<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended JUNE 30, 1997
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____ to _____
Commission file number 0-4410
TELECOMM INDUSTRIES CORP.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 06-0844558
- ------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9310 PROGRESS PARKWAY
MENTOR, OHIO 44060
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(Address of principal executive offices)
216-953-1400
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $0.01 par value: 11,771,559 (as of August 12, 1997)
- ------------------------------------------------------------------
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
TELECOMM INDUSTRIES CORP. AND SUBSIDIARIES
INDEX
PART I--FINANCIAL INFORMATION Page No.
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Item 1. Financial Statements (unaudited) . . . . . . . . . . . . . . . .3
Consolidated Balance Sheets --
June 30, 1997 and December 31, 1996. . . . . . . . . . . . . . .4
Consolidated Statements of Income --
three and six months ended June 30, 1997
and June 30, 1996. . . . . . . . . . . . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows --
six months ended June 30, 1997 and
June 30, 1996. . . . . . . . . . . . . . . . . . . . . . . . . .6
Notes to Consolidated Financial Statements . . . . . . . . . . .7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . .8
PART II--OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 15
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
The Registrant's financial statements follow this page.
<PAGE>
Telecomm Industries Corp.
Unaudited Consolidated Balance Sheet
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
Six Months Year
ended ended
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 661,653 $ 238,312
Notes receivable - current portion 0 400,000
Accounts receivable -trade 1,325,393 2,548,961
Inventories 545,645 616,147
Prepaid income taxes 55,465 48,260
Prepaid expenses 30,058 38,660
Employee advances 313,751 139,887
---------- ----------
Total current assets 2,931,965 4,030,227
---------- ----------
Property and equipment-at cost net of
accumulated depreciation of $341,504
and $235,679 at June 30,1997 and December 31, 1996,
respectively 791,308 482,712
Other assets:
Accounts receivable, less current portion 1,214,757 1,013,520
Intangibles - net of accumulated amortization
of $58,927 and $20,200 at June 30,
1997 and December 31, 1996, respectively 1,113,861 81,244
---------- ----------
Total assets $6,051,891 $5,607,703
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 156,920 $ 113,384
Current portion of long-term debt 295,563 175,823
Accounts payable trade 13,587 408,848
Accrued payroll and related expenses 122,282 122,719
Other accrued expenses 22,712 56,185
Deferred income taxes 106,321 106,321
Accrued commissions and contractor fees 361,249 455,582
Income taxes payable 72,103 81,136
Accrued bonus 317,000 816,900
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Total current liabilities 1,467,737 2,336,898
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Long-term liabilities:
Long-term debt, less current portion 763,619 389,436
Deferred income taxes 591,472 402,913
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Total liabilities 2,822,828 3,129,247
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Stockholders' equity:
Common stock $.01 par value: authorized -20,000,000
shares: issued - 10,300,746 and 9,742,791:
outstanding -10,200,746 and 9,642,791,
at June 30, 1997 and December 31, 1996 102,008 96,078
Additional paid in capital 2,548,640 2,086,237
Receivables from stockholders (42,960) (44,531)
Retained earnings 621,375 340,672
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Total stockholders' equity 3,229,063 2,478,456
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Total liabilities and stockholders' equity $6,051,891 $5,607,703
---------- ----------
---------- ----------
</TABLE>
See notes to unaudited consolidated balance sheet
<PAGE>
Telecomm Industries Corp
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended Six Months Ended Six Months Ended
------------- ------------- ----------------- ----------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
------------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net revenues $ 3,148,192 $ 2,315,419 $ 5,742,251 $ 4,246,182
Commissions,contractor fees, and related expenses 1,119,139 864,788 1,947,744 1,525,600
Selling, general and administrative expenses 1,729,640 1,224,415 3,263,943 2,254,732
------------ ------------ ------------ ------------
Operating income 299,413 226,216 530,564 465,850
Other income (expense):
Gain(loss) on disposal of assets - (870) - (870)
Interest income - 14,193 2,692 27,247
Interest expense (34,113) (11,727) (65,417) (19,467)
------------ ------------ ------------ ------------
(34,113) 1,596 (62,725) 6,910
------------ ------------ ------------ ------------
Income from operations before income tax expense 265,300 227,812 467,839 472,760
Income tax expense (credit) 106,120 94,100 187,136 189,100
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income $ 159,180 $ 133,712 $ 280,703 $ 283,660
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per common and common equivalent share
------------ ------------ ------------ ------------
Net income 0.02 0.01 0.03 0.03
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Number of shares used in computing earnings per ------------ ------------ ------------ ------------
common and common equivelant share 10,200,746 9,607,791 10,200,746 9,607,791
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Dividends per common share - - - -
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See notes to unaudited statement of operations
<PAGE>
Telecomm Industries Corp.
Unaudited Consolidated Statements of Cash Flows
for the six months ended June 30,1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows frrm operating activities:
Net income $ 280,703 $ 283,660
Adjustments to reconcile to net cash
provided by (used in) operating activities:
Expenses not requiring the use of cash:
Depreciation and amortization 144,553 58,497
Deferred taxes 188,559 -
Loss (gain) on sales of fixed assets - -
Changes in assets and liabilities:
Accounts receivable 1,223,568 (467,078)
Inventory 70,502 (172,531)
Prepaid income taxes (7,205) -
Prepaid expenses 8,602 63,772
Employee advances (173,864) (6,183)
Accounts payable (395,261) 60,368
Accrued expenses (33,482) (3,798)
Payroll taxes payable (437) 42,991
Accrued commissions and contractor fees (94,333) 5,705
Income taxes payable (9,033) 22,066
Accrued bonuses (499,900) (35,134)
---------- ----------
Total adjustments 422,269 (431,325)
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Net cash provided by (used in)
operating activities $ 702,972 $ (147,665)
Cash flows from investing activities:
Purchases of fixed assets (414,422) (145,337)
Proceeds from sale of fixed assets - 15,595
Purchase acquisition of Long-Tell
Communications, Inc. (317,925) -
Purchase acquisition of Northeastern
Communication Services, Inc. (753,410) -
Proceeds from stockholders receivables 1,571 57,083
Increase in long-term accounts receivable (201,237) -
Decrease in notes receivable 400,000 15,488
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Net cash used in investing activities (1,285,423) (57,171)
---------- ----------
Cash flows from financing activities:
Payments on long-term debt (142,818) (76,495)
Proceeds from issuance of long-term debt 636,741 33,812
Proceeds from issuance of common stock to
employees 45,000 -
Proceeds from issuance of common stock for
purchase acquisitions 423,333 -
Net borrowings under line of credit 43,536 152,613
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1,005,792 109,930
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Net (decrease) increase in cash 423,341 (94,906)
Cash at beginning of period 238,312 575,367
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Cash at end of period $ 661,653 $ 480,461
---------- ----------
---------- ----------
</TABLE>
See notes to unaudited statement of cash flows
<PAGE>
TELECOMM INDUSTRIES CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Certain reclassifications have been made to the financial statements to
conform to the 1996 method of presentation.
2. The accompanying unaudited consolidated condensed interim financial
statements have been prepared in accordance with the instructions to
Form 10-QSB and Regulations S-X and do not include all of the information
and note disclosures required by generally accepted accounting principles.
Therefore, the accompanying interim financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Form 10-KSB of Telecomm Industries Corp. ("Telecomm," the
"Company" or the "Registrant") for the year ended December 31, 1996. The
statements reflect all adjustments that are, in the opinion of management,
necessary to present fairly the financial position of the Company as of
June 30, 1997 and the results of its operations. These adjustments are of
a normal and recurring nature.
3. The results of operations for the period ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full year.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Telecomm was incorporated on December 13, 1967, and until December 1993,
its name was Scoto Data Com., Inc. The Registrant has two wholly owned
subsidiaries, Centel Corporation d/b/a Teleco ("Teleco") and Authorized Network
Distributors, Inc. ("AND"). The operations of Teleco were primarily acquired in
April 1994 and AND was acquired in September 1995. AND was acquired by merger,
in a stock-for-stock exchange. AND acquired Seraphim Information Systems, Inc.
("Seraphim") by merger in January 1996, in a stock-for-stock exchange. The
results of AND for 1995 and Seraphim for 1996 have been pooled with the results
of Teleco.
Teleco distributes telecommunications services in the major metropolitan
markets of the State of Ohio for Ameritech Corporation ("Ameritech") and sells
telecommunication equipment and provides related installation, maintenance and
repair services. AND distributes telecommunication services in Illinois,
Indiana and Ohio for Ameritech.
Because of a change in Ameritech's commission payment structure, Telecomm
adopted a new compensation plan for its sales force in 1996. Previous to June
1996, Ameritech paid 100% of the commissions earned at the time the service was
installed. After June 1996, Ameritech began paying Telecomm 60% of the
commissions earned at the time the service was installed and the remaining 40%
over the life of the contract. Telecomm adopted an aggressive commission policy
which enabled it to adjust to the new method of payment from Ameritech, while
continuing to actively attract and maintain skilled, experienced salespeople.
In addition, in the third quarter of 1996, Ameritech implemented a new
billing and customer record system in an effort to consolidate and standardize
its five non-standard billing systems. The combined effect on the Company of
the change in timing of commission payments and the new system implementation is
a lengthened collection period for receivables, which adversely affects the
Company's working capital and cash flow.
RECENT EVENTS
On July 30, 1997, the Company purchased 529,187 shares of the Company's
common stock at $0.60 per share from former employees of the Company.
On August 12, 1997, the Registrant purchased all of the assets of Unitel,
Inc., an Indiana corporation ("Unitel"), pursuant to an Asset Purchase Agreement
dated July 7, 1997 among the Registrant, Unitel, Paul Satterthwaite, Jon
Satterthwaite, the controlling shareholders of Unitel, and Teleco Acquisition
Corp., an Ohio corporation and wholly-owned subsidiary of the Registrant.
Unitel operates as a telephone and computer systems integrator and a distributor
of Ameritech and BellSouth products and services. The purchase price for the
assets consists of (i) 2,000,000 shares of common stock, par value $0.01, of the
Registrant (the "Common Stock"), (ii) a convertible promissory note in the
principal amount of $1,000,000, and (iii) the assumption of Unitel's
<PAGE>
liabilities, including a bank loan with a current balance of approximately
$1,300,000 and obligations to trade creditors of Unitel in an amount not to
exceed $1,200,000. The consideration paid in the acquisition was determined by
negotiation between the Registrant and Unitel, based in part on the trading
price of the Common Stock. See Part II, Item 5--Other Information.
In connection with its acquisition of Unitel on August 12, 1997, Telecomm
negotiated a $2 million term loan and a $2 million line of credit with Key Bank,
N.A. The new loans consolidate and replace several short and long-term credit
facilities of Telecomm and Unitel with other banks. The term loan is payable in
fifty-nine equal monthly installments of $30,000 plus interest on the unpaid
balance at prime plus 0.5% per annum. Final payment of $230,000 plus interest
is due on August 18, 2002. The line of credit is for the lesser of $2,000,000
or the borrowing base of eligible collateral, bears interest at the rate of
prime plus 0.25% per annum, is subject to various customary restrictions and is
payable on demand. The loans are secured by a lien on all the assets of
Telecomm and its subsidiaries. Currently, $1,080,000 is outstanding under the
line of credit.
SECOND QUARTER OF 1997 COMPARED TO SECOND QUARTER OF 1996
The Company's net revenues increased 36% to $3.1 million for the second
quarter of 1997 from $2.3 million in the comparable 1996 period, primarily due
to increased equipment sales and services and partially offset by a reduction in
base commissions paid by Ameritech at the time the service is installed pursuant
to the change in Ameritech's commission payment structure instituted in 1996.
Net revenues from equipment sales and services increased 80% to $1.3 million
from $.7 million in the second quarter of 1996, including $170,000 in sales
generated by Northeastern Communication Services, Inc. ("NCS") which the Company
acquired in January 1997. Net revenues from network services increased 15% to
$1.8 million in 1997 from $1.6 million in the comparable 1996 period. For the
second quarter ended June 30, 1997, sales of equipment and related services
represented 41% of net revenues, sales of Ameritech services represent 58% of
net revenues, and sales of long-distance and other services represented 1% of
net revenue compared to 31% equipment sales and services and 69% Ameritech sales
and services in the comparable 1996 period. Revenues attributed to Ameritech
services related to data transmission decreased 47% to $252,000 from $479,000 in
the comparable 1996 period, and sales of voice transmission services increased
41% to $1,581,000 from $1,120,000 in the comparable period in 1996.
Commission, contractor fees and related expenses increased $254,000 to $1.1
million in the second quarter of 1997, a 29% increase from such expenses of $.9
million in the second quarter of 1996. The increase was due primarily to
increased costs of labor and equipment to support additional sales in the second
quarter of 1997. As a percentage of net revenues, these expenses decreased to
36% during the second quarter of 1997, from 37% during the second quarter of
1996, primarily due to shifting to less dependence on sales generated from
independent sales representatives which was only partially offset by increased
equipment and labor costs.
Selling, general and administrative expenses ("SG&A") increased $.5 million
to $1.7 million in the second quarter of 1997, a 41% increase from SG&A expenses
of $1.2 million in the comparable 1996 period. As a percentage of net revenues,
these expenses increased to 55% during the second quarter of 1997, from 53%
during the second quarter of 1996, primarily as a result of an
<PAGE>
increase in personnel as a result of the NCS acquisition and an adjustment to
increase base sales salaries to more closely reflect sales production.
Interest income decreased by $14,000 to $0 in the second quarter of 1996
primarily due to the use of short-term investments to meet operating expenses.
Interest expense increased by $22,000 to $34,000 in the second quarter of 1997
from $12,000, primarily due to increased borrowing by the Company under its line
of credit facilities and issuance of new notes in connection with the
acquisitions of NCS and Long-Tell Communications, Inc. ("LTI"), also acquired in
January 1997.
Income from continuing operations before income taxes increased by $37,000
to $265,000 in the second quarter of 1997, an increase of 16% from $228,000 in
the comparable 1996 period, primarily for the reasons state above.
The provision for income taxes increased by $12,000 to $106,000 in the
second quarter of 1997 compared to $94,000 in the second quarter of 1996, due to
higher earnings.
As a result of the foregoing, net income for the second quarter of 1997 was
$159,000, an increase of 19%, from net income for the second quarter of 1996 of
$134,000.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO JUNE 30, 1996
The Company's net revenues increased 35% to $5.7 million for the first six
months of 1997 from $4.2 million in the comparable 1996 period, primarily due to
increased equipment sales and services and partially offset by a reduction in
base commissions paid by Ameritech at the time the service is installed pursuant
to the change in Ameritech's commission payment structure instituted in 1996.
Net revenues from equipment sales and services increased 85% to $2.4 million
from $1.3 million in the first six months of 1996, including $412,000 in sales
generated by NCS. Net revenues from network services increased 11% to $3.2
million in 1997 from $2.9 million in the comparable 1996 period. For the six
months ended June 30, 1997, sales of equipment and related services represented
41% of net revenues, sales of Ameritech services represent 57% of net revenues,
and sales of long-distance and other services represented 2% of net revenue
compared to 30% equipment sales and services and 70% Ameritech sales and
services for the comparable 1996 period. Revenues attributed to Ameritech
services related to data transmission increased 1% to $648,000 from $640,000 in
the comparable 1996 period, and sales of voice transmission services increased
14% to $2,619,000 from $2,306,000 for the comparable period in 1996.
Commission, contractor fees and related expenses increased $422,000 to $1.9
million in the first six months of 1997, a 27% increase from such expenses of
$1.5 million in the first six months of 1996. The increase was due primarily to
increased costs of labor and equipment to support additional sales in the first
six months of 1997. As a percentage of net revenues, these expenses decreased
to 33% during the first six months of 1997, from 36% during the first six months
of 1996, primarily due to shifting to less dependence on sales generated from
independent sales representatives which was only partially offset by increased
equipment and labor costs.
<PAGE>
Selling, general and administrative expenses ("SG&A") increased $1 million
to $3.3 million in the first six months of 1997, a 45% increase from SG&A
expenses of $2.3 million in the comparable 1996 period. As a percentage of net
revenues, these expenses increased to 57% during the first six months of 1997,
from 53% during the first six months of 1996, primarily as a result of an
increase in personnel as a result of the NCS acquisition and an adjustment to
increase base sales salaries to more closely reflect sales production.
Interest income decreased by $24,000 to $3,000 in the first six months of
1996 compared to $27,000 in the first six months of 1996, primarily due to the
use of short-term investments to meet operating expenses. Interest expense
increased by $46,000 to $65,000 in the first six months of 1997 from $19,000,
primarily due to increased borrowing by the Company under its line of credit
facilities and issuance of new notes in connection with the acquisitions of NCS
and LTI.
Income from continuing operations before income taxes decreased by $5,000
to $468,000 in the first six months of 1997, a decrease of 1% from $473,000 in
the comparable 1996 period, primarily for the reasons state above.
The provision for income taxes decreased by $2,000 to $187,000 in the first
six months of 1997 compared to $189,000 in the first six months of 1996, due to
lower earnings.
As a result of the foregoing, net income for the first six months of 1997
was $281,000, a decrease of 1%, from net income for the first six months of 1996
of $284,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirement is to fund its growth,
including working capital, acquisitions of other companies, and the purchase of
equipment. The Company uses cash generated from operations, borrowings under
its credit facilities, the sale of equity in private placements and vendor trade
credit to fund these requirements.
Cash at June 30, 1997 increased $423,000, or 277%, since December 31, 1996.
Net cash provided by operating activities was $703,000 in the first six months
of 1997 compared to cash used in operating activities of $148,000 in the first
six months of 1996. The change was primarily attributable to a $1.2 million
decrease in accounts receivable in the first six months of 1997, compared to a
$467,000 increase in accounts receivable in the first six months of 1996, as a
result of the combined effect on the Company of Ameritech's change in timing of
commission payments and its implementation of a new billing and customer record
system, and to a lesser extent, a $70,000 decrease in inventory in the first six
months of 1997 compared to a $172,000 increase in inventory in the first six
months of 1996. These decreases in accounts receivable and inventory were
offset by a $500,000 decrease in accrued bonuses, a $489,000 decrease in
accounts payables and accrued commissions and contractor fees compared to a
$35,000 increase in accrued bonuses and a $60,000 decrease in accounts payable
in the first six months of 1996.
<PAGE>
Net cash used in investing activities increased to $1.3 million in the
first six months of 1997 compared to net cash used in investing activities of
$58,000 in the comparable 1996 period, primarily as a result of the acquisitions
of NCS and LTI in the 1997 first quarter.
Cash flow from financing activities was $1 million in the first six months
of 1997 compared to $109,000 in the first six months of 1996 primarily because
of increased long-term debt and common stock issued to fund acquisitions in
1997. In connection with the acquisition of NCS the Company borrowed $400,000,
bearing interest at an annual rate equal to 0.5% in excess of the prime rate in
affect from time to time, payable in thirty-six equal monthly installments,
commencing January 10, 1997 and maturing on January 10, 2000. On August 12,
1997, this loan was replaced by the new loans from Key Bank, N.A. described
under "Recent Events" above.
Michael J. Toth, then Chairman of the Board and Chief Executive Officer and
currently a director of the Company, held 50% of the shares of LTI. In the
acquisition of LTI, he received $25,000 in cash and the $200,000 promissory note
from the Company, bearing interest at 9% per annum payable in monthly
installments of interest only, with the principal payable on January 3, 2002.
The promissory note is unsecured and subordinate to all future borrowings by
Telecomm.
Short-term trade credit represents a significant source of financing for
inventory. Trade credit arises from the willingness of the Company's creditors
to grant payment terms for inventory purchases. Inventory levels decreased
$70,000 from December 31, 1996 to June 30, 1997, primarily to support the
Company's completion of increased sales. Although the Company has negotiated
what it believes to be favorable payment terms from its primary vendors, there
is no assurance that the Company will be able to obtain these terms in the
future.
Approximately $244,000 in unused borrowing availability existed under the
credit line of the Company's credit facilities at June 30, 1997. As of August
12, 1997, the Company has negotiated a new line of credit not to exceed two
million dollars and subject to certain borrowing base criteria. The new line of
credit replaces all previously held lines of credit of both the Company and
Unitel combined. The Company believes its cash reserves and funds available
from the line of credit will be sufficient to provide the liquidity necessary to
fund its anticipated capital and operational requirements over the next twelve
months. The Company may also seek to obtain additional sources of funding,
including additional debt or equity financings as it continues to grow. There
is no assurance that the Company will be able to obtain any further increases in
its line of credit or additional debt or equity financing to support its
continued growth.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report that are not historical facts
are forward-looking statements that are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statement. These risks and uncertainties
include, but are not limited to, the dependance of the Company on one
principal supplier, Ameritech, for a significant portion of its revenues;
changes in Ameritech's commission payment plan and its billing and record
system, adversely affecting the Company's working capital and cash flow
resulting in potential decreases in long-term accounts receivable; changes
arising from greater competition
<PAGE>
in local telephone service attributable to passage of the Telecommunications
Act; the introduction of competitors into the market including competitors
with financial and other reserves significantly greater than those of
Telecomm; the ability of the Company to integrate the operations of NCS and
Unitel into the Company; the availability of other acquisitions and the
integration of the operations of those acquisitions, if completed, into the
Company; the ability of Telecomm to continue to grow its sales force
internally and to expand its product menu, particularly in light of the
increased competition in the telecommunication markets in which Telecomm
operates; and general economic conditions, and other risk factors discussed
herein. In addition, any of the risks detailed above may have an impact on
the Company's ability to access any or all of its new line of credit. These
risks must be considered by an investor or potential investor in the Company.
<PAGE>
PART II--OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On July 30, 1997, the Company purchased 529,187 shares of the Company's
common stock at $0.60 per share from former employees of the Company.
On August 12, 1997, the Registrant purchased all of the assets of Unitel,
Inc., an Indiana corporation ("Unitel"), pursuant to an Asset Purchase Agreement
(the "Agreement") dated July 7, 1997 among the Registrant; Unitel; Paul
Satterthwaite and Jon Satterthwaite, the controlling shareholders of Unitel (the
"Shareholders"); and Teleco Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of the Registrant ("Buyer"). Unitel operates as a
telephone and computer systems integrator and a distributor of Ameritech and
BellSouth products and services. The purchase price for the assets consisted of
(i) 2,000,000 shares of common stock, par value $0.01, of the Registrant (the
"Common Stock"), (ii) a convertible promissory note in the principal amount of
$1,000,000, and (iii) the assumption of Unitel's liabilities, including a bank
loan with a current balance of approximately $1,300,000 and obligations to trade
creditors of Unitel in an amount not to exceed $1,200,000. The consideration
paid in the acquisition was determined by negotiation between the Registrant and
Unitel, based in part on the trading price of the Registrant's common stock.
The shares of the Common Stock will not be registered under the Securities
Act of 1933, as amended (the "Act"), because they were issued to two
stockholders of Unitel in a transaction exempt from the registration
requirements of the Act. The certificates representing the shares of Common
Stock contain a legend restricting transfer without compliance with the Act.
Each of the Shareholders entered into Employment and Non-Competition
Agreements with the Registrant and Buyer on the closing date, providing for both
Shareholders to be employed by and not to compete with Buyer and the Registrant.
In connection with its acquisition of Unitel on August 12, 1997, the
Registrant negotiated a $2 million term loan and a $2 million line of credit
with Key Bank, N.A. The new loans consolidate and replace several short and
long-term credit facilities of the Registrant and Unitel with other banks. The
term loan is payable in fifty-nine equal monthly installments of $30,000 plus
interest on the unpaid balance at prime plus 0.5% per annum. Final payment of
$230,000 plus interest is due on August 18, 2002. The line of credit is for the
lesser of $2 million or the borrowing base of eligible collateral, bears
interest at the rate of prime plus 0.25% per annum, is subject to various
customary restrictions and is payable on demand. The loans are secured by a
lien on all of the assets of the Registrant and its subsidiaries. Currently,
$1,080,000 is outstanding under the line of credit.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
2.1 Asset Purchase Agreement, dated July 7, 1997, by and among
Unitel, Inc., Paul Satterthwaite, Jon Satterthwaite, Teleco
Acquisition Corp. and Telecomm Industries Corp.
27 Financial Data Schedule
FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
Audited financial statements for Unitel, Inc. for the year ended
December 31, 1996 will be filed not later than 60 days following the
filing of this Report.
PRO FORMA FINANCIAL INFORMATION
Pro forma financial statements of the Registrant showing the effect of
the acquisition of Unitel, Inc. will be filed not later than 60 days
following the filing of this Report.
B. REPORTS ON FORM 8-K
On January 3, 1997, the Company filed a Form 8-K reporting the
acquisitions of NCS and Long-Tell in Items 2 and 7 of Form 8-K. An amendment to
the January 3, 1997 Form 8-K containing financial statements relating to the NCS
acquisition was filed by the Company on June 26, 1997. On January 8, 1997, the
Company filed a Form 8-K to report, in Item 7, a press release of the Company of
the same date.
<PAGE>
SIGNATURES
In accordance with the Exchange Act, the Registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TELECOMM INDUSTRIES CORP.
Date: August 14, 1997 By: /s/ Frank Campanale
---------------------------
Frank P. Campanale
Chief Financial Officer
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made this 7th day of July, 1997, at Cleveland, Ohio, by
and among Unitel, Inc., an Indiana corporation, (hereinafter referred to as the
"Seller"), Paul Satterthwaite and Jon Satterthwaite, individuals and controlling
shareholders of Seller (hereinafter referred to collectively as
"Satterthwaite"), Teleco Acquisition Corporation, an Ohio corporation
(hereinafter referred to as "Buyer"), Telecomm Industries Corp., a Delaware
corporation ("Telecomm").
RECITALS
1. Seller is an Indiana corporation, and presently owns and operates a
voice and data telecommunication business, operated from the locations,
identified on SCHEDULE 5.2.
2. Seller desires to sell to Buyer and Buyer desires to purchase and
acquire the going concern value and good will of Seller's business, including
all of the assets of Seller (all of which are hereinafter defined as the
"Transferred Assets"), all on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the terms, covenants and conditions
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the terms identified below in this Section will
have the meanings indicated, unless a different and common meaning of the term
is clearly indicated by the context.
1.1 ACQUISITION BALANCE SHEET - means the June 30, 1997 Balance Sheet of
Seller, a copy of which is attached hereto and marked SCHEDULE 1.1.
1.2 ACQUISITION STATEMENT OF INCOME AND EXPENSES - means the June 30, 1997
Statement of Income and Expenses of Seller, a copy of which is attached hereto
and marked SCHEDULE 1.2.
1.3 ACQUISITION FINANCIAL STATEMENTS - means the Acquisition Balance Sheet,
and the Acquisition Statement of Income and Expenses.
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1.4 BUYER - Teleco Acquisition Corporation, an Ohio corporation, a wholly
owned subsidiary of Telecomm.
1.5 BUYER INDEMNIFIED PARTIES - Teleco Acquisition Corporation, an Ohio
corporation, its Affiliated entities, Officers, Directors, shareholders and
employees.
1.6 AGREEMENT - means this Asset Purchase Agreement together with the
Attachments.
1.7 ATTACHMENTS - means the Schedules and Exhibits referred to herein and
attached hereto.
1.8 AUTHORIZATION - means any Government consent, license, permit, grant or
other governmental authorization.
1.9 CLOSING - means the Closing of the Transaction as described in SECTION
12 hereinbelow.
1.10 CLOSING DATE - means the 31st day of July, 1997, or such other date
as subsequently may be agreed upon by the parties, in writing. Any reference
herein to the Closing Date for the purpose of establishing a point in time, or
calculating a period of time, means 11:59 p.m., local time on the Closing Date.
1.11 CONTRACT - means any voluntarily entered written or oral agreement or
commitment that is legally binding on any person or Entity under applicable law.
1.12 COURT ORDER - means any judgment, decree, injunction or order of any
federal, state, local or foreign court that is binding on any person or Entity
or its property under applicable law.
1.13 EFFECTIVE DATE - means the date first above written.
1.14 ENTITY - means a corporation, partnership, sole proprietorship, joint
venture or other form of organization whether formed for the conduct of a
business or profit seeking activity, active or passive, or not for profit.
1.15 GAAP - means generally accepted accounting principles as determined
by the Financial Accounting Standards Board. All references herein to financial
statements prepared in accordance with GAAP means in accordance with GAAP
consistently applied throughout the periods to which reference is made.
1.16 INDEMNITOR - means Seller and Satterthwaite, jointly and severally.
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1.17 INTELLECTUAL PROPERTY - means any tradenames, trademarks, service
marks, copyrights and works of authorship, and all registrations and
applications for the foregoing, and all licenses or license rights related to or
based upon the foregoing, software licenses and know-how licenses, trade
secrets, fictitious names, assumed names, all industrial models and all United
States and foreign patent rights covered by, disclosed in or otherwise related
thereto and all registrations and applications therefor and all reissues,
divisions, continuations-in-part, re-examinations and extensions thereof,
together with the right to sue for past infringement and improper, unlawful or
unfair use of any of the foregoing.
1.18 PERMITTED EXCEPTIONS - means such restrictions, encumbrances,
easements, conditions, reservations and limitations, pertaining to the Assets,
and in all events, approved by Buyer in writing, as provided hereunder.
1.19 SELLER - means Unitel, Inc., an Indiana corporation.
1.20 SELLER'S BUSINESS - means the existing business operations (including
without limitation, the goodwill and going concern value), labor relations,
customer and supplier relations, and products, if any, or services, if any, of
Seller.
1.21 TELECOMM - means Telecomm Industries Corp., a Delaware Corporation and
the parent corporation of Buyer.
1.22 TRANSACTION - means the transaction contemplated by the Agreement,
and the related Exhibits.
1.23 TRANSFERRED ASSETS - means the assets to be sold and transferred by
Seller to Buyer in accordance with this Agreement as more specifically described
in SECTION 2.
1.24 YEAR-END BALANCE SHEETS - means the Balance Sheet for the year ended
December 31, 1996.
1.25 YEAR-END STATEMENTS OF INCOME AND EXPENSES - means the Statements of
Income and Expenses of Seller for the year ended December 31, 1996.
1.26 YEAR-END FINANCIAL STATEMENTS - means the Year-End Balance Sheets,
and the Year-End Statement of Income and Expenses.
SECTION 2. PURCHASE AND SALE OF ASSETS
On the basis of the warranties and representations contained herein, all of
which are a primary inducement to Buyer and upon which Buyer has relied, and
subject to the terms, covenants and conditions set forth hereinafter, Seller
agrees to sell, transfer and assign to
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Buyer free of all encumbrances except Permitted Exceptions, and Buyer agrees to
purchase, all of the property and assets owned by Seller (whether known or
unknown, tangible or intangible, real, personal or mixed, and wherever located)
existing as of the Closing. The assets to be purchased and sold hereby are
sometimes hereafter collectively referred to as the "Transferred Assets." The
Transferred Assets include, but are not limited to, all of the following assets
of Seller will sell and deliver to Buyer, and Buyer will purchase and acquire
from Seller certain of the property and assets owned by Seller, including
Seller's Business (the "Transferred Assets"), and described as follows:
2.1 All of the receivables of Seller, as of the Closing Date;
2.2 All inventory of Seller;
2.3 All rights to prepaid expenses, as of the Closing Date;
2.4 The motor vehicles described in SCHEDULE 2.4;
2.5 The real property;
2.6 All other fixed assets owned by Seller and used in connection with the
conduct of Seller's Business, including-the machinery, equipment, telephone
equipment, tooling, furniture and furnishings, computer hardware, all of
which are specifically described in SCHEDULE 2.6. The list of fixed assets
set forth in SCHEDULE 2.6 is not intended by the parties to be an
exhaustive or exclusive listing of the fixed assets of Seller sold
hereunder, it being the intention of the parties that Buyer acquire all
fixed assets of Seller, used by Seller in connection with Seller's
Business, irrespective of whether or not any such fixed assets are
disclosed therein, and regardless of whether such assets have been written
off the books and records of account of Seller;
2.7 All right, title and interest in and to all of Seller's Contracts
pursuant to an Assignment and Assumption Agreement, a copy of said
agreement being attached hereto as EXHIBIT 2.7; provided, however, that, in
the case of unfilled purchase orders, and customer supply and distributor
agreements (if any), Buyer will assume the duties and obligations of such
Contracts, which accrue after Closing as to the delivery of products and
services to such customers;
2.8 The customer list of the customers of Seller's Business, including
those customers disclosed in SCHEDULE 2.8;
2.9 All manuals, charts, instructions of application, files and records,
signs, customer and marketing-data, engineering data, plans and blueprints
as are used in connection with Seller's Business, and all documents, papers
and records pertaining to employees, customers and vendors in connection
with Seller's Business, including accounts receivable and trade payable
records; provided, however, that Seller may retain all corporate records
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and minute books, all original books of account and accounting data
maintained by Seller for financial reporting and tax reporting purposes;
2.10 All Intellectual Property of Seller used in connection with Seller's
Business, as disclosed in SCHEDULE 2.10; including the exclusive right to
use the name "Unitel", or any derivative therefor, and including all rights
Seller has to its know-how, trade secrets, processes, technology,
discoveries, unpatented inventions and designs, formulae and procedures and
other intellectual property, including, but not limited to, documentation
relating to any of the foregoing, all shop rights and the right to sue for
past infringement or improper, unlawful or unfair use or disclosure thereof
and the right to apply for patent, design or similar protection therefor
anywhere in the world;
2.11 Know-how, trade secrets, processes, technology, discoveries,
unpatented inventions and designs, formulae and procedures and other
intellectual property, including, but not limited to, documentation
relating to any of the foregoing, all shop rights and the right to sue for
past infringement or improper, unlawful or unfair use or disclosure thereof
and the right to apply for patent, design or similar protection therefor
anywhere in the world;
2.12 All assignable authorizations relating to or utilized in connection
with Seller's Business or any part thereof or the Transferred Assets;
2.13 All supplies of Seller, including without limitation, stationery and
other office supplies;
2.14 All Seller's rights to any leasehold improvements;
2.15 All Seller's interest in and to all telephone, fax and telex numbers,
post office box numbers and all listings pertaining to Seller's Business in
all telephone books and directories, stationery, forms, labels, shipping
material, catalogs, brochures, art work, photographs and advertising and
promotional materials, the telephone, fax and telex numbers and post office
box numbers being identified in attached Schedule 2.15;
2.16 Rights in, to and under third-party manufacturers' warranties;
2.17 Claims as to which Seller is a judgment creditor;
2.18 Rights in and to Seller's corporate name and all variants thereof,
and all rights to use of Seller's corporate name as a trademark, tradename
or service mark;
2.19 All assets reflected on the Final Closing Balance Sheet, whether or
not referenced in any paragraph above;
2.20 The goodwill and going concern of value of Seller's Business;
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2.21 All cash, bank deposits, and marketable securities.
The list of assets set forth above is not intended by the parties to be an
exhaustive or exclusive listing of the assets of Seller sold hereunder, it being
the intention of the parties that Buyer acquire all assets, property rights,
Contract rights and legal rights of Seller, wherever situated, irrespective of
whether or not any such assets or rights are disclosed herein, and regardless of
whether such assets have been written off the books and records of account of
Seller, but excluding the assets described by SECTION 3 below.
SECTION 3. ASSETS SPECIFICALLY EXCLUDED
This Agreement will specifically exclude the sale and purchase of:
3.1 The corporate minute book, stock records and tax returns of Seller and
other similar corporate books and records originals of which Seller is
required to maintain under applicable laws (provided copies of the same are
included among the Transferred Assets);
3.2 Any shares of Seller's capital stock held in Seller's treasury;
3.3 All personal items of Satterthwaite identified in Schedule 3.3
attached hereto; and
3.4 All rights of Seller arising under this Agreement, including but not
limited to the Purchase Price consideration to be received per Section 4
below.
SECTION 4. PURCHASE PRICE AND MANNER OF PAYMENT
The purchase price to be paid by Buyer to Seller for the Transferred Assets
shall be a sum equal to following:
(i) 2,000,000 shares of common stock of Telecomm, par value $.01 shares
("Shares");
(ii) $1,000,000 convertible promissory note as set forth in EXHIBIT A (the
"Note");
(iii) the payment of Seller's bank loan due Fifth Third Bank calculated as
of the Closing Date;
(iv) the payment of Seller's creditors per Schedule 10.8, not to exceed
$1,200,000;
(v) the assumption of Seller's additional liabilities approved by Buyer
which additional liabilities will be set for in Schedule 4.1, which
Schedule will be updated at Closing to include those additional liabilities
of the Seller incurred in the normal course of business
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through the Closing Date; provided however, Seller shall be solely
responsible for all professional fees including accounting and legal
incurred by Seller in connection with the execution and consummation of
this Agreement.
Buyer and Seller agree that an allocation of the purchase price will be
made among the Transferred Assets as set forth on IRS Form 8594, Asset
Acquisition Statement, attached as EXHIBIT B hereto, and that said IRS form will
be prepared and attached to their respective federal income tax returns. The
parties shall mutually agree upon the allocation within 45 days after the
Closing.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER SATTERTHWAITE
Seller and Satterthwaite, JOINTLY AND SEVERALLY, represent and warrant to
Buyer as follows:
5.1 STATUS OF SELLER.
Seller is a corporation duly organized, duly incorporated, validly existing
and in good standing under the laws of the State of Indiana, with all requisite
corporate power and authority to carry on Seller's Business and own the
Transferred Assets. Seller is qualified or registered with any other state as
required by state law in order to conduct Seller's Business, all such foreign
states being described in SCHEDULE 5.1.
5.2 BUSINESS LOCATIONS. Schedule 5.2 identifies each state and country
where Seller:
a. owns or leases real property;
b. maintains sales offices or sales agents; or
c. maintains inventory.
5.3 OWNERSHIP OF SELLER.
All of the issued and outstanding shares of the capital stock of Seller are
owned of record and beneficially by its shareholders as follows:
Shareholder No. of Shares
----------- -------------
Jon Satterthwaite 251
Paul Satterthwaite 251
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5.4 AUTHORIZATION OF SALE.
The officers of Seller who execute and deliver the Agreement and the
Exhibits have the requisite capacity, power and authority to do so. The
execution and delivery by Seller, through its officers, of this Agreement, and
all documents attendant thereto, and the performance of the Transaction has been
duly and validly authorized by the shareholders and the board of directors of
Seller, and will not (a) violate any material Contract to which Seller is a
party or gives rise to a right of termination or acceleration under any material
Contract by which Seller is bound; (b) violate any provisions of the Articles
of Incorporation, Regulations, By-laws or any other governing instruments or
corporate documents of Seller (including without limitation any buy-sell
agreement or close corporation agreement); (c) violate any law or Regulation of
any Government; or (d) violate any Court Order binding upon Seller or affecting
the Transferred Assets, including Seller's Business, or (e) constitute an event
which, after notice or lapse of time or both, could result in any of the
foregoing.
5.5 BINDING NATURE AND ENFORCEABILITY OF AGREEMENT.
The Agreement, and all other documents delivered to Buyer at the Closing,
are legally binding upon Seller and Satterthwaite (and all other signatories),
as applicable, and enforceable against Seller and Satterthwaite (and all other
signatories), as applicable, in all respects.
5.6 GOOD TITLE.
Seller has good and marketable title to the Transferred Assets, free and
clear of all Liens whatsoever, except as disclosed and accepted by Buyer, in
writing, as a Permitted Exception, in SCHEDULE 5.6.
5.7 COMPLIANCE WITH LAWS: AUTHORIZATIONS.
Seller is not in violation of any law, including regulations of any
government (state or federal), relating to the operation of Seller's Business,
which violation or violations might have a material adverse effect, individually
or in the aggregate, upon Seller's Business. The operation of Seller's Business
conforms to all applicable laws, including regulations. There have been no
allegations of or inquiries concerning any violations of law by Seller within
the past three (3) years.
5.8 TAX RETURNS AND AUDITS.
Except as disclosed on Schedule 5.8, Seller has duly filed all government
tax returns required of Seller to be filed, and all government taxes owed by
Seller with respect to Seller's Business, assets or income, which are due and
payable have been paid or will be paid timely, to the Closing Date, including
without limitation, all social security taxes, withholding taxes, sales and use
taxes, property and income taxes, unemployment insurance or workers compensation
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taxes, to the appropriate government, other than taxes which are not yet due or
which, if due, (a) are not yet delinquent, (b) are being contested in good faith
or have not been finally determined.
5.9 CONTRACTS.
Except as disclosed in SECTION 5.9, Seller is not a party to, nor is Seller
bound by any Contract, which is not terminable at will without cost or
liability.
Except as disclosed in SCHEDULE 5.9, all material Contracts disclosed
therein are assignable to Buyer without any requirement to obtain the consent of
any person or Entity. In the course of Buyer's due diligence, Seller has
delivered to Buyer accurate and complete copies of each such written Contract,
and an accurate and complete written description of each such oral Contract, in
each case with all modifications and amendments thereto.
5.10 COMPLIANCE WITH CONTRACTS.
With respect to Seller's Business, Seller has complied with all the
material provisions of all Contracts to which Seller is a party or under which
Seller is bound, and Seller is not in default of any material provision thereof.
5.11 FINANCIAL MATTERS.
Seller has delivered to Buyer complete and accurate copies of the Year-End
Financial Statements. In addition, Seller has delivered to Buyer complete and
accurate copies of the Acquisition Financial Statements. The Year-End Financial
Statements and the Acquisition Financial Statements have been prepared in
conformity with GAAP throughout the periods covered, and are consistent with
prior periods, except as otherwise expressly noted therein, or otherwise
disclosed in SCHEDULE 5.11, and have been prepared from the accounting books and
records of Seller. The Year-End Balance Sheets and the Acquisition Balance Sheet
fairly present the financial condition of Seller at such dates indicated. The
Year End Statements of Income and the Acquisition Statement of Income fairly
present the results of Seller's Business for the periods thereby covered.
Specifically, but not by way of limitation, the Year-End Balance Sheets and
the Acquisition Balance Sheet disclose all the liabilities of Seller as of the
date of such balance sheets, including a reserve for all taxes and liabilities
accrued or due at such dates, but not yet payable (except such liabilities as
are not required to be reflected therein in accordance with GAAP, or which are
otherwise disclosed in Schedule 5.11).
The accounting books and records of Seller are complete and accurate, and
fairly reflect all transactions to which Seller is a party, and the items of
income and expense, assets and Liabilities and all accruals required, are
reflected in accordance with GAAP, except as deviations are otherwise disclosed
herein in SCHEDULE 5.11. Such books and records of Seller are prepared
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and maintained in form and substance adequate for preparing financial statements
for Seller in accordance with GAAP.
Except as disclosed in the Agreement or the Attachments, and except for
events of general application which would affect all comparable or similarly
situated businesses, since the date of Seller's Acquisition Balance Sheet,
whether or not in the ordinary course of business, there has not been, occurred
or arisen:
a. any material adverse change in the Seller's Business; or
b. any damage or destruction in the nature of a casualty loss, whether
covered by insurance or not, adversely affecting any of Seller's
assets (including the Transferred Assets), or Seller's Business; or
c. any capital expenditures or commitments therefore which, in the
aggregate, are in excess of Five Thousand Dollars ($5,000.00); or
d. any sale or other disposition or dissipation of any fixed assets of
Seller, except as disclosed in SCHEDULE 5.11(i); or
e. any other event, condition or state of facts of a character which
might materially adversely affect, or threatens to materially
adversely affect, Seller's Business.
SCHEDULE 5.11.1 is a complete and accurate list of all of the receivables
of Seller, as of the 30th day of June, 1997, which shows the amount due and
aging analysis thereof and noting, where applicable, any of the same as are the
subject of any pending or threatened litigation, or dispute. All such
receivables and those arising subsequent to the date of said list and prior to
Closing have arisen only in the ordinary course of business for goods sold or
services rendered. Except as disclosed in SCHEDULE 5.11.1, there are no
counterclaims or set-offs with respect to any such receivables. Schedule 5.11.1
shall be updated as of the Closing Date.
Schedule 5.11.2 is a complete and accurate list of all Inventories of
Seller, whether or not reflected on the Acquisition Balance Sheet, are disclosed
in a detailed descriptive listing of its components and prepared as of the 30th
day of June, 1997.
5.12 EMPLOYMENT MATTERS.
Seller employs a total of ninety-two (92) employees. Except as set forth
on SCHEDULE 5.13, Seller does not use any leased employees. SCHEDULE 5.12 lists
the names, dates of hire, current annual compensation rates and other
compensation arrangements of all of Seller's employees.
Except as disclosed in SCHEDULE 5.12, there are no controversies pending or
threatened between Seller and the employees of Seller's Business which may have
a material adverse impact upon Buyer's operation of Seller's Business after the
Closing Date, including, but not limited to, sexual harassment and
discrimination claims and claims arising under workers' compensation laws
("Employee Claims"), and there is no state of facts or event which could
reasonably be
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expected to form the basis for any Employee Claims. Except as disclosed in
SCHEDULE 5.12, Seller is in compliance with all applicable laws relating to the
employment of labor regarding Seller's Business, including without limitation,
the provisions thereof relating to wages and hours, discrimination, and worker's
compensation and safety.
Except as disclosed in SCHEDULE 5.12, no charges have been filed against
Seller within the past three (3) years with respect to Seller's Business which
are pending as of the Closing, nor have any lawsuits been instituted, by the
Equal Employment Opportunity Commission, any comparable state agency, or
individuals alleging any violation of any federal or state antidiscrimination
acts which are pending as of the Closing. Except as disclosed in SCHEDULE 5.12,
Seller has entered into no settlement or consent agreements with the EEOC or any
comparable state agency with respect to Seller's Business that may bind a
successor business. Except as disclosed in SCHEDULE 5.12, during the past three
(3) years, Seller has not undergone any Department of Labor investigation or
audit regarding a violation or potential violation of the Fair Labor Standards
Act with respect to Seller's Business which are pending as of the Closing, nor
is Seller subject to any pending lawsuits by any individuals or the Department
of Labor alleging violations of the Fair Labor Standards Act. All Contracts in
effect between Seller and the employees of Seller's Business are disclosed in
SECTION 5.12, whether written or oral, including without limitation, all
Contracts containing any restrictive covenant provision or
confidentiality/nondisclosure provisions. Except as disclosed in SCHEDULE 5.12,
Seller is not subject to any National Labor Relations Board orders resulting
from unfair labor practice charges arising out of Seller's Business.
Seller has paid in full to all employees all wages, commissions, bonuses
and other direct compensation for all services performed by them up to the
Closing Date. Seller has withheld or collected from each payment made to each of
its employees the amount of all taxes required to be withheld or collected
therefrom, and Seller has paid the same when due to the proper government.
Except as otherwise disclosed in SCHEDULE 5.12, the employees of Seller will not
have any accrued bonuses or accrued vacation pay that remain unpaid as of the
Closing Date, nor will Seller owe such employees any other money for any reason
whatsoever, including without limitation, any employee deposits.
With respect to Seller's Business, except as otherwise disclosed in
SCHEDULE 5.12, Seller has not entered into a collective bargaining agreement
with any labor union. There is no union representation of Seller's employees,
there has been no attempt by a labor organization to organize seller's employees
into a collective bargaining unit, and there is no basis to believe that there
is any imminent threat of an attempt to organize a union.
5.13 OWNERSHIP OF ASSETS.
Except as disclosed in SCHEDULE 5.13, there is no property or asset which
is used by Seller in the conduct of Seller's Business or without which Seller's
Business could not be conducted, as presently conducted, which is either (a) not
included in the Transferred Assets, or (b) not disclosed as a rented or leased
asset in SCHEDULE 5.13.
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5.14 REAL ESTATE.
SCHEDULE 5.14 contains a complete and accurate list of all real property
which is either (a) currently owned, leased by Seller, or otherwise used by
Seller pursuant to a license or easement. Seller either owns outright or holds
such leasehold estates (and will continue to do so at Closing) in all real
property as is necessary for the conduct of Seller's Business.
5.15 TANGIBLE PERSONAL PROPERTY.
SCHEDULE 5.15 sets forth all of the leased vehicles used by Seller with
respect to the conduct of Seller's Business.
Within five (5) days of the Closing, Seller will cause, at Seller's cost, a
Uniform Commercial Code search to be made with respect to the tangible personal
property together with a Government Tax Lien search with the appropriate
government agencies for the state wherein the tangible personal property is
located, and deliver a report of the same to Buyer.
5.16 EMPLOYEE FRINGE BENEFITS.
With respect to Seller's Business, SCHEDULE 5.16 contains a list of each
and every employee fringe benefit provided, whether by written or oral agreement
or plan, to any one or more of Seller's employees or agents, including without
limiting the generality of the foregoing, all pension plans, welfare plans,
voluntary employee beneficiary associations, life insurance, death benefits,
vacation pay benefits, health insurance or medical care benefits.
5.17 BILL OF SALE.
The execution and delivery of a Bill of Sale to be delivered to Buyer at
the Closing Date will vest in Buyer good and marketable title to all of the
Transferred Assets, free and clear of all restrictions, liens and encumbrances
whatsoever, except (a) the Permitted Exceptions.
5.18 CONSENTS.
No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, Government, Entity or person is required
in connection with the execution, delivery or performance of this Agreement, any
Exhibit, or any other agreement, instrument or document to be delivered by or on
behalf of Seller in connection herewith.
5.19 BROKERS AND FINDERS.
No broker, finder or other person or Entity acting in a similar capacity
has participated on behalf of Seller or Satterthwaite in bringing about the
Transaction, has rendered any services with respect thereto or has been in any
way involved therewith.
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5.20 NO FOREIGN PERSON.
Seller is not a "foreign person" as contemplated by Section 1445(a) of the
Code, and therefore Buyer will have no duty to deduct and withhold a tax equal
to ten percent (10%) of the amount realized on this transaction.
5.21 RESTRICTED SHARES.
a. Seller acknowledges, understands and agrees that the Shares have
not been registered with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act") and
have not been registered under any state securities law. The Shares may
not be resold or redistributed without registration under the Securities
Act and any applicable state securities laws, unless an applicable
exemption from such registration is available.
b. The Shares being acquired by Seller under this Agreement, are
being acquired for Seller's own account, for investment purposes, not for
the interest of any other person, firm or entity, and not with a view to or
present intention of reselling or distributing all or any portion of, or
interest in, the Shares.
c. Seller does not have any right to compel Telecomm to register the
Shares under the Securities Act or any state securities law and such Seller
acknowledges that Telecomm has no present intention of registering the
Shares.
d. Seller has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of this
investment in the Shares and of making an informed investment decision.
e. The certificates evidencing the Shares shall bear the following
legend:
The shares represented by this stock certificate have not
been registered under any state securities act (the "State
Acts") or the Securities Act of 1933, as amended (the
"Securities Act"). The shares cannot be sold or otherwise
disposed of without either registration or an exemption from
registration. The corporation is under no obligation to
register the shares under the State Acts or the Securities
Act. The shares are subject to a further restriction as
evidenced by the Agreement between the shareholders of P&J
Holdings, Inc. (formally Unitel Corporation) in a
Shareholder Agreement dated July __, 1997.
13
<PAGE>
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
6.1 STATUS OF BUYER.
Buyer is a corporation duly organized, duly incorporated, validly existing
and in good standing under the laws of the State of Ohio, and has full corporate
powers and authority to execute and perform this Agreement.
6.2 AUTHORIZATION OF SALE.
The officers of Buyer who execute and deliver the Agreement have the
requisite capacity, power and authority to do so. The execution and delivery by
Buyer, through its officers, of this Agreement, and all documents attendant
thereto, and the performance of the Transaction has been duly and validly
authorized by the board of directors of Buyer, and will not (a) violate any
Contract to which Buyer is a party; or (b) violate any provisions of the
Articles of Incorporation, the Regulations or any other governing documents or
corporate documents of Buyer.
6.3 BINDING NATURE AND ENFORCEABILITY OF AGREEMENT.
The Agreement, and all other documents delivered to Seller at the Closing,
and signed by Buyer, are binding upon Buyer, in all respects.
6.4 CONSENTS.
No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, Government, Entity or person is required
in connection with the execution, delivery or performance of this Agreement, any
Exhibit, or any other agreement, instrument or document to be delivered by or on
behalf of Buyer in connection herewith.
6.5 BROKERS AND FINDERS.
No broker, finder or other person or Entity acting in a similar capacity
has participated on behalf of Buyer in bringing about the Transaction, has
rendered any services with respect thereto or has been involved, in any way,
therewith.
6.6 FINANCING. Buyer and Telecomm warrant and represent to Seller that
adequate shares of Telecomm stock are authorized and able to be issued by
Telecomm to complete this transaction and the issuance of the Note will violate
no other corporate borrowing agreements,
14
<PAGE>
liquidity or ratio agreements. Seller acknowledges that the Note will be
subordinated to the Key Bank Loan.
6.7 LITIGATION. There is no claim, action, suit proceeding or governmental
investigation pending or, to the best knowledge of Buyer, threatened against
Buyer, by or before any court, governmental or regulatory authority or by any
third party which challenges the validity of this Agreement, and to the best
knowledge of Buyer, there is no reasonable basis therefor.
6.8 INVESTIGATION BY BUYER. Buyer agrees, to the fullest extent permitted
by law, that neither Seller or Satterthwaite shall have any liability or
responsibility whatsoever to Buyer or its directors, officers, employees,
affiliates, controlling persons, agents or representatives on any basis
(including, without limitation, in contract or tort, under federal or state
securities law or otherwise) based upon any information provided or made
available, or statement made, to Buyer or its directors, officers, employees,
affiliates, controlling persons, agents or representatives (or any omissions
therefrom), including, without limitation, in respect of the specific
representations and warranties of Seller and Satterthwaite set forth in this
Agreement, except as and only to the extent expressly set forth herein with
respect to such representations and warranties and subject to the limitations
and restrictions contained herein and except for acts of fraud.
SECTION 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
ACCURACY AND COMPLETENESS
No representation made or warranty given in this Agreement and no material
statement contained in any document, instrument, Schedule, or Exhibit delivered
to Buyer pursuant hereto or in connection with the Transaction, by any of
Seller's officers, directors, employees or agents, contains, or will contain,
any untrue statement of a fact, or omits, or will omit, to state a fact
necessary to make the statements contained therein, in the light of the
circumstances in which they are made, not misleading. The parties acknowledge
that the representations and warranties contained herein are a significant
inducement to the parties entering into the Transaction.
SECTION 8. INDEMNIFICATION
8.1 INDEMNIFICATION.
For a period of twelve (12) months following the Closing Date, indemnitor
will defend, indemnify the Buyer Indemnified Parties against and hold harmless
the Buyer Indemnified Parties from any Damages, suffered by the Buyer
Indemnified Parties, and resulting to the Buyer Indemnified Parties from any of
the following:
a. Any inaccurate representation made by Seller and Satterthwaite
pursuant to the Agreement;
15
<PAGE>
b. Any breach of warranty given by Seller and Satterthwaite pursuant
to the Agreement:
8.2 RIGHTS OF SET OFF.
In the event that Buyer is entitled to indemnification from Indemnitor for
Damages, Buyer may apply, in its sole discretion, the dollar amount of the
Damages as a setoff against any Liability Buyer owes to Indemnitor.
Such right of setoff will not be exclusive, but will be cumulative with all
other remedies available to Buyer. The amount of such right of setoff will
serve as a reduction of the Purchase Price specified in SECTION 4 hereinabove.
Buyer is not required to commence litigation or to take other action against any
third party prior to making a claim against Indemnitor either for
indemnification or to entitle Buyer to its right of setoff, provided, however,
the amount of any indemnification shall be reduced by any amount received by
Buyer with respect thereto under any insurance coverage from any third party
alleged to be responsible thereto, which insurance claim Buyer shall use
reasonable efforts to pursue, but shall not be required to bring suit to do so.
SECTION 9. ACCESS TO RECORDS
Seller grants to Buyer (its agents, employees, attorneys and accountants)
during normal business hours, after the Effective Date, full and complete access
to Seller's premises, and such business documents and records as Buyer may
request, in order that Buyer may become fully acquainted with the Transferred
Assets (including the condition of same, and the premises upon which Seller's
Business is operated), Seller's Business, and all matters and things pertaining
to the operation of Seller's Business, and in order that Buyer may ascertain the
accuracy of Seller's representations and warranties herein made or given.
For a period of as least six (6) years after Closing, Seller will maintain
in a safe and secure place all business records and documents pertaining to
Seller's Business, including all tax records and books of account, and will
thereafter permit Buyer to review such records and make copies.
SECTION 10. BUYER'S CONDITIONS PRECEDENT TO CLOSING
The obligation of Buyer to consummate this Agreement, and to perform
hereunder at-Closing, in any respect, is subject to and conditioned upon the
satisfaction, at or prior to the Closing Date, of each and every one of the
following Conditions Precedent:
16
<PAGE>
10.1 COMPLIANCE WITH AGREEMENT.
All of the terms and conditions of this Agreement to be complied with and
performed by the Seller and Satterthwaite on or before the Closing Date,
including the delivery to Buyer of all schedules, documents and instruments
required to be delivered to Buyer hereunder, will have been complied with and
performed, and Seller will have permitted Buyer to conduct a full and complete
due diligence inspection as contemplated herein.
10.2 REPRESENTATIONS AND WARRANTIES.
All representations and warranties of Seller set forth in this Agreement
will be true and correct, subject to any changes contemplated by this Agreement,
and any deviation or falsity will have been disclosed to and agreed to by Buyer,
in writing, subsequent to the Effective Date and prior to the Closing.
10.3 NO ADVERSE EVENTS.
Since the Effective Date, whether or not in the ordinary course of
business, there will not have been, occurred or arisen any event, condition or
state of facts of any character (except for changes in general economic
conditions) which materially adversely affects (or which may reasonably be
anticipated to adversely affect after Closing) the conduct or profitability of
Seller's Business by Buyer after Closing, or the use by Buyer of the Transferred
Assets.
10.4 EXECUTION AND DELIVERY OF THE EXHIBITS.
All persons or Entities identified as parties to the Exhibits will have
fully executed the same and delivered them to Buyer for its execution.
10.5 NAME CHANGE.
Buyer will have received all documentation necessary to effectuate a change
of Seller's corporate name to one not using any of the word "Unitel" or any
variant thereof or words similar thereto, and to permit Buyer to use Seller's
name in the state of its incorporation and in all states wherein Seller is
qualified to do business as a foreign corporation.
10.6 GOOD STANDING.
Buyer will have received good standing certificates dated no more than 10
days prior to the Closing Date from Seller's state of incorporation and each
state in which the Seller is qualified to do business as a foreign corporation.
17
<PAGE>
10.7 SCHEDULES.
In Buyer's opinion, no change in any Schedule which is updated and
delivered to Buyer by Seller in accordance with SUBSECTION 14.20 hereof will be
materially adverse to the financial condition, Transferred Assets or Seller's
Business.
Should any of the conditions precedent specified hereinabove in favor of
Buyer fail to be satisfied on or prior to the Closing, Buyer will have the
power, at it's option, exercisable by the giving by Buyer of written notice to
Seller evidencing such intent to terminated this Agreement, and thereby render
the duties and obligations of Buyer hereunder null and void. In the event any
condition precedent fails to be satisfied by reason of any loss, damage or
destruction of the Transferred Property, for which insurance proceeds are due
and owing, Buyer, at its option, in lieu of exercising its right of termination
hereunder, may elect to proceed with the Transaction, and close the same, and
thereafter all such insurance proceeds, or claims with respect to such property
loss, will be paid or assigned to Buyer. Seller will cooperate fully in
obtaining such proceeds.
10.8 SETTLEMENT OF TRADE CREDITOR CLAIMS.
Seller's creditors, other than its lender, Fifth Third Bank, or other
entities involved in financing arrangements, shall have executed settlement
agreement for their outstanding claims so that in the aggregate the total
obligations due such creditors as of the Closing Date shall not exceed One
Million Two Hundred Thousand Dollars ($1,200,000.00). Seller shall provide
Buyer with SCHEDULE 10.8 listing all such creditors.
10.9 DUE DILIGENCE.
Completion of all required due diligence to the full satisfaction of Buyer,
including but not limited to the review of all business and financial aspects of
Seller and the schedules attached hereto..
10.10 EMPLOYMENT AND NON-COMPETITION AGREEMENTS.
Satterthwaite will enter into Employment and Non-Competition Agreements,
copies of which are attached hereto as EXHIBIT C.
10.11 BANK LOAN.
The Key Bank loan proposal of May 21, 1997 attached hereto as EXHIBIT "D"
shall have been completed to the full satisfaction of Key Bank and Buyer, and
the proceeds used to pay Seller's current bank debt due July 1, 1997, and the
creditors of Seller referenced in Section 10.8. Seller further acknowledges
that the Key Bank Loan will require Seller to subordinate the Note to said loan.
18
<PAGE>
10.12 PUBLICITY AND DISCLOSURE.
Prior to the Closing, any news release or announcement by Seller or
Satterthwaite pertaining to the Agreement, or the Transaction, will be submitted
first to Buyer for its approval. No general announcement, nor any statement or
disclosure will be made to any person or Entity, including without limitation,
Seller's customers or suppliers concerning the Transaction without the prior
written consent of Buyer.
In no event will any party hereto disclose to any person or Entity any of
the terms or provisions of this Agreement or the Attachments, at any time,
either before or after Closing, without first obtaining the written consent of
all parties, except as required by a Court Order or as required by law, in which
event the party required to ma-kc disclosure will immediately notify all other
parties of such impending disclosure.
10.13 AMENDMENT OF ARTICLES OF INCORPORATION.
At Closing, Seller will amend its Articles of Incorporation changing its
corporate name to a name dissimilar to the name acquired by Buyer hereunder,
such new name to be first approved by Buyer in writing, such approval not to be
unreasonably withheld.
SECTION 11. SELLER'S CONDITION PRECEDENT TO CLOSING
The obligation of Seller to consummate this Agreement and to perform
hereunder at Closing, in any respect, is subject to and conditional upon the
satisfaction, at or prior to the Closing Date, of each and every one of the
following conditions precedent.
11.1 PAYMENT OF SELLER'S CURRENT BANK LOAN AND RELEASE OF SATTERTHWAITE.
Seller's current bank loan to Fifth Third Bank shall be paid in full upon
the Closing and the previous personal guarantee given by Satterthwaite to the
bank shall be released by the bank.
11.2 PAYMENT OF TRADE CREDITORS.
The trade creditors of Seller shall be paid the previously agreed upon
settlement amounts, not to exceed Six Hundred Thousand Dollars ($600,000) in
total.
11.3 EMPLOYMENT OF SELLER'S EMPLOYEE.
Schedule 11.3 sets forth copies of all Employment Agreements to which
Seller has entered into with its employees. All other employees of Seller are
"employees at will."
Buyer and Seller within fourteen (14) days following the execution of this
Agreement shall have agreed upon those employees of Seller which shall be hired
by Buyer at the same salary as they were receiving prior to the sale. In
addition, said selected employees shall receive the same benefit package that
the employees have at Telecomm. Buyer agrees that Buyer shall be responsible
for the payment of any valid employment claims of those employees not hired by
Buyer including the cost of settlement of any wrongful discharge claims. The
defense of any such claims shall be borne by the Buyer and the decision to
settle or litigate shall be that of the
19
<PAGE>
Buyer. Any service recognition standards applicable to Telecomm employees shall
also apply to Seller's selected employees and they shall be given credit for
their prior employment with Seller, provided however, in regard to 401K
participation, the time periods for participation shall be subject to what is
permitted by law and the agreement upon which Buyer and Telecomm are bound.
This section 11.3 shall not apply to Satterthwaite whose employment shall be
governed by their own employment agreements to be executed with the Buyer as a
condition of the Closing.
11.4 BOARD OF DIRECTORS SEATS.
Satterthwaite shall receive (SUBJECT TO FURTHER CONSIDERATION) ___________
seats on the Telecomm Board of Directors. At all future Shareholder meetings
held for the election of directors their representative appointee(s) shall be
recommended to the Shareholders of Telecomm for continued selection for as long
as said appointee(s) remains employed by Buyer in an executive capacity.
SECTION 12. CLOSING
12.1 TIME AND PLACE OF CLOSING.
The transfers and deliveries contemplated hereby (the "Closing") will take
place on the 31st day of July, 1997, at 10:00 a.m., local time. The Closing
will take place at the law offices of Dworken & Bernstein Co., L.P.A., 153 East
Erie Street, Painesville, Ohio 44077, or such other date, time or place as the
parties may mutually agree.
SECTION 13. MISCELLANEOUS
13.1 FURTHER ACTS.
The parties agree to perform any further acts and to execute and deliver
any other documents which may be reasonably necessary to carry out the intent
and provisions of this Agreement.
13.2 ASSIGNMENT.
Without the consent of Seller, Buyer may assign all or any part of this
Agreement and all or any part of its rights and obligations hereunder to an
affiliate of Buyer.
13.3 HEADINGS.
The clause headings appearing in this Agreement have been, inserted for the
purpose of convenience and reference. They do not purport to, and will not be
deemed to, define, limit or extend the scope or intent of the clauses to which
they apply, and they will not be considered in construing the terms of this
Agreement.
20
<PAGE>
13.4 INVESTIGATION WILL NOT CONSTITUTE A WAVIER.
No investigation, or lack thereof, by Buyer, or any of its agents, will be
deemed to constitute or imply a waiver of any rights of Buyer may have,
including any right to indemnification as the result of any material
misrepresentation, or breach of warranty, or covenant in favor of Buyer as
otherwise provided in this Agreement.
13.5 COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which when
so executed will be deemed to be an original for all purposes.
13.6 PARTIAL INVALIDITY.
If any provision of this Agreement is invalid or is held illegal or
unenforceable, then notwithstanding any such invalidity, illegality, or
unenforceability of such provision, the
remainder of this Agreement will subsist and will be in full force and effect as
though such invalid, illegal or unenforceable provision had been omitted from
this Agreement.
13.7 ENTIRE AGREEMENT.
This Agreement embodies the entire agreement of the parties as to the
subject matter herein contained. There are no promises, terms, conditions or
obligations other than those contained herein; and this Agreement will supersede
all previous communications, representations, or agreements, either verbal or
written, between the parties hereto. Without limiting the foregoing, no letter,
telegram, or other communication passing between the parties hereto, concerning
any matter during the negotiation of this Agreement, will be deemed a part of
this Agreement, nor will it have the effect of modifying or adding to this
Agreement.
13.8 ADDITIONAL DOCUMENTS.
Each party will execute and deliver, to either party, subsequent to the
Closing, such other documents or instruments as may be reasonably necessary to
effectuate the provisions and purpose of this Agreement. Without limitation of
the generality of the foregoing, Seller will perform all reasonable acts to
cause any licenses or permits issued to Seller to be assigned or transferred to
Buyer in order that Buyer may conduct Seller's Business subsequent to the
Closing as herein contemplated.
13.9 NO AMENDMENT.
No amendment, modification, change or discharge of any term or provision of
this Agreement will be valid or binding unless the same is in writing and signed
by all the parties hereto. No waiver of any of the terms of this Agreement will
be valid unless signed by the parties against whom such waiver is asserted.
21
<PAGE>
13.10 GENDER.
All terms and words used in this Agreement, regardless of the number and
gender in which they are used, will be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Agreement, or any other section or
clause herein, may require, the same as if such words had been fully and
properly written in the required number and gender.
13.11 TIME PERIODS.
Any action required hereunder to be taken within a certain number of days
will be taken within that number of calendar days; provided, however, that if
the last day for taking such action falls on a weekend or a holiday, the period
during which such action may be taken will be automatically extended to the next
business day.
13.12 CONSTRUCTION.
This Agreement has been prepared by the joint efforts of the respective
attorneys for each of the parties. This Agreement should be interpreted fairly,
and not strictly construed against either party.
13.13 NO THIRD PARTY BENEFICIARIES.
The parties affirmatively state that they do not intend to confer any legal
or contractual rights or benefits upon any third persons or Entities, either
directly or incidentally, and all legal rights, duties and obligations set forth
in this Agreement will bind and benefit only the parties hereto.
13.14 NOTICES.
Any notice or demand required or permitted to be given hereunder, will be
in writing, signed by the party giving or making the same, and will be delivered
by certified mail, return receipt requested, or by personal hand delivery with
receipt of delivery, to all parties hereto at their respective addresses
hereinafter set forth. In the event that delivery of any such notice or demand
cannot be effected as aforesaid, the same may be served by any method authorized
for the service of legal process as set forth in the Ohio Rules of Civil
Procedure. Any party hereto will have the right to change the place to which any
such notice or demand, or other written instrument will be sent to him by
similar notice sent in a like manner to all parties hereto. The date of mailing
of any such offer or demand, if applicable, will be deemed to be the date of
such offer or demand and will be effective from that date. The addresses of the
parties to this Agreement are as shown hereinbelow:
22
<PAGE>
To Buyer: 9310 Progress Parkway
Mentor, Ohio 44060
Fax: (216) 639-6660
Attention: James Lowery, Chairman
with a copy to: Dworken & Bernstein Co., L.P.A.
153 East Erie Street
Painesville, Ohio 44077
Tel. No. (216) 946-7656
Fax: (216) 352-3469
Attention: Melvyn E. Resnick, Esq.
To Seller: 8450 Westfield Blvd.
Indianapolis, Indiana 46240
Fax: (317) 574-1020
Attention: Paul Satterthwaite, President
with a copy to: Frank & Kraft
135 North Pennsylvania Street, Suite 1100
Indianapolis, Indiana 46204
Tel. No. (317) 684-1100
Fax: (317) 684-6111
Attention: Robert W. Zentz, Esquire
13.15 BINDING.
This Agreement will bind and inure to the benefit of the parties hereto,
their respective assigns, and personal representatives and successors.
13.16 INCORPORATION BY REFERENCE.
All exhibits and documents attached hereto will be deemed to be
incorporated herein by reference as though fully set forth.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement,
intending to be legally bound thereby.
Signed in the Presence of:
UNITEL, INC. (Seller)
- --------------------------- By: /s/ Paul Satterthwaite
---------------------------------------
Paul Satterthwaite, President
- ---------------------------
23
<PAGE>
- --------------------------- /s/ Paul Satterthwaite
------------------------------------------
Paul Satterthwaite, Individually
- ---------------------------
/s/ Jon Satterthwaite
- --------------------------- ------------------------------------------
Jon Satterthwaite, Individually
- ---------------------------
TELECO ACQUISITION CORPORATION
(Buyer)
By: /s/ James Lowery
- --------------------------- ------------------------------------------
James Lowery, CEO
- ---------------------------
TELECOMM INDUSTRIES CORP.
By: /s/ James Lowery
- --------------------------- ---------------------------------------
James Lowery, CEO
- ---------------------------
24
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 661653
<SECURITIES> 0
<RECEIVABLES> 2540150
<ALLOWANCES> 0
<INVENTORY> 545645
<CURRENT-ASSETS> 2931965
<PP&E> 1132812
<DEPRECIATION> 341504
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<CURRENT-LIABILITIES> 1467737
<BONDS> 0
0
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<COMMON> 102008
<OTHER-SE> 3127055
<TOTAL-LIABILITY-AND-EQUITY> 6051891
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<TOTAL-REVENUES> 5742231
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<TOTAL-COSTS> 5211687
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