<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-22610
DAVEL COMMUNICATIONS GROUP, INC.
(Exact name of registrant as specified in its charter)
Illinois 37-1064777
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1429 Massaro Boulevard
Tampa, Florida 33619
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 623-3545
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, no par value
(Title of class)
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 __
As of March 24, 1997, the aggregate market value of the voting stock held
by non-affiliates of the registrant was approximately $74,445,621. As of March
24, 1997, there were 4,581,269 shares of the registrant's Common Stock
outstanding.
Documents incorporated by reference:
Information contained in the registrant's 1997 definitive proxy material to
be filed with the Securities and Exchange Commission has been incorporated by
reference in Part III of this Annual Report on Form 10-K.
<PAGE>
PART I
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Certain of the statements contained in the body of this Report are
forward-looking statements (rather than historical facts) that are subject to
risks and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. In the preparation of
this Report, where such forward-looking statements appear, the Company has
sought to accompany such statements with meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those described in the forward-looking statements. An
additional statement summarizing the principal risks and uncertainties inherent
in the Company's business is included herein under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Safe
Harbor Statement." Readers of the Report are encouraged to read these
cautionary statements carefully.
ITEM 1. BUSINESS
General
Davel Communications Group, Inc. (the "Company") is one of the largest
independent providers of pay telephone services in the United States. The
Company owns and operates a network of over 15,000 pay telephones in 24 states
and the District of Columbia, of which over 14,000 are located in 20
southeastern and midwestern states, and provides operator services to these pay
telephones through its long distance switching equipment and through contractual
relationships with various long distance companies. The Company's pay
telephones accept coins as payment for local and long distance calls and can
also be used to make "non-coin" or "cashless" calls, including calling card
calls, credit card calls, collect calls and third-party billed calls. The
Company's pay telephones are located at convenience stores, truck stops, service
stations, grocery stores and other locations with a high demand for pay
telephone service.
During the year ending December 31, 1996, the Company also provided
operator services to hotel and motel rooms in 43 states through its wholly-owned
subsidiary, Comtel Computer Corp. ("Comtel"). On December 31, 1996, the Company
sold 100% of the Common Stock of Comtel to Portland, Oregon based Skylink
Telecommunications Corp. ("Skylink"). All calls placed from hotel and motel
room telephones connected to the Company's network are "non-coin" calls.
Until December 31, 1996, the Company also manufactured and repaired
telecommunications equipment including sophisticated computer-based private
branch exchanges ("PBXs") as well as key systems and small business systems.
During the fourth quarter of 1996, the Company discontinued its remanufacturing
and repair operations. See Note B of Notes to Consolidated Financial Statements
for information regarding the Company's discontinued operations.
The Company's executive offices are located at 1429 Massaro Boulevard,
Tampa, Florida 33619 and its telephone number is (813) 623-3545.
2
<PAGE>
Industry Overview
Calls made from pay telephones have been estimated to represent
revenues to the United States telecommunications industry of several billion
dollars per year. Pay telephones may be "public," meaning they are owned by
local exchange carriers ("LECs") or "independent," meaning they are owned and
operated by companies independent of the LECs. Of the approximately 2.2 million
pay telephones currently operating in the United States, it is estimated that
approximately 1.8 million are public and 350,000 are independent.
Today's telecommunications marketplace was principally shaped by the
court-ordered AT&T Divestiture of its Regional Bell Operating Companies
("RBOCs") which provided local telephone services within their areas of
operation. The AT&T Divestiture and the many regulatory changes adopted by the
FCC and state regulatory authorities in response to the AT&T Divestiture have
resulted in the creation of new business segments in the telecommunications
industry. For example, prior to the AT&T Divestiture, only RBOCs or other LECs
were permitted to own and operate pay telephones.
As part of the AT&T Divestiture, the United States was divided into
geographic areas known as Local Access Transport Areas or "LATAs." LECs provide
telephone service that both originates and terminates within the same LATA
("intraLATA traffic") pursuant to tariffs filed with and approved by state
regulatory authorities. Most state regulatory authorities require LECs to
provide local access line service to independent pay telephone companies. See
"Business-Regulation."
Long distance companies provide service between LATAs ("interLATA
traffic") and, in some circumstances, may also provide long distance service
within LATAs. An interLATA long distance telephone call begins with an
originating LEC transmitting the call from the telephone that originates the
call to a point of connection with a long distance carrier. The long distance
carrier, through its owned or leased switching and transmission facilities,
transmits the call across its long distance network to the LEC serving the local
area in which the recipient of the call is located. This terminating LEC then
delivers the call to the recipient.
Pay Telephone Operations
As of December 31, 1996 and December 31, 1995, the Company owned and
operated 15,281 and 11,163 pay telephones, respectively, an increase of 4,118
installed pay telephones. Substantially all of the Company's pay telephones
accept coins as payment for local or long distance calls and can also be used to
place local or long distance cashless calls.
Coin Calls
The Company's pay telephones generate coin revenues primarily from
local calls. In all of the territories in which the Company's pay telephones are
located, the Company charges the same rates for local coin calls as does the
LEC. The maximum rate LECs and independent pay telephone companies may charge
for local calls is typically set by state regulatory authorities and in most
cases is $0.25 or $0.35. The Company pays local line charges to LECs for each of
its installed pay telephones. These line charges cover basic service to the
telephone as well as the transport of local coin calls.
3
<PAGE>
InterLATA long distance coin calls are carried by long distance
carriers that have agreed to provide long distance service to the Company's
telephones. The Company pays a charge to a long distance carrier each time that
carrier transports a long distance call for which the Company receives coin
revenue. The Company's pay telephones also generate coin revenue from intraLATA
long distance calls. IntraLATA long distance coin calls are carried by the LEC
that provides service to the pay telephone. The Company pays a charge to the LEC
for transport of these calls.
On September 20, 1996, the FCC adopted rules and policies to implement
Section 276 of the Communications Act of 1934, as amended by the
Telecommunications Act of 1996, governing the pay telephone industry. Among
other provisions, the new rules require that local coin rates must generally be
deregulated no later than October 1, 1997. See "Regulation-Federal Regulation."
Cashless Calls
The Company also receives revenues from cashless calls made from its
pay telephones. Cashless calls include credit card calls, calling card calls,
collect calls and third-party billed calls. Cashless calls from the Company's
pay telephones are generally handled by the Company's subsidiary, Phone Zone,
Inc. ("Phone Zone"). Phone Zone's switching equipment is located in Tampa,
Florida. See "Business--Switching Equipment." Phone Zone performs certain of
the operator services necessary to complete cashless calls.
The services needed to complete a cashless call include providing an
automated or live operator to answer the call, verifying billing information,
validating calling cards and credit cards, routing and transmitting the call to
its destination, monitoring the call's duration and determining the charge for
the call, and billing and collecting the applicable charge. The Company has
contracted with an operator service provider to provide live operators to
handle calls requiring them. Billing information is verified and collect calls
and credit cards are validated by the Company's switch through one of several
companies that provide on-line access to validation databases. The Company
contracts for transport of its calls over networks operated by long distance
carriers. The Company's switch is programmed to select the most cost-effective
carrier and transmission circuit then available to the Company to complete the
call as dialed. Billing and collection of call charges is performed for the
Company by one of several service bureaus specializing in that activity.
The Company believes the extensive data processing capabilities of the
switch enhance (i) the availability of management information relating to
cashless call traffic, (ii) the services provided to property owners, and (iii)
the Company's ability to respond to any difficulties in call completion. The
switch currently handles interstate long distance cashless calls and certain
international cashless calls from over 90% of the Company's pay telephones as
well as interLATA/intrastate long distance cashless calls from over 65% of the
Company's pay telephones.
The Company realizes additional revenues from certain long distance
companies pursuant to FCC and state regulation as compensation for "dial-around"
cashless calls made from its pay telephones. A dial-around call is made by
dialing an access code for the purpose of reaching a long distance company other
than the one designated by the pay telephone operator, generally by dialing a
1-800 number, a 950-number or a five-digit "10XXX" code before dialing "0" for
operator service. Recently enacted rules adopted pursuant to the
Telecommunications Act of
4
<PAGE>
1996 are expected to increase the amount of dial around call compensation
received by the Company and other independent pay telephone providers. See
"Business--Regulation."
Placement of Pay Telephones
Each of the Company's pay telephones is located in proximity to one of
the Company's fifteen regional offices, from which Company employees operate and
service these telephones and conduct sales and marketing efforts within the
region. The following table sets forth the number of pay telephones installed in
each state as of December 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
State 1996 1995
- -------------------- ------ ------
<S> <C> <C>
Alabama 154 89
Arkansas 27 5
Arizona 675 -
Colorado 3 -
District of Columbia 172 26
Delaware 54 56
Florida 4,148 3,854
Georgia 606 506
Illinois 880 770
Iowa 870 736
Indiana 202 198
Louisiana 105 -
Kentucky 346 290
Maryland 513 194
Missouri 123 143
Mississippi 850 70
North Carolina 2,164 1,671
Nebraska 24 28
Nevada 4 -
South Carolina 1,275 1,196
South Dakota - 2
Tennessee 1,006 888
Texas 6 -
Virginia 887 441
Utah 187 -
------ ------
Totals 15,281 11,163
====== ======
</TABLE>
The Company selects locations for its pay telephones where there is
high demand for pay telephone service, such as convenience stores, truck stops,
service stations, grocery stores, shopping centers and hotels. For many
locations, historical information regarding a LEC-operated pay telephone is
available because LECs are often obligated pursuant to agreements to provide
this information to owners of locations of their pay telephones. In other
locations, the Company conducts a site survey to examine geographical factors,
population density, traffic patterns and other factors in determining whether to
install a pay telephone. The Company's marketing staff is
5
<PAGE>
encouraged to obtain agreements to install the Company's pay telephones
("Placement Agreements") for locations with favorable historical data regarding
pay telephones.
Placement Agreements generally provide for revenue sharing with the
owners of the locations at which the Company's pay telephones are located
("Property Owners"). The Company's Placement Agreements generally provide
commissions based on fixed percentages of revenues and are generally of a five-
year term. The Company can generally terminate a Placement Agreement on 30 days'
notice to the Property Owner if the pay telephone does not generate sufficient
revenue.
Marketing
The Company employs marketing personnel for its pay telephone
operations in each of its regions of operation. Regional marketing personnel are
responsible for finding desirable locations for pay telephones and obtaining
Placement Agreements with Property Owners within their geographical areas and
focus their sales efforts on small-and medium-sized business customers. The
Company believes that using regional marketing personnel provides better market
penetration because of their familiarity with and proximity to their regions. To
date, independent pay telephone providers have had a competitive advantage over
LECs due to their ability to offer commissions to location owners for both local
and long distance calls. Historically, LECs generally were unable to derive
revenues from interstate calls and non-coin, interLATA calls, and consequently,
were unable to offer commissions on such calls. Recently enacted rules adopted
pursuant to the Telecommunications Act of 1996 grant LECs the ability to select
the long distance carrier for interLATA long distance calls in conjunction with
the location owner. This will enable LECs to derive revenues and pay commissions
from these calls in the future. See "Business--Regulation."
The Company's national sales personnel are responsible for accounts
that overlap regional boundaries, such as multiple store chains and restaurant
franchises that often have hundreds or thousands of potential locations, and
also provide support to the Company's regional personnel. The Company has
historically installed approximately 70% of its pay telephones through the sales
and marketing efforts of the Company's regional marketing personnel and the
remaining 30% from the efforts of national sales personnel. The Company's
marketing personnel receive incentive compensation based upon their achievement
of sales goals.
The Company intends to install, net of pay telephone removals,
approximately 2,000 pay telephones in 1997, compared with approximately 1,407
net installations in 1994, 2,100 net installations in 1995 and 1,351 in 1996,
exclusive of acquisitions. The Company intends to obtain locations for these
additional installations by emphasizing its internal marketing efforts. The
Company surveys these locations with a view to installing Company pay telephones
in locations that are within its operating regions, that appear likely to
generate sufficient coin and cashless call revenues and that meet the Company's
other criteria. The Company may also "presubscribe" LEC-owned pay telephones at
those locations that are not within the Company's operating regions or that do
not have sufficient coin call traffic but that do generate a volume of cashless
calls that can be serviced profitably through the Company's switch or a contract
service arrangement with a long distance carrier. See "Specialized
Telecommunications Service-Presubscriptions."
6
<PAGE>
Service and Maintenance
The Company employs field service technicians, each of whom collects
coin boxes from, and cleans and maintains, between 125 and 200 pay telephones
and responds to trouble calls made by a Property Owner, a user of a pay
telephone or by the telephone itself as part of its internal diagnostic
procedures. Some technicians are also responsible for the installation of new
telephones. Due to the proximity of each Company pay telephone to one of the
Company's fifteen regional offices and the ability of the field service
technicians to perform all service and maintenance functions, the Company is
able to limit the frequency of trips to the pay telephone as well as the number
of employees needed to service the pay telephones.
Technology
The pay telephone equipment installed by the Company makes use of
microprocessors to provide voice synthesized calling instructions, detect and
count coins deposited during each call, inform the caller at certain intervals
of the time remaining on each call, identify the need for and the amount of an
additional deposit and other functions associated with completion of calls.
Through the use of a non-volatile, electronically erasable, programmable read-
only memory ("EEProm") chip, the pay telephones can also be programmed and
reprogrammed from the Company's central computer facilities to update rate
information or to direct different kinds of calls to particular carriers. The
Company manufactures its pay telephones from standard components and believes
that they incorporate the latest technology.
The Company's pay telephones can distinguish coins by size and weight,
report to a remote location the total coinage in the coin box, perform self-
diagnosis and automatically report problems to a pre-programmed service number,
and immediately report attempts of vandalism or theft. Virtually all of the
telephones operate on power available from the telephone lines, thereby avoiding
the need for and reliance upon an additional power source at the installation
location.
The Company utilizes proprietary and non-proprietary software that
continuously tracks the coin and non-coin revenues from each telephone as well
as expenses relating to that telephone, including commissions payable to the
Property Owners. The software allows the Company to generate detailed financial
information by Property Owner, by location and by telephone, which allows the
Company to monitor the profitability and operating condition of each location
and telephone.
All technical support required to operate the pay telephones, such as
computers and software and hardware specialists, is provided by the Company's
Tampa, Florida office. Materials, equipment and spare parts and accessories are
provided by the Company's manufacturing support operations and inventories are
maintained at each regional office for immediate access by field service
technicians.
The telecommunications industry is characterized by continuous
technological change, frequent service and product introductions and steadily
evolving industry standards. The Company believes that its future success will
depend on its ability to anticipate technological changes and respond in a
timely and effective manner to meet such new industry standards.
7
<PAGE>
Suppliers
The Company's primary suppliers provide pay telephones and pay
telephone parts, local line access, billing and collection services and long
distance services. In order to promote acceptance by end users accustomed to
using LEC-owned pay telephone equipment, the Company utilizes pay telephones
designed to be identical in appearance and operation to pay telephones owned by
LECs.
The Company's primary supplier of pay telephones and circuit boards is
Protel, Inc. of Lakeland, Florida, a leading supplier of pay telephone
equipment, and utilizes the billing and collection services of LDDS Worldcom.
The Company obtains local line access from various LECs, including Bellsouth,
GTE, Ameritech, Southwestern Bell, US West and various other suppliers of local
line access. New sources of local line access are expected to emerge as
competition is authorized in local service markets. Long distance services are
provided to the Company through the use of its own long distance switching
equipment and by various long distance and operator service providers, including
AT&T, MCI, Sprint, Wiltel, LCI, Opticom and others.
The Company believes that multiple suppliers are available to meet all
of its product and service needs at competitive prices and rates and expects the
availability of such products and services to continue in the future, however,
the continuing availability of alternative sources cannot be assured. Transition
from the Company's existing suppliers, if necessary, could have a disruptive
influence on the Company's operations and could give rise to unforeseen delays
and/or expenses. The Company is not aware of any current circumstances that
would require the Company to seek alternative suppliers for any of the products
or services used in the operation of its business.
Acquisitions
The Company supplements its growth through internal sales by pursuing
the acquisition of pay telephone companies within its market areas and in areas
in which the Company desires to establish a market presence. During 1996, the
Company added 2,767 pay telephones to its network through acquisitions. The
Company believes that it is ideally positioned to capitalize on the fragmented
nature of the independent pay telephone industry by maintaining an active
acquisition program. The Company seeks to acquire pay telephone companies that
can provide cost savings and economies of scale through integration into the
Company's service and maintenance, long distance and management information
networks and believes that further acquisitions present a significant growth
opportunity for the Company.
8
<PAGE>
Listed below is a summary of acquisitions completed by the Company
during 1996.
<TABLE>
<CAPTION>
Number of
Company Date States Pay Telephones Purchase Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Pay Phone Group, LLC. January 1996 NC 103 271,500
Suntel April 1, 1996 MD,VA 70 205,000
Cottonwood Communications June 4, 1996 AZ,UT,IA 933 2,620,065
Payphone Corporation of America July 12, 1996 DC,MD,VA 653 1,785,250
Pay Telephone America, LTD. November 1, 1996 AL,AR,FL,LA,MS,TN,TX 1,008 3,500,000
---------------------
Totals 2,767 8,381,815
=====================
</TABLE>
Hospitality Division Operations
Prior to April 1994, the Company was providing telecommunications to
the hospitality industry on a limited basis. With the purchase of Comtel on
April 29, 1994, the Company's Hospitality Division was formed. Comtel continued
to operate as the Company's Hospitality Division as a wholly-owned subsidiary of
the Company until its sale to Skylink on December 31, 1996. During 1996, Comtel
received revenues from cashless calls made from approximately 75,000 hotel and
motel room telephones to which it provided operator services. These cashless
calls included credit card calls, calling card calls, collect calls and third-
party billed calls. Cashless calls from Comtel were generally handled by long
distance carriers through unbundled services arrangements which supplied the
operator and network services necessary to complete cashless calls. The Company
also directed and continues to direct call traffic from Comtel to its switching
equipment in Tampa, Florida through a contractual agreement with Skylink. Comtel
also directed a limited amount of call traffic to long distance companies which
paid compensation on a commission basis.
The services needed to complete a cashless call for Comtel are
essentially the same as those needed to complete a cashless call for the
Company's Pay Telephone Division. See "Pay Telephone Operations--Cashless
Calls." Billing information is verified and collect calls and credit cards are
validated by one of several companies that provide access to validation
databases. Billing and collection of call charges were performed for Comtel by
one of several service bureaus specializing in that activity. At December 31,
1996, Comtel had 308 installed Voicepro units and 275 dialers serving 74,593
hotel and motel room telephones.
Switching Equipment
The Company's switching equipment was obtained from Harris
Corporation, one of several suppliers of switches to the telecommunications
industry. Switches are digital computerized routing systems that receive calls,
route calls through transmission lines to their destination and record
information about the source, destination and duration of the call. Switches
have limits on their capacity to handle and transmit calls, but can be upgraded
to handle more calls as traffic increases. The Company's switch is located in
proximity to its offices in Tampa, Florida. Long distance calls from the
Company's pay telephones that are not handled by its switch or an unbundled
services arrangement are serviced by long distance companies that pay
commissions to the Company for those calls. If the Company experiences
sufficient long distance call volume from other LATAs, the Company will evaluate
the need to upgrade transmission circuitry to direct
9
<PAGE>
additional call traffic to its switching equipment, thereby reducing
transmission costs to the Company's switch.
Using the data capabilities of its switching equipment, the Company
has implemented a management information system that the Company believes
affords it competitive advantages. The Company's management information system
monitors call traffic to provide information regarding pay telephone or network
equipment trouble, the fraudulent use of calling cards or credit cards, or other
problems, thereby allowing the Company to respond promptly. The Company is also
able to monitor and audit telephone company billing reports using the detailed
call records maintained by the switch. This information system has enabled the
Company to increase call completion rates and enhance site selection for its pay
telephones. As a result, the Company has increased revenues from its installed
telephones and reduced costs through the selection of the most economical means
of completing calls. The Company believes some of this information is
unavailable to independent pay telephone companies that do not maintain their
own switching equipment.
Competition
The Company competes for pay telephone locations with LECs and
independent pay telephones operators. The Company also competes, indirectly,
with long distance companies, which can offer location owners commissions on
long distance calls made from LEC-owned pay telephones. Most LECs and long
distance companies against which the Company competes and some independent pay
greater financial, marketing and other resources than the Company. In addition,
many LECs, faced with competition from the Company and other independent pay
telephone companies, have increased their compensation arrangements with owners
of pay telephone locations to offer more favorable commission schedules.
The Company believes the principal competitive factors in the pay
telephone business are (i) the commission payments to a location owner and the
opportunity for a location owner to obtain commissions on both local and long-
distance calls from the same company, (ii) the ability to serve accounts with
locations in several LATAs or states, (iii) the quality of service and the
availability of specialized services provided to a location owner and telephone
users, and (iv) responsiveness to customer service needs. The Company believes
it is currently competitive in these areas.
The Company competes with long distance carriers who provide dial-
around services which can be accessed through the Company's pay telephones.
Certain national long distance operator service providers have launched
advertising promotions which have increased dial-around activity on pay
telephones owned by LECs and independent pay telephone companies, including the
Company. The Company is receiving compensation for dial-around calls placed from
its pay telephones and recent regulatory initiatives resulting from
implementation of the Telecommunications Act of 1996 are expected to increase
the amount of dial-around compensation received on its pay telephones. See
"Business--Regulation."
Specialized Telecommunications Services
The Company uses its expertise in pay telephone operations and the
data processing capability of its switching equipment to design and offer
enhanced telecommunications services and packages of specialized services to
niche market segments.
10
<PAGE>
Presubscriptions
The Company provides long distance operator services to public pay
telephones that have been "presubscribed" by the Company. As a result of the
AT&T Divestiture, public pay telephone location owners have the right to select
a long distance company to provide long distance service to those telephones. To
presubscribe these telephones, the Company enters into agency agreements with
location owners that allow the Company to provide operator services, either
directly using its switch or an unbundled services arrangement or indirectly, by
selecting a long distance company to provide these services. The Company pays
the location owners commissions on its revenues from such arrangements.
Manufacture, Remanufacture and Repair of Telephone Equipment
Manufacture of Pay Telephones
The Company manufactures pay telephone equipment for its own use. The
manufacturing of pay telephone equipment provides the Company with technical
expertise used in the operation, service, maintenance and repair of its pay
telephones. The Company assembles pay telephones from standard pay telephone
components purchased from component manufacturers. These components include a
metal case, an integrated circuit board incorporating a microprocessor, a
handset and cord, and a coin box and lock. The Company believes that the
integrated circuit board is the single most important component in an
independent pay telephone and obtains these boards from Protel, Inc. However,
all of the components purchased by the Company (including integrated circuit
boards) are available from several suppliers, and the Company does not believe
that the loss of any supplier would have a material adverse effect on its
manufacturing operations.
The Company's pay telephones comply with all FCC requirements
regarding the performance and quality of telephone equipment and have all
operating characteristics required by the regulatory authorities of most states,
including: free access to local emergency ("911") telephone numbers and, where
not available, to the LEC operator; free access to local directory assistance;
dial-around access to all locally available long distance companies; the
capability of receiving incoming calls at no charge; and automatic coin return
capability for incomplete calls.
Repair and Remanufacturing
Until December 31, 1996, the Company operated repair and
remanufacturing facilities for a variety of telecommunications equipment
including computer-based PBXs that connect as many as 8,000 individual
telephones, as well as key systems and small business systems. The Company
remanufactured and repaired equipment manufactured by AT&T and other
manufacturers. The Company marketed its services to major businesses that own
telecommunications equipment and to LECs and other distributors of such
equipment.
As a result of competitive pressures in the telephone equipment
industry and the Company's desire to focus its efforts on its core pay telephone
business, the Company discontinued this segment of its operation in the fourth
quarter of 1996.
Regulation
The FCC and state regulatory authorities have traditionally regulated
pay telephone and long distance services, with regulatory jurisdiction being
determined by the interstate or intrastate
11
<PAGE>
character of the service, and the degree of regulatory oversight varying among
jurisdictions. On September 20, 1996, the FCC adopted rules and policies to
implement Section 276 of the Communications Act of 1934, as amended by the
Telecommunications Act of 1996 ("the Telecommunications Act"). The
Telecommunications Act substantially restructured the telecommunications
industry, included specific provisions related to the pay telephone industry and
required the FCC to develop rules necessary to implement and administer the
provisions of the Telecommunication Act on both an interstate and intrastate
basis. Among other provisions, the Telecommunications Act granted the FCC the
power to preempt state regulations to the extent that any state requirements are
inconsistent with regulations adopted by the FCC.
Federal Regulation
The Telephone Operator Consumer Services Improvement Act of 1990 (the
"Operator Services Act") established various requirements for companies that
provide operator services and call aggregators (which send calls to these
companies). The requirements of the Operator Services Act include call branding,
information posting, rate quoting, the filing of informational tariffs and that
pay telephone users have the right to access the operator service provider of
the user's choice to make a cashless interstate call. The Company believes that
it complies with the provisions of the Operator Services Act, both as a call
aggregator and an operator service provider. The Operator Services Act also
requires the FCC to take action to limit the exposure of pay telephone companies
to undue risk of fraud.
While the FCC has not in the past actively regulated the provision of
pay telephone services by independent pay telephone companies, the
Telecommunications Act will significantly alter the FCC's role in the regulation
of the pay telephone industry. The Telecommunications Act directed the FCC to
develop and implement rules by November 6, 1996 to accomplish the following
objectives:
(1) Establish a per call compensation system to ensure pay telephone providers
receive fair compensation for each and every completed intrastate and
interstate call made from their pay telephones, excluding 911 and
Telecommunications Relay Services ("TRS") calls for hearing-impaired
individuals;
(2) Terminate interstate and intrastate subsidies for LEC pay telephones from
LEC-regulated rate base operations;
(3) Establish nonstructural safeguards to eliminate discrimination between LEC
and independent pay telephone providers;
(4) Consider the LECs' right to select and contract with interLATA carriers for
their own pay telephones, subject to: a) the FCC's finding that such
presubscription rights are in the public interest; and b) maintaining
existing contracts between location owners and interLATA carriers until
their expiration;
(5) Authorize all pay telephone providers to choose the intraLATA carrier of
choice subject to requirements of, and contractual rights negotiated with,
location owners;
(6) Determine whether "public interest pay telephones" should be maintained and
under what conditions; and
12
<PAGE>
(7) Preempt any state regulations which are inconsistent with the rules adopted
by the FCC related to implementation of the Telecommunications Act.
On September 20, 1996, the FCC released its Report and Order adopting
regulations to implement the pay telephone provisions of the Telecommunications
Act ("the FCC Rules"). Certain provisions of the FCC Rules became effective on
November 6, 1996 while certain other provisions are scheduled to become
effective on later dates. Petitions for review of the FCC Rules have been filed
with the U.S. Court of Appeals for the District of Columbia Circuit ("the Court
of Appeals") on behalf of a number of parties. The Court of Appeals has agreed
to expedited handling of all appeals and set a briefing schedule that began
February 14, 1997 and will culminate in oral argument on May 13, 1997. A
decision is expected in late June or early July 1997. At this time, the Company
is unable to assess the likelihood that any appeals will result in a stay or
revision of the FCC Rules, if any, nor the impact of the result of such
litigation on the Company's operations. A brief summary of the key provisions of
the FCC Rules as adopted appears below.
The Operator Services Act directed the FCC to consider the need to
prescribe compensation to owners of independent pay telephones for dial-around
access to a long distance company other than the one selected by the independent
pay telephone company. The FCC ruled in May 1992 that independent pay telephone
companies are entitled to compensation for these calls. Because of the
complexity of establishing an accounting system for determining compensation for
these calls, the FCC temporarily set this compensation at $6.00 per pay
telephone per month through December 31, 1994, to be allocated in accordance
with their market share among long distance companies earning annual toll
revenues for interstate calls in excess of $100 million per year. The FCC
approved a request from AT&T, which was responsible for the majority of dial
around compensation, to begin providing dial around compensation on a per call
basis at a rate of $0.25 per call effective January 1, 1995. Sprint received FCC
approval to pay $0.25 per interstate call received from independent pay
telephones beginning July 1, 1995. Other long distance carriers continued to pay
their portions of dial around compensation under the flat rate system until
November 6, 1996, the effective date of the dial around provision of the FCC
Rules.
Recognizing that independent pay telephone providers had experienced
increases in dial-around call traffic since the implementation of dial around
compensation and the inadequacy of current dial around call tracking systems,
the FCC Rules prescribed a new interim dial around compensation system for
independent pay telephone providers. The new interim dial around compensation
system provides for compensation to pay telephone providers for both dial around
"access code" calls dialed for the purpose of reaching a long distance company
other than the one designated by the pay telephone operator, and "800
subscriber" calls placed from pay telephones for the purpose of reaching a party
subscribing to "800" toll-free service. The new interim dial around compensation
rate became effective on November 6, 1996 and is set at a rate of $45.85 per pay
telephone per month to the pay telephone provider to be paid by certain long
distance providers. The interim compensation rate is based on an estimated
industry-wide average of 131 access code and 800 subscriber calls per pay
telephone per month at a rate of $.35 per call. The new interim dial around
compensation system will be effective until October 1, 1997, and will be
replaced at that time with a per-call compensation system, with the initial per-
call rate set at $.35. The FCC has further directed IXCs to develop accurate
call tracking mechanisms by October 1, 1997, and provided for annual independent
verification of dial around compensation payments to pay telephone providers for
two years. After October 1, 1998, the per-call rate for dial around compensation
will be equal to the local coin call rate charged at the pay telephone or a rate
13
<PAGE>
negotiated between the pay telephone provider and the IXC. The FCC Rules also
allow IXCs the option to block 800 subscriber calls from pay telephones in the
event they wish to avoid payment of per call compensation for 800 subscriber
calls. The Company is unable at this time to estimate future levels of dial
around access code and 800 subscriber call traffic, nor the impact of the change
in October 1997 to a per-call compensation mechanism, nor the most likely local
coin call rate in effect in October 1998.
The FCC Rules also directs state regulatory authorities generally to
deregulate local coin call rates charged from pay telephones by no later that
October 1, 1997, to allow market forces to determine appropriate local coin call
rates. Currently, approximately 90% of the Company's pay telephones are located
in areas where local coin call rates are $.25 per call. State regulatory
authorities are free to order deregulation of local coin call rates earlier than
October 1, 1997 and are permitted to obtain an exemption from deregulation by
demonstrating market failures within their state that would impair the
development of market-based rates for local coin calls. The FCC Rules do not
prescribe specific requirements for obtaining such an exemption. The Company is
unable at this time to estimate the impact of deregulation on local coin call
rates, if any, nor the timeframe in which deregulation may begin effecting local
coin call rates, if at all.
The FCC Rules require states by October 1, 1997 to take any additional
action necessary to promote competition in the pay telephone industry. Such
actions must include modification or elimination of existing pay telephone
regulations that act to impose market entry or exit barriers.
The FCC Rules also contain provisions which will significantly impact
LEC pay telephone operations and the competitive environment in which the
Company operates. The FCC Rules require that LEC pay telephone operations be
removed from the regulated rate base no later than April 15, 1997. This
provision requires that LECs' regulated rate payers be repaid by the newly
deregulated pay telephone operation for the value of the pay telephones on which
the LECs are no longer entitled to earn a return. The FCC determined that this
repayment must be based on the net book value of the LEC pay telephone
equipment, defined as the original cost of the equipment less accumulated
depreciation, rather than the current market value of the equipment. The FCC
Rules further required all RBOCs to file Comparably Efficient Interconnection
("CEI") plans within 90 days of the date of the Order to describe their methods
of compliance with nondiscrimination and accounting requirements, as well as
other safeguards against subsidies and discrimination in favor of their own pay
telephone operations. The LECs are also required to make access lines provided
to their own pay telephones available to independent pay telephone providers on
an equal basis.
In the past, RBOCs were not permitted to select the interLATA carrier
to serve their pay telephones. Under the FCC Rules, the RBOCs will be permitted
to select the carrier of interLATA services to their pay telephones effective
upon FCC approval of each RBOC's CEI plan as described above. Existing contracts
between location owners and pay telephone or long distance providers which were
in effect as of February 8, 1996 are grandfathered and will remain in effect.
The FCC Rules preempt state regulations that may require independent
pay telephone providers to route intraLATA calls to the LEC by containing
provisions that allow all pay telephone providers to select the intraLATA
carrier of their choice. The Rules did not preempt state regulations that, for
public safety reasons, require routing of "0-" calls to the LEC, provided that
the state does not require that the LEC carry such calls when the call is
determined to be a non-emergency call.
14
<PAGE>
The FCC Rules determined that the administration of programs for
maintaining "public interest pay telephones" should be left to the states within
certain guidelines. "Public interest pay telephones" are defined as a pay
telephone which (1) fulfills a public policy objective in health, safety, or
public welfare, (2) is not provided for a location provider with an existing
contract for the provision of a pay telephone and (3) would not otherwise exist
as a result of the operation of the competitive marketplace. Each state
regulatory authority is required to complete a review of whether such public
interest pay telephones are adequately provided in its jurisdiction by September
20, 1998.
This summary of the provisions of the Telecommunications Act and the
FCC Rules is not intended to be complete, but is intended to highlight
provisions which are most likely to have an impact on the Company's operations.
The Company believes that the implementation of the Telecommunications Act and
the FCC Rules will act to correct certain historical inequities in the pay
telephone industry and lead to a more equitable competitive environment for all
pay telephone providers. Petitions for review of the FCC Rules have been filed
with the Court of Appeals on behalf of a number of parties. The Court of Appeals
has agreed to expedited handling of all appeals and set a briefing schedule that
began February 14, 1997 and will culminate in oral argument on May 13, 1997. A
decision is expected in late June or early July 1997.
At this time, the Company is unable to assess the likelihood that any
appeals will result in a stay or revision of the FCC Rules, if any, nor the
impact of the result of such litigation on the Company's operations. There can
also be no assurance that implementation of the Telecommunication Act and/or the
FCC Rules will actually result in a more competitive business environment, nor
that a more competitive business environment will have a positive impact on the
Company's operations. While implementation of certain provisions of the FCC
Rules are expected to have a positive impact on the Company's operations, such
benefits may be offset by the potential for increased competitive pressures by
RBOC and other LEC pay telephone operations which may also benefit from
implementation of the Telecommunications Act and the FCC Rules.
The Company's operations could also be affected by the FCC's
consideration of the implementation of a billing system known as "Billed Party
Preference" or "BPP". Under such a system, a cashless call to be carried by a
long distance company would be directed automatically to the long distance
company of the billed party's previously expressed preference. In April 1992,
the FCC tentatively concluded that BPP for interstate operator-assisted calls
was in the public interest and requested industry comments on the ramifications
of BPP. During the Summer of 1992, LECs, long distance companies and other
industry participants, a majority of which were opposed to adopting BPP,
submitted comments. These comments included references to the costs of imposing
BPP (estimated by some to exceed $1 billion in addition to hundreds of millions
of dollars in additional annual operating costs) and the lack of available
equipment for several years to implement BPP. These comments remain under
consideration by the FCC.
The FCC has also issued a Second Notice of Proposed Rulemaking in the
BPP docket which sought comment on the establishment of "rate benchmarks" and/or
caller notification, such as oral rate disclosures, as potential alternatives to
BPP. Currently, interstate rates must be "just and reasonable" as governed by
the Communications Act of 1934, as amended. If implemented, BPP could have a
significant adverse effect on the Company's business. Under BPP, the Company
would lose the ability to direct many cashless calls from its pay telephones to
its switch or a designated long distance company and would therefore lose the
revenues associated with
15
<PAGE>
handling such calls and the ability to pay commissions to location owners on
such calls. The Company believes that the significant expense and technical
modifications necessary to implement a system of BPP as evidenced by the record
in the FCC proceeding make its adoption in the proposed form unlikely. However,
rate benchmarks or caller notification of charges could be implemented by the
FCC for interstate operator-assisted calls. Such a ruling could impact the
financial performance of the Company, depending on the specific level of the
benchmark or the particular notification requirements. There is no currently
mandated schedule for a decision on the BPP docket. Without further guidance
from the FCC, the Company is unable to assess the likelihood of adoption of BPP,
rate benchmarks or caller notification, nor the impact, if any, that such
adoption might have on the Company's operations or results.
Actions by agencies on both the state and federal level have had, and
are expected to continue to have, both positive and negative effects on the
Company. Although management is not presently aware of any action contemplated
by any state or federal agency which would have a material adverse effect on the
Company (other than those discussed above), there is no guarantee that such an
action will not be taken.
State Regulation
State regulatory authorities have primarily been responsible for
regulating the rates, terms and conditions for intrastate pay telephone
services. Regulatory approval to operate pay telephones in a state typically
involves submission of a certification application and an agreement by the
Company to comply with applicable rules, regulations and reporting requirements.
The 49 states that currently permit independent pay telephone providers to
supply local and long distance pay telephone service, and the District of
Columbia, have adopted a variety of state-specific regulations that govern rates
charged for coin and cashless calls as well as a broad range of technical and
operational requirements. The Telecommunications Act contains provision that
will require all states to allow pay telephone competition. State authorities
also regulate LECs' tariffs for interconnection of independent pay telephones,
as well as LECs' own pay telephone operations and practices.
The Company is also affected by state regulation of operator services.
Most states have capped the rates that consumers can be charged for cashless
local and intrastate toll calls made from pay telephones. In addition, the
Company must comply with regulations designed to afford consumers with notice at
the pay telephone location, of the long distance company servicing the telephone
and the ability to access alternate carriers. The Company believes that it is
currently in compliance with regulatory requirements pertaining to its offering
of operator services directly or through other long distance companies.
Certain states are reviewing the rates that LECs charge independent
pay telephone providers for local line access and associated services. Local
line access charges have been reduced in certain states and the Company believes
that selected states' continuing review of local line access charges, coupled
with competition for local line access service resulting from implementation of
the Telecommunications Act, could lead to more options available to the Company
for local line access at competitive rates. No assurance can be given, however,
that such options or local line access rates will become available. The
Telecommunications Act and FCC Rules contain provisions which could impact the
rates pay telephone providers can charge for local coin calls and other aspects
of pay telephone operations and/or regulation at the state level. See
"Regulation - Federal Regulation".
16
<PAGE>
Employees
As of December 31, 1996, the Company had 233 full-time employees, none
of whom are the subject of a collective bargaining agreement. The Company
believes that its relationship with its employees is good.
ITEM 2. PROPERTIES
The Company leases approximately 19,000 square feet in Tampa, Florida
that includes executive office space, a regional office for pay telephone
operations and facilities for the manufacture of pay telephones. Until December
31, 1996, the Company leased approximately 8,200 square feet in Boulder,
Colorado that included executive office space and facilities for assembly and
maintenance of equipment used in Hospitality Division operations. On December
31, 1996, the Company sold 100% of the Common Stock of Comtel. See "Business -
General". The Company also leases an aggregate of approximately 22,000 square
feet to house regional offices for pay telephone operations in Mesa, Arizona;
Miami, Florida; Jacksonville, Florida; Harrisburg, Illinois; Jacksonville,
Illinois; Jackson, Mississippi; Charlotte, North Carolina; Myrtle Beach, South
Carolina; Atlanta, Georgia; Cedar Rapids, Iowa; Baltimore, Maryland; Jackson,
Tennessee; Salt Lake City, Utah and Chesapeake, Virginia. In addition, the
Company's accounting, administrative and legal offices are located in
approximately 10,000 square feet of leased office space in Jacksonville,
Illinois. The Company also leases 18,000 square feet of warehouse space in
Jacksonville, Illinois. The Company believes that these facilities are adequate
to meet the Company's needs in the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company upon its purchase of Comtel was aware of a lawsuit by a
minority shareholder against the selling shareholders and Comtel. Selling
shareholders of Comtel have indemnified the Company and its shareholders against
any claims or damages asserted by the shareholder. The Company believes there is
adequate protection against any potential claims.
The Company is subject to various legal proceedings arising out of the
conduct of its business. It is the opinion of the Company's management that the
ultimate disposition of these proceedings will not 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 fiscal year ended December 31, 1996,
the Company did not submit any matter to a vote of security holders.
17
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Market information. The Company's Common Stock trades on the NASDAQ
National Market System. The following table sets forth, for the periods
indicated, the high and low closing prices on the NASDAQ National Market System
from October 20, 1993 through December 31, 1996.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
October 20 through December 31, 1993 17.50 13.50
January 1 through March 31, 1994 16.25 8.25
April 1 through June 30, 1994 12.75 8.25
July 1 through September 30, 1994 12.00 9.00
October 1 through December 31, 1994 14.25 10.75
January 1 through March 31, 1995 13.25 8.94
April 1 through June 30, 1995 12.88 10.75
July 1 through September 30, 1995 16.00 11.25
October 1 through December 31, 1995 15.25 12.00
January 1 through March 31, 1996 13.75 12.50
April 1 through June 30, 1996 20.00 12.75
July 1 through September 30, 1996 20.75 15.00
October 1 through December 31, 1996 19.00 15.25
</TABLE>
As of March 24, 1997, there were approximately 54 holders of record of
the Common Stock, not including stockholders whose shares were held in "nominee"
or "street" name. The last sale price of the Company's Common Stock on March 24,
1997 was $16.25 per share.
Dividends. The Company has not paid any dividends on its Common Stock
during 1996 and does not intend to pay any Common Stock dividends in the
foreseeable future. It is the current policy of the Company's Board of Directors
to retain earnings to finance the growth and development of the Company's
business. Payment of cash dividends, if made in the future, will be determined
by the Company's Board of Directors based on the conditions then existing,
including the Company's financial condition, capital requirements, cash flow,
profitability, business outlook and other factors.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data presented below under the captions
"Operating Data" and "Balance Sheet Data" are derived from the consolidated
financial statements of the Company. The selected financial data should be read
in conjunction with the financial statements and notes thereto included
elsewhere in this Annual Report and with "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
18
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Data
Revenues:
Coin Calls $18,559 $14,357 $ 9,916 $ 6,616 $5,009
Non-coin calls 16,125 15,760 12,613 8,648 4,789
Long distance income 2,289 1,713 69 -- --
------- ------- ------- ------- ------
Total revenues 36,973 31,830 22,598 15,264 9,798
Operating costs and expenses
Telephone charges-payphones 7,501 6,076 4,748 3,379 2,763
Commissions-payphones 4,606 3,852 2,848 1,944 1,434
Commissions-long distance income 1,680 1,116 1 - -
Service, maint. and network costs 8,546 7,156 5,218 3,166 1,964
Selling, general and administrative 6,402 5,133 3,550 2,115 1,684
Depreciation and amortization 2,986 2,136 1,389 1,188 800
Non-recurring charge -- 215 -- -- --
------- ------- ------- ------- ------
Total operating costs and expenses 31,721 25,684 17,754 11,792 8,645
------- ------- ------- ------- ------
Operating profit 5,252 6,146 4,844 3,472 1,153
Interest and other income 100 125 251 128 75
Interest (expense) (289) (48) (31) (302) (280)
Gain (loss) on sale of investments -- -- (145) -- --
------- ------- ------- ------- ------
Total other income (expense) (189) 77 75 (174) (205)
------- ------- ------- ------- ------
Earnings from continuing operations
before income taxes 5,063 6,223 4,919 3,298 948
Income taxes 1,868 2,403 1,806 1,309 368
------ ------- ------- ------- ------
Earnings from continuing operations 3,195 3,820 3,113 1,989 580
Discontinued operations
Extraordinary item - remanufacturing -- -- -- -- 329 (2)
Gain (loss) from hospitality division
operations 334 (2,043) (1) 790 -- --
Gain (loss) from sales of equipment
and repairs (369) (465) (1) (150) (131) (138)
Gain on sale of hospitality division 747 -- -- -- --
Estimated loss on disposal (102) -- -- -- --
------- ------- ------- ------- ------
Gain (loss) from discontinued
operations 610 (2,508) 640 (131) 191
------- ------- ------- ------- ------
Net earnings $ 3,805 $ 1,312 $ 3,753 $ 1,858 $ 771
======= ======= ======= ======= ======
Earnings per common share
Continuing operations $0.71 $0.86 $0.70 $0.64 $0.21
Discontinued operations $0.13 $(0.57) $0.14 $(0.04) $0.07
Net earnings $0.84 $0.29 $0.84 $0.60 $0.28
Average common shares outstanding 4,513 4,455 4,455 3,117 2,800
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
As of December 31
--------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 4,630 $ 2,433 $ 4,901 $ 4,791 $ 148
Working capital (deficit) 12,130 6,813 6,711 14,614 (175)
Total assets 43,862 33,328 33,035 26,169 8,780
Long-term debt, less current maturities 5,726 209 85 266 3,627
Shareholders' equity 32,935 27,990 26,678 22,918 2,251
</TABLE>
(1) Includes intangible and long-lived assets charged off related to
implementation of SFAS 121.
(2) Represents a gain on insured property destroyed in a fire at one of the
Company's facilities on March 27, 1992, net of related income tax.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto appearing elsewhere
herein.
General
During 1996, the Company derived its revenues from three principal
sources: coin calls, non-coin calls, including hospitality calls, and sales of
equipment and repairs. Coin calls represent calls paid for with coins deposited
in the telephone, and the Company recognizes coin revenue in the amount
deposited.
Non-coin or cashless calls made from the Company's pay telephones and
hospitality and other telephones to which the Company provides operator services
generate revenues in an amount that depends upon whether the Company or a long
distance company handles the call. If the cashless call is handled by the
Company through its switch or an "unbundled" services arrangement, the Company
recognizes non-coin revenues equal to the total amount charged for the call. If
the cashless call is handled by a long distance company, the Company generally
recognizes revenues in an amount equal to the commission on that call paid to
the Company by the long distance company. Under an unbundled services
arrangement, the Company performs certain functions necessary to service
cashless calls, uses the long distance company's switching equipment and its
other services on an as-needed basis, and pays the long distance company on an
unbundled basis for the operator services actually used to complete these calls.
The Company also recognizes non-coin revenues from calls that are
dialed from its pay telephones to gain access to a long distance company other
than the one pre-programmed into the telephone; this is commonly referred to as
"dial-around" access. See "Business--Regulation." The Company also derives a
small amount of non-coin revenue from certain LECs for intraLATA cashless calls.
See "Business-Industry Overview" In addition, the Company received revenues
during 1996 from the remanufacture and repair of telecommunications equipment
such as PBXs, key systems and small business systems. The Company discontinued
this segment of its operation in the fourth quarter of 1996. See "Manufacture,
Remanufacture and Repair of Telephone Equipment--Repair and Remanufacturing."
20
<PAGE>
The principal costs related to the ongoing operation of the Company's
pay telephones include telephone charges, commissions, and service, maintenance
and network costs. Telephone charges consist of payments made by the Company to
LECs and long distance carriers for access charges and use of their networks.
Commission expense represents payments to Property Owners. Service, maintenance
and network costs represent the cost of servicing and maintaining the pay
telephones on an ongoing basis, costs related to operation of the Company's
switch and, in connection with unbundled services arrangements, the fees paid
for those services. Costs of equipment sold and repairs include the cost of
purchasing new and used equipment and repair parts and the labor and materials
necessary to repair and remanufacture the equipment.
The principal costs related to the Company's hospitality calls
included commissions, network costs and billing and collection costs.
Commissions represents payments to Property Owners. Network costs represents
costs related to unbundled services arrangements utilized in providing service
to the Company's hospitality customers. On December 31, 1996, the Company sold
100% of the Common Stock of Comtel. See "Business - General". In 1996, the
Company also provided operator services to its hospitality customers through use
of its switching equipment in Tampa, Florida and continues to provide such
services to Comtel through a contractual agreement with Skylink.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
For the year ended December 31, 1996, total revenues from continuing
operations increased approximately $5.1 million or 16.2%, compared to the year
ended December 31, 1995. This growth was primarily attributable to an increase
from 11,163 pay telephones on December 31, 1995 to 15,281 pay telephones on
December 31, 1996. Pay telephone revenues increased approximately $4.6 million
or 15.2%. In addition to growth in the number of installed pay telephones, the
increase in pay telephone revenues was attributable to the impact of the removal
during the third and fourth quarter of 1996 of approximately 600 under-
performing pay telephones and their replacement at better locations, along with
additional dial around compensation resulting from implementation of the
Telecommunications Act which became effective in November 1996. See "Regulation-
Federal Regulation".
Hospitality call revenues decreased approximately $3.3 million, from
$13.1 million in the year ended December 31, 1995 to $9.8 million in the year
ended December 31, 1996 as a result of lower call volume from telephones in
hotel rooms served by the Company's Hospitality Division due to an increase in
dial around calls. The Company discontinued its Hospitality Division operations
following the sale of Comtel on December 31, 1996.
Revenues from sales of equipment and repairs decreased by
approximately $622,000 or 62.5% due to a shift in the utilization of the
Company's technical personnel to the manufacture of pay telephones to
accommodate its increasing need for equipment to install additional pay
telephone locations and its decision to discontinue its equipment and repair
sales operations in the fourth quarter of 1996.
Telephone charge expenses increased to 21.6% of pay telephone revenues
compared to 20.1% in the prior year. The increase in telephone charges as a
percentage of pay telephone revenues was primarily attributable to lower monthly
long distance revenues as a result of an increase in dial around calls placed
from the Company's pay telephones. The Company's average monthly telephone
charge on a per phone basis did, however, decrease from $50.98 in 1995, to
$47.66 per month in 1996.
21
<PAGE>
Commission expenses increased to 13.3% of pay telephone revenues
compared to 12.8% in the prior year. The increase in commissions as a percentage
of pay telephone revenues was primarily attributable to lower long distance
revenues as a result of an increase in dial around calls placed from the
Company's pay telephones. Commissions to property owners in 1996 actually
decreased on a per phone basis by approximately 9.5% from 1995 as a result of
lower long distance revenues resulting from an increase in dial around calls
placed from the Company's pay telephones.
Service, maintenance and network costs increased to 25.4% of pay
telephone revenues compared to 24.5% in the prior-year period. The increase as a
percentage of pay telephone revenues was primarily attributable to lower long
distance revenues as a result of an increase in dial around calls placed from
the Company's pay telephones. The Company's average monthly service, maintenance
and network costs on a per phone basis did, however, decrease from $61.84 per
month in 1995, to $55.87 per month in 1996 due to operating efficiencies
achieved through expansion of the Company's installed pay telephone base.
Cost of equipment sold and repairs increased to 138.9% of sales of
equipment and repairs compared to 79.3% in the prior year. This increase
resulted primarily from a write-down of the Company's equipment repair and
resale inventory of approximately $164,500 related to the discontinuation and
disposition of the equipment sale and repair operations.
Depreciation and amortization expense on continuing operations
increased approximately $850,000 or 39.8%, from the prior year, reflecting a
36.9% increase in the number of installed pay telephones. Selling, general and
administrative ("SG&A") expenses on continuing operations increased
approximately $1.3 million, or 24.7%, from the prior year. The increase was
primarily attributable to costs associated with the opening and operation of
four new divisional sales and service offices and the hiring of additional
support personnel needed to service the Company's increasing pay telephone base.
Interest income, net of interest expense, decreased approximately
$266,000, or 345.5%, compared to the prior-year period. This decrease resulted
primarily from lower cash balances available for investment due to the
application of cash for acquisitions and the installation of new pay telephones,
coupled with an increase of approximately $241,000 or 502.1% in interest expense
related to the assumption of approximately $5.6 million in debt for the
acquisition of pay telephones during 1996.
Earnings from discontinued operations increased approximately $3.1
million or 124.3% over the prior year period, rising to approximately $610,000
in 1996 from a loss of approximately $2.5 million in 1995. The Company's
earnings on discontinued operations in 1996 included a gain on the sale of
Comtel of approximately $747,000, net of income taxes of $439,000. Discontinued
operations in 1996, before the effect of the gain on the sale of Comtel,
generated a loss of approximately $137,000, net of income taxes and income tax
benefits. Earnings from discontinued operations in 1995 included non-recurring
charges of approximately $2.9 million due to impairment of intangible and long-
lived assets after applying certain provisions of SFAS 121. Discontinued
operations in 1995, before the effect of the non-recurring charges, generated
earnings of approximately $204,000, net of income taxes and income tax benefits.
Earnings from continuing operations decreased approximately $625,000
or 16.4% from the prior year period. Earnings before interest, taxes,
depreciation and amortization ("EBITDA")
22
<PAGE>
on continuing operations remained stable in 1996 at approximately $8.2 million.
EBITDA is not determined in accordance with Generally Accepted Accounting
Principles ("GAAP"), nor, as a result, is it included as a line item in the
Company's consolidated financial statements. EBITDA is not being presented as an
alternative to GAAP operating income or cash flows from operations being shown
on the Company's statements of cash flows. However, it is a commonly accepted
measure of performance in the telecommunications industry. Net earnings
increased approximately $2.5 million or 190.0% from approximately $1.3 million
in 1995 to approximately $3.8 million in 1996.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
For the year ended December 31, 1995, total revenues from continuing
operations increased approximately $9.2 million or 40.9%, compared to the year
ended December 31, 1994. This growth was primarily attributable to an increase
from 8,349 pay telephones on December 31, 1994 to 11,163 pay telephones on
December 31, 1995. Pay telephone revenues increased approximately $7.6 million
or 33.5%.
Hospitality call revenues increased approximately $3.1 million, rising
from $10.0 million in the year ended December 31, 1994 to $13.1 million in the
year ended December 31, 1995. Hospitality call revenues for the year ended
December 31, 1995 represent twelve full months, while results for the prior year
period include only eight months. The Company discontinued its Hospitality
Division operations following the sale of Comtel on December 31, 1996.
Revenues from sales of equipment and repairs decreased by
approximately $461,000 or 31.4% due to the closing in August 1995 of the
Company's repair and remanufacturing facility in Jacksonville, IL and a shift in
the utilization of its technical personnel to the manufacture of pay telephones
to accommodate its increasing need for equipment to install additional pay
telephone locations. The Company discontinued its equipment sales and repair
operations in the fourth quarter of 1996.
Telephone charge expenses decreased to 20.1% of pay telephone revenues
compared to 21.0% in the prior year. The slight decrease in telephone charges as
a percentage of pay telephone revenues was primarily attributable to
implementation of legislation in the State of Florida in July 1995, which
allowed the Company to select a billing option which eliminates measured, local
service on certain of the Company's pay telephones in the State. At December 31,
1995, the Company had 3,854 installed pay telephones in the State of Florida.
Commissions remained relatively flat, increasing slightly to 12.7% of pay
telephone revenues compared to 12.5% in the prior year. Service, maintenance and
network costs remained stable at 23.0% of pay telephone revenues compared to
23.0% in the prior year.
Cost of equipment sold and repairs increased to 79.3% of sales of
equipment and repairs compared to 68.9% in the prior year. This increase
resulted primarily from a higher concentration of sales of equipment during the
year as opposed to a higher concentration in the prior period of sales of
repairs. The Company has historically experienced lower costs related to the
repair of equipment than the sale of equipment. The Company discontinued its
equipment sales and repair operations in the fourth quarter of 1996.
Depreciation and amortization expense on continuing operations
increased approximately $747,000 or 53.8%, from the prior year, primarily
attributable to the increase in the number of installed pay telephones and the
purchase of additional capital equipment. Selling, general
23
<PAGE>
and administrative ("SG&A") expenses on continuing operations increased
approximately $1.6 million, or 44.6%, from the prior year. The increase was
primarily attributable to increases in the cost of professional services,
salaries and wages and costs associated with the opening and operation of two
new divisional sales and service offices.
Interest income, net of interest expense, decreased approximately
$203,000, or 94.9%, compared to the prior-year period. This decrease resulted
primarily from lower cash balances available for investment due to the
application of cash for acquisitions and the installation of pay telephones
obtained through the Company's internal sales efforts.
In 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121"). The Company adopted the statement as of December 31, 1995.
In the 1995 fourth quarter, the Company recorded a non-recurring
charge of $3.1 million ($2.9 million after-tax or $0.65 per share) due to
impairment of intangible and long-lived assets after applying certain provisions
of SFAS 121.
Of the non-recurring charge, $2.7 million related to intangible assets
purchased in the April 1994 acquisition of Comtel. Acquired contracts with hotel
and motel properties for operator services represented $2.5 million of the
charge, and acquired research and development costs represented the remaining
$0.2 million. The contracts written off had either disconnected from the
Company's long distance network or were expected to disconnect without providing
significant future benefits to the Company. The Company determined the future
cash flows from these impaired assets to be negligible and considered a complete
write-down of the remaining intangible balances to be appropriate.
The balance of the non-recurring charge of $0.4 million ($0.2 million
net of tax) represented a write off of uninstalled pay telephone and PBX
switching equipment which was impaired by 1995 changes to the North American
Numbering Plan, the telephone numbering plan used in the United States, Canada,
Bermuda, Puerto Rico and the Caribbean countries ("NANP"). This uninstalled
equipment was not upgradable to accommodate new area codes created by the
changes to the NANP and was determined by the Company to be impaired. All of the
Company's remaining equipment has been upgraded or is fully upgradable to comply
with the changes to the NANP.
Earnings from discontinued operations decreased approximately $3.1
million or 491.9% over the prior year period, from earnings on discontinued
operations of approximately $640,000 in 1994 to a loss of approximately $2.5
million in 1995. Earnings from discontinued operations in 1995 included non-
recurring charges of approximately $2.9 million due to impairment of intangible
and long-lived assets after applying certain provisions of SFAS 121.
Discontinued operations in 1995, before the effect of the non-recurring charges,
generated earnings of approximately $204,000, net of income taxes and income tax
benefits, representing a decrease of approximately $436,000 or 68.1% from 1994.
Earnings from continuing operations increased approximately $707,000
or 22.7% from the prior year period. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") on continuing operations increased
approximately $2.1 million or 33.9% from approximately $6.2 million in 1994 to
approximately $8.3 million in 1995. EBITDA is not determined in accordance
24
<PAGE>
with Generally Accepted Accounting Principles ("GAAP"), nor, as a result, is it
included as a line item in the Company's consolidated financial statements.
EBITDA is not being presented as an alternative to GAAP operating income or cash
flows from operations being shown on the Company's statements of cash flows.
However, it is a commonly accepted measure of performance in the
telecommunications industry. Net earnings decreased approximately $2.5 million
or 65.8% from approximately $3.8 million in 1994 to approximately $1.3 million
in 1995.
Liquidity and Capital Resources
As of December 31, 1996, the Company had a current ratio of 5.62 to 1,
as compared to a current ratio of 2.85 to 1 on December 31, 1995. The increase
was primarily attributable to an increase in working capital from approximately
$6.8 million as of December 31, 1995, to approximately $12.1 million as of
December 31, 1996. This increase in working capital resulted primarily from
increases in cash and notes receivable related to the sale of Comtel on December
31, 1996. The Company received cash proceeds of approximately $2.7 million and a
note receivable in the amount of $2.3 million due at the earlier of December 31,
1997 or a public issuance of securities by the buyer.
The Company's capital expenditures, exclusive of acquisitions, for the
years ended December 31, 1996 and 1995 were $5.1 million and $6.0 million,
respectively. The Company's capital expenditures primarily consisted of the
installation of new pay telephones. The Company made acquisitions of pay
telephones totaling approximately $8.6 million and $1.7 million, respectively,
during the years 1996 and 1995. In 1996, the Company financed its capital
expenditures and acquisitions primarily with approximately $6.5 million in cash
provided by continuing operations and an increase in long-term debt of
approximately $5.5 million. In 1995, the Company financed its capital
expenditures and acquisitions primarily with approximately $6.0 million in cash
provided by continuing operations and approximately $4.9 million in cash
reserves.
The Company has a $25 million revolving line of credit with the
Boatmen's National Bank of St. Louis ("Boatmen's"), with provisions to convert
up to $17.5 million of the line of credit to term loans. The terms of the
agreement call for the Company to pay interest on a graduated scale based on
Boatmen's Corporate Base Rate ("CBR"), which was 8.25% on December 31, 1996. The
interest rate is indexed based on the Company's ratio of funded debt to EBITDA
as defined in the credit facility and is adjusted based on market interest rates
for CBR and LIBOR. The maturity date of the revolving portion of the credit
facility is September 30, 2001. Principal outstanding on each term loan under
the convertible portion of the credit facility shall be payable in 12 to 20
quarterly installments with the last installment due no later than September 30,
2003. As of March 24, 1997, the Company had approximately $2.5 million borrowed
under the revolving portion of the credit facility.
The Company believes that cash generated from operations and available
borrowings under the credit facility will be sufficient to fund the Company's
cash requirements, including capital expenditures, for the next three years. The
Company also believes that it will be able to fund any acquisitions through a
combination of cash generated from operations, additional borrowing and the
issuance of shares of its Common Stock. There can be no assurance, however, that
the Company will continue to expand at its current rate or that additional
financing will be available when needed or, if available, will be available on
terms acceptable to the Company.
25
<PAGE>
Impact of Inflation
Inflation is not a material factor affecting the Company's business.
Switching equipment and transmission costs have not increased and in some cases,
have decreased over the last several years. General operating expenses such as
salaries, employee benefits and occupancy costs are, however, subject to normal
inflationary pressures.
Seasonality
The Company's revenues from its pay telephone operating regions are
affected by seasonal variations to different degrees. For example, many of the
Company's pay telephones in Florida produce substantially higher call volume in
the first and second quarters than at other times during the year, while the
Company's pay telephones throughout the midwestern and eastern United States
produce their highest call volumes during the second and third quarters. While
the aggregate effect of the variations in different geographical regions tend to
counteract the effect of one another, the Company has historically experienced
higher revenue and income in the second and third quarters than in the first and
fourth quarters. Changes in the geographical distribution of its pay telephones
may in the future result in different seasonal variations in the Company's
results.
Safe Harbor Statement
The following "Safe Harbor Statement" is made pursuant to the Private
Securities Litigation Reform Act of 1995. Certain of the statements contained in
the body of this Report are forward-looking statements (rather than historical
facts) that are subject to risks and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. With respect to such forward-looking statements, the Company seeks
the protections afforded by the Private Securities Litigation Reform Act of
1995. The list set forth below is intended to identify certain of the principal
factors that could cause actual results to differ materially from those
described in the forward-looking statements included elsewhere herein. These
factors are not intended to represent a complete list of all risks and
uncertainties inherent in the Company's business, and should be read in
conjunction with the more detailed cautionary statements included elsewhere
herein.
Dial Around Compensation
One of the key mandates of the Telecommunications Act was the
requirement that pay telephone providers be paid fair compensation for each and
every call made from their pay telephones, including dial around access code and
800 subscriber calls. Effective November 6, 1996, the FCC Rules mandate that pay
telephone providers be paid at a rate of $45.85 per pay telephone per month by
certain long distance providers. The interim compensation rate is based on an
estimated industry-wide average of 131 access code and 800 subscriber calls per
pay telephone per month at a rate of $.35 per call. The new interim dial around
compensation system will be effective until October 1, 1997, and will be
replaced at that time with a per-call compensation system, with the initial per-
call rate set at $.35. After October 1, 1998, the per-call rate for dial around
compensation will be equal to the local coin call rate charged at the pay
telephone or a rate negotiated between the pay telephone provider and the IXC.
The FCC Rules also allow IXCs the option to block 800 subscriber calls from pay
telephones in the event they wish to avoid payment of per call compensation for
800 subscriber calls.
26
<PAGE>
The initial flat-rate payment level significantly increases dial
around compensation revenues to the Company, and the Company believes that a
per-call system at a $.35 level will further increase dial around compensation
received. However, market forces and factors outside the Company's control could
significantly impact the resulting revenue impact. These factors include a stay
or change upon review by the U.S. District Court of Appeals, as well as the
FCC's recognition that existing regulations do not prohibit an IXC from blocking
800 subscriber numbers from pay telephones if the IXC wants to avoid paying per-
call compensation on these calls.
Local Coin Rates
In ensuring "fair compensation" for all calls, the FCC further
determined that local coin rates from pay telephones should be generally
deregulated within one year, but provided for possible modifications or
exemptions from deregulation upon a detailed showing by an individual state that
there are market failures within the state that would not allow market-based
rates to develop. The Company believes that deregulation, where implemented,
will likely result in higher rates charged for local coin calls and increase the
Company's revenues from such calls. However, given the lack of direction on the
part of the FCC on specific requirements for obtaining a state exemption, the
Company's inability to adequately predict the responses of individual states or
the market, the Company's inability to provide assurance that deregulation, if
and where implemented, will lead to higher local coin call rates, and the
Company's inability to assess the likelihood that any decision by the U.S.
District Court of Appeals will result in a stay or revision of the FCC Rules,
the Company is unable to predict the ultimate impact on its operations of local
coin rate deregulation.
Other Provisions of the Telecommunications Act and FCC Rules
There are several other provisions of the Telecommunications Act and
FCC Rules that may have substantial positive and negative impacts on the
Company. See "Regulation". Among those are cessation of subsidies upon the
removal of LEC pay telephones from the regulated rate base by April 15, 1997,
the RBOCs' development of specific plans detailing their compliance with
nondiscrimination and accounting requirements and other safeguards against
subsidies and discrimination, and the RBOCs' authority to select interLATA
carriers serving their pay telephones in conjunction with location owners. As a
whole, the Telecommunications Act and FCC Rules should significantly alter the
competitive framework of the pay telephone industry. The Company believes that
implementation of the Telecommunications Act and FCC Rules will address certain
historical inequities in the pay telephone marketplace and lead to a more
equitable competitive environment for all pay telephone providers. However, due
to the pending review of the FCC Rules by the U.S. District Court of Appeals and
uncertainties related to the impact and/or timing of implementation, the Company
can provide no assurance that the Telecommunication Act and/or FCC Rules will
result in a long-term positive impact on the Company.
Billed Party Preference
The FCC has issued a Second Notice of Proposed Rulemaking regarding
Billed Party Preference ("BPP") and associated call rating issues, including
potential rate benchmarks and caller notification requirements for 0+ and 0-
interstate long distance calls. If BPP is implemented, cashless calls would be
directed automatically to the long distance company of the
27
<PAGE>
billed party's previously expressed preference. See "Regulation - Federal
Regulation". The Company believes that the significant expense and technical
modifications necessary to implement a system of BPP as evidenced by the record
in the FCC proceeding make its adoption in the proposed form unlikely. However,
rate benchmarks or caller notification of charges could be implemented by the
FCC for interstate operator-assisted calls. Such a ruling could impact the
financial performance of the Company, depending on the specific level of the
benchmark or the particular notification requirements. There is no currently
mandated schedule for a decision on the BPP docket. Without further guidance
from the FCC, the Company is unable to assess the likelihood of adoption of BPP,
rate benchmarks or caller notification, nor the impact, if any, that such
adoption might have on the Company's operations or results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Schedules
<TABLE>
<CAPTION>
PAGE NUMBERS
------------
<S> <C>
Independent Auditors' Report 29
Consolidated Balance Sheets for December 31,
1996 and 1995 30
Consolidated Statements of Earnings for the years
ended December 31, 1996, 1995 and 1994 31
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1996, 1995 and 1994 32
Consolidated Statements of Cash Flows for
the years ended December 31, 1996, 1995 and 1994 33
Notes to Consolidated Financial Statements 34
SCHEDULES
- ---------
II - Valuation and Qualifying Accounts 52
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no reported disagreements on any matter of accounting
principles or practice or financial statement disclosure at any time during the
twenty-four months prior to December 31, 1996.
28
<PAGE>
Independent Auditors' Report
----------------------------
Board of Directors and Shareholders
Davel Communications Group, Inc.
We have audited the accompanying consolidated balance sheets of Davel
Communications Group, Inc. (an Illinois corporation) and Subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. 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 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 our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Davel
Communications Group, Inc. and Subsidiaries as of December 31, 1996 and 1995,
and the consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
We have also audited Schedule II of Davel Communications Group, Inc.
and Subsidiaries as of December 31, 1996 and 1995, and for each of the three
years in the period ended December 31, 1996. In our opinion, this schedule
presents fairly, in all material respects, the information required to be set
forth therein.
KERBER, ECK & BRAECKEL LLP
Springfield, Illinois
March 14, 1997
29
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31
<TABLE>
<CAPTION>
ASSETS 1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,629,936 $ 2,433,143
Receivables
Accounts, less allowance of $153,793
in 1996 and $370,444 in 1995 6,079,421 7,262,701
Officer and employees 59,418 24,797
Note 2,301,000 --
Inventories 50,856 290,627
Prepaid income taxes 804,945 --
Deferred income taxes 78,847 162,776
Other current assets 151,422 324,907
Net assets of discontinued operations 599,237 --
---------- ----------
Total current assets 14,755,082 10,498,951
PROPERTY AND EQUIPMENT - AT COST
less accumulated depreciation 28,417,615 20,058,029
OTHER ASSETS
Goodwill, less accumulated amortization 274,586 2,392,745
Other assets 414,844 378,203
----------- -----------
Total other assets 689,430 2,770,948
----------- -----------
Total assets $43,862,127 $33,327,928
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 69,207 $ 86,992
Accounts payable 1,044,179 1,672,428
Accrued expenses
Compensation 235,658 162,996
Other 1,276,145 1,047,992
Cash advances on factored receivables -- 697,109
Income taxes payable -- 18,429
----------- -----------
Total current liabilities 2,625,189 3,685,946
LONG-TERM DEBT, less current maturities 5,726,019 204,810
DEFERRED INCOME TAXES 2,575,626 1,447,300
SHAREHOLDERS' EQUITY
Preferred stock - authorized but unissued,
1,000,000 shares $.01 par value in 1996 and 1995 -- --
Common stock - authorized 10,000,000 shares without par
value - 4,581,269 and 4,455,000 shares issued and
outstanding at December 31, 1996 and 1995, respectively 45,813 44,550
Additional paid-in capital 19,912,080 18,772,736
Retained earnings 12,977,400 9,172,586
----------- -----------
Total shareholders' equity 32,935,293 27,989,872
----------- -----------
Total liabilities and shareholders' equity $43,862,127 $33,327,928
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Year ended December 31
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues
Coin calls $18,559,523 $14,356,466 $ 9,915,749
Non-coin calls 16,125,252 15,759,967 12,612,800
Long distance income 2,288,504 1,713,179 69,142
----------- ----------- -----------
Total revenues 36,973,279 31,829,612 22,597,691
Costs and expenses
Telephone charges - payphones 7,500,818 6,075,995 4,748,291
Commissions - payphones 4,605,632 3,852,095 2,847,941
Commissions - long distance income 1,680,579 1,115,598 996
Service, maintenance and network costs 8,545,970 7,155,898 5,217,397
Selling, general and administrative 6,402,159 5,132,909 3,550,106
Depreciation and amortization 2,985,748 2,135,789 1,388,865
Non-recurring charge -- 214,891 --
----------- ----------- -----------
Total operating costs and expenses 31,720,906 25,683,175 17,753,596
----------- ----------- -----------
Operating profit 5,252,373 6,146,437 4,844,095
Other income (expense)
Interest and other income 100,060 124,979 250,765
Interest expense (288,807) (48,463) (31,096)
Loss on sale of marketable securities -- -- (145,139)
----------- ----------- -----------
Total other income (expense) (188,747) 76,516 74,530
----------- ----------- -----------
Earnings from continuing operations before income taxes 5,063,626 6,222,953 4,918,625
Income taxes 1,868,313 2,403,081 1,805,971
----------- ----------- -----------
Earnings from continuing operations 3,195,313 3,819,872 3,112,654
Discontinued operations
Gain (loss ) from operations of hospitality division, net of income
taxes of $114,941, $242,751, and $509,938 in 1996, 1995
and 1994 respectively 334,079 (2,042,731) 789,827
Gain on sale of hospitality division, net of income taxes of
$439,000 746,402 -- --
Loss from operations of remanufacturing division, net of income
tax benefit of $191,509, $267,557, and $88,516 in 1996, 1995
and 1994 respectively (368,990) (465,412) (149,362)
Estimated loss on disposal of remanufacturing division, net of
income tax benefit of $62,510 (101,990) -- --
----------- ----------- -----------
609,501 (2,508,143) 640,465
----------- ----------- -----------
Net earnings $ 3,804,814 $ 1,311,729 $ 3,753,119
=========== =========== ===========
Earnings per common share
Continuing operations $ 0.71 $ 0.86 $0.70
Discontinued operations
Gain (loss) from hospitality division 0.07 (0.46) 0.17
Gain on disposal of hospitality division 0.16 -- --
Loss from remanufacturing division (0.08) (0.11) (0.03)
Estimated loss on disposal of remanufacturing division (0.02) -- --
----------- ----------- -----------
Total $ .84 $ .29 $ .84
=========== =========== ===========
Average shares outstanding 4,513,035 4,455,000 4,455,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid-in Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 4,455,000 $44,550 $18,765,762 $ 4,107,738 $22,918,050
Receipt of Section 16(b)
common stock profits -- -- 6,974 -- 6,974
Net earnings for the year
ended December 31, 1994 -- -- -- 3,753,119 3,753,119
--------- ------- ----------- ----------- -----------
Balance at December 31, 1994 4,455,000 44,550 18,772,736 7,860,857 26,678,143
Net earnings for the year
ended December 31, 1995 -- -- -- 1,311,729 1,311,729
--------- ------- ----------- ----------- -----------
Balance at December 31, 1995 4,455,000 44,550 18,772,736 9,172,586 27,989,872
Stock options and warrants
exercised 126,269 1,263 1,139,344 -- 1,140,607
Net earnings for the year
ended December 31, 1996 -- -- -- 3,804,814 3,804,814
--------- ------- ----------- ----------- -----------
Balance at December 31, 1996 4,581,269 $45,813 $19,912,080 $12,977,400 $32,935,293
========= ======= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings $ 3,804,814 $ 1,311,729 $ 3,753,119
Adjustments to reconcile net earnings to net cash
provided by continuing operations
Discontinued operations (609,501) 2,508,143 (640,465)
Net realized loss on sales of marketable securities -- -- 145,139
(Gain) loss on sale of property and equipment (1,432) (5,972) 8,983
Depreciation and amortization 2,985,748 3,146,707 2,068,875
Amortization of bonds -- -- 28,770
Deferred income taxes 832,791 44,735 243,532
Non-recurring charge -- 214,891 --
Changes in assets and liabilities, net of
effects from acquisitions
(Increase) decrease in accounts receivable 447,154 (1,658,337) (1,164,547)
(Increase) decrease in inventories 15,158 (8,272) 1,800
(Increase) decrease in other assets 397,055 114,786 (174,731)
Increase (decrease) in accounts payable (1,104,388) 392,001 (1,393,183)
Increase (decrease) in accrued expenses 471,184 (364,426) 1,737,187
Increase (decrease) in income taxes payable (769,607) 234,278 (683,980)
------------ ----------- -----------
Net cash provided by continuing operations 6,468,976 5,930,263 3,930,499
Net cash provided by (used in) discontinued operations 670,708 (655,535) 140,879
------------ ----------- -----------
Net cash provided by operating activities 7,139,684 5,274,728 4,071,378
Cash flows from investing activities
Capital expenditures (5,064,077) (6,005,878) (4,387,970)
Proceeds from sale of available for sale securities -- -- 11,308,281
Purchase of available for sale securities -- -- (2,524,882)
Proceeds from sale of property and equipment -- 31,394 5,025
Proceeds from sale of discontinued operations 2,653,727 -- --
Increase in net assets of assets of discontinued operations (599,237) -- --
Increase in cash value of life insurance (8,378) (6,147) (1,824)
Purchase of Comtel Computer Corporation, net of
cash deficit acquired -- -- (6,585,018)
Purchase of payphone businesses and related assets,
net of cash acquired (8,569,957) (1,688,536) (1,687,274)
------------ ----------- -----------
Net cash used in investing activities (11,587,922) (7,669,167) (3,873,662)
Cash flows from financing activities
Long-term debt financing 7,409,479 -- --
Payments on long-term debt (1,906,055) (73,009) (95,100)
Issuance of common stock through stock options and warrants 1,141,607 -- --
Receipt of Section 16(b) common stock profits -- -- 6,974
------------ ----------- -----------
Net cash provided by (used in)
financing activities 6,645,031 (73,009) (88,126)
------------ ----------- -----------
Net increase (decrease) in cash
and cash equivalents 2,196,793 (2,467,448) 109,590
Cash and cash equivalents at beginning of year 2,433,143 4,900,591 4,791,001
------------ ----------- -----------
Cash and cash equivalents at end of year $ 4,629,936 $ 2,433,143 $ 4,900,591
============ =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
33
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. The Company
Davel Communications Group, Inc. and its Subsidiaries taken as a whole (the
Company) operates, services and maintains a system of over 15,000 pay
telephones in 24 states and provides operator services to these pay telephones.
Until December 31, 1996, the Company also provided operator services to
approximately 74,000 motel and hotel telephones in 47 states (Hospitality
Division). The Company also manufactured, remanufactured and repaired pay
telephones and other telecommunications equipment for its own use and for sale
to others through the fourth quarter of 1996 (Remanufacturing Division). The
Hospitality Division was sold and the Remanufacturing Division was discontinued
late in 1996 (See Note B).
2. Principles of Consolidation
The accompanying financial statements include the accounts of the Company and
its wholly-owned subsidiaries. Intercompany transactions and balances have
been eliminated in consolidation, except as noted in Note F.
3. Inventories
Inventories, which consist mainly of repair and manufacturing parts and
supplies, are carried at the lower of cost or market. Cost is determined by
the first-in, first-out method.
4. Concentrations of Credit Risk
Receivables have a significant concentration of credit risk in the
telecommunications industry. In addition, a significant amount of receivables
are generated by approximately 27% of the Company's pay telephones located in
the State of Florida.
The Company and its Subsidiaries maintain cash balances at several financial
institutions located throughout the United States. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000. The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on cash and cash
equivalents.
34
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
5. Fair Value of Financial Instruments
For certain of the Company's financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities, and
notes payable, the carrying amounts approximate fair value due to their short
maturities. Due to floating interest rates and values determined using
borrowing rates currently available to the Company, long-term debt is also
carried at amounts that approximate fair value.
6. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives using
straight-line and accelerated methods.
7. Intangible Assets
Intangible assets represent the unamortized excess of cost over fair market
value of net assets of businesses acquired by purchase in business
combinations. Goodwill is being amortized on a straight-line basis primarily
over ten years.
The Company periodically evaluates the carrying amount of intangible assets,
considering whether the undiscounted cash flows from related operations will be
sufficient to recover recorded asset amounts. As of December 31, 1996, the
management of the Company believes no additional impairment exists, and
therefore, no additional write-downs of intangibles have been made.
8. Recognition of Revenue
Revenues from coin calls and non-coin calls are recognized as calls are made.
When revenue on a telephone call is recorded, an expense is also recorded for
fees associated with the call.
9. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Such temporary
differences include a deferred gain on an involuntary conversion, accumulated
depreciation and amortization of property and equipment and intangibles,
allowance for doubtful accounts, and accrued liabilities.
35
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
10. Earnings Per Share
Earnings per common share are computed on the basis of the average number of
shares outstanding during each year.
11. Cash Equivalents
For purposes of determining cash flows, the Company defines cash and cash
equivalents as highly-liquid investments purchased with an original maturity of
three months or less.
12. Transactions with Majority Shareholder's Businesses
Certain employees of the Company devote a portion of their time to businesses
(other than the Company) owned by Mr. David Hill ("the Shareholder"). Mr. Hill
is the owner of 50.2% of the Company's outstanding common stock. Mr. Hill's
businesses regularly reimburse the Company for an allocation of the salary and
other costs of these employees computed in proportion to the time spent by
these employees working on behalf of such businesses. These reimbursements
have been netted against the appropriate line items from the statement of
earnings in which they were classified.
13. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Although these estimates are based on management's knowledge of current
events and actions it may undertake in the future, they may ultimately differ
from actual results.
14. Reclassification
Certain reclassifications have been made to conform to the 1996 presentation.
15. New Accounting Standard
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), in 1996. Under the
provisions of SFAS 123, companies can elect to account for stock-based
compensation plans using a fair-value based method or continue measuring
compensation expense for those plans using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related Interpretations. The Company has
elected to continue using the intrinsic value method to account for stock-based
compensation plans. SFAS 123 requires companies electing to continue using the
intrinsic value method to make certain pro forma disclosures (see Note J).
36
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE B - DISCONTINUED OPERATIONS
1. Sale of Hospitality Division
On December 31, 1996, the Company sold its Hospitality Division (ComTel
Computer Corp.) in a stock sale agreement for approximately $ 5 million (cash
proceeds of $ 2.7 million and a note receivable of $ 2.3 million). The note
receivable has a maturity date of December 31, 1997, with a stated interest
rate of 9.75% per annum, compounded daily. The Company holds a first security
interest in the assets and common stock of ComTel. The sale resulted in a gain
of $ 746,402, after tax expense of $ 439,000 and added $ .16 to the 1996 net
earnings per share.
The disposal of this division is being accounted for as discontinued operations
and its operating results are segregated and reported as discontinued
operations in the accompanying consolidated statements of earnings and cash
flows for all periods presented.
Information relating to the discontinued operations of the Hospitality Division
for the year ended December 31, 1996, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Revenues $9,832,330
Costs and expenses 9,413,850
----------
Operating profit 418,480
Other income 30,540
----------
Earnings before income taxes 449,020
Income taxes 114,941
----------
Net earnings $ 334,079
==========
</TABLE>
2. Remanufacturing Division
During the fourth quarter of 1996, the Company committed to discontinue its
remanufacturing operations. This disposal has been reported as a discontinued
operation and accordingly, results of its Remanufacturing Division have been
excluded from continuing operations in the consolidated statements of earnings
and cash flows for all periods presented. The net assets to be disposed of
have been separately classified in the accompanying balance sheet at December
31, 1996. The 1995 balance sheet has not been restated.
37
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE B - DISCONTINUED OPERATIONS - Continued
The Company plans to dispose of the assets by selling to other companies in the
industry. The Company has listed the assets in various trade journals. It is
anticipated that the disposal will be completed during the second quarter of
1997.
The Remanufacturing Division had revenues of $372,855 and $994,926 in 1996
and 1995, respectively.
The net assets of discontinued operations are stated at the Company's estimate
of their net realizable value. The estimated loss on disposal at December 31,
1996, included the writedown of inventory to market value based on management's
estimate. These net assets consist of:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Current assets $137,340
Prepaid income taxes 434,962
Property, plant and equipment 39,570
Current liabilities (10,932)
Deferred income taxes (1,703)
--------
Net assets of discontinued operations $599,237
========
</TABLE>
NOTE C - NON-RECURRING CHARGE
In 1995, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121). The
Company adopted the statement during the year ended December 31, 1995.
In the 1995 fourth quarter, the Company recorded a non-recurring charge of
$3.1 million ($2.9 million after-tax or $.65 per share) due to impairment of
intangible and long-lived assets after applying certain provisions of SFAS 121.
Of the non-recurring charge, $2.7 million relates to intangible assets
purchased in the April 1994 acquisition of Comtel Computer Corp. (ComTel), the
Hospitality Division that was sold on December 31, 1996. This non-recurring
charge has been reclassified to discontinued operations. Acquired contracts
with hotel and motel properties for operator services represent $2.5 million
of the charge, and acquired research and development costs represent the
remaining $.2 million. The Company determined the future cash flows from these
impaired assets to be negligible and considered a complete write-down of the
remaining intangible balances to be appropriate.
38
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE C - NON-RECURRING CHARGE - Continued
The balance of the non-recurring charge of $.4 million ($.2 million net of
tax) represents a write off of uninstalled pay telephone and PBX switching
equipment which was made obsolete by 1995 changes to the North American
Numbering Plan, the telephone numbering plan used in the United States, Canada,
Bermuda, Puerto Rico and the Caribbean countries (NANP). This uninstalled
equipment was not upgradable to accommodate new area codes created by the
changes to the NANP and was determined by the Company to be impaired. All of
the Company's remaining equipment has been upgraded or is fully upgradable to
comply with the changes to the NANP.
NOTE D - ACQUISITIONS
During the years ended December 31, 1996 and 1995, the Company made
acquisitions set forth below, each of which has been accounted for as a
purchase. The consolidated financial statements include the operating results
of each business from the date of acquisition. Pro forma results of operations
have not been presented because the effects of each of these acquisitions were
not significant. For all 1996 transactions, the purchase price was completely
allocated to payphones and associated assets including inventory and, in some
instances, non-compete agreements.
On June 4, 1996, the Company completed the acquisition of the assets of
Cottonwood Communication of Burlington, Iowa, including 933 installed pay
telephones in Arizona, Iowa, and Utah in a business combination accounted for
as a purchase. The purchase price for the assets, which included equipment
related to the installed telephones, inventory and location agreements, was
$2,620,065 in cash.
On July 12, 1996, the Company completed the acquisition of 653 installed pay
telephones and other related assets from Payphone Corporation of America for
$1,785,250 in cash in a business combination accounted for as a purchase. The
acquired pay telephones are located primarily in the Washington D.C.
metropolitan area.
On November 1, 1996, the Company completed the acquisition of 1,008 installed
pay telephones and other related assets from Pay Telephone America, Ltd. for
$3,500,000 in cash in a business combination accounted for as a purchase. The
acquired telephones are located primarily in Mississippi and adjoining states.
The Company engaged in other smaller acquisitions accounted for as purchases
during the year. These acquisitions included a total of 173 pay telephones for
$476,500.
39
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE D - ACQUISITIONS - Continued
On April 14, 1995, the Company completed the acquisitions of 712 pay telephones
from five different entities in a business combination accounted for as a
purchase. The purchase included five separate pay telephone routes with
operations in North Carolina, South Carolina, Maryland, Virginia, and
Washington, D.C. The Company acquired the pay telephones and the associated
assets including inventory for $ 1,693,187. The purchase price exceeded the
fair value of the assets acquired by $ 25,000 which was assigned to goodwill
and is being amortized over ten years.
NOTE E - PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows at December 31:
<TABLE>
<CAPTION>
Estimated
Useful Life
1996 1995 in Years
----------- ----------- -----------
<S> <C> <C> <C>
Installed pay telephones and related
equipment $33,281,482 $21,834,933 10
Installed hospitality equipment - 1,486,217 5
Transportation equipment 882,463 763,130 5
Furniture, fixtures and office equipment 439,805 584,303 5-7
Other 356,498 683,176 7-39
----------- -----------
34,960,248 25,351,759
Less accumulated depreciation and
amortization 9,469,535 7,595,789
----------- -----------
25,490,713 17,755,970
Uninstalled pay telephone and hospitality
equipment 2,926,902 2,302,059
----------- -----------
$28,417,615 $20,058,029
=========== ===========
</TABLE>
Maintenance and repairs expense from continuing operations was $ 1,119,986,
$ 823,448 and $ 790,977 for the years ended December 31, 1996, 1995 and 1994,
respectively.
40
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE F - RELATED PARTY NOTES AND TRANSACTIONS
1. Receivables
Following is a summary of receivables from related parties:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accounts receivable from employees $51,316 $ 6,406
Accounts receivable from businesses
owned by the Shareholder 8,102 18,391
------- -------
$59,418 $24,797
======= =======
</TABLE>
2. Transactions With Shareholder
The Company and its Subsidiaries engaged in the following transactions with the
Shareholder.
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Payments made for rent of commercial real
estate and lease of long distance
switching equipment $239,120 $231,720 $221,680
======== ======== ========
Payments received for providing
administrative services $122,206 $126,776 $157,506
======== ======== ========
</TABLE>
41
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE F - RELATED PARTY NOTES AND TRANSACTIONS - Continued
3. Intercompany Profits and Losses
As the Hospitality and Remanufacturing Divisions' results of operations have
been excluded from continuing operations in the consolidated statements of
operations, certain intercompany transactions were not eliminated. These
transactions include: a) revenue from directing call traffic from the
Hospitality Division to the Company's switching equipment, digital computerized
routing systems that receive and route calls through transmission lines to
their destination, b) commissions paid to the Company's Hospitality Division
for directing call traffic through the Company's switching equipment, c) income
from providing administrative support to the discontinued subsidiaries.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- --------
<S> <C> <C> <C>
Revenue
Revenue from switching services provided
to Hospitality Division $2,358,656 $1,750,589 $ 69,142
========== ========== ========
Expenses
Commission paid to Hospitality Division $1,680,579 $1,115,598 $ 966
========== ========== ========
Other Income
Administrative Income $ 582,582 $ 472,996 $346,212
========== ========== ========
</TABLE>
The Stock Purchase Agreement for the sale of the Hospitality Division provides
for a contractual relationship between the Company and the buyer for continuing
use of the Company's switching equipment through December 20, 1997, at a rate
structure substantially as provided during 1996.
42
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE G - LONG-TERM DEBT
Following is a summary of long-term debt as of December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revolving Advance on bank's line-of-credit at the
bank's corporate base rate (8.25% at December 31,
1996), interest due monthly with the principal due
September 30, 2001, collateralized by the
Company's assets. $5,590,417 $ -
Term note payable to bank at the bank's
corporate base rate (8.25% and 8.5% at
December 31, 1996 and 1995, respectively),
35 monthly payments of $3,393 principal plus
interest, beginning May 24, 1995, balance of
principal due April 24, 1998, collateralized
by transportation equipment. 98,393 139,107
Term note payable to bank at 8.092%, monthly
installments of principal and interest of
$923 due January 23, 2008, collateralized
by a mortgage on real estate. 80,464 84,830
Notes payable to banks and others with interest rates
ranging from 5.9% to 9.95% due at various dates
ending March 1998. 25,952 67,865
---------- --------
5,795,226 291,802
Less current maturities 69,207 86,992
---------- --------
$5,726,019 $204,810
========== ========
Annual maturities of long-term debt, are as follows:
Year ended December 31,
1997 $ 69,207
1998 47,592
1999 22,487
2000 5,987
2001 5,596,907
Thereafter 53,046
</TABLE>
43
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE H - LINE-OF-CREDIT
Effective September 30, 1996, the Company expanded the size of its revolving
bank line of credit from $ 15 million to $ 25 million. This line-of-credit
provides for the conversion of up to $ 17.5 million of the line-of-credit to
term loans. The terms of the agreement call for the Company to pay interest on
a graduated scale based on the bank's Corporate Base Rate ("CBR"), which was
8.25% on December 31, 1996. The interest rate is indexed based on the Company's
ratio of funded debt to EBITDA as defined in the credit facility and is
adjusted based on market interest rates for CBR and LIBOR. The maturity date of
the revolving portion of the credit facility is September 30, 2001. Principal
outstanding on each term loan under the convertible portion of the credit
facility shall be payable in 12 to 20 quarterly installments with the last
installment due no later than September 30, 2003. As of December 31, 1996, the
Company had $ 5.6 million borrowed under the revolving portion of the credit
facility.
The line-of-credit agreement requires, among other things, that the Company
meet minimum net worth and current ratio requirements and contains certain
other restrictions related to use of proceeds, compensating balances, types of
investments and the assumption of additional debt. The Company was in
compliance with these covenants at December 31, 1996.
NOTE I - OPERATING LEASE COMMITMENTS
The Company conducts a portion of its operations in leased facilities under
noncancelable operating leases expiring at various dates through 2004. Some of
the operating leases provide the Company pay taxes, maintenance, insurance, and
other occupancy expenses applicable to leased premises.
In June of 1993, the Company entered into a lease of long distance telephone
call switching equipment with the Shareholder. All operating and maintenance
expenses related to the switching equipment are paid by the Company. Also in
June 1993, the Company entered into four noncancelable operating leases with
the Shareholder for facilities. The aggregate monthly lease payment increased
to $ 18,570 starting May 1, 1995.
44
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE I - OPERATING LEASE COMMITMENTS - Continued
The annual minimum rental commitments under operating leases are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C>
1997 $ 390,459
1998 254,200
1999 130,757
2000 103,320
2001 103,320
Thereafter 154,980
----------
Total minimum payments required $1,137,036
==========
</TABLE>
Rent expense for operating leases from continuing operations for the years
ended December 31, 1996, 1995 and 1994 was $ 213,384, $ 168,715 and $ 130,968
respectively.
NOTE J - CAPITAL STOCK TRANSACTIONS
1. Preferred Stock
The Company's articles of incorporation authorize 1,000,000 shares of preferred
stock, par value $ .01 per share. The Company does not have any immediate plans
to issue any shares of preferred stock.
45
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE J - CAPITAL STOCK TRANSACTIONS - Continued
2. Stock Options and Warrants
The Company maintains a Stock Option Plan and a Directors' Stock Option Plan,
accounted for under APB Opinion 25 and related Interpretations. The plans
provide for the grant of nonqualified options to purchase shares of common
stock and outright grants of common stock. The maximum number of shares of
common stock reserved for issuance under the Stock Option Plan and the
Directors' Stock Option Plan are 1,000,000 and 150,000 shares, respectively,
and the maximum term of the options is five years. Generally, key employee
options vest in three equal installments. Nonemployee Director options become
fully vested upon receipt. The exercise price of each option generally equals
the market price of the Company's stock on the date of grant. Accordingly, no
compensation cost has been recognized for the plans. Had compensation cost for
the plans been determined based on the fair value of the options at the grant
dates consistent with the method of Statement of Financial Accounting Standards
123, Accounting for Stock-Based Compensation (SFAS 123), the Company's net
earnings and earnings per share would have been reduced to the pro forma
amounts indicated below.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C> <C>
Net earnings As reported $3,804,814 $1,311,729 $3,753,119
Pro forma 3,205,831 1,283,098 3,274,808
Net earnings per
common share As reported $ .84 $ .29 $ .84
Pro forma .71 .29 .74
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants in 1996, 1995, and 1994, respectively: dividend
yield of 0% for all years; expected volatility of 32.9%, 43.4% and 47.7%;
risk-free interest rates of 6.2%, 5.9% and 5.75%; and expected life of 2.5
years.
46
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE J - CAPITAL STOCK TRANSACTIONS - Continued
A summary of the status of the Company's stock option plans as of December 31,
1996, 1995 and 1994, and changes during the years ending on those dates is
presented below.
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- ------------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 420,774 $12.63 414,674 $12.67 238,250 $13.63
Granted 255,000 14.66 12,000 11.88 176,424 11.42
Exercised (173,874) 12.36 - - - -
Expired - - (5,900) 13.42 - -
-------- ------ ------- -------- -------- --------
Outstanding at end of year 501,900 $14.07 420,774 $12.63 414,674 $12.67
======== ====== ======= ======== ======== ========
Options exerciseable at year end 276,566 $13.44 334,672 $12.61 292,164 $12.59
Weighted-average fair
value of options granted
during the year $ 3.98 $ 3.85 $ 3.95
</TABLE>
The following information applies to options outstanding at December 31, 1996:
Number outstanding 501,900
Range of exercise prices $ 9.25 - $ 15.60
Weighted-average exercise price $14.07
Weighted-average remaining contractual life 3.43
NOTE K - INCOME TAXES
Deferred income taxes arise from temporary differences between the tax bases
of assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets or liabilities at the end of each period are
determined using the tax rate expected to be in effect when taxes are actually
paid or recovered. Income tax provisions will increase or decrease in the same
period in which a change in tax rates is enacted.
47
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE K - INCOME TAXES - Continued
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Currently payable
Federal $ 827,752 $1,968,248 $1,387,427
State 207,770 299,121 265,990
---------- ---------- ----------
1,035,522 2,267,369 1,653,417
Deferred 832,791 135,712 152,554
---------- ---------- ----------
Income tax from continuing operations 1,868,313 2,403,081 1,805,971
Income tax expense (benefit) from
discontinued operations 299,922 (24,806) 421,422
---------- ---------- ----------
Total income tax expense $2,168,235 $2,378,275 $2,227,393
========== ========== ==========
</TABLE>
48
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE K - INCOME TAXES - Continued
Deferred tax assets and liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-------------------- ---------------------
Net Net Net Net
Current Noncurrent Current Noncurrent
Assets Liabilities Assets Liabilities
------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Assets
Accumulated amortization of
intangibles $ - $ 27,140 $ - $1,467,621
Allowance for doubtful accounts 58,441 - 144,473 -
Accrued liabilities 20,406 - 18,303 -
Valuation allowance - - - (988,000)
------- ---------- -------- ----------
78,847 27,140 162,776 479,621
Liabilities
Capital tax loss on sale of Hospitality Division - 561,123 - -
Valuation allowance - (561,123) - -
Differences in basis of fixed assets
primarily due to accumulated
depreciation - 2,602,766 - 1,926,921
------- ---------- -------- ----------
$78,847 $2,575,626 $162,776 $1,447,300
======= ========== ======== ==========
</TABLE>
A deferred tax asset of $561,123 has been provided for the $1.5 million of
tax-basis capital loss carryover on the sale of ComTel. A valuation allowance
for 100% of this deferred tax asset has been provided to reduce the asset to
the amount of tax benefit management believes it will most likely realize. As
time passes, management believes it will be able to better assess the amount of
tax benefit it will realize from applying this capital loss. The capital loss
carryover expires December 31, 2001.
49
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE K - INCOME TAXES - Continued
A reconciliation of Federal statutory income taxes to the Company's effective
tax provision is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ------------ ----------
<S> <C> <C> <C>
Provision for Federal income tax at
the statutory rate (34%) $1,721,633 $2,115,804 $1,672,333
State income taxes, net of Federal benefit 167,099 205,358 162,314
Stock options (207,605) - -
Capital losses 152,000 (49,347) -
Other, net 35,186 131,266 (28,676)
---------- ---------- ----------
Income taxes from continuing operations 1,868,313 2,403,081 1,805,971
Income tax expense (benefit) from
discontinued operations 299,922 (24,806) 421,422
---------- ---------- ----------
Total income tax expense $2,168,235 $2,378,275 $2,227,393
========== ========== ==========
</TABLE>
NOTE L - 401(k) PROFIT SHARING PLAN
The Company maintains a 401(k) profit sharing plan which covers all full-time
employees who meet the eligibility requirements as to age and length of
service. A participant may elect to have his or her compensation reduced by an
amount not to exceed 15% of compensation actually paid. The Company will match
50% of the participants' elective deferrals not exceeding 3% of the
participants' compensation. Profit sharing expense was $ 46,263 and $ 35,428
for 1996 and 1995, respectively.
50
<PAGE>
Davel Communications Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE M - STATEMENT OF CASH FLOWS
Cash paid during the year ended December 31 for interest and income taxes was
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest $ 367,316 $ 142,003 $ 106,101
Income tax payments 2,129,214 2,433,397 2,547,227
</TABLE>
In 1996, non-cash investing activities included a note receivable of $ 2.3
million for the sale of the Hospitality Division.
NOTE N - MAJOR SUPPLIERS
The Telephone Division made purchases from the following major suppliers which
accounted for more than 10% of the Company's total purchases of equipment for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- ----------
<S> <C> <C> <C>
Protel, Inc. $1,304,254 $1,709,778 $1,376,818
Quadrum Telecommunications 251,059 - -
Enclosures, Inc. 226,422 129,645 71,242
</TABLE>
NOTE O - SUBSEQUENT EVENT
In January 1997, the Company was granted corporate authority to do business in
Mexico. However, they are awaiting a license to provide pay telephone services.
Operations are expected to begin in the second quarter of 1997. Organizational
costs capitalized relating to Mexico operations through December 31, 1996, were
$ 132,657.
51
<PAGE>
<TABLE>
<CAPTION>
Davel Communications Group, Inc. and Subsidiaries
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged to
Beginning Costs and Deductions/ Balance at
Description of Year Expenses Write-offs End of Year
----------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Accounts receivable
Allowance for doubtful accounts
Year ended 1994 $ 42,500 $1,000,220 $ 748,328 $294,392
Year ended 1995 294,392 1,318,038 1,241,986 370,444
Year ended 1996 370,444 889,721 1,106,372 153,793
</TABLE>
52
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this Item 10 will be contained in the Company's
definitive proxy materials to be filed with the Securities and Exchange
Commission and is incorporated in this Annual Report on Form 10-K by this
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 will be contained in the Company's
definitive proxy materials to be filed with the Securities and Exchange
Commission and is incorporated in this Annual Report on Form 10-K by this
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 will be contained in the Company's
definitive proxy materials to be filed with the Securities and Exchange
Commission and is incorporated in this Annual Report on 10-K by this reference.
ITEM 13. CERTAIN TRANSACTIONS
The information required by this Item 13 will be contained in the Company's
definitive proxy materials to be filed with the Securities and Exchange
Commission and is incorporated in this Annual Report on 10-K by this reference.
53
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed with, and as part of, this Annual
Report on Form 10-K.
1. Financial Statements
For a complete list of the Financial Statements filed with this Annual
Report on Form 10-K, see the Index to Financial Statements and
Supplementary Data on Page 28.
2. Financial Statement Schedules
The following Supplementary Schedules are filed with this Annual
Report on Form 10-K:
See Index to Financial Statements and Supplementary Data on
Page 28.
3. Exhibits
See Exhibit Index on Page 55.
(b) Reports on Form 8-K.
On February 11, 1997, the Company filed a Current Report on Form 8-K
to report the sale of 100% of the Common Stock of Comtel Computer Corp. and
California Comtel Computer, Inc. to Portland, Oregon-based Skylink
Telecommunications Corp. On March 13, 1997, the Company filed a Current Report
on Form 8-K/A containing the unaudited pro forma financial statements for the
nine months ended September 30, 1996, and the fiscal year ended December 31,
1995, which were not included as part of the filing of the Current Form 8-K as
filed on March 13, 1997.
54
<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.
DAVEL COMMUNICATIONS GROUP, INC.
Date: March 28, 1997 By:
DAVID R. HILL
Chairman of the Board
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>
Signatures Title Date
<S> <C> <C>
/s/ David R. Hill Chairman of the Board of Directors March 28, 1997
- ----------------------------------
David R. Hill
/s/ Robert D. Hill President, Chief Executive Officer March 28, 1997
- ---------------------------------- and Director
Robert D. Hill
/s/ Michael E. Hayes Chief Financial and Accounting March 28, 1997
- ---------------------------------- Officer and Director
Michael E. Hayes
/s/ Jacquelyn J. Borrowman Controller March 28, 1997
- ----------------------------------
Jacquelyn J. Borrowman
/s/ Paul B. Demirdjian Senior Vice President of March 28, 1997
- ---------------------------------- Operations and Director
Paul B. Demirdjian
/s/ Michael G. Kouri Senior Vice President of March 28, 1997
- ---------------------------------- Development and Finance and Director
Michael G. Kouri
/s/ Theodore C. Rammelkamp, Jr. Senior Vice President, General Counsel March 28, 1997
- ---------------------------------- and Director
Theodore C. Rammelkamp, Jr.
/s/ A. Jones Yorke Director March 28, 1997
- ----------------------------------
A. Jones Yorke
/s/ Glen E. Barber Director March 28, 1997
- ----------------------------------
Glen E. Barber
/s/ Thomas M. Vitale Director March 28, 1997
- ----------------------------------
Thomas M. Vitale
</TABLE>
55
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits Description
- -------- -----------
<C> <S>
3.2 Amended and restated By-laws of the Company.(1)
10.1 Amended and Restated Loan Agreement, dated September 30, 1996, by and
between the Company and The Boatmen's National Bank of St. Louis for a
revolving/term credit facility in the principal amount of
$25,000,000.(2)
10.2 Employment Agreement, dated September 12, 1996, between the Company and
David R. Hill.
10.3 Revised Employment Agreement, dated February 28, 1997, between the
Company and Robert D. Hill.
10.4 Revised Employment Agreement, dated February 28, 1997, between the
Company and Paul B. Demirdjian.
10.5 Revised Employment Agreement, dated February 28, 1997, between the
Company and Michael G. Kouri.
10.6 Revised Employment Agreement, dated February 28, 1997, between the
Company and Marlin E. Turnipseed.
10.7 Revised Employment Agreement, dated February 28, 1997, between the
Company and Michael E. Hayes.
10.8 Revised Employment Agreement, dated February 28, 1997, between the
Company and Theodore C. Rammelkamp, Jr.
10.9 Stock Purchase agreement, dated December 20, 1996, by and between the
Company and Skylink Telecommunications Corporation for the sale of 100%
of the Common Stock of Comtel Computer Corp. and California Comtel
Computer, Inc.
10.10 Asset Purchase Agreement, dated January 1, 1996, by and between the
Company and Capital Pay Phone Group, LLC for the purchase of pay
telephone assets.
10.11 Asset Purchase Agreement, dated April 16, 1996, by and between the
Company and Suntel for the purchase of pay telephone assets.
10.12 Asset Purchase Agreement, dated June 4, 1996, by and between the
Company and Cottonwood Ventures, LC for the purchase of pay telephone
assets.
10.13 Asset Purchase Agreement, dated July 12, 1996, by and between the
Company and Payphone Corporation of America for the purchase of pay
telephone assets.
10.14 Asset Purchase Agreement, dated November 1, 1996, by and between the
Company and Pay Telephone America, Ltd. for the purchase of pay
telephone assets.
</TABLE>
- ---------------------
(1) Incorporated herein by reference to the exhibit of the same number in the
Company's Registration Statement on Form S-1 (Registration No. 33-67678).
(2) Incorporated herein by reference to the exhibit of the same number in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994
(File No. 0-22610).
<PAGE>
EXHIBIT 3.2
BY-LAWS
-------
OF
--
DAVEL COMMUNICATIONS GROUP, INC.
--------------------------------
(Restated 1/29/97)
ARTICLE I - OFFICES
-------------------
The registered office of the Corporation shall be located in the City,
County and State designated for such office in the Articles of Incorporation.
The Corporation may also maintain offices at such other places within or without
the United States as the Board of Directors may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
------------------------------------
Section 1 - Annual Meetings:
---------------------------
The annual meeting of the shareholders of the Corporation shall be held
after the close of the fiscal year of the Corporation, at such time as
determined by the directors, for the purpose of electing directors and
transacting such other business as may properly come before the meeting.
Section 2 - Special Meetings:
----------------------------
Special meeting of the shareholders may be called at any time by the Board
of Directors or by the Chairman of the Board and shall be called by the
President or Secretary at the written request of the holders of twenty-five
percent (25%) of the shares then outstanding and entitled to vote thereat, or as
otherwise required by law.
Section 3 - Place of Meetings:
-----------------------------
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
Section 4 - Notice of Meetings:
------------------------------
(a) Except as otherwise provided by Statute, written notice of each
meeting of shareholders, whether annual or special, stating the time when and
place where it is to be
<PAGE>
held, shall be served either personally or by mail, not less than ten or more
than sixty days before the meeting, upon each shareholder of record entitled to
vote at such meeting, and to any other shareholder to whom the giving of notice
may be required by law. Notice of a special meeting shall also state the purpose
or purposes for which the meeting is called, and shall indicate that it is being
issued by, or at the direction of, the person or persons calling the meeting.
If, at any meeting, action is proposed to be taken that would, if taken, entitle
shareholders to receive payment for their shares pursuant to Statute, the notice
of such meeting shall include a statement of that purpose and to that effect. If
mailed, such notice shall be directed to each such shareholder at his address,
as it appears on the records of the shareholders of the Corporation, unless he
shall have previously filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other address, in which
case, it shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by statute.
Section 5 - Quorum:
------------------
(a) Except as otherwise provided herein, or by statute, or in the Articles
of Incorporation [such Articles and any amendments thereof being hereinafter
collectively referred to as the "Articles of Incorporation"], at all meetings of
shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares in attendance at such meeting and entitled to vote thereon, may
adjourn the meeting. At any such adjourned meeting at which a quorum is
present, any business may be transacted at the meeting as originally called if a
quorum had been present.
Section 6 - Voting:
------------------
(a) Except as otherwise provided by statute or by the Articles of
Incorporation, any corporate action, other than the election of directors, to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
<PAGE>
(b) Except as otherwise provided by statute or by the Articles of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent
without a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
shareholder himself, or by his attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven months from the
date of its execution, unless the person executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the records of
the Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled
to vote thereon, shall be and constitute action by such shareholders to the
effect therein expressed, with the same force and effect as if the same had been
duly passed by unanimous vote at a duly called meeting of shareholders and such
resolution so signed shall be inserted in the Minute Book of the corporation
under its proper date.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1 - Number, Election and Term of Office:
-----------------------------------------------
(a) The number of the directors of the Corporation shall be not less than
five, nor more than nine directors as determined from time to time by the Board
by vote of a majority of the entire Board of Directors.
(b) Except as may otherwise be provided herein or in the Articles of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares, present in person or by
proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the
shareholders next succeeding his election, and until his successor is elected
and qualified, or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
-----------------------------
The Board of Directors shall be responsible for the control and management
of the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Articles of Incorporation or by
statute expressly conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular Meetings; Notice:
-----------------------------------------------
<PAGE>
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders, at the place of
such annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution
for the holding of other regular meetings of the Board of Directors, and may fix
the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) Section 4 of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in paragraph (c) of
such Section 4.
Section 4 - Special Meetings; Notice:
------------------------------------
(a) Special meetings of the Board of Directors shall be held whenever
called by the Chairman, President or by any two of the directors, at such time
and place as may be specified in the respective notices or waivers of notice
thereof.
(b) Except as otherwise required by statute, notice of special meetings
shall be mailed directly to each director, addressed to him at his residence or
usual place of business, at least two (2) days before the day on which the
meeting is to be held, or shall be sent to him at such place by telegram,
telefax, radio or cable, or shall be delivered to him personally or given to him
orally, not later than the day before the day on which the meeting is to be
held. A notice, or waiver of notice, except as required by Section 8 of this
Article III, need not specify the purpose of the meeting nor shall such notice
of special meeting otherwise limit the business to be transacted at such
meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
--------------------
At all meetings of the Board of Directors, the Chairman of the Board, if
any and if present, shall preside. If there shall be no chairman, or he shall be
absent, then the President shall preside, and in his absence, a Chairman chosen
by the directors shall preside.
Section 6 - Quorum and Adjournments:
-----------------------------------
<PAGE>
(a) At all meetings of the Board of Directors, the presence of a majority
of the entire Board shall be necessary and sufficient to constitute a quorum for
the transaction of business, except as otherwise provided by law, by the
Articles of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the same
from time to time without notice, until a quorum shall be present.
Section 7 - Manner of Acting:
----------------------------
(a) At all meetings of the Board of Directors, each director present shall
have one vote, irrespective of the number of shares of stock, if any, which he
may hold.
(b) Except as otherwise provided by statute, by the Articles of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the Corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 8 - Vacancies:
---------------------
Any vacancy in the Board of Directors occurring by reason of an increase
in the number of directors, or by reason of the death, resignation,
disqualification, removal (unless a vacancy created by the removal of a director
by the shareholders shall be filled by the shareholders at the meeting at which
the removal was effected) or inability to act of any director, or otherwise,
shall be filed for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
-----------------------
Any director may resign at any time by giving written notice to the Board
of Directors, the President or the Secretary of the Corporation. Unless
otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
Section 10 - Removal:
--------------------
Any director may be removed with or without cause at any time by the
affirmative vote of shareholders holding of record in the aggregate at least a
majority of the outstanding shares of the Corporation at a special meeting of
the shareholders called for that purpose, and may be removed for cause by action
of the Board.
Section 11 - Salary:
-------------------
<PAGE>
No stated salary shall be paid to directors, as such, for their services,
but by resolution of the Board of Directors a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board; provided, however, that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 12 - Contracts:
----------------------
(a) No contract or other transaction between this Corporation and any
other corporation shall be impaired, affected or invalidated, nor shall any
director be liable in any way by reason of the fact that any one or more of the
directors of this Corporation is or are interested in, or is a director or
officer, or are directors or officers of such other corporation, provided that
such facts are disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be
counted in determining the presence of a quorum at such meeting. This Section
shall not be construed to impair or invalidate or in any way affect any contract
or other transaction which would otherwise be valid under the law (common,
statutory or otherwise) applicable thereto.
Section 13 - Committees:
-----------------------
The Board of Directors, by resolution adopted by a majority of the entire
Board, may from time to time designate from among its members an executive
committee and such other committees, and alternate members thereof, as they may
deem desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
---------------------
Section 1 - Number, Qualifications, Election and Term of Office:
---------------------------------------------------------------
(a) The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and such other officers, including a Chairman of the
Board of Directors, and one or more Vice Presidents, as the Board of Directors
may from time to time deem advisable. Any officer other than the Chairman of the
Board of Directors may be, but is not required to be, a director of the
Corporation. Any two or more offices may be held by the same person.
<PAGE>
(b) The officers of the Corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of shareholders.
(c) Each officer shall hold office until the annual meeting of the Board
of Directors next succeeding his election, and until his successor shall have
been elected and qualified, or until his death, resignation or removal.
Section 2 - Resignation:
-----------------------
Any officer may resign at any time by giving written notice of such
resignation to the Board of Directors, or to the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
Section 3 - Removal:
-------------------
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
---------------------
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
Section 5 - Duties of Officers:
------------------------------
Officers of the Corporation shall, unless otherwise provided by the Board
of Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these by-laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
Section 6 - Sureties and Bonds:
------------------------------
In case the Board of Directors shall so require, any officer, employee or
agent of the Corporation shall execute to the Corporation a bond in such sum,
and with such surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the Corporation,
including responsibility for negligence and for the accounting for all property,
funds or securities of the Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
----------------------------------------
<PAGE>
Whenever the Corporation is the holder of shares of any other corporation,
any right or power of the Corporation as such shareholder (including the
attendance, acting and voting at shareholders' meetings and execution of
waivers, consents, proxies or other instruments) may be exercised on behalf of
the Corporation by the President, any Vice President, or such other person as
the board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
---------------------------
Section 1 - Certificate of Stock:
--------------------------------
(a) The certificates representing shares of the Corporation shall be in
such form as shall be adopted by the Board of Directors, and shall be numbered
and registered in the order issued. They shall bear the holder's name and the
number of shares, and shall be signed by (i) the Chairman of the Board or the
President or a Vice President, and (ii) the Secretary or Treasurer, or any
Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal.
(b) No certificate representing shares shall be issued until the full
amount of consideration therefor has been paid, except as otherwise permitted by
law.
(c) To the extent permitted by law, the Board of Directors may authorize
the issuance of certificates for fractions of a share which shall entitle the
holder to exercise voting rights, receive dividends and participate in
liquidating distributions, in proportion to the fractional holdings; or it may
authorize the payment in cash of the fair value of fractions of a share as of
the time when those entitled to receive such fractions are determined; or it may
authorize the issuance, subject to such conditions as may be permitted by law,
of scrip in registered or bearer form over the signature of an officer or agent
of the Corporation, exchangeable as therein provided for full shares, but such
scrip shall not entitle the holder to any rights of a shareholder, except as
therein provided.
Section 2 - Lost or Destroyed Certificates:
------------------------------------------
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board
of Directors in its discretion may require, the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper so to do.
Section 3 - Transfers of Shares:
-------------------------------
<PAGE>
(a) Transfers of shares of the Corporation shall be made on the share
records of the Corporation only by the holder of record thereof, in person or by
his duly authorized attorney, upon surrender for cancellation of the certificate
or certificates representing such shares, with an assignment or power of
transfer endorsed thereon or delivered therewith, duly executed, with such proof
of the authenticity of the signature and of authority to transfer and of payment
of transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and, accordingly,
shall not be bound to recognize any legal, equitable or other claim to, or
interest in, such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise expressly
provided by law.
Section 4 - Record Date:
-----------------------
In lieu of closing the share records of the Corporation, the Board of
Directors may fix, in advance, a date not exceeding sixty (60) days, nor less
than ten days, as the record date for the determination of shareholders entitled
to receive notice of, or to vote at, any meeting of shareholders, or to consent
to any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividends, or allotment of any
rights, or for the purpose of any other action. If no record date is fixed, the
record date for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if no notice is given, the
day on which the meeting is held; the record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
resolution of the directors relating thereto is adopted. When a determination
of shareholders of record entitled to notice of or to vote at any meeting of
shareholders has been made as provided for herein, such determination shall
apply to any adjournment thereof, unless the directors fix a new record date for
the adjourned meeting.
ARTICLE VI - DIVIDENDS
----------------------
Subject to applicable law, dividends may be declared and paid out of any
funds available therefor, as often, in such amounts, and at such time or times
as the Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
-------------------------
The fiscal year of the Corporation shall be fixed by the Board of
Directors from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
-----------------------------
<PAGE>
The corporate seal, if any, shall be in such form as shall be approved
from time to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
-----------------------
Section 1 - By Shareholders:
---------------------------
All by-laws of the Corporation shall be subject to alteration or repeal,
and new by-laws may be made, by the affirmative vote of shareholders holding of
record in the aggregate at least a majority of the outstanding shares entitled
to vote in the election of directors at any annual or special meeting of
shareholders, provided that the notice or waiver of notice of such meeting shall
have summarized or set forth in full therein, the proposed amendment.
Section 2 - By Directors:
------------------------
The Board of Directors shall have power to make, adopt, alter, amend and
repeal, from time to time, by-laws of the Corporation; provided, however, that
the shareholders entitled to vote with respect thereto as in this Article IX
above provided may alter, amend or repeal by-laws made by the board of
Directors, except that the board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of Directors, or to change
any provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
ARTICLE X - INDEMNITY
---------------------
(a) Any person a party to any action, suit or proceeding, by reason of the
fact that he, his testator or intestate representative is or was a director,
officer or employee of the Corporation, or of any corporation in which he served
as such at the request of the Corporation, shall be indemnified by the
Corporation to the fullest extent of the applicable law against the reasonable
expenses, including attorney's fees, actually and necessarily incurred by him in
connection with the defense of such action, suit or proceedings, or in
connection with any appeal therein, except in relation to matters as to which it
shall be adjudged in such action, suit or proceedings, or in connection with any
appeal therein that such officer, director or employee has been adjudged to be
liable to the Corporation unless indemnification shall be otherwise allowed upon
application to the adjudicating court.
(b) The foregoing right of indemnification shall not be deemed exclusive
of any other rights to which any officer or director or employee may be entitled
apart from the provisions of this section.
<PAGE>
(c) The amount of indemnity to which any officer or any director may be
entitled shall be fixed by the Board of Directors, except that in any case where
there is no disinterested majority of the Board available, the amount shall be
fixed by independent legal counsel shall determine the amount of such indemnity
in a written opinion.
<PAGE>
EXHIBIT 10.1
$25,000,000
REVOLVING AND TERM LOAN FACILITY
PROVIDED BY
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
TO
DAVEL COMMUNICATIONS GROUP, INC.
September 23, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. General. 1
1.1. Effective Date. 1
1.2. Defined Terms. 1
1.3. Singular and Plural Forms. 2
1.4. References. 2
1.5. References to Applicable Lending Office. 2
1.6. References to Covered Person. 2
1.7. Accounting Terms with GAAP Meanings; Consolidated Basis. 2
1.8. "Satisfactory to Lender". 2
1.9. Computation of Time Periods. 2
2. Commitment. 2
2.1. Revolving Commitment. 2
2.1.1. Limitation on Revolving Advances. 3
2.2. Convertible Revolving Commitment. 3
2.2.1. Limitation on Convertible Revolving Advances. 3
2.3. Term Conversions. 3
3. Interest. 4
3.1. Rates. 4
3.2. Interest Periods for LIBOR Loans. 4
3.3. Conversion of Loans. 5
3.4. Compensation for Increase In LIBOR Loan Costs. 5
3.5. LIBOR Loan Funding Losses. 6
3.6. Rate After Maturity. 7
3.7. Time of Accrual. 7
3.8. Computation. 7
3.9. Usury. 7
4. Fees. 7
4.1. Non-Use Fee. 7
4.2. Term Conversion Fee. 8
4.3. Calculation of Fees. 8
5. Payments. 8
5.1. Scheduled Payments on Revolving Loan. 8
5.1.1. Interest. 8
5.1.2. Principal. 9
5.2. Scheduled Payments on Convertible Revolving Loan. 9
5.2.1. Interest. 9
5.2.2. Principal. 9
5.3. Scheduled Payments on Conversion Term Loans. 9
5.3.1. Interest. 9
5.3.2. Principal. 9
5.4. Prepayments and Reduction of Commitments. 9
5.4.1. Voluntary. 9
5.4.1.1. Revolving Loan. 9
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.4.1.2. Revolving Commitment. 10
5.4.1.3. Term Loan. 10
5.4.1.4. Premiums. 10
5.4.2. Mandatory. 10
5.4.2.1. Over-Advances. 10
5.4.2.2. Term Conversions. 11
5.4.2.3. Proceeds from Sales of Assets. 11
5.4.2.4. Proceeds from Sale of Securities. 11
5.4.2.5. Application of Insurance/Condemnation Proceeds. 11
5.5. Manner of Payments and Timing of Application of Payments. 12
5.5.1. Payment Requirement. 12
5.5.2. Application of Payments. 12
5.5.3. Interest Calculation. 12
5.5.4. Returned Checks. 13
5.6. Due Dates Not on Business Days. 13
6. Indemnity for Returned Payments. 13
7. Borrowing Procedure and Limits. 13
7.1. Revolving Advances. 13
7.2. Lender's Right to Make Other Revolving Advances. 14
7.3. Term Conversions. 14
7.4. Restriction on Number of LIBOR Loans. 15
7.5. Suspension of Obligation to Make LIBOR Advances. 15
8. Security and Guaranties. 15
8.1. Security. 15
8.2. Guaranties. 16
8.3. Guarantor Security Agreements. 16
8.4. Further Security. 16
9. Power of Attorney. 17
10. Conditions of Lending. 17
10.1. Conditions to Initial Advance. 18
10.1.1. Listed Documents and Other Items. 18
10.1.2. Financial Condition. 18
10.1.3. No Default. 18
10.1.4. Perfection of Liens and Security Interests. 18
10.1.5. Representations and Warranties. 18
10.1.6. Material Adverse Change. 18
10.1.7. Pending Material Proceedings. 18
10.1.8. Payment of Fees. 18
10.1.9. Legal Opinion. 18
10.1.10. Other Items. 18
10.2. Conditions to Term Conversions and Subsequent Advances. 19
10.2.1. General Conditions. 19
10.2.2. Representations and Warranties. 19
10.2.3. Default. 19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
11. Representations and Warranties. 19
11.1. Organization and Existence. 19
11.2. Authorization. 19
11.3. Due Execution. 19
11.4. Enforceability of Obligations. 19
11.5. Burdensome Obligations. 20
11.6. Legal Restraints. 20
11.7. Labor Disputes. 20
11.8. No Material Proceedings. 20
11.9. Material Licenses. 20
11.10. Compliance with Laws. 20
11.10.1. Compliance. 20
11.10.2. Proceedings. 20
11.10.3. Investigations. 20
11.10.4. Notices; Reports. 21
11.10.5. Environmental Property Transfer Acts. 21
11.10.6. Wage and Hour Laws. 21
11.11. Other Names. 21
11.12. Capitalization. 21
11.13. Financial Statements. 21
11.14. No Change in Condition. 21
11.15. No Defaults. 21
11.16. Investments. 21
11.17. Indebtedness. 21
11.18. Indirect Obligations. 22
11.19. Operating Leases. 22
11.20. Capital Leases. 22
11.21. Tax Liabilities; Governmental Charges. 22
11.22. Pension Benefit Plans. 22
11.22.1. Prohibited Transactions. 22
11.22.2. Claims. 22
11.22.3. Reporting and Disclosure Requirements. 22
11.22.4. Accumulated Funding Deficiency. 23
11.22.5. Multi-employer Plan. 23
11.23. Welfare Benefit Plans. 23
11.24. Retiree Benefits. 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
11.25. State of Collateral and other Property. 23
11.25.1. Accounts. 23
11.25.2. Inventory. 24
11.25.3. Equipment. 24
11.25.4. Documents, Instruments and Chattel Paper. 24
11.26. Chief Place of Business; Locations of Collateral. 25
11.27. Negative Pledges. 25
11.28. Security Documents. 25
11.28.1. Borrower Security Agreements. 25
11.28.2. Guarantor Security Agreements. 25
11.29. Stock Pledge Agreement. 25
11.30. S Corporation. 25
11.31. Subsidiaries and Affiliates. 26
11.32. Margin Stock. 26
11.33. Securities Matters. 26
11.34. Investment Company Act, Etc. 26
11.35. No Material Misstatements or Omissions. 26
11.36. Filings. 26
11.37. Broker's Fees. 26
11.38. Disclosure. 26
12. Survival of Representations. 27
13. Affirmative Covenants. 27
13.1. Use of Proceeds. 27
13.2. Concentration Account. 27
13.3. Corporate Existence; Material Licenses. 27
13.4. Maintenance of Property and Leases. 27
13.5. Inventory. 27
13.6. Insurance. 28
13.7. Payment of Taxes and Other Obligations. 28
13.8. Compliance With Laws. 28
13.8.1. Environmental Laws. 28
13.8.2. Pension Benefit Plans. 29
13.8.3. Employment Laws. 29
13.8.4. Wage and Hour Laws. 29
13.9. Pension Benefit Plans. 29
13.10. Notice of Material Events. 29
13.11. Borrowing Officer. 31
13.12. Maintenance of Liens of Security Documents. 31
13.12.1. Preservation and Perfection of Liens. 31
13.12.2. Collateral Held by Warehouseman, Bailee, etc. 31
13.12.3. Compliance With Terms of Security Documents. 32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
13.13. Accounting System. 32
13.13.1. Account Records. 32
13.13.2. Inventory Records. 32
13.14. Financial Statements. 32
13.14.1. Annual Financial Statements. 32
13.14.2. Monthly Financial Statements. 32
13.15. Telephone Lists. 33
13.16. Other Information. 33
13.17. Audits by Lender. 33
13.18. Verification of Accounts. 33
13.19. Appraisals of Collateral. 33
13.20. Access to Officers and Auditors. 33
13.21. Further Assurances. 34
14. Negative Covenants. 34
14.1. Investments. 34
14.2. Indebtedness. 35
14.3. Prepayments. 36
14.4. Indirect Obligations. 36
14.5. Liens. 36
14.6. FCC Licenses and Permits. 37
14.7. Bailments; Consignments; Warehousing. 37
14.8. Disposal of Property. 37
14.9. Change of Business. 37
14.10. Issuance of Securities. 37
14.11. Transactions With Affiliates. 37
14.12. Debt Payments and Material Agreements. 37
14.13. Conflicting Agreements. 37
14.14. Sale and Leaseback Transactions. 38
14.15. New Subsidiaries. 38
14.16. Transactions Having Material Adverse Effect. 38
15. Financial Covenants. 38
15.1. Net Worth. 38
15.2. Minimum Current Ratio. 38
15.3. Senior Funded Indebtedness to Capitalization. 38
15.4. Funded Indebtedness to Capitalization. 38
15.5. Senior Funded Indebtedness to EBITDA. 38
15.6. Funded Indebtedness to EBITDA. 38
15.7. Fixed Charges Coverage. 38
16. Default. 39
16.1. Events of Default. 39
16.1.1. Failure to Pay Principal or Interest. 39
16.1.2. Failure to Pay Other Amounts Owed to Lender. 40
16.1.3. Failure to Pay Amounts Owed to Other Persons. 40
16.1.4. Representations or Warranties. 40
16.1.5. Certain Covenants. 40
16.1.6. Other Covenants. 40
16.1.7. Acceleration of Other Indebtedness. 40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
16.1.8. Default Under Other Agreements. 40
16.1.9. Bankruptcy; Insolvency; Etc. 40
16.1.10. Judgments; Attachment; Etc. 41
16.1.11. Pension Benefit Plan Termination, Etc. 41
16.1.12. Transfers by Borrower to its Shareholders. 41
16.1.13. Liquidation or Dissolution. 41
16.1.14. Seizure of Assets. 42
16.1.15. Racketeering Proceeding. 42
16.1.16. Loan Documents; Liens. 42
16.1.17. Loss to Collateral. 42
16.1.18. Material Adverse Event. 42
16.1.19. Change of Control. 42
16.2. Cross-Default. 42
16.3. Cross-Collateralization. 43
16.4. Rights and Remedies in the Event of Default. 43
16.4.1. Termination of Commitments. 43
16.4.2. Acceleration. 43
16.4.3. Right of Set-off. 43
16.4.4. Notice to Account Debtors. 43
16.4.5. Entry Upon Premises and Access to Information. 43
16.4.6. Secured Party Rights. 44
16.4.7. Miscellaneous. 44
16.4.8. Application of Funds. 45
16.5. Limitation of Liability; Waiver. 45
16.6. Notice. 45
17. Miscellaneous. 45
17.1. Notices. 45
17.2. Right to Cure. 45
17.3. Amendments, Waivers and Consents. 46
17.4. Rights Not Exclusive. 46
17.5. Survival of Agreements. 46
17.6. Successors and Assigns. 46
17.7. Participations. 46
17.8. Payment of Expenses. 47
17.9. Indemnity. 47
17.10. Changes in Accounting Principles. 47
17.11. Loan Records. 48
17.12. Other Security and Guaranties. 48
17.13. Severability. 48
17.14. Counterparts. 48
17.15. Governing Law; No Third Party Rights. 49
17.16. Choice of Forum. 49
17.17. Jury Trial. 49
17.18. Captions. 49
17.19. Incorporation By Reference. 50
17.20. Statutory Notice. 50
</TABLE>
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement (this "Agreement") is entered
into by and between Davel Communications Group, Inc., an Illinois corporation
("Borrower") and The Boatmen's National Bank of St. Louis, a national banking
association ("Lender").
Preamble
Prior to the date hereof, Borrower and Lender entered into a Loan
Agreement dated as of September 30, 1994 (the "Prior Loan Agreement"), pursuant
to which Lender extended a revolving credit facility to Borrower in the amount
of $15,000,000 (as the same may have been renewed, extended, amended,
rearranged, restructured, refinanced, restated, replaced or otherwise modified
from time to time, the "Prior Revolving Loan"), which was evidenced by a
revolving note in said amount (the "Prior Revolving Note"), up to $10,000,000 of
which was convertible to a term credit facility (as the same may have been
renewed, extended, amended, rearranged, restructured, refinanced, restated,
replaced or otherwise modified from time to time, the "Prior Term Loan";
together with the Prior Revolving Loan, the "Prior Loans"), which was evidenced
by a term note in said amount (the "Prior Term Note;" together with the Prior
Revolving Note, the "Prior Notes").
Borrower has requested that Lender restructure and refinance and
increase the Prior Loans as described in this Agreement. Lender is willing to
restructure, refinance, and increase the Prior Loans upon and subject to certain
terms and conditions to which Borrower has agreed and which are fully contained
herein.
This Agreement amends and restates (and the Borrower expressly states
that it does not constitute an extinguishment or novation of) the Prior Loan
Agreement, the Prior Revolving Loan, the Prior Term Loan, the Prior Revolving
Note and the Prior Term Note. This Agreement and each document executed in
connection herewith evidences or effects a restructuring and refinancing of the
Prior Revolving Loan and the Prior Term Loan, and does not evidence under any
circumstances a release or relinquishment of the priority of any or all of the
Liens of Lender in any assets (real and personal) of Borrower, or a waiver of
Borrower's obligation to reimburse Lender for any amounts previously evidenced
by the Prior Revolving Note or the Prior Term Note or as otherwise set forth in
the Prior Loan Agreement and related loan documents. The loan documents executed
in connection with the Prior Loan Agreement shall be deemed amended to refer to
this Agreement and the obligations of Borrower described herein.
In consideration of the mutual agreements herein and other sufficient
consideration, the receipt of which is hereby acknowledged, Borrower and Lender
agree as follows:
1. General.
1.1. Effective Date. This Agreement shall become effective on
September 23, 1996 (the "Effective Date").
1.2. Defined Terms. Each capitalized term in this Agreement shall
have the meaning defined in the Glossary which is attached hereto as Appendix .
If a capitalized term is not defined in the Glossary, it shall have the meaning
defined elsewhere in this
<PAGE>
Agreement. If a capitalized term is not defined in either the Glossary or
elsewhere in this Agreement, it shall have the meaning defined in the UCC.
1.3. Singular and Plural Forms. All definitions shall be equally
applicable to both the singular and the plural forms of the terms defined.
1.4. References. The words "hereof", "herein", "hereby",
"hereunder", and words of similar import refer to this Agreement as a whole and
not to any particular provision of this Agreement. The word "Section" or
"section" and "Page" or "page" refer to a section or page, respectively, of this
Agreement unless it expressly refers to something else.
1.5. References to Applicable Lending Office. The term "Applicable
Lending Office" means the office of Lender at One Boatmen's Plaza, 800 Market
Street, St. Louis, Missouri 63101.
1.6. References to Covered Person. The term "Covered Person"
means Borrower, and if it now has or at any time acquires any Subsidiaries that
have significant assets or operations in the reasonable determination of Lender,
each of such Subsidiaries. The words "a Covered Person", "any Covered Person",
"each Covered Person" and "every Covered Person" refer to Borrower and each of
its Subsidiaries separately.
1.7. Accounting Terms with GAAP Meanings; Consolidated Basis.
Unless the context otherwise requires, accounting terms herein that are not
defined herein shall have their meanings and shall be calculated under GAAP.
All financial measurements herein respecting "Borrower" shall be made and
calculated for Borrower and all of its Subsidiaries on a consolidated basis in
accordance with GAAP.
1.8. "Satisfactory to Lender". Whenever herein a document is
required to be "satisfactory to Lender", unless expressly stated otherwise such
document must be satisfactory to Lender in both form and substance. If a
document or matter is required herein to be "satisfactory to Lender", unless
expressly stated otherwise Lender shall have the absolute discretion to
determine whether the document or matter is satisfactory to Lender.
1.9. Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including" and the words "to" and "until"
shall each mean "to but excluding." Periods of days referred to in this
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed, and references in this Agreement to months and years shall be to
calendar months and calendar years unless otherwise specified.
2. Commitment.
2.1. Revolving Commitment. The "Revolving Commitment" on any date shall be
an amount equal to $7,500,000 minus the Dollar amount by which it may have
otherwise been reduced as provided herein. Subject to the terms and conditions
hereof, and in reliance upon the representations and warranties of Borrower
herein, Lender commits to make advances to Borrower (each a "Revolving Advance")
from time to time during the period commencing on the Effective Date and ending
at the close of business on September 23, 2001 (the "Ultimate Revolving Maturity
Date"). (The from time to time outstanding principal balance of all Revolving
Advances from the Lender is referred to herein as the "Revolving
<PAGE>
Loan".) The obligation of Borrower to repay the Revolving Loan shall
be evidenced by a promissory note payable to the order of Lender in a maximum
principal amount equal to the Revolving Commitment (the "Revolving Note")
satisfactory to Lender. Amounts applied to reduce the Revolving Loan may be
reborrowed as Revolving Advances as provided herein, but no Revolving Advance
will be made on or after the Ultimate Revolving Maturity Date. At any time
after an Event of Default occurs that is not waived in writing by Lender, Lender
may cancel the Revolving Commitment as provided in Section .
2.1.1. Limitation on Revolving Advances. No revolving Advance will be
made which would result in the Revolving Loan exceeding the Revolving
Commitment. Lender may, however, in its sole discretion make such Revolving
Advances, but shall not be deemed by doing so to have increased the
Revolving Commitment and shall not be obligated to make any such Revolving
Advances thereafter. No Revolving Advance will be made on or after the
Ultimate Revolving Maturity Date.
2.2. Convertible Revolving Commitment. The "Convertible
Revolving Commitment" on any date shall be an amount equal to $17,500,000 minus
(i) the sum of all Term Conversions, and (ii) the Dollar amount by which it may
have otherwise been reduced as provided herein. Subject to the terms and
conditions hereof, and in reliance upon the representations and warranties of
Borrower herein, Lender commits to make advances to Borrower (each a
"Convertible Revolving Advance") from time to time during the period commencing
on the Effective Date and ending at the close of business on September 23, 1998
(the "Ultimate Convertible Revolving Maturity Date"). (The from time to time
outstanding principal balance of all Revolving Advances from the Lender is
referred to herein as the "Convertible Revolving Loan".) The obligation of
Borrower to repay the Convertible Revolving Loan shall be evidenced by a
promissory note payable to the order of Lender in a maximum principal amount
equal to the Convertible Revolving Commitment (the "Convertible Revolving Note")
satisfactory to Lender. Amounts applied to reduce the Convertible Revolving
Loan may be reborrowed as Convertible Revolving Advances as provided herein, but
no Convertible Revolving Advance will be made on or after the Convertible
Ultimate Revolving Maturity Date. At any time after an Event of Default occurs
that is not waived in writing by Lender, Lender may cancel the Convertible
Revolving Commitment as provided in Section .
2.2.1. Limitation on Convertible Revolving Advances. No Convertible
Revolving Advance will be made which would result in the Convertible
Revolving Loan exceeding the Convertible Revolving Commitment. Lender may,
however, in its sole discretion make such Convertible Revolving Advances,
but shall not be deemed by doing so to have increased the Convertible
Revolving Commitment and shall not be obligated to make any such
Convertible Revolving Advances thereafter. No Convertible Revolving Advance
will be made on or after the Ultimate Convertible Revolving Maturity Date.
2.3. Term Conversions. Subject to the terms and conditions
hereof, Lender commits to convert (each a "Term Conversion"), provided that no
Default or Event of Default exists, portions or all of the outstanding principal
amount of the Convertible Revolving Loan into term loans (each a "Conversion
Term Loan" and collectively the "Conversion Term Loans") to Borrower (the "Term
Commitment"), in one or more conversions, from time to time during the period
commencing on the Effective Date and ending at the close of Lender's
<PAGE>
business at the Applicable Lending Office on the Ultimate Convertible Revolving
Maturity Date. No Term Conversion will be made which would result in the
aggregate Conversion Term Loans exceeding the Term Commitment. No Term
Conversion will be made after the Ultimate Convertible Revolving Maturity Date.
Each Term Conversion will have a repayment period of from 12 to 20 quarters (the
"Term Conversion Repayment Period"), as elected by Borrower in the applicable
Term Conversion Request, but in any event each Term Conversion will be payable
in full on the Ultimate Term Maturity Date. The obligation of Borrower to repay
each Conversion Term Loan shall be evidenced by a promissory note in
substantially the form attached hereto as Exhibit with respect to each such
Conversion Term Loan payable to the order of Lender (each a "Term Note" and
collectively, the "Term Notes"). Amounts applied to reduce any Conversion Term
Loan may not be reborrowed. The Convertible Revolving Commitment shall be
permanently reduced, on a dollar for dollar basis, by the amount of each Term
Conversion.
3. Interest.
3.1. Rates. The Revolving Loan, the Convertible Revolving Loan, and each
Conversion Term Loan shall bear interest at a per annum rate that is either the
Adjusted CBR or the Adjusted LIBO Rate, as designated by Borrower as provided
herein. "Adjusted CBR" shall mean the CBR plus the CBR increment. The "Adjusted
LIBO Rate" shall mean the LIBO Rate plus the LIBO increment. The "CBR increment"
and the "LIBO increment" shall be the percentage from the table below that is
adjacent to the ratio of Borrower's Funded Indebtedness (as defined in Section )
to EBITDA (as defined in Section ) as calculated at the end of each fiscal
quarter of Borrower ending each March 31, June 30, September 30 and December 31
for the entire 12 month period then ended and shall be adjusted, if necessary,
effective the first calendar day of each June, September, December and March.
<TABLE>
<CAPTION>
============================================================
Ratio of Funded
Indebtedness to EBITDA CBR increment LIBOR increment
<S> <C> <C>
============================================================
less than 1.50 to 1.00 0.000% 1.750%
- ------------------------------------------------------------
equal to or greater than 0.25% 2.125%
1.50 to 1.00 but less
than 2.50 to 1.00
- ------------------------------------------------------------
equal to or greater than 0.50% 2.500%
2.50 to 1.00
- ------------------------------------------------------------
</TABLE>
The LIBOR Increment for each LIBOR Loan shall be determined quarterly, but shall
not be effective as to any existing LIBOR Loan until and unless it is renewed as
a LIBOR Loan.
The CBR Increment for each CBR Loan shall be determined quarterly, and shall
become effective for all CBR Loans immediately.
If Borrower does not deliver its Financial Statements to Lender within the
period required by this Agreement, and such failure continues for 2 Business
Days after notice from Lender, the highest possible CBR Increment and LIBOR
Increment shall become applicable as of the last day of such period and shall
remain applicable until Borrower delivers such Financial Statements to Lender.
3.2. Interest Periods for LIBOR Loans. For each Loan that Borrower
designates to be a LIBOR Loan, Borrower shall select an interest period (each an
"Interest
<PAGE>
Period") to be applicable to such Loan. The Interest Period
for a LIBOR Loan shall be either a one month, two month, three month, or six
month period; provided that:
(i) every such Interest Period for an Advance shall commence on the date
of the Advance;
(ii) if any Interest Period would otherwise expire on a day of a calendar
month which is not a Business Day, then such Interest Period shall expire
on the next succeeding Business Day in that calendar month; provided,
however, that if the next succeeding Business Day would be in the following
calendar month, it shall expire on the first preceding Business Day;
(iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of a calendar month; and
(iv) no Interest Period for a Revolving Loan shall extend beyond the
Revolver Maturity Date, no Interest Period for a Convertible Revolving Loan
shall extend beyond the Convertible Revolver Maturity Date, and no Interest
Period for a Term Loan shall extend beyond the Term Maturity Date.
3.3. Conversion of Loans. Borrower may (i) at any time convert a Loan of
one type into a Loan of another type, or (ii) at the end of any Interest Period
for a LIBOR Loan, continue such LIBOR Loan for an additional Interest Period;
provided, however, that a LIBOR Loan may only be so converted or continued on
the last day of its Interest Period. To cause a conversion or continuation,
Borrower shall give Lender, prior to 11:00 a.m., St. Louis time, two (2)
Business Days prior to the date the conversion or continuation is to be
effective (the "Conversion Date"), a written request given in accordance with
the notice provisions of this Agreement (a "Notice of Conversion/Continuation")
(i) identifying the Loan to be converted or continued, (ii) specifying whether a
conversion or continuation is requested, (iii) in the case of a conversion,
specifying whether the Adjusted LIBO Rate or the Adjusted CBR is to be
applicable to the Loan upon the conversion, and (iv) in the case of conversion
to or continuation of a LIBOR Loan, specifying the Interest Period therefor. If
a Notice of Conversion/Continuation is not made by 11:00 a.m. St. Louis time on
the last day of the Interest Period for a Loan with a base rate for which an
Interest Period must be specified, then Borrower shall be deemed to have timely
given a Notice of Conversion/Continuation to Lender requesting to convert the
Loan to an Adjusted CBR Loan.
3.4. Compensation for Increase In LIBOR Loan Costs. If after the Execution
Date there is any change in any Law or in any rule, order, or guideline of any
Governmental Authority (whether or not having the force of law and whether or
not failure to comply therewith would be unlawful, and including but not limited
to any imposition or increase of reserve requirements) and as a result thereof
or as a result of compliance therewith by Lender or its parent holding company:
(i) Lender is subject to any tax, duty or other charge with respect to its
LIBOR Loans or its obligation to make Advances that are LIBOR Loans, or the
basis of taxation of payments to Lender of the principal of or interest on
its LIBOR Loans, or its obligation to make the same, change (except for
changes in the rate of tax on the overall net income of Lender
<PAGE>
imposed by the United States or other jurisdiction in which Lender's
principal executive office is located); or
(ii) any reserve (including, without limitation, any imposed by the FRB),
special deposit, compulsory loan, assessment, or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, Lender is imposed or deemed applicable or any other condition affecting
its LIBOR Loans or its obligation to make them is imposed on Lender or the
London Interbank Market;
and as a result thereof there is any increase in the direct cost to Lender of
agreeing to make or making an Advance that is a LIBOR Advance or maintaining its
LIBOR Loans (except to the extent already included in the determination of the
applicable LIBO Rate), or there is a reduction in the amount received or
receivable by Lender, then Borrower shall from time to time, upon written notice
from and demand by Lender, pay to Lender, within five Business Days after the
date specified in such notice and demand, additional amounts sufficient to
compensate Lender in the amount of such increased cost. If Lender claims
compensation under this Section, Lender shall furnish a certificate to Borrower
that states the additional amount or amounts to be paid to it hereunder and the
basis therefor. Borrower shall have the burden of proving that any such
certificate is not correct.
3.5. LIBOR Loan Funding Losses. Borrower shall pay to Lender upon demand an
amount sufficient to compensate Lender for all loss and expense suffered by
Lender, including but not limited to loss of profit and the cost of acquiring
funds to make or carry a LIBOR Advance or LIBOR Loan, (i) if for any reason
(other than a default by Lender) a Borrowing does not occur on the date
specified therefor in a Notice of Borrowing (whether or not withdrawn), (ii) if
any prepayment or repayment of a LIBOR Loan or conversion of a LIBOR Loan to a
Loan with a base rate other than the LIBO Rate, whether or not required hereby,
occurs on a date which is not the last day of the Interest Period therefor, or
(iii) if for any reason Borrower fails to repay a LIBOR Loan when required by
the terms of this Agreement. The minimum that Borrower shall be obligated to pay
to Lender in any such event shall be an amount equal to (x) the greater of zero
or
{[A x (B-C) x D]} OVER 360
wherein
"A" is the Affected Principal Amount;
"B" is the decimal equivalent of the LIBO Rate that is (or would be in the
case of Borrower's failure to borrow after giving a Notice of Borrowing)
payable by Borrower on such Loan;
"C" is the decimal equivalent of the LIBO Rate that would apply to a
hypothetical LIBOR Advance the Borrowing Date of which was on the last
Business Day on or before the first day of the Remaining Interest Period
and the amount and Interest Period of which were approximately equal, as
determined by Lender, to the Affected Principal Amount and the Remaining
Interest Period; and
<PAGE>
"D" is the number of days from and including the first day of the Remaining
Interest Period to but excluding the last day of the Remaining Interest
Period;
plus (y) any other out-of-pocket loss or expense (including any internal
processing charge customarily charged by Lender) suffered by Lender in
liquidating deposits prior to maturity in amounts which correspond to the
Affected Principal Amount.
For purposes of this Section:
"Affected Principal Amount" means, as applicable, (i) the principal amount
of a LIBOR Advance that Borrower fails to take after having given a
Revolving Advance Request; (ii) the entire principal amount of a LIBOR Loan
that Borrower fails to repay when required by the terms of this Agreement;
or (iii) the amount of any prepayment or repayment on a LIBOR Loan that
occurs, or the entire principal amount of a LIBOR Loan that converts to a
Loan with a base rate other than the LIBOR Rate, whether or not required
hereby, on a date which is not the last day of the Interest Period
therefor.
"Remaining Interest Period" means, as applicable, (i) the entire Interest
Period that would have been applicable to a Loan that Borrower fails to
take after having given a Revolving Advance Request; (ii) a period equal in
duration to the Interest Period of a LIBOR Loan that Borrower fails to
repay when required by the terms of this Agreement; or (iii) if a
prepayment or repayment on a LIBOR Loan occurs, or a LIBOR Loan converts to
a Loan with a base rate other than the LIBOR Rate, whether or not required
hereby, prior to the last day of the Interest Period therefor, the period
from and including the date thereof to but excluding the last day of such
Interest Period.
A certificate of Lender claiming compensation under this Section and setting
forth the amounts to be paid to it hereunder and the method of calculation
thereof shall be deemed and treated as prima facie correct (subject to rebuttal
by Borrower).
3.6. Rate After Maturity. Borrower shall pay interest on a Loan after its
Maturity, and (at the option of Lender) upon all the Loans and other amounts
that are owing with respect thereto after the occurrence of an Event of Default,
at a per annum rate equal to the rate that would otherwise apply hereunder plus
4%.
3.7. Time of Accrual. Interest shall accrue on all principal amounts
outstanding from and including the date when first outstanding to but excluding
the date when no longer outstanding. Amounts shall be deemed outstanding until
payments are applied thereto as provided herein.
3.8. Computation. Interest shall be computed for the actual days elapsed
over a year deemed to consist of 360 days. Interest rates that are based on the
CBR shall change simultaneously with any change in the CBR and such rates shall
be effective for the entire day on which such CBR change becomes effective.
3.9. Usury. Notwithstanding any provisions to the contrary in Section or
elsewhere in any of the Loan Documents, Borrower shall not be obligated to pay
interest at a rate which exceeds the maximum rate permitted by Law. If, but for
this Section 3.9, Borrower
<PAGE>
would be deemed obligated to pay interest at a rate which exceeds the maximum
rate permitted by Law, or if any of the Loan Obligations is paid or becomes
payable before its originally scheduled Maturity and as a result Borrower has
paid or would be obligated to pay interest at such an excessive rate, then (i)
Borrower shall not be obligated to pay interest to the extent it exceeds the
interest that would be payable at the maximum rate permitted by Law; (ii) any
such excess interest that has been paid by Borrower shall be refunded; and (iii)
the effective rate of interest shall be deemed automatically reduced to the
maximum rate permitted by Law.
4. Fees.
4.1. Non-Use Fee. Borrower shall pay to Lender a fee (the "Non-Use Fee")
calculated by applying (i) the percentage in the table below that is adjacent to
the ratio of Borrower's Funded Indebtedness (as defined in Section ) to EBITDA
(as defined in Section , as calculated at the end of each fiscal quarter of
Borrower ending each March 31, June 30, September 30 and December 31 for the
entire 12 month period then ended) to (ii) the sum of the Unused Revolving
Commitment and the Unused Convertible Revolving Commitment. The Non-Use Fee
shall be payable quarterly in arrears commencing on the first day of the first
calendar quarter beginning after the Effective Date and continuing on the first
day of each calendar quarter beginning thereafter and upon the Ultimate
Revolving Maturity Date.
==============================================================
Ratio of Funded Indebtedness to EBITDA Non-use Fee
==============================================================
less than 2.50 to 1.00 0.250%
- --------------------------------------------------------------
equal to or greater than 2.50 to 1.00 0.375%
- --------------------------------------------------------------
4.2. Term Conversion Fee. On the date of each Term Conversion, Borrower
shall pay to Lender a "Term Conversion Fee" equal to 0.25% of the principal
amount of such Term Conversion.
4.3. Calculation of Fees. All of the foregoing fees that are based
on an annual percentage shall be calculated on the basis of a year deemed to
consist of 360 days and for the actual number of days elapsed.
5. Payments.
5.1. Scheduled Payments on Revolving Loan.
5.1.1. Interest. Borrower shall pay interest accrued on each Adjusted
CBR Loan which is a Revolving Loan or a Convertible Revolving Loan monthly
in arrears, beginning on the first day of the first full calendar month
following the Effective Date, and continuing on the first day of each
calendar month thereafter, and on the Ultimate Revolving Maturity Date.
Borrower shall pay interest accrued on each LIBOR Loan that is a Revolving
Loan or a Convertible Revolving Loan at the end of its Interest Period, and
in addition, for each LIBOR Loan with an Interest Period longer than three
months, Borrower shall pay interest on such LIBOR Loan quarterly on the
first Business Day of each calendar quarter following the first day of such
Interest Period. Borrower
<PAGE>
shall pay interest accrued on the Revolving Loan after the Ultimate
Revolving Maturity Date on demand.
5.1.2. Principal. Borrower shall repay the entire Revolving
Loan on the Ultimate Revolving Maturity Date.
5.2. Scheduled Payments on Convertible Revolving Loan.
5.2.1. Interest. Borrower shall pay interest accrued on the
Convertible Revolving Loan monthly in arrears, beginning on the first day
of the first full calendar month following the Effective Date, and
continuing on the first day of each calendar month thereafter, and on the
Ultimate Convertible Revolving Maturity Date. Borrower shall pay interest
accrued on the Convertible Revolving Loan after the Ultimate Convertible
Revolving Maturity Date on demand.
5.2.2. Principal. Borrower shall repay the entire Convertible
Revolving Loan on the Ultimate Convertible Revolving Maturity Date.
5.3. Scheduled Payments on Conversion Term Loans.
5.3.1. Interest. Borrower shall pay interest accrued on each
Conversion Term Loan monthly in arrears, beginning on the first day of the
first full calendar month following the date of such Conversion Term Loan,
and continuing on the first day of each calendar month thereafter, and on
the Ultimate Term Maturity Date. Borrower shall pay interest accrued on
each Conversion Term Loan after the Ultimate Term Maturity Date on demand.
5.3.2. Principal. Borrower shall repay the principal of each
Conversion Term Loan in consecutive equal quarterly installments, in a
Dollar amount equal to a fraction the numerator of which is the initial
principal amount of such Conversion Term Loan and the denominator of which
is the total number of calendar quarters of the Term Conversion Repayment
Period, beginning on the first day of the first full calendar quarter
following the date of such Conversion Term Loan, and continuing on the
first day of each calendar quarter thereafter, with a final installment of
the remaining outstanding principal balance on the Ultimate Term Maturity
Date.
5.4. Prepayments and Reduction of Commitments.
5.4.1. Voluntary.
5.4.1.1. Revolving Loan. Borrower shall not be entitled to prepay
any LIBOR Loan. Borrower may prepay the Revolving Loan and the
Convertible Revolving Loan (provided such Loans are Adjusted CBR
Loans) at any time without penalty. Amounts applied to reduce the
Revolving Loan or the Convertible Revolving Loan may be reborrowed as
Revolving Advances or Convertible Revolving Advances, respectively, as
provided herein, but no Revolving Advance will be made on or after the
Ultimate
<PAGE>
Revolving Maturity Date and no Convertible Revolving Advance will be
made on or after the Ultimate Convertible Revolving Maturity Date.
5.4.1.2. Revolving Commitment. Borrower may reduce the Revolving
Commitment or the Convertible Revolving Commitment in whole multiples
of $100,000 at any time and from time to time, but only if (i)
Borrower gives Lender written notice of Borrower's intention to make
such reduction at least one Business Day prior to the effective date
of the reduction, and (ii) Borrower makes on the effective date of the
reduction any payment on the Revolving Loan or Convertible Revolving
Loan required under Section as a consequence of the reduction. Any
such reduction of the Revolving Commitment or the Convertible
Revolving Commitment shall be permanent.
5.4.1.3. Term Loan. Borrower shall not be entitled to prepay any
LIBOR Loan. Borrower may wholly prepay any Conversion Term Loan
(provided such Loans are Adjusted CBR Loans) at any time, and may make
partial prepayments on any Conversion Term Loan in whole multiples of
$100,000 from time to time, but only if (i) Borrower gives Lender
written notice of Borrower's intention to make such prepayment at
least one Business Day prior to tendering the prepayment, and (ii)
Borrower pays any accrued interest on the amount prepaid at the time
of such prepayment. Each partial prepayment on a Conversion Term Loan
shall be applied to the remaining principal installments in the
inverse order of their due dates.
5.4.1.4. Premiums. No penalty or premium shall be payable upon
any reduction by Borrower in the Revolving Commitment or Convertible
Revolving Commitment. No penalty or premium shall be payable upon any
prepayment of any Conversion Term Loan.
5.4.2. Mandatory.
5.4.2.1. Over-Advances. If at any time the Revolving Loan exceeds
the Revolving Commitment or the Convertible Revolving Loan exceeds the
Convertible Revolving Commitment, whether as a result of an optional
Revolving Advance or Convertible Revolving Advance by Lender as
contemplated by Section , Section , or otherwise, Borrower shall on
demand make a payment to Lender in the amount of the excess. Each such
prepayment shall be applied first to reduce Adjusted CBR Loans which
are Revolving Loans or Convertible Revolving Loans, as applicable,
until such Loans are reduced to zero, and applied next to reduce LIBOR
Loans which are Revolving Loans or Convertible Revolving Loans, as
applicable, until such Loans are reduced to zero.
<PAGE>
5.4.2.2. Term Conversions. On the date of any Term Conversion,
Borrower shall pay to Lender any accrued interest which accrued prior
to such Term Conversion on the amount so converted.
5.4.2.3. Proceeds from Sales of Assets. If Borrower sells any of
its assets in a single transaction or related series of transactions
that are not in the ordinary course of business, Borrower shall make a
prepayment on the Conversion Term Loans in the amount of the gross
proceeds therefrom less reasonable selling expenses and the increment
in federal, state and local income taxes, if any, payable as a
consequence of any taxable gain from such sale. Borrower need not make
such prepayment, however, unless the net proceeds from such sale or
sales exceed an amount equal to five percent (5%) of Total Assets of
Borrower (calculated prior to giving effect to such sale) in the
aggregate in any Fiscal Year.
5.4.2.4. Proceeds from Sale of Securities. Unless otherwise
permitted herein, if after the Execution Date Borrower issues any
securities, or warrants or options therefor, except such as are
subordinated in right of payment to all the Loan Obligations in a
manner satisfactory to Lender, Borrower shall make a prepayment on the
Conversion Term Loans promptly after such sale in an amount equal to
the lesser of (i) the Conversion Term Loans, or (ii) fifty percent
(50%) of the gross proceeds therefrom less reasonable brokers' and
underwriters' fees and commissions and other reasonable issuing
expenses. Borrower need not make such prepayment, however, as a result
of any issuance of securities, warrants, or options provided the net
proceeds from such issuances do not exceed $1,000,000 in the aggregate
in any Fiscal Year ("Permitted Issuances").
5.4.2.5. Application of Insurance/Condemnation Proceeds. On the
90th day after receipt by Borrower of any Insurance/Condemnation
Proceeds in excess of $500,000, Borrower shall make a prepayment on
the Conversion Term Loans in the amount of such Insurance/Condemnation
Proceeds that have not, within the 90 day period following Borrower's
receipt of such Insurance/Condemnation Proceeds, been either expended,
or committed to be expended, by Borrower for the purpose of
rebuilding, repairing or replacing the property for which such
Insurance/Condemnation Proceeds were paid or for re-investment in
Covered Persons. All amounts so committed to be expended, but not yet
expended, by Borrower for the purpose of rebuilding, repairing or
replacing such property or for re-investment in Covered Persons shall
be deposited in an interest-bearing account with Lender in the name of
Borrower (the "Proceeds Account"). Borrower hereby assigns and grants
to Lender a security interest in any such Proceeds Account as security
for payment and performance of the Loan Obligations. To the extent
that Borrower provides evidence
<PAGE>
satisfactory to Lender that Borrower has committed to expend funds in
the Proceeds Account for rebuilding, repairing or replacing such
property, Borrower may expend such funds. Any funds remaining in the
Proceeds Account upon completion of the rebuilding, repairing or
replacing of such property shall be applied to reduce the Conversion
Term Loans.
Each prepayment under this Section 5.4 that is required to be applied to
reduce the Conversion Term Loans shall be applied to the Conversion Term
Loans in such order as Lender determines in its sole and absolute
discretion. If application to the Conversion Term Loans of any prepayment
required under this Section 5.4 reduces the Conversion Term Loans to zero,
the remaining amount of such prepayment shall be applied to reduce the
Revolving Loan and the Revolving Commitment shall be automatically and
permanently reduced by an equivalent amount. If application to the
Revolving Loan of any prepayment required under this Section 5.4 reduces
the Revolving Loan to zero, the remaining amount of such prepayment shall
be applied to reduce the Convertible Revolving Loan and the Convertible
Revolving Commitment shall be automatically and permanently reduced by an
equivalent amount.
5.5. Manner of Payments and Timing of Application of Payments.
5.5.1. Payment Requirement. Unless expressly provided to the contrary
elsewhere herein, Borrower shall make each payment on the Loan Obligations
to Lender as required under the Loan Documents in Dollars at the Applicable
Lending Office on the date when due, without deduction, set-off or
counterclaim.
5.5.2. Application of Payments. All payments received by Lender in
immediately available funds at or before 12:00 p.m., St. Louis time, on a
Business Day will be applied on the same day. Such payments received on a
day that is not a Business Day or after 12:00 p.m. on a Business Day will
be applied to the relevant Loan Obligation on the next Business Day. Except
as otherwise expressly provided in this Agreement, Lender shall determine
in its discretion the order and manner in which proceeds of the Collateral
and other payments that Lender receives are applied to the Loan
Obligations, and Borrower hereby irrevocably waives the right to direct the
application of all payments and such proceeds. Lender shall have the
continuing and exclusive right to apply and reverse and reapply all such
proceeds and payments to any of the Loan Obligations.
5.5.3. Interest Calculation. Section notwithstanding, for purposes of
interest calculation only, (i) a payment by check, draft or other
instrument received at or before 12:00 p.m., St. Louis time, on a Business
Day shall be deemed to have been applied to the relevant Loan Obligation on
the second following Business Day, (ii) a payment by check, draft or other
instrument received on a day that is not a Business Day or after 12:00 p.m.
on a Business Day shall be deemed to have been applied by Lender to the
relevant Loan Obligation on the third following Business Day, (iii) a
payment in cash or by wire transfer received at or before 12:00 p.m., St.
Louis time, on a Business Day shall be deemed to have been applied to the
relevant Loan Obligation on the Business
<PAGE>
Day when it is received, and (iv) a payment in cash or by wire transfer
received on a day that is not a Business Day or after 12:00 p.m., St. Louis
time, on a Business Day shall be deemed to have been applied to the
relevant Loan Obligation on the next Business Day.
5.5.4. Returned Checks. If a payment is made by check, draft or other
instrument and the check, draft or other instrument is returned to Lender
unpaid, the application of the payment to the Loan Obligation will be
reversed and will be treated as never having been made.
5.6. Due Dates Not on Business Days. If any payment required hereunder
becomes due on a date that is not a Business Day, then such due date shall be
deemed automatically extended to the next Business Day.
6. Indemnity for Returned Payments. If after receipt of any payment of, or
proceeds applied to the payment of, all or any part of the Loan Obligations,
Lender is for any reason compelled to surrender such payment or proceeds to any
Person because such payment or application of proceeds is invalidated, declared
fraudulent, set aside, determined to be void or voidable as a preference, an
impermissible setoff, or a diversion of trust funds, or for any other reason,
then the Loan Obligations or part thereof intended to be satisfied shall be
revived and this Agreement shall continue in full force and Borrower shall be
liable to pay to Lender, and hereby does indemnify Lender and hold Lender
harmless for, the amount of such payment or proceeds surrendered. The provisions
of this Section shall be and remain effective notwithstanding any contrary
action which may be taken by Lender in reliance upon any such payment or
application of proceeds, and any such contrary action so taken shall be without
prejudice to Lender's rights under this Agreement and shall be deemed to have
been conditioned upon such payment or application of proceeds having become
final and irrevocable. The provisions of this Section shall survive termination
of the Revolving Commitment, the Convertible Revolving Commitment, the Term
Commitment and the payment and satisfaction of all of the Loan Obligations.
7. Borrowing Procedure and Limits.
7.1. Revolving Advances. Borrower may request a Revolving Advance or
Convertible Revolving Advance by submitting a Revolving Advance Request to
Lender. Only a written request (which may be mailed, personally delivered or
telecopied as provided in Section ) from a Borrowing Officer to Lender that
specifies the amount of the Revolving Advance or Convertible Revolving Advance
to be made, the date the proceeds of the Revolving Advance or Convertible
Revolving Advance are requested to be made available to Borrower (the "Revolving
Advance Date"), whether it is to be a LIBOR Advance or an Adjusted CBR Advance,
and the Interest Period to be applicable to the Advance if it is a LIBOR Advance
shall be treated as a "Revolving Advance Request". Each Revolving Advance and
Convertible Revolving Advance shall be in an amount of no less than $50,000 that
is a whole multiple of $10,000. A Revolving Advance Request received by Lender
on a day that is not a Business Day or that is received by Lender after 2:00
p.m., St. Louis time, on a Business Day shall be treated as having been received
by Lender at 2:00 p.m., St. Louis time, on the next Business Day. A Revolving
Advance Request shall become irrevocable at 2:00 p.m., St. Louis time, on the
Revolving Advance Date unless it is sooner revoked by a Borrowing Officer.
Lender shall incur no liability to Borrower for treating any such request as a
Revolving Advance Request or for treating a revocation thereof as such if Lender
believes in good faith that the Person
<PAGE>
making the request or revocation is a Borrowing Officer. Lender shall also
incur no liability to Borrower for failing to treat any such request as a
Revolving Advance Request or for treating a revocation thereof as such if Lender
believes in good faith that the Person making the request or revocation is not a
Borrowing Officer. Each Revolving Advance Request by a Borrowing Officer shall
constitute a certification by Borrower that (i) no Default has occurred that is
continuing and not waived in writing by Lender and no Event of Default has
occurred that is not waived in writing by Lender, (ii) all representations and
warranties of Borrower in this Agreement are then true, and will be true on the
Revolving Advance Date, as if then made, and (iii) all conditions precedent
hereunder to the making of the requested Revolving Advance or Convertible
Revolving Advance have been satisfied. There may not be more than one Revolving
Advance or Convertible Revolving Advance made pursuant to a Revolving Advance
Request on any one day. Provided that all conditions precedent herein to a
requested Revolving Advance or Convertible Revolving Advance have been
satisfied, Lender will fund the amount of such requested Revolving Advance or
Convertible Revolving Advance, as applicable into the Concentration Account on
the Revolving Advance Date.
7.2. Lender's Right to Make Other Revolving Advances. Lender shall have
the right to make Revolving Advances or Convertible Revolving Advances at any
time and from time to time to cause timely payment of any of the Loan
Obligations. Lender will give notice to Borrower after making any such Revolving
Advance or Convertible Revolving Advance.
7.3. Term Conversions. Borrower may request a Term Conversion by
submitting a Term Conversion Request to Lender. Only a written request (which
may be mailed, personally delivered or telecopied as provided in Section ) from
a Borrowing Officer to Lender that specifies the amount of the Term Conversion
to be made, the Term Conversion Repayment Period, and the date the Term
Conversion is requested to be made (the "Term Conversion Date") shall be treated
as a "Term Conversion Request". If at any time the Convertible Revolving Loan
exceeds $7,500,000, Borrower shall be deemed to have made a Term Conversion
Request in the amount of $7,500,000. Each Term Conversion shall be made in an
amount of no less than $2,000,000 that is a whole multiple of $250,000. A Term
Conversion Request received by Lender on a day that is not a Business Day or
that is received by Lender after 2:00 p.m., St. Louis time, on a Business Day
shall be treated as having been received by Lender at 2:00 p.m., St. Louis time,
on the next Business Day. A Term Conversion Request shall become irrevocable at
2:00 p.m., St. Louis time, on the Term Conversion Date unless it is sooner
revoked by a Borrowing Officer. Lender shall incur no liability to Borrower for
treating any such request as a Term Conversion Request or for treating a
revocation thereof as such if Lender believes in good faith that the Person
making the request or revocation is a Borrowing Officer. Lender shall also incur
no liability to Borrower for failing to treat any such request as a Term
Conversion Request if Lender believes in good faith that the Person making the
request is not a Borrowing Officer. Each Term Conversion Request by a Borrowing
Officer shall constitute a certification by Borrower that (i) no Default has
occurred that is continuing and not waived in writing by Lender and no Event of
Default has occurred that is not waived in writing by Lender, (ii) all
representations and warranties of Borrower in this Agreement are then true, and
will be true on the Term Conversion Date, as if then made, and (iii) all
conditions precedent hereunder to the making of the requested Term Conversion
have been satisfied. There may not be more than one Term Conversion made
pursuant to a Term Conversion Request on any one day. Provided that all
conditions precedent herein to a requested Term Conversion have been satisfied,
Lender will make the requested Term Conversion on the later to occur of (i) the
date Lender receives a
<PAGE>
Term Note from Borrower to evidence the Conversion Term Loan created by such
Term Conversion or (ii) the Term Conversion Date.
7.4. Restriction on Number of LIBOR Loans. No more than ten LIBOR Loans
with different Interest Periods may be outstanding at any one time.
7.5. Suspension of Obligation to Make LIBOR Advances. If (i) on any date
for determining the LIBO Rate for any Interest Period, by reason of any changes
arising after the Execution Date affecting the London Interbank Market, or
Lender's position in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in the
definition herein of LIBO Rate, or (ii) the making of any Advance which is to be
a LIBOR Advance or the continuance of any LIBOR Advance by Lender has become
unlawful by compliance by Lender in good faith with any Law or any pronouncement
of a Governmental Authority (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful), then Lender shall
promptly give notice to Borrower of such determination. Until Lender notifies
Borrower that the circumstances giving rise to the suspension described herein
no longer exist, (a) the obligation of Lender to make Advances which are LIBOR
Advances shall be suspended, (b) each outstanding LIBOR Advance from Lender
shall be automatically converted into an Adjusted CBR Advance on the earlier of
the last day of the Interest Period for such LIBOR Advance or the last date
permitted by applicable law, and (c) all Revolving Advances from Lender shall be
Adjusted CBR Advances. Notwithstanding anything to the contrary contained
herein, if a LIBOR Advance is converted to an Adjusted CBR Advance pursuant to
this Section 7.5, the per annum interest rate applicable thereto from and after
the effective date of such conversion shall be the Adjusted CBR (but otherwise
calculated as provided in Section ).
8. Security and Guaranties. As security for payment and performance of the Loan
Obligations, Borrower shall on the Execution Date execute and deliver, or cause
to be executed and delivered, to Lender the following documents:
8.1. Security.
8.1.1. security agreements from Borrower granting to Lender a
security interest in all of the Goods, Equipment, Accounts, Inventory,
Instruments, Documents, Chattel Paper, and General Intangibles of Borrower,
whether now owned or hereafter acquired, and all proceeds thereof (the
"Borrower Personal Property Collateral"), subject only to Permitted Liens
affecting such property (each such security agreement that Borrower
executes and delivers to Lender, either on or after the Execution Date, and
as it may be amended, restated or replaced from time to time, a "Borrower
Security Agreement");
8.1.2. stock pledge agreements granting to Lender a lien and security
interest in all of the capital stock and other Securities of every
Subsidiary and Affiliate of Borrower, now or hereafter issued and
outstanding, and all proceeds thereof (each such stock pledge agreement
that Borrower or any Subsidiary or Affiliate of Borrower executes and
delivers to Lender, either on or after the Execution Date, and as it may be
amended, restated, or replaced from time to time, a "Stock Pledge
Agreement");
<PAGE>
8.1.3. subordination agreements as required by Lender, executed by
Persons having any security interest in the assets of Borrower or any
Covered Person, including, but not limited to, a subordination agreement
executed by Resurgens Communications Group, Inc., with respect to its liens
and security interests under that certain agreement For The Provision of
Billing and Collection Services By Resurgens Communications Group, Inc. To
Phone Zone dated June 2, 1992, and that certain Agreement for Operator
Services dated June 2, 1992 between Resurgens and Phone Zone, as the same
may be amended, renewed, restated or otherwise modified (the "Resurgens
Agreements") (each such subordination agreement that Borrower causes to be
executed and delivered to Lender, either on or after the Execution Date,
and as it may be amended, restated or replaced from time to time, a
"Subordination Agreement");
8.1.4. a collateral assignment of contracts (the "Assignment of
Contracts") among Borrower, Phone Zone, Inc. and Lender, assigning to
Lender (i) all of Borrower's rights and interest in the Equipment Lease
Agreement and certain other contracts and (ii) all of Phone Zone, Inc.'s
right, title and interest in the Resurgens Agreements.
Lender may, in its sole discretion, (i) exchange, waive or release any of
the Collateral, (ii) apply Collateral and direct the order or manner of
sale thereof as Lender may determine, and (iii) settle, compromise, collect
or otherwise liquidate any Collateral in any manner, all without affecting
the Loan Obligations or Lender's right to take any other action with
respect to any other Collateral.
8.2. Guaranties. The Loan Obligations shall be guarantied jointly and
severally by all current and hereafter existing or acquired Subsidiaries of
Borrower that have significant assets or operations in the reasonable
determination of Lender including, but not limited to, Telaleasing Enterprises,
Inc., an Illinois corporation, Phone Zone, Inc., an Illinois corporation, TRCA,
Inc., an Illinois corporation, Adtec Communications, Inc., a Florida
corporation, Interstate Communications, Inc., a Georgia corporation, ComTel
Computer Corp., a Nevada corporation, California ComTel Computer, Inc., a
California corporation and Jax Payphones, Inc., a Florida corporation, pursuant
to one or more continuing guaranties satisfactory to Lender (each and
collectively, as the same may be amended, restated or replaced from time to
time, the "Guaranty").
8.3. Guarantor Security Agreements. The obligations of Guarantors under
the Guaranty shall be secured by security agreements from each Guarantor
granting to Lender a security interest in all of the Goods, Equipment, Accounts,
Inventory, Instruments, Documents, Chattel Paper, General Intangibles and other
personal property of such Guarantor, whether now owned or hereafter acquired,
and all proceeds thereof (the "Guarantor Personal Property Collateral"), subject
only to Permitted Liens (each such security agreement that a Guarantor executes
and delivers to Lender, either on or after the Execution Date, and as it may be
amended, restated or replaced from time to time, a "Guarantor Security
Agreement");
8.4. Further Security. As further security for the Loan Obligations, if
Borrower or any of its Subsidiaries acquires or leases any real property with
significant value and utility to Borrower or its Subsidiaries after the
Execution Date, Borrower shall notify Lender thereof and shall, if Lender
reasonably requests, deliver or cause to be delivered to
<PAGE>
Lender a deed of trust or mortgage, or leasehold deed of trust or mortgage, as
appropriate, on each parcel of such real property promptly upon request by
Lender.
All of the foregoing documents and any similar documents that Borrower or
Guarantors execute and deliver to Lender after the Execution Date to secure the
Loan Obligations, as they may be amended, restated or replaced from time to
time, are referred to herein collectively as the "Security Documents". If
Borrower or any of its Subsidiaries acquires any Subsidiaries subsequent to the
Execution Date, Borrower shall notify Lender thereof and shall immediately upon
Lender's request deliver appropriate Security Documents in substantially the
form delivered pursuant hereto from such of the acquired Subsidiaries as may be
requested by Lender; all such Security Documents delivered to Lender, together
with the other Security Documents delivered pursuant hereto, as the same may be
amended, restated or replaced, shall be deemed to be, as applicable, the
Borrower Security Agreement; Stock Pledge Agreement; Subordination Agreement;
Assignment of Contracts; Guaranty or Guarantor Security Agreement hereunder, and
all such agreements shall be Security Documents hereunder.
9. Power of Attorney. Borrower hereby irrevocably designates, makes, constitutes
and appoints Lender (and all Persons designated by Lender), as Borrower's true
and lawful agent and attorney-in-fact (which appointment is coupled with an
interest and is therefore irrevocable), and authorizes Lender, in the name of
Borrower, or in Lender's name, to exercise the following powers or take the
following actions; provided, however, that such designation and authorization
shall be automatically revoked upon the payment in full of the Loan Obligations,
and the termination of the Commitments:
9.1. During the continuance of a Default that is not waived in writing by
Lender and after the occurrence of an Event of Default that is not waived in
writing by Lender: (i) demand payment of any Account; (ii) enforce payment of
any Account by legal proceedings or otherwise; (iii) exercise all of Borrower's
rights and remedies in proceedings brought to collect any Account; (iv) sell or
assign any Account upon such terms, for such amount and at such time or times as
Lender deems advisable; (v) settle, adjust, compromise, extend or renew any
Account; (vi) discharge and release any Account; (vii) prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or other similar documents
against an Account Debtor; (viii) notify the postal authorities of any change of
the address for delivery of such Borrower's mail to any address designated by
Lender, (ix) endorse Borrower's name on any verification of Accounts and notices
thereof to Account Debtors; and (x) do all other acts and things which are
necessary, in Lender's commercially reasonable judgment after considering all
relevant facts and circumstances, to fulfill the Loan Obligations.
9.2. At any time, (i) make one or more Revolving Advances or Convertible
Revolving Advances to pay the costs and expenses of any of the foregoing; (ii)
take control in any manner of any item of payment or proceeds of any Account;
(iii) have access to any lockbox or postal box into which Borrower's mail is
deposited; (iv) endorse Borrower's name upon any items of payment and collect
and apply the same to the Loan Obligations as provided herein; (v) endorse
Borrower's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Account or other item of the
Collateral; (vi) execute in Borrower's name and on Borrower's behalf any
financing statements or amendments thereto; and (vii) communicate with
Borrower's independent certified public accountants.
10. Conditions of Lending.
<PAGE>
10.1. Conditions to Initial Advance. As conditions precedent to Lender's
obligation to make the initial Advance:
10.1.1. Listed Documents and Other Items. Lender shall have received
on or before the Effective Date all of the documents and other items listed
or described in Exhibit hereto, with each being (as applicable) duly
executed and (also as applicable) sealed, attested, acknowledged,
certified, or authenticated.
10.1.2. Financial Condition. Lender shall have determined to its
satisfaction that the financial statements of Borrower for the period ended
December 31, 1995 (the "Initial Financial Statements") as furnished to
Lender and other information furnished to Lender by Borrower fairly and
accurately reflect the business and financial condition of Borrower, its
cash flows and the results of its operations for the periods covered by the
Initial Financial Statements and such information.
10.1.3. No Default. No Default shall have occurred and be continuing
that is not waived in writing by Lender, no Event of Default shall have
occurred that is not waived in writing by Lender, and neither will occur as
a result of such Advance being requested or made or the application of the
proceeds thereof.
10.1.4. Perfection of Liens and Security Interests. Every lien and
security interest required to be granted by Borrower and Guarantors to
Lender under Section shall have been perfected and shall be, except as
otherwise satisfactory to Lender, a first priority lien or security
interest.
10.1.5. Representations and Warranties. The representations and
warranties contained in the Loan Documents shall be true and correct.
10.1.6. Material Adverse Change. Since the date of the most recent
Financial Statements delivered to Lender, there shall not have been any
change in the financial condition of Borrower which would have a Material
Adverse Effect.
10.1.7. Pending Material Proceedings. There shall be no pending
Material Proceedings.
10.1.8. Payment of Fees. Borrower shall have paid and reimbursed to
Lender all fees, costs and expenses that are payable or reimbursable to
Lender hereunder on or before the Effective Date.
10.1.9. Legal Opinion. Lender shall have received an opinion of
Borrower's counsel satisfactory to Lender.
10.1.10. Other Items. Lender shall have received such other consents,
approvals, opinions, certificates or documents as it reasonably deems
necessary.
<PAGE>
10.2. Conditions to Term Conversions and Subsequent Advances. The
obligation of Lender to make any Term Conversion or subsequent Advance shall be
subject to the prior or concurrent fulfillment of each of the following
additional conditions precedent:
10.2.1. General Conditions. All of the conditions to the initial
Advances in Section shall have been and shall remain satisfied.
10.2.2. Representations and Warranties. The representations and
warranties contained in the Loan Documents shall be true and correct as of
the time of such Advance or Term Conversion, with the same force and effect
as if made at such time.
10.2.3. Default. No Default shall have occurred and be continuing
that is not waived in writing by Lender, no Event of Default shall have
occurred that is not waived in writing by Lender, and neither will occur as
a result of such Revolving Advance, Convertible Revolving Advance, or Term
Conversion being requested or made or the application of the proceeds
thereof.
11. Representations and Warranties.
Except as otherwise described the disclosure schedule that is attached
hereto as Exhibit (the "Disclosure Schedule"), Borrower represents and warrants
to Lender as follows:
11.1. Organization and Existence. Each Covered Person is duly organized
and existing in good standing under the laws of the state of its organization,
is duly qualified to do business and is in good standing in every state where
the nature or extent of its business or properties require it to be qualified to
do business, except where the failure to so qualify will not have a Material
Adverse Effect. Each Covered Person has the power and authority to own its
properties and carry on its business as now being conducted.
11.2. Authorization. Each Covered Person is duly authorized to execute and
perform every Loan Document to which such Covered Person is a party, and
Borrower is duly authorized to borrow hereunder, and this Agreement and the
other Loan Documents have been duly authorized by all requisite corporate action
of each Covered Person. No consent, approval or authorization of, or declaration
or filing with, any Governmental Authority, and no consent of any other Person,
is required in connection with Borrower's execution, delivery or performance of
this Agreement and the other Loan Documents, except for those already duly
obtained.
11.3. Due Execution. Every Loan Document to which a Covered Person is a
party has been executed on behalf of such Covered Person by a Person duly
authorized to do so.
11.4. Enforceability of Obligations. Each of the Loan Documents to which a
Covered Person is a party constitutes the legal, valid and binding obligation of
such Covered Person, enforceable against such Covered Person in accordance with
its terms, except to the extent that the enforceability thereof against such
Covered Person may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by equitable
principles of general application.
<PAGE>
11.5. Burdensome Obligations. No Covered Person is a party to or bound by
any Contract or is subject to any provision in the Charter Documents of such
Covered Person which would, if performed by such Covered Person, result in a
Default or Event of Default either immediately or upon the elapsing of time.
11.6. Legal Restraints. The execution of any Loan Document by a Covered
Person will not violate or constitute a default under the Charter Documents of
such Covered Person, any Material Agreement of such Covered Person, or any
Material Law, and will not, except as expressly contemplated or permitted in
this Agreement, result in any Lien being imposed on any of such Covered Person's
property. The performance by any Covered Person of its obligations under any
Loan Document to which it is a party will not violate or constitute a default
under the Charter Documents of such Covered Person, any Material Agreement of
such Covered Person, or any Material Law, and will not, except as expressly
contemplated or permitted in this Agreement, result in any Lien being imposed on
any of such Covered Person's property.
11.7. Labor Disputes. There is no collective bargaining agreement or other
labor contract covering employees of a Covered Person, and no such collective
bargaining agreement or other labor contract is scheduled to expire during the
term of this Agreement. No union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees of a
Covered Person for any similar purpose, and there is no pending or, to the best
of Borrower's knowledge, threatened, strike, work stoppage, material unfair
labor practice claim or other material labor dispute against or affecting any
Covered Person or its employees.
11.8. No Material Proceedings. There are no Material Proceedings pending
or, to the best knowledge of Borrower, threatened.
11.9. Material Licenses. All Material Licenses have been obtained or exist
for each Covered Person.
11.10. Compliance with Laws. Each Covered Person is in compliance with all
Material Laws. Without limiting the generality of the foregoing:
11.10.1. Compliance. The operations of every Covered Person comply in
all material respects with all applicable Environmental Laws and Employment
Laws.
11.10.2. Proceedings. None of the operations of any Covered Person
are the subject of any judicial or administrative complaint, order or
proceeding alleging the violation of any applicable Environmental Laws or
Employment Laws which, if adversely determined, would have a Material
Adverse Effect on Borrower.
11.10.3. Investigations. None of the operations of any Covered Person
are the subject of investigation by any Governmental Authority regarding
the improper transportation, storage, disposal, generation or release into
the environment of any Hazardous Waste, the results of which may have a
Material
<PAGE>
Adverse Effect on such Covered Person, on the value of the Collateral, or
on the overall assets of such Covered Person.
11.10.4. Notices; Reports. No notice or report under any
Environmental Law indicating a past or present spill or release into the
environment of any Hazardous Waste has been filed, or is required to be
filed, by any Covered Person.
11.10.5. Environmental Property Transfer Acts. No Environmental
Property Transfer Acts are applicable to the transactions contemplated by
this Agreement and Borrower has provided all notices and obtained all
necessary environmental permit transfers and consents, if any, required in
order to consummate the transactions contemplated by this Agreement, to
perfect Lender's Liens and to operate Borrower's business as presently or
proposed to be operated.
11.10.6. Wage and Hour Laws. Each Covered Person to which any of the
Wage and Hour Laws apply pays its employees in compliance with such Laws.
11.11. Other Names. No Covered Person has used any name other than the
full name which identifies such Covered Person in this Agreement. The only trade
name or style under which a Covered Person sells Inventory or creates Accounts,
or to which instruments in payment of Accounts are made payable, is the name
which identifies such Covered Person in this Agreement.
11.12. Capitalization. Borrower's authorized capital stock consists of
10,000,000 shares of common stock, no par value, of which 4,556,219 shares are
validly issued and outstanding, fully paid and non-assessable.
11.13. Financial Statements. The Initial Financial Statements are complete
and correct, have been prepared in accordance with GAAP, and fairly reflect the
financial condition, results of operations and cash flows of the Persons covered
thereby as of the dates and for the periods stated therein.
11.14. No Change in Condition. Since the date of the Initial Financial
Statements delivered to Lender, there has been no change in the financial
condition of any Covered Person which would have a Material Adverse Effect on
Borrower.
11.15. No Defaults. No Covered Person has breached or violated or is in
default under any Material Agreement, or is in default with respect to any
Material Obligation of such Covered Person. No Default has occurred which is
continuing and no Event of Default has occurred.
11.16. Investments. No Covered Person has any Investments in other Persons
except existing Permitted Investments.
11.17. Indebtedness. No Covered Person has any Indebtedness except
existing Permitted Indebtedness.
<PAGE>
11.18. Indirect Obligations. No Covered Person has any Indirect
Obligations except existing Permitted Indirect Obligations.
11.19. Operating Leases. No Covered Person has an interest as lessee under
any Operating Leases, except as permitted under Section .
11.20. Capital Leases. No Covered Person has an interest as a lessee under
any Capital Leases, except as disclosed on Schedule .
11.21. Tax Liabilities; Governmental Charges. Each Covered Person has
filed or caused to be filed all tax reports and returns required to be filed by
it with any Governmental Authority, except where extensions have been properly
obtained or where such Covered Person was unaware of any obligation to file a
report or return, and has paid or made adequate provision for payment of all
taxes, assessments, fees and other charges levied upon it or upon its income or
properties by any Governmental Authority which are due and payable, including
interest and penalties, except such taxes, assessments, fees and other charges,
if any, as are being diligently contested in good faith by appropriate
proceedings and as to which such Covered Person has established adequate
reserves in conformity with GAAP on the books of such Covered Person. No Liens
for any such taxes, assessments, fees or other charges have been filed and no
claims are being asserted with respect to any such taxes, assessments, fees or
other charges which, if adversely determined, would have a Material Adverse
Effect on such Covered Person. Except as disclosed on Exhibit , none of the
federal income tax returns of any Covered Person has ever been audited by the
Internal Revenue Service. There are no material unresolved issues concerning any
tax liability of a Covered Person which, if adversely determined, would have a
Material Adverse Effect on such Covered Person.
11.22. Pension Benefit Plans. All Pension Benefit Plans maintained by each
Covered Person or an ERISA Affiliate qualify under Section 401 of the Code and
are in compliance with the provisions of ERISA. Except with respect to events or
occurrences which would not have a Material Adverse Effect:
11.22.1. Prohibited Transactions. None of such Pension Benefit Plans
has participated in, engaged in or been a party to any non-exempt
prohibited transaction as defined in ERISA or the Code, and no officer,
director or employee of a Covered Person or of an ERISA Affiliate has
committed a breach of any of the responsibilities or obligations imposed
upon fiduciaries by Title I of ERISA.
11.22.2. Claims. There are no claims, pending or threatened,
involving any such Pension Benefit Plan by a current or former employee (or
beneficiary thereof) of such Covered Person or ERISA Affiliate, nor is
there any reasonable basis to anticipate any claims involving any such
Pension Benefit Plan which would likely be successfully maintained against
such Covered Person or ERISA Affiliate.
11.22.3. Reporting and Disclosure Requirements. There are no
violations of any reporting or disclosure requirements with respect to any
such Pension Benefit Plan and none of such Pension Benefit Plans has
violated any applicable Law, including but not limited to ERISA and the
Code.
<PAGE>
11.22.4. Accumulated Funding Deficiency. No such Pension Benefit Plan
has (i) incurred an "accumulated funding deficiency" (within the meaning of
Section 412(a) of the Code), whether or not waived; (ii) been a Pension
Benefit Plan with respect to which a Reportable Event (to the extent that
the reporting of such events to the PBGC within thirty days of the
occurrence has not been waived) has occurred and is continuing; or (iii)
been a Pension Benefit Plan with respect to which there exist conditions or
events which have occurred that present a significant risk of termination
of such Pension Benefit Plan by the PBGC.
11.22.5. Multi-employer Plan. No Covered Person or ERISA Affiliate
has received notice that any Multi-employer Plan to which such Covered
Person or ERISA Affiliate contributes is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multi-employer
Plan to which such Covered Person or ERISA Affiliate contributes is
reasonably expected to be in reorganization or to be terminated within the
meaning of Title IV of ERISA.
11.23. Welfare Benefit Plans. No Covered Person or ERISA Affiliate
maintains a Welfare Benefit Plan that has a liability which, if enforced or
collected, would have a Material Adverse Effect. Each Covered Person and ERISA
Affiliate has complied in all material respects with the applicable requirements
of Section 4980B of the Code pertaining to continuation coverage as mandated by
COBRA.
11.24. Retiree Benefits. No Covered Person or ERISA Affiliate has an
obligation to provide any Person with any medical, life insurance, or similar
benefit following such Person's retirement or termination of employment (or to
such Person's beneficiary subsequent to such Person's death) other than (i) such
benefits provided to Persons at such Person's sole expense and (ii) obligations
under COBRA.
11.25. State of Collateral and other Property. Each Covered Person has
good and marketable or merchantable title to all real and personal property
purported to be owned by it or reflected in the Initial Financial Statements,
except for personal property sold in the ordinary course of business after the
date of the Initial Financial Statements. There are no Liens on any of the
property purported to be owned by any Covered Person, including the Collateral,
except existing Permitted Liens. Each tangible item of Personal Property
Collateral purported to be owned by a Covered Person is in good operating
condition and repair and is suitable for the use to which it is customarily put
by its owner. Without limiting the generality of the foregoing:
11.25.1. Accounts. With respect to each Account scheduled, listed or
referred to in reports submitted by Borrower to Lender pursuant to the Loan
Documents, except as disclosed therein: (i) the Account arose from a bona
fide transaction completed in accordance with the terms of any documents
pertaining to such transaction; (ii) the Account is not evidenced by a
judgment and there is no material dispute respecting it; (iii) the amount
of the Account as shown on Borrower's books and records and all invoices
and statements which may be delivered to Lender with respect thereto are
actually and absolutely owing to Borrower and are not in any way
contingent; (iv) there are no set-offs, counterclaims or disputes existing
or asserted with respect to the Account and
<PAGE>
Borrower has not made any agreement with any Account Debtor for any
deduction therefrom except a discount or allowance allowed by Borrower in
the ordinary course of its business for prompt payment; (v) there are no
facts, events or occurrences which in any way impair the validity or
enforcement of the Account or tend to reduce the amount payable thereunder
as shown on Borrower's books and records and all invoices and statements
delivered to Lender with respect thereto; (vi) the Account is assignable;
(vii) the Account arose in the ordinary course of Borrower's business;
(viii) to the best of Borrower's knowledge, the Account Debtor with respect
to the Account has the capacity to contract; (ix) the services furnished
and/or goods sold giving rise to the Account are not subject to any Lien
except the first priority, perfected Lien of Lender and except the
Permitted Liens; (x) to the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against the Account
Debtor with respect to the Account; and (xi) no payments have been or shall
be made on the Account except payments promptly delivered to Lender or to
other financial institutions approved by Lender pursuant to this Agreement.
11.25.2. Inventory. With respect to Inventory scheduled, listed or
referred to in any certificate, schedule, list or report given by Borrower,
except as disclosed therein: (i) such Inventory (except for Inventory in
transit) is located at one or another of the premises listed on Exhibit ;
(ii) Borrower has good and merchantable title to such Inventory subject to
no Lien whatsoever except for the first priority, perfected security
interest granted to Lender in connection herewith and except for existing
Permitted Liens; (iii) such Inventory is of good and merchantable quality,
free from any material defects; (iv) such Inventory is not subject to any
licensing, patent, royalty, trademark, trade name or copyright agreements
with any third parties; and (v) the completion of manufacture and sale or
other disposition of such Inventory by Lender following an Event of Default
shall not require the consent of any Person and shall not constitute a
breach or default under any contract or agreement to which Borrower is a
party or to which the Inventory is subject.
11.25.3. Equipment. With respect to the Borrower's equipment: (i)
Borrower has good and marketable title thereto; (ii) none of such equipment
is subject to any Liens except for the first priority security interest
granted to Lender pursuant hereto and except for Permitted Liens; (iii) all
such equipment is in good operating condition and repair, ordinary wear and
tear alone excepted, and is suitable for the uses to which customarily put
in the conduct of Borrower's business; and (iv) none of such equipment used
in the conduct of Borrower's business is leased, other than leases of non-
material items of office equipment.
11.25.4. Documents, Instruments and Chattel Paper. All documents,
instruments and chattel paper describing, evidencing or constituting
Collateral, and all signatures and endorsements thereon, are complete,
valid, and genuine, and all goods evidenced by such documents, instruments
and chattel paper are owned by Borrower free and clear of all Liens other
than Permitted Liens.
11.26. Chief Place of Business; Locations of Collateral. As of the
Execution Date, the chief executive office and the principal places of business
of Borrower are located at
<PAGE>
the places listed and so identified on Exhibit . As of the Execution Date, the
books and records of Borrower, and all of Borrower's chattel paper and all
records of Accounts, are located at the places listed and so identified on
Exhibit . As of the Execution Date, all of the Collateral (except for Inventory
which is in transit) is located at the places listed and so identified on
Exhibit . There is no office or place of business at which Borrower conducts
business except those identified as its chief executive office, its places of
business, and the places where its books and records pertaining to Accounts and
chattel paper are kept as so identified on Exhibit .
11.27. Negative Pledges. No Covered Person is a party to or bound by any
Contract which prohibits the creation or existence of any Lien upon or
assignment or conveyance of any of the Collateral.
11.28. Security Documents.
11.28.1. Borrower Security Agreements. The Borrower Security
Agreements are effective to grant to Lender an enforceable security
interest in all rights, title and interest of Borrower in the Borrower
Personal Property Collateral. Upon appropriate filing (as to all Borrower
Personal Property Collateral in which a security interest may be perfected
under the applicable state's UCC by filing a financing statement) or
Lender's taking possession (as to items of the Borrower Personal Property
Collateral of which a secured party must take possession in order to
perfect a security interest under the applicable state's UCC), Lender will
have a fully perfected security interest in the Borrower Personal Property
Collateral described in the Borrower Security Agreements, subject only to
Permitted Liens affecting the Borrower Personal Property Collateral.
11.28.2. Guarantor Security Agreements. The Guarantor Security
Agreements are effective to grant to Lender an enforceable security
interest in all rights, title and interest of Guarantor in the Guarantor
Personal Property Collateral. Upon appropriate filing (as to all Guarantor
Personal Property Collateral in which a security interest may be perfected
under the applicable state's UCC by filing a financing statement) or
Lender's taking possession (as to items of the Guarantor Personal Property
Collateral of which a secured party must take possession in order to
perfect a security interest under the applicable state's UCC), Lender will
have a fully perfected security interest in the Guarantor Personal Property
Collateral described in the Guarantor Security Agreements, subject only to
Permitted Liens affecting the Guarantor Personal Property Collateral.
11.29. Stock Pledge Agreement. The Stock Pledge Agreement is effective to
grant to Lender a security interest in and lien on all of Borrower's and its
Subsidiaries' rights and interest in the stock described therein.
11.30. S Corporation. There is no election in effect under Section 1362(a)
of the Code for Borrower to be treated as an "S Corporation" as defined in
Section 1361(a) of the Code.
<PAGE>
11.31. Subsidiaries and Affiliates. Exhibit is a correct and complete list
of the name and relationship to Borrower of all of Borrower's Subsidiaries and
Affiliates.
11.32. Margin Stock. Borrower is not engaged and will not engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" "margin stock" (within the
meaning of Regulation U), and no part of the proceeds of any Advance will be
used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock or for any
purpose which violates, or which would be inconsistent with, the provisions of
Regulation U or Regulation G of the FRB. None of the transactions contemplated
by the Acquisition Documents will violate Regulations G, T, U or X of the FRB.
11.33. Securities Matters. No proceeds of any Advance will be used to
acquire any security in any transaction which is subject to Sections 13 and 14
of the Securities Exchange Act of 1934, as amended.
11.34. Investment Company Act, Etc. Borrower is not an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, or a company "controlled" (within the meaning of such
Investment Company Act) by such an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended. Borrower is not subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or any
other Law limiting or regulating its ability to incur Indebtedness for money
borrowed.
11.35. No Material Misstatements or Omissions. Neither the Loan Documents,
any of the Financial Statements nor any statement, list, certificate or other
information furnished or to be furnished by Borrower to Lender in connection
with the Loan Documents or any of the transactions contemplated thereby contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein not misleading. Borrower has disclosed
to Lender everything regarding the business, operations, property, financial
condition, or business prospects of itself and every Covered Person that would
have a Material Adverse Effect on Borrower or any Covered Person.
11.36. Filings. All registration statements, reports, proxy statements and
other documents, if any, required to be filed by Borrower with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, have been filed, and such
filings are complete and accurate and contain no untrue statements of material
fact or omit to state any material facts required to be stated therein or
necessary in order to make the statements therein not misleading.
11.37. Broker's Fees. No broker or finder is entitled to compensation for
services rendered with respect to the transactions described in this Agreement.
11.38. Disclosure. Neither this Agreement nor any document or statement
furnished to Lender by or on behalf of Borrower hereunder contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained herein or therein not misleading.
<PAGE>
12. Survival of Representations. All representations and warranties in Section
, and all representations and warranties in any certificate delivered by
Borrower pursuant hereto, shall survive execution of each of the Loan Documents
and the making of every Advance and Term Conversion, and may be relied upon by
Lender as being true and correct until all of the Loan Obligations are fully and
irrevocably paid.
13. Affirmative Covenants.
Borrower covenants and agrees that, so long as the Commitments remain in
effect or any of the Loan Obligations are owing to Lender by Borrower, Borrower
shall do, or cause to be done, the following:
13.1. Use of Proceeds. Revolving Advances and Convertible Revolving
Advances shall be used solely for working capital, general corporate purposes,
and to fund acquisitions.
13.2. Concentration Account. Borrower shall maintain a depository account
with Lender at the Applicable Lending Office into which the proceeds of every
Revolving Advance and Convertible Revolving Advance will be funded by Lender and
from which all payments on the Loan Obligations will be paid by Borrower (the
"Concentration Account").
13.3. Corporate Existence; Material Licenses. Each Covered Person shall
maintain its existence in good standing and its right to transact business in
those states in which it is now or hereafter doing business, except where the
failure to do so would not have a Material Adverse Effect on Borrower. Each
Covered Person shall obtain and maintain all Material Licenses for such Covered
Person. Notwithstanding anything in this Section to the contrary, any Covered
Person may transfer its assets, including without limitation Material Licenses,
to another Covered Person, provided that Borrower gives Lender prior written
notice of such transaction. Thereafter, any such Covered Person may dissolve or
otherwise discontinue its right to transact business.
13.4. Maintenance of Property and Leases. Each Covered Person shall
maintain in good condition and working order, and repair and replace as
required, all buildings, equipment, machinery, fixtures and other real and
personal property whose useful economic life has not elapsed and which is
necessary for the ordinary conduct of the business of such Covered Person. Each
Covered Person shall maintain in good standing and free of defaults all of its
leases of buildings, equipment, machinery, fixtures and other real and personal
property whose useful economic life has not elapsed and which is necessary for
the ordinary conduct of the business of such Covered Person. Borrower shall not
permit any of its equipment or other property to become a fixture to real
property or an accession to other personal property unless Lender has a valid,
perfected and first priority Lien in such real or personal property. Borrower
will not, without Lender's prior written consent, alter or remove any
identifying symbol or number on its equipment.
13.5. Inventory. Borrower shall keep its Inventory in good and
merchantable condition at its own expense and shall hold such Inventory for sale
or lease, or to be furnished in connection with the rendition of services, in
the ordinary course of Borrower's business, on terms which do not include (other
than with respect to immaterial amounts of inventory, if any) bill-and-hold,
guaranteed sale, sale and return, sale on approval,
<PAGE>
consignment or similar repurchase or return terms. All such Inventory shall be
produced in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations and orders thereunder.
13.6. Insurance. Each Covered Person shall at all times keep insured or
cause to be kept insured, with insurance companies having a rating of at least
"A" by Best's Rating Service, all property owned by it of a character usually
insured by others carrying on businesses similar to that of such Covered Person
in such manner and to such extent and covering such risks as such properties are
usually insured. Each Covered Person shall at all times carry insurance, with
insurance companies having a rating of at least "A" by Best's Rating Service,
against liability on account of damage to persons or property (including product
liability insurance and insurance required under all applicable workmen's
compensation laws) and covering all other liabilities common to such Covered
Person's business, in such manner and to such extent as such coverage is usually
carried by others conducting businesses similar to that of such Covered Person.
All policies of liability insurance maintained hereunder shall name Lender as an
additional insured; all fire and casualty policies of insurance maintained
hereunder shall reflect Lender's interest therein as mortgagee under a standard
New York or Union mortgagee clause. Lender is authorized, but not obligated, as
the attorney-in-fact for Borrower, (i) prior to the occurrence of an Event of
Default with Borrower's consent (which consent shall not be unreasonably
withheld), and, upon the occurrence of an Event of Default, without Borrower's
consent, to adjust and compromise proceeds payable under such policies of
insurance, (ii) to collect, receive and give receipts for such proceeds in the
name of Borrower and Lender, and (iii) to endorse Borrower's name upon any
instrument in payment thereof. Such power granted to Lender shall be deemed
coupled with an interest and shall be irrevocable. All policies of insurance
maintained hereunder shall contain a clause providing that such policies may not
be canceled, reduced in coverage or otherwise modified without 30 days prior
written notice to Lender. Borrower shall upon request of Lender at any time
furnish updated Evidence of Insurance (in the form required as a condition to
Lender's lending hereunder) for such insurance to Lender.
13.7. Payment of Taxes and Other Obligations. Each Covered Person shall
promptly pay and discharge or cause to be paid and discharged, as and when due,
any and all income taxes, federal or otherwise, lawfully assessed and imposed
upon it, and any and all lawful taxes, rates, levies, and assessments whatsoever
upon its properties and every part thereof, or upon the income or profits
therefrom and all claims of materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons for labor, materials, supplies, storage or
other items or services which if unpaid might be or become a Lien or charge upon
any of its property; provided, however, that nothing herein contained shall be
construed as prohibiting a Covered Person from diligently contesting in good
faith by appropriate proceedings the validity of any such taxes, rates, levies,
or assessments, provided such Covered Person has established adequate reserves
therefor in conformity with GAAP on the books of such Covered Person, and no
Lien, other than a Permitted Lien, results from such non-payment.
13.8. Compliance With Laws. Each Covered Person shall comply with all
Material Laws. Without limiting the generality of the foregoing:
13.8.1. Environmental Laws. Each Covered Person shall comply and
shall use commercially reasonable efforts to ensure compliance by all
tenants, subtenants and other occupants, if any, with all Environmental
Laws.
<PAGE>
13.8.2. Pension Benefit Plans. Each Covered Person and each ERISA
Affiliate shall comply with all reporting and disclosure requirements and
all provisions of the Code and ERISA applicable to any Pension Benefit Plan
maintained by such Covered Person or ERISA Affiliate.
13.8.3. Employment Laws. Each Covered Person shall comply with all
requirements of all Employment Laws applicable to such Covered Person.
13.8.4. Wage and Hour Laws. Each Covered Person shall comply with all
requirements of all Wage and Hour Laws applicable to such Covered Person.
13.9. Pension Benefit Plans. Each Covered Person (1) shall notify Lender
promptly of the establishment of any Pension Benefit Plan by such Covered
Person, or by any ERISA Affiliate, which is subject to the requirements of
ERISA; (2) shall maintain each such Pension Benefit Plan without terminating or
amending the same if such termination or amendment would result in any liability
to such Covered Person or ERISA Affiliate under Title IV of ERISA or any
increase in current liability for the plan year that such Covered Person or
ERISA Affiliate is required to provide security to such Pension Benefit Plan
under Section 401(a)(29) of the Code; (3) shall at all times make prompt
payments or contributions to meet the minimum funding standards set forth in
ERISA and the Code with respect to any Pension Benefit Plan maintained by such
Covered Person or ERISA Affiliate to which such standards are applicable; and
(4) promptly furnish such additional information concerning any such Pension
Benefit Plan as Lender may from time to time request.
13.10. Notice of Material Events. Borrower shall, promptly upon any
Responsible Officer of Borrower obtaining knowledge or notice thereof, give
notice to Lender of any (i) breach of any of the covenants in Section or ; (ii)
Default or Event of Default; (iii) the commencement of any Material Proceeding;
and (iv) any loss of or damage to any assets of a Covered Person or institution
of any proceeding for the condemnation or other taking of any of the assets of a
Covered Person, to the extent that such loss, damage or proceeding is likely to
give rise to Insurance/Condemnation Proceeds or to result in a Material Adverse
Effect. In addition,
13.10.1. Borrower shall furnish to Lender from time to time all
information which Lender reasonably requests with respect to the status of
any Material Proceeding.
13.10.2. Borrower shall within five days inform Lender of its receipt
of, and deliver to Lender a copy of, any (a) notice that any violation of
any Environmental Law or Employment Law which may have a Material Adverse
Effect may have been committed or is about to be committed by any Covered
Person, (b) notice that any administrative or judicial complaint or order
has been filed or is about to be filed against any Covered Person alleging
violations of any Environmental Law or Employment Law or requiring such
Covered Person to take any action in connection with the release of any
Hazardous Waste into the environment, (c) notice from a federal, state, or
local governmental agency or private party alleging that a Covered Person
may be liable or responsible for costs associated with a response to or
cleanup of a release of Hazardous Waste into the
<PAGE>
environment or any damages caused thereby, (d) notice that a Covered Person
is subject to federal, state or local investigation regarding the improper
transportation, storage, disposal, generation or release into the
environment of any Hazardous Waste, or (e) notice that any properties or
assets of a Covered Person are subject to a Lien in favor of any
Governmental Authority for any liability under any Environmental Law or
damages arising from or costs incurred by such governmental entity in
response to a release of Hazardous Waste into the environment.
13.10.3. Borrower shall within 30 days after they occur deliver to
Lender notice of the following events: (i) the failure of any Covered
Person or ERISA Affiliate to make any required installment or any other
required payment to any Pension Benefit Plan in sufficient amount to comply
with ERISA and the Code on or before the due date for such installment or
payment; (ii) the occurrence of any Reportable Event, "prohibited
transaction" or "accumulated funding deficiency" (as those terms are
defined in ERISA) with respect to any Pension Benefit Plan maintained or
contributed to by a Covered Person or ERISA Affiliate; (iii) receipt by a
Covered Person or ERISA Affiliate of any notice from a Multi-employer Plan
regarding the imposition of withdrawal liability; and (iv) receipt by a
Covered Person or ERISA Affiliate of any notice of the institution, or a
Covered Person's expectancy of the institution, of any proceeding or
receipt by such Covered Person or ERISA Affiliate of any notice of the
taking, or such Covered Person's expectancy of the taking, of any other
action which may result in the termination of any Pension Benefit Plan
maintained or contributed to by such Covered Person or ERISA Affiliate, or
the withdrawal or partial withdrawal by a Covered Person or ERISA Affiliate
from any Pension Benefit Plan, and the filing or receipt by a Covered
Person or ERISA Affiliate of any such notice and filing or receipt of all
subsequent reports or notices under ERISA with or from the Internal Revenue
Service, the PBGC, or the DOL relating to the same; and, in addition to
such notice, deliver to Lender a certificate of the President or Chief
Financial Officer of Borrower, setting forth details as to such events and
the action that the affected Covered Person or ERISA Affiliate proposes to
take with respect thereto. For purposes of this Section, Borrower and any
ERISA Affiliate shall be deemed to know all facts known by the
Administrator of any Plan of which Borrower or any ERISA Affiliate is the
plan sponsor.
13.10.4. Borrower shall, within ten days after it occurs, deliver to
Lender notice of any default or event of default, or the occurrence of any
event which would with the passage of time, giving of notice or otherwise,
constitute a default or event of default with respect to any of the
Permitted Indebtedness.
13.10.5. Borrower shall, immediately after becoming aware thereof,
deliver notice to Lender of any pending or threatened strike, work
stoppage, material unfair labor practice claim or other material labor
dispute affecting Borrower.
13.10.6. Borrower shall deliver notice to Lender of any change in
Borrower's name, state of incorporation, form of organization, trade names
or styles under which Borrower will sell Inventory or create Accounts, or
to which
<PAGE>
instruments in payment of Accounts may be made payable, at least 30 days
prior to such change.
13.10.7. Borrower shall, immediately after becoming aware thereof,
deliver notice to Lender of any change in Borrower's property, business,
operations or condition (financial or otherwise) which may have a Material
Adverse Effect.
13.10.8. Borrower shall, immediately after becoming aware thereof,
deliver notice to Lender of any violation of any Law applicable to Borrower
or its properties which may have a Material Adverse Effect.
13.11. Borrowing Officer. Borrower shall keep on file with Lender at all
times an appropriate instrument naming each Borrowing Officer.
13.12. Maintenance of Liens of Security Documents.
13.12.1. Preservation and Perfection of Liens. Borrower shall
promptly, upon the reasonable request of Lender and at Borrower's expense,
execute, acknowledge and deliver, or cause the execution, acknowledgment
and delivery of, and thereafter file or record in the appropriate
governmental office, any document or instrument supplementing or confirming
the Security Documents or otherwise deemed necessary by Lender to create,
preserve or perfect any Lien purported to be created by the Security
Documents or to fully consummate the transactions contemplated by the Loan
Documents. The foregoing actions by Borrower shall include, without
limitation, (a) filing financing or continuation statements, and amendments
thereof, in form and substance satisfactory to Lender; (b) delivering to
Lender the original certificates of title for motor vehicles with Lender's
security interest properly endorsed thereon; (c) delivering to Lender the
originals of all instruments, documents and chattel paper, and all other
Collateral of which Lender determines it should have physical possession in
order to perfect and protect Lender's security interest therein, duly
endorsed or assigned to Lender without restriction; (d) delivering to
Lender warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued; (e) transferring
Inventory to warehouses designated by Lender; (f) placing notations on
Borrower's books of account to disclose Lender's security interest; and (g)
delivering to Lender all letters of credit on which Borrower is named
beneficiary.
13.12.2. Collateral Held by Warehouseman, Bailee, etc. If any
Collateral other than pay telephone equipment or VoicePro computer
equipment is at any time in the possession or control of a warehouseman,
bailee or any of Borrower's agents or processors, then Borrower shall
notify Lender thereof and, upon Lender's request, shall notify such Person
of Lender's security interest in such Collateral and instruct such Person
to hold all such Collateral for Lender's account subject to Lender's
instructions. If at any time any Collateral is located on any premises that
are not owned by Borrower, then Borrower shall obtain written waivers, in
form and substance satisfactory to Lender, of all present and future Liens
to which the owner or lessor or any mortgagee of such premises may be
entitled to assert against the Collateral.
<PAGE>
13.12.3. Compliance With Terms of Security Documents. Borrower shall
comply with all of the terms, conditions and covenants in the Security
Documents to which Borrower is a party.
13.13. Accounting System. Each Covered Person shall maintain a system of
accounting established and administered in accordance with GAAP. Without
limiting the generality of the foregoing:
13.13.1. Account Records. Each Covered Person shall maintain a record
of Accounts at either its principal place of business or at Borrower's
principal place of business that itemize each Account of such Covered
Person and describe the names and addresses of the Account Debtors on such
Accounts, relevant invoice numbers, shipping dates and due dates,
collection histories, and agings of such Accounts.
13.13.2. Inventory Records. Each Covered Person shall maintain a
perpetual inventory at either its principal place of business or at
Borrower's principal place of business that records, by type, quality and
quantity, its cost therefor, withdrawals therefrom and additions thereto,
and listing any returns, rejections, repossessions, stoppages in transit,
losses, damages or destruction of or to such Inventory.
13.14. Financial Statements. Borrower shall deliver to Lender:
13.14.1. Annual Financial Statements. Within 90 days after the close
of each Fiscal Year, year-end Financial Statements of Borrower and its
Subsidiaries, containing an audit report without qualification by Kerber,
Eck and Braeckel or other independent certified public accounting firm
selected by Borrower and satisfactory to Lender, and accompanied by (a) a
Compliance Certificate of the Chief Financial Officer of Borrower, (b) a
certificate of the independent certified public accountants that examined
such Financial Statements to the effect that they have reviewed and are
familiar with this Agreement and that, in examining such Financial
Statements, they did not become aware of any fact or condition which then
constituted a Default or Event of Default, except for those, if any,
described in reasonable detail in such certificate and (c) the report, if
any, prepared by the independent certified public accounting firm in
connection with its audit of Borrower with respect to financial, managerial
and administrative operations, compliance matters, recommendations and
similar observations (the "Auditor Prepared Management Letter").
13.14.2. Monthly Financial Statements. Within 45 days after the end
of each month, unaudited consolidated and consolidating Financial
Statements of Borrower and its Subsidiaries for such month, in each case
accompanied by a Compliance Certificate of the Chief Financial Officer of
Borrower, together with a report of the aging of all Accounts of Borrower
in such detail as is reasonably satisfactory to Lender.
Each Compliance Certificate shall be in the form of Exhibit , shall contain
detailed calculations of the financial measurements referred to in Section for
the relevant periods, and shall contain
<PAGE>
statements by the signing officer to the effect that, except as explained in
reasonable detail in such Compliance Certificate, (i) the attached Financial
Statements are complete and correct in all material respects (subject, in the
case of Financial Statements other than annual, to normal year-end audit
adjustments) and have been prepared in accordance with GAAP applied consistently
throughout the periods covered thereby and with prior periods (except as
disclosed therein), (ii) all of the representations and warranties of Borrower
contained in this Agreement and other Loan Documents are true and correct as of
the date such certification is given as if made on such date, and (iii) there
exists no Default which is continuing that has not been waived in writing by
Lender and no Event of Default has occurred that has not been waived in writing
by Lender. If any Compliance Certificate delivered to Lender discloses that a
representation or warranty is not true and correct, or that a Default or Event
of Default has occurred that has not been waived in writing by Lender, such
Compliance Certificate shall set forth what action Borrower has taken or
proposes to take with respect thereto.
13.15. Telephone Lists. Borrower shall provide to Lender, within 90 days
after the close of each Fiscal Year, a report containing a complete and accurate
list, satisfactory to Lender in form and detail, of all installed pay telephone
equipment, and within 45 days after the end of each Fiscal Quarter, a
supplemental report listing all pay telephone equipment installed, removed, sold
or otherwise acquired or surrendered since the date of the immediately preceding
quarterly or annual report.
13.16. Other Information. Upon the written request of Lender, Borrower
shall promptly deliver to Lender such other information about the business,
operations, revenues, financial condition, property, or business prospects of
Borrower as Lender may, from time to time, reasonably request.
13.17. Audits by Lender. Lender or Persons authorized by and acting on
behalf of Lender may at any time during normal business hours audit the books
and records of each Covered Person from time to time upon reasonable notice to
such Covered Person, and in the course thereof may make copies or abstracts of
such books and records and discuss the affairs, finances and books and records
of such Covered Person with its accountants and officers. Each Covered Person
shall cooperate with Lender and such Persons in the conduct of such audits and
shall deliver to Lender any instrument necessary for Lender to obtain records
from any service bureau maintaining records for such Covered Person. After the
occurrence of a Default that is continuing or the occurrence of an Event of
Default, Borrower shall reimburse Lender for all costs and expenses incurred by
Lender in conducting each audit.
13.18. Verification of Accounts. Lender shall have the right at any time
and from time to time, after first giving either oral or written notice to
Borrower, to verify the validity and amount of any Account and any other matter
relating to an Account, by communicating in writing or orally directly with the
Account Debtor or any Person who represents or Lender believes represents the
Account Debtor.
13.19. Appraisals of Collateral. Whenever a Default or Event of Default
exists, and at such other times as Lender requests, Borrower shall at its
expense and upon Lender's request, provide Lender with appraisals or updates
thereof of any or all of the Collateral from an appraiser acceptable to Lender,
and prepared on a basis satisfactory to Lender.
13.20. Access to Officers and Auditors. Each Covered Person shall permit
Persons authorized by Lender to discuss the affairs, finances and accounts of
such Covered
<PAGE>
Person with its officers and independent auditors as often as Lender may
reasonably request, and such Covered Person shall direct such officers and
independent auditors to cooperate with Lender and make full disclosure to Lender
of those matters that they may deem relevant to the continuing ability of
Borrower timely to pay and perform the Loan Obligations.
13.21. Further Assurances. Borrower shall execute and deliver, or cause to
be executed and delivered, to Lender such documents and agreements, and shall
take or cause to be taken such actions, as Lender may from time to time request
to carry out the terms and conditions of this Agreement and the other Loan
Documents.
14. Negative Covenants.
Borrower covenants and agrees that, while the Commitments remain in effect
or any of the Loan Obligations are owing to Lender by Borrower, Borrower shall
not, directly or indirectly, do any of the following, or permit any Covered
Person to do any of the following, without the prior written permission of
Lender:
14.1. Investments. Make any Investments in any other Person except the
following ("Permitted Investments"):
14.1.1. (i) investments in or backed by interest-bearing United
States government obligations; (ii) investments in certificates of deposit
issued by, or time deposits with, Lender or any commercial bank organized
and existing under the Laws of the United States or any State thereof
having a Thompson Bankwatch Rating of B/C or better, or if unrated,
maintaining a minimum primary capital to asset ratio of 8%; (iii)
investments in prime commercial paper rated A1 by Standard and Poor's
Corporation or Prime P1 by Moody's Investor Service, Inc.; (iv) investments
in agreements involving the sale and guarantied repurchase of United States
government securities; or (v) investments in municipal obligations rated
AAA by Standard and Poor's Corporation or Aaa by Moody's Investor Service,
Inc. or, if unrated, insured by a financial institution acceptable to
Lender. No individual Investment described in the preceding sentence shall
have a maturity in excess of twenty-four (24) months and the average
maturity of all investments described in the preceding sentence shall not
exceed six (6) months.
14.1.2. Accounts arising in the ordinary course of business and
payable in accordance with Borrower's customary trade terms.
14.1.3. Investments existing on the Execution Date and disclosed in
Exhibit.
14.1.4. Notes or securities received by Borrower in settlement of
Indebtedness of other Persons to Borrower that was incurred in the ordinary
course of Borrower's business.
14.1.5. Accounts from Affiliates of David R. Hill that arise from the
rendering of services by Borrower to such Affiliates.
<PAGE>
Notwithstanding anything in this Section to the contrary, but only if (a)
the assets acquired are substantially related to the business of, or the entity
involved is in substantially the same business as, Borrower or such Covered
Person, (b) no Event of Default has occurred and no Default has occurred and is
continuing at the time of such transaction or would occur as a result of such
transaction, (c) Borrower has provided to Lender financial statements (which
shall be audited financial statements if (i) audited financial statements are
available to Borrower or (ii) audited financial statements are required pursuant
to SEC Rule 3-05; provided that in the event audited financial statements are
not available to Borrower but are otherwise required by SEC Rule 3-05, such
audited financial statements shall be provided to Lender promptly after their
completion) with respect to the entity involved for the three fiscal years prior
to such transaction, and (d) Borrower has provided to Lender pro forma financial
statements for Borrower or the surviving corporation, as applicable, that are
reasonably satisfactory to Lender, cover the consummation and the first three
fiscal years following the consummation of the transaction, and show that the
requirements in Section will be complied with upon consummation of the
transaction and throughout such three fiscal year period, Borrower or any
Covered Person may merge, consolidate, acquire the assets of or an equity
interest in any other entity if (i) Borrower or such Covered Person is the
surviving corporation, (ii) the transaction does not constitute a Hostile
Takeover, (iii) when involving an equity interest, immediately thereafter
Borrower or such Covered Person holds at least 80% of the total outstanding
equity interests of the other entity that are entitled to vote, (iv) the greater
of the (A) acquisition cost or (B) value of the assets, as determined by Lender,
does not exceed an amount equal to 20% of Borrower's Total Assets immediately
before the consummation of such transaction, and (v) when involving an equity
interest, the other entity is Solvent immediately before the consummation of
such transaction and will be Solvent immediately after the consummation of such
transaction.
14.2. Indebtedness. Create, incur, assume or allow to exist any
Indebtedness of any kind or description, except the following (the "Permitted
Indebtedness"):
14.2.1. Indebtedness to trade creditors in the ordinary course of
business, to the extent that it is not overdue past the original due date
by more than 90 days; provided that nothing herein shall be construed as
prohibiting Borrower from diligently contesting in good faith by
appropriate proceedings the validity of any such Indebtedness, provided
Borrower has established adequate reserves therefor in conformity with GAAP
on its books, and no Lien, other than a Permitted Lien, results from such
overdue payment.
14.2.2. Indebtedness to Zero Plus Dialing, Inc., a Delaware
corporation ("ZPDI"), pursuant to that certain Billing and Collection
Services Agreement between Comtel Computer Corp. and ZPDI, as amended by
that certain Addendum A, Advanced Payment Agreement, dated as of August 9,
1991 (the "Advanced Payment Agreement"); provided, however, that: (i) such
Indebtedness shall not exceed $1,250,000 in the aggregate at any time, (ii)
such Indebtedness is fully paid within six (6) months after the Effective
Date, and (iii) the Advanced Payment Agreement is terminated within six (6)
months after the Effective Date.
14.2.3. Indebtedness secured by purchase money security interests in
an aggregate amount not to exceed 10% of Total Assets at any time.
<PAGE>
14.2.4. Seller Financing, so long as such Indebtedness is
subordinated to the Loan Obligations pursuant to a subordination agreement
satisfactory to Lender.
14.2.5. Indebtedness under operating leases with payments not to
exceed $1,000,000 in the aggregate during any calendar year.
14.2.6. The Loan Obligations.
14.2.7. Indebtedness existing on the Execution Date and disclosed to
Lender on Exhibit.
14.2.8. Indebtedness incurred with the prior written consent of
Lender.
14.3. Prepayments. Voluntarily prepay any Indebtedness other than (a) the
Loan Obligations in accordance with their terms, and (b) trade payables in the
ordinary course of business.
14.4. Indirect Obligations. Create, incur, assume or allow to exist any
Indirect Obligations except Indirect Obligations existing on the Execution Date
and disclosed on Exhibit.
14.5. Liens. Create, incur, assume or allow to exist any Lien upon all or
any part of its property, real or personal, now owned or hereafter acquired,
except the following (the "Permitted Liens"):
14.5.1. Liens for taxes, assessments or governmental charges not
delinquent or being diligently contested in good faith and by appropriate
proceedings and for which adequate book reserves in accordance with GAAP
are maintained.
14.5.2. Liens arising out of deposits in connection with workmen's
compensation, unemployment insurance, old age pensions, or other social
security or retirement benefits legislation.
14.5.3. Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like nature
arising in the ordinary course of business.
14.5.4. Liens imposed by any Law, such as mechanics', workmen's,
materialmen's, landlords', carriers', or other like Liens arising in the
ordinary course of business which secure payment of obligations which are
not past due or which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP are maintained on Borrower's books.
14.5.5. Purchase money liens securing payment of the purchase price
of capital assets acquired by Borrower after the Execution Date in an
<PAGE>
aggregate amount not to exceed 10% of Total Assets at any one time or
otherwise approved by Lender in advance in writing.
14.5.6. Liens existing on the Execution Date and disclosed on
Exhibit .
14.6. FCC Licenses and Permits. Fail to maintain in good standing any
license or permit which Borrower or any of its Subsidiaries is required by Law
to maintain in connection with the assembly, installation, ownership or
operation of pay telephones, including but not limited to licenses and permits
required by the Federal Communications Commission, unless the failure to
maintain any such license or permit will not have a Material Adverse Effect.
14.7. Bailments; Consignments; Warehousing. Store any Inventory with a
bailee, warehouseman, consignee or pursuant to an express or implied agreement
establishing a bailment or consignment of Inventory or similar arrangement,
unless Lender has received a written acknowledgment satisfactory to Lender from
the third party involved which acknowledges the prior perfected lien and
security interest of Lender in such Inventory.
14.8. Disposal of Property. Sell, transfer, exchange, lease or
otherwise dispose of all or substantially all of its assets, except as otherwise
provided in Section .
14.9. Change of Business. Engage in any business other than the
assembly, installation and operation of pay telephones, the provision of
telephone operator and related services, and other telecommunication business.
14.10. Issuance of Securities. Issue any capital stock, create any new
class of stock, or issue any other securities except such as are subordinated in
right of payment to all the Loan Obligations in a manner satisfactory to Lender
and except for Permitted Issuances.
14.11. Transactions With Affiliates. Enter into or be a party to any
transaction or arrangement, including without limitation, the purchase, sale or
exchange of property of any kind or the rendering of any service, with any
Affiliate, or make any loans or advances to any Affiliate; provided, however,
that if no Event of Default has occurred and is continuing, Borrower may engage
in the foregoing transactions in the ordinary course of business and pursuant to
the reasonable requirements of its business and on fair and reasonable terms
substantially as favorable to it as those which it could obtain in a comparable
arm's-length transaction with a non-Affiliate.
14.12. Debt Payments and Material Agreements. Default upon or fail to
pay any Indebtedness for money borrowed as the same matures, or breach, violate
or be in default under any Material Agreement.
14.13. Conflicting Agreements. Enter into any agreement, that would, if
fully complied with by it, result in a Default or Event of Default either
immediately or upon the elapsing of time.
<PAGE>
14.14. Sale and Leaseback Transactions. Enter into any arrangement with
any Person providing for Borrower to lease or rent property that Borrower has or
will sell or otherwise transfer to such Person.
14.15. New Subsidiaries. Organize, create or acquire any Subsidiary other
than in accordance with the terms hereof.
14.16. Transactions Having Material Adverse Effect. Enter into any
transaction which has a Material Adverse Effect.
15. Financial Covenants.
15.1. Net Worth. Net Worth of Borrower shall at no time be less than the
sum of (i) $25,000,000 plus (ii) 75% of all net income (exclusive of any net
losses) subsequent to December 31, 1995.
15.2. Minimum Current Ratio. The ratio of Borrower's Current Assets to
Current Liabilities shall at no time be less than 1.10 to 1.00.
15.3. Senior Funded Indebtedness to Capitalization. The ratio of
Borrower's Senior Funded Indebtedness to Capitalization shall not exceed .55 to
1.00 as of the end of any calendar month.
15.4. Funded Indebtedness to Capitalization. The ratio of Borrower's
Funded Indebtedness to Capitalization shall not exceed .60 to 1.00 as of the end
of any calendar month.
15.5. Senior Funded Indebtedness to EBITDA. The ratio of Borrower's
Senior Funded Indebtedness to EBITDA shall not exceed 3.00 to 1.00 as of the
last day of any calendar quarter, as calculated for the 12 month period then
ended.
15.6. Funded Indebtedness to EBITDA. The ratio of Borrower's Funded
Indebtedness to EBITDA shall not exceed 4.00 to 1.00 as of the last day of any
calendar quarter, as calculated for the 12 month period then ended.
15.7. Fixed Charges Coverage. The ratio of Borrower's EBITDA to Fixed
Charges shall not be less than 1.00 to 1.00 as of the last day of any calendar
quarter, as calculated for the 12 month period then ended.
<PAGE>
As used in this Section ,
"Net Worth" means, at a particular date, Total Assets minus Total
Liabilities.
"Total Assets" means the sum of all assets as presented in the balance
sheet in Borrower's most recent Financial Statements.
"Total Liabilities" means all liabilities as presented in the balance
sheet in Borrower's most recent Financial Statements.
"Funded Indebtedness" as of the end of any period means the sum of the
aggregate principal of all Indebtedness.
"Senior Funded Indebtedness" as of the end of any period means the sum of
the aggregate principal of all Indebtedness (other than Indebtedness which
has been subordinated to the Loan Obligations).
"Capitalization" means the sum of Net Worth and Funded Indebtedness.
"EBITDA" of Borrower for any applicable period shall mean the net income
of Borrower during such period from continuing operations, exclusive of
(a) income or (loss) from discontinued operations, (b) income or (loss)
from extraordinary items, (c) the income or (loss) effect of changes in
accounting principles, (d) gains or (losses) on sales of assets not in the
ordinary course of business (to the extent such gains or losses are
included in income or losses from continuing operations), (e) income and
franchise taxes, (f) interest expense, and (g) depreciation and
amortization expense.
"Fixed Charges" means, as of the end of any applicable period, an amount
equal to the sum of the (a) interest expense, (b) tax expense, (c) paid
and declared dividends, (d) the lesser of actual capital expenditures or
an amount equal to 150% of depreciation expense for such period, and (e)
the greater of (i) an amount equal to 25% of Total Funded Indebtedness on
the last day of the calendar quarter for which such amount is being
calculated and (ii) Current Maturities of Funded Indebtedness.
"Current Maturities of Funded Indebtedness" means, at any time, the amount
of principal scheduled to be repaid on Funded Indebtedness within twelve
(12) months after such time.
All other capitalized terms used in this Section shall have their meanings and
shall be calculated under GAAP.
16. Default.
16.1. Events of Default. Any one or more of the following shall
constitute an event of default (an "Event of Default") under this Agreement:
16.1.1. Failure to Pay Principal or Interest. Failure of Borrower
to pay any principal of the Revolving Loan, Convertible Revolving Loan, or
any Conversion Term Loan or interest accrued thereon when due.
<PAGE>
16.1.2. Failure to Pay Other Amounts Owed to Lender. Failure of
Borrower to pay any of the Loan Obligations (other than principal of the
Revolving Loan, Convertible Revolving Loan, or any Conversion Term Loan
or interest accrued thereon) within 5 days after the date when due.
16.1.3. Failure to Pay Amounts Owed to Other Persons. Failure
of any Covered Person to make any payments when due on any Indebtedness
of such Covered Person over $100,000 to Persons other than Lender which
continues unwaived beyond any applicable grace period specified in the
documents evidencing such Indebtedness.
16.1.4. Representations or Warranties. Any representation or
warranty made by Borrower in this Agreement, or any statement or
representation made in any certificate, report, opinion or other
document delivered pursuant to this Agreement, is discovered to have
been false in any material respect when made.
16.1.5. Certain Covenants. Failure of any Covered Person to
comply with the covenants in Sections , , , through and .
16.1.6. Other Covenants. Failure of any Covered Person to
comply with any of the terms or provisions of any of the Loan Documents
applicable to it (other than a failure which constitutes an Event of
Default under any of Sections through ) which is not remedied or waived
in writing by Lender within 20 days after the initial occurrence of such
failure; provided, however, that no such grace period shall apply, and
an Event of Default shall exist promptly upon such failure to comply, if
such failure may not, in Lender's reasonable determination, be cured by
Borrower during such 20 day period.
16.1.7. Acceleration of Other Indebtedness. Any Obligation of a
Covered Person in excess of $250,000 (other than the Loan Obligations)
for the payment of borrowed money becomes or is declared to be due and
payable or required to be prepaid (other than by a regularly scheduled
prepayment) prior to the original maturity thereof.
16.1.8. Default Under Other Agreements. The occurrence of any
default or event of default under any agreement to which a Covered
Person is a party (other than the Loan Documents), which default or
breach continues unwaived beyond any applicable grace period provided
therein and likely would have a Material Adverse Effect.
16.1.9. Bankruptcy; Insolvency; Etc. A Covered Person (i) fails
to pay, or admits in writing its inability to pay, its debts as they
become due, or otherwise becomes insolvent (however evidenced); (ii)
makes an assignment for the benefit of creditors; (iii) files a petition
in bankruptcy, is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for any receiver or any trustee of such Covered
Person or any substantial part of its property; (iv) commences any
proceeding relating to such Covered Person under any reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; (v) has
commenced against it
<PAGE>
any such proceeding which remains undismissed for a period of thirty (30)
days, or by any act indicates its consent to, approval of, or acquiescence
in any such proceeding or the appointment of any receiver of or any
trustee for it or of any substantial part of its property, or allows any
such receivership or trusteeship to continue undischarged for a period of
thirty (30) days; or (vi) takes any corporate action to authorize any of
the foregoing.
16.1.10. Judgments; Attachment; Etc. Any one or more judgments
or orders is entered against a Covered Person or any attachment or other
levy is made against the property of a Covered Person with respect to a
claim or claims involving in the aggregate liabilities (not paid or
fully covered by insurance, less the amount of reasonable deductibles in
effect on the Execution Date) in excess of $500,000, becomes final and
non-appealable or if timely appealed is not fully bonded and collection
thereof stayed pending the appeal.
16.1.11. Pension Benefit Plan Termination, Etc. Any Pension
Benefit Plan termination by the PBGC or the appointment by the
appropriate United States District Court of a trustee to administer any
Pension Benefit Plan or to liquidate any Pension Benefit Plan; or any
event which constitutes grounds either for the termination of any
Pension Benefit Plan by PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer or liquidate any
Pension Benefit Plan shall have occurred and be continuing for thirty
(30) days after Borrower has notice of any such event; or any voluntary
termination of any Pension Benefit Plan which is a defined benefit
pension plan as defined in Section 3(35) of ERISA while such defined
benefit pension plan has an accumulated funding deficiency, unless
Lender has been notified of such intent to voluntarily terminate such
plan and has given its consent and agreed that such event shall not
constitute a Default; or the plan administrator of any Pension Benefit
Plan applies under Section 412(d) of the Code for a waiver of the
minimum funding standards of Section 412(1) of the Code and Lender
believes that the substantial business hardship upon which the
application for such waiver is based could subject any Covered Person or
ERISA Affiliate to a liability in excess of $25,000.
16.1.12. Transfers by Borrower to its Shareholders. Borrower
makes any payment with respect to its stock, including any cash dividend
or acquisition or redemption of any outstanding stock or retirement or
prepayment of any securities before their regularly scheduled maturity
dates, or loans or advances to shareholders of Borrower. Any transfer
or payment to a shareholder of Borrower shall be deemed a loan or
advance for purposes of this Section.
16.1.13. Liquidation or Dissolution. A Covered Person files a
certificate of dissolution under applicable state law or is liquidated
or dissolved or suspends or terminates the operation of its business, or
has commenced against it any action or proceeding for its liquidation or
dissolution or the winding up of its business, or takes any corporate
action in furtherance thereof; provided, however, that a Covered Person
may do any of the above so long as the assets of such Covered Person are
transferred to another Covered Person.
<PAGE>
16.1.14. Seizure of Assets. All or any part of the property of
Borrower is nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such property or of Borrower
shall be assumed by any Governmental Authority or any court of competent
jurisdiction at the instance of any Governmental Authority, except where
contested in good faith by proper proceedings diligently pursued where a
stay of enforcement is in effect.
16.1.15. Racketeering Proceeding. There is filed against
Borrower any civil or criminal action, suit or proceeding under any
federal or state racketeering statute (including, without limitation,
the Racketeer Influenced and Corrupt Organization Act of 1970), which
action, suit or proceeding is not dismissed within 120 days and could
result in the confiscation or forfeiture of any material portion of the
Collateral.
16.1.16. Loan Documents; Liens. For any reason other than the
failure of Lender to take any action available to it to maintain
perfection of the Liens created in favor of Lender pursuant to the Loan
Documents, any Loan Document ceases to be in full force and effect or
any Lien with respect to any portion of the Collateral intended to be
secured thereby ceases to be, or is not, valid, perfected and prior to
all other Liens (other than the Permitted Liens) or is terminated,
revoked or declared void or invalid.
16.1.17. Loss to Collateral. Any loss, theft, damage or destruction
of any item or items of Collateral occurs which is not fully covered by
insurance and has a Material Adverse Effect.
16.1.18. Material Adverse Event. There occurs any material
adverse change in Borrower's property, business, operation, or condition
(financial or otherwise), or there occurs any event which has a Material
Adverse Effect.
16.1.19. Change of Control. Merge or consolidate with or into
another Person (except as otherwise provided in Section ), or permit any
Person or Group (other than David R. Hill) to become the record or
beneficial owner, directly or indirectly, of securities representing
thirty percent (30%) or more of the voting power of Borrower's then
outstanding securities having the power to vote, or acquiring the power
to elect a majority of the Board of Directors of Borrower, or permit any
Person or Group at any time to become the record or beneficial owner,
directly or indirectly, of more outstanding securities having the power
to vote than David R. Hill so owns; provided, however, that it shall not
be an Event of Default if a Person or Group (other than David R. Hill)
becomes the record or beneficial owner, directly or indirectly, of
securities representing thirty percent (30%) or more of the voting power
of Borrower's then outstanding securities having the power to vote so
long as David R. Hill owns more than fifty percent (50%) of the voting
power of Borrower's then outstanding securities having the power to
vote.
16.2. Cross-Default. Any Event of Default under this Agreement will
constitute an event of default under any other agreement of Borrower with Lender
and under
<PAGE>
any evidence of Indebtedness of Borrower held by Lender, whether or not such is
an event of default specified therein.
16.3. Cross-Collateralization. Upon an Event of Default, the proceeds of
any property or Collateral of Borrower in the possession of Lender or in which
Lender has a security interest, whether or not such property or Collateral is
held as security for the Indebtedness under the Loan Documents or for any of the
other Loan Obligations, may be applied by Lender, at its discretion to any of
the Loan Obligations, at such times and in such order as Lender may from time to
time deem appropriate. The rights of Lender under this Section are in addition
to other rights and remedies (including, without limitation, rights of set-off
described in Section ) which Lender may otherwise have.
16.4. Rights and Remedies in the Event of Default.
16.4.1. Termination of Commitments. Upon an Event of Default
described in Section , the Commitments shall be deemed canceled. Upon
any other Event of Default, and at any time thereafter, Lender may
cancel the Commitments. Such cancellation may be without demand or
notice of any kind, which Borrower expressly waives.
16.4.2. Acceleration. Upon an Event of Default described in
Section , all of the outstanding Loan Obligations shall automatically
become immediately due and payable. Upon any other Event of Default,
and at any time thereafter, Lender may declare all of the outstanding
Loan Obligations immediately due and payable. Such acceleration may be
without demand or notice of any kind, which Borrower expressly waives.
16.4.3. Right of Set-off. Upon the occurrence of any Event of
Default and at any time and from time to time thereafter, Lender is
hereby authorized, without notice to Borrower (any such notice being
expressly waived by Borrower), to set off and apply against the Loan
Obligations any and all deposits (general or special, time or demand,
provisional or final) at any time held, or any other Indebtedness at any
time owing by Lender to or for the credit or the account of Borrower,
irrespective of whether or not Lender shall have made any demand under
this Agreement or the Notes and although such Loan Obligations may be
unmatured. The rights of Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights
of set-off) which Lender may otherwise have.
16.4.4. Notice to Account Debtors. Upon the occurrence of any
Event of Default and acceleration of the Loan Obligations as provided
herein, Lender may, without prior notice to Borrower, notify any or all
Account Debtors that the Accounts have been assigned to Lender and that
Lender has a security interest therein, and Lender may direct, or
Borrower, at Lender's request, shall direct, any or all Account Debtors
to make all payments upon the Accounts directly to Lender. Lender shall
furnish Borrower with a copy of any such notice issued by Lender
promptly after notifying such Account Debtors.
16.4.5. Entry Upon Premises and Access to Information. Upon an Event
of Default and acceleration of the Loan Obligations as provided herein,
<PAGE>
and at any time thereafter: Lender may (i) enter upon the premises leased
or owned by Borrower where Collateral is located (or is believed to be
located) without any obligation to pay rent to Borrower, or any other
place or places where Collateral is believed to be located, (ii) render
Collateral usable or saleable, (iii) remove Collateral therefrom to the
premises of Lender or any agent of Lender for such time as Lender may
desire in order effectively to collect or liquidate Collateral; (iv) take
possession of, and make copies and abstracts of, Borrower's original books
and records, obtain access to Borrower's data processing equipment,
computer hardware and software relating to any of the Collateral and use
all of the foregoing and the information contained therein in any manner
Lender deems appropriate in connection with the exercise of Lender's
rights; and (v) notify postal authorities to change the address for
delivery of Borrower's mail to an address designated by Lender and to
receive, open and process all mail addressed to Borrower.
14.4.6. Secured Party Rights. Upon an Event of Default and
acceleration of the Loan Obligations as provided herein, and at any time
and from time to time thereafter:
a) Lender may exercise any or all of its rights under the
Security Documents, as a secured party under the UCC and any
other applicable Law; and
b) Lender may sell or otherwise dispose of Collateral at
public or private sale in a commercially reasonable manner,
which sale Lender may postpone from time to time by announcement
at the time and place of sale stated in the notice of sale or by
announcement at any adjourned sale without being required to
give a new notice of sale, all as Lender deems advisable, for
cash or credit; provided, however, that Lender may become the
purchaser at any such sale if permissible under applicable Law
and Lender may, in lieu of actual payment of the purchase price,
offset the amount thereof against Borrower's obligations owing
to Lender; and Borrower agrees that Lender has no obligation to
preserve rights to Collateral against prior parties or to
marshal any Collateral for the benefit of any Person;
In connection with the advertising for sale, selling or otherwise
realizing upon any of the Collateral securing the obligations of
Borrower to Lender, Lender may use and is hereby granted a license to
use, without charge or liability to Lender therefor, any of Borrower's
labels, trade names, trademarks, trade secrets, service marks, patents,
patent applications, licenses, certificates of authority, advertising
materials, or any of Borrower's other properties or interests in
properties of similar nature, to the extent that such use thereof is not
prohibited by agreements under which Borrower has rights therein, and
all of Borrower's rights under license, franchise and similar agreements
shall inure to Lender's benefit.
16.4.7. Miscellaneous. Upon the occurrence of an Event of Default
and at any time thereafter, Lender may exercise any other rights and
<PAGE>
remedies available to Lender under the Loan Documents or otherwise
available to Lender at law or in equity.
16.4.8. Application of Funds. Any funds received by Lender with
respect to the Loan Obligations after any acceleration, including but
not limited to proceeds of Collateral, shall be applied as follows: (i)
first, to reimburse Lender for any amounts due to Lender under Sections
and ; (ii) second, to the payment of all other amounts due hereunder
(other than the Loans and interest accrued thereon); (iii) third, to the
payment of interest accrued on the Loans; (iv) fourth, to the payment of
the Loans, in such order as Lender determines in its sole discretion;
and (v) fifth, to the payment of the other Loan Obligations. Any
remaining amounts shall be paid to Borrower or such other Persons as
shall be legally entitled thereto.
16.5. Limitation of Liability; Waiver. Lender shall not be liable to
Borrower as a result of any commercially reasonable possession, repossession,
collection or sale by Lender of Collateral; and Borrower hereby waives all
rights of redemption from any such sale and the benefit of all valuation,
appraisal and exemption laws. If Lender seeks to take possession of any of the
Collateral by replevin or other court process, Borrower hereby irrevocably
waives (i) the posting of any bonds, surety and security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession, (ii) any demand for possession of the Collateral prior to the
commencement of any suit or action to recover possession thereof, (iii) any
requirement that Lender retain possession and not dispose of any Collateral
until after trial or final judgment, and (iv) to the extent permitted by
applicable law, all rights to notice and hearing prior to the exercise by Lender
of Lender's right to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing. Lender
shall have no obligation to preserve rights to the Collateral or to marshall any
Collateral for the benefit of any Person.
16.6 Notice. Any notice of intended action required to be
given by Lender, if given as provided in Section at least 10 calendar days
prior to such proposed action, shall be effective and constitute commercially
reasonable and fair notice to Borrower.
17. Miscellaneous.
17.1. Notices. All notices, consents, requests and demands to or upon
the respective parties hereto shall be in writing, and shall be deemed to have
been given or made when delivered in person to those Persons listed on the
signature pages hereof or when deposited in the United States mail, postage
prepaid, or, in the case of telegraphic notice, or the overnight courier
services, when delivered to the telegraph company or overnight courier service,
or in the case of telex or telecopy notice, when sent, verification received, in
each case addressed as set forth on the signature pages hereof, or such other
address as either party may designate by notice to the other in accordance with
the terms of this paragraph. No notice given to or demand made on Borrower by
Lender in any instance shall entitle Borrower to notice or demand in any other
instance.
17.2. Right to Cure. Lender may from time to time, in its sole
discretion (but shall have no obligation to do so), for Borrower's account and
at Borrower's expense, pay (or make a Revolving Advance or Convertible Revolving
Advance to pay) any amount or do any act required of Borrower hereunder or
requested by Lender to preserve, protect, maintain
<PAGE>
or enforce the Loan Obligations, the Collateral or Lender's Liens thereon, and
which Borrower fails to pay or do, including, without limitation, payment of any
judgment against Borrower, insurance premium, taxes or assessments, warehouse
charge, finishing or processing charge, landlord's claim, and any other Lien
upon or with respect to the Collateral. All payments that Lender makes pursuant
to this Section and all out-of-pocket costs and expenses that Lender pays or
incurs in connection with any action taken by it hereunder shall be a part of
the Loan Obligations, the repayment of which shall be secured by the Collateral.
Any payment made or other action taken by Lender pursuant to this Section shall
be without prejudice to any right to assert an Event of Default hereunder and to
pursue Lender's other rights and remedies with respect thereto.
17.3. Amendments, Waivers and Consents. No amendment to, waiver of, or
departure from full compliance with any provision of this Agreement, or of any
of the other Loan Documents, or consent to any departure by Borrower herefrom or
therefrom, shall be effective unless it is in writing and signed by authorized
officers of Borrower and the Lender; provided, however, that any such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No failure by Lender to exercise, and no delay by Lender in
exercising, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Lender of any right,
remedy, power or privilege hereunder preclude any other exercise thereof, or the
exercise of any other right, remedy, power or privilege.
17.4. Rights Not Exclusive. Every right granted to Lender hereunder or
under any other Loan Document or allowed to it at law or in equity shall be
deemed cumulative and may be exercised from time to time.
17.5. Survival of Agreements. All covenants and agreements made herein
and in the other Loan Documents shall survive the execution and delivery of this
Agreement, the Notes and other Loan Documents and the making of every Advance
and every Term Conversion. All agreements, obligations and liabilities of
Borrower under this Agreement concerning the payment of money to Lender,
including but not limited to Borrower's obligations under Sections and , but
excluding the obligation to repay the Loans and interest accrued thereon, shall
survive the repayment in full of the Loans and interest accrued thereon, the
return of the Notes to Borrower and the termination of the Commitments.
17.6. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and all future holders of the Notes
and their respective successors and assigns, except that Borrower may not
assign, delegate or transfer any of its rights or obligations under this
Agreement without the prior written consent of Lender. With respect to
Borrower's successors and assigns, such successors and assigns shall include,
without limitation, any receiver, trustee or debtor-in-possession of or for
Borrower. Lender shall have the right to assign its rights and to delegate its
obligations under the Loan Documents to one or more financial institutions
selected by Lender and reasonably acceptable to Borrower that assumes Lender's
obligations to make Revolving Advances, Convertible Revolving Advances, and
Conversion Term Loans to Borrower subject to the terms and conditions herein.
Lender shall have the right to assign its rights under the Loan Documents to any
Federal Reserve Bank, but without delegation of Lender's obligations thereunder.
17.7. Participations. Lender may in the ordinary course of its
commercial banking business and in accordance with applicable law grant
participations to one or more
<PAGE>
banks or other financial institutions in the Loans. For this purpose, Lender may
disclose to a potential or actual participant any information supplied to Lender
by or on behalf of Borrower. Borrower hereby acknowledges and agrees that every
such participant has the same right of set-off as does Lender under Section ;
provided, however, that all amounts received by any such participant through the
exercise of the right of set-off in excess of its share of the Loans as a
participant shall be remitted to Lender.
17.8. Payment of Expenses. Borrower agrees to pay or reimburse Lender
for its costs and expenses incurred in connection with Lender's due diligence
review, the negotiation and preparation of the Loan Documents, and the
perfection of Lender's liens and security interests in the Collateral, including
but not limited to recording and filing fees, appraisal fees, environmental
consultant fees, all actual attorney's expenses advanced (including but not
limited to expenses for lien searches and filing charges, facsimile and other
electronic data transmissions, long-distance telephone charges, courier and
delivery charges and photocopying charges) and reasonable attorneys' fees.
Further, if at any time or times hereafter Lender engages legal counsel for
advice or other representation to enforce the rights of Lender against Borrower
under the Loan Documents or in connection with any amendment, supplement,
waiver, consent or subsequent closing relating to any of the Loan Documents at
the request of Borrower or as a consequence of a Default or Event or Default,
then all reasonable fees and all expenses advanced of such legal counsel and all
litigation costs, including costs incurred as a consequence of any proceedings
involving Borrower under the federal Bankruptcy Code (if any) shall constitute a
part of the Loan Obligations and be payable on demand.
17.9. Indemnity. Borrower shall pay, indemnify and hold harmless Lender
and its directors, officers, employees, agents, and representatives (the
"Indemnified Parties") for, from and against, and promptly reimburse the
Indemnified Parties for, any and all claims, damages, liabilities, losses, costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses and amounts paid in settlement) (the "Indemnified Liabilities")
incurred, paid or sustained by the Indemnified Parties in connection with,
arising out of, based upon or otherwise involving or resulting from any
threatened, pending or completed action, suit, investigation or other proceeding
by, against or otherwise involving the Indemnified Parties and in any way
dealing with, relating to or otherwise involving this Agreement, any of the
other Loan Documents, or any transaction contemplated hereby or thereby (each a
"Triggering Event"); provided, however, that Borrower shall have no obligation
to indemnify the Indemnified parties hereunder with respect to any Indemnified
Liabilities arising from the gross negligence, bad faith or willful misconduct
of any of the Indemnified Parties. The obligations of Borrower under this
Section shall survive the termination of the Commitments, the payment and
satisfaction of all of the Loan Obligations, and the release of the Collateral.
To the extent that any of the indemnities set forth in this Section may be
unenforceable because it is violative of any Law or public policy, Borrower
shall pay the maximum portion which it is permitted to pay under applicable law.
17.10. Changes in Accounting Principles. If Borrower, at the end of its
Fiscal Year and with the concurrence of its independent certified public
accountants, changes the method of valuing the Inventory of Borrower, or if any
other changes in accounting principles from those used in the preparation of any
of the Financial Statements are required by or result from the promulgation of
principles, rules, regulations, guidelines, pronouncements or opinions by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or bodies with similar
<PAGE>
functions), and any of such changes result in a change in the method of
calculation of, or affect the results of such calculation of, any of the
financial covenants, standards or terms found herein, then the parties hereto
agree to enter into and diligently pursue negotiations in order to amend such
financial covenants, standards or terms so as to equitably reflect such changes,
with the desired result that the criteria for evaluating the financial condition
and results of operations of Borrower shall be the same after such changes as if
such changes had not been made; provided, however, that until such changes are
made, all financial covenants herein and all the provisions hereof which
contemplate financial calculation hereunder shall remain in full force and
effect.
17.11. Loan Records. The date and amount of all Advances to Borrower,
Term Conversions and payments of amounts due from Borrower under the Loan
Documents will be recorded in the records that Lender normally maintains for
such types of transactions. The failure to record, or any error in recording,
any of the foregoing shall not, however, affect the obligation of Borrower to
repay the Loans and other amounts payable under the Loan Documents. Borrower
shall have the burden of proving that Lender's records are not correct. Borrower
agrees that Lender's books and records showing the Loan Obligations and the
transactions pursuant to this Agreement shall be admissible in any action or
proceeding arising therefrom, and shall constitute prima facie proof thereof,
irrespective of whether any Loan Obligation is also evidenced by a promissory
note or other instrument. Lender will provide to Borrower a monthly statement of
Advances, Term Conversions, payments, and other transactions pursuant to this
Agreement. Such statement shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reversals and reapplications of
payments as provided in Section and corrections of errors discovered by Lender),
unless Borrower notifies Lender in writing to the contrary within thirty (30)
days after such statement is rendered. In the event a timely written notice of
objections is given by Borrower, only the items to which exception is expressly
made will be considered to be disputed by Borrower.
17.12. Other Security and Guaranties. Lender may, without notice or
demand and without affecting Borrower's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Loan Obligations and exchange, enforce
and release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Loan Obligations
and release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Loan Obligations, or any other Person in any way obligated to pay
all or any part of the Loan Obligations.
17.13. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or lack of authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction unless the ineffectiveness of such provision
would result in such a material change as to cause completion of the
transactions contemplated hereby to be unreasonable.
17.14. Counterparts. This Agreement may be executed by the parties
hereto on any number of counterparts and on separate counterparts, and all such
counterparts taken together shall constitute one and the same instrument. It
shall not be necessary in
<PAGE>
making proof of this Agreement to produce or account for more than one
counterpart signed by the party to be charged.
17.15. Governing Law; No Third Party Rights. THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MISSOURI APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. This Agreement is
solely for the benefit of the parties hereto and their respective successors and
assigns, and no other Person shall have any right, benefit, priority or interest
under, or because of the existence of, this Agreement.
17.16. Choice of Forum. SUBJECT ONLY TO THE EXCEPTION IN THE NEXT
SENTENCE, BORROWER AND LENDER HEREBY AGREE TO THE EXCLUSIVE JURISDICTION OF THE
FEDERAL COURT OF THE EASTERN DISTRICT OF MISSOURI AND THE STATE COURTS OF
MISSOURI LOCATED IN ST. LOUIS COUNTY AND THE CITY OF ST. LOUIS, MISSOURI, AND
WAIVE ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY
ACTION INSTITUTED THEREIN, AND AGREE THAT ANY DISPUTE CONCERNING THE
RELATIONSHIP BETWEEN LENDER AND BORROWER OR THE CONDUCT OF EITHER PARTY IN
CONNECTION WITH THIS AGREEMENT OR OTHERWISE SHALL BE HEARD ONLY IN THE COURTS
DESCRIBED ABOVE. NOTWITHSTANDING THE FOREGOING: (1) LENDER SHALL HAVE THE RIGHT
TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN ANY COURTS
OF ANY OTHER JURISDICTION LENDER DEEMS NECESSARY OR APPROPRIATE IN ORDER TO
REALIZE ON THE COLLATERAL, REAL ESTATE OR OTHER SECURITY FOR THE LOAN
OBLIGATIONS, AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS
FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
17.17. Jury Trial. BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR (2) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF THEM IN
RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH OF BORROWER
AND LENDER AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EITHER MAY FILE
AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
17.18. Captions. Section captions and the Table of Contents are for
convenience only and shall not affect the interpretation or construction of this
Agreement or the other Loan Documents.
<PAGE>
17.19. Incorporation By Reference. All of the terms of the other Loan
Documents are incorporated in and made a part of this Agreement by this
reference.
17.20. Statutory Notice. The following notice is given pursuant to
Section 432.045 of the Missouri Revised Statutes; nothing contained in such
notice shall be deemed to limit or modify the terms of the Loan Documents:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND
OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER) AND
US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE
REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS
WE MAY LATER AGREE IN WRITING TO MODIFY IT.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by appropriate duly authorized officer as of the date on the first page.
DAVEL COMMUNICATIONS GROUP, INC.
By:
David R. Hill
Chairman
Notice Address:
Davel Communications Group, Inc.
601 West Morgan Street
Jacksonville, IL 62651
Attention: Michael E. Hayes or
Theodore C. Rammelkamp, Jr.
FAX # (217) 243-6016
TEL # (217) 243-4391
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:
Name:
Title:
Notice Address:
The Boatmen's National Bank
of St. Louis
One Boatmen's Plaza
800 Market Street
P.O. Box 236
St. Louis, MO 63166-0236
Attention: Eric A. Gudmestad
FAX # (314) 466-6499
TEL # (314) 466-6456
<PAGE>
Acknowledgement
- ---------------
Each of the undersigned hereby acknowledges that it has reviewed the Amended and
Restated Loan Agreement (as it may be further amended, modified, restated, or
replaced from time to time) and hereby agrees to be bound by each of its terms
and conditions, and that no acknowledgement by the undersigned shall be
necessary for any future amendments, modifications, restatements, or
replacements of such Loan Agreement.
TELALEASING ENTERPRISES, INC.
By:
Name:
Title:
PHONE ZONE, INC.
By:
Name:
Title:
INTERSTATE COMMUNICATIONS, INC.
By:
Name:
Title:
ADTEC COMMUNICATIONS, INC.
By:
Name:
Title:
<PAGE>
COMTEL COMPUTER CORP.
By:
Name:
Title:
CALIFORNIA COMTEL COMPUTER, INC.
By:
Name:
Title:
TRCA, INC.
By:
Name:
Title:
JAX PAYPHONES, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT
-------
FORM OF TERM NOTE
$________________ St. Louis, Missouri
__________, 199__
For value received, Davel Communications Group, Inc., an Illinois
corporation ("Borrower") promises to pay to the order of THE BOATMEN'S NATIONAL
BANK OF ST. LOUIS, a national banking association ("Lender") the principal sum
of ________________________ DOLLARS ($___________________) in ______________
(____) consecutive equal principal payments to be made quarterly commencing on
_________________ ___, 199__, and on the first day of each calendar quarter
thereafter, through and including _________________ ___, 199__, with a final
installment in the amount of the remaining outstanding principal balance and all
accrued interest thereon being due on ______________ ___, 199__.
Borrower further promises to pay interest from the date hereof on the
balance of said principal from time to time outstanding at a per annum rate or
rates determined pursuant to the Loan Agreement. Upon the occurrence of any
Event of Default as defined in the Loan Agreement, or at the option of Lender
upon the occurrence of a Default as defined in the Loan Agreement, all
outstanding principal and, to the extent permitted by law, accrued interest in
respect of this Term Note (this "Note"), and all other amounts owing hereunder
shall bear interest, payable on demand, at the Default Rate set forth in the
Loan Agreement. In addition, such default rate of interest shall apply after
Maturity, whether by acceleration or otherwise. All such interest shall be
computed on the basis of a year deemed to consist of 360 days and paid for the
actual number of days elapsed. Interest shall be payable on such dates as are
provided under the Loan Agreement.
Both principal and interest are payable in Dollars to Lender at its office
at One Boatmen's Plaza, 800 Market Street, St. Louis, Missouri 63101
(Attention:_________________).
This Note is referred to in, and is issued under the terms of, and pursuant
to the provisions of, that certain Amended and Restated Loan Agreement dated as
of August ___, 1996 between Lender and Borrower (as it may be further amended,
restated, extended, renewed, replaced, or otherwise modified from time to time,
the "Loan Agreement"). All capitalized terms used and not otherwise defined
herein shall have the same meanings as given them in the Loan Agreement.
This Note is secured by the Collateral described in the Loan Documents,
executed from time to time by Borrower in favor of Lender as set forth in the
Loan Agreement and reference to the Loan Documents and the Loan Agreement is
made for a statement of the rights of the Lender with respect to such
Collateral.
Borrower shall prepay the principal amount of this Note to the extent
provided in the Loan Agreement. Borrower may prepay the principal amount of this
Note to the extent and upon the conditions provided in the Loan Agreement.
<PAGE>
The date and amount of all disbursements and receipts representing
principal and receipts of interest by Lender with respect to the Term Loan shall
be recorded by Lender in the records it maintains with respect thereto. The
failure to record, or any error in recording, any of the foregoing shall not,
however, affect the obligations of Borrower under this Note to repay the
principal amount advanced hereunder together with all interest accruing thereon.
Such record as maintained by Lender shall constitute prima facie evidence of the
amount outstanding under this Note.
Reference is made to the Loan Agreement for provisions regarding the
acceleration of the maturity hereof on the occurrence of any Event of Default,
which provisions are incorporated herein by this reference.
If any payment required under this Note or the Loan Agreement is not made
when due, or upon any other Event of Default, Borrower shall pay all costs of
collection on this Note, including but not limited to court costs and reasonable
attorneys fees and actual expenses of such attorneys, whether or not litigation
is commenced, including representation of Lender in connection with any
bankruptcy or insolvency proceeding of Borrower.
Demand for payment, protest, notice of dishonor, and all other notices and
demands under this Note and any and all lack of diligence in the enforcement of
this Note are hereby waived by all who are or shall become parties to this Note
and the same hereby assent to each and every extension or postponement of the
time of payment, at or after demand, or other indulgence, and hereby waive any
and all notice thereof. Every such party by becoming a party to this Note
further waives any and all defenses which such party may have based on
suretyship or impairment of collateral with respect to this Note.
No amendment, modification or waiver of any provision of this Note, nor
consent to any departure by Borrower herefrom, shall be effective unless the
same shall be in writing signed by an authorized officer of Lender, and then
only in the specific instance and for the purpose for which given. No failure on
the part of Lender to exercise, and no delay in exercising, any right under this
Note shall operate as a waiver thereof, nor shall any single or partial exercise
by Lender of any right under this Note preclude any other or further exercise
thereof, or the exercise of any other right. Each and every right granted to
Lender under this Note or allowed to it at law or in equity shall be deemed
cumulative and such remedies may be exercised from time to time concurrently or
consecutively at Lender's option.
All notices required to be given or which may be given in connection with
this Note shall be given in the manner required for notices under the Loan
Agreement.
This Note is governed by and shall be interpreted in accordance with the
laws of the State of Missouri, without regard to choice of conflict of laws
rules.
DAVEL COMMUNICATIONS GROUP, INC., an Illinois
corporation
By:
Name:
Title:
<PAGE>
EXHIBIT
-------
DOCUMENTS AND REQUIREMENTS LIST
- -------------------------------------------------------------------------------
DOCUMENT OR REQUIREMENT
- -------------------------------------------------------------------------------
I. Loan Agreement with all Exhibits.
- -------------------------------------------------------------------------------
II. Revolving Note.
- -------------------------------------------------------------------------------
III. Convertible Revolving Note.
- -------------------------------------------------------------------------------
IV. Form of Term Notes.
- -------------------------------------------------------------------------------
V. Security Agreement with Borrower that covers the Borrower Personal
Property Collateral.
- -------------------------------------------------------------------------------
VI. Security Agreement with Guarantors that covers the Guarantor Personal
Property Collateral.
- -------------------------------------------------------------------------------
VII. Guaranty of Guarantors.
- -------------------------------------------------------------------------------
VIII. Contribution, Subordination and Security Agreement among the Guarantors.
- -------------------------------------------------------------------------------
IX. Assignment of Equipment Lease Agreement between Borrower and David R.
Hill.
- -------------------------------------------------------------------------------
X. Stock Pledge Agreement of Borrower pledging all stock of its Subsidiaries.
- -------------------------------------------------------------------------------
XI. Stock Powers and Original Stock Certificates for each of the following:
a. Telaleasing Enterprises, Inc.
b. Phone Zone, Inc.
c. TRCA, Inc.
d. California ComTel Computer, Inc.
e. Comtel Computer Corp.
- -------------------------------------------------------------------------------
I. Stock Pledge Agreement of Telaleasing Enterprises, Inc., pledging all
stock of its Subsidiaries.
- -------------------------------------------------------------------------------
II. Stock Powers and Original Stock Certificates for each of the following:
a. Adtec Communications, Inc.
b. Jax Payphones, Inc.
c. Interstate Communications, Inc.
- -------------------------------------------------------------------------------
I. Subordination Agreement from Resurgens Communications Group, Inc.
- -------------------------------------------------------------------------------
II. UCC Financing Statements.
- -------------------------------------------------------------------------------
A. Lender against Borrower covering Accounts, Inventory, Instruments,
Documents, Chattel Paper, General Intangibles, Goods and Equipment.
1. Illinois Secretary of State
<PAGE>
- -------------------------------------------------------------------------------
B. Lender against each Guarantor covering Accounts, Inventory,
Instruments, Documents, Chattel Paper, General Intangibles, Goods and Equipment:
- -------------------------------------------------------------------------------
Telaleasing Enterprises, Inc.
- -------------------------------------------------------------------------------
i. Alabama Secretary of State
- -------------------------------------------------------------------------------
ii. Florida Secretary of State
- -------------------------------------------------------------------------------
iii. Hillsborough County, FL
- -------------------------------------------------------------------------------
iv. Catoosa County, GA
- -------------------------------------------------------------------------------
v. Illinois Secretary of State
- -------------------------------------------------------------------------------
vi. Indiana Secretary of State
- -------------------------------------------------------------------------------
vii. Kentucky Secretary of State
- -------------------------------------------------------------------------------
viii. Mississippi Secretary of State
- -------------------------------------------------------------------------------
ix. North Carolina Secretary of State
- -------------------------------------------------------------------------------
x. Mechlenburg County, NC
- -------------------------------------------------------------------------------
xi. Tennessee Secretary of State
- -------------------------------------------------------------------------------
xii. Virginia State Corporation Commission
- -------------------------------------------------------------------------------
xiii. Iowa Secretary of State
- -------------------------------------------------------------------------------
xiv. South Carolina Secretary of State
- -------------------------------------------------------------------------------
xv. Missouri Secretary of State
- -------------------------------------------------------------------------------
xvi. St. Louis County, Missouri
- -------------------------------------------------------------------------------
xix. Arizona Secretary of State
- -------------------------------------------------------------------------------
xx. Nevada Secretary of State
- -------------------------------------------------------------------------------
xxi. Maryland Secretary of State
- -------------------------------------------------------------------------------
xxii. Chatham County, Georgia
- -------------------------------------------------------------------------------
xxiii. Dougherty County, Georgia
- -------------------------------------------------------------------------------
xxiv. Lowndes County, Georgia
- -------------------------------------------------------------------------------
xxv. Richmond County, Georgia
<PAGE>
- -------------------------------------------------------------------------------
Phone Zone, Inc.
- -------------------------------------------------------------------------------
i. Illinois Secretary of State
- -------------------------------------------------------------------------------
Interstate Communications, Inc.
- -------------------------------------------------------------------------------
i. Catoosa County, GA.
- -------------------------------------------------------------------------------
ii. Illinois Secretary of State
- -------------------------------------------------------------------------------
iii. Tennessee Secretary of State
- -------------------------------------------------------------------------------
Adtec Communications, Inc.
- -------------------------------------------------------------------------------
i. Florida Secretary of State
- -------------------------------------------------------------------------------
ComTel Computer Corp.
- -------------------------------------------------------------------------------
i. California Secretary of State
- -------------------------------------------------------------------------------
ii. North Carolina Secretary of State
- -------------------------------------------------------------------------------
iii. Colorado Secretary of State
- -------------------------------------------------------------------------------
iv. Florida Secretary of State
- -------------------------------------------------------------------------------
v. Texas Secretary of State
- -------------------------------------------------------------------------------
vi. New York Secretary of State
- -------------------------------------------------------------------------------
vii. Indiana Secretary of State
- -------------------------------------------------------------------------------
viii. Illinois Secretary of State
- -------------------------------------------------------------------------------
TRCA, Inc.
- -------------------------------------------------------------------------------
i. Illinois Secretary of State
- -------------------------------------------------------------------------------
ii. Florida Secretary of State
- -------------------------------------------------------------------------------
Jax Payphones, Inc.
- -------------------------------------------------------------------------------
i. Florida Secretary of State
- -------------------------------------------------------------------------------
ii. Illinois Secretary of State
<PAGE>
- -------------------------------------------------------------------------------
I. Closing Certificate of Borrower, signed by the President of Borrower,
addressed to Lender and dated as of the Closing Date, to the effect that: (i)
all representations and warranties of Borrower contained in the Loan Documents
or otherwise made in writing to Lender in connection therewith by or on behalf
of each Borrower are true and correct as of such date, with the same force and
effect as if made on such date; (ii) all of the conditions to the making of the
Initial Advances that have not been waived by lender have been satisfied; (iii)
that there has been no Material Adverse Change since the date of the Initial
Financial Statements; and (iv) after giving effect to the execution and delivery
of the Loan Documents and the making of the Initial Advances, no Default or
Event of Default has occurred.
- -------------------------------------------------------------------------------
II. Opinion of Borrower's Counsel covering such matters as Lender may
require.
- -------------------------------------------------------------------------------
III. Certificates of Insurance for Borrower and Subsidiaries containing
summaries of the types of coverage, names of the respective insurers, limits of
coverage, and expiration dates, and reflecting that Lender is an additional
insured on public liability policies.
- -------------------------------------------------------------------------------
IV. Copies of all insurance policies.
- -------------------------------------------------------------------------------
V. The Initial Financial Statements.
- -------------------------------------------------------------------------------
VI. Secretary's Certificate for Borrower with certified Articles of
Incorporation, Bylaws, Resolutions, and Incumbency Statement.
- -------------------------------------------------------------------------------
VII. Secretary's Certificate for each of the following Guarantors with
certified Articles of Incorporation, Bylaws, Resolutions, and Incumbency
Statement.
- -------------------------------------------------------------------------------
1. Telaleasing Enterprises, Inc.
2. Phone Zone, Inc.
3. TRCA, Inc.
4. Adtec Communications, Inc.
5. Interstate Communications, Inc.
6. ComTel Computer Corp.
7. California ComTel Computer, Inc.
8. Jax Payphones, Inc.
VIII. Good Standing Certificate for Borrower from the Secretary of State of
Illinois.
- -------------------------------------------------------------------------------
IX. Good Standing Certificate for each of the following Guarantors from
the listed Secretary of State:
- -------------------------------------------------------------------------------
1. Telaleasing Enterprises, Inc. (Illinois)
2. Phone Zone, Inc. (Illinois)
3. TRCA, Inc. (Illinois)
4. Adtec Communications, Inc. (Florida)
5. Interstate Communications, Inc. (Georgia)
6. ComTel Computer Corp. (Nevada)
7. California ComTel Computer, Inc. (California)
8. Jax Payphones, Inc. (Florida)
- -------------------------------------------------------------------------------
X. Copies of Equipment Lease(s) from David R. Hill to Borrower
<PAGE>
- -------------------------------------------------------------------------------
XI. Copies of all consents, licenses and approvals, if any, obtained by
Borrower in connection with the execution, performance, and enforceability of
the Loan Documents.
- -------------------------------------------------------------------------------
XII. Pre closing UCC, Tax, and Judgment Lien Search Reports of filings
against Borrower in the following jurisdictions:
a. Illinois Secretary of State
- -------------------------------------------------------------------------------
I. Pre closing UCC, Tax, and Judgment Lien Search Reports of filings
against each of the following Guarantors in the listed jurisdictions:
1. Telaleasing Enterprises, Inc.
a. Iowa Secretary of State
b. South Carolina Secretary of State
c. Missouri Secretary of State
d. St. Louis County, Missouri
e. Arizona Secretary of State
f. Utah Secretary of State
g. Washington, D.C.
h. Florida Secretary of State
i. Hillsborough County, FL
j. Tennessee Secretary of State
k. Illinois Secretary of State
l. Nevada Secretary of State
m. Catoosa County, Georgia
n. Maryland Secretary of State
o. Kentucky Secretary of State
p. Indiana Secretary of State
q. North Carolina Secretary of State
r. Mechlenburg County, NC
s. Alabama Secretary of State
t. Mississippi Secretary of State
u. Virginia Secretary of State
v. Chatham County, Georgia
w. Dougherty County, Georgia
x. Lowndes County, Georgia
y. Richmond County, Georgia
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
1. Phone Zone, Inc.
a. Illinois Secretary of State
1. TRCA, Inc.
a. Florida Secretary of State
b. Illinois Secretary of State
1. Adtec Communications, Inc.
a. Florida Secretary of State
1. Interstate Communications, Inc.
a. Catoosa County, GA
b. Tennessee Secretary of State
vi. ComTel Computer Corp.
a. California Secretary of State
b. North Carolina Secretary of State
c. Colorado Secretary of State
d. St. Louis County, Missouri
e. Missouri Secretary of State
f. Arizona Secretary of State
g. Utah Secretary of State
h. Washington, D.C.
i. Florida Secretary of State
j. Texas Secretary of State
k. New York Secretary of State
l. Indiana Secretary of State
m. Illinois Secretary of State
n. Nevada Secretary of State
vii. California ComTel Computer, Inc.
a. California Secretary of State
viii. Jax Payphones, Inc.
a. Florida Secretary of State
b. Illinois Secretary of State
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT
--------
DISCLOSURE SCHEDULE OF BORROWER
None, if none listed.
<PAGE>
EXHIBIT
--------
PLACES OF BUSINESS; LOCATIONS OF COLLATERAL
List previously delivered to Lender.
<PAGE>
EXHIBIT
--------
FORM OF COMPLIANCE CERTIFICATE
TO: THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
This Compliance Certificate is furnished pursuant to that certain Amended
and Restated Loan Agreement executed _____________, 1996 (as the same may be
amended, restated or otherwise modified from time to time, the "Loan
Agreement"), among Davel Communications Group, Inc. ("Borrower") and The
Boatmen's National Bank of St. Louis ("Lender"). Unless otherwise defined
herein, capitalized terms used in this Compliance Certificate have the meanings
defined in the Loan Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _________________________ of the Borrower.
2. I have reviewed the terms of the Loan Agreement and the Loan Documents
and I have made, or have caused to be made under my supervision, a
review of the transactions and conditions of the Borrower and each
other Covered Person during the accounting period covered by the
attached Financial Statements.
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which
constitutes an Default or Event of Default as of the date of this
Compliance Certificate.
4. [Use for annual financial statements: Schedule I attached hereto
contains the Financial Statements for Borrower for the fiscal year
ended __________, which are complete and correct in all material
respects and have been prepared in accordance with GAAP applied
consistently throughout the period and with prior periods (except as
disclosed therein).]
[Use for quarterly and monthly financial statements: Schedule I
attached hereto contains the Financial Statements for Borrower for the
fiscal <quarter> <month> ended ______________, which are complete and
correct in all material respects (subject to normal year-end audit
adjustments) and have been prepared in accordance with GAAP applied
consistently throughout the period and with prior periods (except as
disclosed therein).]
5. Borrower and every other Covered Person is in compliance with all of
the covenants in the Loan Agreement, including the financial covenants
in Section , and Schedule II attached hereto contains calculations
based on Borrower's financial statements and other financial records
that show Borrower's compliance with such financial covenants. The
calculations and the data upon which they are based are believed by me
to be complete and correct.
This Compliance Certificate, together with the Schedules hereto, is executed and
delivered this ______ day of __________________.
<PAGE>
Print Name:
Title:
<PAGE>
SCHEDULE I TO COMPLIANCE CERTIFICATE
------------------------------------
<PAGE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
-------------------------------------
The following calculations are made in accordance with the provisions of the
Loan Agreement and are based on the period ended _______________.
SECTION FINANCIAL MEASUREMENTS.
1. Minimum Net Worth (Section ).
----------------------------
A. Total Assets $____________
B. Total Liabilities $____________
C. Current Net Worth (item 1.A. minus item 1.B.) S___________
D. Net Worth at December 31, 1995 $____________
E. All net income subsequent to December 31,
1995 (without deduction for losses) $____________
F. 75% of item 1.E. $____________
G. Minimum Net Worth permitted by Section S__________/1/
2. Minimum Current Ratio (Section ).
--------------------------------
A. Current Assets $____________
B. Current Liabilities $____________
C. Ratio of item 3.A to item 3.B ____________
D. Minimum Ratio permitted by Section 1.10 to 1.00
3. Senior Funded Indebtedness to Capitalization Ratio (Section ).
-------------------------------------------------------------
A. Senior Funded Indebtedness $___________
B. Capitalization
C. Ratio of item 3.A to item 3.B.
D. Maximum ratio of Senior Funded Indebtedness to ____________
Capitalization permitted by Section .55 to 1.00
- ----------------------
/1/ Minimum Net Worth permitted by Section at any time is the sum of
$25,000,000 plus 1.F.
<PAGE>
4. Funded Indebtedness to Capitalization Ratio ().
----------------------------------------------
A. Funded Indebtedness $___________
B. Ratio of item 4.A to 3.B. $___________
C. Maximum ratio of Funded Indebtedness to Capitalization ___________
permitted by Section .60 to 1.00
5. Senior Funded Indebtedness to EBITDA (Section ).
-----------------------------------------------
A. Senior Funded Indebtedness $_____________
B. 1. Net income from continuing
operations $_____________
2. Interest Expense $_____________
3. Income and franchise taxes $_____________
4. Depreciation $_____________
5. Amortization $_____________
6. Sum of items 5.B.1 through 5.B.5 $_____________
7. Gain or (loss) on sales of assets not
in ordinary course of business $_____________
8. Income or (loss) from
discontinued operations $_____________
9. Income or (loss) effect of changes
in accounting principles $_____________
10. Sum of items 5.B.7 through 5.B.9 $_____________
11. EBITDA (item 5.B.6 minus item 5.B.10) $_____________
C. Ratio of Senior Funded Indebtedness to EBITDA
(ratio of 5.A to 5.B.11) _____________
D. Maximum ratio permitted by Section 3.00 to 1.00
6. Maximum Funded Indebtedness to EBITDA (Section ).
------------------------------------------------
A. Funded Indebtedness $_____________
B. EBITDA (item 5.11.) $_____________
C. Ratio of item 6.A. to item 6.B. _____________
D. Maximum ratio permitted by Section 4.00 to 1.00
<PAGE>
Fixed Charges Coverage (Section ).
----------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TWELVE [Month [Month [Month [Month [Month [Month [Month [Month [Month [Month [Month [Month
MONTHS Year] Year] Year] Year] Year] Year] Year] Year] Year] Year] Year] Year]
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income from continuing
operations ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
State and federal income
taxes and franchise
taxes ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Interest expense ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Depreciation expense ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Amortization expense ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Sum of items 7.A. through
7.E. ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Income or (loss) from
discontinued
operations ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Income or (loss) from
accounting changes ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Gain or (loss) from sale
of assets not in the
ordinary course of
business ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Sum of items 7.G. through
7.I ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
EBITDA (item 7.F. minus
item 7.J.) ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
- ------
Interest expense ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
State and federal income
taxes ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Paid and declared
dividends ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Lesser of (a) actual capital
expenditure or (b)
150% of depreciation
expense (specify) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Greater of (a) 25% of Funded
Indebtedness or (b)
Current Maturities
of Funded Indebtedness
(specify) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
- ------
Fixed charges (sum of items
7.L. through 7.Q.) ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
Ratio of item K. to item Q.
- ------
Minimum ratio permitted by Section
1.00 to 1.00
<PAGE>
EXHIBIT
-------
Wholly-Owned Subsidiaries of Borrower
- -------------------------------------
Telaleasing Enterprises, Inc.
Phone Zone, Inc.
T.R.C.A., Inc.
ComTel Computer Corp.
California Comtel Computer, Inc.
Subsidiaries of Telaleasing Enterprises, Inc.
- ---------------------------------------------
Adtec Communications, Inc. (wholly-owned)
Interstate Communications, Inc. (wholly-owned)
Jax Payphones, Inc. (80% owned)
<PAGE>
APPENDIX 1.1
GLOSSARY AND INDEX OF DEFINED TERMS
"Account Debtor": the obligor on any Account.
"Account": as to any Person, the right of such Person to payment for goods sold
or leased or for services rendered by such Person.
"accumulated funding deficiency" is defined in Section .
"Advanced Payment Agreement" is defined in Section .
"Adjusted CBR" is defined in Section .
"Adjusted CBR Advance": an Advance that will be a Loan bearing interest at the
Adjusted CBR.
"Adjusted CBR Loan": a Loan that bears interest at the Adjusted CBR.
"Adjusted LIBO Rate" is defined in Section .
"Advance": a Revolving Advance or Convertible Revolving Advance.
"Affected Principal Amount" is defined in Section .
"Affiliate": with respect to any Person, (a) any other Person who is a partner,
director, officer or stockholder of such Person; and (b) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person, and any partner, director, officer or stockholder of
such other Person. For purposes of this Agreement, control of a Person by
another Person shall be deemed to exist if such other Person has the power,
directly or indirectly, either to (i) vote twenty percent (20%) or more of the
securities having the power to vote in an election of directors of such Person,
or (ii) direct the management of such Person, whether by contract or otherwise
and whether alone or in combination with others.
"this Agreement": this Amended and Restated Loan Agreement.
"Anniversary Date": each anniversary of the Execution Date.
"Applicable Lending Office" is defined in Section .
"Assignment of Contracts" is defined in Section .
"Auditor Prepared Management Letter" is defined in Section .
"Beneficial Owner": as defined in Rule 13-D-3 of the Securities and Exchange
Commission.
"Borrower" is defined in the first paragraph of this Agreement.
"Borrower Personal Property Collateral" is defined in Section .
<PAGE>
"Borrower Security Agreement" is defined in Section .
"Borrowing Officer": means an officer of Borrower duly authorized on behalf of
Borrower to request Advances under this Agreement.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks located in Missouri are authorized or required to close under
the laws of either the United States or the State of Missouri.
"Capital Lease": any lease obligation that has been or should be capitalized
under GAAP.
"Capitalization" is defined in Section .
"CBR": the per annum interest rate so designated from time to time as the
Corporate Base Rate by Lender. The CBR is a reference rate and does not
necessarily represent the lowest or best rate charged to any customer of Lender.
"CBR increment" is defined in Section .
"Charter Documents": the articles or certificate of incorporation and bylaws of
a corporation; the articles of association and bylaws of an unincorporated
association; the certificate of limited partnership and partnership agreement of
a limited partnership; the partnership agreement of a general partnership; the
operating agreement of a limited liability company; or the indenture of a trust.
"Claims Act": the Assignment of Claims Act of 1940, as amended from time to
time.
"COBRA": the Consolidated Omnibus Budget Reconciliation Act.
"Code": the Internal Revenue Code of 1986, as amended from time to time, and all
regulations thereunder of the IRS.
"Collateral": the collateral described in the Security Documents.
"Commitments": the Revolving Commitment, the Convertible Revolving Commitment,
and the Term Commitment.
"Commonly Controlled Entity": a Person which is under common control with
another Person within the meaning of Section 414(b) or (c) of the Code.
"Concentration Account" is defined in Section .
"Contract": any contract, note, deed, or other agreement or undertaking or any
security.
"Conversion Date" is defined in Section .
"Conversion Term Loans": on any date, the outstanding principal balance of all
Conversion Term Loans as of such date.
"Convertible Revolving Advance" is defined in Section .
<PAGE>
"Convertible Revolving Loan" is defined in Section .
"Convertible Revolving Note" is defined in Section .
"Covered Person" is defined in Section .
"Default": any of the events that constitute an Event of Default, but without
giving effect to any requirement for the giving of notice, for the lapse of
time, or both, or for the happening of any other condition, event or act.
"Disclosure Schedule" is defined in Section .
"DOL": the United States Department of Labor.
"Dollars" and the sign "$": lawful money of the United States.
-
"EBITDA" is defined in Section .
"Effective Date" is defined in Section .
"Employment Law": ERISA, the Occupational Safety and Health Act, the Fair Labor
Standards Act or any other Law pertaining to the terms or conditions of labor or
safety in the workplace.
"Encumbrance": as to any item of real or personal property, any easement, right-
of-way, license, condition, restrictive covenant, reservation, encroachment or
other adverse possession or use, or zoning or similar restriction, that is not a
Lien but is enforceable by any Person other than the record owner of such
property.
"Environmental Law": the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Toxic
Substances Control Act, the Clean Water Act, the Clean Air Act, or any other Law
pertaining to environmental quality or remediation of releases of Hazardous
Waste, or that imposes liability or establishes standards of conduct with
respect to Hazardous Waste.
"Environmental Property Transfer Act": any Law that conditions, restricts,
prohibits or requires any notification or disclosure triggered by the closure of
any property or the transfer, sale or lease of any property or deed or title for
any property for environmental reasons including, but not limited to, any so-
called "Environmental Cleanup Responsibility Acts" or "Responsible Property
Transfer Acts."
"EPA": the United States Environmental Protection Agency.
"Equipment Lease Agreement": that certain equipment lease agreement dated as of
May 15, 1993 between Borrower and David R. Hill, as amended, modified, restated
or replaced from time to time.
"ERISA Affiliate": (a) any corporation which is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the Code) as
Borrower; (b) a partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with Borrower; or (c) a member of the same affiliated service group
<PAGE>
(within the meaning of Section 414(m) of the Code) as Borrower, any corporation
described in clause (a) above or any partnership, trade or business described in
clause (b) above.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended from
time to time.
"Event of Default" is defined in Section .
"Execution Date": the date when this Agreement has been executed.
"Financial Statements": financial statements of Borrower and its Subsidiaries
that are furnished to Lender as required herein.
"Fiscal Year": Borrower's fiscal year for financial accounting purposes, which
is a year of twelve calendar months ending on December 31 of each year. Fiscal
Year 1994 will end on December 31, 1994.
"FRB": the Board of Governors of the Federal Reserve System and any successor
thereto or to the functions thereof.
"Funded Indebtedness" is defined in Section .
"GAAP": those generally accepted accounting principles set forth in Statements
of the Financial Accounting Standards Board and in Opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants or
which have other substantial authoritative support in the United States and are
applicable in the circumstances, as applied on a consistent basis.
"Governmental Authority": the federal government of the United States; the
government of any foreign country that is recognized by the United States or is
a member of the United Nations; any state of the United States; any local
government or municipality within the territory or under the jurisdiction of any
of the foregoing; any department, agency, division, or instrumentality of any of
the foregoing; and any court whose orders or judgments are enforceable by or
within the territory of any of the foregoing.
"Group": as used in Regulation 13-D issued by the Securities and Exchange
Commission.
"Guarantor Personal Property Collateral" is defined in Section .
"Guarantor Security Agreement" is defined in Section .
"Guaranty" is defined in Section .
"Hazardous Waste": any hazardous, explosive, corrosive, reactive, radioactive,
or toxic material or substance, or any other substance, whether in solid, liquid
or gaseous form, whose manufacture, storage, transportation, release or disposal
is subject to regulation or control under an Environmental Law, or which is
defined or treated as being hazardous, explosive, corrosive, reactive,
radioactive, or toxic in any Law.
"Hostile Takeover": any transaction by a Covered Person involving a merger,
consolidation or other business combination where the directors of the entity to
be merged, consolidated or combined are opposed to or resist such transaction.
<PAGE>
"Indebtedness": as to any Person at any particular date, any obligation
enforceable against such Person (i) to repay borrowed money; (ii) to pay the
deferred purchase price of property or services; (iii) to make payments or
reimbursements with respect to bank acceptances or to a factor; (iv) to make
payments or reimbursements with respect to letters of credit or drawings
thereunder; (v) that is secured by any Lien on any property of such Person; (vi)
to make any payment or contribution to a Multi-Employer Plan; (vii) that is
evidenced by a note, bond, debenture or similar instrument; (viii) under any
conditional sale agreement or title retention agreement; or (ix) to pay interest
or fees with respect to any of the foregoing.
"Indemnified Liabilities" is defined in Section .
"Indemnified Parties" is defined in Section .
"Indirect Obligation": as to any Person, (a) any guaranty by such Person of any
Obligation of another Person; (b) any Lien on any property of such Person that
secures any Obligation of another Person, (c) any enforceable contractual
obligation that such Person (i) purchase an Obligation of another Person or any
property that is security for such Obligation, (ii) advance or contribute funds
to another Person for the payment of an Obligation of such other Person or to
maintain the working capital, net worth or solvency of such other Person as
required in any documents evidencing an Obligation of such other Person, (iii)
purchase property, securities or services from another Person for the purpose of
assuring the beneficiary of any Obligation of such other Person that such other
Person has the ability to timely pay or discharge such Obligation, (iv) grant a
Lien on any property of such Person to secure any Obligation of another Person,
or (v) otherwise assure or hold harmless the beneficiary of any Obligation of
another Person against loss in respect thereof; and (d) any other contractual
requirement enforceable against such Person that has the same substantive effect
as any of the foregoing. The term "Indirect Obligation" does not, however,
include the indorsement by a Person of instruments for deposit or collection in
the ordinary course of business or the liability of a general partner of a
partnership for Obligations of such partnership. The amount of any Indirect
Obligation of a Person shall be deemed to be the stated or determinable amount
of the Obligation in respect of which such Indirect Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith.
"Initial Financial Statements" is defined in Section .
"Insurance/Condemnation Proceeds": insurance proceeds payable as a consequence
of damage to or destruction of any of the Collateral and proceeds payable as a
consequence of condemnation or sale in lieu of condemnation of any of the
Collateral.
"Interest Period" is defined in Section .
"Inventory": all raw materials and supplies used or consumed, or held by
Borrower for use or consumption, in Borrower's business, as now or hereafter
conducted.
"Investment": (a) a loan or advance of money or property to a Person, (b) stock
or other equity interest in a Person, (c) a debt instrument issued by a Person,
whether or not convertible to stock or other equity interest in such Person, or
(d) any other interest in or rights with respect to a Person which include, in
whole or in part, a right to share, with or without conditions or restrictions,
some or all of the revenues or net income of such Person.
"investment company" is defined in Section .
<PAGE>
"IRC": the Internal Revenue Code of 1986, as amended, and all regulations
issued thereunder.
"IRS": the Internal Revenue Service.
"Law": any statute, ordinance, code, rule, regulation, order, judgment, award or
decree of any Governmental Authority.
"Lender" is defined in the first paragraph of this Agreement.
"LIBOR Advance": an Advance that will be a Loan bearing interest at the Adjusted
LIBO Rate.
"LIBO Increment" is defined in Section .
"LIBOR Loan": a Loan that bears interest at the Adjusted LIBO Rate.
"LIBO Rate": an interest rate per annum equal to the quotient (rounded to the
nearest 0.001%) of
(i) the rate at which Dollar deposits in immediately available funds,
approximately equal in amount to the applicable Advance and for a maturity
equal to the applicable Interest Period for such Advance, are offered or
available in the London Interbank Market for Eurodollars as of 11:00 a.m.
(London time) two Business Days before the applicable Revolving Advance
Date or Conversion Date, as reported on Telerate Screen LIBO page 3750,
and if such Telerate Screen no longer exists at any time subsequent to the
Effective Date, than the equivalent thereof,
divided by
(ii) a number equal to one minus the decimal equivalent of the aggregate
of the maximum rates during the applicable Interest Period of all reserve
requirements (including, without limitation, marginal, emergency,
supplemental and special reserves), established by the FRB or any other
Governmental Authority to which Lender is subject, in respect of
"Eurocurrency liabilities" as referred to in Regulation D, including but
not limited to those imposed under Regulation D. (The amount of every
LIBOR Advance shall be deemed to constitute a Eurocurrency liability and
as such shall be deemed to be subject to such reserve requirements without
benefit of credits for proration, exceptions or offsets which may be
available from time to time to Lender under Regulation D.) The LIBO Rate
shall be adjusted automatically on and as of the effective date of any
change in any such reserve requirements.
"Lien": as to any item of tangible or intangible property, any interest therein
that secures an Obligation or Indirect Obligation of any Person, whether created
by statute (such as but not limited to a statutory lien for work or materials)
or under a mortgage, deed of trust, security agreement, financing statement,
pledge, hypothecation agreement, assignment, or other document, or which arises
under any form of preferential or title retention agreement or arrangement
(including but not limited to a conditional sale agreement or a lease) that has
substantially the same economic effect as any of the foregoing.
"Loan Documents": this Agreement, the Notes, the Security Documents and all
other agreements, certificates, documents, instruments and other writings
executed in connection herewith.
<PAGE>
"Loan Obligations": all of Borrower's Indebtedness owing to Lender, whether as
principal, interest, fees or otherwise, all reimbursement obligations of
Borrower to Lender with respect to any letter of credit issued by Lender for the
account of Borrower, and all other obligations (including but not limited to
obligations for the payment of money) and liabilities of Borrower to Lender (and
all extensions, renewals, modifications, rearrangements, restructures,
replacements and refinancings of the foregoing, whether or not the same involve
modifications to interest rates or other payment terms) and all costs of
collection of the foregoing, including but not limited to reasonable attorneys'
fees and attorneys' expenses (whether or not there is litigation), courts costs
and all costs in connection with any proceedings under the United States
Bankruptcy Code pertaining thereto, whether arising under any of the Loan
Documents or otherwise, and whether now existing or hereafter created, absolute
or contingent, direct or indirect, joint or several, secured or unsecured, due
or not due, contractual or tortious, liquidated or unliquidated, arising by
operation of law or otherwise, or acquired by Lender outright, conditionally or
as collateral security from another, including but not limited to the obligation
of Borrower to repay future advances by Lender, whether or not made pursuant to
commitment and whether or not presently contemplated by Borrower and Lender in
the Loan Documents.
"Loan" or "Loans": the Revolving Loan, the Convertible Revolving Loan, and/or
the Conversion Term Loans.
"Material Adverse Effect": as to any Person and with respect to any event or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, investigation or proceeding), a material adverse effect
on the business, operations, revenues, financial condition or property of such
Person or the ability of such Person to timely pay or perform such Person's
Obligations generally, or in the case of Borrower, specifically the ability of
Borrower to pay or perform any of Borrower's Obligations to Lender.
"Material Agreement": as to any Person, any Contract to which such Person is a
party or by which such Person is bound which, if violated or breached, would
have a Material Adverse Effect on such Person or any Covered Person.
"Material Law": any Law whose violation by a Person would have a Material
Adverse Effect with respect to such Person.
"Material License": (i) as to any Covered Person, any license, permit or consent
from a Governmental Authority or other Person and any registration and filing
with a Governmental Authority or other Person which if not obtained, held or
made by such Covered Person would have a Material Adverse Effect with respect to
such Covered Person or any other Covered Person, and (ii) as to any Person who
is a party to this Agreement or any of the other Loan Documents, any license,
permit or consent from a Governmental Authority or other Person and any
registration or filing with a Governmental Authority or other Person that is
necessary for the execution or performance by such party, or the validity or
enforceability against such party, of this Agreement or such other Loan
Document.
"Material Obligation": as to any Person, an Obligation of such Person which if
not fully and timely paid or performed would have a Material Adverse Effect on
such Person.
"Material Proceeding": any litigation, investigation or other proceeding by or
before any Governmental Authority (i) which involves any of the Loan Documents
or any of the transactions contemplated thereby, or involves a Covered Person as
a party or any property of a Covered
<PAGE>
Person, and would have a Material Adverse Effect with respect to any Covered
Person if adversely determined, (ii) in which there has been issued an
injunction, writ, temporary restraining order or any other order of any nature
which purports to restrain or enjoin the making of any Advance or Term
Conversion, the consummation of any other transaction contemplated by the Loan
Documents, or the enforceability of any provision of any of the Loan Documents,
(iii) which involves the actual or alleged breach or violation by a Covered
Person of, or default by a Covered Person under, any Material Agreement, or (iv)
which involves the actual or alleged violation by a Covered Person of any
Material Law.
"Maturity": as to any Indebtedness, the time when it becomes payable in full,
whether at a regularly scheduled time, because of acceleration or otherwise.
"Multi-employer Plan": a Pension Benefit Plan which is a multi-employer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Worth" is defined in Section .
"Non-Use Fee" is defined in Section .
"Notes": the Revolving Note, the Convertible Revolving Note, and the Term Notes.
"Notice of Conversion/Continuation" is defined in Section .
"Obligation": as to any Person, any Indebtedness of such Person and any other
contractual obligation enforceable against such Person which would involve the
expenditure of money by such Person if complied with or enforced, including but
not limited to an Indirect Obligation of such person.
"Operating Lease": any lease that is not a Capital Lease.
"PBGC": the Pension Benefit Guaranty Corporation.
"Pension Benefit Plan": any "pension benefit plan" as defined in Section 3(2) of
Title I of ERISA which is subject to Title IV of ERISA and in respect of which a
Covered Person or a Commonly Controlled Entity of such Covered Person is an
"employer" as defined in Section 3(5) of ERISA.
"Permitted Indebtedness" is defined in Section .
"Permitted Investments" is defined in Section .
"Permitted Issuances" is defined in Section .
"Permitted Liens" is defined in Section .
"Person": any individual, partnership, corporation, trust, unincorporated
association, joint venture, limited liability company, Governmental Authority,
or other organization in any form that has the legal capacity to sue or be sued.
If the context so implies or requires, the term Person includes Borrower.
<PAGE>
"Personal Property Collateral": the Borrower Personal Property Collateral and
the Guarantor Personal Property Collateral.
"Prior Loan Agreement" is defined in the preamble of this Agreement.
"Prior Loans" is defined in the preamble of this Agreement.
"Prior Notes" is defined in the preamble of this Agreement.
"Prior Revolving Loan" is defined in the preamble of this Agreement.
"Prior Revolving Note" is defined in the preamble of this Agreement.
"Prior Term Loan" is defined in the preamble of this Agreement.
"Prior Term Note" is defined in the preamble of this Agreement.
"Regulation D", "Regulation G", and "Regulation U": respectively, Regulation D
issued by the FRB, Regulation G issued by the FRB, and Regulation U issued by
the FRB.
"Remaining Interest Period" is defined in Section.
"Reportable Event": a reportable event as defined in Title IV of ERISA or the
regulations thereunder.
"Responsible Officer": as to any Person that is not an individual, partnership
or trust, the Chairman of the Board of Directors, the President, the chief
executive officer, the chief operating officer, the chief financial officer, the
Treasurer, any Assistant to the Treasurer, or any Vice President in charge of a
principal business unit; as to any partnership, any individual who is a general
partner thereof or any individual who has general management or administrative
authority over all or any principal unit of the partnership's business; and as
to any trust, any individual who is a trustee.
"Resurgens": Resurgens Communications Group, Inc., a Georgia corporation.
"Resurgens Agreements" is defined in Section.
"Revolving Advance" is defined in Section.
"Revolving Advance Date" is defined in Section.
"Revolving Advance Request" is defined in Section.
"Revolving Commitment" is defined in Section.
"Revolving Loan" is defined in Section.
"Revolving Note" is defined in Section.
"S Corporation" is defined in Section.
"Security": a security as defined in Section 2(1) of the Securities Act of 1933,
as amended.
<PAGE>
"Security Documents" is defined in Section.
"Seller Financing": financing provided by an entity to a Covered Person to
finance, in whole or in part, a purchase of substantially all of the assets of
such entity or a merger, consolidation or other business combination with such
entity.
"Senior Funded Indebtedness" is defined in Section.
"Solvent": as to any Person, when (a) the fair value of such Person's assets is
in excess of the total amount of its debts (including contingent liabilities);
(b) such Person is able to pay its debts as they mature; (c) such Person does
not have unreasonably small capital for the business in which it is engaged or
for any business or transaction in which it is about to engage; or (d) such
Person is not "insolvent" as such term is defined in Section 101(32) of the
United States Bankruptcy Code.
"Stock Pledge Agreement" is defined in Section.
"Subordination Agreement" is defined in Section.
"Subsidiary": as to any Person, a corporation with respect to which at least 80%
of the outstanding shares of stock of each class having ordinary voting power
(other than stock having such power only by reason of the happening of a
contingency) is at the time owned by such Person or by one or more Subsidiaries
of such Person.
"Term Commitment" is defined in Section.
"Term Conversion": is defined in Section.
"Term Conversion Date": is defined in Section.
"Term Conversion Fee" is defined in Section.
"Term Conversion Repayment Period" is defined in Section.
"Term Conversion Request": is defined in Section.
"Term Note": is defined in Section.
"This Agreement": this document (including every document that is stated herein
to be an appendix, exhibit or schedule hereto (whether or not attached hereto),
as amended from time to time.
"Total Assets" is defined in Section.
"Total Liabilities" is defined in Section.
"Triggering Event" is defined in Section.
"UCC": the Uniform Commercial Code as in effect from time to time in the State
of Missouri, or as to matters governed by the laws of another jurisdiction, as
in effect in such jurisdiction.
"Ultimate Convertible Revolving Maturity Date" is defined in Section.
"Ultimate Revolving Maturity Date" is defined in Section.
<PAGE>
"Ultimate Revolving Maturity Date" is defined in Section.
"Ultimate Term Maturity Date": as to any Conversion Term Loan shall be the
earlier to occur of (i) the date on which the final payment of principal
outstanding under such Conversion Term Loan and all interest accrued thereon is
due or (ii) the fifth anniversary of the Execution Date, as set forth in the
applicable Term Note.
"United States": when used in a geographical sense, all the states of the United
States of America and the District of Columbia; and when used in a legal
jurisdictional sense, the government of the country that is the United States of
America.
"Unused Convertible Revolving Commitment": the Convertible Revolving Commitment
less the sum of (i) the Convertible Revolving Loan and (ii) the Term Conversion
Loans.
"Unused Revolving Commitment": the Revolving Commitment less the Revolving Loan.
"Wage and Hour Laws": the Davis-Bacon Act, the Service Contract Act, the
Contract Work Hours & Safety Standards Act and any other federal Law regulating
the wages or hours of employment.
"Welfare Benefit Plan": any plan described by Section 3(1) of ERISA.
"ZPDI" is defined in Section.
<PAGE>
Exhibit 10.2
EMPLOYMENT CONTRACT
THIS AGREEMENT made by and between DAVEL COMMUNICATIONS GROUP, INC., an Illinois
Corporation, hereinafter called "Employer" or "Davel," and David Hill,
hereinafter called "Employee". In consideration of the mutual covenants and
agreements set forth below, the parties agree as follows:
1. Term of Employment: Employee has been employed under previous
contractual agreements as Chairman of the Board and Chairman of the Executive
Committee of the Board. Employer and Employee have determined to terminate all
prior contractual agreements regarding employment and to enter into this
Agreement. Employer hereby employs Employee and Employee hereby agrees to be so
employed as Chairman of the Board and Chairman of the Executive Committee of the
Board of Employee and to work at such places as directed by Employer. The
prior contract of the Employee is hereby extended through December 31, 1996.
Except as specifically provided herein, the terms of this Agreement shall apply
to all periods after December 31, 1996 and shall continue through December 31st,
2002 or until terminated by one of the parties as hereinafter provided, or until
the Employee's death, retirement or permanent disability. At the end of the term
this Agreement shall continue for consecutive one year terms unless either party
gives written notice of its intent not to renew the Agreement at least 60 days
prior to the expiration of the original term or any renewal or extended term.
2. Duties:
a. The Employee agrees to accept the duties commonly involved in carrying
out the position for which employed and any other duties as may be
required by Employer. The Employer shall have the right at any time
during the term of this Agreement to change the duties of Employee or
assign duties different from the duties originally assigned.
b. The Employee will not engage in any employment or enterprise
inconsistent with his duties hereunder. Employee shall travel as
reasonably required in the performance of his duties hereunder.
c. The Employee as Chairman of the Board and Chairman of the Executive
Committee of the Board, and in such other offices as
<PAGE>
from time to time assigned in Davel or associated enterprises, shall
perform the duties of Chairman of the Board and Chairman of the
Executive Committee of the Board which shall consist of the duties
normally associated with such positions and such other duties as shall
be from time to time assigned. The Employee shall report to and be
responsible to the Board of Directors in the regular conduct of his
duties.
3. Base Compensation: The Employee shall be paid a base salary of
$400,000.00 per annum during the term of this Agreement. The Employee's base
compensation shall be payable in accordance with Employer's payroll practices.
Employee shall be reimbursed for his reasonable expenses incurred in the
performance of his duties hereunder upon presentation of proper evidence thereof
as required by Employer.
4. Bonus. In addition to the base compensation, the Employee shall receive
an annual bonus to be determined as a percentage of the Employee's base salary.
The range of percentages to be applied to the Employee's base salary for the
computation of bonus shall be based on the percentage by which the Annual Before
Tax Profit (ABTP) of the Company exceeds the Annual Before Tax Profit for 1996
("ABTP Increase"). For the purposes of this Agreement the ABTP shall be adjusted
for extraordinary and non-recurring items of Employer. From within the
percentage range so established, the Compensation Committee, shall determine the
specific percentage to be applied based on the performance and contribution of
the Employee. The range of percentages shall be established in accordance with
the following table:
<TABLE>
<CAPTION>
If the ABTP the range of percentages
Increase is for determining bonus shall be
- ---------------------------------------------------------------------
<S> <C>
0 to 17% 5% to 15%
- ---------------------------------------------------------------------
(Greater-than) 17% to 22% 10% to 20%
- ---------------------------------------------------------------------
(Greater-than) 22% to 27% 15% to 25%
- ---------------------------------------------------------------------
(Greater-than) 27% to 32% 20% to 35%
- ---------------------------------------------------------------------
(Greater-than) 32% 30% to 45%
- ---------------------------------------------------------------------
</TABLE>
5. Stock Options and Grants:
a) On September 1, 1996 Employee shall be granted 200,000 fully
vested Options in accordance with the terms of the Stock Option Plan
of the Company to purchase common stock of the Company
<PAGE>
at an exercise price equal to the closing price of the Common Stock on
September 1, 1996 or, if no such price is available, on the last day
prior to September 1, 1996 for which a closing market price is
available. Further, options to purchase stock of the Employer shall be
awarded to the Employee annually pursuant to the terms of this
Employment Contract and otherwise in accordance with the terms and
conditions of the Employer's Stock Option Plan based upon the
percentage by which the Annual Before Tax Profit (ABTP) of the Company
exceeds the Annual Before Tax Profit for 1996 ("ABTP Increase"). For
the purposes of this Agreement the ABTP shall be adjusted for
extraordinary and non-recurring items of Employer. The actual number
of options awarded shall be determined by multiplying the Employee's
base salary, as set forth at (P)3, above, times a percentage, selected
by the Compensation Committee based upon the performance and
contribution of the Employee, from the range of percentages applicable
to the ABTP Increase as set forth in the following table:
<TABLE>
<CAPTION>
If the Percentage ABTP the range of percentages
Growth for Year is for determining option awards shall be
- ---------------------------------------------------------------------------
<S> <C>
0 to 17% 10% to 20%
- ---------------------------------------------------------------------------
(Greater-than) 17% to 22% 21% to 40%
- ---------------------------------------------------------------------------
(Greater-than) 22% to 27% 41% to 80%
- ---------------------------------------------------------------------------
(Greater-than) 27% to 32% 81% to 160%
- ---------------------------------------------------------------------------
(Greater-than) 32% 161% to 240%
- ---------------------------------------------------------------------------
</TABLE>
The dollar amount so determined shall be divided by the exercise price
of the options awarded to determine the actual number of options. The
exercise price shall be determined in accordance with the terms and
conditions of the Employer's Stock Option Plan. Except as otherwise
accelerated, options so awarded shall vest one- third when awarded,
one-third twelve months after the date of the award and the balance 24
months after the date of the award. All options shall be exercisable
when vested.
<PAGE>
b. The Employee shall be eligible for annual stock grants valued at
$100,000. One-half of the shares constituting each annual grant shall
not be transferred for six months following such grant; the remaining
one-half of such shares shall not be transferred for eighteen months
following such grant. Each annual grant shall be deemed to be issued
on the first business day of each calendar year from 1997 through
2002.
6. Other Benefits and Vacation:
a. Employer has established a 401(k) Profit Sharing Plan to provide
for voluntary Employee before and after tax contributions. The Profit
Sharing Plan may also provide for Employer contributions as may be
from time to time determined by the Employer consistent with and
subject to the terms of the plan as established by the Employer.
Employee may participate in such plan provided he is otherwise
qualified under the terms and conditions of any such Profit Sharing
Plan.
b. The Employee shall be entitled to vacations in accordance with
the regular policies of the employer as in effect from time to time.
Vacation shall be scheduled at the convenience of the Employer.
c. The Employer shall maintain an IRC (S)125 plan, or similar
arrangement as from time to time permitted by the Internal Revenue
Code as then in effect, for health insurance premiums and other
permitted (S)125 benefits and the Employee shall be permitted to
divert compensation for such premiums and other benefits.
d. The Employee shall be entitled to participate in the regular
Health Insurance plan of the Employer as from time to time in effect
on the terms and conditions as provided for employees generally.
e. The Employer shall provide reasonable transportation for Employee
for business use to be accounted for by the Employee consistent with
the normal business practices of Employer as from time to time
established.
7. Nondisclosure and Noncompetition: The Employee hereby agrees as a
condition of Employment to
<PAGE>
a. At all times while this Agreement is in force and after its
termination or expiration for whatever reason, the Employee agrees to
refrain from disclosing, either directly or indirectly, the Employer's
customer lists, trade secrets, or other confidential material.
Employee agrees to take reasonable security measures to prevent
accidental disclosure of such information. All files, records,
documents, drawings, specifications, equipment and similar items
relating to Employer's business, whether prepared by the Employee or
otherwise coming into his possession, shall remain the exclusive
property of the Employer.
b. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or
in any other individual or representative capacity, engage or
participate in any business of any nature which is in competition in
any way with the business of the Employer except by permission of the
Employer.
c. For a period of one (1) year after the expiration or termination
of this Agreement, except in the case of a termination by the Employer
for any reason other than the causes set forth at (P)8(c) below, the
Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or
representative capacity, engage or participate in any business of any
nature which is in competition with the Employer in the business of
telecommunications within the existing market areas of the Employer
for which Employee had significant responsibility and in which
Employee materially participated in the management and operation of
the Employer.
d. Employer shall be entitled to injunctive and/or other equitable
relief to prevent or remedy a breach of the provisions of the
Agreement and to secure their enforcement, in addition to any other
remedies or damages which may be available to Employer.
8. Termination:
a. Upon a change in control of the ownership of Employer all stock
options previously awarded to the Employee shall vest and be
immediately exercisable. Further, the term of this Agreement shall be
revised to eighteen months from the date of such change in control if
at the time of such change of control the remaining term of this
Agreement, or any extended or renewal term, is less than eighteen
<PAGE>
months. If the Employer, after a change in control, elects to
terminate this Agreement in accordance with the terms of (P)8(a) the
amount of severance pay then due, in addition to all salary and bonus
pro-rated through the date of termination, shall be equal to the
greater of six months base compensation or the remaining base
compensation due under this Agreement in lieu of the amount otherwise
due under (P)8(a). A change of control shall be deemed to have
occurred at anytime David Hill (the principal shareholder) or his
descendants own less than 30% of the issued and outstanding voting
shares of the Employer.
b. Any other provision of this Agreement notwithstanding, the
Employer may terminate this Agreement without notice if the
termination is based on a violation by the Employee of paragraph 7 of
this Agreement, or on fraud, embezzlement, securities law violation,
sexual harassment of other employees, criminal indictment or
conviction, or other conduct involving crimes, misdemeanors or moral
turpitude. In the event of termination pursuant to this paragraph the
Employee shall be entitled only to the base compensation provided for
herein earned prior to the date of termination computed pro rata up to
and including the date of termination.
c. The death or permanent disability of the Employee shall terminate
this Agreement and the employment of the Employee. Upon the death or
permanent disability of the Employee, all previously awarded options
shall vest and become immediately exercisable by the estate of the
employee.
9. Severability: In the event any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10. Assignment: This Agreement shall not be assignable, in whole or in
part, by the Employee but shall inure to the benefit of and bind the successors
and any assigns of Employer.
11. Fees and Costs: If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the party substantially
prevailing shall be entitled to its costs incurred in such action, including
reasonable attorney fees, in addition to any other relief that may be proper
hereunder or at law or in equity.
12. Notices: All notices hereunder shall be given in writing by personal
service or certified mail, return receipt requested, postage prepaid, addressed
to the
<PAGE>
parties at the following respective addresses, or at such other address as may
be designated:
Employer Employee
--------------------------------------------
Davel Communications Group, Inc. David Hill
601 W. Morgan 1605 Mound
Jacksonville, Illinois 62650 Jacksonville, IL 62650
13. Entire Agreement: This Agreement constitutes the entire Agreement of
the parties. No modification, variance or change in any of its terms or
provisions shall be valid unless in writing and signed by both parties.
14. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
15. Waiver: The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same or any other provision of
this Agreement; nor shall the waiver by either party of the breach of any
provision hereof be a waiver of any subsequent breach of such provision or of
the provision itself.
IN WITNESS WHEREOF, the parties have executed this Agreement in triplicate
originals on this 12th day of September, 1996
DAVEL COMMUNICATIONS GROUP, INC.
______________________________________
Thomas M. Vitale,
Chairman of the Compensation Committee
EMPLOYEE
______________________________________
David Hill, Chairman of the Board
<PAGE>
Exhibit 10.3
REVISED EMPLOYMENT CONTRACT
THIS AGREEMENT made by and between DAVEL COMMUNICATIONS GROUP, INC., an Illinois
Corporation, hereinafter called "Employer" or "Davel," and Robert D. Hill,
hereinafter called "Employee". In consideration of the mutual covenants and
agreements set forth below, the parties agree as follows:
1. Term of Employment: Employee is now employed under a previous
contractual agreement as Chief Executive Officer dated June 11, 1997. The
purpose of this Agreement is to clarify, amend and restate the Agreement dated
June 11, 1996. Employer hereby employs Employee and Employee hereby agrees to be
so employed as Chief Executive Officer of Employee and to work at such places
as directed by Employer. This Employment Contract shall be effective on the
first day of January, 1996 and shall continue through December 31st, 1998 or
until terminated by one of the parties as hereinafter provided, or until the
Employee's death, permanent disability or retirement. At the end of the term
this Agreement shall continue for consecutive one year terms unless either party
gives written notice of its intent not to renew the Agreement at least 60 days
prior to the expiration of the original term or any renewal or extended term.
2. Duties:
a. The Employee agrees to accept the duties commonly involved in carrying
out the position for which employed and any other duties as may be
required by Employer. The Employer shall have the right at any time
during the term of this Agreement to change the duties of Employee or
assign duties different from the duties originally assigned.
b. The Employee shall devote his best efforts, on a full-time basis, to
the Employer's business, and will not engage in any employment or enterprise
detracting from this goal. Employee shall travel as reasonably required in the
performance of his duties hereunder.
c. The Employee as Chief Executive Officer, and in such other offices as
from time to time assigned in Davel or associated enterprises, shall perform the
duties of Chief Executive Officer which shall consist of the duties normally
associated with such positions and such other duties as shall be from time to
1
<PAGE>
time assigned. The Employee shall report to and be responsible to the
Chairman of the Board in the regular conduct of his duties.
3. Base Compensation: The Employee shall be paid a base salary of
$200,000 per annum during the term of this Agreement. The Employee's base
compensation shall be payable in accordance with Employer's payroll practices.
Employee shall be reimbursed for his reasonable expenses incurred in the
performance of his duties hereunder upon presentation of proper evidence thereof
as required by Employer.
4. Bonus. In addition to base compensation, the Employee shall receive an
annual bonus to be determined as a percentage of the Employee's base salary. The
range of percentages to be applied to the Employee's base salary for the
computation of bonus shall be based on the percentage growth in the Earnings Per
Share (EPS), adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets) of Employer for the year to which the bonus
is applicable. From within the percentage range so established, the Chairman of
the Board, shall recommend to the Compensation Committee of the Board for
approval the specific percentage to be applied based on the performance and
contribution of the Employee. The range of percentages shall be established in
accordance with the following table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining bonus shall be
- ------------------------------------------------------------
<S> <C>
0 to 17% 5% to 15%
- ------------------------------------------------------------
(Greater-than) 17% to 22% 10% to 20%
- ------------------------------------------------------------
(Greater-than) 22% to 27% 15% to 25%
- ------------------------------------------------------------
(Greater-than) 27% to 32% 20% to 35%
- ------------------------------------------------------------
(Greater-than) 32% 30% to 45%
- ------------------------------------------------------------
</TABLE>
For example, if the EPS for 1995 is 94c. and the 1996 EPS is $1.20, then the
percentage EPS growth is 28% (26/94) and the applicable range is 27% to 32%. If
within the applicable range, the Chairman of the Board upon approval of the
Compensation Committee, determines based on the performance and contribution of
the Employee that the appropriate percentage is 29%, then the employees bonus
shall be 29% of the Base compensation provided at (P)3.
5. Stock Options and Grants:
a) Options to purchase stock of the Employer shall be awarded to the
Employee annually pursuant to the terms of this
2
<PAGE>
Employment Contract and otherwise in accordance with the terms and
conditions of the Employer's Stock Option Plan based upon EPS
percentage growth, adjusted for extraordinary items (including but not
limited to the 1995 write down of ComTel assets), and the performance
and contribution of the Employee as determined by the as determined by
the Chairman of the Board subject to approval by the Compensation
Committee. The actual number of options awarded shall be determined by
multiplying the Employee's base salary, as set forth at (P)3, above,
times a percentage, selected by the Chairman of the Board and approved
by the Compensation Committee, from the range of percentages
applicable to the achieved EPS percentage growth as set forth in the
following table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining option awards shall be
- ----------------------------------------------------------------------------
<S> <C>
0 to 17% 10% to 20%
- ----------------------------------------------------------------------------
(Greater-than) 17% to 22% 21% to 40%
- ----------------------------------------------------------------------------
(Greater-than) 22% to 27% 41% to 80%
- ----------------------------------------------------------------------------
(Greater-than) 27% to 32% 81% to 160%
- ----------------------------------------------------------------------------
(Greater-than) 32% 161% to 240%
- ----------------------------------------------------------------------------
</TABLE>
The dollar amount so determined shall be divided by the exercise price
of the options awarded to determine the actual number of options. The
exercise price shall be determined in accordance with the terms and
conditions of the Employer's Stock Option Plan. Except as otherwise
accelerated, options so awarded shall vest one- third when awarded,
one-third twelve months after the date of the award and the balance 24
months after the date of the award. All options shall be exercisable
when vested.
For example, if the EPS for 1995 is 94c and the 1996 EPS is $1.20,
then the percentage EPS growth is 28% (26/94) and the applicable range
is 81% to 160%. The Chairman of the Board and upon approval of the
Compensation Committee, determines, based on the performance and
contribution of the Employee, that the appropriate percentage is 90%.
If the
3
<PAGE>
exercise price of the options determined in accordance with the terms
of the Employee Stock Option Plan is $13.00 per share, then the number
of options awarded would be determined by dividing 90% of the
Employee's Base compensation provided at (P)3 by the exercise price of
$13.00 per share.
b. The Employee shall be eligible for annual stock grants valued at
$40,000. One-half of the shares constituting each annual grant shall
not be transferred for six months following such grant; the remaining
one-half of such shares shall not be transferred for eighteen months
following such grant. All restrictions on transfer after six months
from the date of each grant shall be removed in the event of a change
in control. Each annual grant shall be deemed to be issued on the
first business day of each calendar year or, if later, the first
business day following the execution of this Agreement.
6. Other Benefits and Vacation:
a. Employer has established a 401(k) Profit Sharing Plan to provide for
voluntary Employee before and after tax contributions. The Profit
Sharing Plan may also provide for Employer contributions as may be
from time to time determined by the Employer consistent with and
subject to the terms of the plan as established by the Employer.
Employee may participate in such plan provided he is otherwise
qualified under the terms and conditions of any such Profit Sharing
Plan.
b. The Employee shall be entitled to vacations in accordance with the
regular policies of the employer as in effect from time to time.
Vacation shall be scheduled at the convenience of the Employer.
c. The Employer shall maintain an IRC (S)125 plan, or similar arrangement
as from time to time permitted by the Internal Revenue Code as then in
effect, for health insurance premiums and other permitted (S)125
benefits and the Employee shall be permitted to divert compensation
for such premiums and other benefits .
d. The Employee shall be entitled to participate in the regular Health
Insurance plan of the Employer as from time to time in effect on the
terms and conditions as provided for employees generally.
e. The Employer shall provide an automobile to Employee for
4
<PAGE>
business use to be accounted for by the Employee consistent with the
normal business practices of Employer as from time to time
established.
7. Nondisclosure and Noncompetition: The Employee hereby agrees as a
condition of Employment to
a. At all times while this Agreement is in force and after its
termination or expiration for whatever reason, the Employee agrees to
refrain from disclosing, either directly or indirectly, the Employer's
customer lists, trade secrets, or other confidential material.
Employee agrees to take reasonable security measures to prevent
accidental disclosure of such information. All files, records,
documents, drawings, specifications, equipment and similar items
relating to Employer's business, whether prepared by the Employee or
otherwise coming into his possession, shall remain the exclusive
property of the Employer.
b. During the term of this Agreement, the Employee shall not, directly or
indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director or in any
other individual or representative capacity, engage or participate in
any business of any nature which is in competition in any way with the
business of the Employer.
c. For a period of one (1) year after the expiration or termination of
this Agreement, except in the case of a termination by the Employer
for any reason other than the causes set forth at (P)8(d) below and
except in the case of a termination in connection with or at anytime
after a change of control and for which the Employee is entitled to
severance pay computed in accordance with the provisions of (P)8(c),
the Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or
representative capacity, engage or participate in any business of any
nature which is in competition with the Employer in the business of
telecommunications within the existing market areas of the Employer
for which Employee had significant responsibility and in which
Employee materially participated in the management and operation of
the Employer.
d. Employer shall be entitled to injunctive and/or other equitable relief
to prevent or remedy a breach of the provisions of the Agreement and
to secure their enforcement, in addition to any other remedies or
damages which may be available to Employer.
5
<PAGE>
8. Termination:
a. This Agreement may be terminated by either party giving two (2) weeks
written notice of termination to the other party. If requested by the
Employer, the Employee agrees to cooperate in training his successor
following notice of termination of this Agreement. If the Employer
terminates the agreement, the Employer, in addition to all salary and
bonus pro-rated through the date of termination, shall pay severance
pay equal to the lesser of six months base compensation or the
remaining base compensation due under this Agreement.
b. Upon a change in control of the ownership of Employer all stock
options previously awarded to the Employee shall vest and be
immediately exercisable.
c. Upon a change of control the term of this Agreement shall be
automatically revised to eighteen months from the date of such change
in control if at the time of such change of control the remaining term
of this Agreement, or any extended or renewal term, is less than
eighteen months. If at or after a change in control, any of the
following occur
(i) The Employer or any successor of Employer terminates the
employee, or
(ii) The Employee elects to terminate employment by written notice
within 60 days of the date of any change in control, or
(iii) The Employee is required to move more than 100 miles from his
current place of employment and the Employee elects to resign
by written notice, or
(iv) The Employee is required to assume a position which requires a
change in title or a diminution of responsibilities and the
Employee elects to resign by written notice,
then the amount of severance pay due shall be equal to the sum of the
following:
(i) salary for services performed pro-rated
6
<PAGE>
through the date of termination, plus
(ii) the greater of six months base compensation or the remaining
base compensation due under this Agreement, plus
(iv) cash bonus computed by determining the bonus for one year at
the maximum possible rate pursuant to (P)4, dividing the
amount so determined by twelve and then multiplying the result
by the greater of six or the number of months (or parts
thereof) remaining on the term of this Agreement.
The Employee may, in any event, elect in the Employee's sole
discretion to receive a lesser amount of severance pay. Any payment
made in accordance with the provisions of this paragraph shall be due
in full upon the occurrence of any of the events described in
(P)8(c)(i), (P)8(c)(ii), (P)8(c)(iii) or (P)8(c)(iv). In the event of
a payment in accordance with the terms of this paragraph, Employer
shall provide Employee and dependents insured at the time of
termination health insurance substantially similar to that then
provided for the greater of the remaining term of the contract or six
months. Payment and provision of health insurance in accordance with
the terms of this (P)8 shall be satisfaction in full of all sums due
to Employee by reason of this Agreement. A change of control shall be
deemed to have occurred at anytime David Hill (the principal
shareholder) or his descendants own less than 30% of the issued and
outstanding voting shares of the Employer.
d. Any other provision of this Agreement notwithstanding, the Employer
may terminate this Agreement if the termination is based on a
violation by the Employee of (P)7 of this Agreement, or on fraud,
embezzlement, securities law violation, sexual harassment of other
employees, criminal indictment or conviction, or other conduct
involving crimes, misdemeanors or moral turpitude. In the event of
termination pursuant to this paragraph, no severance pay shall be
payable to Employee as otherwise provided herein and the Employee
shall be entitled only to the base compensation provided for herein
earned prior to the date of termination computed pro rata up to and
including the date of termination.
7
<PAGE>
e. The death or permanent disability of the Employee shall terminate this
Agreement and the employment of the Employee. Upon the death or
permanent disability of the Employee, all previously awarded options
shall vest and become immediately exercisable by the estate of the
employee.
9. Severability: In the event any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10. Assignment: This Agreement shall not be assignable, in whole or in
part, by the Employee but shall inure to the benefit of and bind the successors
and any assigns of Employer.
11. Fees and Costs: If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the party substantially
prevailing shall be entitled to its costs incurred in such action, including
reasonable attorney fees, in addition to any other relief that may be proper
hereunder or at law or in equity.
12. Notices: All notices hereunder shall be given in writing by personal
service or certified mail, return receipt requested, postage prepaid, addressed
to the parties at the following respective addresses, or at such other address
as may be designated:
Employer Employee
-------- --------
Davel Communications Group, Inc. Robert D. Hill
601 W. Morgan 17615 Esprit Dr.
Jacksonville, Illinois 62650 Tampa, FL 33647-2506
13. Entire Agreement: This Agreement constitutes the entire Agreement of
the parties. No modification, variance or change in any of its terms or
provisions shall be valid unless in writing and signed by both parties.
14. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
15. Waiver: The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same or any other provision of
this Agreement; nor shall the waiver by either party of the breach of any
provision hereof be a waiver of any subsequent breach of such provision or of
the provision itself.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals on this 28th day of February, 1997.
8
<PAGE>
DAVEL COMMUNICATIONS GROUP, INC.
______________________________________
David Hill, Chairman of the Board
EMPLOYEE
______________________________________
Robert D. Hill
9
<PAGE>
EXHIBIT 10.4
REVISED EMPLOYMENT CONTRACT
THIS AGREEMENT made by and between DAVEL COMMUNICATIONS GROUP, INC., an
Illinois Corporation, hereinafter called "Employer" or "Davel," and Paul
Demirdjian, hereinafter called "Employee". In consideration of the mutual
covenants and agreements set forth below, the parties agree as follows:
1. Term of Employment: Employee is now employed under a previous
contractual agreement as Senior Vice President of Operations dated June 11,
1997. The purpose of this Agreement is to clarify, amend and restate the
Agreement dated June 11, 1996. Employer hereby employs Employee and Employee
hereby agrees to be so employed as Senior Vice President of Operations of
Employee and to work at such places as directed by Employer. This Employment
Contract shall be effective on the first day of January, 1996 and shall continue
through December 31st, 1998 or until terminated by one of the parties as
hereinafter provided, or until the Employee's death, permanent disability or
retirement. At the end of the term this Agreement shall continue for consecutive
one year terms unless either party gives written notice of its intent not to
renew the Agreement at least 60 days prior to the expiration of the original
term or any renewal or extended term.
2. Duties:
a. The Employee agrees to accept the duties commonly involved in
carrying out the position for which employed and any other duties as
may be required by Employer. The Employer shall have the right at any
time during the term of this Agreement to change the duties of
Employee or assign duties different from the duties originally
assigned.
b. The Employee shall devote his best efforts, on a full-time basis,
to the Employer's business, and will not engage in any employment or
enterprise detracting from this goal. Employee shall travel as
reasonably required in the performance of his duties hereunder.
c. The Employee as Senior Vice President of Operations, and in such
other offices as from time to time assigned in Davel or associated
enterprises, shall perform the duties of Senior Vice President of
Operations which shall consist of the duties normally associated with
such positions and such other duties as shall be from time to time
assigned. The Employee shall report to and be responsible to the Chief
Executive Officer in the regular conduct of his duties.
<PAGE>
3. Base Compensation: The Employee shall be paid a base salary of $145,000
per annum during the term of this Agreement. The Employee's base compensation
shall be payable in accordance with Employer's payroll practices. Employee shall
be reimbursed for his reasonable expenses incurred in the performance of his
duties hereunder upon presentation of proper evidence thereof as required by
Employer.
4. Bonus. In addition to base compensation, the Employee shall receive an
annual bonus to be determined as a percentage of the Employee's base salary. The
range of percentages to be applied to the Employee's base salary for the
computation of bonus shall be based on the percentage growth in the Earnings Per
Share (EPS), adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets) of Employer for the year to which the bonus is
applicable. From within the percentage range so established, the CEO, in
consultation with the Chairman of the Board, shall recommend to the Compensation
Committee of the Board for approval the specific percentage to be applied based
on the performance and contribution of the Employee. The range of percentages
shall be established in accordance with the following table:
<TABLE>
<CAPTION>
-----------------------------------------------------------
If the Percentage EPS the range of percentages
Growth for Year is for determining bonus shall be
-----------------------------------------------------------
<S> <C>
0 to 17% 5% to 15%
-----------------------------------------------------------
(Greater-than) 17% to 22% 10% to 20%
-----------------------------------------------------------
(Greater-than) 22% to 27% 15% to 25%
-----------------------------------------------------------
(Greater-than) 27% to 32% 20% to 35%
-----------------------------------------------------------
(Greater-than) 32% 30% to 45%
-----------------------------------------------------------
</TABLE>
For example, if the EPS for 1995 is 94c and the 1996 EPS is $1.20, then the
percentage EPS growth is 28% (26/94) and the applicable range is 27% to 32%. If
within the applicable range, the CEO upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines based on the
performance and contribution of the Employee that the appropriate percentage is
29%, then the employees bonus shall be 29% of the Base compensation provided at
(P)3.
5. Stock Options and Grants:
a) Options to purchase stock of the Employer shall be awarded to
the Employee annually pursuant to the terms of this Employment
Contract and otherwise in accordance with the terms and conditions of
the Employer's Stock Option Plan based upon EPS percentage growth,
adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets), and the performance and
contribution of the Employee as determined by the CEO in
<PAGE>
consultation with the Chairman of the Board and subject to approval by
the Compensation Committee. The actual number of options awarded shall
be determined by multiplying the Employee's base salary, as set forth
at (P)3, above, times a percentage, selected by the CEO in
consultation with the Chairman of the Board and approved by the
Compensation Committee, from the range of percentages applicable to
the achieved EPS percentage growth as set forth in the following
table:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
If the Percentage EPS the range of percentages
Growth for Year is for determining option awards shall be
-------------------------------------------------------------------
<S> <C>
0 to 17% 10% to 20%
-------------------------------------------------------------------
(Greater-than) 17% to 22% 21% to 40%
-------------------------------------------------------------------
(Greater-than) 22% to 27% 41% to 80%
-------------------------------------------------------------------
(Greater-than) 27% to 32% 81% to 160%
-------------------------------------------------------------------
(Greater-than) 32% 161% to 240%
-------------------------------------------------------------------
</TABLE>
The dollar amount so determined shall be divided by the exercise price
of the options awarded to determine the actual number of options. The
exercise price shall be determined in accordance with the terms and
conditions of the Employer's Stock Option Plan. Except as otherwise
accelerated, options so awarded shall vest one-third when awarded,
one-third twelve months after the date of the award and the balance 24
months after the date of the award. All options shall be exercisable
when vested.
For example, if the EPS for 1995 is 94c and the 1996 EPS is $1.20,
then the percentage EPS growth is 28% (26/94) and the applicable range
is 81% to 160%. The CEO, upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines,
based on the performance and contribution of the Employee, that the
appropriate percentage is 90%. If the exercise price of the options
determined in accordance with the terms of the Employee Stock Option
Plan is $13.00 per share, then the number of options awarded would be
determined by dividing 90% of the Employee's Base compensation
provided at (P)3 by the exercise price of $13.00 per share.
<PAGE>
b. The Employee shall be eligible for annual stock grants valued at
$30,000. One-half of the shares constituting each annual grant shall
not be transferred for six months following such grant; the remaining
one-half of such shares shall not be transferred for eighteen months
following such grant. All restrictions on transfer after six months
from the date of each grant shall be removed in the event of a change
in control. Each annual grant shall be deemed to be issued on the
first business day of each calendar year or, if later, the first
business day following the execution of this Agreement.
6. Other Benefits and Vacation:
a. Employer has established a 401(k) Profit Sharing Plan to provide
for voluntary Employee before and after tax contributions. The Profit
Sharing Plan may also provide for Employer contributions as may be
from time to time determined by the Employer consistent with and
subject to the terms of the plan as established by the Employer.
Employee may participate in such plan provided he is otherwise
qualified under the terms and conditions of any such Profit Sharing
Plan.
b. The Employee shall be entitled to vacations in accordance with
the regular policies of the employer as in effect from time to time.
Vacation shall be scheduled at the convenience of the Employer.
c. The Employer shall maintain an IRC (S)125 plan, or similar
arrangement as from time to time permitted by the Internal Revenue
Code as then in effect, for health insurance premiums and other
permitted (S)125 benefits and the Employee shall be permitted to
divert compensation for such premiums and other benefits.
d. The Employee shall be entitled to participate in the regular
Health Insurance plan of the Employer as from time to time in effect
on the terms and conditions as provided for employees generally.
e. The Employer shall provide an automobile to Employee for business
use to be accounted for by the Employee consistent with the normal
business practices of Employer as from time to time established.
7. Nondisclosure and Noncompetition: The Employee hereby agrees as a
condition of Employment to
a. At all times while this Agreement is in force and after its
termination or expiration for whatever reason, the Employee agrees to
refrain from
<PAGE>
disclosing, either directly or indirectly, the Employer's customer
lists, trade secrets, or other confidential material. Employee agrees
to take reasonable security measures to prevent accidental disclosure
of such information. All files, records, documents, drawings,
specifications, equipment and similar items relating to Employer's
business, whether prepared by the Employee or otherwise coming into
his possession, shall remain the exclusive property of the Employer.
b. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or
in any other individual or representative capacity, engage or
participate in any business of any nature which is in competition in
any way with the business of the Employer.
c. For a period of one (1) year after the expiration or termination
of this Agreement, except in the case of a termination by the Employer
for any reason other than the causes set forth at (P)8(d) below and
except in the case of a termination in connection with or at anytime
after a change of control and for which the Employee is entitled to
severance pay computed in accordance with the provisions of (P)8(c),
the Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or
representative capacity, engage or participate in any business of any
nature which is in competition with the Employer in the business of
telecommunications within the existing market areas of the Employer
for which Employee had significant responsibility and in which
Employee materially participated in the management and operation of
the Employer.
d. Employer shall be entitled to injunctive and/or other equitable
relief to prevent or remedy a breach of the provisions of the
Agreement and to secure their enforcement, in addition to any other
remedies or damages which may be available to Employer.
8. Termination:
a. This Agreement may be terminated by either party giving two (2)
weeks written notice of termination to the other party. If requested
by the Employer, the Employee agrees to cooperate in training his
successor following notice of termination of this Agreement. If the
Employer terminates the agreement, the Employer, in addition to all
salary and bonus pro-rated through the date of termination, shall pay
severance pay equal to the lesser of six months base compensation or
the remaining base compensation due under this Agreement.
<PAGE>
b. Upon a change in control of the ownership of Employer all stock
options previously awarded to the Employee shall vest and be
immediately exercisable.
c. Upon a change of control the term of this Agreement shall be
automatically revised to eighteen months from the date of such change
in control if at the time of such change of control the remaining term
of this Agreement, or any extended or renewal term, is less than
eighteen months. If at or after a change in control, any of the
following occur
(i) The Employer or any successor of Employer terminates
the employee, or
(ii) The Employee elects to terminate employment by
written notice within 60 days of the date of any change in
control, or
(iii) The Employee is required to move more than 100 miles
from his current place of employment and the Employee elects to
resign by written notice, or
(iv) The Employee is required to assume a position which
requires a change in title or a diminution of responsibilities
and the Employee elects to resign by written notice,
then the amount of severance pay due shall be equal to the sum of
the following:
(i) salary for services performed pro-rated through the
date of termination, plus
(ii) the greater of six months base compensation or the
remaining base compensation due under this Agreement, plus
(iv) cash bonus computed by determining the bonus for one
year at the maximum possible rate pursuant to (P)4, dividing the
amount so determined by twelve and then multiplying the result by
the greater of six or the number of months (or parts
<PAGE>
thereof) remaining on the term of this Agreement.
The Employee may, in any event, elect in the Employee's sole
discretion to receive a lesser amount of severance pay. Any payment
made in accordance with the provisions of this paragraph shall be due
in full upon the occurrence of any of the events described in
(P)8(c)(i), (P)8(c)(ii), (P)8(c)(iii) or (P)8(c)(iv). In the event of
a payment in accordance with the terms of this paragraph, Employer
shall provide Employee and dependents insured at the time of
termination health insurance substantially similar to that then
provided for the greater of the remaining term of the contract or six
months. Payment and provision of health insurance in accordance with
the terms of this (P)8 shall be satisfaction in full of all sums due
to Employee by reason of this Agreement. A change of control shall be
deemed to have occurred at anytime David Hill (the principal
shareholder) or his descendants own less than 30% of the issued and
outstanding voting shares of the Employer.
d. Any other provision of this Agreement notwithstanding, the
Employer may terminate this Agreement if the termination is based on a
violation by the Employee of (P)7 of this Agreement, or on fraud,
embezzlement, securities law violation, sexual harassment of other
employees, criminal indictment or conviction, or other conduct
involving crimes, misdemeanors or moral turpitude. In the event of
termination pursuant to this paragraph, no severance pay shall be
payable to Employee as otherwise provided herein and the Employee
shall be entitled only to the base compensation provided for herein
earned prior to the date of termination computed pro rata up to and
including the date of termination.
e. The death or permanent disability of the Employee shall terminate
this Agreement and the employment of the Employee. Upon the death or
permanent disability of the Employee, all previously awarded options
shall vest and become immediately exercisable by the estate of the
employee.
9. Severability: In the event any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10. Assignment: This Agreement shall not be assignable, in whole or in
part, by the Employee but shall inure to the benefit of and bind the successors
and any assigns of Employer.
<PAGE>
11. Fees and Costs: If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the party substantially
prevailing shall be entitled to its costs incurred in such action, including
reasonable attorney fees, in addition to any other relief that may be proper
hereunder or at law or in equity.
12. Notices: All notices hereunder shall be given in writing by personal
service or certified mail, return receipt requested, postage prepaid, addressed
to the parties at the following respective addresses, or at such other address
as may be designated:
Employer Employee
-------- --------
Davel Communications Group, Inc. Paul Demirdjian
601 W. Morgan 3518 Saddleback
Jacksonville, Illinois 62650 Lutz, FL 33549
13. Entire Agreement: This Agreement constitutes the entire Agreement of
the parties. No modification, variance or change in any of its terms or
provisions shall be valid unless in writing and signed by both parties.
14. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
15. Waiver: The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same or any other provision of
this Agreement; nor shall the waiver by either party of the breach of any
provision hereof be a waiver of any subsequent breach of such provision or of
the provision itself.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals on this 28th day of February, 1997.
DAVEL COMMUNICATIONS GROUP, INC.
______________________________________
Robert D. Hill, CEO
EMPLOYEE
______________________________________
Paul Demirdjian
<PAGE>
EXHIBIT 10.5
REVISED EMPLOYMENT CONTRACT
THIS AGREEMENT made by and between DAVEL COMMUNICATIONS GROUP, INC., an Illinois
Corporation, hereinafter called "Employer" or "Davel," and Michael Kouri,
hereinafter called "Employee". In consideration of the mutual covenants and
agreements set forth below, the parties agree as follows:
1. Term of Employment: Employee is now employed under a previous
contractual agreement as Senior Vice President dated June 11, 1997. The purpose
of this Agreement is to clarify, amend and restate the Agreement dated June 11,
1996. Employer hereby employs Employee and Employee hereby agrees to be so
employed as Senior Vice President of Employee and to work at such places as
directed by Employer. This Employment Contract shall be effective on the first
day of January, 1996 and shall continue through December 31st, 1998 or until
terminated by one of the parties as hereinafter provided, or until the
Employee's death, permanent disability or retirement. At the end of the term
this Agreement shall continue for consecutive one year terms unless either party
gives written notice of its intent not to renew the Agreement at least 60 days
prior to the expiration of the original term or any renewal or extended term.
2. Duties:
a. The Employee agrees to accept the duties commonly involved in carrying
out the position for which employed and any other duties as may be
required by Employer. The Employer shall have the right at any time
during the term of this Agreement to change the duties of Employee or
assign duties different from the duties originally assigned.
b. The Employee shall devote his best efforts, on a full-time basis,
to the Employer's business, and will not engage in any employment or
enterprise detracting from this goal. Employee shall travel as
reasonably required in the performance of his duties hereunder.
c. The Employee as Senior Vice President, and in such other offices
as from time to time assigned in Davel or associated enterprises,
shall perform the duties of Senior Vice President which shall consist
of the duties normally associated with such positions and such other
duties as shall be from time to time assigned. The Employee shall
report to and be responsible to the Chief Executive Officer in the
regular conduct of his duties.
3. Base Compensation: The Employee shall be paid a base salary of
$145,000 per annum during the term of this Agreement. The Employee's base
compensation shall be
<PAGE>
payable in accordance with Employer's payroll practices. Employee shall be
reimbursed for his reasonable expenses incurred in the performance of his duties
hereunder upon presentation of proper evidence thereof as required by Employer.
4. Bonus. In addition to base compensation, the Employee shall receive an
annual bonus to be determined as a percentage of the Employee's base salary. The
range of percentages to be applied to the Employee's base salary for the
computation of bonus shall be based on the percentage growth in the Earnings Per
Share (EPS), adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets) of Employer for the year to which the bonus
is applicable. From within the percentage range so established, the CEO, in
consultation with the Chairman of the Board, shall recommend to the Compensation
Committee of the Board for approval the specific percentage to be applied based
on the performance and contribution of the Employee. The range of percentages
shall be established in accordance with the following table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining bonus shall be
- ---------------------------------------------------------------------
<S> <C>
0 to 17% 5% to 15%
- ---------------------------------------------------------------------
(Greater-than) 17% to 22% 10% to 20%
- ---------------------------------------------------------------------
(Greater-than) 22% to 27% 15% to 25%
- ---------------------------------------------------------------------
(Greater-than) 27% to 32% 20% to 35%
- ---------------------------------------------------------------------
(Greater-than) 32% 30% to 45%
- ---------------------------------------------------------------------
</TABLE>
For example, if the EPS for 1995 is 94c. and the 1996 EPS is $1.20, then the
percentage EPS growth is 28% (26/94) and the applicable range is 27% to 32%. If
within the applicable range, the CEO upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines based on the
performance and contribution of the Employee that the appropriate percentage is
29%, then the employees bonus shall be 29% of the Base compensation provided at
(P)3.
5. Stock Options and Grants:
a) Options to purchase stock of the Employer shall be awarded to the
Employee annually pursuant to the terms of this Employment Contract
and otherwise in accordance with the terms and conditions of the
Employer's Stock Option Plan based upon EPS percentage growth,
adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets), and the performance and
contribution of the Employee as determined by the CEO in consultation
with the Chairman of the Board and subject to approval by the
Compensation Committee. The actual
<PAGE>
number of options awarded shall be determined by multiplying the
Employee's base salary, as set forth at (P)3, above, times a
percentage, selected by the CEO in consultation with the Chairman of
the Board and approved by the Compensation Committee, from the range
of percentages applicable to the achieved EPS percentage growth as set
forth in the following table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining option awards shall be
- -----------------------------------------------------------------------------
<S> <C>
0 to 17% 10% to 20%
- -----------------------------------------------------------------------------
(Greater-than) 17% to 22% 21% to 40%
- -----------------------------------------------------------------------------
(Greater-than) 22% to 27% 41% to 80%
- -----------------------------------------------------------------------------
(Greater-than) 27% to 32% 81% to 160%
- -----------------------------------------------------------------------------
(Greater-than) 32% 161% to 240%
- -----------------------------------------------------------------------------
</TABLE>
The dollar amount so determined shall be divided by the exercise price
of the options awarded to determine the actual number of options. The
exercise price shall be determined in accordance with the terms and
conditions of the Employer's Stock Option Plan. Except as otherwise
accelerated, options so awarded shall vest one-third when awarded,
one-third twelve months after the date of the award and the balance 24
months after the date of the award. All options shall be exercisable
when vested.
For example, if the EPS for 1995 is 94c and the 1996 EPS is $1.20,
then the percentage EPS growth is 28% (26/94) and the applicable range
is 81% to 160%. The CEO, upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines,
based on the performance and contribution of the Employee, that the
appropriate percentage is 90%. If the exercise price of the options
determined in accordance with the terms of the Employee Stock Option
Plan is $13.00 per share, then the number of options awarded would be
determined by dividing 90% of the Employee's Base compensation
provided at (P)3 by the exercise price of $13.00 per share.
b. The Employee shall be eligible for annual stock grants valued at
$30,000. One-half of the shares constituting each annual grant shall
not be transferred for six months following such grant; the remaining
one-half of such shares
<PAGE>
shall not be transferred for eighteen months following such grant. All
restrictions on transfer after six months from the date of each grant
shall be removed in the event of a change in control. Each annual
grant shall be deemed to be issued on the first business day of each
calendar year or, if later, the first business day following the
execution of this Agreement.
6. Other Benefits and Vacation:
a. Employer has established a 401(k) Profit Sharing Plan to provide
for voluntary Employee before and after tax contributions. The Profit
Sharing Plan may also provide for Employer contributions as may be
from time to time determined by the Employer consistent with and
subject to the terms of the plan as established by the Employer.
Employee may participate in such plan provided he is otherwise
qualified under the terms and conditions of any such Profit Sharing
Plan.
b. The Employee shall be entitled to vacations in accordance with
the regular policies of the employer as in effect from time to time.
Vacation shall be scheduled at the convenience of the Employer.
c. The Employer shall maintain an IRC (S)125 plan, or similar
arrangement as from time to time permitted by the Internal Revenue
Code as then in effect, for health insurance premiums and other
permitted (S)125 benefits and the Employee shall be permitted to
divert compensation for such premiums and other benefits.
d. The Employee shall be entitled to participate in the regular
Health Insurance plan of the Employer as from time to time in effect
on the terms and conditions as provided for employees generally.
e. The Employer shall provide an automobile to Employee for business
use to be accounted for by the Employee consistent with the normal
business practices of Employer as from time to time established.
7. Nondisclosure and Noncompetition: The Employee hereby agrees as a
condition of Employment to
a. At all times while this Agreement is in force and after its
termination or expiration for whatever reason, the Employee agrees to
refrain from disclosing, either directly or indirectly, the Employer's
customer lists, trade secrets, or other confidential material.
Employee agrees to take reasonable security measures to prevent
accidental disclosure of such information. All files, records,
documents, drawings, specifications, equipment and similar
<PAGE>
items relating to Employer's business, whether prepared by the
Employee or otherwise coming into his possession, shall remain the
exclusive property of the Employer.
b. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or
in any other individual or representative capacity, engage or
participate in any business of any nature which is in competition in
any way with the business of the Employer.
c. For a period of one (1) year after the expiration or termination
of this Agreement, except in the case of a termination by the Employer
for any reason other than the causes set forth at (P)8(d) below and
except in the case of a termination in connection with or at any time
after a change of control and for which the Employee is entitled to
severance pay computed in accordance with the provisions of (P)8(c),
the Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or
representative capacity, engage or participate in any business of any
nature which is in competition with the Employer in the business of
telecommunications within the existing market areas of the Employer
for which Employee had significant responsibility and in which
Employee materially participated in the management and operation of
the Employer.
d. Employer shall be entitled to injunctive and/or other equitable
relief to prevent or remedy a breach of the provisions of the
Agreement and to secure their enforcement, in addition to any other
remedies or damages which may be available to Employer.
8. Termination:
a. This Agreement may be terminated by either party giving two (2)
weeks written notice of termination to the other party. If requested
by the Employer, the Employee agrees to cooperate in training his
successor following notice of termination of this Agreement. If the
Employer terminates the agreement, the Employer, in addition to all
salary and bonus pro-rated through the date of termination, shall pay
severance pay equal to the lesser of six months base compensation or
the remaining base compensation due under this Agreement.
b. Upon a change in control of the ownership of Employer all stock
options previously awarded to the Employee shall vest and be
immediately exercisable.
<PAGE>
c. Upon a change of control the term of this Agreement shall be
automatically revised to eighteen months from the date of such change
in control if at the time of such change of control the remaining term
of this Agreement, or any extended or renewal term, is less than
eighteen months. If at or after a change in control, any of the
following occur
(i) The Employer or any successor of Employer terminates
the employee, or
(ii) The Employee elects to terminate employment by
written notice within 60 days of the date of any change in
control, or
(iii) The Employee is required to move more than 100 miles
from his current place of employment and the Employee elects to
resign by written notice, or
(iv) The Employee is required to assume a position which
requires a change in title or a diminution of responsibilities
and the Employee elects to resign by written notice,
then the amount of severance pay due shall be equal to the sum of
the following:
(i) salary for services performed pro-rated through the
date of termination, plus
(ii) the greater of six months base compensation or the
remaining base compensation due under this Agreement, plus
(iv) cash bonus computed by determining the bonus for one
year at the maximum possible rate pursuant to (P)4, dividing the
amount so determined by twelve and then multiplying the result by
the greater of six or the number of months (or parts thereof)
remaining on the term of this Agreement.
<PAGE>
The Employee may, in any event, elect in the Employee's sole
discretion to receive a lesser amount of severance pay. Any payment
made in accordance with the provisions of this paragraph shall be due
in full upon the occurrence of any of the events described in
(P)8(c)(i), (P)8(c)(ii), (P)8(c)(iii) or (P)8(c)(iv). In the event of
a payment in accordance with the terms of this paragraph, Employer
shall provide Employee and dependents insured at the time of
termination health insurance substantially similar to that then
provided for the greater of the remaining term of the contract or six
months. Payment and provision of health insurance in accordance with
the terms of this (P)8 shall be satisfaction in full of all sums due
to Employee by reason of this Agreement. A change of control shall be
deemed to have occurred at anytime David Hill (the principal
shareholder) or his descendants own less than 30% of the issued and
outstanding voting shares of the Employer.
d. Any other provision of this Agreement notwithstanding, the
Employer may terminate this Agreement if the termination is based on a
violation by the Employee of (P)7 of this Agreement, or on fraud,
embezzlement, securities law violation, sexual harassment of other
employees, criminal indictment or conviction, or other conduct
involving crimes, misdemeanors or moral turpitude. In the event of
termination pursuant to this paragraph, no severance pay shall be
payable to Employee as otherwise provided herein and the Employee
shall be entitled only to the base compensation provided for herein
earned prior to the date of termination computed pro rata up to and
including the date of termination.
e. The death or permanent disability of the Employee shall terminate
this Agreement and the employment of the Employee. Upon the death or
permanent disability of the Employee, all previously awarded options
shall vest and become immediately exercisable by the estate of the
employee.
9. Severability: In the event any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10. Assignment: This Agreement shall not be assignable, in whole or in
part, by the Employee but shall inure to the benefit of and bind the successors
and any assigns of Employer.
11. Fees and Costs: If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the party substantially
prevailing shall be entitled to
<PAGE>
its costs incurred in such action, including reasonable attorney fees, in
addition to any other relief that may be proper hereunder or at law or in
equity.
12. Notices: All notices hereunder shall be given in writing by personal
service or certified mail, return receipt requested, postage prepaid, addressed
to the parties at the following respective addresses, or at such other address
as may be designated:
Employer Employee
---------------------------------------------
Davel Communications Group, Inc. Michael Kouri
601 W. Morgan 10404 Canary Isle Drive
Jacksonville, Illinois 62650 Tampa, FL 33647
13. Entire Agreement: This Agreement constitutes the entire Agreement of
the parties. No modification, variance or change in any of its terms or
provisions shall be valid unless in writing and signed by both parties.
14. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
15. Waiver: The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same or any other provision of
this Agreement; nor shall the waiver by either party of the breach of any
provision hereof be a waiver of any subsequent breach of such provision or of
the provision itself.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals on this 28th day of February, 1997.
DAVEL COMMUNICATIONS GROUP, INC.
______________________________________
Robert D. Hill, CEO
EMPLOYEE
______________________________________
Michael Kouri
<PAGE>
Exhibit 10.6
REVISED EMPLOYMENT CONTRACT
THIS AGREEMENT made by and between DAVEL COMMUNICATIONS GROUP, INC., an Illinois
Corporation, hereinafter called "Employer" or "Davel," and Marlin E. Turnipseed,
hereinafter called "Employee". In consideration of the mutual covenants and
agreements set forth below, the parties agree as follows:
1. Term of Employment: Employee is now employed under a previous
contractual agreement as President of Telaleasing dated June 11, 1997. The
purpose of this Agreement is to clarify, amend and restate the Agreement dated
June 11, 1996. Employer hereby employs Employee and Employee hereby agrees to be
so employed as Executive Vice President for Marketing of Employee and to work
at such places as directed by Employer. This Employment Contract shall be
effective on the first day of January, 1996 and shall continue through December
31st, 1998 or until terminated by one of the parties as hereinafter provided, or
until the Employee's death, permanent disability or retirement. At the end of
the term this Agreement shall continue for consecutive one year terms unless
either party gives written notice of its intent not to renew the Agreement at
least 60 days prior to the expiration of the original term or any renewal or
extended term.
2. Duties:
a. The Employee agrees to accept the duties commonly involved in carrying
out the position for which employed and any other duties as may be
required by Employer. The Employer shall have the right at any time
during the term of this Agreement to change the duties of Employee or
assign duties different from the duties originally assigned.
b. The Employee shall devote his best efforts, on a full-time basis,
to the Employer's business, and will not engage in any employment or
enterprise detracting from this goal. Employee shall travel as
reasonably required in the performance of his duties hereunder.
c. The Employee as Executive Vice President for Marketing, and in
such other offices as from time to time assigned in Davel or
associated enterprises, shall perform the duties of Executive Vice
President for Marketing which shall consist of the duties normally
associated with such positions and such other duties as shall be from
time to time assigned. The Employee shall report to and be responsible
to the Chief Executive Officer in the regular conduct of his duties.
<PAGE>
3. Base Compensation: The Employee shall be paid a base salary of
$100,000 per annum during the term of this Agreement. The Employee's base
compensation shall be payable in accordance with Employer's payroll practices.
Employee shall be reimbursed for his reasonable expenses incurred in the
performance of his duties hereunder upon presentation of proper evidence thereof
as required by Employer.
4. Bonus. In addition to base compensation, the Employee shall receive an
annual bonus to be determined as a percentage of the Employee's base salary. The
range of percentages to be applied to the Employee's base salary for the
computation of bonus shall be based on the percentage growth in the Earnings Per
Share (EPS), adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets) of Employer for the year to which the bonus
is applicable. From within the percentage range so established, the CEO, in
consultation with the Chairman of the Board, shall recommend to the Compensation
Committee of the Board for approval the specific percentage to be applied based
on the performance and contribution of the Employee. The range of percentages
shall be established in accordance with the following table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining bonus shall be
- ---------------------------------------------------------------------
<S> <C>
0 to 17% 5% to 15%
- ---------------------------------------------------------------------
(Greater-than) 17% to 22% 10% to 20%
- ---------------------------------------------------------------------
(Greater-than) 22% to 27% 15% to 25%
- ---------------------------------------------------------------------
(Greater-than) 27% to 32% 20% to 35%
- ---------------------------------------------------------------------
(Greater-than) 32% 30% to 45%
- ---------------------------------------------------------------------
</TABLE>
For example, if the EPS for 1995 is 94c. and the 1996 EPS is $1.20, then the
percentage EPS growth is 28% (26/94) and the applicable range is 27% to 32%. If
within the applicable range, the CEO upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines based on the
performance and contribution of the Employee that the appropriate percentage is
29%, then the employees bonus shall be 29% of the Base compensation provided at
(P)3.
5. Stock Options and Grants:
a) Options to purchase stock of the Employer shall be awarded to the
Employee annually pursuant to the terms of this Employment Contract
and otherwise in accordance with the terms and conditions of the
Employer's Stock Option Plan based upon EPS percentage growth,
adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets), and the performance and
contribution of the Employee as determined by the CEO in
<PAGE>
consultation with the Chairman of the Board and subject to approval by
the Compensation Committee. The actual number of options awarded shall
be determined by multiplying the Employee's base salary, as set forth
at (P)3, above, times a percentage, selected by the CEO in
consultation with the Chairman of the Board and approved by the
Compensation Committee, from the range of percentages applicable to
the achieved EPS percentage growth as set forth in the following
table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining option awards shall be
- -----------------------------------------------------------------------------
<S> <C>
0 to 17% 10% to 20%
- -----------------------------------------------------------------------------
(Greater-than) 17% to 22% 21% to 40%
- -----------------------------------------------------------------------------
(Greater-than) 22% to 27% 41% to 80%
- -----------------------------------------------------------------------------
(Greater-than) 27% to 32% 81% to 160%
- -----------------------------------------------------------------------------
(Greater-than) 32% 161% to 240%
- -----------------------------------------------------------------------------
</TABLE>
The dollar amount so determined shall be divided by the exercise price
of the options awarded to determine the actual number of options. The
exercise price shall be determined in accordance with the terms and
conditions of the Employer's Stock Option Plan. Except as otherwise
accelerated, options so awarded shall vest one-third when awarded,
one-third twelve months after the date of the award and the balance 24
months after the date of the award. All options shall be exercisable
when vested.
For example, if the EPS for 1995 is 94c and the 1996 EPS is $1.20,
then the percentage EPS growth is 28% (26/94) and the applicable range
is 81% to 160%. The CEO, upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines,
based on the performance and contribution of the Employee, that the
appropriate percentage is 90%. If the exercise price of the options
determined in accordance with the terms of the Employee Stock Option
Plan is $13.00 per share, then the number of options awarded would be
determined by dividing 90% of the Employee's Base compensation
provided at (P)3 by the exercise price of $13.00 per share.
<PAGE>
b. The Employee shall be eligible for annual stock grants valued at
$20,000. One-half of the shares constituting each annual grant shall
not be transferred for six months following such grant; the remaining
one-half of such shares shall not be transferred for eighteen months
following such grant. All restrictions on transfer after six months
from the date of each grant shall be removed in the event of a change
in control. Each annual grant shall be deemed to be issued on the
first business day of each calendar year or, if later, the first
business day following the execution of this Agreement.
6. Other Benefits and Vacation:
a. Employer has established a 401(k) Profit Sharing Plan to provide
for voluntary Employee before and after tax contributions. The Profit
Sharing Plan may also provide for Employer contributions as may be
from time to time determined by the Employer consistent with and
subject to the terms of the plan as established by the Employer.
Employee may participate in such plan provided he is otherwise
qualified under the terms and conditions of any such Profit Sharing
Plan.
b. The Employee shall be entitled to vacations in accordance with
the regular policies of the employer as in effect from time to time.
Vacation shall be scheduled at the convenience of the Employer.
c. The Employer shall maintain an IRC (S)125 plan, or similar
arrangement as from time to time permitted by the Internal Revenue
Code as then in effect, for health insurance premiums and other
permitted (S)125 benefits and the Employee shall be permitted to
divert compensation for such premiums and other benefits.
d. The Employee shall be entitled to participate in the regular
Health Insurance plan of the Employer as from time to time in effect
on the terms and conditions as provided for employees generally.
7. Nondisclosure and Noncompetition: The Employee hereby agrees as a
condition of Employment to
a. At all times while this Agreement is in force and after its
termination or expiration for whatever reason, the Employee agrees to
refrain from disclosing, either directly or indirectly, the Employer's
customer lists, trade secrets, or other confidential material.
Employee agrees to take reasonable security measures to prevent
accidental disclosure of such information. All files, records,
documents, drawings, specifications, equipment and similar items
relating to Employer's business, whether prepared by the Employee or
<PAGE>
otherwise coming into his possession, shall remain the exclusive
property of the Employer.
b. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or
in any other individual or representative capacity, engage or
participate in any business of any nature which is in competition in
any way with the business of the Employer.
c. For a period of one (1) year after the expiration or termination
of this Agreement, except in the case of a termination by the Employer
for any reason other than the causes set forth at (P)8(d) below and
except in the case of a termination in connection with or at any time
after a change of control and for which the Employee is entitled to
severance pay computed in accordance with the provisions of (P)8(c),
the Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or
representative capacity, engage or participate in any business of any
nature which is in competition with the Employer in the business of
telecommunications within the existing market areas of the Employer
for which Employee had significant responsibility and in which
Employee materially participated in the management and operation of
the Employer.
d. Employer shall be entitled to injunctive and/or other equitable
relief to prevent or remedy a breach of the provisions of the
Agreement and to secure their enforcement, in addition to any other
remedies or damages which may be available to Employer.
8. Termination:
a. This Agreement may be terminated by either party giving two (2)
weeks written notice of termination to the other party. If requested
by the Employer, the Employee agrees to cooperate in training his
successor following notice of termination of this Agreement. If the
Employer terminates the agreement, the Employer, in addition to all
salary and bonus pro-rated through the date of termination, shall pay
severance pay equal to the lesser of six months base compensation or
the remaining base compensation due under this Agreement.
b. Upon a change in control of the ownership of Employer all stock
options previously awarded to the Employee shall vest and be
immediately exercisable.
<PAGE>
c. Upon a change of control the term of this Agreement shall be
automatically revised to eighteen months from the date of such change
in control if at the time of such change of control the remaining term
of this Agreement, or any extended or renewal term, is less than
eighteen months. If at or after a change in control, any of the
following occur
(i) The Employer or any successor of Employer terminates
the employee, or
(ii) The Employee elects to terminate employment by
written notice within 60 days of the date of any change in
control, or
(iii) The Employee is required to move more than 100 miles
from his current place of employment and the Employee elects to
resign by written notice, or
(iv) The Employee is required to assume a position which
requires a change in title or a diminution of responsibilities
and the Employee elects to resign by written notice,
then the amount of severance pay due shall be equal to the sum of
the following:
(i) salary for services performed pro-rated through the
date of termination, plus
(ii) the greater of six months base compensation or the
remaining base compensation due under this Agreement, plus
(iv) cash bonus computed by determining the bonus for one
year at the maximum possible rate pursuant to (P)4, dividing the
amount so determined by twelve and then multiplying the result by
the greater of six or the number of months (or parts thereof)
remaining on the term of this Agreement.
<PAGE>
The Employee may, in any event, elect in the Employee's sole
discretion to receive a lesser amount of severance pay. Any payment
made in accordance with the provisions of this paragraph shall be due
in full upon the occurrence of any of the events described in
(P)8(c)(i), (P)8(c)(ii), (P)8(c)(iii) or (P)8(c)(iv). In the event of
a payment in accordance with the terms of this paragraph, Employer
shall provide Employee and dependents insured at the time of
termination health insurance substantially similar to that then
provided for the greater of the remaining term of the contract or six
months. Payment and provision of health insurance in accordance with
the terms of this (P)8 shall be satisfaction in full of all sums due
to Employee by reason of this Agreement. A change of control shall be
deemed to have occurred at any time David Hill (the principal
shareholder) or his descendants own less than 30% of the issued and
outstanding voting shares of the Employer.
d. Any other provision of this Agreement notwithstanding, the
Employer may terminate this Agreement if the termination is based on a
violation by the Employee of (P)7 of this Agreement, or on fraud,
embezzlement, securities law violation, sexual harassment of other
employees, criminal indictment or conviction, or other conduct
involving crimes, misdemeanors or moral turpitude. In the event of
termination pursuant to this paragraph, no severance pay shall be
payable to Employee as otherwise provided herein and the Employee
shall be entitled only to the base compensation provided for herein
earned prior to the date of termination computed pro rata up to and
including the date of termination.
e. The death or permanent disability of the Employee shall terminate
this Agreement and the employment of the Employee. Upon the death or
permanent disability of the Employee, all previously awarded options
shall vest and become immediately exercisable by the estate of the
employee.
9. Severability: In the event any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10. Assignment: This Agreement shall not be assignable, in whole or in
part, by the Employee but shall inure to the benefit of and bind the successors
and any assigns of Employer.
11. Fees and Costs: If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the party substantially
prevailing shall be entitled to
<PAGE>
its costs incurred in such action, including reasonable attorney fees, in
addition to any other relief that may be proper hereunder or at law or in
equity.
12. Notices: All notices hereunder shall be given in writing by personal
service or certified mail, return receipt requested, postage prepaid, addressed
to the parties at the following respective addresses, or at such other address
as may be designated:
Employer Employee
--------------------------------------------
Davel Communications Group, Inc. Marlin E. Turnipseed
601 W. Morgan 2334 Eagle Bluff Drive
Jacksonville, Illinois 62650 Valrico, FL 33594
13. Entire Agreement: This Agreement constitutes the entire Agreement of
the parties. No modification, variance or change in any of its terms or
provisions shall be valid unless in writing and signed by both parties.
14. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
15. Waiver: The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same or any other provision of
this Agreement; nor shall the waiver by either party of the breach of any
provision hereof be a waiver of any subsequent breach of such provision or of
the provision itself.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals on this 28th day of February, 1997.
DAVEL COMMUNICATIONS GROUP, INC.
______________________________________
Robert D. Hill, CEO
EMPLOYEE
______________________________________
Marlin E. Turnipseed
<PAGE>
Exhibit 10.7
REVISED EMPLOYMENT CONTRACT
THIS AGREEMENT made by and between DAVEL COMMUNICATIONS GROUP, INC., an Illinois
Corporation, hereinafter called "Employer" or "Davel," and Michael E. Hayes,
hereinafter called "Employee". In consideration of the mutual covenants and
agreements set forth below, the parties agree as follows:
1. Term of Employment: Employee is now employed under a previous
contractual agreement as Senior Vice President & Chief Financial Officer dated
June 11, 1997. The purpose of this Agreement is to clarify, amend and restate
the Agreement dated June 11, 1996. Employer hereby employs Employee and Employee
hereby agrees to be so employed as Senior Vice President & Chief Financial
Officer of Employee and to work at such places as directed by Employer. This
Employment Contract shall be effective on the first day of January, 1996 and
shall continue through December 31st, 1998 or until terminated by one of the
parties as hereinafter provided, or until the Employee's death, permanent
disability or retirement. At the end of the term this Agreement shall continue
for consecutive one year terms unless either party gives written notice of its
intent not to renew the Agreement at least 60 days prior to the expiration of
the original term or any renewal or extended term.
2. Duties:
a. The Employee agrees to accept the duties commonly involved in carrying
out the position for which employed and any other duties as may be
required by Employer. The Employer shall have the right at any time
during the term of this Agreement to change the duties of Employee or
assign duties different from the duties originally assigned.
b. The Employee shall devote his best efforts, on a full-time basis,
to the Employer's business, and will not engage in any employment or
enterprise detracting from this goal. Employee shall travel as
reasonably required in the performance of his duties hereunder.
c. The Employee as Senior Vice President & Chief Financial Officer,
and in such other offices as from time to time assigned in Davel or
associated enterprises, shall perform the duties of Senior Vice
President & Chief Financial Officer which shall consist of the duties
normally associated with such positions and such other duties as shall
be from time to time assigned. The Employee shall report to and be
responsible to the Chief Executive Officer in the regular conduct of
his duties.
<PAGE>
3. Base Compensation: The Employee shall be paid a base salary of
$120,000 per annum during the term of this Agreement. The Employee's base
compensation shall be payable in accordance with Employer's payroll practices.
Employee shall be reimbursed for his reasonable expenses incurred in the
performance of his duties hereunder upon presentation of proper evidence thereof
as required by Employer.
4. Bonus. In addition to base compensation, the Employee shall receive an
annual bonus to be determined as a percentage of the Employee's base salary. The
range of percentages to be applied to the Employee's base salary for the
computation of bonus shall be based on the percentage growth in the Earnings Per
Share (EPS), adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets) of Employer for the year to which the bonus
is applicable. From within the percentage range so established, the CEO, in
consultation with the Chairman of the Board, shall recommend to the Compensation
Committee of the Board for approval the specific percentage to be applied based
on the performance and contribution of the Employee. The range of percentages
shall be established in accordance with the following table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining bonus shall be
- ---------------------------------------------------------------------
<S> <C>
0 to 17% 5% to 15%
- ---------------------------------------------------------------------
(Greater-than) 17% to 22% 10% to 20%
- ---------------------------------------------------------------------
(Greater-than) 22% to 27% 15% to 25%
- ---------------------------------------------------------------------
(Greater-than) 27% to 32% 20% to 35%
- ---------------------------------------------------------------------
(Greater-than) 32% 30% to 45%
- ---------------------------------------------------------------------
</TABLE>
For example, if the EPS for 1995 is 94c. and the 1996 EPS is $1.20, then the
percentage EPS growth is 28% (26/94) and the applicable range is 27% to 32%. If
within the applicable range, the CEO upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines based on the
performance and contribution of the Employee that the appropriate percentage is
29%, then the employees bonus shall be 29% of the Base compensation provided at
(P)3.
5. Stock Options and Grants:
a) Options to purchase stock of the Employer shall be awarded to the
Employee annually pursuant to the terms of this Employment Contract
and otherwise in accordance with the terms and conditions of the
Employer's Stock Option Plan based upon EPS percentage growth,
adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets), and the performance and
<PAGE>
contribution of the Employee as determined by the CEO in consultation
with the Chairman of the Board and subject to approval by the
Compensation Committee. The actual number of options awarded shall be
determined by multiplying the Employee's base salary, as set forth at
(P)3, above, times a percentage, selected by the CEO in consultation
with the Chairman of the Board and approved by the Compensation
Committee, from the range of percentages applicable to the achieved
EPS percentage growth as set forth in the following table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining option awards shall be
- -----------------------------------------------------------------------------
<S> <C>
0 to 17% 10% to 20%
- -----------------------------------------------------------------------------
(Greater-than) 17% to 22% 21% to 40%
- -----------------------------------------------------------------------------
(Greater-than) 22% to 27% 41% to 80%
- -----------------------------------------------------------------------------
(Greater-than) 27% to 32% 81% to 160%
- -----------------------------------------------------------------------------
(Greater-than) 32% 161% to 240%
- -----------------------------------------------------------------------------
</TABLE>
The dollar amount so determined shall be divided by the exercise price
of the options awarded to determine the actual number of options. The
exercise price shall be determined in accordance with the terms and
conditions of the Employer's Stock Option Plan. Except as otherwise
accelerated, options so awarded shall vest one- third when awarded,
one-third twelve months after the date of the award and the balance 24
months after the date of the award. All options shall be exercisable
when vested.
For example, if the EPS for 1995 is 94c and the 1996 EPS is $1.20,
then the percentage EPS growth is 28% (26/94) and the applicable range
is 81% to 160%. The CEO, upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines,
based on the performance and contribution of the Employee, that the
appropriate percentage is 90%. If the exercise price of the options
determined in accordance with the terms of the Employee Stock Option
Plan is $13.00 per share, then the number of options awarded would be
determined by dividing 90% of the Employee's Base compensation
provided at (P)3 by the exercise price of $13.00 per share.
<PAGE>
b. The Employee shall be eligible for annual stock grants valued at
$30,000. One-half of the shares constituting each annual grant shall
not be transferred for six months following such grant; the remaining
one-half of such shares shall not be transferred for eighteen months
following such grant. All restrictions on transfer after six months
from the date of each grant shall be removed in the event of a change
in control. Each annual grant shall be deemed to be issued on the
first business day of each calendar year or, if later, the first
business day following the execution of this Agreement.
6. Other Benefits and Vacation:
a. Employer has established a 401(k) Profit Sharing Plan to provide
for voluntary Employee before and after tax contributions. The Profit
Sharing Plan may also provide for Employer contributions as may be
from time to time determined by the Employer consistent with and
subject to the terms of the plan as established by the Employer.
Employee may participate in such plan provided he is otherwise
qualified under the terms and conditions of any such Profit Sharing
Plan.
b. The Employee shall be entitled to vacations in accordance with
the regular policies of the employer as in effect from time to time.
Vacation shall be scheduled at the convenience of the Employer.
c. The Employer shall maintain an IRC (S)125 plan, or similar
arrangement as from time to time permitted by the Internal Revenue
Code as then in effect, for health insurance premiums and other
permitted (S)125 benefits and the Employee shall be permitted to
divert compensation for such premiums and other benefits.
d. The Employee shall be entitled to participate in the regular
Health Insurance plan of the Employer as from time to time in effect
on the terms and conditions as provided for employees generally.
7. Nondisclosure and Noncompetition: The Employee hereby agrees as a
condition of Employment to
a. At all times while this Agreement is in force and after its
termination or expiration for whatever reason, the Employee agrees to
refrain from disclosing, either directly or indirectly, the Employer's
customer lists, trade secrets, or other confidential material.
Employee agrees to take reasonable security measures to prevent
accidental disclosure of such information. All files, records,
documents, drawings, specifications, equipment and similar items
relating to Employer's business, whether prepared by the Employee or
<PAGE>
otherwise coming into his possession, shall remain the exclusive
property of the Employer.
b. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or
in any other individual or representative capacity, engage or
participate in any business of any nature which is in competition in
any way with the business of the Employer.
c. For a period of one (1) year after the expiration or termination
of this Agreement, except in the case of a termination by the Employer
for any reason other than the causes set forth at (P)8(d) below and
except in the case of a termination in connection with or at anytime
after a change of control and for which the Employee is entitled to
severance pay computed in accordance with the provisions of (P)8(c),
the Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or
representative capacity, engage or participate in any business of any
nature which is in competition with the Employer in the business of
telecommunications within the existing market areas of the Employer
for which Employee had significant responsibility and in which
Employee materially participated in the management and operation of
the Employer.
d. Employer shall be entitled to injunctive and/or other equitable
relief to prevent or remedy a breach of the provisions of the
Agreement and to secure their enforcement, in addition to any other
remedies or damages which may be available to Employer.
8. Termination:
a. This Agreement may be terminated by either party giving two (2)
weeks written notice of termination to the other party. If requested
by the Employer, the Employee agrees to cooperate in training his
successor following notice of termination of this Agreement. If the
Employer terminates the agreement, the Employer, in addition to all
salary and bonus pro-rated through the date of termination, shall pay
severance pay equal to the lesser of six months base compensation or
the remaining base compensation due under this Agreement.
b. Upon a change in control of the ownership of Employer all stock
options previously awarded to the Employee shall vest and be
immediately exercisable.
<PAGE>
c. Upon a change of control the term of this Agreement shall be
automatically revised to eighteen months from the date of such change
in control if at the time of such change of control the remaining term
of this Agreement, or any extended or renewal term, is less than
eighteen months. If at or after a change in control, any of the
following occur
(i) The Employer or any successor of Employer terminates
the employee, or
(ii) The Employee elects to terminate employment by
written notice within 60 days of the date of any change in
control, or
(iii) The Employee is required to move more than 100 miles
from his current place of employment and the Employee elects to
resign by written notice, or
(iv) The Employee is required to assume a position which
requires a change in title or a diminution of responsibilities
and the Employee elects to resign by written notice,
then the amount of severance pay due shall be equal to the sum of
the following:
(i) salary for services performed pro-rated through the
date of termination, plus
(ii) the greater of six months base compensation or the
remaining base compensation due under this Agreement, plus
(iv) cash bonus computed by determining the bonus for one
year at the maximum possible rate pursuant to (P) 4, dividing the
amount so determined by twelve and then multiplying the result by
the greater of six or the number of months (or parts thereof)
remaining on the term of this Agreement.
<PAGE>
The Employee may, in any event, elect in the Employee's sole
discretion to receive a lesser amount of severance pay. Any payment
made in accordance with the provisions of this paragraph shall be due
in full upon the occurrence of any of the events described in
(P)8(c)(i), (P)8(c)(ii), (P)8(c)(iii) or (P)8(c)(iv). In the event of
a payment in accordance with the terms of this paragraph, Employer
shall provide Employee and dependents insured at the time of
termination health insurance substantially similar to that then
provided for the greater of the remaining term of the contract or six
months. Payment and provision of health insurance in accordance with
the terms of this (P)8 shall be satisfaction in full of all sums due
to Employee by reason of this Agreement. A change of control shall be
deemed to have occurred at anytime David Hill (the principal
shareholder) or his descendants own less than 30% of the issued and
outstanding voting shares of the Employer.
d. Any other provision of this Agreement notwithstanding, the
Employer may terminate this Agreement if the termination is based on a
violation by the Employee of (P)7 of this Agreement, or on fraud,
embezzlement, securities law violation, sexual harassment of other
employees, criminal indictment or conviction, or other conduct
involving crimes, misdemeanors or moral turpitude. In the event of
termination pursuant to this paragraph, no severance pay shall be
payable to Employee as otherwise provided herein and the Employee
shall be entitled only to the base compensation provided for herein
earned prior to the date of termination computed pro rata up to and
including the date of termination.
e. The death or permanent disability of the Employee shall terminate
this Agreement and the employment of the Employee. Upon the death or
permanent disability of the Employee, all previously awarded options
shall vest and become immediately exercisable by the estate of the
employee.
9. Severability: In the event any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10. Assignment: This Agreement shall not be assignable, in whole or in
part, by the Employee but shall inure to the benefit of and bind the successors
and any assigns of Employer.
11. Fees and Costs: If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the party substantially
prevailing shall be entitled to
<PAGE>
its costs incurred in such action, including reasonable attorney fees, in
addition to any other relief that may be proper hereunder or at law or in
equity.
12. Notices: All notices hereunder shall be given in writing by personal
service or certified mail, return receipt requested, postage prepaid, addressed
to the parties at the following respective addresses, or at such other address
as may be designated:
Employer Employee
--------------------------------------------
Davel Communications Group, Inc. Michael E. Hayes
601 W. Morgan 24 Book Lane
Jacksonville, Illinois 62650 Jacksonville, IL 62650
13. Entire Agreement: This Agreement constitutes the entire Agreement of
the parties. No modification, variance or change in any of its terms or
provisions shall be valid unless in writing and signed by both parties.
14. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
15. Waiver: The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same or any other provision of
this Agreement; nor shall the waiver by either party of the breach of any
provision hereof be a waiver of any subsequent breach of such provision or of
the provision itself.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals on this 28th day of February, 1997.
DAVEL COMMUNICATIONS GROUP, INC.
______________________________________
Robert D. Hill, CEO
EMPLOYEE
______________________________________
Michael E. Hayes
<PAGE>
EXHIBIT 10.8
REVISED EMPLOYMENT CONTRACT
THIS AGREEMENT made by and between DAVEL COMMUNICATIONS GROUP, INC., an Illinois
Corporation, hereinafter called "Employer" or "Davel," and Theodore C.
Rammelkamp, Jr., hereinafter called "Employee". In consideration of the mutual
covenants and agreements set forth below, the parties agree as follows:
1. Term of Employment: Employee is now employed under a previous
contractual agreement as Senior Vice President & General Counsel dated June 11,
1997. The purpose of this Agreement is to clarify, amend and restate the
Agreement dated June 11, 1996. Employer hereby employs Employee and Employee
hereby agrees to be so employed as Senior Vice President & General Counsel of
Employee and to work at such places as directed by Employer. This Employment
Contract shall be effective on the first day of January, 1996 and shall continue
through December 31st, 1998 or until terminated by one of the parties as
hereinafter provided, or until the Employee's death, permanent disability or
retirement. At the end of the term this Agreement shall continue for consecutive
one year terms unless either party gives written notice of its intent not to
renew the Agreement at least 60 days prior to the expiration of the original
term or any renewal or extended term.
2. Duties:
a. The Employee agrees to accept the duties commonly involved in carrying
out the position for which employed and any other duties as may be
required by Employer. The Employer shall have the right at any time
during the term of this Agreement to change the duties of Employee or
assign duties different from the duties originally assigned.
b. The Employee shall devote his best efforts, on a full-time basis, to
the Employer's business, and will not engage in any employment or
enterprise detracting from this goal. Employee shall travel as
reasonably required in the performance of his duties hereunder.
c. The Employee as Senior Vice President & General Counsel, and in such
other offices as from time to time assigned in Davel or associated
enterprises, shall perform the duties of Senior Vice President &
General Counsel which shall consist of the duties normally associated
with such positions and such other duties as shall be from time to
time assigned. The Employee shall report to and be responsible to the
Chief Executive Officer in the regular conduct of his duties.
<PAGE>
3. Base Compensation: The Employee shall be paid a base salary of
$120,000 per annum during the term of this Agreement. The Employee's base
compensation shall be payable in accordance with Employer's payroll practices.
Employee shall be reimbursed for his reasonable expenses incurred in the
performance of his duties hereunder upon presentation of proper evidence thereof
as required by Employer.
4. Bonus. In addition to base compensation, the Employee shall receive an
annual bonus to be determined as a percentage of the Employee's base salary. The
range of percentages to be applied to the Employee's base salary for the
computation of bonus shall be based on the percentage growth in the Earnings Per
Share (EPS), adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets) of Employer for the year to which the bonus
is applicable. From within the percentage range so established, the CEO, in
consultation with the Chairman of the Board, shall recommend to the Compensation
Committee of the Board for approval the specific percentage to be applied based
on the performance and contribution of the Employee. The range of percentages
shall be established in accordance with the following table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining bonus shall be
<S> <C>
0 to 17% 5% to 15%
[Greater-than] 17% to 22% 10% to 20%
[Greater-than] 22% to 27% 15% to 25%
[Greater-than] 27% to 32% 20% to 35%
[Greater-than] 32% 30% to 45%
- -------------------------------------------------------
</TABLE>
For example, if the EPS for 1995 is 94c. and the 1996 EPS is $1.20, then the
percentage EPS growth is 28% (26/94) and the applicable range is 27% to 32%. If
within the applicable range, the CEO upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines based on the
performance and contribution of the Employee that the appropriate percentage is
29%, then the employees bonus shall be 29% of the Base compensation provided at
(P)3.
5. Stock Options and Grants:
a) Options to purchase stock of the Employer shall be awarded to
the Employee annually pursuant to the terms of this Employment
Contract and otherwise in accordance with the terms and conditions of
the Employer's Stock Option Plan based upon EPS percentage growth,
adjusted for extraordinary items (including but not limited to the
1995 write down of ComTel assets), and the performance and
contribution of the Employee as determined by the CEO in
<PAGE>
consultation with the Chairman of the Board and subject to approval by
the Compensation Committee. The actual number of options awarded shall
be determined by multiplying the Employee's base salary, as set forth
at (P)3, above, times a percentage, selected by the CEO in
consultation with the Chairman of the Board and approved by the
Compensation Committee, from the range of percentages applicable to
the achieved EPS percentage growth as set forth in the following
table:
<TABLE>
<CAPTION>
If the Percentage EPS the range of percentages
Growth for Year is for determining option awards shall be
<S> <C>
0 to 17% 10% to 20%
[Greater-than] 17% to 22% 21% to 40%
[Greater-than] 22% to 27% 41% to 80%
[Greater-than] 27% to 32% 81% to 160%
[Greater-than] 32% 161% to 240%
- ---------------------------------------------------------------
</TABLE>
The dollar amount so determined shall be divided by the exercise price
of the options awarded to determine the actual number of options. The
exercise price shall be determined in accordance with the terms and
conditions of the Employer's Stock Option Plan. Except as otherwise
accelerated, options so awarded shall vest one- third when awarded,
one-third twelve months after the date of the award and the balance 24
months after the date of the award. All options shall be exercisable
when vested.
For example, if the EPS for 1995 is 94c and the 1996 EPS is $1.20,
then the percentage EPS growth is 28% (26/94) and the applicable range
is 81% to 160%. The CEO, upon consultation with the Chairman of the
Board and upon approval of the Compensation Committee, determines,
based on the performance and contribution of the Employee, that the
appropriate percentage is 90%. If the exercise price of the options
determined in accordance with the terms of the Employee Stock Option
Plan is $13.00 per share, then the number of options awarded would be
determined by dividing 90% of the Employee's Base compensation
provided at (P)3 by the exercise price of $13.00 per share.
<PAGE>
b. The Employee shall be eligible for annual stock grants valued at
$30,000. One-half of the shares constituting each annual grant shall
not be transferred for six months following such grant; the remaining
one-half of such shares shall not be transferred for eighteen months
following such grant. All restrictions on transfer after six months
from the date of each grant shall be removed in the event of a change
in control. Each annual grant shall be deemed to be issued on the
first business day of each calendar year or, if later, the first
business day following the execution of this Agreement.
6. Other Benefits and Vacation:
a. Employer has established a 401(k) Profit Sharing Plan to provide
for voluntary Employee before and after tax contributions. The Profit
Sharing Plan may also provide for Employer contributions as may be
from time to time determined by the Employer consistent with and
subject to the terms of the plan as established by the Employer.
Employee may participate in such plan provided he is otherwise
qualified under the terms and conditions of any such Profit Sharing
Plan.
b. The Employee shall be entitled to vacations in accordance with
the regular policies of the employer as in effect from time to time.
Vacation shall be scheduled at the convenience of the Employer
c. The Employer shall maintain an IRC (S)125 plan, or similar
arrangement as from time to time permitted by the Internal Revenue
Code as then in effect, for health insurance premiums and other
permitted (S)125 benefits and the Employee shall be permitted to
divert compensation for such premiums and other benefits.
d. The Employee shall be entitled to participate in the regular
Health Insurance plan of the Employer as from time to time in effect
on the terms and conditions as provided for employees generally.
7. Nondisclosure and Noncompetition: The Employee hereby agrees as a
condition of Employment to
a. At all times while this Agreement is in force and after its
termination or expiration for whatever reason, the Employee agrees to
refrain from disclosing, either directly or indirectly, the Employer's
customer lists, trade secrets, or other confidential material.
Employee agrees to take reasonable security measures to prevent
accidental disclosure of such information. All files, records,
documents, drawings, specifications, equipment and similar items
relating to Employer's business, whether prepared by the Employee or
<PAGE>
otherwise coming into his possession, shall remain the exclusive
property of the Employer.
b. During the term of this Agreement, the Employee shall not,
directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or
in any other individual or representative capacity, engage or
participate in any business of any nature which is in competition in
any way with the business of the Employer.
c. For a period of one (1) year after the expiration or termination
of this Agreement, except in the case of a termination by the Employer
for any reason other than the causes set forth at (P)8(d) below and
except in the case of a termination in connection with or at any time
after a change of control and for which the Employee is entitled to
severance pay computed in accordance with the provisions of (P)8(c),
the Employee shall not, directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or
representative capacity, engage or participate in any business of any
nature which is in competition with the Employer in the business of
telecommunications within the existing market areas of the Employer
for which Employee had significant responsibility and in which
Employee materially participated in the management and operation of
the Employer.
d. Employer shall be entitled to injunctive and/or other equitable
relief to prevent or remedy a breach of the provisions of the
Agreement and to secure their enforcement, in addition to any other
remedies or damages which may be available to Employer.
8. Termination:
a. This Agreement may be terminated by either party giving two (2)
weeks written notice of termination to the other party. If requested
by the Employer, the Employee agrees to cooperate in training his
successor following notice of termination of this Agreement. If the
Employer terminates the agreement, the Employer, in addition to all
salary and bonus pro-rated through the date of termination, shall pay
severance pay equal to the lesser of six months base compensation or
the remaining base compensation due under this Agreement.
b. Upon a change in control of the ownership of Employer all stock
options previously awarded to the Employee shall vest and be
immediately exercisable.
<PAGE>
c. Upon a change of control the term of this Agreement shall be
automatically revised to eighteen months from the date of such change
in control if at the time of such change of control the remaining term
of this Agreement, or any extended or renewal term, is less than
eighteen months. If at or after a change in control, any of the
following occur
(i) The Employer or any successor of Employer terminates
the employee, or
(ii) The Employee elects to terminate employment by
written notice within 60 days of the date of any change in
control, or
(iii) The Employee is required to move more than 100 miles
from his current place of employment and the Employee elects to
resign by written notice, or
(iv) The Employee is required to assume a position which
requires a change in title or a diminution of responsibilities
and the Employee elects to resign by written notice,
then the amount of severance pay due shall be equal to the sum of
the following:
(i) salary for services performed pro-rated through the
date of termination, plus
(ii) the greater of six months base compensation or the
remaining base compensation due under this Agreement, plus
(iv) cash bonus computed by determining the bonus for one
year at the maximum possible rate pursuant to (P)4, dividing the
amount so determined by twelve and then multiplying the result by
the greater of six or the number of months (or parts thereof)
remaining on the term of this Agreement.
<PAGE>
The Employee may, in any event, elect in the Employee's sole
discretion to receive a lesser amount of severance pay. Any payment
made in accordance with the provisions of this paragraph shall be due
in full upon the occurrence of any of the events described in
(P)8(c)(i), (P)8(c)(ii), (P)8(c)(iii) or (P)8(c)(iv). In the event of
a payment in accordance with the terms of this paragraph, Employer
shall provide Employee and dependents insured at the time of
termination health insurance substantially similar to that then
provided for the greater of the remaining term of the contract or six
months. Payment and provision of health insurance in accordance with
the terms of this (P)8 shall be satisfaction in full of all sums due
to Employee by reason of this Agreement. A change of control shall be
deemed to have occurred at any time David Hill (the principal
shareholder) or his descendants own less than 30% of the issued and
outstanding voting shares of the Employer.
d. Any other provision of this Agreement notwithstanding, the
Employer may terminate this Agreement if the termination is based on a
violation by the Employee of (P)7 of this Agreement, or on fraud,
embezzlement, securities law violation, sexual harassment of other
employees, criminal indictment or conviction, or other conduct
involving crimes, misdemeanors or moral turpitude. In the event of
termination pursuant to this paragraph, no severance pay shall be
payable to Employee as otherwise provided herein and the Employee
shall be entitled only to the base compensation provided for herein
earned prior to the date of termination computed pro rata up to and
including the date of termination.
e. The death or permanent disability of the Employee shall terminate
this Agreement and the employment of the Employee. Upon the death or
permanent disability of the Employee, all previously awarded options
shall vest and become immediately exercisable by the estate of the
employee.
9. Severability: In the event any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10. Assignment: This Agreement shall not be assignable, in whole or in
part, by the Employee but shall inure to the benefit of and bind the successors
and any assigns of Employer.
11. Fees and Costs: If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the party substantially
prevailing shall be entitled to
<PAGE>
its costs incurred in such action, including reasonable attorney fees, in
addition to any other relief that may be proper hereunder or at law or in
equity.
12. Notices: All notices hereunder shall be given in writing by personal
service or certified mail, return receipt requested, postage prepaid, addressed
to the parties at the following respective addresses, or at such other address
as may be designated:
Employer Employee
-------- --------
Davel Communications Group, Inc. Theodore C. Rammelkamp, Jr.
601 W. Morgan 1228 West College
Jacksonville, Illinois 62650 Jacksonville, IL 62650
13. Entire Agreement: This Agreement constitutes the entire Agreement of
the parties. No modification, variance or change in any of its terms or
provisions shall be valid unless in writing and signed by both parties.
14. Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
15. Waiver: The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same or any other provision of
this Agreement; nor shall the waiver by either party of the breach of any
provision hereof be a waiver of any subsequent breach of such provision or of
the provision itself.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals on this 28th day of February, 1997.
DAVEL COMMUNICATIONS GROUP, INC.
______________________________________
Robert D. Hill, CEO
EMPLOYEE
______________________________________
Theodore C. Rammelkamp, Jr.
<PAGE>
EXHIBIT 10.9
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") dated December 20, 1996 is by
and among the following:
a) SKYLINK TELECOMMUNICATIONS CORPORATION, a Nevada Corporation
herein referred to as the "Buyer"; and
b) COMTEL COMPUTER CORP., a Nevada corporation, and CALIFORNIA
COMTEL COMPUTER, INC., a California Corporation, both of which may be
hereinafter collectively referred to herein as the "Company" or
"Companies";
c) Davel Communications Group, Inc. (Selling Shareholder) who is
referred to herein as the "Seller" or "Selling Shareholder" and who is
represented by Theodore C. Rammelkamp, Jr. as agent, who is referred to
herein as the "Seller's Agent" with reference to the following
circumstances:
WHEREAS The Company operates and has under contract phones in hotels and
other similar operations for which it provides VoicePro, PBX equipment and
Operator Services, hereafter referred to as "Hospitality" services;
WHEREAS the Buyer desires to purchase all of Selling Shareholder's interest
in the Company;
WHEREAS the Selling Shareholder owns 100% of the issued and outstanding
shares of COMTEL COMPUTER, CORP., consisting of 20,948,529.54 shares, and 100%
of the issued and outstanding shares of CALIFORNIA COMTEL COMPUTER, INC.,
consisting of 9,350 shares, said shares being all of the issued and outstanding
shares of both corporations. All of said shares are hereafter referred to as the
"Transferred Shares."
WHEREAS Theodore C. Rammelkamp, Jr. as Seller's Agent, is the authorized
attorney-in-fact for the Selling Shareholder with the power to sign, execute,
acknowledge, deliver, and receive this Stock Purchase Agreement and such
contracts, agreements, options, covenants, deeds, conveyances, bills of sale,
leases, assignments, insurance policies, checks, stock certificates, proxies,
warrants, commercial paper, and such other instruments of whatever kind and
nature as may be necessary or proper for the completion of this transaction.
Attached hereto at Exhibit A is a Power of Attorney evidencing such authority;
and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
Purchase and Sale of Stock. Subject to the terms and conditions herein
set forth, on the Closing Date (as hereinafter defined), Buyer agrees to
purchase from Seller 9,350 shares in
<PAGE>
California ComTel Computer, Inc. for the sum of $1,000.00 and
20,948,529.54 shares in ComTel Computer Corp. for $5,003,000 adjusted for
certain pre-agreement items ("Pre-Agreement Items") set forth at Schedule 1
all payable and more fully described as follows:
Seller has previously entered into an escrow agreement dated April 25,
1996 at Farmers State Bank and Trust Company whereby Buyer has paid into
escrow certain sums as a good faith deposit for the performance of the
transaction contemplated by this Agreement. Upon Closing, all of said funds
in escrow shall be released by Letter of Direction to Buyer; and
The sum of $2,703,000 as adjusted for the Pre-Agreement Items, which
adjusted sum is referred to herein as the "First Escrow Deposit," by
deposit with the Escrow Agent (as hereafter defined) in available funds on
or before December 31, 1996; and
The additional sum of $2,300,000 by deposit with the Escrow Agent in
available funds no later than the earlier of December 31, 1997 or within
ten days of closing and receipt of funds from the underwriter of an Initial
Public Issue of stock by Buyer. This additional sum shall be subject to
adjustment as hereafter provided at paragraph 9.1.3 and, as so adjusted,
shall bear interest at 9.75% per annum, compounded daily, until deposited
with the Escrow Agent. Said additional sum plus interest and after
adjustments is referred to herein as the "Second Escrow Deposit." At
Seller's sole discretion the Second Escrow Deposit may be made in Common
Stock of Seller valued at the price set for such stock by Seller's
underwriter on the date of first issuance to the public.
Security Interest in Assets. At Closing, the Buyer shall cause Comtel
Computer Corp. to grant Seller a security interest in all equipment of
Comtel Computer Corp. and all accounts and accounts receivable arising from
the transmission of telecommunications traffic from customers as of the
date of Closing (including proceeds and substantially equivalent
replacements) to secure the payment of the Second Escrow Deposit. Said
security interest shall not be subordinate to any interests created by
Buyer at any time or by Comtel Computer Corp. at or after Closing except
for such purposes related to the financing of the capital expansion or on
going business operations of Comtel Computer Corp. to which Seller has
given its written consent for subordination of its interests. Seller shall
not unreasonably withhold such consent, but in evaluating any request for
subordination Seller may, in addition to other factors, consider the
intended use of proceeds, Seller's own obligations to Boatmen's National
Bank of St. Louis (or any successor institution) and the impairment of its
collateral. Without Seller's consent Comtel Computer Corp. may finance
acquisition of new assets by Purchase Money Security interest in the assets
acquired. The security interest contemplated by this paragraph 1.3.1 shall
be granted by Security Agreement substantially as set forth at Schedule
1.3.1
Security Interest in the Transferred Shares. This Agreement in its
entirety shall constitute a Security Agreement or Pledge by Buyer of the
Transferred Shares to secure the Payment of the Second Escrow Deposit.
<PAGE>
Collateral. Buyer hereby grants to Seller a security interest in the
Transferred Shares to secure payment of the Second Escrow Deposit.
Perfection. Pending payment of the Second Escrow Deposit, Seller shall
transfer the shares to the Escrow Agent, pursuant to an escrow agreement
("Escrow Agreement") substantially in the form as set forth at Schedule
1.3.2.2.
Sale or Encumbrance. Buyer shall not, without the written consent of
the Secured Party, sell, contract to sell, assign, lease, encumber or
dispose of the Transferred Shares or any interest therein until this
Agreement and all debts secured by it have been fully satisfied.
Remedies. Upon the failure of Buyer to timely pay the Second Escrow
Deposit the Seller and Buyer shall within three days after written demand
for such payment by Seller direct the Escrow Agent to deliver the
Transferred Shares to Seller as Seller's own property free and clear of all
encumbrances whether arising out of this Agreement or otherwise.
Voting Rights in the Transferred Shares. At Closing Seller shall
deliver to Buyer a proxy to vote the transferred shares substantially in
the form as set forth at Schedule 1.3.3 which Proxy shall provide that
Seller shall have all voting rights in respect of the Transferred Shares
during such periods as Buyer is not in "Material Breach," hereafter
defined. For the purposes of this paragraph 1.3.3, a "Material Breach"
shall mean any breach of warranty, or nonfulfillment or failure to perform
any material obligation on the part of the Buyer under this Agreement, The
Telecommunications Services Agreement set forth at Schedule 4.1 or The
Security Agreement set forth at Schedule 1.3.1 which continues without cure
for more than 30 days after written Notice by Seller referencing this
paragraph which specifies the breach of warranty, or the nonfulfillment or
failure to perform a material obligation.
Delivery of Shares and Payment. Subject to the conditions set forth in
this Agreement, on or before December 31, 1996, Buyer shall deposit with
the Escrow Agent, subject to the terms of the Escrow Agreement, the First
Escrow Deposit. After the Buyer has made the First Escrow Deposit and on or
before December 31, 1996 Seller shall deliver, subject to the terms of the
Escrow Agreement, to the Escrow Agent the Transferred Shares and the
undated, fully executed stock powers authorizing the transfer of shares to
the Buyer ("Stock Powers"). Further, Seller shall cause to be delivered on
or before December 31, 1996 forms UCC-3, fully executed and suitable for
filing which release all security interests of Boatmen's National Bank of
St. Louis in the assets of the Companies ("Boatmen's Lien Releases"). On
December 31, 1996 and otherwise in accordance with the terms of the Escrow
Agreement, the Buyer and Seller shall direct the Escrow Agent to pay to the
Seller the First Escrow Deposit and transfer to Buyer the Boatmen's Lien
Releases. When required by paragraph 1.3 Buyer shall deposit the Second
Escrow Deposit in available funds with the Escrow Agent. At such time and
otherwise in accordance with the terms of the Escrow Agreement to the Buyer
and Seller shall direct the Escrow Agent to deliver the Transferred Shares
and Stock Powers to Buyer and the Second Escrow Deposit to Seller.
<PAGE>
Closing Date. The closing ("Closing") of the transaction provided in
this Agreement shall be conducted through escrow as provided above and
shall take place on December 31, 1996 ("Closing Date") in accordance with
the terms of this Agreement and the Escrow Agreement.
Transition Matters and Continuing Relationship.
Carrier Services. Seller and the Companies currently utilize and share
a telecommunications network which consists of various elements, including
but not limited to shared contracts for transmission and billing and
clearing and state tariffs. Further, the Companies utilize the switching
equipment and certain services of an Inter-Exchange Carrier which is a
wholly-owned subsidiary of Seller, Phone Zone, Inc. ("PZI"). For a period
of one year after the date hereof, Seller and Buyer shall continue to allow
the use of their contracts for transmission and billing and clearing and
state tariffs on a common basis. Further, ComTel Computer Corp. and Seller
shall enter into a telecommunications services agreement
("Telecommunications Services Agreement") effective January 1, 1997 whereby
Seller shall provide the Companies telecommunications services
substantially as provided as of the date of this Agreement at the existing
rate structure, subject to adjustment for increases in Seller's costs, for
such services until January 1, 1998. Said Telecommunications Services
Agreement shall provide for a security deposit of one month's charges to
ensure full and timely payment to Seller and its subsidiaries. The
Telecommunications Services Agreement shall be in the form as set forth at
Schedule 4.1.
Access to Records. The parties shall each allow the other reasonable
access to the books and records of the other as may be required from time
to time.
Covenant Not to Compete. For a period of two years from Closing,
Seller shall not solicit customers of the Companies with whom the Companies
have a contractual relationship for telecommunications services for the
provision of similar services and otherwise as set forth in a
Noncompetition Agreement as set forth at Schedule 4.3.
Intercompany Transfers. As of an effective date prior to the "Balance
Sheet Date" (as hereafter defined) Seller shall have eliminated all
intercompany account balances by way of transfer of intercompany account
balances. Further, after the Balance Sheet Date and prior to the Closing
Date, Seller may eliminate subsequently accrued intercompany account
balances by way of transfer of such account balances, but in no event shall
it reduce the current assets of the Companies to an amount less than the
current liabilities of the Companies.
Representations and Warranties of Seller.
Title to Shares. Seller represents and warrants that the Selling
Shareholder has good and marketable title to the Transferred Stock required
to be transferred pursuant to this Agreement, free and clear of all liens,
claims, encumbrances, and restrictions of every kind; and the Selling
Shareholder has the complete and unrestricted right, power, and authority
to sell, transfer, and assign the Transferred Stock required to be
transferred pursuant to this Agreement.
<PAGE>
Stock Rights. Seller represents and warrants that as of the Closing
there shall be no presently outstanding warrants, options, contracts,
commitments, warranties, agreements, incentive stock option plans, Employee
Non-Qualified Stock Option Plan or other rights of any character affecting
or relating in any manner to the issuance of the Companies' capital stock
or other securities, or entitling anyone to acquire the capital stock or
other securities of the Companies (hereinafter collectively referred to as
"Options") and as of the Closing all Options shall have been terminated or
assigned to Buyer.
Organization. Seller represents and warrants that ComTel Computer
Corp. is a duly organized and validly existing Nevada corporation in good
standing, with all requisite power and authority to carry on its business
as currently conducted. Seller represents and warrants that California
ComTel Computer, Inc. is a duly organized and validly existing California
corporation in good standing, with all requisite power and authority to
carry on its business as currently conducted.
Qualification. Except as set forth at Schedule 5.4, Seller represents
and warrants that the Companies are duly qualified as foreign corporations
in good standing in each jurisdiction where the nature of their activities
or its properties owned or leased makes qualification necessary and in
which the failure to qualify will have a materially adverse effect. Seller
hereby agrees to cause Comtel Computer Corp. to become qualified to do
business in all states set forth at Schedule 5.4 at the sole expense and
effort of Seller prior to January 31, 1997.
Tariffs. Except as provided at Schedule 5.5, Seller represents and
warrants that the Companies are duly tariffed and qualified to conduct
their telecommunications operations in accordance with the rates charged
and the services provided under the laws of the United States and the
regulations promulgated by the Federal Communications Commission and under
the laws of each state or other jurisdiction in which it operates and the
applicable regulations of each applicable Public Utility Commission,
Commerce Commission or similar agency therein. At Schedule 1, Seller has
credited Buyer with certain sums to compensate Buyer for the expense of the
Companies in updating the tariffs set forth at Schedule 5.5.
Capitalization. Seller represents and warrants that ComTel Computer
Corp. is authorized to issue 30,000,000 shares of common stock, with no par
value, of which 20,948,529.54 are duly and validly issued and outstanding.
Seller represents and warrants that California ComTel Computer, Inc. is
authorized to issue 10,000 shares of common stock, with no par value, of
which 9,350 shares are duly and validly issued and outstanding;
Indebtedness. Seller represents and warrants that except for trade
accounts payable incurred in the ordinary course of business and except as
set forth at Schedule 5.7 there is no long term or material short term
indebtedness for borrowed money, bond, note, debenture, mortgage, pledge,
security agreement, conditional sale agreement, equipment trust agreement,
letter of credit agreement, loan agreement or contract or commitment of the
Companies for the borrowing or lending of money (including without
limitation, loans to or from officers, directors or any members of their
immediate families), and the Companies are not in any default of any
provision of such outstanding long term or material short term obligations.
Seller represents and warrants that it has delivered to Buyer true copies
of all instruments relating to
<PAGE>
the long term and material short term indebtedness for borrowed money and
obligations set forth at Schedule 5.7.
Financial Statements. As set forth at Schedule 5.8 Seller has
furnished Buyer with Financial Statements for the Companies consisting of a
Certified Audit for the fiscal year ending December 31, 1995 ("Certified
Audit") and an unaudited statement for the stub period ending October 31,
1996. The aforesaid Financial Statements may be referred to herein as the
"Financial Statements" and October 31, 1996 may be referred to herein as
the "Balance Sheet Date." Seller represents and warrants that to the best
of Seller's knowledge the Financial Statements are in accordance with the
books and records of the Companies, fairly present the financial condition
of the Companies at such dates and the results of its operations for the
periods specified, in accordance with generally accepted accounting
principles applied on a basis consistent with prior accounting periods.
Fixed Asset List. Attached at Schedule 5.8.1 is a fixed asset list of
the Companies dated December 16, 1996. Seller warrants that this list is
accurate and correctly states the assets of the Companies.
Present Status. Seller represents and warrants that the Companies,
since the Balance Sheet Date, and except as set forth at Schedule 5.9, have
not done any of the following:
Incurred any obligations or liabilities except current
liabilities in the ordinary course of business;
Discharged or satisfied any liens or encumbrances, or paid any
obligations or liabilities, except current balance sheet liabilities
and current liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
Declared or made any shareholder payment or distribution or
purchased or redeemed any of their securities or agreed to do so;
Mortgaged, pledged, or subjected to lien, encumbrance, or charge
any of its assets except for such liens as are created pursuant to the
Companies' ongoing financing arrangement with Zero Plus Dialing, Inc.
(ZPDI);
Canceled any debt or claim;
Sold or transferred any assets except from inventory in the
ordinary course of business;
Suffered any damage, destruction, or loss (whether or not covered
by insurance) materially affecting its properties, business, or
prospects;
Waived any rights of substantial value;
Amended its Articles of Incorporation or Bylaws;
<PAGE>
Effected any change in the authorized and unissued stock;
Acquired, redeemed, issued or disposed of any shares of stock of
any class or description, granted any options, warrants or other
rights for the issuance thereof;
Merged, consolidated, liquidated, dissolved, reorganized, sold or
otherwise disposed of substantially all of their assets;
Made any loan or advance to any officer, director, employee,
consultant, representative, salesman or agent of the Companies;
Changed the accounting methods or practices followed by the
Companies, or changed the depreciation or amortization policies or
rates used;
Made any unlawful payment to governmental or quasi-governmental
officials, or payments to customers or suppliers for rebating of
charges;
Entered into any transaction other than in the ordinary course of
business.
Taxes. Except as set forth at Schedule 5.10, Seller represents and
warrants that the Companies have duly filed all federal, state, and local
income tax, excise tax, sales tax, use tax, gross receipts tax, franchise
tax, employment tax, payroll tax, withholding tax, real property tax,
personal property tax and all other tax returns required to be filed by
them and have paid all such federal, state, and local taxes required to be
paid with regard to the periods covered by the returns. As of Closing Date,
Seller represents and warrants that the Companies are not delinquent in the
payment of any tax, assessment, or governmental charge; have no tax
deficiencies proposed or assessed against them; have not executed any
waiver of the statute of limitations on the assessment or collection of any
tax; and are not currently under audit by the Internal Revenue Service or
state tax authorities for any years subject to adjustment. There are not in
force any extensions of time with respect to the dates on which any tax
return was or is due to be filed by the Companies or any waivers or
agreements by the Companies for an extension of time for the assessment or
payment of any tax. With respect to any such extensions it shall be the
obligation of Seller to prepare, file and pay any such returns and taxes.
In the event that after Closing a deficiency is determined in the amount of
any tax payable by the Companies relating to periods prior to Closing,
Seller shall be liable for the payment of any deficiency attributable to
periods prior to Closing determined in the following manner:
To the extent permitted by applicable law, the parties hereto
agree to cause state and local tax periods of each of the Companies to
be closed at the close of business on the Closing Date. In the event
applicable law does not permit the closing of any such period, the
allocation of tax liability shall be made in accordance with Section
5.10.2.
<PAGE>
For the purposes of this Section 5.10 "Code" means the Internal
Revenue Code of 1986, as amended.
For the purposes of this Section 5.10 "Post-Closing Tax Period"
means (i) any taxable period beginning on or after the Closing Date.
For the purposes of this Section 5.10 "Pre-closing Tax Period"
means any taxable period commencing on a day before the Closing Date.
Lawsuits and Proceedings. Seller represents and warrants that to the
best of Seller's knowledge there are no lawsuits or administrative
proceedings pending or threatened against the Companies or affecting any of
their properties or rights, other than those more fully described at
Schedule 5.11.
Compliance with Law and Instruments. Seller represents and warrants
that to the best of Seller's knowledge the business and operation of the
Companies have been and are being conducted in accordance with all
applicable laws, rules, and regulations of all authorities, except those
that do not materially and adversely affect the Companies or its
properties, assets or businesses; the performance of this Agreement will
not result in any material breach of, constitute a default under, or result
in the imposition of any lien or encumbrance on any property of the
Companies under any agreement or other instrument to which the Companies or
Seller is a party or by which either is bound or affected, and will not
materially violate the articles of incorporation or the bylaws of the
Companies; and the Companies are not, and will not be by virtue of the
transaction contemplated in this contract, materially in violation of their
articles of incorporation, their bylaws, or of any indebtedness, mortgage,
contract, lease, or other agreement.
Good Title. Seller represents and warrants that except with respect to
assets held under leases and licenses the Companies have good, absolute,
and marketable title to all of their properties and assets, subject to no
mortgage, pledge, lien, charge, security interest, encumbrance, or
restriction except those revealed on the Financial Statements at Schedule
5.8 and except for such liens incurred in favor of Billing Information
Concept, Inc., formerly ZPDI and referred to herein as "ZPDI," pursuant to
the Companies' ongoing financing arrangements with ZPDI.
Condition of Tangible Assets. Seller represents and warrants that to
the best of Seller's knowledge all of the equipment of the Companies is in
good condition and repair, reasonable wear and tear excepted, and that to
the best of Seller's knowledge the Companies have not been threatened with
any action or proceeding under any building or zoning ordinance,
regulation, or law which has not been withdrawn or which is not being
contested in good faith.
Patents and Trademarks. Seller represents and warrants that to the
best of Seller's knowledge: the Companies own, possess, and have good title
to all copyrights, trademarks, trademark rights, patents, patent rights,
and licenses necessary to the conduct of their business; the Companies are
not materially infringing on or otherwise acting materially adversely to
the rights of any person under or in respect to any copyrights, trademarks,
trademark rights, patents, patent rights, or licenses owned by any person
or persons; there is no claim or pending or threatened action with regard
to any alleged infringement or related violation; the Companies are not
obligated to pay any royalties or fees to any licensee or other
<PAGE>
claimant to any patent trademark, trade name, copyright, or other
intangible asset; and the Companies have the unrestricted right to use all
trade secrets, customer lists, manufacturing and other processes incident
to the manufacture, use, or sale of any and all products and services
currently sold by them.
Contracts. Seller represents and warrants that except as set forth at
Schedule 5.16 the Companies have not issued or received any written notice
of breach or default in respect of contracts, agreements, leases,
documents, or other commitments to which it is a party or by which it is
otherwise bound or affected. Further Seller represents and warrants that
except as set forth at Schedule 5.16 it has no knowledge of any material
breach or default in respect of any contracts, agreements, leases,
documents, or other commitments to which it is a party or by which it is
otherwise bound or affected. Seller represents and warrants that to the
best of Seller's knowledge except as set forth at Schedule 5.16 the
Companies are not a party to, or otherwise bound by, any of the following
kinds of contracts:
Any written or oral contract not made in the ordinary course of
business;
Any employment or consultant contract not terminable at will
without cost or other liability;
Any labor union contract, bonus, pension, profit sharing,
retirement, share purchase, stock option, hospitalization, group
insurance, or similar employee benefit plan;
Any real or personal property lease, as lessor or lessee;
Any advertising or public relations contract;
Any purchase, supply, or service contract for a price exceeding
$5,000.00 that is not terminable without cost or expense on less than
30 days' notice. This paragraph does not apply to any contract with
hospitality locations for the provision of telecommunications
services;
Any deed of trust, mortgage, conditional sales contract, security
agreement, pledge agreement, trust receipt, or any other agreement or
arrangement under which any of the assets or properties of the
Companies are subject to a lien, encumbrance, charge, or other
restriction;
Any license agreement, whether as licensee or licensor;
Compensation of Officers and Others. Seller represents and warrants
that since the Balance Sheet Date, there has not been any material change
in any compensation, commission, bonus, or other remuneration payable to
any officer, director, agent, employee, or consultant of the Companies,
except for increases in the ordinary course of business consistent with
prior practice.
Inventories. Seller represents and warrants that the inventories of
the Companies that are reflected in the Financial Statements and all
inventory items that have been acquired since the Balance Sheet Date
consist of goods of such quality and
<PAGE>
in such quantities as are usable or saleable in the ordinary course of
their business; and that since the Balance Sheet Date the Companies have
continued to replenish inventory in a normal and customary manner
consistent with prior and prudent practice.
Real Property. Seller represents and warrants that the Companies own
no fee, reversionary or remainder interests in any real property.
Real Estate Leased. Schedule 5.20 sets forth a list of all leases,
subleases or other agreements under which the Company is lessee or lessor
of any real property. The Company is the holder of the leasehold estates
purported to be granted by the instruments described on Schedule 5.20,
except as otherwise stated therein. Except as set forth on Schedule 5.20,
all such leases, subleases and other agreements are to the best of Seller's
knowledge (i) in good standing, valid and effective, (ii) grant the
leasehold estates they purport to grant free and clear of all mortgages,
liens, claims, charges, security interests, encumbrances or other
restrictions on the Companies' interests in the leases, subleases and other
agreements which would materially affect the use for which they are held by
the Companies (other than any unperfected landlord's lien); to the best of
Seller's knowledge there is not under any of such instruments any existing
or claimed default, event of default or event which with notice or lapse of
time or both would constitute an event of default which would materially
and adversely affect the assets, properties, business, operations or
financial condition of the Companies; the Seller has not received notice
that any structures, improvements, fixtures in real estate leased by or to
the Companies do not conform to any and all applicable state and local
laws, zoning and building ordinances and health and safety ordinances; no
notice from any governmental body has been served upon the Company claiming
any violation of any such law or ordinance, or requiring any substantial
work, repairs, construction, alterations or installation on or in
connection with such real estate, which has not been complied with or is
not being contested in good faith.
Software. Seller represents and warrants that the Companies have
developed certain proprietary computer software programs relating to the
Hospitality segment and to Seller's knowledge the Companies have the sole
and exclusive ownership of such proprietary programs and no proceeding is
pending or threatened in regard to the ownership or the Companies' rights
in said programs.
Banking Relationships. The Seller represents and warrants that
Schedule 5.22 sets forth (i) the name of each bank, trust company and stock
or other broker with which the Companies have an account, credit line or
safe deposit box or vault, or otherwise maintain relations, (ii) the names
of all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (iii) the purpose of each such account, safe deposit
box or vault, and (iv) the names of all persons authorized by proxies,
powers of attorney or other like instrument to act on behalf of the
Companies in matters concerning any of its business or affairs. No such
proxies, powers of attorney or other like instruments are irrevocable.
Records. Seller represents and warrants that the respective books of
account and minute books of the Companies are complete and correct and
reflect all those transactions involving the Companies' business that
properly should have been set forth in those books.
<PAGE>
Accounts Receivable. Seller represents and warrants that all of the
accounts receivable of the Companies reflected in the Financial Statements
and all of the accounts receivable that have arisen since the Balance Sheet
Date (except accounts receivable that have been collected since the Balance
Sheet Date) have arisen in the ordinary course of business for goods or
services delivered or rendered.
Accounts Payable. Seller represents and warrants that all of the
accounts payable of the Companies reflected in the Financial Statements and
all of the accounts payable that have arisen since the Balance Sheet Date
(except accounts payable that have been paid since the Balance Sheet Date)
have arisen in the ordinary course of business for goods or services
delivered or rendered.
Seller further represents and warrants that at Closing the account
payable to MCI as determined by invoice from MCI dated November 15, 1996
shall be paid through the last monthly invoice received on or before
Closing.
Purchase Commitments. Seller represents and warrants that to the best
of Seller's knowledge and except as set forth in Schedule 5.26, all
purchase commitments of the Companies arose in the ordinary course of
business.
Insurance Policies. Set forth at Schedule 5.27 are all of the
Insurance Policies of the Companies which policies shall be in full force
and effect as of the Closing date but all of which lapse by their terms at
midnight on the Closing Date.
Expenses and Brokers Commissions. Seller represents and warrants that
it knows of no commission, finder fee or other renumeration due to any
finder, broker, or the like employed by it in connection with this
Agreement.
Accurate Disclosure. The Seller represents and warrants that this
Agreement, including the Schedules annexed hereto, does not contain any
untrue statement of material fact.
Representations and Warranties of Buyer.
Authorization. This Agreement has been duly authorized, executed and
delivered by the Buyer, and the Buyer has full power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and Buyer shall evidence this authority in form
reasonably satisfactory to Seller prior to Closing.
Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has
full power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted. At or prior to Closing
Buyer shall deliver to Seller a Certificate of Good Standing evidencing
Buyer's good standing in the state of Nevada.
<PAGE>
Compliance with Laws and Instruments. Neither the execution and
delivery of this Agreement by Buyer nor the consummation of the
contemplated transactions will (i) violate any provisions of the Articles
of Incorporation or Bylaws of the Buyer; (ii) violate, conflict with or
result in the breach or termination of or constitute a default under the
terms of, any mortgage, lease, bond, indenture, agreement, franchise or
other instrument or obligation to which the Buyer is a party or by which
the Buyer may be bound or by which any of the Buyer's properties or assets
may be bound.
Consent. No consent of any other party and no consent, license,
approval or authorization of, or exemption by, or registration or
declaration with, any governmental authority, bureau or agency not
previously obtained, is required in connection with the execution,
delivery, validity or enforceability of this Agreement with respect to the
Buyer.
No Extraordinary Transactions. The Buyer shall not cause the Companies
to engage on the Closing Date in any transaction outside the ordinary
course of business, other than the transactions described herein.
Taxes. Buyer shall promptly refund to Seller any refund of taxes
attributable to any period prior to Closing whether said refund is made by
way of direct payment or credit.
Access. Buyer shall cause ComTel Computer, Corp. to provide to Seller
reasonable access to its books and records as may be required by Seller for
preparation of tax returns, tax audits, compliance with the terms of this
Agreement and other similar and reasonable purposes.
Expenses and Brokers Commissions. Buyer represents and warrants that
it knows of no commission, finder fee or other renumeration due to any
finder, broker, or the like employed by it in connection with this
Agreement.
Conditions to Buyer's Performance. The obligations of the Buyer at and
prior to Closing are subject to the satisfaction or waiver, in writing, at or
prior to Closing of each of the following conditions:
Representations and Warranties. All representations and warranties of
Seller and the Companies contained in this Agreement shall be true and
correct in all material respects as of the Closing Date as if such
representations and warranties were made as of the Closing Date; Seller and
the Companies shall have performed all agreements and covenants required by
this Agreement to be performed by them prior to or at the Closing Date; and
there shall have been no material adverse change in the financial
condition, results of operations, business, properties or assets of the
Companies. On the Closing Date, there shall be delivered to the Buyer a
certificate of the Seller and the Companies, dated the Closing Date, to the
foregoing effect substantially in the form as set forth at Schedule 7.1.
Court Orders. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court or governmental body or authority, directing that the
transactions provided for herein or any of them not be consummated as
herein provided.
<PAGE>
Schedules and Exhibits. On and prior to the date of Closing, the
Seller and Companies shall have furnished all Exhibits and Schedules to the
Buyer required to be furnished by Seller and Companies.
Opinion of Counsel. The Buyer shall have received the opinion of the
General Counsel of the Seller, dated as of the Closing Date, addressed to
the Buyer and in form and substance satisfactory to the Buyer to the effect
that:
The Companies are corporations duly organized, validly existing
and in good standing under the laws of the States of Nevada and
California, respectively, and have the corporate power to own their
property and conduct their business as now being conducted. Seller
shall deliver to Buyer a Certificate of Good Standing evidencing
Seller's good standing in the State of Illinois at or prior to
Closing;
Upon completion of the purchase of the Shares pursuant to this
Agreement, Buyer will acquire the Shares free and clear of any liens,
encumbrances or adverse claims;
This Agreement has been duly executed and delivered on behalf of
the Seller and the Companies, and constitutes a legal, valid and
binding obligation of each of the Selling Shareholders and the
Companies, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws from time to time in effect which affect
creditors' rights generally, and by legal and equitable limitations on
the enforceability of specific remedies). At or prior to Closing
Seller shall deliver to Buyer a Secretary's Certificate evidencing
Seller's authority for this transaction;
Counsel has no knowledge of any actions, suits or proceedings
pending or threatened against or affecting the Company in any court or
before any arbitrator of any kind or before or by any governmental
body except as disclosed and provided for at Schedule 5.11;
In rendering such opinion, counsel may rely as to factual matters
on certificates of officers, directors or shareholders of the Company
and on certificates of governmental officers.
Resignations. The Seller shall provide the Buyer the written
resignations, effective as of the Closing Date, of all of the Officers and
Directors of the Companies.
Conditions to Seller's and Companies' Performance. The obligations of the
Seller at Closing are subject to the satisfaction or waiver, in writing, at or
prior to Closing of each of the following conditions:
Representations and Warranties. All representations and warranties of
Buyer contained in this Agreement shall be true and correct in all material
respects as of the Closing Date as if such representations and warranties
were made at and as of the Closing Date by the terms of this Agreement;
Buyer shall have performed all agreements and covenants required by this
Agreement to be performed by it prior to or at the Closing; and on the
Closing Date there shall have been delivered to the Seller a certificate of
the Buyer, dated the Closing Date, to the foregoing effect substantially in
the form as set forth at Schedule 8.1.
<PAGE>
Court Orders. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court or governmental body or authority directing that the
transactions provided for herein or any of them not be consummated as
herein provided.
Opinion of Counsel. The Seller shall have received the opinion of
Tollefsen & Company P.C., counsel to the Buyer, dated the Closing Date,
addressed to the Seller and in form and substance satisfactory to the
Seller, to the effect that:
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has the
corporate power to own its property and conduct its business as now
being conducted;
This Agreement has been duly authorized, executed and delivered
on behalf of Buyer, and constitutes a legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws from time to time in effect which affect
creditors rights generally, and by legal and equitable limitations on
the enforceability of specific remedies);
The execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated
hereby, will not violate the Articles of Incorporation or Bylaws of
the Buyer or any law, regulation, judgment, order, injunction, decree
or award known to such counsel to be applicable to Buyer of any court,
arbitrator or governmental body;
No consent of any party and no consent, license, approval or
authorization of, or exemption by, or registration or declaration
with, any governmental authority, bureau or agency not previously
obtained and in effect on the Closing Date is required in connection
with the execution, delivery, validity or enforceability of this
Agreement or the consummation of the transactions contemplated hereby.
In rendering such opinion, counsel may rely as to factual matters
on certificates of officers or directors of the Buyer and on
certificate of government officers.
Schedules and Exhibits. On and prior to the date of Closing, the Buyer
shall have furnished all Exhibits and Schedules to the Seller required to
be furnished by Buyer.
Indemnification.
Terms of Indemnification. Seller shall indemnify the Buyer against any
and all damages, claims, loss, expenses (including, but not limited to,
reasonable attorneys' fees and disbursements) and liabilities resulting
from any misrepresentation, breach of warranty, or nonfulfillment or
failure to perform any material obligation on the part of the Seller under
this Agreement (collectively referred to hereinafter as the "Indemnified
Liabilities"). The Buyer agrees to indemnify the Seller against any and all
damages, claims, loss, expenses (including, but not limited to, reasonable
attorneys' fees and disbursements) and liabilities resulting from any
misrepresentation, breach of warranty, or nonfulfillment or failure to
perform any covenant or agreement on the part of the Buyer under this
Agreement. The party claiming indemnification hereunder is hereinafter
referred to as the "Indemnified
<PAGE>
Party" and the party against whom such claims are asserted hereunder is
hereinafter referred to as the "Indemnifying Party".
Limits on Indemnification. No claim may be made against Seller for
indemnification under this Agreement unless and then only to the extent the
aggregate of all Indemnified Liabilities incurred by Buyer exceed $50,000.
This limitation shall not apply to any claim made pursuant to the breach of
any warranty or representation made at paragraphs 5.25.1 and 5.10. In no
event shall Seller's total liability for all claims asserted under this
Agreement exceed the sum of the payments actually received by Seller.
Adjustment of Liability. Any payment to be made by Seller to Buyer
pursuant to paragraph 9 hereof shall be reduced by any tax benefit accruing
to the Indemnified Party on account of any such indemnification payment and
by the amounts actually recovered by the Indemnified Party from its
insurance carriers, and any amount recovered by the Indemnified Party
subsequent to the payment by the Indemnifying Party hereunder with respect
to the same claim shall be remitted to the Indemnifying Party, except that
such remittance shall not exceed the amount of the indemnification payment
made by the Indemnifying Party. Buyer agrees after the Closing to maintain
insurance coverage currently maintained by Seller to the extent that such
policies provide coverage for Indemnified Liabilities.
Timing of Payment. Payment of any claim for indemnification by Buyer
or Seller which is finally determined by judgement, agreement or otherwise
prior to the payment of the Second Escrow Deposit shall be an adjustment to
the Second Escrow Deposit. Any claim not finally determined by judgement,
agreement or otherwise by such date shall not be an adjustment to the
Second Escrow Deposit and shall not be cause to delay or withhold such
payment.
Method of Asserting Claims. All claims for indemnification by any
Indemnified Party shall be asserted and resolved as follows:
In the event that any claims or demand for which an Indemnifying
Party would be liable to an Indemnified Party under this Agreement is
asserted against or sought to be collected from such Indemnified Party
by a third party, the Indemnified Party shall promptly notify in
writing the Indemnifying Party of such claim or demand, specifying the
nature of and specific basis for such claim or demand and the amount
or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim and
demand (the "Claim Notice"). The Indemnifying Party shall not be
obligated to indemnify the Indemnified Party with respect to any such
claim or demand if the Indemnified Party fails to notify the
Indemnifying Party thereof in accordance with the provisions of this
Agreement in reasonably sufficient time so that the Indemnifying
Party's ability to defend against the claim or demand is not
prejudiced. The Indemnifying Party shall have thirty (30) days from
the personal delivery or mailing of the Claim Notice (the "Notice
Period") to notify the Indemnified Party (i) whether or not the
Indemnifying Party disputes its liability to the Indemnified Party
hereunder with respect to such claim or demand and (ii) whether or not
the Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such claim or demand. In the
event that the Indemnifying Party notified the Indemnified Party
within the Notice Period that it
<PAGE>
desires to defend the Indemnified Party against such claim or demand
and except as hereinafter provided, the Indemnifying Party shall have
the right to defend by all appropriate proceedings, and control the
settlement of any such claim or proceeding which proceedings shall be
settled or prosecuted by him to a final conclusion. If the Indemnified
Party desires to participate in, but not control, any such defense or
settlement it may do so at its sole cost and expense. If requested by
the Indemnifying Party, the Indemnified Party agrees to cooperate with
the Indemnifying Party and its counsel in contesting any claim or
demand which the Indemnifying Party elects to contest, including,
without limitation, by executing or causing to have executed any power
of attorney authorizing the Indemnifying Party to act on behalf of the
Indemnified Party or the Companies, or, if appropriate and related to
the claim in question, in making any counterclaim against the person
asserting the third-party claim or demand, or any cross-complaint
against any person. No claim may be settled without the consent of the
Indemnifying Party.
Seller and Buyer (i) agree that any suit, action or other legal
proceeding arising out of this Agreement may be brought only in the
United States District Court for Illinois, and (ii) consent to the
jurisdiction of any such court in any such suit, action or
proceedings; and thus waive any objection which such party may have to
the laying of venue of any such suit, action or proceedings in any
such court.
Seller and Buyer agree that this Agreement shall be construed in
accordance with, and governed by, the laws of the State of Illinois.
Survival of Representations, Warranties and Indemnification. The
representations and warranties of Seller and all other obligations of
Seller hereunder, shall survive the Closing and, except for breach of the
representations and warranties set forth at paragraph 5.1, shall expire on
the first anniversary of the Closing Date, and thereafter, except as
provided in the next succeeding sentence, no claim may be brought by the
Buyer arising under or in connection with this Agreement or any of the
transactions contemplated hereby, except for a breach by the Seller of its
obligations under paragraph 5.1. If written notice of a claim has been
given by the Buyer prior to the first anniversary of the Closing Date, then
the relevant representation, warranty or other obligation shall survive as
to such claim until the claim has been finally resolved. Notwithstanding
the foregoing and except for the representation and warranties made in
Section 5.10, in the event that, prior to the Closing, the Buyer has
knowledge that any representation or warranty made by the Seller is
incorrect as of the date hereof or will be incorrect as of the Closing, the
Buyer shall have as its sole remedy hereunder the option (i) if such
misrepresentation or breach of warranty is material, to terminate this
Agreement (on ten business days' notice during which period the other party
may cure such representation or breach of warranty) or (ii) to proceed with
the Closing and, upon the Closing, such party shall be conclusively deemed
to have waived all such claims hereunder relating to such misrepresentation
or breach of warranty.
Exclusive Remedy. From and after the Closing, Seller shall not be
liable or responsible in any manner whatsoever to Buyer, whether for
indemnification or otherwise, except as expressly provided in this Section
9, which provides the exclusive remedy and cause of action of the Buyer
with respect to any matter arising out of or in connection with this
Agreement or the transactions contemplated hereby.
Miscellaneous.
<PAGE>
Delivery of Documents. Following the Closing, the Seller and the
Buyer each shall execute and deliver such documents, provide information
and take such other action, as shall be reasonably requested by the other
party hereto to carry out the transactions contemplated by this Agreement.
Notices. All notices or other communications required or permitted by
this Agreement shall be sufficiently given and deemed delivered when
posted if in writing and mailed by registered or certified mail, return
receipt requested, as follows:
If to the Seller, to:
Davel Communications Group, Inc.
1429 Massaro Drive
Tampa, FL 33619
Attn: Mr. David Hill
With a copy to:
Davel Communications Group, Inc.
601 W. Morgan Street
Jacksonville, IL 62650
Attn: Theodore C. Rammelkamp, Jr.
If to the Buyer, to:
Comtel Computer Corp.
6272 West 91st Ave.
Westminster, CO 80030
Attn: Larry Trudell
With a copy to:
Tollefsen & Company, P.C.
2825 Colby Avenue
Suite 205
Everett, WA 98201
Attn: Robert Kaye
or to such other addresses as the parties may from time to time designate
in accordance with the procedure for Notice provided by this paragraph.
Assignment. This Agreement shall not be assigned by the Seller except
that it may be assigned by operation of law by Seller. Buyer may assign
this Agreement, without the consent of the Seller, to any corporation
controlling, controlled by or under common control with Buyer.
Amendment and Waiver. This Agreement shall not be amended, except
pursuant to an instrument executed by all of the parties hereto. Any
term or provision of this Agreement
<PAGE>
may be waived pursuant to an instrument executed by the party entitled to
the benefit thereof.
Expenses. Each of the parties to this Agreement shall bear its own
expenses incurred in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby.
Severability. If any provision of this Agreement, or the application
of any such provision to any person or circumstance, shall be held invalid
by a court of competent jurisdiction, the remainder of this Agreement, or
the application of such provision to persons or circumstances other than
those as to which it is held invalid, shall not be affected thereby.
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 a single instrument.
Entire Agreement. This Agreement sets forth the entire understanding
and agreement between the parties as to the matters covered herein and
supersedes any prior understanding, agreement or statement written or oral
of intent. No provision of this Agreement shall be construed to confer any
rights or remedies of any person other than the Seller or the Buyer.
Survival of Representations. The representations, warranties,
agreements and covenants given or made by the Seller and Buyer under this
Agreement shall, subject to the provisions of Section 11, survive the
Closing and any audit or investigation made by or on behalf of the
parties.
(S)338 Election. The Buyer covenants that it will not make any
election under (S)338 of the Internal Revenue code (or any similar
provision under State or local law) with respect to this transaction.
Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Time. Time is of the essence with respect to this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
BUYER:
SKYLINK TELECOOMUNICATIONS CORPORATION
______________________________________
Terrance J. Trapp, President
THE COMPANIES
<PAGE>
COMTEL COMPUTER CORP. CALIFORNIA COMTEL COMPUTER, INC.
___________________________ ________________________________
Theodore C. Rammelkamp, Jr. Theodore C. Rammelkamp, Jr.
Senior Vice President Senior Vice President
SELLING SHAREHOLDER
DAVEL COMMUNICATIONS GROUP, INC
_______________________________
Theodore C. Rammelkamp, Jr.
Senior Vice President
<PAGE>
Exhibit 10.10
ASSET PURCHASE AGREEMENT
CAPITAL PAY PHONE GROUP, LLC
&
TELALEASING ENTERPRISES, INC.
THIS ASSET PURCHASE AGREEMENT ("Agreement") is effective on the first day
of January, 1996, by and between Capital Payphones Group LLC, a North Carolina
Limited Liability Company (hereinafter referred to as "Capital" or "Seller") and
Telaleasing Enterprises, Inc. (hereinafter referred to as "Telaleasing," "TEI,"
"Purchaser" or "Buyer").
W I T N E S S E T H,
-------------------
WHEREAS, the Seller owns and operates pay telephones and related service
facilities pursuant to agreements which are sometimes styled "Public
Communication Location Agreements," "Public Telephone Equipment and Service
Contracts," "Paytelephone Agreements," Coin Operated Telephone Equipment and
Service Contracts," "Contracts," "Payphone Location Agreements," "Royalty
Agreements," "Vending Agreements," "Leases," or other similar names and all of
which hereinafter are called "Location Agreements"; and
WHEREAS, Capital is a North Carolina Limited Liability Company owned 100%
by Richard Sheridan, George Richards, Ben Bidini, Kevin O'Connel and Melicue
Metts. The designated Managers of Capital under the laws of South Carolina are
George Richards and Richard Sheridan either one of whom alone is authorized to
act as agent for Capital in this transaction.
WHEREAS, Purchaser is an Illinois Corporation, solely owned by Davel
Communications Group, Inc. ("Davel").
WHEREAS, Purchaser is in the business of owning and operating pay
telephones and providing associated services; and
WHEREAS, Seller and Davel Communications Group, Inc. entered into a Letter
of Intent dated December 19, 1995 which Letter was assigned to Davel's wholly
owned subsidiary, Telaleasing Enterprises, Inc. Said Letter of Intent
contemplates the transaction memorialized by this Agreement. Any rights, duties
and obligations of Davel, Telaleasing or Capital created by, or arising out of,
said Letter of Intent are terminated and void as of the date of this Agreement.
This Agreement shall be the sole expression of the intent of the parties, their
rights duties and obligations with respect to all matters arising out of the
transaction contemplated by either the Letter of Intent or this Agreement.
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Seller desires to sell, and the Purchaser desires to purchase 103 installed pay
telephones from Seller together with associated Location Agreements, equipment,
contracts and inventory.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. ASSETS TO BE PURCHASED.
----------------------
Subject to the terms and conditions set forth herein, Purchaser agrees
to purchase and acquire from the Seller, and the Seller agrees to sell,
transfer, assign and convey to the Purchaser, free and clear of any and all
liens and encumbrances (excepting obligations imposed by the Location Agreements
<PAGE>
which shall be assumed by Purchaser), 103 installed pay telephones located in
North Carolina (all of said units are hereinafter referred to as "Installed Pay
Telephones"), certain uninstalled, complete pay telephone sets, associated
enclosures, equipment, inventory, tools, parts, supplies, associated Location
Agreements and all assets and records related to the operation of the Installed
Pay Telephones. All of said assets, including the Installed Pay telephones, may
be collectively referred to herein as the "Assets" and are more fully described
below. No liabilities are assumed by the Purchaser except as explicitly
described in this Agreement. The Assets include, but are not limited to, the
following:
(a) Installed Pay Telephones and Equipment. All equipment, communications
equipment, pay telephones, enclosures, masts, cables, wiring, electrical wiring,
conduit, slabs and related property used in connection with, or located at, all
of Seller's Installed Pay telephones, a true and correct list of which is
attached hereto as Exhibit 1-a.
(b) Location Agreements. All Location Agreements associated with the
Installed Pay telephones. All rights, duties, obligations and liabilities
arising out of the Location Agreements and attributable to periods prior to
"Closing" (as hereinafter defined) shall be retained by Seller and all such
rights, duties, obligations and liabilities attributable to periods after
Closing shall be assumed by and be the property of the Purchaser. A few Location
Agreements may not be memorialized by a writing but are nonetheless assigned by
this Agreement. All written Location Agreements are listed in Exhibit 1-b true
and exact copies of all such Location Agreements are attached to Exhibit 1(b).
(c) Inventory. Inventory as more fully described in Exhibit 1-c.
(d) Tools and Equipment. Tools, furnishings and equipment, if any, used in
the installation, maintenance and operation of the pay telephones as more fully
described in Exhibit 1-d.
(e) Business Records. All business records and copies of financial records
pertaining to the Assets and the operation of the Assets, including, without
limitation, the following: sales records; customer lists; correspondence with
customers; agency letters; correspondence and agreements with local exchange
carriers, interexchange carriers, and alternate operator services, including
bills and commission statements; records pertaining to suppliers; insurance
policies; insurance policy data; service records; advertising materials;
computer access codes and passwords. Seller will cooperate in providing such
records in a format and media convenient to Buyer. Seller may retain copies of
any such records.
(f) Warranties and Licenses. All warranties and licenses and patents, if
any, relating to any of the Assets including, but not limited to, computer
software licenses necessary to the operation of the Installed Pay Telephones.
(g) Prepaid Expenses and Deposits. All prepaid expenses, utility deposits,
security deposits, lease deposits and insurance premiums and AOS commissions
relating to the Assets.
(h) Advertising Agreements. All Advertising Agreements whether written or
oral that provide for income to Seller resulting from advertising revenue
produced from booths, enclosures or other sources.
(i) Accounts Receivable. All accounts receivable attributable to periods
after Closing. Seller shall provide such notification to payers regarding
payment for amounts attributable to post Closing periods as Purchaser shall
reasonably request. All accounts receivable attributable to periods prior to
Closing shall remain the property of Seller and are not conveyed hereby.
(j) Revenues. All revenues attributable to periods subsequent to Closing
less expenses and charges attributable to such periods required by this
Agreement to be paid prior to Closing.
<PAGE>
(k) Goodwill. The Seller shall assign to Purchaser at Closing all of
Seller's interest in the business telephone numbers of Seller as set forth at
Exhibit 1-k.
2. CONSIDERATION.
(a) Purchase Price. As consideration for the transfer and assignment
of the Assets, Purchaser shall pay a total purchase price of $$$$$. The purchase
price shall be allocated among the assets in accordance with Exhibit 2a. As
required by applicable law and regulation, the parties agree that after Closing
each shall file an Asset Acquisition Statement prepared pursuant to I.R.C.
(S)1060 on IRS Form 8594 consistent with said allocation.
(b) Payment. Unless subject to modification as provided at (P)6(e)
$$$$$ of the purchase price shall be paid at Closing by cashiers check,
certified check, or wire transfer to the Seller as the Seller shall direct. An
additional $$$$$, unless subject to modification as provided by (P)6(e), of the
purchase price shall be paid at Closing into escrow and held and paid as set
forth at (P)8. The escrowed amount of $$$$$, or $$$$$$ as the case may be, is
held to secure the payment by Seller of those items specified in paragraphs,
3(a), 3(b), 3(c), 3(g), 3(h), 3(i), 3(l), 3(m), 3(n), 3(o), 3(q), 6(b), 6(c),
6(e), 11, 12, 14 and 15 of this Agreement.
3. REPRESENTATIONS AND WARRANTIES.
Seller's Representations and Warranties
The Seller represents and warrants to the Purchaser that the following
are true and correct as of the date hereof, and will be true and correct on the
"Closing Date" (as hereafter defined) except as Seller may notify Purchaser
prior to Closing in a signed writing. Any such notification prior to Closing
which modifies any of the following representations and warranties shall, at the
sole option of Purchaser, result in termination of this Agreement without any
liability for such termination to Seller:
(a) Taxes. No claim or liability is pending or has been assessed or
asserted, or has been threatened against the Seller in connection with any taxes
which are, or may, become a lien against the Assets. Seller shall provide such
reasonable evidence as Seller may require in support of the warranty made by
this paragraph.
(b) Financial Information. The financial information regarding the
Assets and business of Seller and all reports of revenues and expenses provided
to the Purchaser are true, correct and complete and present fairly and
accurately the true financial position, condition and results of operations of
the business of Seller for the periods indicated. Such financial information has
been prepared in accordance with generally accepted accounting principles on a
basis consistently applied. To the best of Seller's knowledge no fact or
condition exists, or is contemplated or threatened, which might have a material
adverse effect on the business of Seller or the Assets.
(c) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Seller' authority is entitled to make any claim against the
Purchaser or the Seller for any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
(d) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Seller or its consummation of
the transactions contemplated hereby.
(e) Approval of Third Parties. No approval of any third party is
required as a condition to the execution and delivery of this Agreement by the
Seller or its consummation of the
<PAGE>
transactions contemplated hereby. The obligation for the receipt of any such
approvals shall rest solely with Seller and is a condition precedent to Closing
and payment.
(f) No Prohibition Against Purchaser. The Seller is not a party to,
or otherwise subject to, any agreement, indenture, instrument, lease, judgment
or any other decree or any other regulation or demand of any government, bureau,
board or agency which would prohibit the consummation of the transaction
contemplated by his Agreement or would otherwise be breached or impaired by such
consummation.
(g) Title to Assets. The Seller is the owner of all the Assets and
will convey the Assets to the Purchaser free and clear of all mortgages,
pledges, liens (including liens for taxes), encumbrances, charges, claims, title
retention agreements or other security interests or arrangements except as
specifically provided herein. Purchaser shall assume no responsibility for any
liability, claim or obligation of Seller arising prior to the date of Closing
and otherwise only as provided in this Agreement.
(h) Litigation. Seller has operated the Assets in compliance with all
applicable laws, rules and regulations except as may be immaterial to this
transaction. There are no actions, lawsuits or proceedings pending or
threatened against the Seller in law or in equity, or before any governmental
agency, that if determined adversely to the Seller would materially affect the
Assets being sold hereunder or the business of Seller or that would bring into
question the validity of this Agreement or any action taken or to be taken in
accordance with or in connection with this Agreement.
(i) Contractual Interests. The Location Agreements are in full force
and effect. To the best of Seller's knowledge there are no existing defaults
under these agreements on the part of Seller, which are, individually or in the
aggregate, material to the operation of the Assets. The original of each
Location Agreement, or a copy where no original is available, as scheduled at
Exhibit 1-b and associated documents have been furnished to the Purchaser. The
Seller is not a party to any other material contract, agreement or understanding
(whether oral or written) relating to the Assets or Location Agreements which
has not been disclosed in writing to the Purchaser.
(j) Fixed Assets and Inventory. The Assets conveyed by this Agreement
are conveyed in an "as is" condition and no warranty as to condition or fitness
is made except that Seller warrants that it has no knowledge of any condition or
state of the Assets which would have a material adverse effect on the Assets.
(k) Employment Agreements. Seller has no employment or consulting
contracts relating to the Assets which will cause any lien to attach or charge
to be imposed on or against the Assets.
(l) Location Agreements. Seller warrants that as of the execution of
this Agreement, it has no knowledge of any claims existing or contemplated
against Seller whatsoever by the parties to the Location Agreements. Further,
Seller warrants that it has no knowledge of any claims existing or contemplated
by third parties relating to the use or operation of the Assets.
(m) Payment of All Taxes. The Seller has paid, or will pay, on or
prior to the Closing Date, all sales, excise, use, income or other taxes or
similar charges due or to become due by Seller for all periods prior to Closing,
the non-payment of which may subject Purchaser to liability, jointly or
severally, in whole or in part for such amounts.
(n) Noncancelability of Location Agreements. The Location Agreements
are not terminable due to the execution of this Agreement or the performance of
the terms hereof.
(o) Payment of All Commissions. The Seller has paid, or will pay, on
or prior to the Closing Date, all commissions due from Seller or attributable to
periods prior to Closing under all Location Agreements.
<PAGE>
(p) Installed Pay telephone Keys. The Seller has delivered to the
Purchaser, on or prior to the Closing Date, all keys to the Installed Pay
telephones, including keys to the upper housing and lower housing, and there are
no other keys or copies thereof held by any other parties, including employees
of Seller.
(q) Payment of Telephone Charges. The Seller has paid, or will pay,
on or prior to the Closing Date all telephone bills and charges due from the
Seller to the local exchange carrier, any interexchange carriers or to any other
entity or party for services provided for all periods prior to Closing and
attributable to the Assets.
(r) Good Standing. Seller warrants that it has the legal capacity and
authority to own and transfer property and to conduct business in all
jurisdictions applicable to the transactions contemplated by this Agreement.
Seller is in good standing in North Carolina. At or before Closing, Seller will
provide Buyer a Certificate and Resolution in substantially the form attached
hereto at Exhibit 3(r) evidencing Seller's authority for the transactions
contemplated by this Agreement.
Purchaser's Representations and Warranties
The Purchaser represents and warrants to the Seller that the following are
true and correct as of the date hereof, and will be true and correct on the
Closing Date except as Purchaser may notify Seller prior to Closing in a signed
writing. Any such notification prior to Closing which modifies any of the
following representations and warranties shall, at the sole option of Seller,
result in termination of this Agreement without any liability for such
termination to Purchaser:
(s) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Purchaser's authority is entitled to make any claim against the
Seller or the Purchaser for any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
(t) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Purchaser or its consummation of
the transactions contemplated hereby.
(u) Approval of Third Parties. No approval of any third party is
required as a condition to the execution and delivery of this Agreement by the
Purchaser or its consummation of the transactions contemplated hereby. The
obligation for the receipt of any such approvals shall rest solely with Seller
and is a condition precedent to Closing and payment.
(v) No Prohibition Against Purchaser. The Purchaser is not a party
to, or otherwise subject to, any agreement, indenture, instrument, lease,
judgment or any other decree or any other regulation or demand of any
government, bureau, board or agency which would prohibit the consummation of the
transactions contemplated by his Agreement or would otherwise be breached or
impaired by such consummation.
(w) Corporate Standing. Telaleasing Enterprises, Inc. is a
corporation duly organized and validly existing in good standing under the laws
of the State of Illinois with full power an authority to own its properties and
conduct its business as conducted.
(x) Corporate Authority. This Agreement and the transactions
contemplated hereby have been duly and validly authorized by Purchaser.
4. ACCESS TO RECORDS/VERIFICATION OF ASSETS.
<PAGE>
Seller has and will permit representatives of Purchaser full access to
all the property, books, contracts, documents, records, reports, and data bases
of Seller relating to the Assets and shall furnish such additional information
concerning same as Purchaser or its agents may reasonably request. Purchaser and
Seller agree that the basis for the establishment of the purchase price is the
financial statements and accounting information previously provided and the
number of Installed Pay telephones. If there is substantial deviation from these
previous representations, the Purchaser may elect to terminate this Agreement
without penalty or seek an adjusted purchase price from Seller prior to Closing.
5. DUE DILIGENCE.
This Agreement shall be binding upon the parties effective as of the
date of execution subject to verification, by the Purchaser, from information,
records, documents and other items provided by the Seller sufficient to verify
the factual basis for the warranties and representations made to it by the
Seller herein. In the event during such review period information is made
available to the Purchaser which is materially inconsistent with the
representations or warranties contained herein, then Purchaser may deliver
written notice prior to Closing terminating this Agreement without penalty or
further obligation.
6. PRE-CLOSING TRANSITION MATTERS.
(a) Implementation of Change With Owners. After Closing Seller shall
fully cooperate with Purchaser, but only as specifically requested from time to
time, in advising parties to the Location Agreements that the business of Seller
is under new management as of the date of Closing and to advise them as to the
manner in which to place requests for service in the future.
(b) Non-Coin Long Distance. Seller is entitled to receive
compensation for long distance traffic from 0+ and 0- traffic from Operator
Service Providers. All such commissions, payments or other monies due and owing
Seller attributable to periods prior to Closing shall be the property of Seller
and shall be properly paid to Seller. This and any other property of Seller
which may come into Purchaser's possession shall be promptly delivered by
Purchaser to Seller. All such commissions, payments or other monies due and
owing Seller attributable to periods after Closing shall be the property of
Purchaser and shall be properly payable to Purchaser. This and any other
property of Purchaser which may come into Seller's possession shall be promptly
delivered by Seller to Purchaser. After Closing Seller shall provide such
notification to payors regarding payment for amounts attributable to post
Closing periods as Purchaser shall reasonably request. Seller agrees to assist
as required in the implementation of any change of Long Distance provider
requested by Purchaser after Closing Date subject to compliance with applicable
regulations.
(d) Coin. The parties shall allocate all pay telephone coin revenues
by assigning to Buyer all uncollected coin in the pay telephone boxes on the
Closing Date to Purchaser. Seller shall not accelerate or otherwise alter its
normal collection practices to take advantage of this method of allocation.
(c) Local Lines. After Closing Seller will cooperate in the transfer
of local telephone company lines and services to Purchaser, as required.
(d) Records and Rate Files. Seller shall cooperate with Purchaser in
making available all rate files, databases and similar information prior to
Closing to facilitate the transfer of the Installed Pay telephones to Buyer at
Closing. Seller will cooperate in providing such records in a format and media
convenient to Buyer.
(e) Renew Month to Month Contracts. Location Agreements with respect
to 20 Pay Telephones identified by reference to the Assigned Contract Numbers at
Exhibit 1(b) will, or have, expired prior to December 31, 1996, to wit: #67, #8,
#24, #28, #79, #9, #13, #36, #41, #48, #49, #53, #60, #61,
<PAGE>
#62, #63, #64, #66, #78 and #105. Seller Agrees hereby to obtain new Location
Contracts with a minimum term of at least five years for each of the above
designated locations prior to Closing. If Seller has not obtained the required
renewals prior to Closing the additional sum of $1,000 per each Location for
which a renewal has not been obtained prior to Closing, up to $20,000, shall be
withheld from sums otherwise due to Seller at Closing and paid into escrow by
Buyer until such renewals are obtained and presented by Seller to Buyer. To the
extent that Seller is unable to obtain the required renewals on or before
February 1, 1996, the Purchase Price shall be reduced by $1,0000 for each pay
telephone location for which no renewal is obtained and such reduction shall be
refunded to Buyer from the escrowed funds.
7. CLOSING.
The transactions contemplated by this Agreement shall be consummated
effective January 1, 1995 except as accelerated or extended by mutual, written
agreement of the parties. Said date or accelerated or extended date shall be
known herein as the "Closing Date" or the "Closing." The Seller and the
Purchaser shall take the following actions on the Closing Date:
(a) The Seller shall deliver to the Purchaser the following fully
executed documents as a condition precedent to payment:
(i) A Bill of Sale substantially in the form as set
forth at Exhibit 7-a-i transferring ownership of the Assets
except for those items conveyed pursuant to (P) 7(a)(ii)
and (P) 7(a)(iii)
(ii) An Assignment of the Location Agreements
substantially in the form as set forth at Exhibit 7-a-ii;
(iii) All documents of Title relating to any
separately titled property, free and clear of liens and
evidencing transfer of ownership to Purchaser;
(iv) All originally executed Location Agreements;
(v) Such other documents as may be reasonably
required to consummate and evidence the transactions and
transfers contemplated by this Agreement as may be
requested by Buyer.
(b) The Purchaser shall pay the sums provided to Seller as set forth
and in the manner provided by (P)2, (P)6(e) and (P)18.
(c) Transfer of Assets. On or prior to Closing Seller shall deliver
all of the Assets to Purchaser. Seller shall deliver all keys (and any copies
thereof) to all Installed Pay telephones (both upper housing and lower housing
keys).
(d) Place of Closing. All transactions contemplated herein shall be
consummated at Buyer's Tampa, Florida office or at such other places the parties
may mutually determine in writing.
(e) Exhibits. Any Exhibits not provided at the time of execution of
this Agreement shall be provided at or prior to Closing as a condition precedent
to Closing.
<PAGE>
8. CONTINUING RELATIONSHIPS.
The Seller agrees to use its reasonable efforts for a period not to
exceed 90 days from Closing to assure an orderly transition and favorable
business relationship between the Purchaser and Seller's existing phone
customers and suppliers. Seller shall provide adequate training of personnel on
the procedures of Seller's business. The Seller shall not, from and after the
Closing Date, solicit orders from such customers. In addition, the Seller
shall, from and after such time, direct to the Purchaser all inquiries from such
customers and other persons regarding the business of Seller in South Carolina
and North Carolina. The Seller shall, from and after the Closing Date, maintain
the absolute confidentiality of all matters relating to the Assets and business
for three (3) years following the Closing Date.
9. CONDUCT OF BUSINESS.
From the date of this Agreement through the Closing Date, the Seller
shall:
(a) not enter into any material or unusual contracts affecting the
business of Seller without the prior written consent of the Purchaser;
(b) not create any security interests in any of the Assets.
(c) continue to operate the business in a routine and regular fashion,
not attempting to manipulate collections or payment to its advantage, including
but not limited to coin collection from the Installed Pay telephones, commission
payments to owners or payment of telephone company charges.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
The obligations of the Purchaser to acquire the Assets in accordance
with the terms of this Agreement and the obligations of Seller to sell the
Assets shall be subject to the fulfillment on, or prior to, the Closing Date of
each of the following conditions:
(a) Accuracy of Representations. All representations and warranties
of the Purchaser and Seller contained in this Agreement, and Exhibits hereto or
otherwise made in writing pursuant to this Agreement shall be true and correct
on as of the Closing Date with the same force and effect as though made on and
as of the Closing Date.
(b) Performance of Obligations. The Seller and Purchaser shall have
performed and complied with all of the obligations and conditions required by
this Agreement to be performed or complied with by Seller and Purchaser on or
prior to the Closing Date.
(c) No Change of Condition and Due Diligence. The Assets shall not
have been adversely affected in any way, directly or indirectly, which would
affect Purchaser's operation or use of the Assets.
11. BULK TRANSFERS.
The parties believe that the transactions contemplated by this
Agreement are not subject to the bulk transfer laws and agree that Seller and
Purchaser will not comply with the requirements of any applicable law dealing
with the bulk transfer of assets. Seller agrees to indemnify and hold Purchaser
harmless from any loss, expenses, costs (including legal fees and expenses)
incurred by Purchaser from failure to so comply.
12. COMPLIANCE WITH TAX PROVISIONS.
<PAGE>
Seller agrees to indemnify and hold Purchaser harmless from and
against any and all sales, excise, use, income or other taxes due as a result of
this transaction and to pay such taxes, if any, when due.
13. ADDITIONAL INSTRUMENTS.
The Seller agrees from time to time, upon the request of the
Purchaser, to execute and deliver to the Purchaser such other instruments of
sale, transfer, assignment and conveyance and to take such other action as the
Purchaser may reasonably request to effectively vest ownership in the Purchaser
of all of the Assets sold, transferred, assigned and conveyed hereunder.
14. EXPENSES.
Each party hereto shall pay all expenses incurred by it in connection
with the negotiation, execution and performance of this Agreement, whether or
not the transactions contemplated herein are consummated, including the fees and
expenses of the counsel and accountants of each. The Seller and Purchaser shall
prorate as of the Closing Date all personal property taxes which may be assessed
or levied on the Assets.
15. INDEMNIFICATION.
The Seller agrees to indemnify the Purchaser fully and hold the
purchaser harmless from and against and in respect of all demands, actions or
causes of action, assessments, losses, damages, liabilities, judgments, costs
and reasonable expenses (including interest and reasonable attorneys' fees)
asserted against or incurred by the Purchaser arising out of a breach of any
representation, warranty or agreement of the Seller contained in this Agreement
or in any Exhibit hereto or arising out of any act or omission of the Seller
prior to the Closing Date (except with respect of liabilities specifically
assumed by the Purchaser).
16. SURVIVAL OF REPRESENTATION.
All representations, warranties and agreements contained in this
Agreement or any Exhibit hereto or made pursuant of the transactions
contemplated by this Agreement shall survive the Closing Date for a period of
five years from the Closing Date.
17. MISCELLANEOUS PROVISIONS.
(a) Publicity. All notices to third parties and all other publicity
concerning the transaction contemplated by this Agreement shall be planned and
coordinated by Purchaser. Seller agrees not to make any public disclosure
regarding this transaction without the prior written approval of Purchaser.
(b) Effect of Headings. The subject headings of the articles,
sections and paragraphs of this Agreement are included for purposes of
convenience only and shall not affect the construction or interpretation of any
of its provisions.
(c) Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) Waiver of Compliance. Any failure of Purchaser, on the one hand,
or Seller, on the other hand, to comply with any obligation, covenant, agreement
or condition herein may be expressly waived in writing. Failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
<PAGE>
(e) Availability of Equitable Remedies. Since a breach of various
provisions of this Agreement could not adequately be compensated by money
damages, Seller or Purchaser, as the case may be, may obtain, in addition to any
other remedy available to it, an injunction restraining such breach and specific
performance of such provisions of this Agreement without proof of loss or
imminent loss, and no bond or other security shall be required in connection
therewith.
(f) Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any person other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third person any right of
subrogation or action over or against any party to this Agreement.
(g) Binding on Successors. This Agreement shall be binding on, and
inure to the benefit of, the parties to it and their respective heirs, legal
representatives and successors.
(h) Recovery of Litigation Costs. If any legal action, arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the party substantially prevailing shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, whether or not such action is brought to judgment, in
addition to any other relief to which it may be entitled.
(i) Full Disclosure. No representation or warranty made by any party
hereto and no certificate or document furnished or to be furnished to any party
hereto pursuant to this Agreement contains or will contain any untrue statement
of a material fact or fails to contain information necessary to make the
statements contained therein not misleading.
(j) Exhibits. The exhibits referred to herein shall be attached
hereto and are a part of this Agreement as if fully set forth herein.
(k) Notices. All notices, requests, demands or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been delivered on the third day after posting by certified United States Mail,
with postage prepaid:
(1) If to Purchaser: Telaleasing Enterprises, Inc.
1429 Massaro Boulevard
Tampa, Florida 33619
Attn: Bob Hill
With a copy to: Davel Communications Group, Inc.
601 West Morgan
Jacksonville, IL 62650
Attn: T.C. Rammelkamp, Jr.
(2) If to Seller: Capital Pay Phone Group, LLC.
P.O. Box 15668
Surfside Beach, SC 25577
Attn: Richard Sheridan
or to such other person or address as Purchaser shall furnish to the other
parties hereto in writing.
<PAGE>
(l) Governing Law and Arbitration. This Agreement shall be governed
and construed in accordance with the law of the State of North Carolina and its
courts shall have jurisdiction of any matters arising hereunder. Any dispute
arising out of this Agreement shall be submitted by the parties for arbitration
in accordance with the rules and procedures of the American Arbitration
Association.
(m) Entire Agreement. This Agreement, including the exhibits and
other documents referred to herein which form a part hereof, embodies the entire
agreement and understanding or the parties hereto in respect to the subject
matter contained herein. There are no restrictions, promises, warranties,
covenants or understandings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by the parties hereto.
(n) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(o) Non-Disclosure. Seller agrees that it shall not negotiate for the
sale, trade or other transfer of any of the assets which are the subject of this
Agreement after the execution of this Agreement and prior to the earlier of
termination of the Agreement or Closing.
18. ESCROW PROVISIONS.
On the date of Closing the amount determined in accordance with the
provisions of (P) 6(e) and (P) 2(b) shall be paid into escrow account number
1304461 at Central Carolina Bank, 2008 East Highway 54, Durham, NC 27713 to
secure payment of the items set forth at paragraphs 3(a), 3(b), 3(c), 3(g),
3(h), 3(i), 3(l), 3(m), 3(n), 3(o), 3(q), 6(b), 6(c), 6(e), 11, 12, 14 and 15 of
this Agreement. Upon receipt of renewed Location Contracts as required by
(P)6(e), $1,000 for each Pay Telephone renewed shall be released from Escrow, up
to $20,000 upon joint certification by the parties to the escrow agent of such
renewal. The escrow Agreement shall provide that both parties will submit full
accountings to each other within 90 days of Closing at which time, upon written
direction to the escrow agent signed by both parties, the escrow agent shall
disburse all funds in accordance with said written direction. The terms of the
Escrow Agreement shall be substantially as set forth at Exhibit 18.
19. GUARANTY.
In accordance with the terms of the Guaranties attached hereto at Exhibits
19(1) - 19(4), Richard Sheridan, George Richards, Ben Bidini, Kevin O'Connel and
Melicue Metts being all the owners or shareholders of Seller hereby fully
guaranty, individually and severally, the performance of this Agreement in all
of its particulars by Seller.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
PURCHASER:
TELALEASING
ENTERPRISES, INC., an Illinois Corporation
___________________________
David Hill, Chairman
ATTEST:
<PAGE>
___________________________
Theodore C. Rammelkamp, Jr.
Assistant Secretary
Seller:
CAPITAL PAY PHONE
GROUP, LLC
____________________________________
Richard Sheridan, Manager
<PAGE>
EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
SUNTEL
&
TELALEASING ENTERPRISES, INC.
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made this 16th day of
April, 1996, by and between Suntel (also known as Suntel Company, Sun Tel, Inc.
and Suntel, Inc.), hereinafter referred to as "Suntel" or "Seller," and
Telaleasing Enterprises, Inc., hereinafter referred to as "Telaleasing", "TEI",
"Purchaser" or "Buyer".
W I T N E S S E T H,
-------------------
WHEREAS, the Seller owns and operates paytelephones and related service
facilities pursuant to agreements which are sometimes styled "Public
Communication Location Agreements," "Public Telephone Equipment and Service
Contracts," "Paytelephone Agreements," "Coin Operated Telephone Equipment and
Service Contracts," "Contracts," "Payphone Location Agreements," "Royalty
Agreements," "Vending Agreements," "Leases," or other similar names and
hereinafter are called "Location Agreements"; and
WHEREAS, Suntel is a Maryland general partnership and from time to time
has conducted its business under the names Suntel Company, Sun Tel, Inc. and
Suntel, Inc.; although the selling entity has never been incorporated under the
laws of any jurisdiction; and
WHEREAS Robert A. Watkins and Marc Authier are the general partners of
Suntel and Suntel has no other partners, and
WHEREAS, Purchaser is an Illinois corporation, solely owned by Davel
Communications Group, Inc. ("Davel").
WHEREAS, Purchaser is in the business of owning and operating pay
telephones and providing associated services; and
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Seller desires to sell, and the Purchaser desires to purchase all of Seller's
installed pay telephones consisting of units in and around Baltimore, Maryland
together with associated Location Agreements, equipment, contracts and
inventory.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. ASSETS TO BE PURCHASED.
Subject to the terms and conditions set forth herein, Purchaser agrees to
purchase and acquire from the Seller, and the Seller agrees to sell, transfer,
assign and convey to the Purchaser, free and clear of any and all liens and
encumbrances (excepting obligations imposed by the Location Agreements which
shall be assumed by Purchaser) 70 installed pay telephones located in and around
Baltimore, Maryland ("Installed Pay telephones"), associated enclosures,
equipment, inventory, tools, parts, supplies, associated Location Agreements
(including approximately 20 where no equipment is yet installed) and all assets
and records directly used in the operation of the Installed Pay telephones. All
of said assets, including the Installed Pay telephones, may be collectively
referred to herein as the "Assets" and are more
<PAGE>
fully described below. No liabilities are assumed by the Purchaser except as
explicitly described in this Agreement. The Assets include, but are not limited
to, the following:
(a) Installed Pay Telephones, Equipment and Location Agreements. All
equipment, communications equipment, pay telephones, enclosures, masts, cables,
wiring, electrical wiring, conduit, slabs and related property used in
connection with, or located at, all of Seller's Installed Pay telephones and
associated Location Agreements, a true and correct list of which is attached
hereto as Exhibit 1-a. And also including approximately 20 Location Agreements
without installed pay telephone equipment. All rights, duties, obligations and
liabilities arising out of the Location Agreements and attributable to periods
prior to Closing shall be retained by Seller and all such rights, duties,
obligations and liabilities attributable to periods after Closing shall be
assumed by and be the property and obligation of the Purchaser. A few Location
Agreements may not be memorialized by a writing but are nonetheless assigned by
this Agreement. All written Location Agreements are listed in and attached to
Exhibit 1-a.
(b) Equipment and Inventory. As described in Exhibit 1-b.
(c) Business Records. As requested by Purchaser, all business records
and copies of financial records directly pertaining to the Assets or necessary
for the operation of the Assets.
(d) Warranties and Licenses. All warranties and licenses and patents,
if any, relating to any of Assets including, but not limited to, computer
software licenses.
(e) Prepaid Expenses and Deposits. All coin in the pay telephones.
(f) Accounts Receivable. All accounts receivable attributable to
periods after Closing. Seller shall provide such notification to payers
regarding payment for amounts attributable to post closing periods as Purchaser
shall reasonably request. All accounts receivable attributable to periods prior
to closing shall remain the property of Seller and are not conveyed hereby.
(g) Revenues. All revenues attributable to periods subsequent to
Closing less expenses and charges attributable to such periods required by this
Agreement to be paid prior to closing.
2. CONSIDERATION.
(a) Purchase Price. As consideration for the transfer and assignment
of the Assets, Purchaser shall pay a total purchase price of $205,000.
(b) Payment at Closing. $149,275 of the purchase price shall be paid
in by wire transfer to Seller's account as directed by Seller at Closing.
Fifteen thousand of the purchase price shall be paid in accordance with and
subject to the contingencies set forth at (P)2(c), below. $40,725 shall be paid
to the Sellers in accordance with and subject to the contingencies at (P)2(d),
below.
(c) General Contingencies. Fifteen thousand dollars of the purchase
price shall be paid on or before July 1, 1996 subject to performance by Seller
of its representations, warranties and covenants herein including but not
limited to payment by Seller of those items specified in paragraphs 3(l), 3(m),
3(o), 3(q), 3(r), 6(b), 11, 12, 14 and 15 of this Agreement. The $15,000 of the
purchase price due July 1, 1996 is security for and subject to deduction for the
items specified in paragraphs 2(d), 3(l), 3(m), 3(o), 3(q), 3(r), 6(b), 11, 12,
14 and 15 of this Agreement.
(d) Baltimore Minor Privilege Permits. The parties are uncertain
about the applicability of, or requirement for, certain Special Privilege
Permits to operate phones encroaching on a public way or easement. Seller hereby
agrees to assume the risk that such permits are not required for any of the
installed phones for which permits have not previously been issued. Buyer wishes
further security for this agreement of Seller. Therefore, $40,725 of the
purchase price shall be paid to Seller in six equal,
<PAGE>
quarterly installments of $6,787.50, payable at the end of the quarter, subject
to reduction of $271.50 for each telephone which Buyer is required to remove by
reason of failure to obtain such permit. The reduction to the quarterly payment
shall apply to all phones so removed in the quarter for which payment is made
and to all quarters thereafter. However, the reduction for the quarter in which
the pay telephone is removed shall be prorated based on the number of days in
the quarter for which the phone was installed. For example, if no phones are
required to be removed in the first quarter, four on the first day of the second
quarter, two at the midpoint of the third quarter and none thereafter, the
payments required would be as follows: first quarter = $6,787.50, second quarter
= $5,701.50, third quarter = $5,430.00 and $5,158.50 thereafter.
3. REPRESENTATIONS AND WARRANTIES.
Seller's Representations and Warranties
The Seller represents and warrants to the Purchaser that the
following are true and correct as of the date hereof, and will be true and
correct on the Closing Date except as Seller may notify Purchaser prior to
Closing in a signed writing. Any such notification prior to Closing which
modifies any of the following representations and warranties shall, at the sole
option of Purchaser, result in termination of this Agreement without any
liability for such termination to Seller:
(a) Taxes. No claim or liability is pending or has been assessed or
asserted, or has been threatened against the Seller in connection with any taxes
which are, or may, become a lien against the Assets.
(b) Financial Information. The Seller prior to Closing will furnish
to Purchaser detailed financial information which will verify that the installed
pay telephones are performing substantially in accordance with Exhibit 3-b. To
the best of Seller's knowledge no fact or condition exists, or is contemplated
or threatened, which would have a material adverse effect on the business of
Seller or the Assets.
(c) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Seller' authority is entitled to make any claim against the
Purchaser or the Seller for any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
(d) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Seller or its consummation of
the transactions contemplated hereby.
(e) Approval of Third Parties. There is no unobtained approval of any
third party, except pursuant to release of liens, required as a condition to the
execution and delivery of this Agreement by the Seller or the consummation of
the transactions contemplated hereby. The obligation for the receipt of all such
approvals shall rest solely with Seller and is a condition precedent to Closing
and payment.
(f) No Prohibition Against Purchaser. The Seller is not a party to,
or otherwise subject to, any agreement, indenture, instrument, lease, judgment
or any other decree or any other regulation or demand of any government, bureau,
board or agency which would prohibit the consummation of the transaction
contemplated by his Agreement or would otherwise be breached or impaired by such
consummation.
(g) Title to Assets. The Seller is the owner of all the Assets and
will convey the Assets to the Purchaser free and clear of all mortgages,
pledges, liens (including liens for taxes due and payable), encumbrances,
charges, claims, title retention agreements or other security interests or
<PAGE>
arrangements except as specifically provided herein. Purchaser shall assume no
responsibility for any liability, claim or obligation of Seller arising prior to
the date of Closing and otherwise only as provided in this Agreement.
(h) Litigation. Seller has operated the Assets in material compliance
with all applicable laws, rules and regulations except as may be immaterial to
this transaction. There are no actions, lawsuits or proceedings pending or
threatened against the Seller in law or in equity, or before any governmental
agency, that if determined adversely to the Seller would materially affect the
Assets being sold hereunder or that would bring into question the validity of
this Agreement or any action taken or to be taken in accordance with or in
connection with this Agreement.
(i) Contractual Interests. The Location Agreements are in full force
and effect. To the best of Seller's knowledge there are no existing defaults
under these agreements on the part of Seller, which are, individually or in the
aggregate, material to the operation of the Assets. All available originals, and
where none is available an exact copy, if available, of each Location Agreement
as scheduled at Exhibit 1-b and associated documents have been furnished to the
Purchaser. The Seller is not a party to any other material contract, agreement
or understanding (whether oral or written) relating to the Assets or Location
Agreements.
(j) Fixed Assets and Inventory. The Assets conveyed by this Agreement
are conveyed in an "as is" condition and no warranty as to condition or fitness
is made except that Seller warrants that it has no knowledge of any condition or
state of the Assets which would have a material adverse effect on the Assets,
taken as a whole.
(k) Employment Agreements. Seller has no employment or consulting
contracts relating to the Assets which will cause any lien to attach or charge
to be imposed on or against the Assets.
(l) Location Agreements. Seller warrants that as of the execution of
this Agreement, it has no knowledge of any claims existing or contemplated
against Seller whatsoever by the parties to the Location Agreements. Further,
Seller warrants that it has no knowledge of any claims existing or contemplated
by third parties relating to the use or operation of the Assets.
(m) Payment of All Taxes. The Seller has paid, or will pay, on or
prior to the Closing Date, all sales, excise, use, income or other taxes or
similar charges due and payable or to become due and payable by Seller for all
periods prior to Closing, the non-payment of which may subject Purchaser to
liability, jointly or severally, in whole or in part for such amounts.
Notwithstanding anything to the contrary contained in this Agreement, Seller
shall be responsible and liable for all taxes relating to the Assets or their
use on or before the Closing and Purchaser shall be responsible and liable for
all taxes relating to the Assets and their use after Closing. After the Closing,
each party shall cooperate with the other in dealing with any taxing authority
with respect to the business conducted and the Assets. Purchaser may, at its
sole discretion if Seller has failed to pay such taxes or charges within 10 days
of Seller's receipt of written notice, pay said taxes or charges and (i) give
prompt notice to Seller for reimbursement, such reimbursement to be made within
three (3) business days; or (ii) pay such taxes or charges and deduct same as a
credit against the balance of the purchase price or any other consideration due
to Seller. This provision does not relieve Seller from its obligation to pay
such charges or taxes if Purchaser does not avail itself of the foregoing
remedies.
(n) Noncancelability of Location Agreements. The Location Agreements
are not terminable due to the execution of this Agreement or the performance of
the terms hereof.
(o) Payment of All Commissions. The Seller has paid, or will pay, on
or prior to the Closing Date, all commissions due from Seller or attributable to
periods prior to Closing under all Location Agreements. Alternatively, the
Seller shall pay such commissions as they become due after the Closing for the
period before the Closing. If the Seller fails to pay any such commissions
arising for
<PAGE>
periods before the Closing, the Purchaser may pay any such commissions at its
sole discretion if Seller has failed to pay such commissions within 10 days of
Seller's receipt of written notice, pay said commissions and (i) give prompt
notice to Seller for reimbursement, such reimbursement to be made within three
(3) business days; or (ii) pay such commissions and deduct same as a credit
against the balance of the purchase price or any other consideration due to
Seller. This provision does not relieve Seller from its obligation to pay such
charges or taxes if Purchaser does not avail itself of the foregoing remedies.
(p) Installed Pay Telephone Keys. The Seller has delivered to the
Purchaser, on or prior to the Closing Date, all keys to the Installed Pay
telephones, including keys to the upper housing and lower housing, and there are
no other keys or copies thereof held by any other parties, including employees
of Seller to the best of Seller's knowledge and belief.
(q) Payment of Telephone Charges. The Seller has paid, or will pay,
on the later of the Closing date or when billed by the local exchange carrier,
all telephone bills and charges due from the Seller to the local exchange
carrier, any interexchange carriers or to any other entity or party for services
provided for all periods prior to Closing and attributable to the Assets.
Alternatively, the Purchaser may pay any such bills and charges at its sole
discretion if Seller has failed to pay such bills and charges within 10 days of
Seller's receipt of written notice, pay said bills and charges and (i) give
prompt notice to Seller for reimbursement, such reimbursement to be made within
three (3) business days; or (ii) pay such bills and deduct same as a credit
against the balance of the purchase price or any other consideration due to
Seller. This provision does not relieve Seller from its obligation to pay such
charges or taxes if Purchaser does not avail itself of the foregoing remedies.
(r) Authority. Under the laws of the State of Maryland Seller has
full power and authority to own its properties and conduct its business as
conducted and is authorized to own its properties and conduct its business as
conducted. Seller has obtained, and to the extent permitted by law will transfer
to Purchaser, all necessary permits and licences for the operation of the Pay
Telephones. Permit and license fees are not subject to proration under this
Agreement. This Agreement and the transactions contemplated hereby have been
duly and validly authorized and, at closing, indefeasible title to the Assets
will be vested in the Seller and transferred to the Purchaser free and clear of
any claims or encumbrances except for any liens created by Purchaser or
obligations of Purchaser assumed under this Agreement. This Agreement shall,
when executed, be a valid and binding obligation of Seller and its partners in
their individual capacities.
Purchaser's Representations and Warranties
The Purchaser represents and warrants to the Seller that the following are
true and correct as of the date hereof, and will be true and correct on the
Closing Date except as Purchaser may notify Seller prior to Closing in a signed
writing. Any such notification prior to Closing which modifies any of the
following representations and warranties shall, at the sole option of Seller,
result in termination of this Agreement without any liability for such
termination to Purchaser:
(t) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Purchaser's authority is entitled to make any claim against the
Seller for any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
(u) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Purchaser or its consummation of
the transactions contemplated hereby.
(v) Approval of Third Parties. No approval of any third party is
required as a condition to the execution and delivery of this Agreement by the
Purchaser or its consummation of the transactions contemplated hereby. The
obligation for the receipt of any such approvals shall rest solely with Seller
and is a condition precedent to Closing and payment.
<PAGE>
(w) No Prohibition Against Purchaser. The Purchaser is not a party
to, or otherwise subject to, any agreement, indenture, instrument, lease,
judgment or any other decree or any other regulation or demand of any
government, bureau, board or agency which would prohibit the consummation of the
transactions contemplated by his Agreement or would otherwise be breached or
impaired by such consummation.
(x) Corporate Standing. Telaleasing Enterprises, Inc. is a
corporation duly organized and validly existing in good standing under the laws
of the State of Illinois with full power and authority to own its properties and
conduct its business as conducted.
(y) Corporate Authority. This Agreement and the transactions
contemplated hereby have been duly and validly authorized and Purchaser shall
provide at or prior to Closing the Seller with Certified Resolutions or other
reasonable evidence of authority for the transaction memorialized by this
agreement.
4. ACCESS TO RECORDS/VERIFICATION OF ASSETS.
Prior to Closing Seller will permit representatives of Purchaser full
access to all the property, books, contracts, documents, records, reports, and
data bases of Seller relating to the Assets and will furnish such information
concerning same as Purchaser or its agents may reasonably request. Purchaser and
Seller agree that the basis for the establishment of the purchase price is the
financial statements and accounting information previously provided and the
number of Installed Paytelephones (70).
5. DUE DILIGENCE.
This Agreement shall be binding upon the parties effective as of the
date of execution subject to verification, by the Purchaser, from information,
records, documents and other items provided by the Seller sufficient to verify
the factual basis for the warranties and representations made to it by the
Seller herein.
6. TRANSITION MATTERS.
(a) Implementation of Change With Owners. After Closing Seller shall
fully cooperate with Purchaser, but only as specifically requested from time to
time, in advising parties to the Location Agreements that the business of Seller
is under new management as of the date of Closing and to advise them as to the
manner in which to place requests for service in the future.
(b) Non-Coin Long Distance. Seller is entitled to receive
compensation for long distance traffic from 0+ and 0- traffic from Operator
Service Providers. All such commissions, payments or other monies due and owing
Seller attributable to periods prior to Closing shall be the property of Seller
and shall be properly paid to Seller. This and any other property of Seller
which may come into Purchaser's possession shall be promptly delivered by
Purchaser to Seller. All such commissions, payments or other monies due and
owing Seller attributable to periods after Closing shall be the property of
Purchaser and shall be properly payable to Purchaser. This and any other
property of Purchaser which may come into Seller's possession shall be promptly
delivered by Seller to Purchaser. After Closing Seller shall provide such
notification to payors regarding payment for amounts attributable to post
closing periods as Purchaser shall reasonably request. Seller agrees to assist
as required in the implementation of any change of Long Distance Provider
requested by Purchaser after Closing Date subject to compliance with applicable
regulations.
<PAGE>
(c) Coin. The parties shall poll the phones at Closing and Seller
shall be credited for all coin in the phones at Closing. Buyer shall be entitled
thereafter to remove and retain all coin in the phone at Closing without further
accounting to Seller for such coin.
(d) Local Lines. After Closing Seller will cooperate in the transfer
of local telephone company lines and services to Purchaser, as required.
Purchaser shall use its reasonable best efforts to proceed promptly to effect a
transfer of service to the local exchange carrier and will accomplish all such
transfers no later than April 15, 1996.
(e) Records and Rate Files. Seller shall cooperate with Purchaser in
making available all rate files, databases and similar information prior to
Closing to facilitate the transfer of the Installed Paytelephones to Buyer at
Closing. Seller will cooperate in providing such records in a format and media
convenient to Buyer.
7. CLOSING.
The transactions contemplated by this Agreement shall be consummated
on or before April 16, 1996. Said date shall be known herein as "the Closing
Date" or the "Closing." The Seller and the Purchaser shall take the following
actions on the Closing Date:
(a) The Seller shall deliver to the Purchaser the following fully
executed documents as a condition precedent to payment:
(i) A Bill of Sale substantially in the form as set forth at
Exhibit 7-a-i transferring ownership of the Assets except
for those items conveyed pursuant to (P) 7(a)(ii).
(ii) An Assignment and Assumption of the Location Agreements
substantially in the form as set forth at Exhibit 7-a-ii;
(iii) All existing, available originally executed Location
Agreements;
(iv) Such other documents as may be reasonably required to
consummate and evidence the transactions and transfers
contemplated by this Agreement as may be requested by Buyer.
(b) The Purchaser shall pay the sums provided to Seller and the
Escrow agent as set forth and in the manner provided by (P)2.
(c) Transfer of Assets. On or prior to Closing Seller shall deliver
all of the Assets to Purchaser. Seller shall deliver all keys (and any copies
thereof) to all Installed Paytelephones (both upper housing and lower housing
keys).
(d) Place of Closing. All transactions contemplated herein shall be
consummated at Seller's Maryland office or at such other places the parties may
mutually determine in writing.
(e) Exhibits. Any Exhibits not provided at the time of execution of
this Agreement shall be provided at or prior to Closing.
8. CONTINUING RELATIONSHIPS.
<PAGE>
The Seller agrees to use its reasonable efforts for a period not to
exceed 10 days from closing to assure an orderly transition and favorable
business relationship between the Purchaser and Seller's existing phone
customers and suppliers. The Seller shall not, from and after the Closing Date,
solicit orders from such customers. In addition, the Seller shall, from and
after such time, direct to the Purchaser all inquiries from such customers and
other persons regarding the business of Seller. The Seller shall, from and
after the Closing Date, maintain the absolute confidentiality of all matters
relating to the Assets and business for three (3) years following the Closing
Date. Except for information which Seller has made publicly available or is
otherwise in the public domain, Purchaser shall not use or disclose any
information which Purchaser may have acquired concerning the Seller, or the
business practices of Seller, that are not directly related to the Assets.
Without limiting the foregoing and except for information which Seller has made
publicly available or is otherwise in the public domain, Purchaser shall not use
or divulge to any third person any financial information concerning the Seller,
including, but not limited to, the Financial Statements (except for financial
information directly related to the Installed Paytelephones).
Neither Seller nor any of its partners shall for a period of sixty (60)
months from the date of Closing directly or indirectly, own, manage, operate,
join, control, participate in, advise, or be connected in any manner with any
person, firm, corporation or other entity which is, or becomes engaged in the
operation of Paytelephones or in the solicitation for the installation or sale
the of or of any associated services, including but not limited to long distance
services, to any customers of Seller within 300 miles of Baltimore, Maryland or
any person or entity within such area. This covenant on the part of the Seller,
its officers and shareholders shall be construed as an agreement independent of
any other provisions of this Agreement. The parties hereto agree that this
restrictive covenant may be enforced in law or in equity, including, but not
limited to, injunctive relief against Seller. The parties hereto agree that in
the event of the breach of this restrictive covenant, the Purchaser and related
entities may not have an adequate remedy at law other than an injunction, or
that damages will be difficult to ascertain as the result of such breach and
that, if an injunction is sought by the Purchaser or related entities, Seller
waives any requirement that the Purchaser post any bond and the unsuccessful
party agrees to pay any attorneys' fees and court costs in the event the
successful party receives its requested relief.
9. CONDUCT OF BUSINESS.
From the date of this Agreement through the Closing Date, the Seller
shall:
(a) not enter into any material or unusual contracts affecting the
business of Seller without the prior written consent of the Purchaser;
(b) not create any security interests in any of the Assets.
(c) continue to operate the business in a routine and regular
fashion.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
The obligations of the Purchaser to acquire the Assets in accordance
with the terms of this Agreement and the obligations of Seller to sell the
Assets shall be subject to the fulfillment on, or prior to, the Closing Date of
each of the following conditions:
(a) Accuracy of Representations. All representations and warranties
of the Purchaser and Seller contained in this Agreement, and Exhibits hereto or
otherwise made in writing pursuant to this Agreement shall be true and correct
in all material respects on the Closing Date with the same force and effect as
though made on and as of the Closing Date.
(b) Performance of Obligations. The Seller and Purchaser shall have
performed and complied with all of the obligations and conditions required by
this Agreement to be performed or complied with by Seller and Purchaser on or
prior to the Closing Date.
<PAGE>
(c) No Change of Condition and Due Diligence. The Assets shall not
have been adversely affected in any way, directly or indirectly, which would
affect Purchaser's operation or use of the Assets.
11. BULK TRANSFERS.
The parties agree that Seller and Purchaser will not comply with the
requirements of any applicable law dealing with bulk transfers of assets.
Seller agree to indemnify and hold Purchaser harmless from any loss, expenses,
costs (including legal fees and expenses) incurred by Purchaser from failure to
so comply.
12. COMPLIANCE WITH TAX PROVISIONS.
Seller agrees to indemnify and hold Purchaser harmless from and
against any and all sales, excise, use, income or other taxes due as a result of
this transaction. If the Seller does not pay any such taxes the Purchaser may
pay any such taxes at its sole discretion if Seller has failed to pay such taxes
within 10 days of Seller's receipt of written notice, pay said taxes and (i)
give prompt notice to Seller for reimbursement, such reimbursement to be made
within three (3) business days; or (ii) pay such commissions and deduct same as
a credit against the balance of the purchase price or any other consideration
due to Seller. This provision does not relieve Seller from its obligation to pay
such taxes if Purchaser does not avail itself of the foregoing remedies.
Notwithstanding the foregoing, Purchaser knows of no taxes, sales taxes, excise
taxes, use taxes or other taxes (other than federal income taxes) that will
become due as a result of the transactions contemplated by this Agreement.
Purchaser agrees to indemnify and hold Seller harmless from and
against any and all sales, use, property, income or other taxes due as a result
of Purchaser's use or operation of the Assets on and after the Closing Date.
13. ADDITIONAL INSTRUMENTS.
The Seller agree from time to time, upon the request of the
Purchaser, to execute and deliver to the Purchaser such other instruments of
sale, transfer, assignment and conveyance and to take such other action as the
Purchaser may reasonably request to effectively vest ownership in the Purchaser
of all of the Assets sold, transferred, assigned and conveyed hereunder.
14. EXPENSES.
Each party hereto shall pay all expenses incurred by it in connection
with the negotiation, execution and performance of this Agreement, whether or
not the transactions contemplated herein are consummated, including the fees and
expenses of the counsel and accountants of each.
15. INDEMNIFICATION.
(a) Seller. The Seller agrees to indemnify the Purchaser fully and
hold the purchaser harmless from and against and in respect of all demands,
actions or causes of action, assessments, losses, damages, liabilities,
judgments, costs and reasonable expenses (including interest and reasonable
attorneys' fees) asserted against or incurred by the Purchaser arising out of a
breach of any representation, warranty or agreement of the Seller contained in
this Agreement or in any Exhibit hereto or arising out of any act or omission of
the Seller prior to the Closing Date (except with respect of liabilities
specifically assumed by the Purchaser). In no event shall Seller's aggregate
obligation under this section, 15(a), exceed the purchase price paid to it under
section 2 hereof.
<PAGE>
(b) Purchaser. The Purchaser agrees to indemnify the Seller fully and
hold the Seller harmless from and against and in respect of all demands,
actions, or causes of action, assessments, losses, damages, liabilities,
judgements, costs and reasonable expenses, including interest and reasonable
attorney fees) asserted against or incurred by the Seller arising out of a
breach of any representation, warranty or agreement of the Purchaser contained
in this Agreement or in any Exhibit hereto or arising out of any act or omission
of the Purchaser after the Closing Date (except with respect of liabilities
specifically retained by the Seller).
(c) De Minimus Recovery Limitation. Notwithstanding the provisions of
sections 15(a) and 15(b) no party shall be liable for any indemnification or
breach of representation or warranty until the amount of all damages or losses
exceeds $5,000 in the aggregate. The limitations of this section shall not apply
to any operating liabilities or revenues or taxes. Once the $5,000 limit is
exceeded, the party liable shall be liable for the entire amount of such loss or
damage, including the $5,000 threshold amount.
16. SURVIVAL OF REPRESENTATION.
All representations, warranties and agreements contained in this
Agreement or any Exhibit hereto or made pursuant of the transactions
contemplated by this Agreement shall survive the Closing Date for a period of
one year from the closing date.
17. MISCELLANEOUS PROVISIONS.
(a) Publicity. All notices to third parties and all other publicity
concerning the transaction contemplated by this Agreement shall be planned and
coordinated by Purchaser. Seller agrees not to make any public disclosure
regarding this transaction without the prior written approval of Purchaser,
except as otherwise required by this Agreement, or applicable law.
(b) Effect of Headings. The subject headings of the articles,
sections and paragraphs of this Agreement are included for purposes of
convenience only and shall not affect the construction or interpretation of any
of its provisions.
(c) Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) Waiver of Compliance. Any failure of Purchaser, on the one hand,
or Seller, on the other hand, to comply with any obligation, covenant, agreement
or condition herein may be expressly waived in writing. Failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
(e) Availability of Equitable Remedies. Since a breach of various
provisions of this Agreement could not adequately be compensated by money
damages, Seller or Purchaser, as the case may be, may obtain, in addition to any
other remedy available to it, an injunction restraining such breach and specific
performance of such provisions of this Agreement without proof of loss or
imminent loss, and no bond or other security shall be required in connection
therewith.
(f) Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any person other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third person any right of
subrogation or action over or against any party to this Agreement.
<PAGE>
(g) Binding on Successors. This Agreement shall be binding on, and
inure to the benefit of, the parties to it and their respective heirs, legal
representatives and successors.
(h) Recovery of Litigation Costs. If any legal action, arbitration or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the party substantially prevailing shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, whether or not such action is brought to judgment, in
addition to any other relief to which it may be entitled.
(i) Full Disclosure. No representation or warranty made by any party
hereto and no certificate or document furnished or to be furnished to any party
hereto pursuant to this Agreement contains or will contain any untrue statement
of a material fact or fails to contain information necessary to make the
statements contained therein not misleading, subject to the provisions of
section 4 hereof.
(j) Exhibits. The exhibits referred to herein shall be attached
hereto and are a part of this Agreement as if fully set forth herein.
(k) Notices. All notices, requests, demands or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been delivered five days after posting by certified United States Mail, with
postage prepaid:
(1) If to Purchaser:
Davel Communications Group, Inc.
601 West Morgan
Jacksonville, IL 62650
Attn: T.C. Rammelkamp, Jr.
(2) If to Seller:
Suntel
5921 Moravia Park Dr.
Baltimore, MD 21206
or to such other person or address as a party shall furnish to the other parties
hereto in writing.
(l) Governing Law and Arbitration. This Agreement shall be governed
and construed in accordance with the law of the State of Maryland and its courts
shall have jurisdiction of any matters arising hereunder. Any dispute arising
out of this Agreement shall be submitted by the parties for arbitration in
accordance with the rules and procedures of the American Arbitration
Association.
(m) Entire Agreement. This Agreement, including the exhibits and
other documents referred to herein which form a part hereof, embodies the entire
agreement and understanding or the parties hereto in respect to the subject
matter contained herein. There are no restrictions, promises, warranties,
covenants or understandings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by the parties hereto.
(n) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
<PAGE>
(o) Non-Disclosure. Seller agrees that it shall not negotiate for the
sale, trade or other transfer of any of the assets which are the subject of this
Agreement after the execution of this Agreement and prior to the earlier of
termination of the Agreement or Closing.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the day and year first above written.
PURCHASER:
TELALEASING ENTERPRISES, INC.,
an Illinois Corporation
__________________________________
By: Ed Turnipseed
Its: President
SELLER:
SUNTEL
__________________________________
Robert A. Watkins
__________________________________
Marc Authier
<PAGE>
EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
COTTONWOOD VENTURES, LC
&
TELALEASING ENTERPRISES, INC.
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made June 4, 1996, by and
between Cottonwood Venture, LC, hereinafter referred to as "Cottonwood" or
"Seller," and Telaleasing Enterprises, Inc., hereinafter referred to as
"Telaleasing", "TEI", "Purchaser" or "Buyer".
W I T N E S S E T H,
-------------------
WHEREAS, the Seller owns and operates pay telephones and related service
facilities pursuant to agreements which are sometimes styled "Public
Communication Location Agreements," "Public Telephone Equipment and Service
Contracts," "Pay Telephone Agreements," Coin Operated Telephone Equipment and
Service Contracts," "Contracts," "Pay Phone Location Agreements," "Royalty
Agreements," "Vending Agreements," "Leases," or other similar names and
hereinafter are called "Location Agreements"; and
WHEREAS, Cottonwood is an Iowa Limited Liability Company, and
WHEREAS Winegard Realty Company and Western States Financial Group, Inc.
are the sole members of Cottonwood. Western States Financial Group, Inc. is an
Iowa Corporation and Winegard Realty Company is an Iowa Corporation solely owned
by Winegard Company. Western States Financial Group, Inc., Winegard Realty
Company and Winegard Company will jointly and severally guarantee fully,
absolutely and without recourse the performance and obligations of Cottonwood
hereunder.
WHEREAS, Purchaser is an Illinois corporation, solely owned by Davel
Communications Group, Inc. ("Davel"). Davel will guarantee fully, absolutely and
without recourse the performance and obligations of Purchaser hereunder.
WHEREAS, Purchaser is in the business of owning and operating pay
telephones and providing associated services; and
WHEREAS, Purchaser and Seller entered into a Letter of Intent dated May 1,
1996 and a Memorandum of Agreement subsequent thereto on May 8, 1996 which
Letter and Memorandum were assigned to Davel's wholly owned subsidiary,
Telaleasing Enterprises, Inc. Said Letter of Intent and Memorandum contemplate
the transaction memorialized by this Agreement. Any rights, duties and
obligations of Davel, Telaleasing or Cottonwood created by, or arising out of,
said Letter of Intent or Memorandum are terminated and void as of the date of
this Agreement. This Agreement shall be the sole
<PAGE>
expression of the intent of the parties, their rights duties and obligations
with respect to all matters arising out of the transaction contemplated by the
Letter of Intent, the Memorandum or this Agreement.
WHEREAS, Subject to the terms and conditions hereinafter set forth, the
Seller desires to sell, and the Purchaser desires to purchase all of Seller's
installed paytelephones consisting of units in Arizona, Iowa and Utah together
with associated Location Agreements, equipment, software, furniture, fixtures,
computers, office equipment, parts, contracts and inventory.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. ASSETS TO BE PURCHASED.
Subject to the terms and conditions set forth herein, Purchaser agrees
to purchase and acquire from the Seller, and the Seller agrees to sell,
transfer, assign and convey to the Purchaser, free and clear of any and all
liens and encumbrances (excepting obligations imposed by the Location Agreements
which shall be assumed by Purchaser) approximately 909 installed Pay Telephones
located in Arizona, Iowa and Utah ("Installed Pay Telephones"), associated
enclosures, equipment, inventory, software, computers, fixtures, furniture,
tools, parts, supplies, associated Location Agreements, the name "Cottonwood"
and all assets and records directly used in the operation of the Installed Pay
Telephones. All of said assets, including the Installed Pay Telephones, may be
collectively referred to herein as the "Assets" and are more fully described
below. No liabilities are assumed by the Purchaser except as explicitly
described in this Agreement. The Assets include, but are not limited to, the
following:
(a) Installed Pay Telephones, Equipment and Location Agreements. All
equipment, communications equipment, Pay Telephones, enclosures, masts, cables,
wiring, electrical wiring, conduit, slabs and related property used in
connection with, or located at, all of Seller's Installed Pay Telephones and
associated Location Agreements, a true and correct list of which is attached
hereto as Exhibit 1-a. No transfer of any FCCI based technology or equipment is
intended by this paragraph. Any FCCI technology or equipment present in the
Installed Pay Telephone Base at Closing shall be removed by Buyer and returned
to Seller as soon as practical. All rights, duties, obligations and liabilities
arising out of the Location Agreements and attributable to periods prior to
Closing shall be retained by Seller and all such rights, duties, obligations and
liabilities attributable to periods after Closing shall be assumed by and be the
property and obligation of the Purchaser. A few Location Agreements may not be
memorialized by a writing but are nonetheless assigned by this Agreement. All
written Location Agreements are listed in Exhibit 1-a and the originals of said
Agreement are attached to Exhibit 1-a,
(b) Equipment and Inventory. As described in Exhibit 1-b. No sale or
transfer of any FCCI based technology or equipment is intended by this
paragraph,
(c) Business Records. As requested by Purchaser, all business records
and copies of financial records directly pertaining to the Assets or necessary
for the operation of the Assets,
(d) Warranties and Licenses. All warranties and licenses and patents,
if any and to the extent transferable, relating to any of Assets including, but
not limited to, computer software licenses. No sale or transfer of any FCCI
based technology, licences or software is intended by this paragraph,
(e) Prepaid Expenses and Deposits. All coin in the Pay Telephones at
Closing for which Seller shall receive a credit at Closing, above and beyond the
purchase price, based on polling procedures satisfactory to the parties.
(f) Accounts Receivable. All accounts receivable attributable to
periods after Closing. Seller shall provide such notification to payers
regarding payment for amounts attributable to post closing
<PAGE>
periods as Purchaser shall reasonably request. All accounts receivable
attributable to periods prior to closing shall remain the property of Seller and
are not conveyed hereby.
(g) Revenues. All revenues attributable to periods subsequent to
Closing.
(h) Name. Buyer shall have the right to use the name "Cottonwood" in
its pay phone and telecommunications operations; however, Seller makes no
representation that it has any proprietary or exclusive right to such name.
2. CONSIDERATION.
(a) Purchase Price. As consideration for the transfer and assignment
of the Assets, Purchaser shall pay a total purchase price computed as follows:
(i) $2,850.00 for each Installed Pay Telephone as of the
Closing, but not to exceed 909 Installed Pay Telephones. All Installed Pay
Telephones shall have been installed prior to May 8, 1996 except for 21 to be
installed in Arizona which shall be installed prior to Closing; plus,
(ii) $10,000 for 15 locations and associated contracts some of
which are fully or partially installed as further set forth on Exhibit 2(a)(ii);
plus,
(iii) $400 for each Protel Upgrade Kit in inventory as of
Closing. A Protel upgrade kit shall consist of a new or fully warranted as if
new refurbished Protel 2000 or 7000 series circuit board, relay and cable; less,
(iv) $600 for each Installed Pay Telephone which has not been
upgraded with a 2000 or 7000 series Protel circuit board.
(b) Payment at Closing. 91.5% of the purchase price shall be paid in
by wire transfer to Seller's account as directed by Seller at Closing. The
balance of the purchase price shall be paid at Closing into escrow and held and
paid as set forth at (P) 18. The escrowed amount is held as security against,
and is subject to deduction for, Sellers failure to perform its representations,
warranties and covenants herein including but not limited to payment by Seller
of those items specified in paragraphs 3(l), 3(m), 3(o), 3(q), 3(r), 6(b), 11,
12, 14 and 15 of this Agreement.
3. REPRESENTATIONS AND WARRANTIES.
Seller's Representations and Warranties
The Seller represents and warrants to the Purchaser that the following
are true and correct as of the date hereof, and will be true and correct on the
Closing Date except as Seller may notify Purchaser prior to Closing in a signed
writing. Any such notification prior to Closing which modifies any of the
following representations and warranties shall, at the sole option of Purchaser,
result in termination of this Agreement without any liability for such
termination to Seller:
(a) Taxes. No claim or liability is pending or has been assessed or
asserted, or has been threatened against the Seller in connection with any taxes
which are, or may, become a lien against the Assets.
(b) Financial Information. The Seller has furnished to Buyer detailed
financial information which is accurate in all material respects. To the best of
Seller's knowledge no fact or condition
<PAGE>
exists, or is contemplated or threatened, which would have a material adverse
effect on the business of Seller or the Assets.
(c) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Seller' authority is entitled to make any claim against the
Purchaser or the Seller for any commission or finder's fee in connection with
the transactions contemplated by this Agreement except that Lanier Consulting is
entitled to a commission from the Seller the payment of which commission shall
be the sole obligation of the Seller. Buyer shall have no obligation hereunder
to pay or direct funds to Lanier.
(d) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Seller or its consummation of
the transactions contemplated hereby.
(e) Approval of Third Parties. There is no unobtained approval of any
third party, except pursuant to release of liens, required as a condition to the
execution and delivery of this Agreement by the Seller or the consummation of
the transactions contemplated hereby. The obligation for the receipt of all such
approvals shall rest solely with Seller and is a condition precedent to Closing
and payment.
(f) No Prohibition Against Purchaser. The Seller is not a party to,
or otherwise subject to, any agreement, indenture, instrument, lease, judgment
or any other decree or any other regulation or demand of any government, bureau,
board or agency which would prohibit the consummation of the transaction
contemplated by his Agreement or would otherwise be breached or impaired by such
consummation.
(g) Title to Assets. The Seller is the owner of all the Assets and
will convey the Assets to the Purchaser free and clear of all mortgages,
pledges, liens (including liens for taxes due and payable), encumbrances,
charges, claims, title retention agreements or other security interests or
arrangements except as specifically provided herein. Purchaser shall assume no
responsibility for any liability, claim or obligation of Seller arising prior to
the date of Closing and otherwise only as provided in this Agreement.
(h) Litigation. Seller has operated the Assets in material compliance
with all applicable laws, rules and regulations except as may be immaterial to
this transaction. There are no actions, lawsuits or proceedings pending or
threatened against the Seller in law or in equity (except for a threatened suit
by First Continental Communications, Inc. and Bruce Boland or related entities)
or before any governmental agency, that if determined adversely to the Seller
would materially affect the Assets being sold hereunder or that would bring into
question the validity of this Agreement or any action taken or to be taken in
accordance with or in connection with this Agreement.
(i) Contractual Interests. The Location Agreements are in full force
and effect. To the best of Seller's knowledge there are no existing defaults
under these agreements on the part of Seller, which are, individually or in the
aggregate, material to the operation of the Assets. All available originals, and
where none is available an exact copy, if available, of each Location Agreement
as scheduled at Exhibit 1-b and associated documents have been furnished to the
Purchaser. The Seller is not a party to any other material contract, agreement
or understanding (whether oral or written) relating to the Assets or Location
Agreements.
(j) Fixed Assets and Inventory. The Assets conveyed by this Agreement
are conveyed in an "as is" condition and no warranty as to condition or fitness
is made except that Seller warrants that all Installed Pay Telephones are
operational (except to the extent pending, filed applications for lines have not
been approved) as of Closing and that it has no knowledge of any condition or
state of the Assets which would have a material adverse effect on the Assets,
taken as a whole.
<PAGE>
(k) Employment Agreements. Seller has no employment or consulting
contracts relating to the Assets which will cause any lien to attach or charge
to be imposed on or against the Assets.
(l) Location Agreements. Seller warrants that as of the execution of
this Agreement, it has no knowledge of any claims existing or contemplated
against Seller whatsoever by the parties to the Location Agreements.
(m) Payment of All Taxes. The Seller has paid, or will pay as they
become due, all sales, excise, use, income or other taxes or similar charges due
and payable or to become due and payable by Seller for all periods prior to
Closing, the non-payment of which may subject Purchaser to liability, jointly or
severally, in whole or in part for such amounts. Notwithstanding anything to the
contrary contained in this Agreement, Seller shall be responsible and liable for
all taxes relating to the Assets or their use on or before the Closing and
Purchaser shall be responsible and liable for all taxes relating to the Assets
and their use after Closing. After the Closing, each party shall cooperate with
the other in dealing with any taxing authority with respect to the business
conducted and the Assets. Purchaser may, at its sole discretion if Seller has
failed to pay such taxes or charges within 10 days of Seller's receipt of
written notice, pay said taxes or charges and (i) give prompt notice to Seller
for reimbursement, such reimbursement to be made within three (3) business days;
or (ii) pay such taxes or charges and deduct same as a credit against the
balance of the purchase price or any other consideration due to Seller. Buyer
shall not pay any such taxes which are the subject of dispute between Seller and
the applicable taxing authority provided Seller gives Buyer written notice of
such dispute and provided that such non-payment does not disrupt or interfere
with Buyer's continued use or revenues from the purchased assets. This provision
does not relieve Seller from its obligation to pay such charges or taxes if
Purchaser does not avail itself of the foregoing remedies.
(n) Noncancelability of Location Agreements. The Location Agreements
are not terminable due to the execution of this Agreement or the performance of
the terms hereof.
(o) Payment of All Commissions. The Seller has paid, or will pay, on
or prior to the Closing Date, all commissions due from Seller or attributable to
periods prior to Closing under all Location Agreements. Alternatively, the
Seller shall pay such commissions as they become due after the Closing for the
period before the Closing. If the Seller fails to pay any such commissions
arising for periods before the Closing, the Purchaser may pay any such
commissions at its sole discretion if Seller has failed to pay such commissions
within 10 days of Seller's receipt of written notice, pay said commissions and
(i) give prompt notice to Seller for reimbursement, such reimbursement to be
made within three (3) business days; or (ii) pay such commissions and deduct
same as a credit against the balance of the purchase price or any other
consideration due to Seller. Buyer shall not pay any such commissions which are
the subject of dispute between Seller and the applicable location provided
Seller gives Buyer written notice of such dispute and provided that such non-
payment does not disrupt or interfere with Buyer's continued use or revenues
from the purchased assets. This provision does not relieve Seller from its
obligation to pay such commissions if Purchaser does not avail itself of the
foregoing remedies.
(p) Installed Pay Telephone Keys. The Seller has delivered to the
Purchaser, on or prior to the Closing Date, all keys to the Installed Pay
Telephones, including keys to the upper housing and lower housing, and there are
no other keys or copies thereof held by any other parties, including employees
of Seller to the best of Seller's knowledge and belief.
(q) Payment of Telephone Charges. The Seller has paid, or will pay,
on the later of the Closing date or when billed by the local exchange carrier,
all telephone bills and charges due from the Seller to the local exchange
carrier, any interexchange carriers or to any other entity or party for services
provided for all periods prior to Closing and attributable to the Assets.
Alternatively, the Purchaser may pay any such bills and charges at its sole
discretion if Seller has failed to pay such bills and charges within 10 days of
Seller's receipt of written notice, pay said bills and charges and (i) give
prompt notice to Seller for reimbursement, such reimbursement to be made within
three (3) business days; or (ii) pay such bills and deduct same as a credit
against the balance of the purchase price or any other consideration due to
Seller. Buyer shall not pay any such bills or charges which are the subject of
dispute between Seller and the
<PAGE>
applicable creditor authority provided Seller gives Buyer written notice of such
dispute and provided that such non-payment does not disrupt or interfere with
Buyer's continued use or revenues from the purchased assets. This provision does
not relieve Seller from its obligation to pay such bills or charges if Purchaser
does not avail itself of the foregoing remedies.
(r) Corporate Standing. Cottonwood Venture, L..C. is a Limited
Liability Company duly organized and validly existing in good standing under the
laws of the State of Iowa with full power an authority to own its properties and
conduct its business as conducted. Seller shall provide a Certificate of
Existence from the State of Iowa as of a recent date satisfactory to Buyer.
(s) Corporate Authority. This Agreement and the transactions
contemplated hereby have been duly and validly authorized and, at Closing, good
title to the Assets will be vested in the Seller and transferred to the
Purchaser free and clear of any claims or encumbrances except for any liens
created by Purchaser or obligations of Purchaser. This Agreement shall, when
executed, be a valid and binding obligation of Seller and its Guarantors. Seller
shall provide Purchaser at or prior to Closing with Certified Resolutions and a
Managing Member's Certificate substantially in the form as provided at Exhibit
3-s as evidence of authority for the transaction memorialized by this agreement.
Purchaser's Representations and Warranties
The Purchaser represents and warrants to the Seller that the following are
true and correct as of the date hereof, and will be true and correct on the
Closing Date except as Purchaser may notify Seller prior to Closing in a signed
writing. Any such notification prior to Closing which modifies any of the
following representations and warranties shall, at the sole option of Seller,
result in termination of this Agreement without any liability for such
termination to Purchaser:
(t) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Purchaser's authority is entitled to make any claim against the
Seller for any commission or finder's fee in connection with the transactions
contemplated by this Agreement. Lanier Consulting is entitled to a commission
from the Seller, pursuant to Seller's agreement with Lanier, the payment of
which commission shall be the sole obligation of the Seller. Buyer shall have no
obligation hereunder to pay or direct funds to Lanier.
(u) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Purchaser or its consummation of
the transactions contemplated hereby.
(v) Approval of Third Parties. No approval of any third party is
required as a condition to the execution and delivery of this Agreement by the
Purchaser or its consummation of the transactions contemplated hereby. The
obligation for the receipt of any such approvals shall rest solely with Seller
and is a condition precedent to Closing and payment.
(w) No Prohibition Against Purchaser. The Purchaser is not a party
to, or otherwise subject to, any agreement, indenture, instrument, lease,
judgment or any other decree or any other regulation or demand of any
government, bureau, board or agency which would prohibit the consummation of the
transactions contemplated by his Agreement or would otherwise be breached or
impaired by such consummation.
(x) Corporate Standing. Telaleasing Enterprises, Inc. is a
corporation duly organized and validly existing in good standing under the laws
of the State of Illinois with full power and authority to own its properties and
conduct its business as conducted.
(y) Corporate Authority. This Agreement and the transactions
contemplated hereby have been duly and validly authorized and Purchaser shall
provide at or prior to Closing the Seller with
<PAGE>
Certified Resolutions or other reasonable evidence of authority for the
transaction memorialized by this agreement.
4. ACCESS TO RECORDS/VERIFICATION OF ASSETS.
Prior to Closing Seller will permit representatives of Purchaser full
access to all the property, books, contracts, documents, records, reports, and
data bases of Seller relating to the Assets and will furnish such information
concerning same as Purchaser or its agents may reasonably request. Purchaser and
Seller agree that the basis for the establishment of the purchase price is the
financial statements and accounting information previously provided and the
number of Installed Pay Telephones.
5. DUE DILIGENCE.
This Agreement shall be binding upon the parties effective as of the
date of execution subject to verification, by the Purchaser, from information,
records, documents and other items provided by the Seller sufficient to verify
the factual basis for the warranties and representations made to it by the
Seller herein.
6. TRANSITION MATTERS.
(a) Implementation of Change With Owners. After Closing Seller shall
fully cooperate with Purchaser, but only as specifically requested from time to
time, in advising parties to the Location Agreements that the business of Seller
is under new management as of the date of Closing and to advise them as to the
manner in which to place requests for service in the future.
(b) Non-Coin Long Distance. Seller is entitled to receive
compensation for long distance traffic from 0+ and 0- traffic from Operator
Service Providers. All such commissions, payments or other monies due and owing
Seller attributable to periods prior to Closing shall be the property of Seller
and shall be properly paid to Seller. This and any other property of Seller
which may come into Purchaser's possession shall be promptly delivered by
Purchaser to Seller. All such commissions, payments or other monies due and
owing Seller attributable to periods after Closing shall be the property of
Purchaser and shall be properly payable to Purchaser. This and any other
property of Purchaser which may come into Seller's possession shall be promptly
delivered by Seller to Purchaser. After Closing Seller shall provide such
notification to payors regarding payment for amounts attributable to post
closing periods as Purchaser shall reasonably request. Seller agrees to assist
as required in the implementation of any change of Long Distance Provider
requested by Purchaser after Closing Date subject to compliance with applicable
regulations.
(c) Coin. The parties shall poll the phones at Closing and Seller
shall be credited for all coin in the phones at Closing. Buyer shall be entitled
thereafter to remove and retain all coin in the phone at Closing without further
accounting to Seller for such coin.
(d) Local Lines. After Closing Seller will cooperate in the transfer
of local telephone company lines and services to Purchaser, as required.
Purchaser shall use its reasonable best efforts to proceed promptly to effect a
transfer of service to the local exchange carrier and will accomplish all such
transfers no later than July 15, 1996.
(e) Records and Rate Files. Seller shall cooperate with Purchaser in
making available all rate files, databases and similar information prior to
Closing to facilitate the transfer of the Installed Pay Telephones to Buyer at
Closing. Seller will cooperate in providing such records in a format and media
convenient to Buyer.
<PAGE>
(f) Public Utility Commissions. Seller shall fully cooperate with
Buyer in obtaining the approval of the Arizona Public Utility Commission for the
operation of the Installed Pay Telephones located in Arizona. Such cooperation
shall include, but not be limited to, Buyer's use of Seller's authority, if any,
pending approval of Buyer's application for COCOT authority, which shall be
promptly filed and prosecuted by Buyer. Similar cooperation shall be provided
within the States of Iowa and Utah. In the event Buyer's use of said COCOT
authority is in violation of applicable law or regulation or causes any such
violation, then Seller shall have the right to rescind such use.
(g) FCCI Based Technology. There is no intention by this Agreement to
sell or otherwise transfer to Buyer any technology, equipment, licenses,
software or other items, tangible or intangible, which relate in any manner to
FCCI based technology. To the extent such items are in possession of Buyer after
Closing they shall be promptly returned to Seller. At Closing there may be
certain Installed Pay Telephones utilizing circuit boards based on FCCI
technology, Buyer shall as soon as practical replace such circuit boards and
return those based on FCCI technology to Seller.
7. CLOSING.
The transactions contemplated by this Agreement shall be consummated
on or before June 4, 1996. Said date shall be known herein as "the Closing Date"
or the "Closing." The Seller and the Purchaser shall take the following actions
on the Closing Date:
(a) The Seller shall deliver to the Purchaser the following fully
executed documents as a condition precedent to payment:
(i) A Bill of Sale substantially in the form as set forth at
Exhibit 7-a-i transferring ownership of the Assets except
for those items conveyed pursuant to (P)7(a)(ii).
(ii) An Assignment and Assumption of the Location Agreements
substantially in the form as set forth at Exhibit 7-a-ii;
(iii) All existing, available originally executed Location
Agreements;
(iv) Such other documents as may be reasonably required to
consummate and evidence the transactions and transfers
contemplated by this Agreement as may be requested by
Buyer.
(b) The Purchaser shall pay the sums provided to Seller and the
Escrow agent as set forth and in the manner provided by (P)2.
(c) Transfer of Assets. On or prior to Closing Seller shall deliver
all of the Assets to Purchaser. Seller shall deliver all keys (and any copies
thereof) to all Installed Pay Telephones (both upper housing and lower housing
keys).
(d) Place of Closing. All transactions contemplated herein shall be
consummated at Seller's Iowa office or at such other places the parties may
mutually determine in writing.
(e) Exhibits. Any Exhibits not provided at the time of execution of
this Agreement shall be provided at or prior to Closing.
8. CONTINUING RELATIONSHIPS.
<PAGE>
The Seller agrees to use its reasonable efforts for a period not to exceed
30 days from closing to assure an orderly transition and favorable business
relationship between the Purchaser and Seller's existing phone customers and
suppliers. The Seller shall not, from and after the Closing Date, solicit orders
from such customers. In addition, the Seller shall, from and after such time,
direct to the Purchaser all inquiries from such customers and other persons
regarding the business of Seller. The Seller shall, from and after the Closing
Date, maintain the absolute confidentiality of all matters relating to the
Assets and business for three (3) years following the Closing Date. Except for
information which Seller has made publicly available or is otherwise in the
public domain, Purchaser shall not use or disclose any information which
Purchaser may have acquired concerning the Seller, or the business practices of
Seller, that are not directly related to the Assets. Without limiting the
foregoing and except for information which Seller has made publicly available or
is otherwise in the public domain, Purchaser shall not use or divulge to any
third person any financial information concerning the Seller, including, but not
limited to, the Financial Statements (except for financial information directly
related to the Installed Pay Telephones). None of the foregoing restrictions on
disclosure by Seller or Purchaser shall apply to disclosures mandated by a
court, taxing authority or other governmental entity with authority to require
such disclosure.
Except for passive investment as less than a 10% shareholder in any
publicly traded company, neither Seller nor any of its members and certain
individuals including but not limited to Randy Winegard and Robert W. Seery,
shall for a period of thirty-six (36) months from the date of Closing directly
or indirectly, own, manage, operate, join, control, participate in, advise, or
be connected in any manner with any person, firm, corporation or other entity
which is, or becomes engaged in the operation of pay telephones or in the
solicitation for the installation or sale of any associated services, including
but not limited to long distance services, to any customers of Seller within the
States of Utah, Iowa and Arizona or any person or entity within such States.
This covenant on the part of the Seller, its officers and shareholders shall be
construed as an agreement independent of any other provisions of this Agreement.
The parties hereto agree that this restrictive covenant may be enforced in law
or in equity, including, but not limited to, injunctive relief against Seller.
The parties hereto agree that in the event of the breach of this restrictive
covenant, the Purchaser and related entities may not have an adequate remedy at
law other than an injunction, or that damages will be difficult to ascertain as
the result of such breach and that, if an injunction is sought by the Purchaser
or related entities, Seller waives any requirement that the Purchaser post any
bond and the unsuccessful party agrees to pay any attorneys' fees and court
costs in the event the successful party receives its requested relief.
This paragraph, (P)8, shall not apply to or hinder in any way Seller's
operation of its approximately eight installed pay telephones in the State of
New York which are not subject to this Agreement.
9. CONDUCT OF BUSINESS.
From the date of this Agreement through the Closing Date, the Seller
shall:
(a) not enter into any material or unusual contracts affecting the
business of Seller without the prior written consent of the Purchaser;
(b) not create any security interests in any of the Assets;
(c) continue to operate the business in a routine and regular
fashion.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
The obligations of the Purchaser to acquire the Assets in accordance
with the terms of this Agreement and the obligations of Seller to sell the
Assets shall be subject to the fulfillment on, or prior to, the Closing Date of
each of the following conditions:
<PAGE>
(a) Accuracy of Representations. All representations and warranties
of the Purchaser and Seller contained in this Agreement, and Exhibits hereto or
otherwise made in writing pursuant to this Agreement shall be true and correct
in all material respects on the Closing Date with the same force and effect as
though made on and as of the Closing Date.
(b) Performance of Obligations. The Seller and Purchaser shall have
performed and complied with all of the obligations and conditions required by
this Agreement to be performed or complied with by Seller and Purchaser on or
prior to the Closing Date.
(c) No Change of Condition and Due Diligence. The Assets shall not
have been adversely affected in any way, directly or indirectly, which would
affect Purchaser's operation or use of the Assets.
(d) State Regulatory Qualification. There shall be no bar to the
operation of the Installed Pay Telephones by Buyer in Arizona immediately after
Closing due to regulatory requirements of Arizona.
11. BULK TRANSFERS.
The parties agree that Seller and Purchaser will not comply with the
requirements of any applicable law dealing with bulk transfers of assets. Seller
agree to indemnify and hold Purchaser harmless from any loss, expenses, costs
(including legal fees and expenses) incurred by Purchaser from failure to so
comply.
12. COMPLIANCE WITH TAX PROVISIONS.
Seller agrees to indemnify and hold Purchaser harmless from and
against any and all sales, excise, use, income or other taxes due as a result of
this transaction. If the Seller does not pay any such taxes the Purchaser may
pay any such taxes at its sole discretion if Seller has failed to pay such taxes
within 10 days of Seller's receipt of written notice, pay said taxes and (i)
give prompt notice to Seller for reimbursement, such reimbursement to be made
within three (3) business days; or (ii) pay such taxes and deduct same as a
credit against the balance of the purchase price or any other consideration due
to Seller. This provision does not relieve Seller from its obligation to pay
such taxes if Purchaser does not avail itself of the foregoing remedies.
Purchaser shall not pay any such taxes which are the subject of dispute between
Seller and the applicable taxing authority provided Seller gives Purchaser
written notice of such dispute and provided that such non-payment does not
disrupt or interfere with Purchaser's continued use or revenues from the
purchased assets. Notwithstanding the foregoing, Purchaser knows of no taxes,
sales taxes, excise taxes, use taxes or other taxes (other than federal income
taxes) that will become due as a result of the transactions contemplated by this
Agreement.
Purchaser agrees to indemnify and hold Seller harmless from and
against any and all sales, excise, use, income or other taxes due as a result of
Purchaser's use or operation of the Assets on and after the Closing Date. If the
Purchaser does not pay any such taxes the Seller may pay any such taxes at its
sole discretion if Purchaser has failed to pay such taxes within 10 days of
Purchaser's receipt of written notice, pay said taxes and give prompt notice to
Purchaser for reimbursement, such reimbursement to be made within three (3)
business days. This provision does not relieve Purchaser from its obligation to
pay such taxes if Seller does not avail itself of the foregoing remedy. Seller
shall not pay any such taxes which are the subject of dispute between Purchaser
and the applicable taxing authority provided Purchaser gives Seller written
notice of such dispute. Notwithstanding the foregoing, Purchaser knows of no
taxes, sales taxes, excise taxes, use taxes or other taxes (other than federal
income taxes) that will become due as a result of the transactions contemplated
by this Agreement.
<PAGE>
13. ADDITIONAL INSTRUMENTS.
The Seller agree from time to time, upon the request of the Purchaser,
to execute and deliver to the Purchaser such other instruments of sale,
transfer, assignment and conveyance and to take such other action as the
Purchaser may reasonably request to effectively vest ownership in the Purchaser
of all of the Assets sold, transferred, assigned and conveyed hereunder.
14. EXPENSES.
Each party hereto shall pay all expenses incurred by it in connection
with the negotiation, execution and performance of this Agreement, whether or
not the transactions contemplated herein are consummated, including the fees and
expenses of the counsel and accountants of each.
15. INDEMNIFICATION.
(a) Seller. The Seller agrees to indemnify the Purchaser fully and
hold the Purchaser harmless from and against and in respect of all demands,
actions or causes of action, assessments, losses, damages, liabilities,
judgments, costs and reasonable expenses asserted against or incurred by the
Purchaser arising out of a breach of any representation, warranty or agreement
of the Seller contained in this Agreement or in any Exhibit hereto or arising
out of any act or omission of the Seller prior to the Closing Date (except with
respect of liabilities specifically assumed by the Purchaser). Further, without
limitation of the foregoing, Seller agrees to indemnify the Purchaser fully and
hold the Purchaser harmless from and against and in respect of all demands,
actions or causes of action, assessments, losses, damages, liabilities,
judgments, costs and reasonable expenses asserted against or incurred by the
Purchaser arising out of any claim or action by First Continental
Communications, Inc. and Bruce Boland or related entities and which claim could
have been asserted against Seller based on facts existing prior to Closing. In
no event shall Seller's aggregate obligation under this section, 15(a), exceed
the purchase price paid to it under section 2 hereof.
(b) Purchaser. The Purchaser agrees to indemnify the Seller fully and
hold the Seller harmless from and against and in respect of all demands,
actions, or causes of action, assessments, losses, damages, liabilities,
judgements, costs and reasonable expenses asserted against or incurred by the
Seller arising out of a breach of any representation, warranty or agreement of
the Purchaser contained in this Agreement or in any Exhibit hereto or arising
out of any act or omission of the Purchaser after the Closing Date (except with
respect of liabilities specifically retained by the Seller).
(c) De Minimus Recovery Limitation. Notwithstanding the provisions of
sections 15(a) and 15(b) no party shall be liable for any indemnification or
breach of representation or warranty until the amount of all damages or losses
exceeds $5,000 in the aggregate. The limitations of this section shall not apply
to any operating liabilities or revenues or taxes. Once the $5,000 limit is
exceeded, the party liable shall be liable for the entire amount of such loss or
damage, including the $5,000 threshold amount.
(d) Method of Asserting and Handling Claims For Indemnification. In
the event that any claims or demand for which an Indemnifying Party would be
liable to an Indemnified Party under this Agreement is asserted against or
sought to be collected from such Indemnified Party by a third party, the
Indemnified Party shall promptly notify in writing the Indemnifying Party of
such claim or demand, specifying the nature of and specific basis for such claim
or demand and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
claim and demand (the "Claim Notice")). The Indemnifying Party shall not be
obligated to indemnify the Indemnified Party with respect to any such claim or
demand if the Indemnified Party fails to notify the Indemnifying Party thereof
in accordance with the provisions of this Agreement in reasonably sufficient
time so that the Indemnifying Party's ability to defend against the claim or
demand is not prejudiced. The Indemnifying Party shall have thirty (30) days
from the personal delivery or mailing of the Claim Notice (the
<PAGE>
"Notice Period") to notify the Indemnified Party (i) whether or not the
Indemnifying Party disputes its liability to the Indemnified Party hereunder
with respect to such claim or demand and (ii) whether or not the Indemnifying
Party desires, at its sole cost and expense, to defend the Indemnified Party
against such claim or demand. In the event that the Indemnifying Party notified
the Indemnified Party within the Notice Period that it desires to defend the
Indemnified Party against such claim or demand and except as hereinafter
provided, the Indemnifying Party shall have the right to defend by all
appropriate proceedings, and control the settlement of any such claim or
proceeding which proceedings shall be settled or prosecuted by him to a final
conclusion. If the Indemnified Party desires to participate in, but not control,
any such defense or settlement it may do so at its sole cost and expense. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim or demand
which the Indemnifying Party elects to contest, including, without limitation,
by executing or causing to have executed any power of attorney authorizing the
Indemnifying Party to act on behalf of the Indemnified Party or the Companies,
or, if appropriate and related to the claim in question, in making any
counterclaim against the person asserting the third-party claim or demand, or
any cross-complaint against any person. No claim may be settled without the
consent of the Indemnifying Party.
16. SURVIVAL OF REPRESENTATION.
All representations, warranties and agreements contained in this
Agreement or any Exhibit hereto or made pursuant of the transactions
contemplated by this Agreement shall survive the Closing Date for a period of
twelve months from the Closing Date.
17. MISCELLANEOUS PROVISIONS.
(a) Publicity. All notices to third parties and all other publicity
concerning the transaction contemplated by this Agreement shall be planned and
coordinated by Seller and Purchaser. Seller and Purchaser agree not to make any
public disclosure regarding this transaction without the prior written approval
of other, except as otherwise required by this Agreement, or applicable law.
Nothing in this paragraph 17 shall prevent Buyer from disclosing elements of
this agreement to financial analysts, accountants and others in the financial
community in the normal course of its business.
(b) Effect of Headings. The subject headings of the articles,
sections and paragraphs of this Agreement are included for purposes of
convenience only and shall not affect the construction or interpretation of any
of its provisions.
(c) Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) Waiver of Compliance. Any failure of Purchaser, on the one hand,
or Seller, on the other hand, to comply with any obligation, covenant, agreement
or condition herein may be expressly waived in writing. Failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
(e) Availability of Equitable Remedies. Since a breach of various
provisions of this Agreement could not adequately be compensated by money
damages, Seller or Purchaser, as the case may be, may obtain, in addition to any
other remedy available to it, an injunction restraining such breach and specific
performance of such provisions of this Agreement without proof of loss or
imminent loss, and no bond or other security shall be required in connection
therewith.
(f) Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any person other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any
<PAGE>
provision give any third person any right of subrogation or action over or
against any party to this Agreement.
(g) Binding on Successors. This Agreement shall be binding on, and
inure to the benefit of, the parties to it and their respective heirs, legal
representatives and successors.
(h) Full Disclosure. No representation or warranty made by any party
hereto and no certificate or document furnished or to be furnished to any party
hereto pursuant to this Agreement contains or will contain any untrue statement
of a material fact or fails to contain information necessary to make the
statements contained therein not misleading, subject to the provisions of
section 4 hereof.
(i) Exhibits. The exhibits referred to herein shall be attached
hereto and are a part of this Agreement as if fully set forth herein.
(j) Notices. All notices, requests, demands or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been delivered five days after posting by certified United States Mail, with
postage prepaid:
(1) If to Purchaser:
Davel Communications Group, Inc.
601 West Morgan
Jacksonville, IL 62650
Attn: T.C. Rammelkamp, Jr.
(2) If to Seller: Cottonwood Venture, L.C.
3000 Kirkwood Street
Burlington, IA 52601
Attn: Pat Haney
and to Western States Financial Group, Inc.
2700 Westown Parkway
Suite 220
West Des Moines, IA 50266
Attn: Robert W. Seery
or to such other person or address as a party shall furnish to the other parties
hereto in writing.
(k) Governing Law. This Agreement shall be governed and construed in
accordance with the law of the State of Illinois.
(l) Entire Agreement. This Agreement, including the exhibits and
other documents referred to herein which form a part hereof, embodies the entire
agreement and understanding or the parties hereto in respect to the subject
matter contained herein. There are no restrictions, promises, warranties,
covenants or understandings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by the parties hereto.
(m) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
<PAGE>
(n) Non-Disclosure. Seller agrees that it shall not negotiate for the
sale, trade or other transfer of any of the assets which are the subject of this
Agreement after the execution of this Agreement and prior to the earlier of
termination of the Agreement or Closing.
18. ESCROW PROVISIONS.
On the date of Closing the amount determined in accordance with the
provisions of (P) 6(c) and (P) 2(b) shall be paid into escrow account number
611801616 at First Star Bank Burlington to secure payment of the items set forth
at paragraphs 3(a), 3(b), 3(c), 3(g), 3(h), 3(i), 3(l), 3(m), 3(n), 3(o), 3(q),
6(b), 6(c), 6(e), 11, 12, 14 and 15 of this Agreement. The escrow Agreement
shall provide that both parties will submit a preliminary accounting to each
other within 45 days of Closing at which time, upon written direction to the
escrow agent signed by both parties, the escrow agent shall disburse one-half of
the funds, in accordance with said written direction. The escrow Agreement shall
provide that both parties will submit a final accounting to each other within 90
days of Closing at which time, upon written direction to the escrow agent signed
by both parties, the escrow agent shall disburse the balance of escrow funds, in
accordance with said written direction. The terms of the Escrow Agreement shall
be substantially as set forth at Exhibit 18.
19. GUARANTY.
In accordance with the terms of the Guaranties attached hereto at Exhibits
19(1) - 19(3), Winegard Realty Company, Western States Financial Group, Inc. and
Winegard Company being all the members or shareholders of members of Seller
hereby fully guaranty, individually and severally, the performance of this
Agreement in all of its particulars by Seller.
In accordance with the terms of the Guarantys attached hereto at Exhibit
19(4), Davel Communications Group, Inc. being the sole shareholder of Buyer
hereby fully guaranties the performance of this Agreement in all of its
particulars by Buyer.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
PURCHASER:
TELALEASING ENTERPRISES, INC.,
an Illinois Corporation
----------------------------------------
By: Theodore C. Rammelkamp, Jr.
Its: Senior Vice President & General Counsel
ATTEST
- -----------------------------
By: Ronnie Stucker
Its: Vice President
SELLER:
COTTONWOOD VENTURE, L.C.
an Iowa Limited Liability Company
----------------------------------------
By Winegard Realty Company
Its Managing Member
<PAGE>
By: Randy Winegard
President, Winegard Realty Company
ATTEST
- ------------------------------
By: Garry Cox
Its: Attorney in fact
<PAGE>
Exhibit 10.13
ASSET PURCHASE AGREEMENT
PAYPHONE CORPORATION OF AMERICA
&
TELALEASING ENTERPRISES, INC.
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made July 12, 1996, by and
between Payphone Corporation of America, Ltd. hereinafter referred to as "PCA"
or "Seller," and Telaleasing Enterprises, Inc., hereinafter referred to as
"Telaleasing", "TEI", "Purchaser" or "Buyer".
W I T N E S S E T H,
-------------------
WHEREAS, the Seller owns and operates pay telephones and related service
facilities pursuant to agreements which are sometimes styled "Public
Communication Location Agreements," "Public Telephone Equipment and Service
Contracts," "Pay Telephone Agreements," "Coin Operated Telephone Equipment and
Service Contracts," "Contracts," "Pay Phone Location Agreements," "Royalty
Agreements," "Vending Agreements," "Leases," or other similar names and
hereinafter are called "Location Agreements"; and
WHEREAS, PCA is a District of Columbia Corporation; and
WHEREAS Charles R. Carlsen is the sole shareholder of PCA. Charles R.
Carlsen will guarantee fully, absolutely and without recourse the performance
and obligations of PCA hereunder; and
WHEREAS, Purchaser is an Illinois corporation, solely owned by Davel
Communications Group, Inc. ("Davel"). Davel will guarantee fully, absolutely and
without recourse the performance and obligations of Purchaser hereunder; and
WHEREAS, Purchaser is in the business of owning and operating pay
telephones and providing associated services; and
WHEREAS, Purchaser and Seller entered into a Letter of Intent dated May 24,
1996 which Letter was assigned to Davel's wholly owned subsidiary, Telaleasing
Enterprises, Inc. Said Letter of Intent contemplates the transaction
memorialized by this Agreement. Any rights, duties and obligations of Davel,
Telaleasing or PCA created by, or arising out of, said Letter of Intent and any
amendments thereto are terminated and void as of the date of this Agreement.
This Agreement shall be the sole expression of the intent of the parties, their
rights duties and obligations with respect to all matters arising out of the
transaction contemplated by the Letter of Intent or this Agreement; and
WHEREAS, Subject to the terms and conditions hereinafter set forth, the
Seller desires to sell, and the Purchaser desires to purchase all of Seller's
installed paytelephones consisting of units in and around Washington, DC and
Alexandria, VA together with associated Location Agreements, equipment,
software, furniture, fixtures, computers, office equipment, parts, contracts and
inventory.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. ASSETS TO BE PURCHASED.
Subject to the terms and conditions set forth herein, Purchaser agrees
to purchase and acquire from the Seller, and the Seller agrees to sell,
transfer, assign and convey to the Purchaser, free and clear of any and all
liens and encumbrances (excepting obligations imposed by the Location Agreements
<PAGE>
which shall be assumed by Purchaser and except as set below in this paragraph)
approximately 657 installed Pay Telephones located in and around Alexandria, VA
and Washington, DC. ("Installed Pay Telephones"), associated enclosures,
equipment, inventory, software, computers, fixtures, furniture, tools, parts,
supplies, associated Location Agreements, and all assets and records directly
used in the operation of the Installed Pay Telephones. All of said assets,
including the Installed Pay Telephones, may be collectively referred to herein
as the "Assets" and are more fully described below. No liabilities are assumed
by the Purchaser except as explicitly described in this Agreement. At Exhibit 1
is set forth a list of known, scheduled liens to which the Assets may be
subject, the parties shall obtain the release of said liens by payment of
Seller's funds distributed at Closing (as hereafter defined). The Assets
include, but are not limited to, the following:
(a) Installed Pay Telephones, Equipment and Location Agreements. All
equipment, communications equipment, Pay Telephones, enclosures, masts, cables,
wiring, electrical wiring, conduit, slabs and related property used in
connection with, or located at, all of Seller's Installed Pay Telephones and
associated Location Agreements, a true and correct list of which is attached
hereto as Exhibit 1-a. All rights, duties, obligations and liabilities arising
out of the Location Agreements and attributable to periods prior to Closing
shall be retained by Seller and all such rights, duties, obligations and
liabilities attributable to periods after Closing shall be assumed by and be the
property and obligation of the Purchaser. A few Location Agreements may not be
memorialized by a writing but are nonetheless assigned by this Agreement. All
written Location Agreements are listed in Exhibit 1-a and the originals of said
Agreement are attached to Exhibit 1-a.
(b) Equipment and Inventory. As described in Exhibit 1-b.
(c) Business Records. As requested by Purchaser, all business records
and copies of financial records directly pertaining to the Assets or necessary
for the operation of the Assets.
(d) Warranties and Licenses. All warranties and licenses and patents,
if any and to the extent transferable, relating to any of Assets including, but
not limited to, computer software licenses.
(e) Prepaid Expenses and Deposits. All coin in the Pay Telephones at
Closing for which Seller shall receive a credit at Closing, above and beyond the
purchase price, based on polling procedures satisfactory to the parties.
(f) Accounts Receivable. All accounts receivable attributable to
periods after Closing. Seller shall provide such notification to payers
regarding payment for amounts attributable to post closing periods as Purchaser
shall reasonably request. All accounts receivable attributable to periods prior
to closing shall remain the property of Seller and are not conveyed hereby.
Buyer shall promptly notify Seller upon receipt of any such accounts and shall
promptly pay any such accounts so received to Seller.
(g) Revenues. All revenues attributable to periods subsequent to
Closing.
(h) Name. Buyer shall have the right to use the name "PCA" and the
name Payphone Corporation of America" in its pay phone and telecommunications
operations for a period of three years after Closing in the geographic area now
covered by the Installed Pay Telephones; however, Seller makes no representation
that it has any proprietary or exclusive right to such name.
(i) Saul Contractual Rights. All contractual rights to install
approximately 20 pay telephones pursuant to contracts with Saul Holdings, LP
which contracts shall be delivered to Buyer on or before July 17, 1996.
2. CONSIDERATION.
<PAGE>
(a) Purchase Price. As consideration for the transfer and assignment
of the Assets, Purchaser shall pay a total purchase price of $1,785,250.00.
Said purchase price is computed as follows:
$2,000 x 48 for the Installed Pay Telephones under the
recently renewed contract with Saul Holding, LP, plus
$350 x 20 for the contracts scheduled at Exhibit 1-i, plus
$7,500.00 as payment, in part, of a signing bonus recently
advanced by Seller to Saul Holdings, LP., plus
$2,750 x 609 Installed Pay Telephones for all of the balance
of the Installed Pay Telephones and all other Assets.
(b) Payment at Closing. $921,000 of the purchase price shall be paid
as directed by Seller at Closing. The balance of the purchase price shall be
paid at Closing into escrow and held and paid as set forth at (P) 18. The
escrowed amount is held as security against, and is subject to deduction for,
Sellers failure to perform its representations, warranties and covenants herein
including but not limited to payment by Seller of those items specified in
paragraphs 2(c), 3(l), 3(m), 3(o), 3(q), 3(r), 6(b), 11, 12, 14 and 15 of this
Agreement.
(c) Refund of Purchase Price. Scheduled at Exhibit 1-a are 97
Installed Pay Telephones under contract with the Hecht Company ("Hecht
Contract") which contract expires on August 7, 1997. In the event that Davel is
unable to obtain a renewal of the Hecht Contract, in whole or in part, then a
portion of the purchase price shall be refunded by Seller as set forth in this
paragraph. Upon renewal of the Hecht Contract in whole or in part by Buyer,
Seller shall be released from its obligation to refund to the extent of $1.36426
per phone per day for each day such renewal extends beyond August 7, 1997. In
the event of failure to renew, then to the extent Buyer is required to remove
pay telephones installed pursuant to the Hecht Contract, Seller shall refund
$1.136426 per phone for each day remaining until August 7, 1999 after the
removal of the applicable pay telephone. Seller shall have no obligation to
refund if the reason for removal or failure to obtain a contract renewal is due
to any of the following:
Buyer's failure to use its commercially reasonable best efforts
to obtain a renewal, or
Buyer's poor or inadequate performance, or
Any other cause within the reasonable control of Buyer, but in no
event shall Buyer be required to act in a commercially unreasonable
manner, or
<PAGE>
Buyer's breach of the Hecht Contract.
3. REPRESENTATIONS AND WARRANTIES.
Seller's Representations and Warranties
The Seller represents and warrants to the Purchaser that the following
are true and correct as of the date hereof, and will be true and correct on the
Closing Date (as hereafter defined) except as Seller may notify Purchaser prior
to Closing in a signed writing. Any such notification prior to Closing which
modifies any of the following representations and warranties shall, at the sole
option of Purchaser, result in termination of this Agreement without any
liability for such termination to Seller:
(a) Taxes. No claim or liability is pending or has been assessed or
asserted, or has been threatened against the Seller in connection with any taxes
which are, or may, become a lien against the Assets.
(b) Financial Information. The Seller has furnished to Buyer detailed
financial information which is accurate in all material respects. To the best
of Seller's knowledge no fact or condition exists, or is contemplated or
threatened, which would have a material adverse effect on the business of Seller
or the Assets.
(c) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Seller's authority is entitled to make any claim against the
Purchaser or the Seller for any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
(d) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Seller or its consummation of
the transactions contemplated hereby.
(e) Approval of Third Parties. There is no unobtained approval of any
third party, except pursuant to release of liens, required as a condition to the
execution and delivery of this Agreement by the Seller or the consummation of
the transactions contemplated hereby. The obligation for the receipt of all
such approvals shall rest solely with Seller and is a condition precedent to
Closing and payment.
(f) No Prohibition Against Purchaser. The Seller is not a party to,
or otherwise subject to, any agreement, indenture, instrument, lease, judgment
or any other decree or any other regulation or demand of any government, bureau,
board or agency which would prohibit the consummation of the transaction
contemplated by his Agreement or would otherwise be breached or impaired by such
consummation.
(g) Title to Assets. Except as set forth at (P) 1 and Exhibit the
Seller is the owner of all the Assets and will convey the Assets to the
Purchaser free and clear of all mortgages, pledges, liens (including liens for
taxes due and payable), encumbrances, charges, claims, title retention
agreements or other security interests or arrangements except as specifically
provided herein. Purchaser shall assume no responsibility for any liability,
claim or obligation of Seller arising prior to the date of Closing and otherwise
only as provided in this Agreement.
(h) Litigation. Seller has operated the Assets in material compliance
with all applicable laws, rules and regulations except as may be immaterial to
this transaction. There are no actions, lawsuits or proceedings pending or
threatened against the Seller in law or in equity or before any
<PAGE>
governmental agency, that if determined adversely to the Seller would materially
affect the Assets being sold hereunder or that would bring into question the
validity of this Agreement or any action taken or to be taken in accordance with
or in connection with this Agreement.
(i) Contractual Interests. The Location Agreements are in full force
and effect. To the best of Seller's knowledge there are no existing defaults
under these agreements on the part of Seller, which are, individually or in the
aggregate, material to the operation of the Assets. All available originals, and
where none is available an exact copy, if available, of each Location Agreement
as scheduled at Exhibit 1-a and associated documents have been furnished to the
Purchaser. The Seller is not a party to any other material contract, agreement
or understanding (whether oral or written) relating to the Assets or Location
Agreements.
(j) Fixed Assets and Inventory. The Assets conveyed by this Agreement
are conveyed in an "as is" condition and no warranty as to condition or fitness
is made except that Seller warrants that all Installed Pay Telephones are
operational (except to the extent pending, filed applications for lines have not
been approved) as of Closing and that it has no knowledge of any condition or
state of the Assets which would have a material adverse effect on the Assets,
taken as a whole.
(k) Employment Agreements. Seller has no employment or consulting
contracts relating to the Assets which will cause any lien to attach or charge
to be imposed on or against the Assets.
(l) Location Agreements. Seller warrants that as of the execution of
this Agreement, it has no knowledge of any claims existing or contemplated
against Seller whatsoever by the parties to the Location Agreements.
(m) Payment of All Taxes. The Seller has paid, or will pay as they
become due, all sales, excise, use, income or other taxes or similar charges due
and payable or to become due and payable by Seller for all periods prior to
Closing, the non-payment of which may subject Purchaser to liability, jointly or
severally, in whole or in part for such amounts. Notwithstanding anything to the
contrary contained in this Agreement, Seller shall be responsible and liable for
all taxes relating to the Assets or their use on or before the Closing and
Purchaser shall be responsible and liable for all taxes relating to the Assets
and their use after Closing. After the Closing, each party shall cooperate with
the other in dealing with any taxing authority with respect to the business
conducted and the Assets. Purchaser may, at its sole discretion if Seller has
failed to pay such taxes or charges within 10 days of Seller's receipt of
written notice, pay said taxes or charges and (i) give prompt notice to Seller
for reimbursement, such reimbursement to be made within three (3) business days;
or (ii) pay such taxes or charges and deduct same as a credit against the
balance of the purchase price or any other consideration due to Seller. Buyer
shall not pay any such taxes which are the subject of dispute between Seller and
the applicable taxing authority provided Seller gives Buyer written notice of
such dispute and provided that such non-payment does not disrupt or interfere
with Buyer's continued use or revenues from the purchased assets. This
provision does not relieve Seller from its obligation to pay such charges or
taxes if Purchaser does not avail itself of the foregoing remedies.
(n) Noncancelability of Location Agreements. The Location Agreements
are not terminable due to the execution of this Agreement or the performance of
the terms hereof.
(o) Payment of All Commissions. The Seller has paid, or will pay, on
or prior to the Closing Date, all commissions due from Seller or attributable to
periods prior to Closing under all Location Agreements. Alternatively, the
Seller shall pay such commissions as they become due after the Closing for the
period before the Closing. If the Seller fails to pay any such commissions
arising for periods before the Closing, the Purchaser may pay any such
commissions at its sole discretion if Seller has failed to pay such commissions
within 10 days of Seller's receipt of written notice, pay said commissions and
(i) give prompt notice to Seller for reimbursement, such reimbursement to be
made within five (5) business days; or (ii) pay such commissions and deduct same
as a credit against the balance of the purchase
<PAGE>
price or any other consideration due to Seller. Buyer shall not pay any such
commissions which are the subject of dispute between Seller and the applicable
location provided Seller gives Buyer written notice of such dispute and provided
that such non-payment does not disrupt or interfere with Buyer's continued use
or revenues from the purchased assets. This provision does not relieve Seller
from its obligation to pay such commissions if Purchaser does not avail itself
of the foregoing remedies.
(p) Installed Pay Telephone Keys. The Seller has delivered to the
Purchaser, on or prior to the Closing Date, all keys to the Installed Pay
Telephones, including keys to the upper housing and lower housing, and there are
no other keys or copies thereof held by any other parties, including employees
of Seller to the best of Seller's knowledge and belief.
(q) Payment of Telephone Charges. The Seller has paid, or will pay,
on the later of the Closing date or when billed by the local exchange carrier,
all telephone bills and charges due from the Seller to the local exchange
carrier, any interexchange carriers or to any other entity or party for services
provided for all periods prior to Closing and attributable to the Assets.
Alternatively, the Purchaser may pay any such bills and charges at its sole
discretion if Seller has failed to pay such bills and charges within 10 days of
Seller's receipt of written notice, pay said bills and charges and (i) give
prompt notice to Seller for reimbursement, such reimbursement to be made within
three (3) business days; or (ii) pay such bills and deduct same as a credit
against the balance of the purchase price or any other consideration due to
Seller. Buyer shall not pay any such bills or charges which are the subject of
dispute between Seller and the applicable creditor authority provided Seller
gives Buyer written notice of such dispute and provided that such non-payment
does not disrupt or interfere with Buyer's continued use or revenues from the
purchased assets. This provision does not relieve Seller from its obligation to
pay such bills or charges if Purchaser does not avail itself of the foregoing
remedies.
(r) Corporate Standing. Payphone Corporation of America is a
corporation duly organized and validly existing in good standing under the laws
of the District of Columbia with full power an authority to own its properties
and conduct its business as conducted. Seller shall provide a Certificate of
Existence from the District of Columbia as of a recent date reasonably
satisfactory to Buyer.
(s) Corporate Authority. This Agreement and the transactions
contemplated hereby have been duly and validly authorized and, at Closing, good
title to the Assets will be vested in the Seller and transferred to the
Purchaser free and clear of any claims or encumbrances (except as described at
(P) 1 and Exhibit 1) above or created by Purchaser or obligations of Purchaser.
This Agreement shall, when executed, be a valid and binding obligation of Seller
and its Guarantors. Seller shall provide Purchaser at or prior to Closing with
Certified Resolutions and a Secretary's Certificate substantially in the form as
provided at Exhibit 3-s as evidence of authority for the transaction
memorialized by this agreement.
Purchaser's Representations and Warranties
The Purchaser represents and warrants to the Seller that the following are
true and correct as of the date hereof, and will be true and correct on the
Closing Date except as Purchaser may notify Seller prior to Closing in a signed
writing. Any such notification prior to Closing which modifies any of the
following representations and warranties shall, at the sole option of Seller,
result in termination of this Agreement without any liability for such
termination to Purchaser:
(t) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Purchaser's authority is entitled to make any claim against the
Seller for any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
(u) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Purchaser or its consummation of
the transactions contemplated hereby.
<PAGE>
(v) Approval of Third Parties. No approval of any third party is
required as a condition to the execution and delivery of this Agreement by the
Purchaser or its consummation of the transactions contemplated hereby. The
obligation for the receipt of any such approvals shall rest solely with Seller
and is a condition precedent to Closing and payment.
(w) No Prohibition Against Purchaser. The Purchaser is not a party
to, or otherwise subject to, any agreement, indenture, instrument, lease,
judgment or any other decree or any other regulation or demand of any
government, bureau, board or agency which would prohibit the consummation of the
transactions contemplated by his Agreement or would otherwise be breached or
impaired by such consummation.
(x) Corporate Standing. Telaleasing Enterprises, Inc. is a
corporation duly organized and validly existing in good standing under the laws
of the State of Illinois with full power and authority to own its properties and
conduct its business as conducted.
(y) Corporate Authority. This Agreement and the transactions
contemplated hereby have been duly and validly authorized and Purchaser shall
provide at or prior to Closing the Seller with Certified Resolutions or other
reasonable evidence of authority for the transaction memorialized by this
agreement.
4. ACCESS TO RECORDS/VERIFICATION OF ASSETS.
Prior to Closing Seller will permit representatives of Purchaser
reasonable access to all the property, books, contracts, documents, records,
reports, and data bases of Seller relating to the Assets and will furnish such
information concerning same as Purchaser or its agents may reasonably request.
Purchaser and Seller agree that the basis for the establishment of the purchase
price is the financial statements and accounting information previously provided
and the number of Installed Pay Telephones.
5. DUE DILIGENCE.
This Agreement shall be binding upon the parties effective as of the
date of execution subject to verification, by the Purchaser, from information,
records, documents and other items provided by the Seller sufficient to verify
the factual basis for the warranties and representations made to it by the
Seller herein.
6. TRANSITION MATTERS.
(a) Implementation of Change With Owners. After Closing Seller shall
fully cooperate with Purchaser, but only as specifically requested from time to
time, in advising parties to the Location Agreements that the business of Seller
is under new management as of the date of Closing and to advise them as to the
manner in which to place requests for service in the future. Such cooperation
shall be limited to that reasonable in the circumstances. If Seller believes
that any such activity is unreasonable, Seller may request compensation as a
condition of performance or refuse to perform such activity.
(b) Non-Coin Long Distance. Seller is entitled to receive
compensation for long distance traffic from 0+ and 0- traffic from Operator
Service Providers. All such commissions, payments or other monies due and owing
Seller attributable to periods prior to Closing shall be the property of Seller
and shall be properly paid to Seller. This and any other property of Seller
which may come into Purchaser's possession shall be promptly delivered within
five (5) days by Purchaser to Seller. All such commissions, payments or other
monies due and owing Seller attributable to periods after Closing shall be the
property of Purchaser and shall be properly payable to Purchaser. This and any
other property of Purchaser which may come into Seller's possession shall be
promptly delivered within five (5) days by Seller to Purchaser. After Closing
Seller shall provide such notification to payors regarding payment for amounts
attributable to post
<PAGE>
closing periods as Purchaser shall reasonably request. Seller agrees to assist
as required in the implementation of any change of Long Distance Provider
requested by Purchaser after Closing Date subject to compliance with applicable
regulations.
(c) Coin. The parties shall poll the phones at Closing and Seller
shall be paid for all coin in the phones at Closing. Buyer shall be entitled
thereafter to remove and retain all coin in the phone at Closing without further
accounting to Seller for such coin.
(d) Local Lines. After Closing Seller will cooperate in the transfer
of local telephone company lines and services to Purchaser, as required.
Purchaser shall use its reasonable best efforts to proceed promptly to effect a
transfer of service to the local exchange carrier and will accomplish all such
transfers no later than July 31, 1996.
(e) Records and Rate Files. Seller shall reasonably cooperate with
Purchaser in making available all rate files, databases and similar information
prior to Closing to facilitate the transfer of the Installed Pay Telephones to
Buyer at Closing. Seller will cooperate in providing such records in a format
and media convenient to Buyer.
(f) Public Utility Commissions. Seller shall take reasonable action
to cooperate with Buyer in obtaining the approval of the Maryland and District
of Columbia Public Utility Commissions for the operation of the Installed Pay
Telephones. Such cooperation shall include, but not be limited to, Buyer's use
of Seller's authority, if any, pending approval of Buyer's application for COCOT
authority, which shall be promptly filed and prosecuted by Buyer.
7. CLOSING.
The transactions contemplated by this Agreement shall be consummated
on or before July 12, 1996. Said date shall be known herein as "the Closing
Date" or the "Closing." The Seller and the Purchaser shall take the following
actions on the Closing Date:
(a) The Seller shall deliver to the Purchaser the following fully
executed documents as a condition precedent to payment:
(i) A Bill of Sale substantially in the form as set forth at
Exhibit 7-a-i transferring ownership of the Assets except for those
items conveyed pursuant to (P)7(a)(ii).
(ii) An Assignment and Assumption of the Location Agreements
substantially in the form as set forth at Exhibit 7-a-ii;
(iii) All existing, available originally executed Location
Agreements;
(iv) Such other documents as may be reasonably required to
consummate and evidence the transactions and transfers
contemplated by this Agreement as may be requested by Buyer.
(b) The Purchaser shall pay the sums provided to Seller and the
Escrow agent as set forth and in the manner provided by (P)2.
(c) Transfer of Assets. On or prior to Closing Seller shall deliver
all of the Assets to Purchaser. Seller shall deliver all keys (and any copies
thereof) to all Installed Pay Telephones (both upper housing and lower housing
keys).
<PAGE>
(d) Place of Closing. All transactions contemplated herein shall be
consummated at the office of Seller's attorneys, Howrey & Simon, Washington, DC.
or at such other places the parties may mutually determine in writing.
(e) Exhibits. Any Exhibits not provided at the time of execution of
this Agreement shall be provided at or prior to Closing.
8. CONTINUING RELATIONSHIPS.
The Seller agrees to use its reasonable efforts for a period not to
exceed 60 days from closing to assure an orderly transition and favorable
business relationship between the Purchaser and Seller's existing phone
customers and suppliers. The Seller shall not, from and after the Closing Date,
solicit orders from such customers. In addition, the Seller shall, from and
after such time, direct to the Purchaser all inquiries from such customers and
other persons regarding the business of Seller. The Seller shall, from and
after the Closing Date, maintain the absolute confidentiality of all matters
relating to the Assets and business for three (3) years following the Closing
Date. Except for information which Seller has made publicly available or is
otherwise in the public domain, Purchaser shall not use or disclose any
information which Purchaser may have acquired concerning the Seller, or the
business practices of Seller, that are not directly related to the Assets.
Without limiting the foregoing and except for information which Seller has made
publicly available or is otherwise in the public domain, Purchaser shall not use
or divulge to any third person any financial information concerning the Seller,
including, but not limited to, the Financial Statements (except for financial
information directly related to the Installed Pay Telephones). None of the
foregoing restrictions on disclosure by Seller or Purchaser shall apply to
disclosures mandated by a court, taxing authority or other governmental entity
with authority to require such disclosure.
Except for passive investment as less than a 10% shareholder in any
publicly traded company, neither Seller nor its sole shareholder, Charles
Carlsen, shall for a period of sixty (60) months from the date of Closing
directly or indirectly, own, manage, operate, join, control, participate in,
advise, or be connected in any manner with any person, firm, corporation or
other entity which is, or becomes engaged in the operation of pay telephones to
any customers of Seller within Maryland, Virginia or the District of Columbia or
any person or entity within such States. This covenant on the part of the
Seller, its officers and shareholders shall be construed as an agreement
independent of any other provisions of this Agreement. The parties hereto agree
that this restrictive covenant may be enforced in law or in equity, including,
but not limited to, injunctive relief against Seller. The parties hereto agree
that in the event of the breach of this restrictive covenant, the Purchaser and
related entities may not have an adequate remedy at law other than an
injunction, or that damages will be difficult to ascertain as the result of such
breach and that, if an injunction is sought by the Purchaser or related
entities, Seller waives any requirement that the Purchaser post any bond and the
unsuccessful party agrees to pay any attorneys' fees and court costs in the
event the successful party receives its requested relief. The Covenant Not to
Compete shall be provided in the form as set forth at Exhibit 8-1.
9. CONDUCT OF BUSINESS.
From the date of this Agreement through the Closing Date, the Seller
shall:
(a) not enter into any material or unusual contracts affecting the
business of Seller without the prior written consent of the Purchaser;
(b) not create any security interests in any of the Assets;
(c) continue to operate the business in a routine and regular fashion.
<PAGE>
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
The obligations of the Purchaser to acquire the Assets in accordance
with the terms of this Agreement and the obligations of Seller to sell the
Assets shall be subject to the fulfillment on, or prior to, the Closing Date of
each of the following conditions:
(a) Accuracy of Representations. All representations and warranties
of the Purchaser and Seller contained in this Agreement, and Exhibits hereto or
otherwise made in writing pursuant to this Agreement shall be true and correct
in all material respects on the Closing Date with the same force and effect as
though made on and as of the Closing Date.
(b) Performance of Obligations. The Seller and Purchaser shall have
performed and complied with all of the obligations and conditions required by
this Agreement to be performed or complied with by Seller and Purchaser on or
prior to the Closing Date.
(c) No Change of Condition and Due Diligence. The Assets shall not
have been adversely affected in any material way, directly or indirectly, which
would affect Purchaser's operation or use of the Assets.
11. BULK TRANSFERS.
The parties agree that they will waive compliance with the
requirements of any State law dealing with bulk transfers of assets either
pursuant to the Uniform Commercial Code or State laws relating to sales, service
or use taxes and agree to indemnify and hold each other harmless from any loss,
expenses, costs (including reasonable legal fees and reasonable expenses)
incurred by the other from failure to so comply. This Section, (S) 11, shall not
be interpreted to relieve Seller of its obligation to transfer the Assets free
and clear of all liens and encumbrances as otherwise provided in this Agreement.
12. COMPLIANCE WITH TAX PROVISIONS.
Seller agrees to indemnify and hold Purchaser harmless from and
against any and all sales, excise, use, income or other taxes due as a result of
this transaction. If the Seller does not pay any such taxes the Purchaser may
pay any such taxes at its sole discretion if Seller has failed to pay such taxes
within 10 days of Seller's receipt of written notice, pay said taxes and (i)
give prompt notice to Seller for reimbursement, such reimbursement to be made
within three (3) business days; or (ii) pay such taxes and deduct same as a
credit against the balance of the purchase price or any other consideration due
to Seller. This provision does not relieve Seller from its obligation to pay
such taxes if Purchaser does not avail itself of the foregoing remedies.
Purchaser shall not pay any such taxes which are the subject of dispute between
Seller and the applicable taxing authority provided Seller gives Purchaser
written notice of such dispute and provided that such non-payment does not
disrupt or interfere with Purchaser's continued use or revenues from the
purchased assets. Notwithstanding the foregoing, Purchaser knows of no taxes,
sales taxes, excise taxes, use taxes or other taxes (other than federal income
taxes) that will become due as a result of the transactions contemplated by this
Agreement.
Purchaser agrees to indemnify and hold Seller harmless from and
against any and all sales, excise, use, income or other taxes due as a result of
Purchaser's use or operation of the Assets on and after the Closing Date. If
the Purchaser does not pay any such taxes the Seller may pay any such taxes at
its sole discretion if Purchaser has failed to pay such taxes within 10 days of
Purchaser's receipt of written notice, pay said taxes and give prompt notice to
Purchaser for reimbursement, such reimbursement to be made within three (3)
business days. This provision does not relieve Purchaser from its obligation to
pay such taxes if Seller does not avail itself of the foregoing remedy. Seller
shall not pay any such taxes which are the subject of dispute between Purchaser
and the applicable taxing authority provided Purchaser gives Seller written
notice of such dispute. Notwithstanding the foregoing, Purchaser knows of no
taxes, sales
<PAGE>
taxes, excise taxes, use taxes or other taxes (other than federal income taxes)
that will become due as a result of the transactions contemplated by this
Agreement.
13. ADDITIONAL INSTRUMENTS.
The Seller agree from time to time, upon the request of the Purchaser,
to execute and deliver to the Purchaser such other instruments of sale,
transfer, assignment and conveyance and to take such other action as the
Purchaser may reasonably request to effectively vest ownership in the Purchaser
of all of the Assets sold, transferred, assigned and conveyed hereunder.
14. EXPENSES.
Each party hereto shall pay all expenses incurred by it in connection
with the negotiation, execution and performance of this Agreement, whether or
not the transactions contemplated herein are consummated, including the fees and
expenses of the counsel and accountants of each.
15. INDEMNIFICATION.
(a) Seller. The Seller agrees to indemnify the Purchaser fully and
hold the Purchaser harmless from and against and in respect of all demands,
actions or causes of action, assessments, losses, damages, liabilities,
judgments, costs and reasonable expenses asserted against or incurred by the
Purchaser arising out of a breach of any representation, warranty or agreement
of the Seller contained in this Agreement or in any Exhibit hereto or arising
out of any act or omission of the Seller prior to the Closing Date (except with
respect of liabilities specifically assumed by the Purchaser). In no event shall
Seller's aggregate obligation under this section, 15(a), exceed the purchase
price less amounts paid to Buyer from escrow after Closing.
(b) Purchaser. The Purchaser agrees to indemnify the Seller fully and
hold the Seller harmless from and against and in respect of all demands,
actions, or causes of action, assessments, losses, damages, liabilities,
judgements, costs and reasonable expenses asserted against or incurred by the
Seller arising out of a breach of any representation, warranty or agreement of
the Purchaser contained in this Agreement or in any Exhibit hereto or arising
out of any act or omission of the Purchaser after the Closing Date (except with
respect of liabilities specifically retained by the Seller).
(c) De Minimus Recovery Limitation. Notwithstanding the provisions of
sections 15(a) and 15(b) no party shall be liable for any indemnification or
breach of representation or warranty until the amount of all damages or losses
exceeds $5,000 in the aggregate, excluding . The limitations of this section
shall not apply to any operating liabilities or revenues or taxes or Refund
pursuant to (P) 2(c). Once the $5,000 limit is exceeded, the party liable shall
be liable for the entire amount of such loss or damage, including the $5,000
threshold amount.
(d) Method of Asserting and Handling Claims For Indemnification. In
the event that any claims or demand for which an Indemnifying Party would be
liable to an Indemnified Party under this Agreement is asserted against or
sought to be collected from such Indemnified Party by a third party, the
Indemnified Party shall promptly notify in writing the Indemnifying Party of
such claim or demand, specifying the nature of and specific basis for such claim
or demand and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of such
claim and demand (the "Claim Notice")). The Indemnifying Party shall not be
obligated to indemnify the Indemnified Party with respect to any such claim or
demand if the Indemnified Party fails to notify the Indemnifying Party thereof
in accordance with the provisions of this Agreement in reasonably sufficient
time so that the Indemnifying Party's ability to defend against the claim or
demand is not prejudiced. The Indemnifying Party shall have thirty (30) days
from the personal delivery or mailing of the Claim Notice
<PAGE>
(the "Notice Period") to notify the Indemnified Party (i) whether or not the
Indemnifying Party disputes its liability to the Indemnified Party hereunder
with respect to such claim or demand and (ii) whether or not the Indemnifying
Party desires, at its sole cost and expense, to defend the Indemnified Party
against such claim or demand. In the event that the Indemnifying Party notified
the Indemnified Party within the Notice Period that it desires to defend the
Indemnified Party against such claim or demand and except as hereinafter
provided, the Indemnifying Party shall have the right to defend by all
appropriate proceedings, and control the settlement of any such claim or
proceeding which proceedings shall be settled or prosecuted by him to a final
conclusion. If the Indemnified Party desires to participate in, but not control,
any such defense or settlement it may do so at its sole cost and expense. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim or demand
which the Indemnifying Party elects to contest, including, without limitation,
by executing or causing to have executed any power of attorney authorizing the
Indemnifying Party to act on behalf of the Indemnified Party or the Companies,
or, if appropriate and related to the claim in question, in making any
counterclaim against the person asserting the third-party claim or demand, or
any cross-complaint against any person. No claim may be settled without the
consent of the Indemnifying Party.
16. SURVIVAL OF REPRESENTATION.
All representations, warranties and agreements contained in this
Agreement or any Exhibit hereto or made pursuant of the transactions
contemplated by this Agreement shall survive the Closing Date for a period of
eighteen months from the Closing Date.
17. MISCELLANEOUS PROVISIONS.
(a) Publicity. All notices to third parties and all other publicity
concerning the transaction contemplated by this Agreement shall be planned and
coordinated by Seller and Purchaser. Seller and Purchaser agree not to make any
public disclosure regarding this transaction without the prior written approval
of other, except as otherwise required by this Agreement, or applicable law.
Nothing in this paragraph 17 shall prevent Buyer from disclosing elements of
this agreement to financial analysts, accountants and others in the financial
community in the normal course of its business.
(b) Effect of Headings. The subject headings of the articles,
sections and paragraphs of this Agreement are included for purposes of
convenience only and shall not affect the construction or interpretation of any
of its provisions.
(c) Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) Waiver of Compliance. Any failure of Purchaser, on the one hand,
or Seller, on the other hand, to comply with any obligation, covenant, agreement
or condition herein may be expressly waived in writing. Failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
(e) Availability of Equitable Remedies. Since a breach of various
provisions of this Agreement could not adequately be compensated by money
damages, Seller or Purchaser, as the case may be, may obtain, in addition to any
other remedy available to it, an injunction restraining such breach and specific
performance of such provisions of this Agreement without proof of loss or
imminent loss, and no bond or other security shall be required in connection
therewith.
(f) Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any person other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to
<PAGE>
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
(g) Binding on Successors. This Agreement shall be binding on, and
inure to the benefit of, the parties to it and their respective heirs, legal
representatives and successors.
(h) Full Disclosure. No representation or warranty made by any party
hereto and no certificate or document furnished or to be furnished to any party
hereto pursuant to this Agreement contains or will contain any untrue statement
of a material fact or fails to contain information necessary to make the
statements contained therein not misleading, subject to the provisions of
section 4 hereof.
(i) Exhibits. The exhibits referred to herein shall be attached
hereto and are a part of this Agreement as if fully set forth herein.
(j) Notices. All notices, requests, demands or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been delivered five days after posting by certified United States Mail, with
postage prepaid:
(1) If to Purchaser:
Davel Communications Group, Inc.
601 West Morgan
Jacksonville, IL 62650
Attn: T.C. Rammelkamp, Jr.
(2) If to Seller: Charles R. Carlsen
2803 28th St., N.W.
Washington, D.C. 20008
or to such other person or address as a party shall furnish to the other parties
hereto in writing.
(k) Arbitration, Governing Law and Attorney Fees. All disputes
arising under this Agreement shall be settled under the Rules of Conciliation
and Arbitration of the International Chamber of Commerce by one arbitrator,
knowledgeable in the hospitality and telecommunications industry, appointed in
accordance with said Rules, with recourse, if necessary, to the International
Center for Technical Expertise of the ICC in accordance with the ICC's Rules for
Technical Expertise; provided however if the amount in dispute is more than
$100,000 three arbitrators shall be appointed upon the request of either party.
Unless the parties agree otherwise, the place of Arbitration shall be Chicago,
Illinois, U.S.A. Any agreed place of Arbitration must be in a country which is a
party to the Convention on the Recognition and Enforcement of Foreign
Arbitration Awards ("New York Convention"). The Arbitration proceedings shall be
conducted in the English language. The costs of Arbitration and the expenses of
the parties in preparation and attending the arbitration proceeding or any other
proceeding arising out of this Agreement, including but not limited to the
reasonable attorney fees of the parties, shall be charged to the party
substantially prevailing. Reasonable attorney's fees shall be computed by
reference to the reasonable charge for such services without regard to the
amount actually paid or whether or not the services were performed by in-house
counsel or otherwise and shall include reasonable costs associated with such
services. This Agreement shall be governed and construed in accordance with the
law of the State of Illinois.
(l) Entire Agreement. This Agreement, including the exhibits and
other documents referred to herein which form a part hereof, embodies the entire
agreement and understanding or the parties hereto in respect to the subject
matter contained herein. There are no restrictions, promises, warranties,
covenants or understandings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
<PAGE>
No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by the parties hereto.
(m) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(n) Non-Disclosure. Seller agrees that it shall not negotiate for the
sale, trade or other transfer of any of the assets which are the subject of this
Agreement after the execution of this Agreement and prior to the earlier of
termination of the Agreement or Closing. Further, Buyer agrees except as
required by law and except for its normal and customary dealings with its
accountants and attorneys and with the financial community and investing public,
it shall not disclose the identity of the Seller for 180 days after Closing.
(o) Recitals. The introductory recitals set forth on page one of this
Agreement are specifically incorporated into this Agreement and are a part
thereof.
18. ESCROW PROVISIONS.
On the date of Closing the amount determined in accordance with the
provisions of (P)6(c) and (P)2(b) shall be paid into an Escrow by deposit to
Howrey & Simon to secure payment of the items set forth at paragraphs 2(c),
3(a), 3(b), 3(c), 3(g), 3(h), 3(i), 3(l), 3(m), 3(n), 3(o), 3(q), 6(b), 6(c),
6(e), 11, 12, 14 and 15 of this Agreement. The Escrow Agreement shall provide
that the escrowed funds shall not be distributed except on direction of both
parties or upon order of a court of competent jurisdiction and in no event prior
to January 2, 1997. The Seller may direct the investment of escrowed funds, but
all investments must be in either United States Government or domestic Bank
instruments denominated in United States currency. All interest earned on the
escrowed funds shall be allocated proportionately as the amounts are distributed
to the parties. The escrow Agreement shall further provide that both parties
will submit a preliminary accounting to each other on December 1, 1996 at which
time, upon written direction to the escrow agent signed by both parties, the
escrow agent shall make an interim disbursement of all of the escrowed funds
(except as such funds are necessary to secure Seller's potential obligations
pursuant to (P)2(c)) on or after January 7, 1997 in accordance with said written
direction. In no event shall funds be distributed from the Escrow Account if
such distribution would result in the Escrow Account having a balance less than
the potential Refund of Purchase Price due to Seller pursuant to (P)2(c), but
except for such obligation Seller shall be entitled to no continuing escrow
security after January 7, 1997. If the parties have not agreed to an interim
distribution by February 15, 1997, either party may submit the issue of division
of escrow to arbitration as provided at (P)17(k) above. To the extent funds
remain in escrow to secure Seller's obligations imposed by (P)2(c), the parties
shall submit at anytime upon renewal of all or some of the contracts and, if
funds still remain in escrow, on September 1, 1998 and September 1, 1999,
respectively and seek distribution in accordance with written direction signed
by both parties within 30 days of each such accounting. If the parties have not
agreed to a final distribution by the earlier of renewal of all the contracts or
October 1, 1999, either party may submit the issue of division of the remaining
escrow to arbitration as provided at (P)17(k) above. The terms of the Escrow
Agreement shall be substantially as set forth at Exhibit 18.
19. GUARANTY.
In accordance with the terms of the Guaranty attached hereto at Exhibit
19(1) Charles R. Carlsen, sole shareholder of Seller hereby fully guaranties
the performance of this Agreement in all of its particulars by Seller.
<PAGE>
In accordance with the terms of the Guaranty attached hereto at Exhibit
19(2), Davel Communications Group, Inc. being the sole shareholder of Buyer
hereby fully guaranties the performance of this Agreement in all of its
particulars by Buyer.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
PURCHASER:
TELALEASING ENTERPRISES, INC.,
an Illinois Corporation
__________________________________
By: Theodore C. Rammelkamp, Jr.
Its: Senior Vice President
Witness
_____________________________
By:
SELLER:
PAYPHONE CORPORATION OF AMERICA,
a District of Columbia Corporation
__________________________________
By: Charles R. Carlsen
Its: President
Witness
_____________________________
By:
Guarantor
DAVEL COMMUNICATIONS GROUP, INC.,
an Illinois Corporation
__________________________________
By:
Its:
Witness
_____________________________
By:
Guarantor
CHARLES R. CARLSEN, Individually
__________________________________
<PAGE>
EXHIBIT 10.14
ASSET PURCHASE AGREEMENT
PAY TELEPHONE AMERICA, LTD.
&
TELALEASING ENTERPRISES, INC.
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made November 1, 1996, by and
between Pay Telephone America, Ltd., hereinafter referred to as "PTA" or
"Seller," and Telaleasing Enterprises, Inc., hereinafter referred to as
Telaleasing", "TEI", "Purchaser" or "Buyer".
W I T N E S S E T H,
-------------------
WHEREAS, the Seller owns and operates pay telephones and related service
facilities pursuant to agreements which are sometimes styled "Public
Communication Location Agreements," "Public Telephone Equipment and Service
Contracts," "Pay Telephone Agreements," "Coin Operated Telephone Equipment and
Service Contracts," "Contracts," "Pay Phone Location Agreements," "Royalty
Agreements," "Vending Agreements," "Leases," or other similar names and
hereinafter are called "Location Agreements"; and
WHEREAS, Pay Telephone America, Ltd. is a Mississippi Corporation; and
WHEREAS Johnston Industries Alabama, Inc., an Alabama Corporation, is the
sole shareholder of PTA. Johnston Industries Alabama, Inc. will guarantee
fully, absolutely and without recourse the performance and obligations of PTA
hereunder; and
WHEREAS Johnston Industries, Inc., a Georgia Corporation, is the sole
Shareholder of Johnston Industries Alabama, Inc. Johnston Industries, Inc. will
guaranty fully and absolutely the performance of Johnston Industries Alabama,
Inc. on its guaranty; and
WHEREAS, Purchaser is an Illinois corporation, solely owned by Davel
Communications Group, Inc. ("Davel"). Davel will guarantee fully, absolutely and
without recourse the performance and obligations of Purchaser hereunder; and
WHEREAS, Purchaser is in the business of owning and operating pay
telephones and providing associated services; and
WHEREAS, Purchaser and Seller entered into a Letter of Intent dated October
1, 1996 which Letter was assigned to Davel's wholly owned subsidiary,
Telaleasing Enterprises, Inc. Said Letter of Intent contemplates the transaction
memorialized by this Agreement. Any rights, duties and obligations of Davel,
Telaleasing or PTA created by, or arising out of, said Letter of Intent and any
amendments thereto are terminated and void as of the date of this Agreement.
This Agreement shall be the sole expression of the intent of the parties, their
rights, duties and obligations with respect to all matters arising out of the
transaction contemplated by the Letter of Intent or this Agreement; and
<PAGE>
WHEREAS, Subject to the terms and conditions hereinafter set forth, the
Seller desires to sell, and the Purchaser desires to purchase all of Seller's
installed pay telephones consisting of units in Mississippi, Alabama, Tennessee,
Louisiana, Arkansas, Florida and Texas together with associated Location
Agreements, equipment, software, furniture, fixtures, computers, office
equipment, parts, contracts and inventory.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties agree as follows:
1. ASSETS TO BE PURCHASED.
Subject to the terms and conditions set forth herein, Purchaser agrees
to purchase and acquire from the Seller, and the Seller agrees to sell,
transfer, assign and convey to the Purchaser, free and clear of any and all
liens and encumbrances except for (i) obligations imposed by the Location
Agreements which shall be assumed by Purchaser, (ii) as set forth below in this
paragraph and (iii) liens and encumbrances arising out of any matter set forth
in Exhibit 3-h which liens and encumbrances shall be reserved for in the Escrow
referred to in (P) 2(b) hereof, or otherwise indemnified against under the
provisions of (P) 15(a) hereof) approximately 1,000 installed pay telephones
located in Mississippi, Alabama, Tennessee, Louisiana, Arkansas, Florida and
Texas ("Installed Pay Telephones"), associated enclosures, equipment, inventory,
software, computers, fixtures, furniture, tools, parts, supplies, associated
Location Agreements, and all assets and records (or true and exact copies
thereof) directly used in the operation of the Installed Pay Telephones. All of
said assets, including the Installed Pay Telephones, may be collectively
referred to herein as the "Assets" and are more fully described below. No
liabilities are assumed by the Purchaser except as explicitly described in this
Agreement. At Exhibit 1 is set forth a list of known, scheduled liens to which
the Assets may be subject, the parties shall obtain the release of said liens by
payment of Seller's funds distributed at Closing (as hereafter defined) or as
otherwise provided in this (P) 1. The Assets include, but are not limited to,
the following:
(a) Installed Pay Telephones, Equipment and Location Agreements. All
equipment, communications equipment, Pay Telephones, enclosures, masts, cables,
wiring, electrical wiring, conduit, slabs and related property used in
connection with, or located at, all of Seller's Installed Pay Telephones and
associated Location Agreements, a true and correct list of which is attached
hereto as Exhibit 1-a. All rights, duties, obligations and liabilities arising
out of the Location Agreements and attributable to periods prior to Closing
shall be retained by Seller and all such rights, duties, obligations and
liabilities attributable to periods after Closing shall be assumed by and be the
property and obligation of the Purchaser. A few Location Agreements may not be
memorialized by a writing but are nonetheless assigned by this Agreement. All
written Location Agreements are listed in Exhibit 1-a and the originals of said
Agreement are attached to Exhibit 1-a,
(b) Equipment and Inventory. As described in Exhibit 1-b,
(c) Business Records. As requested by Purchaser all original location
files and true and exact copies of all financial and business records pertaining
to the Assets or necessary for the operation of the Assets,
(d) Warranties and Licenses. All warranties and licenses and patents,
if any and to the extent transferable, relating to any of Assets including, but
not limited to, computer software licenses,
(e) Prepaid Expenses and Deposits. All coin in the Pay Telephones at
Closing for which Seller shall receive a credit at Closing, above and beyond the
purchase price, based on the mutually determined best estimate of the parties
and on polling and collection procedures satisfactory to the parties,
(f) Accounts Receivable. All accounts receivable attributable to
periods after Closing. Seller shall provide such notification to payers
regarding payment for amounts attributable to post closing periods as Purchaser
shall reasonably request. All accounts receivable attributable to periods prior
to closing shall remain
<PAGE>
the property of Seller and are not conveyed hereby. Buyer shall promptly notify
Seller upon receipt of any such accounts and shall promptly pay any such
accounts so received to Seller,
(g) Revenues. All revenues attributable to periods subsequent to
Closing,
(h) Name. Buyer shall have the right to use the name "PTA" and the
name Pay Telephone America, Ltd. in its pay phone and telecommunications
operations; however, Seller makes no representation that it has any proprietary
or exclusive right to such name.
(i) Contractual Rights. All contractual rights to install pay
telephones not yet installed which contracts are summarized and attached hereto
at Exhibit 1(i).
2. CONSIDERATION.
(a) Purchase Price. As consideration for the transfer and assignment
of the Assets, Purchaser shall pay a total purchase price of $3,500,000.
(b) Payment at Closing. $533,000 of the purchase price shall be paid
at Closing into escrow ("Escrow") and held and paid as set forth at (P) 2(c),
(P) 15(a) and (P) 18. The escrowed amount is held as security against, and is
subject to deduction for, Sellers failure to perform its representations,
warranties and covenants herein including but not limited to payment by Seller
of those items specified in paragraphs 2(c), 3(a), 3(b), 3(c), 3(g), 3(h), 3(i),
3(l), 3(m), 3(n), 3(o), 3(q), 6(b), 6(c), 6(e), 11, 12, 14 and 15 of this
Agreement. The balance of the purchase price shall be paid as directed by Seller
at Closing.
(c) Kenner & Ridgeland Contracts Scheduled at Contract #015 in Exhibit
1-a are twenty-two (22) Installed Pay Telephones under contract with CF Kenner
Associates ("Kenner Contract") and at Contract #033 in Exhibit 1-a are
scheduled sixteen (16) Installed Pay Telephones under contract with the
Ridgeland Associates ("Ridgeland Contract") both the Kenner Contract and the
Ridgeland Contract require written consent by the Business Owner for the sale
and assignment to Davel. In all events the equipment installed pursuant to the
Kenner and Ridgeland Contracts shall remain the property of Buyer; however, it
is the obligation of Seller to obtain such written consents which consents have
not been obtained prior to Closing, therefore:
(i) Upon delivery to Buyer by Seller of written consent,
substantially in the form as set forth at Exhibit 2-c-i ("Kenner
Consent"), for the transfer of the Kenner Contract, the parties shall
immediately direct the Escrow Agent (as defined below) to release the
sum of $61,600 to Seller, less any amounts previously paid for the
Kenner contract pursuant to (P) 2(c)(ii). Upon delivery to Buyer by
Seller of written consent, substantially in the form as set forth at
Exhibit 2-c-ii ("Ridgeland Consent"), for the transfer of the
Ridgeland Contract, the parties shall immediately direct the Escrow
Agent to release the sum of $44,800 less any amounts previously paid
for the Ridgeland contract pursuant to (P) 2(c)(ii) to Seller.
(ii) Until such time as the Kenner Consent is provided to Buyer,
Buyer shall upon the request of Seller consent to the release from
Escrow of the sum of $63.00 per month per phone for each month during
which a phone is installed and Buyer has received the benefits of the
Kenner Contract, or substantially similar benefits, for the applicable
phone. In no event shall the amount released for each installed phone
pursuant to the Kenner Contract exceed $2,800 for such phone. Until
such time as the
<PAGE>
Ridgeland Consent is provided to Buyer, Buyer shall upon the request
of Seller consent to the release from Escrow of the sum of $63.00 per
month per phone for each month during which a phone is installed and
Buyer has received the benefits of the Ridgeland Contract, or
substantially similar benefits, for the applicable phone. In no event
shall the amount released for each installed phone pursuant to the
Ridgeland Contract exceed $2,800 for such phone.
(iii) To the extent Pay Telephones installed pursuant to the
Ridgeland and Kenner Contracts are required to be removed or to the
extent it has been finally determined by the lapse of time or
otherwise that Buyer is not entitled to Escrow Funds pursuant to the
terms of this paragraph (P) 2-c, Seller shall consent to the release
of such funds to Buyer. Further, should the Kenner or Ridgeland
Contracts be renewed on substantially different terms, the parties
will agree to reasonable adjustments respecting distributions of
Escrow funds consistent with the terms and the provisions of this
paragraph, (P) 2-c.
(d) Price Allocation. The purchase price shall be allocated among
the assets as required by applicable law and regulation and the parties agree
that after Closing they shall agree to and file an Asset Acquisition Statement
prepared pursuant to I.R.C. (S)1060 on IRS Form 8594 consistent with said
allocation.
3. REPRESENTATIONS AND WARRANTIES.
Seller's Representations and Warranties
The Seller represents and warrants to the Purchaser that the following
are true and correct as of the date hereof, and will be true and correct on the
Closing Date (as hereafter defined) except as Seller may notify Purchaser prior
to Closing in a signed writing. Any such notification prior to Closing which
modifies any of the following representations and warranties shall, at the sole
option of Purchaser, result in termination of this Agreement without any
liability for such termination to Seller:
(a) Taxes. No claim or liability is pending or has been assessed or
asserted, or has been threatened against the Seller in connection with any taxes
which are, or may become, a lien against the Assets.
(b) Financial Information. The Seller has furnished to Buyer detailed,
historical financial information which is accurate in all material respects. To
the best of Seller's knowledge no fact or condition exists, or is contemplated
or threatened, which would have a material adverse effect on the business of
Seller or the Assets.
(c) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Seller's authority is entitled to make any claim against the
Purchaser or the Seller for any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
(d) Approval of Government Agencies. To the best knowledge and belief
of Seller no approval of any governmental or administrative agency or authority
is required as a condition to the execution and delivery of this Agreement by
the Seller or its consummation of the transactions contemplated hereby.
(e) Approval of Third Parties. Except as set forth at Exhibit 3-e,
there is no unobtained approval of any third party, except pursuant to release
of liens, required as a condition to the execution and delivery of this
Agreement by the Seller or the consummation of the transactions contemplated
hereby. The
<PAGE>
obligation for the receipt of all such approvals shall rest solely with Seller
and is a condition precedent to Closing and payment.
(f) No Prohibition Against Purchaser. The Seller is not a party to,
or otherwise subject to, any agreement, indenture, instrument, lease, judgment
or any other decree or any other regulation or demand of any government, bureau,
board or agency which would prohibit the consummation of the transaction
contemplated by his Agreement or would otherwise be breached or impaired by such
consummation.
(g) Title to Assets. Except as set forth at (P) 1 and Exhibit 1 the
Seller is the owner of all the Assets and will convey the Assets to the
Purchaser free and clear of all mortgages, pledges, liens (including liens for
taxes due and payable), encumbrances, charges, claims, title retention
agreements or other security interests or arrangements except as specifically
provided herein. Purchaser shall assume no responsibility for any liability,
claim or obligation of Seller arising prior to the date of Closing and otherwise
only as provided in this Agreement.
(h) Litigation. Except as set forth at Exhibit 3-h, Seller has
operated the Assets in material compliance with all applicable laws, rules and
regulations except as may be immaterial to this transaction. There are no
actions, lawsuits or proceedings pending or threatened against the Seller in law
or in equity or before any governmental agency, that if determined adversely to
the Seller would materially affect the Assets being sold hereunder or that would
bring into question the validity of this Agreement or any action taken or to be
taken in accordance with or in connection with this Agreement.
(i) Contractual Interests. The Location Agreements are in full force
and effect except for the Kenner and Ridgeland Contracts. To the best of
Seller's knowledge there are no existing defaults under these agreements on the
part of Seller, which are, individually or in the aggregate, material to the
operation of the Assets. All available originals, and where none is available an
exact copy, if available, of each Location Agreement as scheduled at Exhibit
1-a and associated documents have been furnished to the Purchaser. The Seller is
not a party to any other material contract, agreement or understanding (whether
oral or written) relating to the Assets or Location Agreements.
(j) Fixed Assets and Inventory. The Assets conveyed by this Agreement
are conveyed in an "as is" condition and no warranty as to condition or fitness
is made except that Seller warrants that all Installed Pay Telephones are
operational (except to the extent pending, filed applications for lines have not
been approved) as of Closing and that it has no knowledge of any condition or
state of the Assets which would have a material adverse effect on the Assets,
taken as a whole.
(k) Employment Agreements. Seller has no employment or consulting
contracts relating to the Assets which will cause any lien to attach or charge
to be imposed on or against the Assets.
(l) Location Agreements. Seller warrants that as of the execution of
this Agreement, it has no knowledge of any claims existing or contemplated
against Seller whatsoever by the parties to the Location Agreements.
(m) Payment of All Taxes. The Seller has paid, or will pay as they
become due, all sales, excise, use, income or other taxes or similar charges due
and payable or to become due and payable by Seller for all periods prior to
Closing, the non-payment of which may subject Purchaser to liability, jointly or
severally, in whole or in part for such amounts. Notwithstanding anything to the
contrary contained in this Agreement, Seller shall be responsible and liable for
all taxes relating to the Assets or their use on or before the Closing and
Purchaser shall be responsible and liable for all taxes relating to the Assets
and their use after Closing. After the Closing, each party shall cooperate with
the other in dealing with any taxing authority with respect to the business
conducted and the Assets. Purchaser may, at its sole discretion if Seller has
failed to pay such taxes or charges within 10 days of Seller's receipt of
written notice, pay said taxes or charges and (i) give prompt notice to Seller
for reimbursement, such reimbursement to be made within three (3) business days;
or (ii) pay such taxes or charges and deduct same as a credit against the
balance of the purchase price or any other consideration due to
<PAGE>
Seller. Buyer shall not pay any such taxes which are the subject of dispute
between Seller and the applicable taxing authority provided Seller gives Buyer
written notice of such dispute and provided that such non-payment does not
disrupt or interfere with Buyer's continued use or revenues from the purchased
assets. This provision does not relieve Seller from its obligation to pay such
charges or taxes if Purchaser does not avail itself of the foregoing remedies.
(n) Noncancelability of Location Agreements. The Location Agreements
are not terminable due to the execution of this Agreement or the performance of
the terms hereof.
(o) Payment of All Commissions. The Seller has paid, or will pay, on
or prior to the Closing Date, all commissions due from Seller or attributable to
periods prior to Closing under all Location Agreements. Alternatively, the
Seller shall pay such commissions as they become due after the Closing for the
period before the Closing. If the Seller fails to pay any such commissions
arising for periods before the Closing, the Purchaser may pay any such
commissions at its sole discretion if Seller has failed to pay such commissions
within 10 days of Seller's receipt of written notice, pay said commissions and
(i) give prompt notice to Seller for reimbursement, such reimbursement to be
made within five (5) business days; or (ii) pay such commissions and deduct same
as a credit against the balance of the purchase price or any other consideration
due to Seller. Buyer shall not pay any such commissions which are the subject of
dispute between Seller and the applicable location provided Seller gives Buyer
written notice of such dispute and provided that such non-payment does not
disrupt or interfere with Buyer's continued use or revenues from the purchased
assets. This provision does not relieve Seller from its obligation to pay such
commissions if Purchaser does not avail itself of the foregoing remedies.
(p) Installed Pay Telephone Keys. The Seller has delivered to the
Purchaser, on or prior to the Closing Date, all keys to the Installed Pay
Telephones, including keys to the upper housing and lower housing, and there are
no other keys or copies thereof held by any other parties, including employees
of Seller to the best of Seller's knowledge and belief.
(q) Payment of Telephone Charges. The Seller has paid, or will pay,
on the later of the Closing date or when billed by the local exchange carrier,
all telephone bills and charges due from the Seller to the local exchange
carrier, any interexchange carriers or to any other entity or party for services
provided for all periods prior to Closing and attributable to the Assets.
Alternatively, the Purchaser may pay any such bills and charges at its sole
discretion if Seller has failed to pay such bills and charges within 10 days of
Seller's receipt of written notice, pay said bills and charges and (i) give
prompt notice to Seller for reimbursement, such reimbursement to be made within
three (3) business days; or (ii) pay such bills and deduct same as a credit
against the balance of the purchase price or any other consideration due to
Seller. Buyer shall not pay any such bills or charges which are the subject of
dispute between Seller and the applicable creditor authority provided Seller
gives Buyer written notice of such dispute and provided that such non-payment
does not disrupt or interfere with Buyer's continued use or revenues from the
purchased assets. This provision does not relieve Seller from its obligation to
pay such bills or charges if Purchaser does not avail itself of the foregoing
remedies.
(r) Corporate Standing. Pay Telephone America, Ltd. is a corporation
duly organized and validly existing in good standing under the laws of
Mississippi with full power and authority to own its properties and conduct its
business as conducted. Seller shall provide a Certificate of Good Standing from
the State of Mississippi as of a recent date reasonably satisfactory to Buyer.
(s) Corporate Authority. This Agreement and the transactions
contemplated hereby have been duly and validly authorized and, at Closing, good
title to the Assets will be vested in the Seller and transferred to the
Purchaser free and clear of any claims or encumbrances (except as described at
(P) 1 and Exhibit 1) above or created by Purchaser or obligations of Purchaser.
This Agreement shall, when executed, be a valid and binding obligation of Seller
and its Guarantor. Seller shall provide Purchaser at or prior to Closing with
Certified Resolutions and a Secretary's Certificate in form reasonably
satisfactory to Buyer as evidence of authority for the transaction memorialized
by this agreement.
Purchaser's Representations and Warranties
<PAGE>
The Purchaser represents and warrants to the Seller that the following are
true and correct as of the date hereof, and will be true and correct on the
Closing Date except as Purchaser may notify Seller prior to Closing in a signed
writing. Any such notification prior to Closing which modifies any of the
following representations and warranties shall, at the sole option of Seller,
result in termination of this Agreement without any liability for such
termination to Purchaser:
(t) No Finders or Brokers. No agent, broker or other person acting
pursuant to the Purchaser's authority is entitled to make any claim against the
Seller for any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
(u) Approval of Government Agencies. No approval of any governmental
or administrative agency or authority is required as a condition to the
execution and delivery of this Agreement by the Purchaser or its consummation of
the transactions contemplated hereby.
(v) Approval of Third Parties. No approval of any third party is
required as a condition to the execution and delivery of this Agreement by the
Purchaser or its consummation of the transactions contemplated hereby. The
obligation for the receipt of any such approvals shall rest solely with Seller
and is a condition precedent to Closing and payment.
(w) No Prohibition Against Purchaser. The Purchaser is not a party
to, or otherwise subject to, any agreement, indenture, instrument, lease,
judgment or any other decree or any other regulation or demand of any
government, bureau, board or agency which would prohibit the consummation of the
transactions contemplated by his Agreement or would otherwise be breached or
impaired by such consummation.
(x) Corporate Standing. Telaleasing Enterprises, Inc. is a
corporation duly organized and validly existing in good standing under the laws
of the State of Illinois with full power and authority to own its properties and
conduct its business as conducted.
4. ACCESS TO RECORDS/VERIFICATION OF ASSETS.
Prior to Closing Seller will permit representatives of Purchaser
reasonable access to all the property, books, contracts, documents, records,
reports, and data bases of Seller relating to the Assets and will furnish such
information concerning same as Purchaser or its agents may reasonably request.
Purchaser and Seller agree that the basis for the establishment of the purchase
price is the financial statements and accounting information previously provided
and the number of Installed Pay Telephones.
5. DUE DILIGENCE.
This Agreement shall be binding upon the parties effective as of the
date of execution subject to verification, by the Purchaser, from information,
records, documents and other items provided by the Seller sufficient to verify
the factual basis for the warranties and representations made to it by the
Seller herein.
6. TRANSITION MATTERS.
(a) Implementation of Change With Owners. After Closing Seller shall
fully cooperate with Purchaser, but only as specifically requested from time to
time, in advising parties to the Location Agreements that the business of Seller
is under new management as of the date of Closing and to advise them as to the
manner in which to place requests for service in the future. Such cooperation
shall be limited to that reasonable in the circumstances. If Seller believes
that any such activity is unreasonable, Seller may request compensation as a
condition of performance or refuse to perform such activity.
(b) Non-Coin Long Distance. Seller is entitled to receive
compensation for long distance traffic from 0+ and 0- traffic from Operator
Service Providers. All such commissions, payments or other monies
<PAGE>
due and owing Seller attributable to periods prior to Closing shall be the
property of Seller and shall be properly paid to Seller. This and any other
property of Seller which may come into Purchaser's possession shall be promptly
delivered within five (5) days by Purchaser to Seller. All such commissions,
payments or other monies due and owing Seller attributable to periods after
Closing shall be the property of Purchaser and shall be properly payable to
Purchaser. This and any other property of Purchaser which may come into Seller's
possession shall be promptly delivered within five (5) days by Seller to
Purchaser. After Closing Seller shall provide such notification to payors
regarding payment for amounts attributable to post closing periods as Purchaser
shall reasonably request. Seller agrees to assist as required in the
implementation of any change of Long Distance Provider requested by Purchaser
after Closing Date subject to compliance with applicable regulations.
(c) Coin. The parties have polled the phones prior to the date hereof
and based on the mutually determined best estimate of the parties Buyer hereby
agrees to pay Seller $47,000.00 for all coin in the phones at Closing in
addition to the purchase price. Seller shall not accelerate or delay removal of
coin from the Pay Telephones in anticipation of Closing so as to distort the
estimate of the parties or the amount of coin remaining in the phones at
Closing. Buyer is hereafter entitled to remove and retain all coin in the phones
at Closing without further accounting to Seller for such coin.
(d) Local Lines. After Closing Seller will cooperate in the transfer
of local telephone company lines and services to Purchaser, as required.
Purchaser shall use its reasonable best efforts to proceed promptly to effect a
transfer of service to the local exchange carrier.
(e) Records and Rate Files. Seller shall reasonably cooperate with
Purchaser in making available all rate files, databases and similar information
prior to Closing to facilitate the transfer of the Installed Pay Telephones to
Buyer at Closing. Seller will cooperate in providing such records in a format
and media convenient to Buyer.
(f) Public Utility Commissions. Seller shall take reasonable action
to cooperate with Buyer in obtaining the approval of the Public Utility
Commissions in all applicable states for the operation of the Installed Pay
Telephones. Such cooperation shall include, but not be limited to, Buyer's use
of Seller's authority, if any, pending approval of Buyer's application for COCOT
authority, which shall be promptly filed and prosecuted by Buyer.
7. CLOSING.
The transactions contemplated by this Agreement shall be consummated
on or before November 1, 1996. Said date shall be known herein as "the Closing
Date" or the "Closing." The Seller and the Purchaser shall take the following
actions on the Closing Date:
(a) The Seller shall deliver to the Purchaser the following fully
executed documents as a condition precedent to payment:
(i) A Bill of Sale substantially in the form as set forth at
Exhibit 7-a-i transferring ownership of the Assets except for those
items conveyed pursuant to (P) 7(a)(ii).
(ii) An Assignment and Assumption of the Location Agreements
substantially in the form as set forth at Exhibit 7-a-ii;
(iii) All existing, available originally executed Location
Agreements;
(iv) Such other documents as may be reasonably required to
consummate and evidence the transactions and transfers contemplated by
this Agreement as may be requested by Buyer.
<PAGE>
(b) The Purchaser shall pay the sums provided to Seller and the
Escrow agent as set forth and in the manner provided by (P)2.
(c) Transfer of Assets. On or prior to Closing Seller shall deliver
all of the Assets to Purchaser. Seller shall deliver all keys (and any copies
thereof) to all Installed Pay Telephones (both upper housing and lower housing
keys).
(d) Place of Closing. All transactions contemplated herein shall be
consummated at the office of Seller in Jackson, Mississippi or at such other
places the parties may mutually determine in writing.
(e) Exhibits. Any Exhibits not provided at the time of execution of
this Agreement shall be provided at or prior to Closing.
8. CONTINUING RELATIONSHIPS.
The Seller agrees to use its reasonable efforts for a period not to
exceed 180 days from closing to assure an orderly transition and favorable
business relationship between the Purchaser and Seller's existing phone
customers and suppliers. The Seller shall not, from and after the Closing Date,
solicit orders from such customers. In addition, the Seller shall, from and
after such time, direct to the Purchaser all inquiries from such customers and
other persons regarding the business of Seller. The Seller shall, from and
after the Closing Date, maintain the absolute confidentiality of all matters
relating to the Assets and business for three (3) years following the Closing
Date. Except for information which Seller has made publicly available or is
otherwise in the public domain, Purchaser shall not use or disclose any
information which Purchaser may have acquired concerning the Seller, or the
business practices of Seller, that are not directly related to the Assets.
Without limiting the foregoing and except for information which Seller has made
publicly available or is otherwise in the public domain, Purchaser shall not use
or divulge to any third person any financial information concerning the Seller,
including, but not limited to, the Financial Statements (except for financial
information directly related to the Installed Pay Telephones). None of the
foregoing restrictions on disclosure by Seller or Purchaser shall apply to
disclosures mandated by a court, taxing authority or other governmental entity
with authority to require such disclosure.
Except for passive investment as less than a 10% shareholder in any
publicly traded company, neither Seller nor Seller's sole shareholder, Johnston
Industries Alabama, Inc., shall for a period of sixty (60) months from the date
of Closing directly or indirectly, own, manage, operate, join, control,
participate in, advise, or be connected in any manner with any person, firm,
corporation or other entity which is, or becomes engaged in the operation of pay
telephones to any customers of Seller within Mississippi, Alabama, Arkansas,
Florida, Louisiana, Texas or Tennessee or any person or entity within such
States. This covenant on the part of the Seller, its officers and shareholders
shall be construed as an agreement independent of any other provisions of this
Agreement. The parties hereto agree that this restrictive covenant may be
enforced in law or in equity, including, but not limited to, injunctive relief
against Seller. The parties hereto agree that in the event of the breach of this
restrictive covenant, the Purchaser and related entities may not have an
adequate remedy at law other than an injunction, or that damages will be
difficult to ascertain as the result of such breach and that, if an injunction
is sought by the Purchaser or related entities, Seller waives any requirement
that the Purchaser post any bond and the unsuccessful party agrees to pay any
attorneys' fees and court costs in the event the successful party receives its
requested relief. The Seller shall deliver at or before Closing Covenants Not to
Compete in the forms as set forth at Exhibit 8(1) and Exhibit 8(2).
9. CONDUCT OF BUSINESS.
From the date of this Agreement through the Closing Date, the Seller
shall:
<PAGE>
(a) not enter into any material or unusual contracts affecting the
business of Seller without the prior written consent of the Purchaser;
(b) not create any security interests in any of the Assets.
(c) continue to operate the business in a routine and regular fashion.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
The obligations of the Purchaser to acquire the Assets in accordance
with the terms of this Agreement and the obligations of Seller to sell the
Assets shall be subject to the fulfillment on, or prior to, the Closing Date of
each of the following conditions:
(a) Accuracy of Representations. All representations and warranties
of the Purchaser and Seller contained in this Agreement, and Exhibits hereto or
otherwise made in writing pursuant to this Agreement shall be true and correct
in all material respects on the Closing Date with the same force and effect as
though made on and as of the Closing Date.
(b) Performance of Obligations. The Seller and Purchaser shall have
performed and complied with all of the obligations and conditions required by
this Agreement to be performed or complied with by Seller and Purchaser on or
prior to the Closing Date.
(c) No Change of Condition and Due Diligence. The Assets shall not
have been adversely affected in any material way, directly or indirectly, which
would affect Purchaser's operation or use of the Assets.
11. BULK TRANSFERS.
The parties agree that they will waive compliance with the
requirements of any State law dealing with bulk transfers of assets either
pursuant to the Uniform Commercial Code or State laws relating to sales, service
or use taxes and Seller agrees to indemnify and hold Buyer harmless from any
loss, expenses, costs (including reasonable legal fees and reasonable expenses)
incurred by the failure to so comply. This Section, (S) 11, shall not be
interpreted to relieve Seller of its obligation to transfer the Assets free and
clear of all liens and encumbrances as otherwise provided in this Agreement.
12. COMPLIANCE WITH TAX PROVISIONS.
Seller agrees to indemnify and hold Purchaser harmless from and
against any and all sales, excise, use, income or other taxes due as a result of
this transaction. If the Seller does not pay any such taxes the Purchaser may
pay any such taxes at its sole discretion if Seller has failed to pay such taxes
within 10 days of Seller's receipt of written notice, pay said taxes and (i)
give prompt notice to Seller for reimbursement, such reimbursement to be made
within three (3) business days; or (ii) pay such taxes and deduct same as a
credit against the balance of the purchase price or any other consideration due
to Seller. This provision does not relieve Seller from its obligation to pay
such taxes if Purchaser does not avail itself of the foregoing remedies.
Purchaser shall not pay any such taxes which are the subject of dispute between
Seller and the applicable taxing authority provided Seller gives Purchaser
written notice of such dispute and provided that such non-payment does not
disrupt or interfere with Purchaser's continued use or revenues from the
purchased assets. Notwithstanding the foregoing, Purchaser knows of no taxes,
sales taxes, excise taxes, use taxes or other taxes (other than federal income
taxes) that will become due as a result of the transactions contemplated by this
Agreement.
Purchaser agrees to indemnify and hold Seller harmless from and
against any and all sales, excise, use, income or other taxes due as a result of
Purchaser's use or operation of the Assets on and after the Closing Date. If
the Purchaser does not pay any such taxes the Seller may pay any such taxes at
its sole discretion if Purchaser has failed to pay such taxes within 10 days of
Purchaser's receipt of written notice, pay said taxes and give prompt notice to
Purchaser for reimbursement, such reimbursement to be made within three
<PAGE>
(3) business days. This provision does not relieve Purchaser from its obligation
to pay such taxes if Seller does not avail itself of the foregoing remedy.
Seller shall not pay any such taxes which are the subject of dispute between
Purchaser and the applicable taxing authority provided Purchaser gives Seller
written notice of such dispute. Notwithstanding the foregoing, Purchaser knows
of no taxes, sales taxes, excise taxes, use taxes or other taxes (other than
federal income taxes) that will become due as a result of the transactions
contemplated by this Agreement.
13. ADDITIONAL INSTRUMENTS.
The Seller agree from time to time, upon the request of the Purchaser,
to execute and deliver to the Purchaser such other instruments of sale,
transfer, assignment and conveyance and to take such other action as the
Purchaser may reasonably request to effectively vest ownership in the Purchaser
of all of the Assets sold, transferred, assigned and conveyed hereunder.
14. EXPENSES.
Each party hereto shall pay all expenses incurred by it in connection
with the negotiation, execution and performance of this Agreement, whether or
not the transactions contemplated herein are consummated, including the fees and
expenses of the counsel and accountants of each.
15. INDEMNIFICATION.
(a) Seller. The Seller agrees to indemnify the Purchaser fully and
hold the Purchaser harmless from and against and in respect of all demands,
actions or causes of action, assessments, losses, damages, liabilities,
judgments, costs and reasonable expenses asserted against or incurred by the
Purchaser arising out of a breach of any representation, warranty or agreement
of the Seller contained in this Agreement or in any Exhibit hereto or arising
out of any act or omission of the Seller prior to the Closing Date (except with
respect of liabilities specifically assumed by the Purchaser). In no event shall
Seller's aggregate obligation under this section, 15(a), exceed the purchase
price less amounts paid to Buyer from escrow after Closing. Further, Seller
hereby indemnifies Buyer against any claim or loss arising out of any matter (or
lien associated therewith) set forth at Exhibit 3-h. Upon either (i) receipt by
Buyer, in form reasonably satisfactory to Buyer, of direct indemnification by
Johnston Industries, Inc. against any such loss or (ii) satisfaction by PTA of
any judgement lien or encumbrance arising out of any matter set forth in Exhibit
3-h, Buyer shall immediately consent to the release from Escrow of the sum of
$100,000.
(b) Purchaser. The Purchaser agrees to indemnify the Seller fully and
hold the Seller harmless from and against and in respect of all demands,
actions, or causes of action, assessments, losses, damages, liabilities,
judgements, costs and reasonable expenses asserted against or incurred by the
Seller arising out of a breach of any representation, warranty or agreement of
the Purchaser contained in this Agreement or in any Exhibit hereto or arising
out of any act or omission of the Purchaser after the Closing Date (except with
respect of liabilities specifically retained by the Seller).
(c) De Minimus Recovery Limitation. Notwithstanding the provisions of
sections 15(a) and 15(b) no party shall be liable for any indemnification or
breach of representation or warranty until the amount of all damages or losses
exceeds $25,000 in the aggregate, excluding. The limitations of this section
shall not apply to any operating liabilities, revenues or taxes or the
indemnification against loss for matters set forth on Exhibit 3-h. Once the
$25,000 limit is exceeded, the party liable shall be liable for the entire
amount of such loss or damage, including the $25,000 threshold amount.
(d) Method of Asserting and Handling Claims For Indemnification. In
the event that any claims or demand for which an Indemnifying Party would be
liable to an Indemnified Party under this Agreement is asserted against or
sought to be collected from such Indemnified Party by a third party, the
Indemnified Party
<PAGE>
shall promptly notify in writing the Indemnifying Party of such claim or demand,
specifying the nature of and specific basis for such claim or demand and the
amount or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim and demand
(the "Claim Notice")). The Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to any such claim or demand if the
Indemnified Party fails to notify the Indemnifying Party thereof in accordance
with the provisions of this Agreement in reasonably sufficient time so that the
Indemnifying Party's ability to defend against the claim or demand is not
prejudiced. The Indemnifying Party shall have thirty (30) days from the personal
delivery or mailing of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (i) whether or not the Indemnifying Party disputes its
liability to the Indemnified Party hereunder with respect to such claim or
demand and (ii) whether or not the Indemnifying Party desires, at its sole cost
and expense, to defend the Indemnified Party against such claim or demand. In
the event that the Indemnifying Party notified the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against such claim
or demand and except as hereinafter provided, the Indemnifying Party shall have
the right to defend by all appropriate proceedings, and control the settlement
of any such claim or proceeding which proceedings shall be settled or prosecuted
by him to a final conclusion. If the Indemnified Party desires to participate
in, but not control, any such defense or settlement it may do so at its sole
cost and expense. If requested by the Indemnifying Party, the Indemnified Party
agrees to cooperate with the Indemnifying Party and its counsel in contesting
any claim or demand which the Indemnifying Party elects to contest, including,
without limitation, by executing or causing to have executed any power of
attorney authorizing the Indemnifying Party to act on behalf of the Indemnified
Party or the Companies, or, if appropriate and related to the claim in question,
in making any counterclaim against the person asserting the third-party claim or
demand, or any cross-complaint against any person. No claim may be settled
without the consent of the Indemnifying Party.
16. SURVIVAL OF REPRESENTATION.
All representations, warranties and agreements contained in this
Agreement or any Exhibit hereto or made pursuant of the transactions
contemplated by this Agreement shall survive the Closing Date for a period of
eighteen months from the Closing Date.
17. MISCELLANEOUS PROVISIONS.
(a) Publicity. All notices to third parties and all other publicity
concerning the transaction contemplated by this Agreement shall be planned and
coordinated by Purchaser. Seller agrees not to make any public disclosure
regarding this transaction without the prior written approval of Buyer, except
as otherwise required by this Agreement, or applicable law. Nothing in this
paragraph 17 shall prevent Seller from disclosing elements of this agreement to
its agents, attorneys and accountants in the normal course of its business.
(b) Effect of Headings. The subject headings of the articles,
sections and paragraphs of this Agreement are included for purposes of
convenience only and shall not affect the construction or interpretation of any
of its provisions.
(c) Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) Waiver of Compliance. Any failure of Purchaser, on the one hand,
or Seller, on the other hand, to comply with any obligation, covenant, agreement
or condition herein may be expressly waived in writing. Failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
(e) Availability of Equitable Remedies. Since a breach of various
provisions of this Agreement could not adequately be compensated by money
damages, Seller or Purchaser, as the case may be, may obtain, in addition to any
other remedy available to it, an injunction restraining such breach and specific
<PAGE>
performance of such provisions of this Agreement without proof of loss or
imminent loss, and no bond or other security shall be required in connection
therewith.
(f) Parties in Interest. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any person other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third person any right of
subrogation or action over or against any party to this Agreement.
(g) Binding on Successors. This Agreement shall be binding on, and
inure to the benefit of, the parties to it and their respective heirs, legal
representatives and successors.
(h) Disclosure. No representation or warranty made by any party
hereto and no certificate or document furnished or to be furnished to any party
hereto pursuant to this Agreement contains or will contain any untrue statement
of a material fact.
(i) Exhibits. The exhibits referred to herein shall be attached
hereto and are a part of this Agreement as if fully set forth herein.
(j) Notices. All notices, requests, demands or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been delivered five days after posting by certified United States Mail, with
postage prepaid:
(1) If to Purchaser:
Davel Communications Group, Inc.
601 West Morgan
Jacksonville, IL 62650
Attn: T.C. Rammelkamp, Jr.
(2) If to Seller: Johnston Industries, Inc.
105 Thirteenth Street
Columbus, GA 31901
Attn: John W. Johnson, V.P. and CFO
with copy to: Smith, Gambrell & Russell
1230 Peachtree Street, NE
Suite 3100 - Promenade 2
Atlanta, GA 30309
Attn: David J. Harris
or to such other person or address as a party shall furnish to the other parties
hereto in writing.
(k) Arbitration, Governing Law and Attorney Fees. All disputes
arising under this Agreement shall be settled under the Rules of Conciliation
and Arbitration of the International Chamber of Commerce by one arbitrator,
knowledgeable in the hospitality and telecommunications industry, appointed in
accordance with said Rules, with recourse, if necessary, to the International
Center for Technical Expertise of the ICC in accordance with the ICC's Rules for
Technical Expertise; provided however if the amount in dispute is more than
$100,000 three arbitrators shall be appointed upon the request of either party.
Unless the parties agree otherwise, the place of Arbitration shall be Chicago,
Illinois, U.S.A. Any agreed place of Arbitration must be in a country which is a
party to the Convention on the Recognition and Enforcement of Foreign
Arbitration Awards ("New York Convention"). The Arbitration proceedings shall be
conducted in the English language. The costs of Arbitration and the expenses of
the parties in preparation and attending the arbitration proceeding or any other
proceeding arising out of this Agreement, including but not limited to the
reasonable attorney fees of the parties, shall be charged to the party
substantially prevailing. Reasonable attorney's fees shall be computed by
reference
<PAGE>
to the reasonable charge for such services without regard to the amount actually
paid or whether or not the services were performed by in-house counsel or
otherwise and shall include reasonable costs associated with such services. This
Agreement shall be governed and construed in accordance with the laws of the
State of Illinois.
(l) Entire Agreement. This Agreement, including the exhibits and
other documents referred to herein which form a part hereof, embodies the entire
agreement and understanding or the parties hereto in respect to the subject
matter contained herein. There are no restrictions, promises, warranties,
covenants or understandings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by the parties hereto.
(m) Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(n) Non-Disclosure. Seller agrees that it shall not negotiate for the
sale, trade or other transfer of any of the assets which are the subject of this
Agreement after the execution of this Agreement and prior to the earlier of
termination of the Agreement or Closing.
(o) Recitals. The introductory recitals set forth on page one of this
Agreement are specifically incorporated into this Agreement and are a part
thereof.
18. ESCROW PROVISIONS.
On the date of Closing $533,000 in accordance with the provisions of
(P) 2(b) shall be paid into an Escrow by deposit to The Farmers State Bank and
Trust Company to secure payment of the items set forth at paragraphs 2(c),
3(a), 3(b), 3(c), 3(g), 3(h), 3(i), 3(l), 3(m), 3(n), 3(o), 3(q), 6(b), 6(c),
6(e), 11, 12, 14 and 15 of this Agreement. The Escrow Agreement shall provide
that the escrowed funds shall not be distributed except on direction of both
parties or upon order of a court of competent jurisdiction. The Seller may
direct the investment of escrowed funds, but all investments must be in either
United States Government or domestic Bank instruments denominated in United
States currency. All interest earned on the escrowed funds shall be allocated
proportionately as the amounts are distributed to the parties. The escrow
Agreement shall provide that both parties will submit an interim accounting to
each other within 90 days of Closing at which time, upon written direction to
the escrow agent signed by both parties, the escrow agent shall disburse all of
the escrow funds in accordance with said written direction, except such funds
as are necessary to secure Buyer's position in respect to the Kenner and
Ridgeland Contracts as set forth at (P) 2-c. The Escrow shall continue
consistent with the terms of (P) 2-c of this Agreement until all fund have been
disbursed. In all events the parties shall submit to each other a final
accounting no later than January, 2001 at which time, upon written direction to
the escrow agent signed by both parties, the escrow agent shall disburse all of
the escrow funds in accordance with said written direction. The terms of the
Escrow Agreement shall be substantially as set forth at Exhibit 18.
19. GUARANTY.
In accordance with the terms and subject to the limitations of the
Guaranty attached hereto at Exhibit 19(1) Johnston Industries Alabama, Inc.,
sole shareholder of Seller hereby fully guaranties the performance of this
Agreement in all of its particulars by Seller. Further, in accordance with the
terms and subject to the limitations of the Guaranty attached hereto at Exhibit
19(2), Johnston Industries, Inc., sole shareholder of Johnston Industries
Alabama, Inc., hereby fully guaranties the performance by Johnston Industries
Alabama, Inc. on its guaranty.
<PAGE>
In accordance with the terms of the Guaranty attached hereto at Exhibit
19(3), Davel Communications Group, Inc. being the sole shareholder of Buyer
hereby fully guaranties the performance of this Agreement in all of its
particulars by Buyer.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
PURCHASER:
TELALEASING ENTERPRISES, INC.,
an Illinois Corporation
__________________________________
By: Theodore C. Rammelkamp, Jr.
Its: Senior Vice President
Attest:
_____________________________
By: Michael Kouri
Its: Senior Vice President
Seller:
PAY TELEPHONE AMERICA, LTD.,
a Mississippi Corporation
__________________________________
By: James Wilkins
Its: President
ATTEST
_____________________________
By:
Its:
Guarantor
DAVEL COMMUNICATIONS GROUP, INC.,
an Illinois Corporation
__________________________________
By:
Its:
Attest
_____________________________
By: Michael Kouri
Its: Senior Vice President
Guarantor
JOHNSTON INDUSTRIES ALABAMA, INC.
_____________________________________________
By:
<PAGE>
Its:
ATTEST
_______________________________________
By:
Its:
Subordinate
Guarantor
JOHNSTON INDUSTRIES, INC.
_____________________________________________
By:
Its:
ATTEST
_______________________________________
By:
Its:
