. TERMINATION FOR CAUSE
Notwithstanding any other provision of this Agreement, Employee may be
terminated on ninety (90) days notice without further benefits or
compensation for any of the following reasons: a) misuse, misappropriation
or embezzlement of any Employer property or funds; b) conviction of a felony
or c) breach of any material provision of this Agreement.
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be effected by an action by the Board of
Directors representing a majority of the members approving such termination. In
the event of termination without cause or a substantial change of job
responsibility, employee will receive bi-weekly the balance of his yearly base
salary for the remaining term of this agreement plus regular company fringe
benefits. All of said payments will be without any rights of mitigation. In no
case shall Employee receive less than 90 days severance pay.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i) BASE SALARY. Employer during the term hereof shall pay Employee a base salary
at the rate of one hundred eighty thousand ($180,000) per annum, payable no less
frequently than in monthly installments.
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder, including
travel and entertainment, such reimbursement to be made in accordance with
regular Employer policy and upon presentation by Employee of the details of, and
vouchers for, such expenses.
iii) SALARY ADJUSTMENTS. Prior to the expiration of each contract year, the
Board of Directors may review Employee's salary and benefits and, if
appropriate, in its sole and absolute discretion, may increase such salary and
benefits for the next succeeding year.
iv) AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an automobile
allowance of five hundred dollars ($500) per month.
v) HOUSING ALLOWANCE: Employer shall provide employee with a housing allowance
of fifteen hundred ($1,500) per month.
<PAGE>
7. OPTIONS
Employee will receive as of December 31, 1998 an option to purchase 100,000
shares of common stock with a strike price equal to the NASDAQ price at the
close of business on December 31, 1998. Said option will vest immediately.
8. FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other executive
management employees.
9. UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business relationship
with its customers or suppliers. Further, Employee will not solicit any of the
employees of Employer to leave the Employer for a period of two (2) years
following such termination. In addition, Employee agrees that all information
received from principals and agents of Employer will be held in total confidence
for a period of two (2) years following termination of employment, to the extent
such information is proprietary and not generally available to the public or
sources outside the company.
10. INCAPACITY
In the event that Employee shall become incapacitated or unable to perform the
duties of his employment hereunder for the balance of the current two year
period (hereinafter referred to as the "Disability Period"), the Employee
nevertheless shall be entitled to full salary and other payments not including
bonus, provided for hereunder during the Disability Period; provided, however,
that any amount paid to the Employee under any Employer provided disability
insurance will be subtracted from payments to be made to the Employee by the
Employer. In the event that Employee is incapacitated for a period which exceeds
the Disability Period, Employee shall not be entitled to receive the
compensation and other payments provided for hereunder for any time after the
end of the Disability Period. In no event shall the disability payment period
exceed the period of this Agreement. Employee shall be considered to be
incapacitated when he is unable to perform the normal duties required of him
hereunder. Incapacity shall be determined by two (2) medical doctors assigned by
Employer.
11. NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or any other
information related to Employee, directly or indirectly, without the express
written consent of Employee, except as required by law or regulation
<PAGE>
12. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless so expressed herein.
13. ENTIRE AGREEMENT: MODIFICATION
All prior agreements (prior to December 1, 1998) with respect to the subject
matter hereof between the parties are hereby canceled. This Agreement contains
the entire agreement of the parties relating to the subject matter hereof, and
the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
No modification of this Agreement shall be valid unless made in writing and
signed by the parties hereto.
14. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
15. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement and shall not be construed as a
waiver or relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect. No waiver of
any term or condition of this Agreement on the part of either party shall be
effective for any purpose whatsoever unless such waiver is in writing and signed
by such party.
16. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
17. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach hereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof. Neither party shall resort to litigation.
18. HEADINGS
The headings of the paragraphs herein are inserted for convenience and shall not
affect any interpretation of this Agreement.
<PAGE>
IN WITNESS WHEREOF the parties have set their hands and seals this 22 day of
December, 1998.
Witness: Employer: ABLE TELCOM HOLDING CORP.
By: /s/ J. ALLEN MAINES By: /s/ C. FRANK SWARTZ
--------------------------- --------------------------------
C. Frank Swartz
Chairman of the Board
Witness: Employee:
By: /s/ J. ALLEN MAINES By: /s/ BILLY V. RAY
--------------------------- --------------------------------
Billy V. Ray
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
Agreement dated this 4th day of January, 1999, by and between Able Telcom
Holding Corp. with its address at 1601 Forum Place, Suite 1110, West Palm Beach,
Florida 33401, its subsidiary MFS Transportation Systems, Inc. with its address
at 200 East Park Drive, Suite 200, Mt. Laurel, NJ 08054, ("Employer"), and G.
Vance Cartee, with his address at 3831 Turtle Dove Blvd., Punta Gorda, Florida
33950, ("Employee").
WITNESSETH:
WHEREAS, Employer is engaged in telephone and telecommunication installation and
service, as well as system development, project management, and installation of
conventional and electronic toll and traffic management systems; and
WHEREAS, Employer desires to employ Employee as President and CEO of its MFS
Transportation Systems, Inc. subsidiary; and
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of the Employer; and
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing and mutual promises and
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT: DUTIES
Employee shall devote his full time to the performance of services as President
and CEO of its MFS Transportation Systems, Inc. subsidiary, subject at all times
to the Board of Directors and CEO of Able Telcom Holding Corp. Employee shall be
in charge of all of the business of MFS Transportation Systems, Inc. and MFS
Transtech, Inc. and the performance of such services and duties as the Board of
Directors and/or CEO of Able Telcom Holding Corp. shall determine.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agrees that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
<PAGE>
3. TERM
Employee's employment hereunder shall be for a term of two (2) years to commence
on the date hereof.
In the event employee voluntarily resigns, Employer's obligations are limited to
payment of the base salary through the last day of Employee's employment. Stock
options are exercisable per the stock option plan provisions and no acceleration
of the un-vested shares will be made to employee.
4. TERMINATION FOR CAUSE
Not withstanding any other provision of this Agreement, Employee may be
terminated on ninety (90) days notice without further benefits or compensation
for any of the following reasons: a) misuse, misappropriation or embezzlement of
any Employer property or funds; b) conviction of a felony; or c) breach of any
material provision of this Agreement.
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be effected by an action of the CEO of Able
Telcom Holding Corp. and /or its Board of Directors representing a majority of
the members approving such termination. In the event of a termination without
cause, the Employee shall be paid the remainder of the base salary due under the
one year contract period, with a minimum of one hundred and eighty (180) days
severance pay (base salary only). Stock options shall automatically become
vested and exercisable.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i) BASE SALARY Employer during the term hereof shall pay Employee a base
salary at the rate of One Hundred and Fifty Thousand dollars($150,000)
per annum, payable no less frequently than monthly installments.
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder,
including travel and entertainment, such reimbursement to be made in
accordance with regular Employer policy and upon presentation by
Employee of the details of, and vouchers for, such expenses.
iii) SALARY ADJUSTMENTS Prior to the expiration of each contract year, the
CEO and/or the Board of Directors of Able Telcom Holding Corp. shall
review the Employee's salary and benefits and if appropriate, at their
sole discretion, shall increase the salary and benefits for the next
succeeding year.
IV) PERFORMANCE BONUS Employee shall be eligible to receive a performance
bonus at the expiration of each contract year. The amount of such bonus
to be determined by the Employee's success in the performance of his
duties as determined by the CEO and Board of Directors of Able Telcom
Holding Corp. and shall be awarded at their sole discretion.
<PAGE>
7. OPTIONS
Subject to the approval of the Board of Directors of Able Telcom Holding Corp.,
Employee will receive an option to acquire Forty Thousand (40,000) shares of
Able Telcom Holding Corp., stock at a price equal to the opening price as quoted
by NASDAQ on the date of grant by the Board. This option shall become fully
vested as follows: 20,000 immediately, 10,000 on December 31,1999, and 10,000 on
December 31, 2000. This option will automatically vest if Able Telcom Holding
Corp. is sold and/or if there is a change in control of Able Telcom Holding
Corp. as of the date of such change in control, if such date is prior to January
1, 2000, if such change in control or sale results from a transaction not
formally under consideration by the Board, as of the date of this agreement.
8. FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other management
employees of equivalent rank.
9. UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business relationship
with its customers or suppliers. Further, Employee will not solicit any of the
employees of Employer to leave the Employer for a period of one (1) year
following such termination. In addition, Employee agrees that all information
received from principals and agents of Employer will be held in total confidence
for a period of one (1) year following termination of employment, to the extent
such information is proprietary and not generally available to the public or
sources outside the Employer's Company.
10. INCAPACITY
In the event that Employee shall become incapacitated or unable to perform the
duties of his employment hereunder for the balance of the current one year
period (hereinafter referred to as the "Disability Period"), the employee,
nevertheless, shall be entitled to full salary and other payments not including
bonus, provided for hereunder during the Disability Period; provided, however,
that any amount paid to the Employee under any Employer provided disability
insurance will be subtracted from payments to be made to the Employee by the
Employer. In the event that the Employee is incapacitated for a period which
exceeds the Disability Period, Employee shall not be entitled to receive the
compensation and other payments provided for hereunder for any time period of
this contract. Employee shall be considered to be incapacitated when he is
unable to perform the normal duties required of him hereunder. Two (2) licensed
medical doctors, chosen by the Employer, shall determine incapacity.
11. NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or provide any
other information related to Employee, directly or indirectly, without the
express written consent of Employee.
<PAGE>
12. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared, by a court of competent
jurisdiction, to be invalid, illegal or incapable of being enforced in whole or
in part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless so expressed herein.
13. ENTIRE AGREEMENT: MODIFICATION
All prior agreements (prior to January 1, 1999) with respect to the subject
matter hereof between the parties are hereby cancelled. This Agreement contains
the entire agreement of the parties relating to the subject matter hereof, and
the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
No modification of this Agreement shall be valid unless made in writing and
signed by the parties hereto.
14. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
15. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement shall not be construed as a waiver or
relinquishment of future compliance therewith, and said terms, conditions and
provisions shall remain in full force and effect. No waiver of any term or
condition of this Agreement on the part of either party shall be effective for
any purpose whatsoever unless such waiver is in writing and signed by such
party.
16. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
17. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach hereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof.
<PAGE>
18. CONTRACT
This contract supersedes all previous contracts between Employer and Employee.
19. HEADINGS
The headings of the paragraphs listed herein are inserted for convenience and
shall not affect any interpretation of the Agreement.
IN WITNESS WHEREOF the parties have set their hands and seals this 4th day of
January, 1999.
Witness: Employer: Able Telcom Holding Corp.
By: __________________________ By: /s/ BILLY V. RAY, JR.
------------------------------
Billy V. Ray, Jr.
Chief Executive Officer
Witness: Employee:
By: __________________________ By: /s/ G. VANCE CARTEE
-------------------------------
G. Vance Cartee
EXHIBIT 10.37
[LOGO]
EMPLOYMENT AGREEMENT
Agreement dated this 1st day of January, 1999, by and between Able Telcom
Holding Corp., with its address at 1601 Forum Place, Suite 1110, West Palm
Beach, Florida, 33401, ("Employer"), and Edward Pollock of 3730 Sandpiper Road
Boynton Beach, FL 33436
WITNESSETH:
WHEREAS, Employer is engaged in the telephone and telecommunication installation
and service, and manufacture, sale and installation of highway signs and traffic
control products; and
WHEREAS, Employer desires to employ Employee as its In-House counsel; and
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of Employer; and
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, is consideration of the foregoing and mutual promises and
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT: DUTIES
Employee shall devote his full time to the performance of services as in-house
counsel or to such other services as may from time to time be designated by the
Company's President or Board of Directors. Employee agrees to perform Employee's
services well and faithfully and to the best of Employee's ability to carry out
the policies and directives of the Company. Employee shall be based in West Palm
Beach, FL but Employee may be required from time to time to perform duties
hereunder for reasonably short periods of time outside said area.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agrees that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
3. TERM
Employee's employment hereunder shall be for a term of two (2) years to commence
on the date hereof. This Agreement may be extended for an additional two year
term after the initial term of two (2) years. The Employee/Employer must give a
minimum of ninety (90) days prior written notice to the Employee/Employer that
either party elects to have the Agreement terminate effective at the end of any
term. If Employer violates a major provision of this Agreement, Employee may
terminate this Agreement and receive an amount equal to the provisions under
paragraph 5 of this agreement titled " Termination without Cause". At the end of
the two- year period, the Employee may sign a consulting agreement. The terms of
this Agreement will be negotiated not later than the 21st month of this
Agreement.
<PAGE>
4. TERMINATION FOR CAUSE
Notwithstanding any other provision of this Agreement, Employee may be
terminated on ninety (90) days notice without further benefits or
compensation for any of the following reasons: a) misuse, misappropriation
or embezzlement of any Employer property or funds; b) conviction of a felony
or, c) breach of any material provision of this Agreement.
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be effected by an action of the CEO. In the
event of the termination without cause, the Employee will be paid severance pay
equal to the term remaining in this agreement plus regular company fringe
benefits for the remaining term of the contract. Severance will be paid on the
day of termination of $50,000 with the balance paid bi-weekly over the next 12
months.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i)BASE SALARY. Employer during the term hereof shall pay Employee a base
salary as follows:
January 1, 1999-June 30, 1999 $10,000 monthly
July 1, 1999 - December 31, 1999 11,000 monthly
January 1, 2000-June 30, 2000 12,000 monthly
July 1, 2000-December 31, 2000 12,500 monthly
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder, including
travel and entertainment, such reimbursement to be made in accordance with
regular Employer policy and upon presentation by Employee of the details of, and
vouchers for, such expenses.
iii) AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an automobile
allowance of three hundred dollars ($300) per month.
7. OPTIONS
Employee will receive as at January 1, 1999 an option to purchase 40,000 shares
of common stock with a strike price equal to the NASDAQ price at the close of
business on December 31, 1998. Said option will vest as follows:
January 1, 1999 15,000
January 1, 2000 15,000
January 2, 2001 10,000
In the event of a change in control/ownership these options will vest
immediately.
<PAGE>
8. FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other management
employees.
9. UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business relationship
with its customers or suppliers. Further, Employee will not solicit any of the
employees of Employer to leave the Employer for a period of three (3) years
following such termination. In addition, Employee agrees that all information
received from principals and agents of Employer will be held in total confidence
for a period of three (3) years following termination of employment, to the
extent such information is proprietary and not generally available to the public
or sources outside the company.
10. NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or any other
information related to Employee, directly or indirectly, without the express
written consent of Employee, except as required by law or regulation
11. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless so expressed herein.
12. ENTIRE AGREEMENT: MODIFICATION
All prior agreements (prior to January 1, 1999) with respect to the subject
matter hereof between the parties are hereby cancelled. This Agreement contains
the entire agreement of the parties relating to the subject matter hereof, and
the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
No modification of this Agreement shall be valid unless made in writing and
signed by the parties hereto.
13. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
<PAGE>
14. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement shall not be construed as a waiver or
relinquishment of future compliance therewith, and said terms, conditions and
provisions shall remain in full force and effect. No waiver of any term or
condition of this Agreement on the part of either party shall be effective for
any purpose whatsoever unless such waiver is in writing and signed by such
party.
15. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
16. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach hereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof.
17. HEADINGS
The headings of the paragraphs herein are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF the parties have set their hands and seals this 4th day of
January, 1999.
Witness: Employer: ABLE TELCOM HOLDING CORP.
By: /s/ ELIZABETH TERRERO By: /s/ BILLY V. RAY
--------------------------- --------------------------------
Billy V. Ray
Chief Executive Officer
Witness: Employee:
By: /s/ ELIZABETH TERRERO By: /s/ EDWARD POLLOCK
--------------------------- --------------------------------
Edward Pollock
EXHIBIT 10.38
[LOGO]
EMPLOYMENT AGREEMENT
Agreement dated this 12 day of November, 1998, by and between Able Telcom
Holding Corp., with its address at 1601 Forum Place, Suite 1110, West Palm
Beach, Florida, 33401, ("Employer"), and Frazier L. Gaines, 212 Briny Avenue,
Apt. B-1 Pompano Beach, Florida 33062("Employee").
WITNESSETH:
WHEREAS, Employer is engaged in the telephone and telecommunication installation
and service, and manufacture sale and installation of highway signs and traffic
control products.
WHEREAS, Employer desires to employ Employee as the CEO Of Able International of
Employer.
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of Employer.
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, is consideration of the foregoing and mutual promises and
covenants herein contained, it is agree as follows:
1. EMPLOYMENT: DUTIES
Employer hereby Employs as the Chief Executive Officer of Able International, a
subsidiary of Employer. Subject at all times to the direction of the Board of
Directors and CEO of Employer, Employee shall be in charge of the overall
business operations of International and the performance of such services and
duties as the Board of Directors and CEO shall determine. However, the duties
and responsibilities assigned to the employee during the term of employment
shall be substantially similar in type and character to those ordinarily
assigned to and performed by persons employed as CEO by corporations carrying on
a business similar to Employer.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agrees that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
3. TERM
Employee's employment hereunder shall be for a term of three (3) years to
commence on the date hereof. This Agreement may be extended for additional one
(1) one year terms after the initial term of three (3) years. The
Employee/Employer must give a minimum of ninety (90) days prior written notice
to the Employee/Employer that either party elects to have the Agreement
terminate effective at the end of any term. If Employer violates a major
provision of this Agreement, Employee may terminate this Agreement and receive
an amount equal to the provisions under item 5 of this agreement titled "
Termination without Cause". At the end of the three- year period, the Employee
may sign a consulting agreement. The terms of this agreement will be negotiated
not later than the 30th month of this Agreement.
4. TERM1NATION FOR CAUSE
Notwithstanding any other provision of this Agreement, Employee may be
terminated on thirty (30) days notice without further benefits or
compensation for any of the following reasons: a) misuse, misappropriation
or embezzlement of any Employer property or funds; b) conviction of a felony,
c) breach of any material provision of this Agreement.
<PAGE>
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be effected by an action by the Board of
Directors representing a majority of the members approving such termination. In
the event of the termination without cause, the Employee will be paid one-year's
severance pay plus regular company fringe benefits. Severance of $100,000 will
be paid on the date of termination with the remainder of $100,000 payable within
45 days from the date of termination.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i) BASE SALARY. Employer during the term hereof shall pay Employee a base salary
at the rate of two hundred thousand dollars ($200,000) per annum, payable no
less frequently than in monthly installments.
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder, including
travel and entertainment, such reimbursement to be made in accordance with
regular Employer policy and upon presentation by Employee of the details of, and
vouchers for, such expenses.
iii) SALARY ADJUSTMENTS. Prior to the expiration of each contract year, the
Board of Directors may review Employee's salary and benefits and if appropriate
in its sole and absolute discretion may increase such salary and benefits for
the next succeeding year.
iv) AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an automobile
allowance of five hundred dollars ($500) per month.
7) OPTIONS
Employee will receive a 100,000 share stock option subject to approval of Board
of Directors. If there is a change of control or sale of Able Telcom Holding
then the 100,000 share option will vest immediately. Otherwise 34,000 options
will vest after one year of employment and 33,000 options will vest each year
thereafter.
8) FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other management
employees. Employer shall also pay all fringe benefits plus $60,000 per year for
the number of years equal to his years of service. This $60,000 per year will
start at the Employee's termination date.
9) UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business relationship
with its customers or suppliers. Further, Employee will not solicit any of the
employees of Employer to leave the Employer for a period of three (3) years
following such termination. In addition, Employee agrees that all information
received from principals and agents of Employer will be held in total confidence
for a period of three (3) years following termination of employment, to the
extent such information is proprietary and not generally available to the public
or sources outside the company.
<PAGE>
10) INCAPACITY
In the event that Employee shall become incapacitated or unable to perform the
duties of his employment hereunder for the balance of the current one year
period (hereinafter referred to as the "Disability Period"), the Employee
nevertheless shall be entitled to full salary and other payments not including
bonus, provided for hereunder during the Disability Period; provided, however,
that any amount paid to the Employee under any Employer-provided disability
insurance will be subtracted from payments to be made to the Employee by the
Employer. In the event that Employee is incapacitated for a period which exceeds
the Disability Period, Employee shall not be entitled to receive the
compensation and other payments provided for hereunder for any time after the
end of the Disability Period. In no event shall the disability payment period
exceed the period of this Agreement. Employee shall be considered to be
incapacitated when he is unable to perform the normal duties required of him
hereunder. Incapacity shall be determined by two (2) medical doctors assigned by
Employer.
11) NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or any other
information related to Employee, directly or indirectly, without the express
written consent of Employee, except as required by law or regulation
12. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforce in whole or in
part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless so expressed herein.
13. ENTIRE AGREEMENT: MODIFICATION
All prior agreements with respect to the subject matter hereof between the
parties are hereby canceled. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this Agreement
shall be valid unless made in writing and signed by the parties hereto.
14. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
15. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement shall not be construed as a waiver or
relinquishment of future compliance therewith, and said terms, conditions and
provisions shall remain in full force and effect. No waiver of any term or
condition of this Agreement on the part of either party shall be effective for
any purpose whatsoever unless such waiver is in writing and signed by such
party.
<PAGE>
16. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
17. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach hereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof.
18. HEADINGS
The headings of the paragraphs herein are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF the parties have set their hands and seals this 30 day of
November, 1998.
Witness: Employer: ABLE TELCOM HOLDING CORP.
By: /s/ HAMMOND By: /s/ GIDEON D. TAYLOR
--------------------------- --------------------------------
Gideon D. Taylor
Chairman of the Board
Witness: Employee:
By: /s/ EDWARD POLLOCK By: /s/ FRAZIER L. GAINES
--------------------------- --------------------------------
Frazier L. Gaines
[SEAL] [SEAL]
/s/ ELIZABETH TERRERO /s/ ELIZABETH TERRERO
EXHIBIT 10.39
EMPLOYMENT AGREEMENT
Agreement dated this 7th day of December, 1998, by and between Able Telcom
Holding Corp., with its address at 1601 Forum Place, Suite 1110, West Palm
Beach, Florida, 33401, ("Employer"), and Gideon Taylor 265 Harper Road Dry Fork,
VA 24549 ("Employee").
WITNESSETH:
WHEREAS, Employer is engaged in the telephone and telecommunication installation
and service, business and the manufacture, sale and installation of highway
signs and traffic control products; and
WHEREAS, Employer desires to continue to employ as Vice President of Special
Projects;
WHEREAS, Employer desires to avail itself of the services of the Employee in
order that his knowledge and ability may be utilized in the conduct and
development of the business and affairs of Employer; and
WHEREAS, Employee has evidenced his willingness to enter into an employment
agreement with respect to his employment by Employer, pursuant to the terms and
conditions hereinafter set forth.
NOW THEREFORE, is consideration of the foregoing and mutual promises and
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT: DUTIES
Employer hereby employs Employee as VP of Special Projects, subject at all times
to the direction of the Board of Directors and CEO of Employer.
2. FULL TIME EMPLOYMENT
Employee hereby accepts employment by Employer upon the terms and conditions
contained herein and agrees that during the term of this Agreement, Employee
shall devote all of his business time, attention and energies to the business of
Employer.
3. TERM
Employee's employment hereunder shall be for a term of 6 months to commence on
the date hereof. This Agreement may be extended for additional one (1) year term
after the initial term. The Employer must give a minimum of thirty (30) days
prior written notice to the Employee that they elect to have the Agreement
extended effective at the end of any term.
4. TERM1NATION FOR CAUSE
Notwithstanding any other provision of this Agreement, Employee may be
terminated on thirty (30) days notice without further benefits or
compensation for any of the following reasons: a) misuse, misappropriation or
embezzlement of any Employer property or funds; b) conviction of a felony, c)
breach of any material provision of this Agreement, d) breach of
responsibility to act in best interest of Company or at the direction of the
Board.
<PAGE>
5. TERMINATION WITHOUT CAUSE
Termination without cause can only be effected by a majority vote of the Board
of Directors approving such termination. In the event of the termination without
cause, the Employee will be paid one-year's severance pay or the remaining
balance of the contract plus regular company fringe benefits for a period of six
months from the date of severance. Severance will be paid on the date of
termination.
6. COMPENSATION
As full compensation for the performance of his duties on behalf of Employer,
Employee shall be compensated as follows:
i) BASE SALARY. Employer during the term hereof shall pay Employee a base salary
at the rate of one hundred eighty thousand dollars ($180,000) per annum (with an
expected total to be paid over the original contract term of $90,000) payable no
less frequently than in monthly installments.
ii) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for the
expenses incurred by Employee in connection with his duties hereunder, including
travel and entertainment, such reimbursement to be made in accordance with
regular Employer policy and upon presentation by Employee of the details of, and
vouchers for such expenses.
iii) SALARY ADJUSTMENTS. Prior to the expiration of each contract term, the
Board of Directors may review Employee's salary and benefits and if appropriate
in its sole and absolute discretion may increase such salary and benefits for
the next succeeding year.
iv) AUTOMOBILE ALLOWANCE. Employer shall provide Employee with an automobile
allowance of five hundred dollars ($500) per month or in lieu thereof, a company
automobile.
7) FRINGE BENEFITS
During the term of this Agreement, Employer shall provide at its sole expense to
the Employee hospitalization, major medical, life insurance and other fringe
benefits on the same terms and conditions as it shall afford other management
employees. Employer shall also pay all fringe benefits plus $75,000 per year for
the number of years equal to his years of employment (years as of the date
hereof) with the minimum years being ten (10). This $75,000 per year will start
at the Employee's termination date.
8) UPON TERMINATION OF EMPLOYMENT
Subsequent to the termination of the employment of Employee, Employee will not
interfere with or disrupt or attempt to disrupt Employer's business
relationships with its customers or suppliers. Further, Employee will not
solicit any of the employees of Employer to leave the Employer for a period of
three (3) years following such termination. In addition, Employee agrees that
all information received from principals and agents of Employer will be held in
total confidence for a period of three (3) years following termination of
employment, to the extent such information is proprietary and not generally
available to the public or sources outside the company.
<PAGE>
9) INCAPACITY
In the event that Employee shall become incapacitated or unable to perform the
duties of his employment hereunder for the balance of the current term
(hereinafter referred to as the "Disability Period"), the Employee nevertheless
shall be entitled to full salary and other payments not including bonus,
provided for hereunder during the Disability Period; provided, however, that any
amount paid to the Employee under any Employer provided disability insurance
will be subtracted from payments to be made to the Employee by the Employer or
insurance company. In the event that Employee is incapacitated for a period
which exceeds the Disability Period, Employee shall not be entitled to receive
the compensation and other payments provided for hereunder for any time after
the end of the Disability Period excepting the employee will be entitled to
receive the benefits called for in paragraph 7 hereof. In no event shall the
disability payment period exceed the period of this Agreement. Employee shall be
considered to be incapacitated when he is unable to perform the normal duties
required of him hereunder. Incapacity shall be determined by two (2) medical
doctors assigned by Employer.
10) NOTICES
All notices hereunder shall be in writing and shall be sent to the parties at
the respective addresses above set forth. All notices shall be delivered in
person or given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when delivered in person or deposited in the United
States mail. Either party may designate any other address to which notice shall
be given, by giving notice to the other of such change of address in the manner
herein provided. Employer, or its management, directors, representatives,
employees or affiliates will not make any public announcements or any other
information related to Employee, directly or indirectly, without the express
written consent of Employee, except as required by law or regulation
11. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless so expressed herein.
12. ENTIRE AGREEMENT: MODIFICATION
All prior agreements with respect to the subject matter hereof between the
parties are hereby canceled. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, and the parties hereto have made
no agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this Agreement
shall be valid unless made in writing and signed by the parties hereto.
13. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall inure
to, and be binding upon, the Employer, its successors and assigns, and upon the
Employee and his legal representatives, heirs and legatees. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.
14. NON-WAIVER
The failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed as a
waiver or relinquishment of this Agreement and shall not be construed as a
waiver or relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect. No waiver of
any term or condition of this Agreement on the part of either party shall be
effective for any purpose whatsoever unless such waiver is in writing and signed
by such party.
<PAGE>
15. GOVERNING LAW
This Agreement shall be construed and governed by the laws of the State of
Florida.
16. ARBITRATION
Any controversy or claim arising under, out of, or in connection with this
Agreement or any breach or claimed breach hereof, shall be settled by
arbitration before the American Arbitration Association, in Palm Beach County,
Florida, before a panel of three arbitrators, in accordance with its rules, and
judgment upon any award rendered may be entered in any court having jurisdiction
thereof.
17. HEADINGS
The headings of the paragraphs herein are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement on 9th day of
December, 1998.
Witness: Employer: ABLE TELCOM HOLDING CORP.
By: /s/ ELIZABETH TERRERO By: /s/ BILLY V. RAY
--------------------------- --------------------------------
Billy V. Ray
By: /s/ C. FRANK SWARTZ CEO
- ------------------------------
Witness: Employee:
By: /s/ ELIZABETH TERRERO By: /s/ GIDEON D. TAYLOR
--------------------------- --------------------------------
Gideon D. Taylor
By: /s/ C. FRANK SWARTZ
---------------------------
[SEAL]
/s/ ELIZABETH TERRERO
<PAGE>
Approval from the Board of Directors of Able Telcom Holding Corp.
SUBJECT: Employment Agreement for Gideon D. Taylor
DATE: December 9, 1998
Signatures:
/s/ C. FRANK SWARTZ
- -----------------------------
Carl Frank Swartz, Chairman
[ABSTAINED]
- -----------------------------
Gideon D. Taylor, Director
/s/ FRAZIER L. GAINES
- -----------------------------
Frazier L. Gaines, Director
/s/ TOM DAVIDSON
- -----------------------------
Tom Davidson, Director
- -----------------------------
Jonathan Bratt, Director
EXHIBIT 10.40
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated and effective as of
April 1, 1998 (the "Effective Date"), is entered into by and between Able Telcom
Holding Corp., a Florida corporation (the "Company"), and Rick Boyle (the
"Employee").
PRELIMINARY STATEMENTS
The Company and its Subsidiaries were contemporaneously herewith
acquired by Able Telcom Holding Corp. ("Able"). Employee is one of the Sellers
who sold his stock in the Company to Able. Prior to the acquisition by Able,
Employee was employed by the Company, and he desires to continue such employment
under the new ownership of the Company by Able. The Company is engaged in the
business of telecommunications installation and construction, and desires to
employ the Employee, and the Employee desires to accept such employment with the
Company, on the terms and conditions set forth in this Agreement. In view of the
Employee's prior relationships with customers, suppliers and others doing
business with the Company and its Subsidiaries, and his experience and knowledge
in the Business (as that term is hereinafter defined), and as a material
inducement to the Company to enter into this Agreement and provide the
compensation and benefits provided for herein, the Employee is willing to agree
to refrain from certain activities in competition with the Company and its
affiliates and to maintain the confidentiality of information as to the Company
or Able to which he may have or gain access.
AGREEMENT
In consideration of the premises and the respective covenants and
agreements of the parties set forth below, and intending to be legally bound
hereby, the parties agree as FOLLOWS:
1. EMPLOYMENT. The Company hereby employs the Employee, and the Employee
hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
2. TERM. The term of the Employee's employment hereunder (the "Term")
shall commence on the Effective Date and continue for a period of 24
months, unless sooner terminated as hereinafter provided.
3. DUTIES AND RESPONSIBILITIES. The Employee shall serve as a Group Vice
President of the Company, reporting to the President of the Company,
and shall perform such duties and responsibilities commensurate with
his position as shall be assigned to him from time to time by the
President of the Company. During the Term, the Employee shall (i)
devote his full business time and attention to the performance of
services under this Agreement, (ii) use his best efforts, skills and
abilities to promote the interests of the Company, and (iii) diligently
and competently perform his employment duties pursuant to this
Agreement. Employee shall owe to the Company a strict fiduciary duty of
good faith, loyalty, diligence and fair dealing.
<PAGE>
4. COMPENSATION AND BENEFITS. During the term of this Agreement, the
Employee shall receive the compensation and benefits described below.
(A) BASE SALARY. The Company shall pay to the Employee, and the
Employee shall accept from the Company, as compensation for
the performance of services to the Company in all capacities
and the Employee's observance and performance of all of the
provisions hereof, a base salary at the annualized rate of
$159,000.00 per annum (the "Base Salary"). The Base Salary
shall be payable in accordance with the normal payroll
practices of the Company and shall be subject to withholding
for applicable taxes and other amounts.
(B) INCENTIVE COMPENSATION. In addition to the Base Salary, with
respect to each fiscal year of the Company ending during the
Term, the Employee shall be eligible to (i) earn incentive or
bonus compensation pursuant to such plan or plans of the
Company as may be in effect from time to time, compensation
under which may in the form of cash, shares of parent company
common stock, or a combination of the foregoing, and (ii)
receive grants of options to purchase shares of parent company
common stock pursuant to such plan or plans as may be in
effect from time to time.
(C) EMPLOYMENT BENEFITS. The Employee shall receive such health,
dental and life insurance benefits as are made available to
employees of the Company generally, and shall be entitled to
participate in the Company's 401(k) plan (subject to
applicable eligibility requirements). The Employee shall be
entitled to paid vacation in accordance with Company policies
as in effect from time to time.
5. REPRESENTATIONS OF EMPLOYEE. The Employee represents and warrants to
the Company that:
(a) He is not a party to, or bound by, any agreement or
commitment, or subject to any restriction, including but not
limited to agreements related to previous employment
containing confidentiality or noncompetition covenants, which
would prevent or materially impair his ability to accept and
perform the employment duties contemplated by this Agreement.
(b) He has not, at any time, been convicted in any criminal
proceeding and is not currently the named subject of a pending
criminal proceeding.
(c) He is not and has not been the subject of any court order,
judgment or decree that permanently or temporarily enjoins him
from engaging in any type of business practice.
(d) He has not, at any time, been found by a court in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law where such
judgment has not subsequently been reversed, suspended or
vacated.
<PAGE>
(e) No petition under the Bankruptcy Code (Title 11 of the United
States Code) or any state insolvency law has been filed by or
against, nor has any receiver or similar officer been
appointed by a court for the business or property of, (i) the
Employee, (ii) any partnership in which the Employee was a
general partner at or within two years before the time of
filing, or (iii) any corporation or business association of
which the Employee was an executive officer or director at or
within two years before the time of such filing.
(f) Except as set forth on Schedule 5 attached hereto, neither the
Employee nor any member of Employee's Family (as defined
below), owns, directly or indirectly, any interest in, or is
an officer, director or employee or consultant of, any entity
which is, or is engaged in business as, a competitor, lessor,
lessee, supplier, distributor, sales agent or customer of the
Company IN the Business.
As used herein, "Employee's Family" shall mean the Employee's extended
family, which shall include his parents, spouse, siblings, aunts, uncles,
nieces, nephews, children and grandchildren. During the Term, the Employee shall
be under a continuing obligation to revise Schedule 5 to assure that the
representations and warranties contained in Section 5(f) are true and correct as
if made every day subsequent to the date thereof.
6. CONFIDENTIALITY.
(A) CONFIDENTIAL INFORMATION. The Employee acknowledges that as a
result of his prior employment with the Company and in the
course of his employment pursuant to this Agreement, he has
had and is expected to continue to have extensive contact with
customers of the Company and its affiliates, and to have
knowledge of and access to trade secrets and other proprietary
and confidential information of the Company and its
affiliates, including, without limitation, the identity of
customers and suppliers and other persons with whom the
Company and its affiliates have business relationships,
technical information, know-how, plans, specifications, and
information relating to the financial condition, results of
operations, employees, inventions, sources, leads or methods
of obtaining business, pricing formulae, methods or
procedures, cost of supplies or services and marketing
strategies of the Company or its affiliates or any other
information relating to the Company or its affiliates that
could reasonably be regarded as confidential or proprietary or
which is not available to the public (collectively, the
"Confidential information"), and that such information, even
to the extent it may be or have been developed or acquired by
or through the efforts of the Employee, constitutes valuable,
special and unique assets of the Company and its affiliates
developed or acquired at great expense which are the exclusive
property of the Company and its affiliates. Accordingly, the
Employee shall not at any time, either during or subsequent to
the term of this Agreement, use or purport to authorize any
person to use, reveal, report, publish, transfer or otherwise
disclose to any person, corporation or other entity, any of
the Confidential information without the
<PAGE>
prior written consent of the Company, except to responsible
officers of the Company and other responsible persons who are
in a contractual or fiduciary relationship with the Company
and who have a need for such information for purposes in the
best interests of the Company. Without limiting the generality
of the foregoing, the Employee shall not, directly or
indirectly, disclose or otherwise make known to any Person the
names or addresses of any of the customers of the Company or
its affiliates, whether such persons are customers as of the
Effective Date or become such in the future and whether or not
such persons have previously conducted business with the
Employee in any capacity, or any information as to the
Company's employees and others providing services to the
Company or its affiliates, including with respect to their
abilities, compensation, benefits and other terms of
employment or engagement. The Employee acknowledges that the
Company would not enter into this Agreement without the
assurances provided above with respect to the Confidential
Information of the Company and its affiliates. The
restrictions following expiration of the Term or termination,
whichever is later, shall be for a period of two (2) years
following such expiration or termination for Confidential
Information that does not consist of trade secrets, but there
shall be no time limitation for the restrictions on disclosure
of trade secrets.
(B) RETURN OF CONFIDENTIAL INFORMATION. Upon the termination of
the Employee's employment with the Company, the Employee shall
promptly deliver to the Company all customer files,
correspondence, manuals, notes, notebooks, reports and copies
thereof, and all other materials relating to the Company's
business, including without limitation any materials
incorporating Confidential information, which are in the
possession or control of the Employee.
(C) CONFIDENTIALITY PROCEDURES. Employee shall be responsible for
establishing, maintaining and enforcing procedures to protect
the confidentiality of the Company's trade secrets and other
confidential information, including also such trade secrets
and confidential information of Able and its affiliates as may
be disclosed or made available to him as a result of or in
conjunction with his employment with the Company since its
inception.
7. RESTRICTIVE COVENANTS. The Employee acknowledges that in order to
assure the Company that it will retain its value as a "going concern"
and will retain the value of its business relationships, it is
reasonable that the Employee be limited in utilizing his special
knowledge of the business of the Company and his relationships with
customers, suppliers and others to compete with the Company, as
hereinafter provided. The parties acknowledge that the Territory (as
defined below) consists of a geographic area where the Company
currently conducts business or intends to conduct business during the
Term. The Employee acknowledges that the Company would not enter into
this Agreement and pay the compensation and provide the benefits
provided for herein without the covenants and agreements of the
Employee set forth in this Section 7.
<PAGE>
(A) RESTRICTION ON COMPETITION. During a period commencing on the
Effective Date and ending on the expiration of the Term or
effective date of termination, whichever is later (the
"Restricted Period"), the Employee shall not, and shall not
permit any persons subject to his direction or control to,
directly or indirectly, anywhere within the States of Georgia,
Tennessee, North Carolina, South Carolina, Virginia, Kentucky,
Florida, Alabama, Mississippi, Louisiana or Arkansas, or in
the District of Columbia (the "Territory"), whether alone or
in association with others, or as principal, officer, agent,
employee, director or stockholder of any corporation,
partnership, association or other entity, or through the
investment of capital, lending of money or property, rendering
of services or otherwise, engage in, significantly influence,
control, have an ownership interest in or otherwise become
actively involved with any business competitive with the
Company in the Business.
(B) NONSOLICITATION. During the Restricted Period and for one (1)
year thereafter, the Employee shall not, and shall not permit
any persons subject to his direction or control to, directly
or indirectly, on their own behalf or on behalf of any other
person (except the Company or its affiliates), (i) (Deleted],
(ii) otherwise divert or attempt to divert any Business from
the Company or any of its Subsidiaries operating in the
Territory, (iii) interfere with the business relationships
between the Company and any of its Subsidiaries operating in
the Territory, on the one hand, and any of their respective
Customers, suppliers or others with whom they have business
relationships in the Business, on the other hand, or (iv)
recruit or otherwise solicit or induce, or enter into or
participate in any plan or arrangement to cause any person who
is an employee of, or otherwise performing services for, the
Company or any of its Subsidiaries to terminate his or her
employment or other relationship with the Company or any of
its Subsidiaries, or (v) hire or assist someone else in hiring
any person who has left the employ of the Company or any of
its Subsidiaries during the twelve months preceding such
hiring.
(C) EXCEPTION. The ownership or control by the Employee or his
affiliates, as a passive investor, of up to five percent of
the outstanding voting securities or securities of any class
of a company with a class of securities registered under the
Securities Exchange Act of 1934, as amended, shall not be
deemed to be a violation of the provisions of this Section 7.
(D) DEFINITIONS. As used herein the term "Business" means and
includes the construction and installation (above ground or
below ground) of telecommunications lines and equipment or
materials appurtenant thereto. "Customer" means and includes
(i) any and all persons for or to whom the Company or its
Subsidiaries provided services or materials or with whom the
<PAGE>
Company or any of its Subsidiaries had contracts for the
provision of services or materials at any time within the 14
month period ending on the date of termination of employment
or expiration of the Term hereof, whichever last occurs, (ii)
any and all persons or entities to whom proposals or bids were
submitted by the Company or its Subsidiaries during the 14
month period prior to the date of termination or expiration of
Term, whichever last occurs, and (iii) any and all persons or
entities from whom the Company or any of its Subsidiaries
received requests for bids or proposals during said 14 month
period.
8. REMEDIES. The restrictions set forth in Sections 6 and 7, including the
length of the Restricted Period, the geographic scope of the Territory
and the activities included in the Business, are considered by the
parties to be reasonable for the purposes of protecting the value of
the business and goodwill of the Company and the legitimate business
interests of Able. The Employee acknowledges that compliance with the
restrictions set forth in Sections 6 and 7 will not prevent him from
earning a livelihood, and that in the event of a breach by the Employee
of any of the provisions of Section 6 and 7, monetary damages would not
provide an adequate remedy to the Company. Accordingly, the Employee
agrees that, in addition to any other remedies available to the
Company, the Company shall be entitled to injunctive and other
equitable relief to secure the enforcement of these provisions, and
shall be entitled to receive reimbursement from the Employee for
attorneys, fees and expenses incurred by it in enforcing these
provisions. In addition to its other rights and remedies hereunder, the
Company shall have the right to require the Employee to account for and
pay over to it all compensation, profits, money, accruals and other
benefits derived or received, directly or indirectly, by the Employee
from any breach of the provisions of Section 7. If the Employee
breaches the covenant set forth in Section 7, the running of the
Restricted Period shall be tolled for so long as such breach continues.
It is the desire and intent of the parties that the provisions of
Sections 6, 7 and 8 be enforced in full; however, if any provisions of
Sections 6, 7 or 8 relating to the time period, scope of activities or
geographic area of restrictions is declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of
activities or geographic area, the maximum time period, scope of
activities or geographic area, as the case may be, shall be reduced to
the maximum which such court deems enforceable with respect only to the
jurisdiction in which such adjudication is made. If any provisions of
Sections 6, 7 or 8 other than those described in the preceding sentence
are adjudicated to be invalid or unenforceable, the invalid or
unenforceable provisions shall be deemed amended (with respect only to
the jurisdiction in which such adjudication is made) in such manner as
to render them enforceable and to effectuate as nearly as possible the
original intentions and agreement of the parties.
9. TERMINATION. The Employee's employment hereunder may be terminated
prior to the expiration of the Term only under the following
circumstances:
(A) DEATH. The Employee's employment hereunder shall terminate
upon his death. Following termination pursuant to this Section
9(a), the Employee shall not be
<PAGE>
entitled to receive any further compensation from the Company
pursuant to this Agreement except any accrued and unpaid Base
Salary through the date of termination.
(B) DISABILITY. The Company may terminate the Employee's
employment hereunder and the Term, effective upon written
notice to the Employee, if the Employee becomes unable to
perform his duties under this Agreement for a period of 90
consecutive days or for an aggregate of 120 days, whether or
not consecutive, in any twelve month period, due to illness,
accident or any other physical or mental incapacity, as
reasonably determined by Company Management (a "Disability").
Notwithstanding any Disability referred to in this Section
9(b), until the date of termination for Disability, the
Company shall continue to pay the Employee his Base Salary,
less any insurance proceeds or other disability benefits
received by the Employee by virtue of such disability, and
provide the Employee's benefits under Section 4(c) up to and
including the date of such termination. Following termination
pursuant to this Section 9(b), the Employee shall not be
entitled to receive any further compensation from the Company
pursuant to this Agreement except any accrued and unpaid Base
Salary through the date of termination.
(C) TERMINATION FOR CAUSE. The Company may terminate the Term and
the Employee's employment hereunder for "Cause," effective
upon written notice to the Employee. Upon termination of the
Employee's employment for Cause, the Employee shall have no
right to receive any further compensation or benefits
hereunder after the date of termination except any accrued and
unpaid Base Salary through the date of termination. As used
herein, "Cause" shall mean the occurrence of one or more of
the following: (i) material breach by the Employee of any
provision of this Agreement; (ii) Employee's gross negligence,
willful misconduct or willful refusal or failure to perform
any of his duties or responsibilities under this Agreement or
to follow any of the Company's lawful policies or directives;
(iii) fraud, commission of a felony or a crime involving moral
turpitude, dishonesty or embezzlement by the Employee; (iv)
the Employee's misappropriation for personal use of assets or
business opportunities of the Company or any of its
affiliates; (v) the Employee's engaging in conduct that is
materially injurious to the Company or its affiliates, whether
monetary or otherwise; or (vi) refusal to follow the specific
instructions of the Board of Directors or the Chief Executive
Officer of Able or the Company.
(D) DATE OF TERMINATION. "Date of termination" shall mean (i) if
the Employee's employment is terminated by his death, the date
of his death, and (ii) if the Employee's employment is
terminated for Disability or Cause, the date specified in the
written notice referred to in Sections 9(b) and (c), as the
case may be.
10. ORIGINAL MATERIAL. The Employee acknowledges that the compensation paid
to the Employee by the Company during the Employee's employment by the
Company is intended to and does compensate the Employee for the
Employee's originality,
<PAGE>
innovativeness and inventiveness as it relates to the Business. The
Employee agrees that any inventions, discoveries, improvements, ideas,
concepts or original works of authorship relating to the Business,
including, without limitations, computer apparatus and programs,
whether or not protectable by patent or copyright, that are or have
been originated, developed, made conceived, authored or reduced to
practice by the Employee alone or jointly with others during the
Employee's employment with the Company shall be the property of and
belong exclusively to the Company. The Employee shall promptly and
fully disclose to the Company the origination or development by the
Employee of any such material and shall provide the Company with any
information that it may reasonable request about such material.
11. MISCELLANEOUS.
(A) DEFINITION OF TERMS. The term "affiliate," when used in this
Agreement with respect to any person, means any person that,
directly or indirectly, controls, is controlled by or is under
common control with such person, and with respect to any
natural person, includes the members of such person's
immediate family (spouse, children and parents). The term
"person," when used in this Agreement means any natural person
or entity with legal status.
(B) NO OBLIGATION TO RENEW. Nothing contained in this Agreement
shall constitute an obligation on the part of the Company or
the Employee to renew this Agreement or the Employee's
employment with the Company upon expiration of the Term, and
neither party shall be required to give prior notice to the
other party of the termination of this Agreement upon the
expiration of the Term. Unless the parties otherwise agree in
writing, continuation of Employee's employment with the
Company beyond the expiration of the Term shall be deemed an
employment at will (but with all terms and conditions other
than the Term of employment remaining in full force and
effect) and Employee's employment may thereafter be terminated
at will by Employee or the Company without further obligation
of either party hereunder. In such event, the date on which
Employee's employment is terminated after expiration of the
Term shall be the commencement date for the Restricted Period.
(C) SURVIVAL. The provisions of Sections 6, 7 and 8 shall survive
the termination of this Agreement for the periods set forth
therein.
(D) ENTIRE AGREEMENT. This Agreement, including the schedules
hereto, sets forth the entire understanding of the parties
with respect to the subject matter hereof and merges and
supersedes any prior or contemporaneous agreements between the
parties pertaining thereto.
(E) AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
<PAGE>
(F) WAIVER. No waiver by any party of any of its rights under this
Agreement shall be effective unless in writing and signed by
the party against which the same is sought to be enforced. No
such waiver by any party of its rights under any provision of
this Agreement shall constitute waiver of such party's rights
under any other provision of this Agreement. No failure by any
party hereto to take any action against any breach of this
Agreement or default by another party shall constitute a
waiver of the former party's right to enforce any provision of
this Agreement or to take action against such breach or
default or any subsequent breach or default by such other
party.
(G) SUCCESSORS AND ASSIGNS. This is an agreement for the provision
of personal services, and the Employee shall not have the
right to assign his rights or obligations hereunder without
the prior written consent of the Company, which may be given
or withheld in the Company's sole discretion. The Company
shall not have the right to assign its rights or obligations
under this Agreement without the prior written consent of the
Employee, provided that this Agreement may be assigned by the
Company without the consent of the Employee to another
corporation under common control with the Company, and upon
the sale of all or substantially all of the assets, business
and goodwill of the Company to another company, or upon the
merger or consolidation of the Company with another company,
this Agreement may be assigned by the Company to the purchaser
of such assets and shall inure to the benefit of, and be
binding upon, both the Employee and the company purchasing
such assets, business and goodwill, or surviving such merger
or consolidation, as the case may be, in the same manner and
to the same extent as though such other company were the
Company. Subject to the foregoing, this Agreement shall inure
to the benefit of, and be binding upon, the parties hereto and
their legal representatives, heirs, successors and permitted
assigns. The rights and obligations of the parties under this
Agreement shall be unaffected by a change in control of the
Company or any of its parent corporations.
(H) ADDITIONAL ACTS. The Employee and the Company shall execute,
acknowledge and deliver and file, or cause to be executed,
acknowledged and delivered and filed, any and all further
instruments, agreements or documents as may be necessary or
expedient in order to consummate the transactions provided for
in this Agreement and do any and all further acts and things
as may be necessary or expedient in order to carry out the
purpose and intent of this Agreement.
(I) COMMUNICATIONS. All notices, requests, demands and other
communications under this Agreement shall be in writing and
shall be deemed to have been given at the time personally
delivered, on the business day following the day such
communication is sent by recognized overnight courier service,
on acknowledgment of receipt of a facsimile of such
communication, or five days after being deposited in the
United States mail enclosed in a registered or certified
postage prepaid envelope, return receipt requested, and
addressed to the intended
<PAGE>
recipient at the address set forth beneath such person's
signature on the signature pages hereto, or sent to such other
address as a party may specify by notice to the other party;
provided, however, that any notice of change of address shall
be effective only upon receipt.
(J) SEVERABILITY. If any provision of this Agreement is held
to be invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall not
affect the validity and enforceability of the other provisions
of this Agreement and the provision held to be invalid or
unenforceable shall be enforced as nearly as possible
according to its original terms and intent to eliminate such
invalidity or unenforceability.
(K) WITHHOLDING TAXES. The Company may withhold from amounts
payable under this Agreement such federal, state and local
taxes as are required to be withheld pursuant to any
applicable law or regulation and the Company shall be
authorized to take such action as may be necessary in the
opinion of the Company's counsel (including, without
limitation, withholding from amounts from any compensation or
other amount owing from the Company to Employee) to satisfy
all obligations for the payment of such taxes.
(L) GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Georgia applicable to agreements made and to be
performed entirely in such state, without regard to the
conflict of laws principles of such state.
(M) CONFIDENTIALITY. The Employee shall not disclose the existence
of this Agreement or any of the terms or conditions hereof to
any person without the prior written consent of Company
Management, except for disclosures to such of Employee's
personal advisors or representatives who have a need to know
such information in connection with the performance of their
services to the Employee.
(N) HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect
the meaning or interpretation of any provisions of this
Agreement.
(O) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
(P) LITIGATION; PREVAILING PARTY. If any litigation is instituted
regarding this Agreement, the prevailing party shall be
entitled to receive from the non-prevailing party, and the
non-prevailing party shall pay, all reasonable fees and
expenses of
<PAGE>
counsel for the prevailing party.
(Q) WAIVER OF JURY TRIAL. Each party hereto knowingly, irrevocably
and voluntarily waives its right to a trial by jury in any
litigation which may arise under or involving this Agreement.
(R) VENUE; JURISDICTION. If any litigation is to be instituted
regarding this Agreement, it shall be instituted in the state
and federal courts located in metropolitan Atlanta, Georgia,
and each party irrevocably consents and submits to the
personal jurisdiction of such courts in any such litigation,
and waives any objection to the laying of venue in such
courts. Service of process in any such litigation shall be
effective as to any party if given to such party by registered
or certified mail, return receipt requested, or by any other
means of mail that requires a signed receipt, postage prepaid,
mailed to such party as provided in Section 11(i).
(S) PARTICIPATION OF PARTIES. The parties hereto acknowledge that
this Agreement and all matters contemplated herein have been
negotiated among all parties hereto and their respective legal
counsel and that all such parties have participated in the
drafting and preparation of this Agreement from the
commencement of negotiations at all times through the
execution hereof.
(T) INJUNCTIVE RELIEF. It is possible that remedies at law may be
inadequate and, therefore, the parties hereto shall be
entitled to equitable relief including, without limitation,
injunctive relief, specific performance or other equitable
remedies in addition to all other remedies provided hereunder
or available to the parties hereto at law or in equity.
(U) REMEDIES CUMULATIVE. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of
any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in
equity.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each duly executed this
Agreement as of the date set forth above.
ABLE TELCOM HOLDING CORP.
BY: /s/ FRAZIER L. GAINES
------------------------------
Frazier Gaines
President
The Centurion Building
1601 West Forum Place
Suite 1110
West Palm Beach, Florida 33401
EMPLOYEE:
/s/ RICHARD A. BOYLE
------------------------------
Rick Boyle
1422 Spainwood Street
Columbia, Tennessee 38401
SCHEDULE 5
FAMILY INTERESTS
[to be added by Employee]
N/A
EXHIBIT 10.41
FINANCING AGREEMENT BETWEEN
ABLE TELCOM HOLDING CORP.
AND COTTON COMMUNICATIONS, INC.
FEBRUARY 17, 1999
THIS AGREEMENT ("Agreement") confirms our discussion with respect to
the subject matter hereof and the parties agree as follows:
1. DEFINITIONS.
a. "Able" means Able Telcom Holding Corp.
b. "Borrower" means Cotton Communications, Inc.
c. "Loan" means the $32,000,000 loaned by Able to
Borrower pursuant to the terms of this Agreement.
d. "Note" means the non-recourse promissory note
attached hereto as EXHIBIT A evidencing the Loan.
e. "Senior Notes" means the 12% Senior Subordinated
Notes of Able initially due January 6, 2005, in the aggregate amount of
$10,000,000.
f. "Series B Preferred Stock" means up to 4,000 shares
of Series B Convertible Preferred Stock of Able issued as of June 30, 1998 in
the aggregate amount of $20,000,000.
2. LOAN. Able agrees to lend Borrower $32,000,000 on the signing of
this Agreement by Able and Borrower. The Loan will be made by Able advancing
funds by means of wire transfer to an account designated by Borrower.
The Loan will be evidenced by the Note and will be prepayable and
repayable, in whole or in part, as applicable, pursuant to the terms of said
Note on the earlier of (i) October 31, 2000 or (ii) the dates on which (A) Able
consummates the redemption of all or any part of the Series B Preferred Stock,
(B) Borrower sells all or any portion of the Series B Preferred Stock or all or
any portion of the Common Stock of Able issued upon conversion of the Series B
Preferred Stock or (C) Able pays, in whole or in part, the Senior Notes.
Upon the occurrence of any of the above events, Borrower will
immediately pay, in accordance with the terms of the Note, the proceeds received
by Borrower to Able within one (1) business day after Borrower receives the
proceeds.
<PAGE>
Upon payment in full of the principal of the Note and all interest
accrued thereon, Able will mark the Note "paid" and return it to Borrower.
3. USE OF PROCEEDS. The proceeds of the Loan will be used by Borrower
to purchase the Series B Preferred Stock from the holders thereof pursuant to
Stock Purchase Agreements substantially in the forms attached hereto as EXHIBIT
B and EXHIBIT C and to purchase the Senior Notes in accordance with two letter
agreements substantially in the forms attached hereto as EXHIBIT D and EXHIBIT
E.
4. SECURITY FOR REPAYMENT. The Loan will be secured by a pledge of the
Series B Preferred Stock stock certificates and the Senior Notes pursuant to a
Pledge Agreement substantially in the form attached hereto as EXHIBIT F.
5. INDEMNIFICATION. In the event that Borrower, or its shareholders,
directors or officers (collectively and individually, the "Indemnified Parties")
become involved in any action, proceeding or investigation in connection with
any matter contemplated by this Agreement, Able shall reimburse the Indemnified
Parties for their reasonable legal and other expenses (including the cost of any
investigation and preparation) as they are incurred by the Indemnified Parties.
Able shall also indemnify and hold harmless the Indemnified Parties
from and against any and all losses, claims, damages and liabilities, joint or
several, related to or arising out of any matters contemplated by this Agreement
unless and to the extent that it shall be finally judicially determined that
such losses, claims, damages or liabilities resulted from the negligence or
willful misconduct of the Indemnified Parties.
6. DISCLOSURE. Neither this Agreement nor the undertaking and
commitment contained herein may be disclosed to or relied upon by any person or
entity other than the parties hereto, and their accountants, attorneys and other
advisors, without the prior written consent of the other party, except that
public disclosure hereof may be made as required by law, including the filing of
a Form 13D and a Form 8K with the Securities and Exchange Commission.
7. AMENDMENT; ASSIGNMENT. This Agreement may be modified or amended
only in writing. This Agreement is not assignable by Borrower without the prior
written consent of Able.
8. OTHER DOCUMENTS. Able and Borrower agree to act in good faith and to
negotiate, prepare and sign such other documents as shall be reasonably required
to further evidence the intent of this Agreement.
9. EXCULPATORY PROVISION. Borrower's obligations under this Financing
Agreement are subject to the Exculpatory Provision contained in the Note.
2
<PAGE>
10. LEGAL INTENT. The parties intend to be legally bound by this
Agreement and agree that this Agreement contains the necessary material items to
be considered a contract.
This Agreement is entered into this 17th day of February, 1999.
COTTON COMMUNICATIONS, INC. ABLE TELCOM HOLDING CORP.
By: /s/ TYLER DIXON By: /s/ BILLY V. RAY
-------------------------------- ------------------------------
Name: Tyler Dixon Name: Billy V. Ray
Title: President Title: President & CEO
3
<PAGE>
EXHIBIT A
Note
EXHIBIT B
Stock Purchase Agreement
EXHIBIT C
Stock Purchase Agreement
EXHIBIT D
Letter Agreement
EXHIBIT E
Letter Agreement
EXHIBIT F
Stock Pledge Agreement
EXHIBIT 10.42
11.5%
NON-RECOURSE PROMISSORY NOTE
Amount: $32,000,000 February 17, 1999
For value received, Cotton Communications, Inc. ("Borrower") hereby
agrees to pay to the order of Able Telcom Holding Corp., its successors or
assigns ("Able"), in lawful money of the United States of America and
immediately available funds, at its offices in West Palm Beach, Florida (or at
such other place or places as Able may designate) the principal amount of
Thirty-Two Million and No/100 Dollars ($32,000,000) on October 31, 2000
("Maturity Date").
INTEREST. Interest on the unpaid principal amount hereof from time to
time shall accrue at an annual rate of 11.5% from the date hereof. Accrued
interest shall be payable on payment of a Voluntary Prepayment or Mandatory
Prepayment and on the Maturity Date.
VOLUNTARY PREPAYMENTS. All or any portion of the unpaid principal
balance of this Note, together with all accrued interest thereon, may be prepaid
by Borrower at any time without penalty. Partial repayments of principal shall
be made in tranches of $3,000,000.
MANDATORY PREPAYMENTS. The principal amount of the Note shall be
prepaid in whole or in part, together with all accrued interest thereon, by
Borrower paying Able on the first business day after Borrower receives the
proceeds of any of the following:
i. the redemption or sale of all or any portion of the
outstanding shares of the Series B Preferred Stock;
ii. the sale of all or any portion of the Common Stock
("Common Stock") issued to Borrower upon conversion
of the Series B Preferred Stock; or,
iii. the prepayment or payment of all or any portion of
the Senior Notes.
Capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Financing Agreement (the "Agreement") between
Borrower and Able dated the date hereof.
Whenever a payment on this Note is stated to be due on a day which is
not a business day, such payment shall be made on the next succeeding business
day with interest accruing to the date of payment. Interest hereunder shall be
computed on the basis of the actual number of days elapsed over a year of 360
days.
If any amount owed by Borrower hereunder is not paid when due, Borrower
shall pay interest on all such past due amounts at a rate equal to 13.5% per
annum (the "Default Rate"),
1
<PAGE>
payable on demand of Able. Nothing herein contained shall be construed or so
operate as to require Borrower to pay any interest, fees, costs or charges at a
rate or in an amount greater than is permitted by applicable law.
Upon the occurrence of a default in payment of principal, interest or
other amounts owing hereunder when due, the unpaid principal amount of this
Note, together with all accrued but unpaid interest thereon, may become, or may
be declared to be, (or in the case of bankruptcy or insolvency of Borrower,
shall, without action on the part of Able, become), immediately due and payable,
without presentation, demand, protest or notice of any kind, all of which are
hereby waived by Borrower. Failure of the holder of this Note to assert any
right herein shall not be a waiver thereof.
Borrower agrees to pay on demand all direct out-of-pocket losses, and
reasonable out-of-pocket costs and expenses, if any (including reasonable fees
and expenses of outside counsel), of Able in connection with the enforcement
(whether by legal proceedings, negotiation or otherwise) of this Note and other
documents delivered hereunder.
Upon the occurrence and during the continuance of any default, Able is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all amounts or other indebtedness
at any time owing by Able to or for the credit or the account of Borrower
against any and all of the obligations of Borrower now or hereafter existing
under this Note, irrespective of whether or not Able shall have made any demand
under this Note and of whether or not such obligations may be matured. Able
agrees promptly to notify Borrower after any such set-off and application made
by Able, but the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Able under this paragraph are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which Able may have.
In the event that this Note is transferred, assigned or pledged,
Borrower hereby waives, as against such transferee, assignee or pledgee, any
defenses and counterclaims that Borrower may have against the holder hereof.
Nothing herein shall be construed as a waiver by any party of the exculpatory
provisions set forth below.
This Note shall be governed by and construed in accordance with the
laws of the state of Florida without regard to conflicts of law provisions
thereof.
If any provision or obligation of the Note shall be determined to be
invalid, ineffective or unenforceable, the validity, effectiveness and
enforceability of the remaining provisions or obligations shall not in any way
be affected or impaired thereby.
EXCULPATORY PROVISION. Notwithstanding anything to the contrary in this
Note or in the Agreement, this Note (A) is payable solely from (1) the Voluntary
Prepayments or the Mandatory Prepayments described herein or, (2) payable at the
Maturity Date, by the delivery of the
2
<PAGE>
remainder of the Series B Preferred Stock, the Common Stock and the Senior Notes
then held by Borrower and (B) does not constitute a personal obligation of
Borrower.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed under
seal and delivered by their respective duly authorized officers as of the date
first above written.
COTTON COMMUNICATIONS, INC.
By: /s/ TYLER DIXON
-----------------------------------
Name: Tyler Dixon
Title: President
3
EXHIBIT 10.43
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement"), given as of this 17th
day of February, 1999, by Cotton Communications, Inc. a Georgia corporation (the
"Pledgor") in favor of Able Telcom Holding Corp. ("Able").
W I T N E S S E T H :
WHEREAS, Able and Pledgor entered into a Financing Agreement (the
"Agreement") dated the date hereof pursuant to which Able loaned Borrower
$32,000,000 to purchase the Series B Preferred Stock and the Senior Notes, which
loan is evidenced by the Note;
WHEREAS, the Pledgor is the owner of 2,785 shares of the Series B
Preferred Stock and all the Senior Notes;
WHEREAS, the Pledgor has agreed to pledge and assign to Able all of the
Pledgor's right, title, and interest in and to the Series B Preferred Stock and
the Senior Notes (collectively, the "Securities") as security for the payment
and performance of the Note;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Pledgor hereby covenants
and agrees with Able that capitalized terms used herein shall have the meanings
ascribed thereto in the Agreement, unless otherwise defined or limited herein,
and the Pledgor further covenants and agrees with Able as follows:
1. WARRANTY. The Pledgor hereby warrants to Able that except for the
security interest created hereby, the Pledgor owns the Securities and has the
unrestricted right to pledge the Securities.
2. SECURITY INTEREST. The Pledgor hereby grants, conveys, and pledges
to Able a security interest in and security title to all of its right, title,
and interest in and to the Securities, together with all proceeds thereof and
all dividends or other amounts paid or payable with respect thereto, as security
for the payment of the Note. The Pledgor has, on this date delivered the
Securities to and deposited the Securities with Able, together with stock powers
endorsed in blank by the Pledgor.
The Pledgor hereby appoints Able the Pledgor's true and lawful
attorney-in-fact to execute such documents (including, without limitation, a
stock power) and as shall be
<PAGE>
necessary to effect a transfer of the Securities by Able (which power of
attorney is coupled with an interest and is irrevocable so long as any of the
Note is outstanding.
3. ADDITIONAL SHARES. In the event that, during the term of this
Agreement:
(a) Any stock dividend, stock split, reclassification, readjustment,
or other change is declared or made in the capital structure of Able,
all new, substituted, and additional shares, or other securities,
issued by reason of any such change and received by the Pledgor or to
which the Pledgor shall be entitled shall be immediately transferred to
Able, by delivery, together with stock powers endorsed in blank by the
Pledgor, and shall thereupon constitute Securities to be held by Able
under the terms of this Agreement; and
(b) Subscriptions, warrants, or any other rights or options shall be
issued in connection with the Securities, all new stock, or other
securities acquired through such subscriptions, warrants, rights, or
options by the Pledgor shall be immediately transferred by delivery to
Able and shall thereupon constitute Securities to be held by Able under
the terms of this Agreement.
4. DEFAULT. Upon the failure of Pledgor to make prepayments on or
payment of the Note, or upon a breach by Pledgor of the Agreement, Able may
transfer, sell, or otherwise dispose of the Securities or any portion of the
Securities at a public or private sale or make other commercially reasonable
disposition of the Securities or any portion thereof after ten (10) days' notice
to the Pledgor, and Able may purchase the Securities or any portion thereof at
any public or private sale.
The proceeds of the public or private sale or other disposition shall
be applied to the Note costs incurred in connection with the sale and to the
payment of the Note.
5. ADDITIONAL RIGHTS OF SECURED PARTY. In addition to its rights and
privileges under this Agreement, Able shall have all the rights, powers, and
privileges of secured parties under the Uniform Commercial Code of the State of
Florida. All rights of Able shall be cumulative and not exclusive.
6. TERMINATION. This Agreement, and the security interest hereunder
granted to Able in the Securities, shall terminate on the earlier of the date on
which the Note is paid in full or all the Securities are sold or redeemed or
paid in full or October 31, 2000.
7. SECURITY AGREEMENT. This Agreement shall constitute a security
agreement under the Uniform Commercial Code as in effect in the State of
Florida.
8. GENERAL.
-2-
<PAGE>
(a) Time is of the essence of this Agreement. No waiver by Able of
any power or right hereunder or of any default by the Pledgor hereunder
shall be binding upon Able unless in writing signed by Able. No failure
or delay by Able to exercise any power or right hereunder or binding
waiver of any default hereunder shall operate as a waiver of any other
or further exercise of such power or any other default. This Agreement,
together with all documents referred to herein, constitutes the entire
agreement between the Pledgor and Able and may not be modified except
by a writing executed by Able and delivered by Able to the Pledgor.
(b) If any paragraph or part thereof shall for any reason be held or
adjudged to be invalid, illegal, or unenforceable by any court of
competent jurisdiction, such paragraph or part thereof so adjudicated
invalid, illegal, or unenforceable shall be deemed separate, distinct,
and independent, and the remainder of this Agreement shall remain in
full force and effect and shall not be affected by such holding or
adjudication.
(c) The rights and obligations of the parties hereunder shall inure
to the benefit of and bind their respective successors and assigns.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida.
(e) All notices and demands required or permitted hereunder or by
law shall be in writing or by telecopy and shall be mailed or delivered
to the party to whom notice is intended to be given at such address as
shall be designated in writing by such party.
-3-
<PAGE>
IN WITNESS WHEREOF, the Pledgor has executed this Agreement by and
through its duly authorized officers as of the day and year first above written.
PLEDGOR:
COTTON COMMUNICATIONS, INC.
By: /s/ TYLER DIXON
--------------------------------
Tyler Dixon
Title: President
Attest: ____________________________
Title: _________________________
[CORPORATE SEAL]
[ ___________________________(SEAL)]
-4-
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 19, 1998, with respect to the 1997 and 1996
financial statements and schedule of Able Telcom Holding Corp. included in the
Annual Report (Form 10-K/A) for the year ended October 31, 1998 which is
incorporated by reference in the Registration Statements (Form S-3, No.
333-22105 and Form S-8, No. 333-04377 pertaining to the 1996 Stock Option Plan
of Able Telcom Holding Corp.).
West Palm Beach, Florida Ernst & Young LLP
March 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 13,544
<SECURITIES> 0
<RECEIVABLES> 65,025
<ALLOWANCES> 866
<INVENTORY> 146,869
<CURRENT-ASSETS> 185,822
<PP&E> 46,995
<DEPRECIATION> 14,921
<TOTAL-ASSETS> 290,760
<CURRENT-LIABILITIES> 160,434
<BONDS> 0
0
11,325
<COMMON> 11
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 290,760
<SALES> 0
<TOTAL-REVENUES> 217,481
<CGS> 179,505
<TOTAL-COSTS> 206,072
<OTHER-EXPENSES> (662)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,534
<INCOME-PRETAX> 6,537
<INCOME-TAX> 3,405
<INCOME-CONTINUING> 2,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,514
<EPS-PRIMARY> (0.59)
<EPS-DILUTED> (0.59)
</TABLE>
