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EXHIBIT C-2
AGREEMENT AND PLAN OF MERGER
among
PHONETEL TECHNOLOGIES, INC.
INTERNATIONAL PAY PHONES, INC.
(Tennessee)
and
ALL OF THE SHAREHOLDERS OF
INTERNATIONAL PAY PHONES, INC.
November 22, 1995
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AGREEMENT AND PLAN OF MERGER
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Agreement and Plan of Merger (the "Agreement"), dated as of November
22, 1995, among PhoneTel Technologies, Inc., an Ohio corporation (the
"Parent"), International Pay Phones, Inc. a Tennessee corporation (together
with all Subsidiaries thereof, "the Company"), and all of the shareholders of
the Company (collectively, the "Sellers"), whose names, addresses and holdings
in the Company are set forth on Exhibit A hereto.
WHEREAS, the Company is engaged in the business of owning and
operating microprocessor-based pay telephones and engaging in the sale,
installation and maintenance of pay telephones; and
WHEREAS, the Boards of Directors of the Parent and the Company
have each approved, and deem it advisable and in the best interests of their
respective shareholders to consummate, the merger of the Company into Buyer
upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of
Directors of the Parent and the Company have each approved this Agreement and
the merger of the Company with and into the Buyer in accordance with the
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terms of this Agreement and the Business Corporation Act of the State of
Tennessee (the "BCA"); and
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger (as defined herein) shall qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and this Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 of the Code;
NOW, THEREFORE, in consideration of the mutual agreements,
covenants, representations and warranties set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
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1.1 THE MERGER. Upon the terms and subject to conditions
of this Agreement and in accordance with the BCA at the Effective Time, the
Company shall be merged with and into the Buyer (the "Merger") and the separate
corporate existence of the Company shall cease. After the Merger, the Buyer
shall continue as the surviving corporation (sometimes hereinafter referred to
as the "Surviving Corporation"). The Merger shall have the
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effects as provided in the applicable provisions of the BCA. Without limiting
the generality of the foregoing, upon the Merger, all the rights, privileges,
immunities, powers and franchises of the Company and the Buyer shall vest in
the Surviving Corporation and, except as otherwise provided for in this
Agreement, all obligations, duties, debts and liabilities of the Company and
the Buyer shall be the obligations, duties, debts and liabilities of the
Surviving Corporation.
1.2 CONVERSION OF SHARES. At the Effective Time:
(a) Each share of common stock, par value $1.00 per
share, of the Company ("Company Shares") outstanding immediately prior to the
Effective Time shall be converted into the right to receive a percentage of the
Consideration equal to the percentage such Company Share represents of all
Company Shares. The consideration (the "Consideration") shall equal the sum of
(i) the excess of (A) the product of $3800 and the Company Phones Amount, over
(B) $15,000, subject to adjustment as set forth in Section 1.4 hereof (to be
paid one half in cash and one half in certificates representing Parent Shares,
valued at the Stock Price) plus (ii) the sum of (A) the product of $1,000 and
the
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Customer Phones Amount plus (B) $25,000 (to be paid in Parent Shares, valued at
the Stock Price).
(b) Each share of common stock of Buyer outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
1.3 CLOSING PAYMENT. (a) Not later than three business
days prior to the Closing, Seller's Representative shall deliver to Buyer a
good faith estimate of the adjustments to the Consideration as of the Closing
Date, including all the detail required by Section 1.4 hereof.
(b) At the Closing, Parent shall pay to Seller
Representative (for distribution Pro Rata to Sellers) an amount equal to the
Consideration which would be payable if adjusted pursuant to Section 1.4 (using
the good faith estimates delivered pursuant to paragraph (a) above); provided
that such amount shall be reduced by $125,000 (one-half in cash and one-half in
Parent Shares, valued at the Stock Price).
1.4 Consideration Adjustments.
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(a) COMPANY PHONE AMOUNT. The Consideration shall
be adjusted to reflect the actual Company Phones Amount and the Customer Phones
Amount, as provided in Section 1.2(a). In addition, the Consideration shall be
further adjusted by the following calculations, provided that the adjustments
in Paragraph (b) shall be made before any adjustments are made pursuant to
paragraph (c).
(b) Length Of Contract; Average Income.
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(i) If at the Closing Date the Average Term
is less than 30 months, then the Consideration shall be reduced by
multiplying (A) the amount calculated pursuant to Section 1.2(a)(i),
(as adjusted by Section 1.4(a)), by (B) a fraction, the numerator of
which will be the Average Term and the denominator of which will be
30.
(ii) If the Average Income is less than $115
per phone then the Consideration shall be reduced by multiplying (A)
the amount calculated pursuant to Section 1.2(a)(i) (as adjusted by
Section 1.4(a) and 1.4(b)(i)) by (B) a fraction, the numerator of
which will be
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the Average Income and the denominator of which will be 115.
(c) Other Adjustments.
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(i) The Consideration shall be decreased by
an amount equal to the excess of (A) all Liabilities of the Company as
of the Closing over (B) the sum of all Current Assets. For purposes
of this paragraph 1.4(c)(i), all amounts specified in clauses (ii) and
(iii) below or in respect of telephone bills due on or after the
Closing Date shall be disregarded.
(ii) The Consideration shall be decreased by
the amount owing in respect of any telephone bills received by the
Company on or before the Closing Date which are due prior to the
Closing Date but not paid by the Company or Sellers on or before the
Closing Date.
(iii) The Consideration shall be increased
by the excess of (A) the amount accrued as of the Closing Date as
receivables from AT&T, Opticon, and third and fourth quarter APCC (but
only to the extent such amount is received by the Company within 150
days after the Closing Date) over (B) the amount of all site
commissions accrued but not
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paid as of the Closing Date. In the event the amount specified in
clause (B) above exceeds the amount in clause (A) above, the
Consideration shall be decreased by the amount of such excess.
(iv) The consideration shall be decreased by
the amount of all indebtedness or other Liabilities relating to the
vehicles specified in Schedule 5.18(d) to the Disclosure Schedule.
(d) The number of Parent Shares to be issued
hereunder shall be adjusted to account for any stock splits, reverse stock
splits, stock dividends, or any similar transaction with respect to Parent
Shares.
(e) As soon as practicable after the Closing Date
(but in any event not more than 150 days after the Closing Date), the Parent
shall cause to be prepared and delivered to Seller Representative and the
Escrow Agent a schedule (the "Adjustment Schedule") which shows, as of the
Closing Date, the calculation of the Consideration as provided in Section
1.2(a) and as adjusted pursuant to this Section 1.4.
(i) Upon receipt of the Adjustment Schedule,
Seller Representative
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shall have the right during the succeeding 10-day period to examine
the Adjustment Schedule and all records used to prepare such
Adjustment Schedule. Seller Representative shall notify Parent in
writing, on or before the last day of the 10-day period, of any good
faith objections to the Adjustment Schedule, setting forth a
reasonably specific description of such objections and the dollar or
other amount, as the case may be, of each objection.
(ii) If Seller Representative in good faith
objects to the Adjustment Schedule, Seller Representative and Parent
shall attempt to resolve any such objections within 10 days of
Parent's receipt of such objections. If Parent and Seller
Representa-tive are unable to resolve the matter within such 10-day
period, they shall jointly appoint a mutually acceptable firm of
independent certified public accountants (or, if they cannot agree on
a mutually acceptable firm, they shall cause their respective
accounting firms to select such firm) within five days after the end
of such 10-day period. The fees
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of such independent certified public accountants shall be divided
equally between Parent and the Seller Representative (on behalf of all
Sellers). Such firm's resolution of the dispute shall be conclusive
and binding upon the Sellers and Parent.
(iii) The Adjustment Schedule shall be
deemed complete upon the earlier of (A) the eleventh (11th) day after
Parent's delivery of the Adjustment Schedule to Seller Representative,
unless prior to such day Seller Representative shall have notified
Parent of a dispute in accordance with paragraph (i), and (B) the
resolution of all disputes, pursuant to paragraph (ii). Within two
business days following completion of the Adjustment Schedule as
aforesaid, either
(A) Parent shall pay Seller Representative, on behalf of
Sellers, the amount, if any, by which the Consideration (as
adjusted) exceeds the amount paid pursuant to Section 1.3(b);
or
(B) Seller Representative, on behalf of Sellers, shall
pay to Buyer the amount, if any, by
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which the amount paid pursuant to Section 1.3(b) exceeds the
Consideration (as adjusted).
(C) All payments pursuant to this Section 1.4(e)(iii)
shall be 50% cash and 50% Parent Shares (valued at the Stock Price)
1.5 Escrow.
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(a) Simultaneously herewith, Parent, the Company,
Seller Representative (on behalf of the Sellers) and Bethea, Jordan & Griffin,
P.A., as escrow agent (the "Escrow Agent") are entering into an Escrow
Agreement in the form attached hereto as Exhibit B, and Parent is depositing
$75,000 (the "Escrow Amount") with the escrow agent, to be held and disposed of
by the Escrow Agent pursuant to the Escrow Agreement. In the event the Closing
does not occur due to (i) a material breach of this Agreement by Parent or (ii)
the failure of the condition set forth in Section 6.1(f) hereof (which failure
has not been waived by Parent), Seller Representative (on behalf of all
Sellers, Pro Rata) shall be entitled to receive the entire Escrow Amount, as
liquidated damages, and shall have no other rights or remedies in respect of
this Agreement. Within three business days after such receipt, the Seller
Representative may sell to Parent for cash, at $1.05 per Parent Share, all of
the Parent Shares theretofore constituting a part of the Escrow Amount.
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(b) At the Closing, Parent shall deposit an
additional $50,000 with the Escrow Agent, which shall become part of the Escrow
Amount, and the Jail Escrow Amount.
(c) Delivery of funds and Parent Shares by the
Escrow Agent to the applicable parties shall be pursuant to the terms of the
Escrow Agreement.
(d) All sums deposited by Parent with the Escrow
Agent shall be 50% cash and 50% Parent Shares (valued at the Stock Price),
except the Jail Escrow Amount.
1.6 APPOINTMENT OF THE SELLER REPRESENTATIVE. Each
Seller hereby irrevocably appoints Nickey Maxey (the "Seller Representative")
as such Seller's attorney-in-fact and representative, to do any and all things
and to execute any and all documents in such Seller's name, place and stead in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, to accept on such Seller's behalf any amount
payable to such Seller under this Agreement, to pay on such Seller's behalf any
amount due from such Seller under this Agreement (subject to a right of
reimbursement from such Seller), to give or receive, on such Seller's behalf,
any notice or instruction under this Agreement, or to amend, terminate or
extend, or waive the terms of, this Agreement. The Parent and Buyer shall be
entitled
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to rely, as being binding upon such Seller, upon any document or other writing
executed by the Seller Representative, and the Parent and Buyer shall not be
liable to any Seller for any action taken or omitted to be taken by the Parent
and Buyer in reliance thereon.
1.7 The Closing.
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(a) Upon the terms and subject to the conditions
contained in this Agreement, the Closing of the transactions contemplated
hereby (the "Closing") will take place at the offices of Skadden, Arps, Slate,
Meagher & Flom, 919 Third Avenue, New York, New York on a date mutually
agreeable to all parties, but no earlier than December 1, 1995 and no later
than January 10, 1996 or such other date as Buyer and the Company shall
reasonably agree (the "Closing Date"), simultaneously with the execution of the
other agreements, documents, instruments and writings executed and delivered
pursuant hereto or in connection herewith (collectively, the "Other
Documents").
(b) At the Closing, the actions described in
Sections 1.7, 1.8, 1.9, 1.10 and 1.11 hereof are being taken. All such actions
shall be deemed to have occurred simultaneously.
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(c) On the Closing Date, the Buyer and the Company
will cause an appropriate Articles of Merger (the "Articles of Merger") to be
executed and filed with the Secretary of State of Tennessee (the "Secretary of
State") in such form and executed as provided in the BCA. The Merger shall
become effective on the date on which the Articles of Merger has been duly
filed with the Secretary of State or such time as is agreed upon by the parties
and specified in the Certificate of Merger, and such time is hereinafter
referred to as the "Effective Time".
1.8 DELIVERIES BY THE SELLERS. At the Closing, the
Sellers are delivering to the Buyer (unless previously delivered) the
following:
(a) stock certificates representing the Shares,
accompanied by stock powers duly endorsed in blank or accompanied by duly
executed instruments of transfer, with all necessary transfer tax and other
revenue stamps affixed thereto;
(b) receipts for the payment provided for by Section
1.3(b) hereof;
(c) Certificates of Good Standing for the Company
from the Tennessee Secretary of State and from
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the Secretary of State of each state in which the Subsidiaries, if any, of the
Company are organized;
(d) the stock books, stock ledgers and minute books
of the Company (all other records of the Company being located on the premises
of the Company);
(e) Certificates of Non-Foreign Status, duly
executed by each of the Sellers, which is attached hereto as Exhibit C;
(f) certificates in substantially the form attached
hereto as Exhibit D, duly executed by each Seller, representing to the Buyer
certain matters in connection with the Securities Act;
(g) certified resolutions of the Boards of Directors
of the Company approving this Agreement and the Other Documents and the
transactions contemplated hereby and thereby;
(h) certified resolutions of the shareholders of the
Company approving this Agreement and the Other Documents and the transactions
contemplated hereby and thereby;
(i) a letter from the independent public accountants
of the Company, certifying that no material adverse change has occurred in the
financial condition of the Company since June 30, 1995;
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(j) all Permits required to be obtained before the
Buyer may legally operate the businesses of the Company;
(k) all consents, assignments or waivers required to
be obtained in connection with the Contracts, in order for the Buyer to assume
the operations and conduct the business of the Company without the breaching
provisions of any Contract;
(l) an executed Consulting and Non-Competition
Agreement, in the form attached hereto as Exhibit E, between the Parent and
Nickey Maxey ("Consulting Agreement");
(m) a certificate from an officer of the Company
certifying that all representations and warranties contained in Article III are
true and correct as of the Closing Date;
(n) an executed Voting Agreement between Parent and
each of the Sellers in the form attached hereto as Exhibit F (the "Voting
Agreement");
(o) an executed Registration Rights Agreement
between Buyer and each of the Sellers in the form attached hereto as Exhibit G
(the "Registration Rights Agreement"); and
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(p) the executed Continuity of Interest Agreement,
in the form attached hereto as Exhibit I, among Parent and the Sellers.
1.9 DELIVERIES BY THE BUYER. At the Closing, the Buyer
is delivering to the Sellers (unless previously delivered) the following:
(a) the payments provided for in Section 1.3(b)
hereof;
(b) the Buyer's Shares provided for in Sections 1.2
and 1.3.
(c) a certificate evidencing the good standing of
the Buyer under the laws of the state of South Carolina and a certificate
evidencing the good standing of the Parent under the laws of the state of Ohio;
(d) certified resolutions of the Boards of Directors
of both the Parent and the Buyer approving this Agreement and the transactions
contemplated hereby;
(e) to each of the Sellers, an executed Voting
Agreement;
(f) to each of the Sellers, an executed Registration
Rights Agreement and
(g) to Nickey Maxey, an executed Consulting
Agreement.
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1.10 CERTIFICATE OF INCORPORATION; BY-LAWS. Pursuant to
the Merger, (A) the Certificate of Incorporation of the Buyer, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation (except that the name of the
Surviving Corporation set forth in the Certificate of Incorporation shall be
International Pay Phones, Inc.) and (B) the By-laws of the Buyer, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation and such By-laws.
1.11 Directors And Officers Of The Surviving Corporation.
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(a) The directors of the Buyer immediately prior to
the Effective Time shall, from and after the Effective Time, be the directors
of the Surviving Corporation until their successors shall have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and By-laws.
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(b) The officers of the Buyer immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
(c) Parent shall cause Nickey Maxey to be appointed
to the Board of Directors of Parent, effective as of the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
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Each Seller severally represents and warrants to the Buyer as
follows:
2.1 AUTHORIZATION; BINDING OBLIGATION. Each of this
Agreement and the Other Documents to which it is a party have been duly and
validly executed and delivered by such Seller and, assuming due authorization,
execution and delivery by the Buyer, constitute a legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms. Such Seller has the legal capacity and all requisite power and
authority, whether corporate or otherwise, to execute and deliver this
Agreement and the Other Documents to which
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it is a party and to consummate the transactions contemplated hereby and
thereby and to perform such Seller's obligations hereunder and thereunder.
Such execution, delivery and consummation has been duly and validly authorized
by all necessary action on the part of such Seller, and, in the case of each
Seller which is a trust, has also been duly and validly authorized by the trust
or trustee of such trust, and no other corporate proceedings on the part of
such Seller are necessary to authorize such execution, delivery and
consummation. No power of attorney has been granted by such Seller with
respect to either any matter relating to the Company or the Shares, or to the
business, operations or assets of the Company.
2.2 TITLE TO THE SHARES. Such Seller is the record and
beneficial owner of, and had good and marketable title to, the number of
Company Shares set forth next to such Seller's name on Exhibit A hereto, free
and clear of all Encumbrances other than those set forth on Schedule 2.2 of the
Disclosure Schedule. Except as set forth on Schedule 2.2 of the Disclosure
Schedule, (i) such Company Shares are not subject to any restrictions on
transferability other than those imposed by the Securities Act and applicable
state securities
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laws and (ii) there are no options, warrants, calls, commitments or rights of
any character to purchase or otherwise acquire Company Shares from such Seller
pursuant to which such Seller may be obligated to sell or transfer any of such
Company Shares.
2.3 CONSENTS AND APPROVALS; NO VIOLATION. Except as set
forth on Schedule 2.3 of the Disclosure Schedule, neither the execution and
delivery of this Agreement and the Other Documents, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with any of the
provisions hereof, will (a) in the case of each Seller which is a trust,
conflict with any provision of the indenture (or other similar organizational
documents) of such Seller, (b) require any consent, waiver, approval,
authorization or permit of, or filing with or notification to, or any other
action by, any Governmental Authority by such Seller, (c) violate any Law of
any Governmental Authority which may be applicable to such Seller, or by which
any of such Seller's businesses, properties or assets (including, without
limitation, such Seller's Company Shares) may be bound or affected or (d)
violate, breach, or conflict with, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of
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termination, cancellation or acceleration or any obligation to pay or result in
the imposition of any Encumbrance upon any of the property (including, without
limitation, such Seller's Company Shares)) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, Encumbrance, Contract,
Permit, Order, or other instrument or obligation to which such Seller is a
party or by which any of such Seller's businesses, properties or assets
(including, without limitation, such Seller's Company Shares) may be bound or
affected.
2.4 FEES TO BROKERS OR OTHER PARTIES. Buyer and the
Sellers shall each pay their own expenses in connection with this transaction,
therefore, except as provided herein, neither the Buyer nor any Sellers has or
will have any obligation to pay any counsel's, accountant's, broker's,
finder's, investment banker's, financial advisor's or similar fee to any party,
in connection with this Agreement or the Other Documents, or the transactions
contemplated hereby or thereby; notwithstanding this provision, the Buyer will
pay a commission to Robert Stanton, as previously disclosed to Seller by Buyer.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
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OF COMPANY AND SELLERS
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The Company, and the Sellers jointly and severally represent
and warrant to the Parent as follows:
3.1 ORGANIZATION AND STANDING; SUBSIDIARIES. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Tennessee. The Company has no subsidiaries. The
Company has all requisite corporate power and authority to own, lease and
operate the properties and assets it now owns, operates and leases and to carry
on the businesses and operations as currently and heretofore conducted. The
Company is duly qualified or licensed to do business and is in good standing in
each of the jurisdictions in which (i) the character or location of the
properties and assets the Company owns, leases or operates, (ii) the conduct of
the Company's business and operations as currently and heretofore conducted or
(iii) any other circumstance makes such qualification necessary.
3.2 ORGANIZATIONAL DOCUMENTS AND CORPORATE RECORDS. (a)
The Sellers have heretofore delivered to the Parent complete and correct
copies, with all
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amendments thereto, of the Certificate or Articles of Incorporation and By-laws
of the Company, as currently in effect. The minute books of the Company have
been made available to the Parent for its inspection, and such minute books
contain complete and correct records of all meetings, and consents in lieu of a
meeting, of the Board of Directors of the Company (and any committees thereof)
and the shareholders since the respective incorporations of the Company, and
accurately reflect all transactions referred to therein. The stock books and
ledgers of the Company have been made available to the Parent for its
inspection, and such books and ledgers are complete and correct in all
respects.
(b) The Sellers have made available to the Buyer
all accounting, and financial books and records (the "Accounting Books and
Records") which relate to the business of the Company. Such books and records
are true, accurate and complete, have been maintained on a basis consistent
with past practice and GAAP, and fairly present the Company's financial
condition and results of operations as set forth in the Audited Financial
Statements.
3.3 AUTHORIZATION. The Company has the requisite
corporate power and authority to execute,
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deliver and perform the obligations under this Agreement and the Other
Documents and to consummate the transactions contemplated hereby and thereby.
All corporate proceedings on the part of the Company which are necessary to
execute, deliver and perform this Agreement and the Other Documents and to
consummate the transactions contemplated hereby and thereby have been duly
authorized and taken. This Agreement and the Other Documents have been duly
and validly executed by the Company, and constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms. No powers of attorney have been granted and are currently in
force by the Company with respect to any matter relating to the Company or the
Company's business, operations or assets.
3.4 THE COMPANY CAPITALIZATION. The authorized capital
stock of the Company consists of 1,000 Company Shares, all of which are issued
and outstanding and owned by the Sellers as set forth on Exhibit A hereto. The
Company has no other class of capital stock authorized or outstanding. None of
the Company's shares of capital stock have been reserved for any purpose. All
of the Company Shares are duly authorized and validly issued, fully paid,
nonassessable and were not issued in
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violation of any preemptive rights. There are no (i) options, warrants, calls,
commitments or rights of any character to purchase or otherwise acquire from
the Company shares of capital stock of any class, (ii) outstanding securities
of the Company that are convertible into or exchangeable or exercisable for
shares of any class of capital stock of the Company, (iii) options, warrants or
other rights to purchase from the Company any such convertible or exchangeable
securities, or (iv) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of the
Company, any options, warrants or rights, pursuant to which, in any of the
foregoing cases, the Company is or would be subject or bound.
3.5 CONSENTS AND APPROVALS; NO VIOLATION. Except as set
forth on Schedule 3.5(a) of the Disclosure Schedule, neither the execution and
delivery of this Agreement and the Other Documents, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with any of the
provisions hereof, will (a) conflict with any provision of the Articles of
Incorporation or By-laws (or other similar organizational documents) of the
Company, (b) require any consent,
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waiver, approval, authorization or permit of, or filing with or notification
to, or any other action by, any Governmental Authority by the Company, except
for filings required to transfer rights under the Permits, which filings have
been made, (c) violate any Law of any Governmental Authority applicable to the
Company, or by which any of the Company's business, properties or assets may be
bound or affected or (d) violate, breach, or conflict with, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or any obligation to pay or
result in the imposition of any Encumbrance upon any of the property) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, Encumbrance, Contract, Permit, Order, or other instrument or
obligation to which the Company is a party or by which any of the Company's
business, properties or assets may be bound or affected.
3.6 FINANCIAL STATEMENTS. The Sellers are furnishing to
the Buyer the unaudited financial statements of the Company as of, and for the
years ended, December 31 in each of the years 1991 through 1994 and the
unaudited financial statements for the Company as of September 30, 1995, and
for the period then ended
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(collectively, the "Financial Statements"). The Financial Statements are
attached hereto as Exhibit H. The Financial Statements have been prepared from
and in accordance with the books and records of the Company in accordance with
GAAP, and, except as noted therein, consistently applied and maintained
throughout the periods indicated. The Financial Statements fairly present in
all respects, (i) the assets, liabilities and financial condition of the
Company, as at the date thereof, except as set forth on Schedule 3.6(a) of the
Disclosure Schedule, and (ii) the results of operations and cash flows of the
Company for the periods then ended. Except as set forth on Schedule 3.6(b) of
the Disclosure Schedule, the statements of income and retained earnings and
cash flows included in the Financial Statements do not contain any material
items of special or nonrecurring income not earned in the ordinary course of
business and consistent with applicable industry standards and practice.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set
forth on Schedule 3.7 of the Disclosure Schedule, the Company does not have any
liabilities or obligations arising from or relating to its business
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and operations of any nature (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) which
were not reflected or reserved against in the Financial Statements, except for
liabilities or obligations incurred since June 30, 1995 in the ordinary course
of business and consistent with past practice. All reserves established by the
Company and set forth in the Financial Statements were determined in accordance
with GAAP. Schedule 3.7 of the Disclosure Schedule sets forth a true, complete
and accurate list of all liabilities or obligations of the Company at the
Closing with respect to borrowed money (including accounts payable and accrued
expenses), letters of credit, and any notes, bonds or similar instruments or
under any capitalized leases of the Company. The transactions contemplated
hereby will not cause the acceleration of or otherwise adversely affect the
terms or conditions of such liabilities or obligations.
3.8 ACCOUNTS RECEIVABLE. Schedule 3.8 of the Disclosure
Schedule sets forth a true, complete and accurate list of all Accounts
Receivable generated in
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connection with the Company Phones as of October 31, 1995. All Accounts
Receivable reflected in the Financial Statements and all Accounts Receivable
acquired or generated since August 31, 1995 by the Company (i) arose from bona
fide transactions in the ordinary course of business consistent with past
practice, (ii) are valid and genuine, (iii) are not subject to any counterclaim
or setoff and (iv) are not subject to any Encumbrance. Except as set forth on
Schedule 3.8, as of the Closing Date (i) no Account Receivable has been
outstanding for more than 90 days, (ii) no telephone service operator has
refused or threatened to refuse to pay its obligations for any reason and (iii)
no Account Receivable debtor is insolvent or is the subject of a bankruptcy
petition.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on Schedule 3.9 of the Disclosure Schedule, since December 31, 1994:
(i) the Company has operated its business in
the ordinary course consistent with past practice;
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(ii) there has not been any material adverse
change in the businesses, results of operations, assets, liabilities,
financial condition or (except for matters which apply to United
States businesses generally) any material adverse change in the
prospects of the Company;
(iii) the Company has not entered into any
agreements binding the Company, incurred any losses, undertaken any
obligations, waived any rights, made any financial commitments, sold,
transferred or otherwise encumbered any assets, nor taken any other
action which may adversely affect the position of Parent in the
business of the Company as heretofore operated;
(iv) the Company has not transferred,
disposed of, abandoned or permitted to lapse or otherwise failed to
preserve any Permit or other form of authorization issued by a
Governmental Authority;
(v) the Company has not taken any actions
which might reasonably affect the
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capital stock of the Company or the rights of holders thereof;
(vi) the Company has not made any change in
any accounting methods, principles or practices (including, without
limitation, changes in depreciation or amortization policies or rates
or relating to the establishment of accrual of reserves) or any
material election with respect to Taxes;
(vii) the Company has not terminated or
amended, breached, or failed to perform in all material respects all
obligations under any Contract and no other party thereto has
terminated or amended, breached, or failed to perform in all material
respects all of its obligations under any Contract;
(viii) the Company has not experienced any
actual or, to the knowledge of the Company and the Sellers, threatened
employee disputes, work stoppages or slow-downs or had any material
change in its relationship with its employees, salesmen, distributors,
or independent contractors;
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(ix) the Company has not failed to replenish
its inventories and supplies in a normal and customary manner
consistent with past practice; and
(x) the Company has not agreed, whether in
writing or otherwise, to take any action described in this Section
3.9.
3.10 PROPERTIES AND ASSETS. The Company has good, valid
and marketable title to all Equipment and other assets (whether personal or
mixed, tangible or intangible (and whether or not fully depreciated or
expensed)) used in their respective business and operations, and such items are
subject to no Encumbrance or arrangement for use by any third party, other than
those set forth on Schedule 3.10 of the Disclosure Schedule. All Equipment is
usable, in good working condition, free of any material defects and suitable
for the purposes of its intended and current operational use.
3.11 CONTRACTS. Schedule 3.11 of the Disclosure Schedule
sets forth a complete and correct list of all Material Contracts as of the
Closing. Complete and correct copies of all written Contracts including any
and all amendments and other modifications thereto have been delivered to or
have been made
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available for inspection by the Buyer. All written Contracts and all oral
Material Contracts (x) are valid and binding obligations of the Company and the
other parties thereto, (y) are in full force and effect and are enforceable as
to the Company and the other parties thereto, in accordance with their
respective terms, and (z) have not been amended or terminated except in the
ordinary course of business consistent with past practice. The Company is not
in default under nor has it breached in any respect any Contract. The
aggregate obligations of the Company with respect to oral Contracts which do
not constitute Material Contracts do not exceed $10,000. No other party to any
Contract (i) has breached such Contract or is in default thereunder, (ii) has
given notice that it intends to terminate such Contract or (iii) has altered,
in any way adverse to the Company, its performance under such Contract. No
event or condition has occurred (or is alleged by any other party to a Contract
to have occurred) which, with or without due notice or lapse of time or both,
would constitute a breach or event of default on the part of the Company, would
provide a basis for a valid claim or acceleration under any Contract as against
the Company or would
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prevent the Company from exercising and obtaining the full benefits of any
rights or options contained therein.
3.12 Compliance With Laws And Permits.
--------------------------------
(a) Except as set forth on Schedule 3.12(a) of the
Disclosure Schedule, the business and operations of the Company have been
conducted and are now being conducted in all material respects in compliance
with all Laws and Orders of all Governmental Authorities having jurisdiction
over the Company and all Permits relating to any of its properties or
applicable to its business.
(b) Except as and to the extent set forth on
Schedule 3.12(b) of the Disclosure Schedule, the Company possesses all Permits
necessary to own and operate its property and assets and to conduct its
business as it is currently conducted. Such Permits are valid, subsisting in
full force and effect, and the Company has fulfilled its obligations under each
of the Permits, and no event has occurred or condition or state of facts exists
which constitutes or, after notice or lapse of time or both, would constitute a
default or violation under any of the Permits or would permit revocation or
termination of any of the Permits. No proceeding which might involve the
revocation or
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termination of any such Permits is pending or, to the knowledge of the Company
or the Sellers, threatened.
(c) the Company has made all filings and received
all approvals in connection with the Permits which are necessary for the Buyer
to own and operate the property and assets of the Company and to conduct the
Company's businesses as they have currently and have heretofore been conducted.
3.13 LITIGATION AND ARBITRATION. (a) Since the date of
the Company's incorporations, no claim, action, cause of action, suit,
proceeding, inquiry, investigation or Order has been initiated, brought or
commenced, or been pending or threatened, against the Company or affecting its
businesses, operations or assets (including actions by or before any
administrative body, arbitration or mediation panel or Governmental Authority),
except as set forth on Schedule 3.13(a) of the Disclosure Schedule. No Order
of any Governmental Authority, arbitrator or mediator is outstanding against
the Company, its business, operations or assets. Neither the Company nor any
of the Sellers has knowledge of any fact or circumstance which could reasonably
be expected to result in any other claim, action, cause of action, suit,
proceeding, inquiry, investigation or Order against
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the Company or affecting its business, operations or assets.
(b) No claim, action, suit, proceeding, inquiry
or investigation has been instituted which threatens to restrain or prohibit or
otherwise challenge the legality or validity of the transactions contemplated
by this Agreement or the Other Documents.
3.14 EMPLOYEE MATTERS. The Company has no employee plans
or agreements in effect. The Company has taken no actions which might
reasonably be expected to result in any violations of ERISA. The consummation
of the transactions contemplated by this Agreement will not entitle any current
or former employee or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except as
expressly provided herein. There are no pending, threatened or anticipated
claims by or on behalf of any employee of the Company.
3.15 LABOR RELATIONS. (a) Except as set forth on
Schedule 3.15(a) of the Disclosure Schedule, (i) there are no labor issues
affecting the Company. The Company has at all times been in compliance with
all applicable Laws in respect of employment and employment practices.
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3.16 TAXES. (a) the Company is a small business
corporation and has had in effect since incorporation a valid election to be
treated as an "S" corporation for federal income tax purposes under the Code
and in the State of Tennessee, and neither the Company nor the Sellers has
taken or caused or permitted to be taken any action during such periods that
would have caused or permitted to be taken any action during such periods that
would have caused a termination of such S election. The Company only files a
state income tax return in Tennessee.
(b) The Company has duly and timely filed all Tax
Returns required to be filed on or before the Closing Date, and all such Tax
Returns are complete and correct in all material respects.
(c) Except as set forth on Schedule 3.16(c) of
the Disclosure Schedule, the Company has timely paid all Taxes due or claimed
to be due from it by any taxing authority.
(d) Except as set forth on Schedule 3.16(d) of
the Disclosure Schedule, the Company has complied in all respects with all
applicable Laws relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes
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pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and within the manner prescribed by
Law, withheld from employee wages and paid over to the proper Governmental
Authorities all amounts required to be withheld and paid over under all
applicable Laws.
(e) There are no Encumbrances for Taxes upon the
Company's assets except for statutory liens for current Taxes not yet due.
(f) The Company has not requested any extension
of time within which to file any Tax Return in respect of any fiscal year which
has not since been filed. Except as set forth on Schedule 3.16(f) of the
Disclosure Schedule, there are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns that has been given by the Company.
(g) Except as set forth on Schedule 3.16(g) of
the Disclosure Schedule, no federal, state, local or foreign audits or other
administrative proceedings or court proceedings have been initiated or are
presently pending with regard to any Taxes or Tax Returns of the Company.
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(h) The Company is not required to include in
income any adjustment pursuant to Section 481(a) of the Code, by reason of a
voluntary change in accounting method (nor has any taxing authority proposed in
writing to the Company any such adjustment or change of accounting method).
(i) The Company is not a party to, is not bound
by, nor has any obligation under, any Tax sharing agreement or similar contract
or arrangement.
(j) No powers of attorney have been granted by
the Company with respect to any matter relating to Taxes which is currently in
force.
(k) The Company has not filed a consent pursuant
to Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by the Company.
(l) Except as set forth on Schedule 3.16(l) of
the Disclosure Schedule, the Company is not a party to any agreement, contract,
or arrangement that will result, separately or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code.
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(m) None of the income recognized for federal,
state, local or foreign Income Tax purposes by the Company during the period
beginning from [July 1, 1995] to the date hereof will be derived other than in
the ordinary course of business.
3.17 INTELLECTUAL PROPERTY. The Company owns or has the
right to use all Intellectual Property used in or necessary to conduct the
businesses as currently conducted, in each case without the payment of any
royalties. The activities and products of the Company do not infringe upon the
Intellectual Property rights of any other Person. To the knowledge of the
Company and the Sellers, there are no infringements by third parties of any
Intellectual Property owned by the Company.
3.18 ENVIRONMENTAL MATTERS. The Company is and has been
in compliance with, and there are no outstanding allegations (for which the
Company has been provided notice) by any Person that the Company is not or has
not been in compliance with, all applicable Laws relating to pollution, the
preservation of the environment and the discharge or release of hazardous
materials into the environment or workplace ("Environmental Laws").
The Company does not require any environmental permits to
conduct its business and operations. The
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Company has not indemnified or agreed to indemnify any other Person for any
liability under, or violation of, Environmental Laws.
3.19 INSURANCE. Schedule 3.19(a) of the Disclosure
Schedule sets forth a complete and correct list as of the Closing of all
primary, excess and umbrella policies, bonds and other forms of insurance, and
renewals thereof, owned or held by or on behalf of or providing insurance
coverage to or for the benefit of the Company (copies of which have previously
been provided to the Parent), with the amount of coverage, cost and expiration
date set forth next to each policy thus listed. All of such insurance policies
are in full force and effect, all premiums currently payable or previously due
have been paid, no notice of cancellation or termination has been received with
respect to any such policy and no assignment of proceeds or Encumbrance exists
with respect to the proceeds of any such policy. Except as and to the extent
set forth on Schedule 3.19(b) of the Disclosure Schedule, there are no pending
claims against such policies. All such policies will remain in full force and
effect upon execution and delivery of this Agreement and the Other Documents
and the consummation of the transactions contemplated hereby and thereby.
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3.20 BANK ACCOUNTS. Schedule 3.20 of the Disclosure
Schedule sets forth a complete and correct list of (i) the names and locations
of all financial institutions at which the Company maintains a checking
account, deposit account, securities account, safety deposit box or other
deposit or safekeeping arrangement, (ii) the number or other identification of
all such accounts and arrangements and (iii) the names of all persons
authorized to draw thereon or have access thereto.
3.21 CUSTOMERS AND SUPPLIERS. Schedule 3.21(a) sets forth
a complete and correct list of (i) the names of those customers generating the
greatest revenues for the Company (listing such number of customers as would,
in the aggregate, generate at least 40% of the Company's total revenues) and
the amount of revenues generated by each such customer in the Company's fiscal
year ended December 31, 1994 and (ii) the names of suppliers to whom the
Company paid more than $25,000 in the Company's fiscal year ended December 31,
1994 and the approximate total purchases by the Company from each such supplier
during such year. Except as and to the extent set forth on Schedule 3.21(b) of
the Disclosure Schedule, there have been no adverse changes in the
relationships between
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the Company and its customers and suppliers since January 1, 1995. The Company
has not been provided with any notice that any supplier, manufacturer or
customer intends to cease doing business with the Company. To the knowledge of
the Company and the Sellers, there are no facts or circumstances (including,
without limitation, the transactions contemplated by this Agreement and the
Other Documents) that could reasonably be expected to have an adverse affect on
the Company's relationships with its customers, suppliers and manufacturers.
3.22 AFFILIATE TRANSACTIONS. Schedule 3.22 of the
Disclosure Schedule sets forth a correct and complete list of all arrangements
or transactions (other than salary, bonus and benefits generally available to
the employees of the Company) between the Company and the Sellers or any
affiliate or associate of the Sellers, or any business or entity in which the
Sellers or any affiliate or associate of any of the Sellers, has any direct or
indirect interest (the "Sellers' Affiliates"), that involves an obligation or
commitment on the part of or for the benefit of the Company or such Sellers'
Affiliate of more than $1,000 in any calendar year (the "Affiliate
Transactions").
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3.23 DISCLOSURE. The Sellers have not failed to disclose
to the Buyer any facts material to the Company's business, results of
operations, assets, liabilities, financial condition and prospects. No
representation or warranty by the Sellers in this Agreement and no statement by
the Sellers in any Other Document (including the Schedules), contains any
untrue statement of a material fact or omits to state any material fact
necessary, in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading.
3.24 PRIOR ACQUISITIONS. No claims, amounts owed,
liabilities, Encumbrances, legal proceedings or any other obligations of any
kind are due or were incurred or outstanding in connection with any
acquisitions made by the Company, except as already recorded on the Financial
Statements heretofore delivered to the Buyer.
3.25 COMPANY PHONES AMOUNT. There were 485 Company Phones
in operation as of the close of business on October 31, 1995.
3.26 CONSENTS; WAIVERS; ASSIGNMENTS; PERMITS. The Sellers
or the Company will, prior to the Closing, have obtained and delivered to
Parent (i) all Permits or consents to transfer which are required to be
obtained
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before the Surviving Corporation may legally operate the Company's business,
(ii) all consents or waivers which would be required in order to not breach any
Contracts to which the Company is a party and (iii) all consents, waivers,
assignments and assumptions pertaining to the Surviving Corporation's
assumption of the Company's debts, a complete listing of which is set forth on
Schedule 3.26 of the Disclosure Schedule.
3.27 RECENT PERFORMANCE. As to the businesses of the
Company (i) the average remaining term of the location contracts is 30 months
and (ii) the average net income for 1995 (calculated as gross revenues minus
telephone bills and commissions) is $115 per month on a per phone basis.
3.28 CASH. Sellers and the Company have taken no steps to
deplete the cash of the Company prior to Closing and have maintained sufficient
cash prior to the Closing to cover ordinary payables due after the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT
--------------------------------------------
The Parent represents and warrants to the Sellers as follows:
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4.1 ORGANIZATION AND STANDING. The Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio. The Parent has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business and operations as it is now being conducted.
4.2 AUTHORIZATION; BINDING OBLIGATION. The Parent has
all requisite corporate power and authority to execute and deliver this
Agreement and the Other Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
Other Documents by the Parent and the consummation of the transactions
contemplated hereby and thereby by the Parent have been duly and validly
authorized by the Board of Directors of the Parent and no other corporate
proceedings on the part of the Parent are necessary to authorize this Agreement
or the Other Documents or to consummate the transactions contemplated hereby or
thereby. This Agreement and the Other Documents have been validly executed and
delivered by the Parent and, assuming due authorization, execution and delivery
by the
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Sellers, constitute legal, valid and binding obligations of the Parent,
enforceable against the Parent in accordance with their terms.
4.3 INVESTMENT PURPOSE. The Parent is acquiring the
Company Shares for its own account without a view to any distribution thereof
in violation of the securities laws of the United States of America or any
state thereof.
4.4 Capitalization.
--------------
(a) As of the date hereof, the authorized capital
stock of Parent consists of: (i) 22,500,000 common shares ("PhoneTel Common
Shares"), $.01 par value 16,033,276 of which are issued and outstanding, and
(ii) 2,500,000 shares of Preferred Stock, $.01 par value, of which (A) 2,125
shares have been designated Preferred Stock, $100 par value, of which no shares
are outstand-ing; (B) 6,500 shares have been designated Convertible Preferred
Stock, without par value, $100 stated value, cumulative and redeemable, of
which no shares are outstanding; (C) 3,880 shares have been designated
Preferred Stock, without par value, $1,000 stated value, cumulative and
redeemable, of which 1,496 shares are outstanding; (D) 16,000 shares have been
designated 8% Preferred Stock, without par value, $100 stated value,
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cumulative and redeemable, of which 12,200 shares are outstanding; (E) 2,500
shares have been designated 7% Convertible Preferred Stock, without par value,
$100 stated value, cumulative and redeemable, all of which shares are
outstanding; (F) 550,000 shares have been designated as 10% Preferred Stock,
without par value, $10 stated value, cumulative ("10% Non-Voting Stock"), of
which 530,534 shares are outstanding; and (G) 1,918,995 shares are not yet
designated nor issued. As of the date hereto, there are outstanding options,
warrants or other rights to purchase 5,316,795 Parent Shares, and 6,826,171
Parent Shares are reserved for issuance pursuant to pending acquisition
agreements. In addition, Parent has committed to propose an amendment to its
Articles of Incorporation providing that each share of 10% Non-Voting Stock may
be converted into 10 Parent Shares. Parent has no other class of capital stock
authorized or issued and outstanding. All of the Parent shares of capital
stock issued are duly authorized and validly issued, fully paid, nonassessable
and not issued in violation of any preemptive rights.
(b) Except as set forth above, as of the date hereof
there are no (i) options, warrants, calls, commitments or right of any
character to purchase or
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otherwise acquire from Parent shares of capital stock of any class, (ii)
outstanding securities of Parent that are convertible into or exchangeable or
exercisable for shares of any class of stock of Parent, (iii) options, warrants
or other rights to purchase from Parent any such convertible or exchangeable
securities, or (iv) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of
Parent, any options, warrants or rights, pursuant to which, in any of the
foregoing cases, Parent is or would be subject or bound; no other shares of
Parent's capital stock have been reserved for any purpose.
ARTICLE V
ADDITIONAL COVENANTS
--------------------
5.1 Taxes.
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(a) Notwithstanding any other provision of this
Agreement to the contrary, the Sellers shall assume and promptly pay all sales,
use, privilege, transfer, documentary, gains, stamp, duties, recording and
similar Taxes and fees (including penalties, interest and additions) imposed
upon any party incurred in connection with the exchange of Shares for Parent
Shares
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and cash (collectively, "Transfer Taxes"), and Sellers shall, at their own
expense, procure any stock transfer stamps required by, and accurately file all
necessary Tax Returns and other documentation with respect to, any Transfer
Tax.
(b) The Sellers shall prepare or cause to be
prepared, and file or cause to be filed on a timely basis all Tax Returns of
the Company with respect to all periods ending on or before the Closing Date,
which Tax Returns shall be made available to Buyer for review two weeks prior
to filing such Tax Returns. The Sellers shall pay all Taxes shown to be due
and payable thereon.
(c) The Sellers and the Parent shall cooperate, and
shall cause their respective officers, employees, agents, auditors and
representatives to cooperate, (i) in preparing and filing the Tax Returns and
(ii) with respect to any audit or other administrative or court proceedings
with respect to Taxes and Tax Returns of the Company for periods ending on or
before the Closing Date, including, in each case, maintaining and making
available to each other all records necessary in connection with Taxes payable
with respect to such Tax Returns and in resolving all disputes and audits and
refunds with respect to such Tax Returns
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and Taxes and any earlier Tax Returns and Taxes of the Company. No election
may be made by the Company with respect to the Taxes of the Company without the
Parent's written consent if such election will adversely affect the Parent.
(d) The Sellers shall promptly notify the Parent of
any notices or materials received from any Governmental Authority which relate
to the business or operations of the Company.
5.2 FURTHER ASSURANCES; COOPERATION. (a) The parties
shall, from time to time before and after the Closing, upon the request of any
other party and without further consideration, execute, acknowledge and deliver
in proper form any further instruments, and take such further actions as such
other party may reasonably require, to carry out effectively the intent of this
Agreement and the Other Documents.
(b) The Sellers shall cooperate with the Company
and the Parent in connection with any claim, action, suit, proceeding, inquiry
or investigation with any other Person which relates to the execution and
delivery of this Agreement or the Other Documents, or the consummation of the
transactions contemplated hereunder and thereunder.
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5.3 NOTIFICATION OF CERTAIN MATTERS. Each of the parties
hereto shall promptly notify the other parties, in the manner provided in
Section 8.10 hereof, of (i) the filing or other initiation of any claim,
action, suit, proceeding, inquiry or investigation which relates to the
execution and delivery of this Agreement or the Other Documents, or the
consummation of the transactions contemplated hereunder or thereunder, (ii) any
circumstance or development which could adversely impair or affect its ability
to perform its obligations under this Agreement and the Other Documents, (iii)
any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement and the Other Documents or (iv) any
notice or other communication from any Governmental Authority in connection
with the transactions contemplated by this Agreement and the Other Documents.
5.4 CONFIDENTIALITY. (a) Sellers and the Company agree
that they will not (and, in the case of the Company and each Seller which is a
corporation, will cause its officers to not) at any time after the Closing,
without the prior written consent of the Buyer, disclose
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or use any information obtained during the negotiation or due diligence process
nor any other confidential information (relating to either the Parent or the
Company) otherwise obtained except (i) as may be necessary in connection with
their tax filing and reporting obligations and (ii) to the extent required by
Law.
(b) Parent agrees that it will not (and will cause
its officers to not) at any time before the Closing, without the prior written
consent of the Company, disclose or use any information obtained during the
negotiation or due diligence process nor any other confidential information
(relating to the Company) otherwise obtained except (i) as may be necessary in
connection with financing and reporting obligations and (ii) to the extent
required by Law.
5.5 PUBLICITY. The Sellers and Parent shall not issue
any press release or make any public statement regarding the transactions
contemplated hereby, without the prior approval of Parent and Seller
Representative, respectively, which approval shall not be unreasonably
withheld.
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5.6 Expenses.
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(a) Except as otherwise specifically provided for
herein, each party hereto shall be solely responsible for all expenses incurred
by it or on its behalf in connection with the preparation and execution of this
Agreement and the Other Documents and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the fees and
expenses of its counsel, accountants, brokers, finders, financial advisors and
other representatives.
(b) The Sellers and the Buyer agree that in the
event any dispute between them, either occurring under, relating to or in
connection with any of the provisions of this Agreement or the Other Documents,
is submitted to a Governmental Authority or other appropriate entity, then all
costs and expenses of the parties (including reasonable legal fees) shall be
paid by the party against whom a determination by such Governmental Authority
or entity is made or, in the absence of a determination wholly against one
party, as such Governmental Authority or entity shall direct.
5.7 DUE DILIGENCE. Until the Closing Date, Sellers and
Buyer will allow one another to examine all
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books and records of the other as is necessary to the completion of the
transaction contemplated herein.
5.8 INTERIM CONDUCT OF BUSINESS. Except as otherwise
contemplated by this Agreement, during the period from the date hereof to the
Closing, the Company shall, and Sellers shall cause the Company to (i) operate
the businesses of the Company only in the ordinary course of business
consistent with past practices, (ii) maintain, keep and preserve the respective
assets of the Company, and (iii) use all best efforts to preserve intact the
present organizations of the Company, keep available the services of the
present employees of the Company, and preserve the Company's relationships with
customers, suppliers, licensors, licensees, contractors and others having
significant business dealings with the Company. Without limiting the
generality of the foregoing, from the date of this Agreement to the Closing
Date, the Company shall not, and Sellers shall not permit the Company to,
without the prior written consent of Parent (which consent may be withheld in
the Parent's sole discretion):
(a) (i) authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options,
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warrants, commitments, subscriptions, rights to purchase or otherwise) any
shares of the capital stock of the Company or any other securities or equity
equivalents, (ii) split, combine or reclassify any shares of such capital stock
or (iii) amend the terms of any such securities or agreements outstanding on
the date hereof;
(b) amend or propose to amend the certificate of
incorporation or by-laws of the Company;
(c) (i) incur or assume any indebtedness or issue
or sell any debt securities or warrants or rights to acquire any debt
securities, (ii) assume, guarantee, endorse or otherwise become liable (whether
directly, contingently or otherwise) for the obligations of any other person,
(iii) make any loans, advances or capital contributions to, or investments in,
any other person or (iv) install any telephones without the prior written
consent of Parent;
(d) sell, lease, transfer or otherwise dispose of
any of its assets, or permit any assets of the Company to suffer any lien
thereupon, except that the Company may transfer to its stockholders the
vehicles listed in Schedule 5.8(d) of the Disclosure Schedule, subject to all
liabilities related thereto;
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(e) change any of the accounting principles or
practices used by the Company (except as required by GAAP);
(f) enter into, adopt, amend or terminate any
employee benefit plan, increase in any manner the compensation or fringe
benefits of any officer or employee or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(g) enter into or offer to enter into any employment
or consulting agreement with any person;
(h) install, or agree to install, any telephones
which, if installed prior to the Closing, would constitute Company Phones,
without the prior written consent of Parent (which will not be unreasonably
withheld);
(i) pay any dividend or make any other distribution
to the Sellers with respect to their Shares except for a dividend of $30,000;
(j) (i) enter into, amend or terminate any Material
Contract or (ii) take any action or fail to take any action that, with or
without notice or lapse of time, would constitute a default under any Material
Contract; or
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(k) take, or agree in writing or otherwise to take,
any of the foregoing actions or any action which would make any representation
or warranty of the Company or Sellers contained in this Agreement untrue or
incorrect as of the date when made or as of any future date or which could
prevent the satisfaction of any condition to Closing set forth in Article VI
hereof.
5.9 DELIVERY OF FINANCIAL STATEMENTS. Sellers shall
cause to be prepared and delivered to Buyer prior to February 10, 1996, audited
consolidated financial statements of the Company as of December 31, 1994 and
December 31, 1995 and for the years then ended, certified by the Company's
independent public accountants, and accompanied by their reports therein.
Parent shall provide to Sellers and to the Company's independent public
accountants such access to the books, records and facilities of the Company as
shall be reasonably necessary for Sellers to satisfy their obligations under
this Section 5.9. Parent shall pay all fees of the Company's independent
public accountants for the audits of the 1994 and 1995 financial statements of
the Company; the Company estimates such fees (together with similar fees under
the South Carolina Agreement) will be approximately $30,000.
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5.10 PAYMENT OF THE TELEPHONE BILLS. The Company shall,
prior to the Closing, pay all telephone bills received by it prior to the
Closing.
5.11 LEASES. Parent and Seller's Representative shall
negotiate in good faith with a goal of executing a lease with respect to all
space required by the Surviving Corporation.
5.12 S CORPORATION STATUS. The Company and Sellers shall
maintain the status of the Company as an S corporation for federal and state
income Tax purposes until the Closing Date.
ARTICLE VI
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARENT.
The obligation of the Parent to consummate the transactions contemplated hereby
is subject to the satisfaction or waiver (subject to applicable law) on or
before the Closing Date, of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND
WARRANTIES Each of the representations and warranties of the Sellers and the
Company contained in this Agreement, the Disclosure Schedule, or in any Other
Document to be executed and delivered by the Sellers or the Company on
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or before the Closing Date pursuant hereto shall have been true and correct in
all material respects when made, and shall be true and correct in all material
respects as of the Closing Date as though made on and as of such date.
(b) PERFORMANCE OF AGREEMENTS.
The Sellers and the Company shall have performed and complied with all of the
covenants and agreements contained in this Agreement to be performed or
complied with by them at or before the Closing.
(c) ADVERSE PROCEEDINGS. No claim,
action, suit, investigation or governmental proceeding shall be pending and no
Law of any Governmental Authority shall be enacted, rendered or in force, which
would render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement and the Other Documents to be executed and
delivered pursuant hereto.
(d) CONSENTS AND APPROVALS. All
necessary consents, approvals or waivers from third parties and Governmental
Authorities shall have been received.
(e) AT&T CONTRACT. Resort
Hospitality Services International, Inc. ("Resort"), a South Carolina
corporation, shall enter into an agreement with Parent, pursuant to which it
will: (i) continue to pay all AT&T
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commissions to the Surviving Corporation in accordance with prior custom
(through the term of the existing contract and through the term of any
extensions or renewals thereof, for as long as such revenues are received from
AT&T), (ii) use its best efforts to maintain or increase the revenue stream
paid pursuant to the AT&T contract, (iii) have no recourse against Parent or
the Surviving Corporation in connection with any commissions that were paid or
accrued prior to the Closing, and (iv) indemnify Buyer against any liability,
whether direct or indirect, to AT&T in connection with any such adjustment.
(f) The Stock Price shall be equal
to or greater than $0.75.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
COMPANY AND THE SELLERS. The obligations of the Company and the Sellers to
consummate the transactions contemplated hereby are subject to the satisfaction
or waiver (subject to applicable Law) on or before the Closing Date of each of
the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND
WARRANTIES. Each of the representations and warranties of the Parent contained
in this Agreement or in any Other Document to be executed and delivered by the
Parent on or
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before the Closing Date pursuant hereto shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects as of the Closing Date as though made on and as of such date.
(b) PERFORMANCE OF AGREEMENTS. The
Parent shall have performed and complied with all of the covenants and
agreements contained in this Agreement to be performed or complied with by the
Parent at or before the Closing.
(c) ADVERSE PROCEEDINGS. No claim,
action, suit, investigation or governmental proceeding shall be pending, and no
Law of any Governmental Authority shall be enacted, rendered or in force, which
would render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement and the Other Documents to be executed and
delivered pursuant hereto.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND
-------------------------------
WARRANTIES; INDEMNIFICATION
-------------------------------
7.1 SURVIVAL OF REPRESENTATIONS
AND WARRANTIES. All representations and warranties of the Sellers and the
Parent contained herein or made pursuant hereto shall survive the Closing and
any investigation at any time made by or on behalf of any party hereto until
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June 30, 1997 except that the representations and warranties contained in
Sections 3.16 (Taxes) and 3.13 (Litigation and Arbitration) shall both survive
until 90 days following the expiration (with valid extensions) of the
applicable statute of limitations. Provided that a claim with respect to a
breach of representation or warranty is made within the applicable period in
accordance with the provisions of Section 7.5 or Section 7.6 hereof, such claim
and any related claims may continue to be asserted beyond such period.
7.2 STATEMENTS AS
REPRESENTATIONS. All statements contained herein or in any Schedule contained
in the Disclosure Schedule or in any Exhibit hereto shall be deemed
representations and warranties within the meaning of Sections 7.1, 7.3(i), and
7.4(i) hereof.
7.3 INDEMNIFICATION BY THE
SELLERS. Subject to the provisions of this Article VII, each Seller shall
severally indemnify, defend and hold harmless the Buyer, any parent, subsidiary
or affiliate of the Buyer, and any director, officer, employee, agent or
advisor of any of them, or any of their respective successors or assigns (a
"Buyer Indemnified Party"), from and against any and all Losses asserted
against, resulting to, imposed upon or
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incurred by any Buyer Indemnified Party, directly or indirectly, by reason of
or resulting from:
(i) the breach of or any inaccuracy in any
of the representations and warranties of the Sellers or the
Company contained in or made pursuant to any section of this
Agreement, or any facts or circumstances constituting such
breach or inaccuracy;
(ii) the breach or nonperformance of
any covenant or agreement of the Sellers or the Company contained
in or made pursuant to this Agreement or any facts or
circumstances constituting such breach or nonperformance; and
(iii) any and all Taxes imposed upon
the Company or Sellers with respect to any taxable period (or any
portion thereof) ending on or before the Closing Date. Without
limiting the generality of the foregoing, Sellers shall
indemnify, defend and hold harmless any Buyer Indemnified Party
from and against any and all Losses asserted against, resulting
to, imposed upon or incurred by any Buyer Indemnified
Party, directly or
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indirectly, by reason or resulting from any and all Taxes imposed upon
the Company or the Sellers arising directly or indirectly from (i) the
failure of the Company to be an S corporation or the termination of
the Company's status as an S corporation and (ii) the imposition of
any Taxes on the Company for any taxable period in which the Company's
election of subchapter S status was in effect (including but not
limited to those Taxes described in Section 1374 and 1375 of the
Code).
7.4 INDEMNIFICATION BY THE
PARENT. Subject to the provisions of this Article VII, the Parent shall
indemnify, defend and hold harmless the Sellers, any parent, subsidiary or
affiliate of the Sellers, and any director, officer, employee, agent or advisor
of any of them or any of their respective heirs, successors or assigns (a
"Seller Indemnified Party"), from and against any and all Losses asserted
against, resulting to, imposed upon or incurred by any Seller Indemnified
Party, directly or indirectly, by reason of or resulting from:
(i) the breach of or any inaccuracy in any
of the representations and warranties of the Parent contained
in or made pur-
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suant to this Agreement or any facts or circumstances
constituting such breach or inaccuracy; and
(ii) the breach or non-performance
of any agreement of the Parent contained in or made pursuant to
this Agreement or any facts or circumstances constituting such
breach or nonperformance.
7.5 Indemnification Procedures.
--------------------------
(a) NOTICE. If any legal
proceeding shall be threatened or instituted or any claim or demand shall be
asserted by any Buyer Indemnified Party or Seller Indemnified Party in respect
of which indemnification may be sought under the provisions of this Agreement,
the party seeking indemnification (the "Claiming Party") shall promptly cause
written notice of the assertion of any such claim, demand or proceeding of
which it has knowledge to be forwarded to the party from whom it is claiming
indemnification (the "Indemnitor"). Such notice shall contain a reference to
the provisions hereof or of such other agreement, instrument or certificate
delivered pursuant hereto, in respect of which such claim is being made, and
shall specify, in reasonable detail, the amount of such Loss if
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determinable at such time. The Claiming Party's failure to give the Indemnitor
prompt notice shall not preclude the Claiming Party from seeking
indemnification from the Indemnitor unless the Claiming Party's failure has
materially prejudiced the Indemnitor's ability to defend the claim, demand or
proceeding.
(b) THIRD PARTY CLAIMS. If the
Claiming Party seeks indemnification from the Indemnitor as a result of a claim
or demand being made by a third party (a "Third Party Claim"), the Indemnitor
shall have the right to promptly assume the control of the defense of such
Third Party Claim, including, at its own expense, employment by it of counsel
reasonably satisfactory to the Claiming Party. The Claiming Party may, in its
sole discretion and at its own expense, employ counsel to represent it in the
defense of the Third Party Claim, and in such event counsel for the Indemnitor
shall cooperate with counsel for the Claiming Party in such defense, provided
that the Indemnitor shall direct and control the defense of such Third Party
Claim or proceeding. Except with the written consent of the Claiming Party,
the Indemnitor shall not consent to the entry of any judgment nor enter into
any settlement of such Third Party Claim which (i) does not include as an
unconditional term
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thereof the release of the Claiming Party from all liability in respect of such
Third Party Claim and (ii) results in the imposition on the Claiming Party of
any remedy other than money damages; provided, however, that the Claiming Party
shall not unreasonably withhold or delay its consent to the entry of any
judgment or any settlement of a Third Party Claim. If the Indemnitor elects
not to exercise its rights to assume the defense of the Third Party Claim, or
if injunctive relief is sought which would have an adverse effect on the
Claiming Party, the Claiming Party may, but shall have no obligation to, defend
against such Third Party Claim or legal proceeding in such manner as it may
deem appropriate, and the Claiming Party may compromise or settle such Third
Party Claim and proceeding without the Indemnitor's consent so long as the
Claiming Party acts in a commercially reasonable manner (without regard to the
Claiming Party's indemnification rights hereunder).
(c) PAYMENT. After any final
judgment or award shall have been rendered by a court, arbitration board or
administrative agency of competent jurisdiction and the time in which to appeal
therefrom shall have expired, or a settlement shall have been consummated, or
the Claiming Party and the Indemnitor shall arrive at a
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mutually binding agreement with respect to each separate matter alleged to be
indemnified by the Indemnitor hereunder, the Claiming Party shall forward to
the Indemnitor notice of any sums due and owing by it with respect to such
matter (in accordance with Section 8.10 hereof) and the Indemnitor shall pay
all of the sums so owing to the Claiming Party within 10 days after the date of
such notice. Notwithstanding the foregoing, the obligation of Sellers to
indemnify under this Article VII shall be limited to 50% of the aggregate
Consideration; such indemnification obligation shall be satisfied 50% in cash
(by wire transfer, certified or bank cashier's check) and 50% in Parent Shares
(valued at the Stock Price).
(d) ESCROW. To the extent that the
Escrow Amount has not been released pursuant to the Escrow Agreement, the Buyer
Indemnified Party's right to indemnification and to be held harmless pursuant
to Section 7.3 hereof must first be asserted against the Escrow Amount.
7.6 Certain Tax Indemnification
---------------------------
Procedures: Notice Requirements; Control
-----------------------------------------
of Proceedings.
--------------
(a) If a notice of
deficiency, proposed adjustment, adjustment, assessment, audit, examination,
suit, dispute or other claim (a "Tax Claim") shall be
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delivered, sent, commenced, or initiated to or against any Buyer Indemnified
Party by any taxing authority with respect to Taxes for which the Sellers have
agreed to indemnify any Buyer Indemnified Party, Parent shall promptly notify
the Sellers' Representative in writing of the Tax Claim. If any such Tax Claim
shall be delivered, sent, commenced or initiated to or against the Sellers by
the relevant taxing authority, the Sellers shall promptly notify Parent in
writing of such Tax Claim.
(b) The Sellers' Representative may,
upon timely notice to Parent, assume and control the defense of any such Tax
Claim at their own cost and expense and with their own counsel. If the
Sellers' Representative elects to assume the defense of any such Tax Claim,
notwithstanding anything to the contrary contained herein, (i) the Sellers'
Representative shall consult with Parent and shall not enter into any
settlement with respect to any such Tax Claim without Parent's prior written
consent if the effect of such settlement would be to increase the liability for
Taxes of Buyer for any taxable period; (ii) the Sellers shall keep Parent
informed of all material developments and events relating to such Tax Claim;
and (iii) at its own cost and expense, Parent shall have the
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right to participate in (but not to control) the defense of such Tax Claim.
(c) In connection with any Tax Claim
that the Sellers' Representative does not timely elect to control pursuant to
Section 7.6, such contest shall be controlled by the Parent, and the Sellers
agree to cooperate with the Parent and its affiliates in pursuing such contest.
Parent shall keep the Sellers informed of all material developments and events
relating to such Tax Claim and Sellers, at their own cost and expense, shall
have the right to participate in (but not control) the defense of such Tax
Claim. Nothing contained herein shall be construed as limiting Parent's right
to indemnification under this Article VII.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 CONSENT TO SERVICE. Each
Seller hereby designates and appoints the Seller Representative as its
authorized agent upon whom process may be served in any suit, proceeding or
other action against such Seller instituted by the Buyer and relating to this
Agreement. Such designation and appointment shall, to the extent permitted by
law, be irrevocable, unless and until a
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successor authorized agent acceptable to the Buyer shall have been appointed by
the Sellers, such successor shall have accepted such appointment and written
notice thereof shall have been given to the Buyer. Each Seller further agrees
that service of process upon such authorized agent or successor shall be deemed
in every respect service of process upon such Seller in any such suit,
proceeding or other action. Each Seller further agrees to take any and all
action, including the execution and filing of all such instruments and
documents, as may be necessary to continue such designation and appointment of
such authorized agent in full force and effect.
8.2 Parties In Interest; No
-----------------------
Third Party Beneficiaries.
- -------------------------
(a) This Agreement shall
be binding upon, inure to the benefit of, and be enforceable by, the parties
hereto and their respective successors and permitted assigns. This Agreement
and the rights and obligations of the Parent and the Sellers hereunder may not
be assigned by any of the parties hereto without the prior written consent of
the other parties, except that the Parent may assign its rights and obligations
hereunder to Buyer, PROVIDED, HOWEVER, that the Parent shall remain
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liable for all of its obligations and those of Buyer hereunder.
(b) This Agreement is not intended,
nor shall it be construed, to confer upon any Person except the parties hereto
and their heirs, successors and permitted assigns any rights or remedies under
or by reason of this Agreement, except for the rights of Buyer Indemnified
Parties and Seller Indemnified Parties under Article VII hereof.
8.3 EXHIBITS AND DISCLOSURE
SCHEDULE. All Exhibits annexed hereto and the Disclosure Schedule referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein.
8.4 ENTIRE AGREEMENT. This
Agreement, including the Exhibits hereto and the documents, schedules,
certificates and instruments referred to herein, embody the entire agreement
and understanding of the parties hereto in respect of the transactions
contemplated by this Agreement. This Agreement supersedes all prior
agreements, arrangements and understandings of the parties with respect to such
transactions.
8.5 WAIVER OF COMPLIANCE. No
amendment, modification, alteration, supplement or waiver of compliance with
any obligation, covenant, agreement,
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provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing executed by all of the
parties or in the case of a waiver, the party against whom enforcement of any
waiver, is sought. Any waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement, provision or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure.
8.6 VALIDITY. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement, each of
which shall remain in full force and effect.
8.7 COUNTERPARTS. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
8.8 HEADINGS. The table of
contents, article and section headings contained in this Agreement are for
convenience only and shall not control or affect in any way the meaning or
interpretation of the provisions of this Agreement.
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8.9 GOVERNING LAW. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without giving effect to the conflicts of law principles of
such jurisdiction.
8.10 NOTICES. All notices,
requests, claims, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
telecopied (with confirmation of receipt), delivered by nationally-recognized
overnight express service or sent by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses:
(a) If to the Buyer to:
PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone: (216) 241-2555
Telecopy: (216) 241-2574
Attention: Chief Executive Officer
Copy to:
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Stephen M. Banker, Esq.
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(b) If to a Seller:
Seller's address, as set forth on Exhibit A
hereto.
Copy to:
Bethea, Jordan & Griffin, P.A.
23-B Shelter Cove Lane, Suite 400
P.O. Drawer 3
Hilton Head Island, SC 29938-0038
Telephone: (803) 785-2171
Telecopy: (803) 686-5991
Attention: Robert M. Deeb, Jr., Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
8.11 TERMINATION. This Agreement may be terminated by
either the Parent or the Company if the Closing has not occurred on or prior to
January 31, 1996. If any party terminates this Agreement pursuant to this
Section 8.11, all obligations of the parties hereunder shall terminate without
any liability of any party to any other party (except for any liability of any
party then in breach and except as provided, however, that the provisions of
Sections 5.4 and 5.6 and the last sentence of Section 5.9 shall survive
termination of this Agreement.)
8.12 EFFECTIVENESS. This Agreement shall not be effective until it and
the South Carolina Agreement have been signed by all parties.
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ARTICLE IX
DEFINITIONS
-----------
9.1 DEFINITIONS. For purposes of this Agreement,
the following terms shall have the meanings set forth below (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):
"ACCOUNTING BOOKS AND RECORDS" shall have the meaning set
forth in Section 3.2(b) hereof.
"ACCOUNTS RECEIVABLE" shall mean all of the accounts
receivable and notes receivable of the Company, as set forth on Schedule 3.8
"ADJUSTMENT SCHEDULE" shall have the meaning set forth in
Section 1.4(e) hereof.
"AFFILIATE TRANSACTIONS" shall have the meaning set forth in
Section 3.22 hereof.
"AGREEMENT" shall have the meaning set forth in the Preamble.
"ARTICLES OF MERGER" shall have the meaning set forth in
Section 1.7.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 3.6 hereof.
"AVERAGE INCOME" shall mean the average monthly net income for
1995 (calculated as gross revenues minus
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telephone bills and commissions) for (i) the Company Phones (as defined herein)
and (ii) the Company Phones (as defined in the South Carolina Agreement).
"AVERAGE TERM" shall mean the average remaining term of the
written contracts for the placement of (i) Company Phones (as defined herein)
and (ii) Company Phones (as defined in the South Carolina Agreement); provided
that, in calculating the term of any such contract, any renewal at the option
of the Company shall be considered part of the term; and further provided that
such calculation shall be weighted to take into account the number of
telephones under each such contract.
"BCA" shall mean the Business Corporation Act of 1988 of the
State of South Carolina
"BUYER" shall mean a wholly owned subsidiary of Parent to be
established by Parent prior to the Closing.
"BUYER INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.3 hereof.
"CLAIMING PARTY" shall have the meaning set forth in section
7.5 hereof.
"CLOSING" shall have the meaning set forth in Section 1.7
hereof.
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"CLOSING DATE" shall have the meaning set forth in Section 1.7
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMPANY" shall mean International Pay Phones, Inc., a
Tennessee corporation and all of its subsidiaries, if any.
"COMPANY PHONES" shall mean microprocessor based pay
telephones owned and operated by the Company, and which are active and
generating income.
"COMPANY PHONES AMOUNT" shall mean the aggregate number of
microprocessor based pay telephones owned and operated by the Company, and
which are active and generating income as of the Closing Date, but excluding
any telephones located at any correctional facility; provided that such amount
shall not include any telephones purchased or installed after the date hereof
unless specifically accepted by Parent in writing.
"COMPANY SHARES" or "SHARES" shall mean each share of Common
Stock, par value $1 per share, of the Company, outstanding immediately prior to
the Effective Time.
"CONSIDERATION" shall have the meaning set forth in Section 1.2(a) hereof.
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"CONSULTING AGREEMENT" shall have the meaning set forth in
Section 1.8(l) hereof.
"CONTRACTS" shall mean and include all leases, contracts,
agreements, licenses, License Agreements, purchase orders, invoices, sales
orders, instruments evidencing indebtedness for borrowed money, mortgages or
other documents securing any indebtedness for borrowed money, commitments and
understandings, written or oral, and all amendments or modifications thereto,
to which the Company is a party or by which the Company is bound.
"CURRENT ASSETS" shall mean all cash, current accounts
receivable and all cash equivalents of the Company as of the Closing Date.
"CUSTOMER PHONE AMOUNT" shall mean the number of telephones
operated by the Company and owned by third parties as of the Closing Date.
"DISCLOSURE SCHEDULE" shall mean the disclosure schedule
delivered in connection herewith.
"EFFECTIVE TIME" shall have the meaning set forth in Section
1.7 hereof.
"ENCUMBRANCE" shall mean any lien, encumbrance, proxy, voting
trust arrangement, pledge, security interest, collateral security agreement,
financing statement (and similar notices) filed with any
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Governmental Authority, claim (including any claim as defined in the Code),
charge, equities, mortgage, pledge, objection, title defect, option,
restrictive covenant or restriction on transfer of any nature whatsoever, and
the interest of the lessor in any property subject to a capital lease.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in
Section 3.18.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean any trade or business, whether or
not incorporated, which (within the meaning of Section 4001 of ERISA) would, in
conjunction with the Company and TN, be deemed a "single employer".
"EQUIPMENT" shall mean all the Company Phones, all Inventory
and all other items of plant and equipment (including, without limitation,
vehicles, furniture, computers, office equipment and office supplies) which are
owned, leased or otherwise used by the Company in the operations of its
businesses.
"ESCROW AGENT" shall have the meaning set forth in Section
1.5(a) hereof.
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"ESCROW AMOUNT" shall have the meaning set forth in Section
1.5(a).
"FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 3.6 hereof.
"GAAP" shall mean generally accepted accounting principles as
in effect on the date hereof.
"GOVERNMENTAL AUTHORITY" shall mean any government or
political subdivision thereof, whether federal, state, local or foreign, or any
agency, department, commission, board, bureau, court, tribunal, body,
administrative or regulatory authority or instrumentality of any such
government or political subdivision.
"INCOME TAXES" shall mean all Taxes based upon or measured by
income.
"INDEMNITOR" shall have the meaning set forth in Section
7.5(a) hereof.
"INTELLECTUAL PROPERTY" shall mean (i) all computer software
applications (whether licensed or otherwise and whether customized or
otherwise), U.S. and foreign patents and patent applications, registered and
unregistered copyrights and copyright applications (including copyrights in
proprietary computer software and databases), trademarks, service marks, trade
dress, logos,
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trade names and similar business identifiers, including, in each case, all
registrations and applications therefor, (ii) all trade secrets, know-how,
formulae, processes, inventions (whether patentable or unpatentable) and other
technical information and (iii) the goodwill of the business symbolized by any
of the foregoing.
"INVENTORY" shall mean and include all inventory owned or held
by the Company and used in the conduct of its business and operations,
including raw materials, components, repair parts, works-in-progress, finished
goods and other similar items, whether new or used.
"JAIL ESCROW AMOUNT" shall mean $35,000 in Parent Shares,
valued at the Stock Price.
"JAIL PHONES CONTRACT" shall mean the contract in place on the
date hereof between the Company and the appropriate authorities for the
placement of telephones in correctional institutions.
"LAW" shall mean any law (including common law), rule,
regulation, restriction (including zoning), code, statute, ordinance, order,
writ, injunction, judgment, decree or other requirement of a Governmental
Authority.
"LIABILITIES" shall mean any obligations or liabilities of any
nature whether known or unknown,
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accrued, absolute, contingent or otherwise, and whether due or to become due of
Company and its affiliates.
"LOSSES" shall mean and include all demands, claims, actions,
causes of action, assessments, damages, losses, liabilities, judgments,
settlements, fines, penalties, sanctions, costs and expenses (including,
without limitation, interest, penalties, reasonable attorneys' fees and
expenses as incurred, and all other reasonable costs of investigating and
defending third party claims as incurred).
"MATERIAL CONTRACT" shall mean any Contract that (i) is with
any of the Sellers' Affiliates, (ii) involves an obligation or commitment of
more than $5,000 or (iii) which otherwise is material to either the Company's
financial conditions, results of operations, assets, liabilities, businesses
or, to the knowledge of the Company and the Sellers, the prospects of the
Company.
"MERGER" shall have the meaning set forth in Section 1.1.
"ORDER" shall mean any order, judgment, injunction, award,
decree, writ, rule or similar action of any Governmental Authority.
"OTHER DOCUMENTS" shall have the meaning set forth in Section
1.7 hereof.
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"PARENT" shall mean PhoneTel Technologies, Inc.
"PARENT SHARES" shall mean shares of the Common Stock, $.01
par value, of the Parent.
"PERMITS" shall mean any franchise, license, certificate,
approval, identification number, registration, permit, authorization, order or
approval of, and any required registration with, any Governmental Authority.
"PERSON" shall mean any individual, partnership, firm, trust,
association, corporation, joint venture, joint stock company, unincorporated
organization, Governmental Authority or other entity.
"PRO RATA" shall mean proportionate to the percentage
ownership of all Company Shares outstanding.
"RESORT" shall have the meaning set forth in Section 6.1(f).
"SECRETARY OF STATE" shall have the meaning set forth in
Section 1.7.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SELLER INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.4 hereof.
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87
"SELLER REPRESENTATIVE" shall have the meaning set forth in
Section 1.6 hereof.
"SELLERS" shall have the meaning set forth in the preamble.
"SELLERS' AFFILIATES" shall have the meaning set forth in
Section 3.22 hereof.
"SOUTH CAROLINA AGREEMENT" shall mean the Agreement and Plan
of Merger, of even date herewith, among International PayPhones, Inc., a South
Carolina corporation, all of the shareholders thereof and Parent.
"STOCK PRICE" shall mean the lesser of $1.05 per Parent Share
or the average of the closing prices for the Parent Shares on the ten trading
days ending two days prior to the Closing Date, adjusted to account for any
stock splits, reverse stock splits, stock dividends or any similar transaction
with respect to Parent Shares.
"SURVIVING CORPORATION" shall have the meaning set forth in
Section 1.1.
"TAX RETURN" shall mean any return, report, information return
or other document (including any related or supporting information) with
respect to Taxes.
"TAXES" shall mean all taxes, charges, fees, duties, levies,
penalties or other assessments imposed by any federal, state, local or foreign
Governmental
86
88
Authority, including, but not limited to, income, gross receipts, excise,
property, sales, gain, use, license, capital stock, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto.
"THIRD PARTY CLAIM" shall have the meaning set forth in
Section 7.5 hereof.
"VOTING AGREEMENT" shall have the meaning set forth in Section
1.8(n).
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89
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, on the day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:
--------------------
Name:
Title: Chairman and CEO
INTERNATIONAL PAY
PHONES,INC.
By:
--------------------
Name:
Title:
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90
THE SHAREHOLDERS OF INTERNATIONAL PAY PHONES,
INC.:
------------------------
[Seller name]
------------------------
[Seller name]
------------------------
[Seller name]
------------------------
[Seller name]
------------------------
[Seller name]
------------------------
[Seller name]
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TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
THE MERGER
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Closing Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Consideration Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.6 Appointment of the Seller Representative . . . . . . . . . . . . . . . . . . . 11
1.7 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.8 Deliveries by the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.9 Deliveries by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.10 Certificate of Incorporation; By-
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.11 Directors and Officers of the
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
2.1 Authorization; Binding Obligation . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Title to the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3 Consents and Approvals; No
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.4 Fees To Brokers or Other Parties . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF COMPANY AND SELLERS
3.1 Organization and Standing;
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Organizational Documents and
Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 The Company Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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Page
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3.5 Consents and Approvals; No
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.7 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 27
3.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.9 Absence of Certain Changes or
Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.10 Properties and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.11 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.12 Compliance with Laws and Permits . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.13 Litigation and Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.14 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.15 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.20 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.21 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.22 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.24 Prior Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.25 Company Phones Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.26 Consents; Waivers; Assignments;
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.27 Recent Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.28 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT
4.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.2 Authorization; Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . 46
4.3 Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE V
ADDITIONAL COVENANTS
5.1 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.2 Further Assurances; Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.3 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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Page
----
5.5 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.7 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.8 Interim Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.9 Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.10 Payment of the Telephone Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.11 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.12 S Corporation Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE VI
6.1 Conditions Precedent to Obligations of the Parent. The obligation of the
Parent to consummate the transactions contemplated hereby is subject to
the satisfaction or waiver (subject to applicable law) on or before the Closing
Date, of each of the following conditions: . . . . . . . . . . . . . . . . . . . . . . 59
6.2 Conditions Precedent to Obligations of the Company and the Sellers . . . . . . . . . . 61
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 62
7.2 Statements as Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.3 Indemnification by the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.4 Indemnification by the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.5 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.6 Certain Tax Indemnification Procedures: Notice Requirements; Control of Proceedings . 69
ARTICLE VIII
MISCELLANEOUS
8.1 Consent to Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.2 Parties in Interest; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . 72
8.3 Exhibits and Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
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94
Page
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8.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.5 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.6 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.11 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE IX
DEFINITIONS
9.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Exhibit A - List of Sellers
Exhibit B - Escrow Agreement
Exhibit C - Certificate of Non-Foreign Status
Exhibit D - Securities Act Certificate
Exhibit E - Consulting and Non-Competition Agreement
Exhibit F - Voting Agreement
Exhibit G - Registration Rights Agreement
Exhibit H - Financial Statements
Exhibit I - Continuity of Interest Agreement
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95
AMENDMENT NO. 1
TO
THE AGREEMENT AND PLAN OF MERGER
AMONG
PHONETEL TECHNOLOGIES, INC.
INTERNATIONAL PAY PHONES, INC.
[Tennessee]
AND
THE SHAREHOLDERS OF INTERNATIONAL PAY PHONES, INC.
Amendment No. 1, dated as of January 16, 1996 ("Amendment No.
1"), to the Agreement and Plan of Merger, dated as of November 22, 1995 (the
"Original Agreement"), among PhoneTel Technologies, Inc., an Ohio corporation
("Parent"), International Pay Phones, Inc., a Tennessee corporation
("Company"), and the shareholders of the Company (collectively, the "Sellers").
Parent and Sellers entered into the Original Agreement on
November 22, 1995. Parent and Sellers desire to amend the Original Agreement
to make the changes set forth below.
NOW THEREFORE, in consideration of the agreements herein set
forth and for other valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Parent and Sellers covenant and agree as follows:
1. The Closing as defined in Section 1.7(a) of the Original
Agreement shall take place on or before February 29, 1996, as
may be mutually agreed by Parent and Sellers, and the term
"Closing Date", as defined and used in the Original Agreement,
shall be amended to mean the date on which the Closing
actually takes place.
2. The term "Buyer" as used in the Original Agreement is hereby
deleted and replaced with the term "Parent" as defined and
used in the Original Agreement.
96
3. The term "Buyer" is hereby eliminated as a de
fined term from Section 9.1 of the Original Agreement.
4. The following Section 1.4(c)(v) is added to the
Original Agreement:
"The Consideration shall be increased by an amount
equal to the Company's net operating loss, before
depreciation and amortization, from January 11, 1996
through the date of Closing as reflected on the
Company's income statement which shall be prepared on
the date of Closing in accordance with generally
accepted accounting practices."
5. Section 8.2(a) of the Original Agreement is hereby amended to
add the following language at the end of such Section:
", and, from and after the Closing Date, Parent may
assign its rights hereunder to any party providing
financing to Parent."
6. If the merger of the Company into Parent (the "Merger")
contemplated by the Original Agreement, as hereby amended, has
not been consummated by February 1, 1996, then the $75,000
deposit held pursuant to the Escrow Agreement shall be
disbursed to Sellers by Bethea, Jordan & Griffin, P.A.
("Escrow Agent"), PROVIDED, HOWEVER, that (i) such $75,000
shall be credited as a partial payment of the Consideration if
the Merger is later consummated and (ii) if either of (a) the
Closing of the Merger or (b) the closing of Parent's pending
financing arrangements with ING are not closed on or prior to
February 29, 1996 due to a breach by the Company or Sellers of
the Original Agreement, as hereby amended, then the Escrow
Agent shall not disburse any funds to Sellers and, if
previously disbursed, Sellers shall promptly (and in any event
within two Business Days after Parent's written request) repay
to Parent the entire $75,000 previously disbursed from the
Escrow.
2
97
7. The Original Agreement and the Escrow Agreement are hereby
amended to provide that (a) the total amount (exclusive of the
Jail Escrow Amount) to be held by the Escrow Agent pursuant to
the Escrow Agreement after Closing shall be $62,500, (b) the
cash portion of the $62,500 shall be held by the Escrow Agent
in an interest bearing account with interest accruing to the
Sellers, (c) the claim period provided for in the Escrow
Agreement shall be shortened to provide that the Escrow Agent
shall hold the $62,500, and that claims can be made, only for
a period of six (6) months, and (d) the amounts to be released
to Seller's Representative in the first six months of the
Escrow shall be reduced by one-half. The Original Agreement
and the Escrow Agreement shall also be amended to reduce the
Jail Escrow Amount to $17,500.
8. The parties agree to execute a formal Amendment to the Escrow
Agreement prior to Closing incorporating the changes and
modifications set forth in paragraph 7 of this Amendment No. 1.
9. Except as herein amended, all terms, provisions and conditions
of the Original Agreement, all Exhibits and Schedules thereto
and all documents executed in connection therewith shall
continue in full force and effect and shall remain enforceable
and binding in accordance with their terms.
10. This Amendment No. 1 may be executed in any number of
identical counterparts, each of which shall for all purposes
be deemed an original and all of which constitute,
collectively, one agreement.
11. This Amendment No. 1 shall be governed by and construed in
accordance with the laws of the State of New York.
12. In the event of a conflict between the terms
and conditions of the Original Agreement and the terms and
conditions of this Amendment No. 1, then the terms and
conditions of this Amendment No. 1 shall prevail.
3
98
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, effective as of the date and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:________________________________
Name:
Title:
INTERNATIONAL PAY PHONES, INC.
By:________________________________
Name:
Title:
SELLERS:
_____________________________
Nickey Maxey
_____________________________
Hugh Collins
4
99
AMENDMENT NO. 2
TO
THE AGREEMENT AND PLAN OF MERGER
AMONG
PHONETEL TECHNOLOGIES, INC.
INTERNATIONAL PAYPHONES, INC.
[Tennessee]
AND
THE SHAREHOLDERS OF INTERNATIONAL PAYPHONES, INC.
Amendment No. 2, dated as of February 23, 1996 ("Amendment No. 2"),
to the Agreement and Plan of Merger, dated as of November 22, 1995 (the
"Original Agreement"), among PhoneTel Technologies, Inc., an Ohio corporation
("Parent"), International Payphones, Inc., a Tennessee corporation ("Company"),
and the shareholders of the Company (collectively, the "Sellers").
Parent, the Company and Sellers entered into the Original Agreement
on November 22, 1995. The Original Agreement was amended pursuant to Amendment
No. 1, dated as of January 16, 1996 among Parent, the Company and Sellers
("Amendment No. 1"). Parent, the Company and Sellers desire to further amend
the Original Agreement to make the changes set forth below.
NOW THEREFORE, in consideration of the agreements herein set forth
and for other valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Parent and Sellers covenant and agree as follows:
1. Section 1.1 of the Original Agreement, as amended by Amendment No.
1, is hereby deleted and replaced with the following:
1.1 THE MERGER. Upon the terms and subject to
conditions of this Agreement and in accordance with Chapter 17 of
the Revised Code of the State of Ohio (the "GCL") at the Effective
Time, the Company shall be merged with and into the Parent (the
"Merger") and the separate corporate existence of the Company shall
cease. After the Merger, the Parent shall continue as the
surviving corporation (sometimes hereinaf-
100
ter referred to as the "Surviving Corporation"). The Merger shall
have the effects as provided in the applicable provisions of the
GCL. Without limiting the generality of the foregoing, upon the
Merger, all the rights, privileges, immunities, powers and
franchises of the Company and the Parent shall vest in the
Surviving Corporation and, except as otherwise provided for in
this Agreement, all obligations, duties, debts and liabilities
of the Company and the Parent shall be the obligations, duties,
debts and liabilities of the Surviving Corporation.
2. Section 1.7(c) of the Original Agreement, as amended by Amendment
No. 1, is hereby deleted and replaced with the following:
(c) On the Closing Date, the Parent and the Company
will cause appropriate Articles of Merger (the "Articles of
Merger") to be executed and filed with the Secretary of State of
Tennessee in such form and executed as provided in the BCA. The
Parent and the Company will also cause an appropriate Certifi- cate
of Merger (the "Certificate of Merger") to be executed and filed
with the Secretary of State of Ohio in such form and executed as
provided in the GCL. The Merger shall become effective on the date
on which the Articles of Merger and the Certificate of Merger has
been duly filed with the appropriate Secretary of State or such
time as is agreed upon by the parties and specified in the
Certificate of Merger, and such time is hereinafter referred to as
the "Effective Time".
3. Except as herein amended, all terms, provisions and conditions of
the Original Agreement, as amended by Amendment No. 1, all exhibits
and Schedule thereto and all documents executed in connection
therewith shall continue in full force and effect and shall remain
enforceable and binding in accordance with their terms.
2
101
4. This Amendment No. 2 may be executed in any number of identical
counterparts, each of which shall for all purposes be deemed an
original and all of which constitute, collectively, one agreement.
5. This Amendment No. 2 shall be governed by and construed in
accordance with the laws of the State of New York.
6. In the event of a conflict between the terms
and conditions of the Original Agreement and the
terms and conditions of this Amendment No. 2, then the terms and
conditions of this Amendment No. 2 shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, effective as of the date and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:_________________________________
Name:
Title:
INTERNATIONAL PAY PHONES, INC.
By:_________________________________
Name:
Title:
SELLERS:
_____________________________
Nickey Maxey
_____________________________
Hugh Collins
3
102
TIME EXTENSION AGREEMENT
FOR
THE AGREEMENT AND PLAN OF MERGER
AMONG
PHONETEL TECHNOLOGIES, INC.
INTERNATIONAL PAYPHONES, INC.
[Tennessee]
AND
THE SHAREHOLDERS OF INTERNATIONAL PAYPHONES, INC.
AND
TERMINATION OF THE ESCROW AGREEMENT
AMONG
BETHEA, JORDAN & GRIFFIN, P.A.
PHONETEL TECHNOLOGIES, INC.
INTERNATIONAL PAYPHONES, INC.
[Tennessee]
AND
THE SHAREHOLDERS OF INTERNATIONAL PAYPHONES, INC.
[Tennessee]
Time Extension Agreement, dated as of March 1, 1996 ("Extension
Agreement"), respecting the Agreement and Plan of Merger, dated as of November
22, 1995, as amended as of January 16, 1996 and February 23, 1996 (the
"Original Agreement"), among PhoneTel Technologies, Inc., an Ohio corporation
("Parent"), International Payphones, Inc., a Tennessee corporation ("Company"),
and the shareholders of the Company (collectively, the "Sellers"), and
termination of the Escrow Agreement, dated as of November 22, 1995, as amended
as of February 29, 1996, (the "Escrow Agreement"), among Bethea, Jordan &
Griffin, P.A. (the "Escrow Agent"), Parent and Sellers.
Parent, the Company and Sellers desire to extend the effectiveness of
all agreements and documents in connection with the Original Agreement, as
amended. Parent, Sellers and the Escrow Agent desire to terminate all
provisions of the Escrow Agreement.
NOW THEREFORE, in consideration of the agreements herein set forth and
for other valuable consideration, the receipt and adequacy of which are hereby
103
acknowledged, Parent, the Company and Sellers covenant and agree as follows:
1. The Original Agreement, all exhibits and schedules thereto and all
documents executed in connection therewith shall exist in the exact form
as previously executed, except as provided in this Extension Agreement.
Any reference to the Original Agreement in any exhibit or schedule to
the Original Agreement or in any document executed in connection
therewith shall be deemed to incorporate this Extension Agreement.
2. The effective dates of documents and agreements executed in connection
with the Original Agreement which have expired are hereby extended until
5 p.m. New York City time on March 15, 1996.
3. All terms, provisions and conditions of the Original Agreement, all
exhibits and schedules thereto and all documents executed in connection
therewith shall continue in full force and effect and shall remain
enforceable and binding in accordance with their terms until 5 p.m. New
York City time on March 15, 1996.
4. The Closing as defined in Section 1.7(a) of the Original Agreement shall
be on or before March 15, 1996, and the term "Closing Date" as defined
and used in the Original Agreement, shall be deemed to mean March 15,
1996 for all purposes relating to accounting and purchase price
adjustments, irrespective of whether March 15, 1996 is the actual date of
the Closing.
5. Section 1.2(a) of the Original Agreement, which defines Consideration,
is hereby deleted and replaced in its entirety with the following:
1.2(a) Each share of common stock, par value $1.00 per share,
of the Company ("Company Shares") outstanding immediately prior to the
Effective Time shall be converted into the right to receive a percentage
of the Consideration equal to the percentage such Company Share
represents of all Company Shares.
2
104
The consideration (the "Consideration") shall equal the sum of (i) the
excess of (A) the product of $3,800 and the Company Phones Amount, over
(B) $15,000, minus $37,500 subject to adjustment as set forth in Section
1.4 hereof (to be paid one half in cash and one half in certificates
representing Parent Shares, valued at the Stock Price); plus (ii) the sum
of (A) the product of $1,000 and the Customer Phones Amount plus (B)
$25,000 (to be paid in Parent Shares, valued at the Stock Price); plus
(iii) $33,611.50 paid either by bank check, cashier's check or wire
transfer of immediately available funds; plus (iv) 1,418 shares of
Parent's 14% Convertible Preferred Stock, no par value, $60 stated value;
plus (v) warrants to purchase 30,624 shares of Parent's Common Stock at
an initial exercise price of $.01.
6. Section 1.5 of the Original Agreement, referring to the Escrow Agreement
and amounts contributed thereto, shall be deleted from the Original
Agreement at the Closing Date.
7. The Escrow Agreement shall be terminated at the Closing Date. Any
amounts currently held in escrow shall be paid in accordance with the
terms of the Escrow Agreement.
8. The proviso contained in Paragraph 6(ii) to Amendment No. 1, dated as of
January 16, 1996, to the Original Agreement shall have no further force
and effect.
9. Except as previously revised or herein amended, all terms, provisions
and conditions of the Original Agreement, and all documents executed in
connection therewith shall continue in full force and effect and remain
enforceable in accordance with their terms.
10. This Extension Agreement may be executed in any number of identical
counterparts, each of which shall for all purposes be deemed an original
and all of which constitute, collectively, one agreement.
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11. This Extension Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
12. In the event of a conflict between the terms and conditions of the
Original Agreement and the terms and conditions of this Extension
Agreement, then the terms and conditions of this Extension Agreement
shall prevail.
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IN WITNESS WHEREOF, the parties hereto have executed this Extension
Agreement, effective as of the date and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:______________________________
PETER GRAF
Chairman
INTERNATIONAL PAYPHONES, INC.
By:______________________________
Name:
Title:
SELLERS
By:______________________________
NICKEY MAXEY
as Shareholders' Representative
BETHEA, JORDAN & GRIFFIN, P.A.
By:______________________________
ROBERT DEEB
Escrow Agent
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