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EXHIBIT (c)(2)
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
among
PHONETEL III, INC.,
PAYPHONES OF AMERICA, INC.
and
ALL OF THE SHAREHOLDERS
of
PAYPHONES OF AMERICA, INC.
August 1, 1996
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TABLE OF CONTENTS
PAGE
ARTICLE I - PURCHASE AND SALE OF THE SHARES;
THE CLOSING..................................................... 2
1.1 Purchase and Sale.......................................... 2
1.2 Purchase Price............................................. 2
1.3 Consideration.............................................. 4
1.4 The Closing; Closing Payment............................... 5
1.5 Consideration Adjustments.................................. 6
1.6 Deliveries by the Sellers.................................. 9
1.7 Deliveries by the Buyer.................................... 11
1.8 Escrow Agreements.......................................... 12
1.9 Payment of Liabilities..................................... 12
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF EACH
SELLER.......................................................... 13
2.1 Authorization; Binding Obligation.......................... 13
2.2 Title to the Shares........................................ 14
2.3 Consents and Approvals; No Violation....................... 14
2.4 Brokers.................................................... 15
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF POA
AND SELLERS..................................................... 16
3.1 Organization and Standing; Subsidiaries.................... 16
3.2 Organizational Documents and Corporate
Records.................................................... 17
3.3 Authorization.............................................. 18
3.4 POA Capitalization......................................... 18
3.5 Consents and Approvals; No Violation....................... 19
3.6 Financial Statements....................................... 20
3.7 Absence of Undisclosed Liabilities......................... 22
3.8 Accounts Receivable........................................ 23
3.9 Equipment.................................................. 23
3.10 Absence of Certain Changes or Events...................... 24
3.11 Properties and Assets..................................... 27
3.12 Contracts................................................. 27
3.13 Compliance with Laws and Permits.......................... 28
3.14 Litigation and Arbitration................................ 29
3.15 Employee Matters.......................................... 30
3.16 Labor Relations........................................... 31
3.17 Taxes..................................................... 31
3.18 Intellectual Property..................................... 33
3.19 Environmental Matters..................................... 34
3.20 Insurance................................................. 34
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3.21 Customers and Suppliers................................... 35
3.22 Warranties; Returns and Cancellations..................... 36
3.23 Affiliate Transactions.................................... 37
3.24 Brokers................................................... 37
3.25 Disclosure................................................ 37
3.26 Prior Acquisitions........................................ 38
3.27 POA Phones................................................ 38
3.28 Consents; Waivers; Assignments; Permits................... 38
3.29 Consents and Approvals; No Violation...................... 39
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE
BUYER........................................................... 40
4.1 Organization and Standing.................................. 40
4.2 Authorization; Binding Obligation.......................... 40
4.3 Brokers.................................................... 41
ARTICLE V - ADDITIONAL COVENANTS......................................... 41
5.1 Conduct of Business of the Seller.......................... 41
5.2 Further Assurances; Cooperation............................ 45
5.3 Notification of Certain Matters............................ 45
5.4 Confidentiality............................................ 46
5.5 Publicity.................................................. 47
5.6 Expenses................................................... 47
5.7 Forwarding of Payments Received............................ 48
5.8 Transfer of Telephones..................................... 48
5.9 Transfer and Similar Taxes; Tax Returns.................... 48
5.10 Delivery of Financial Statement............................ 50
ARTICLE VI - CONDITIONS TO CLOSING....................................... 51
6.1 Conditions Precedent to Obligations
of the Buyer............................................... 51
6.2 Conditions Precedent to Obligations
of the Seller.............................................. 53
ARTICLE VII - SURVIVAL OF REPRESENTATIONS AND WAR-
RANTIES; INDEMNIFICATION........................................ 54
7.1 Survival of Representations and
Warranties................................................. 54
7.2 Statements as Representations.............................. 55
7.3 Indemnification by the Sellers............................. 55
7.4 Indemnification by the Buyer............................... 57
7.5 Tax Indemnification Event.................................. 58
7.6 Limitations on Indemnification............................. 62
7.7 Indemnification Procedures................................. 62
7.8 Remedies................................................... 66
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ARTICLE VIII - MISCELLANEOUS............................................. 66
8.1 Parties in Interest; No Third Party
Beneficiaries...................................... 66
8.2 Exhibits and Disclosure Schedule........................... 67
8.3 Entire Agreement........................................... 67
8.4 Waiver of Compliance....................................... 67
8.5 Validity................................................... 68
8.6 Counterparts............................................... 68
8.7 Headings................................................... 68
8.8 Governing Law.............................................. 68
8.9 Termination................................................ 69
8.10 Notices................................................... 69
ARTICLE IX - Definitions................................................. 70
9.1 Definitions................................................ 70
Exhibit 1 - Calculation of Purchase Price
Exhibit A - List of Sellers
Exhibit B - Certificate of Non-Foreign Status
Exhibit C - List of Contract Consents
Exhibit D - Harvey Agreement
Exhibit E - Brinkmeier Agreement
Exhibit F - Rojeski Agreement
Exhibit G - Securities Act Certificate
Exhibit H - Registration Rights Agreement
Exhibit I - Liabilities To Be Paid or Assumed At Closing
Exhibit J - Financial Statements
Exhibit K - Security Agreement
Exhibit L - Form of Seller Notes
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AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
---------------------------------------------
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT (the
"Agreement"), dated as of August 1, 1996, among PhoneTel III, Inc. (the
"Buyer"), an Ohio corporation, Payphones of America, Inc., a Tennessee
corporation (together with its Subsidiaries, "POA") and all of the shareholders
of POA (individually a "Seller," and collectively, the "Sellers"), whose names,
addresses and holdings in POA are set forth on Exhibit A hereto.
WHEREAS, POA is engaged in the business of owning and
operating pay telephones and engaging in the sale, installation and maintenance
of pay telephones (the "Business");
WHEREAS, the Sellers are the beneficial and record owners of
all of the issued and outstanding common shares (the "Shares"), $.01 par value,
of POA; and
WHEREAS, the Buyer desires to purchase, and the Sellers desire
to sell, all of the Shares, upon the terms and subject to the conditions set
forth herein;
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:
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ARTICLE I
PURCHASE AND SALE OF THE SHARES; THE CLOSING
--------------------------------------------
1.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions hereof, at the Closing (as defined in Section 1.4 hereof) each of the
Sellers will sell, assign, transfer and deliver to the Buyer, and the Buyer will
accept and purchase from each of the Sellers, free and clear of all
Encumbrances, the Shares. The number and percentage of outstanding Shares being
sold by each of the Sellers is set forth opposite such Seller's name on Exhibit
A hereto.
1.2 PURCHASE PRICE.
Upon the terms and subject to the conditions hereof,
in reliance upon the representations, warranties, covenants and agreements of
the Sellers contained herein, the Buyer will deliver consideration having the
following value (the "Purchase Price"):
(a) the product of $4,000 and the number of POA Phones as of
the Closing Date; plus
(b) the product of $1,000 and the number of POA Contract
Phones as of the Closing Date; plus
(c) the product of $1,000 and the number of POA Managed
Phones as of the Closing Date; plus
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(d) the excess of (i) all cash on hand and in the POA Phones
as of July 31, 1996 plus all amounts due to POA as of July 31, 1996 from (A)
Intellicall Inc., Frontier, NOS, QCC and Teltrust Inc. for operator service
calls made on or before July 31, 1996; (B) AT&T and MCI for operator service
and/or dial-around calls made on or before July 31, 1996; and (C) interstate,
intra-LATA and local dial-around and/or set use fee compensation for all periods
through and including July 31, 1996 (but, with respect to clause (A) above, only
to the extent such amounts are received by the Company within 75 days after the
Closing Date) over (ii) the amount of all site commissions and other accounts
payable accrued but not paid as of the Closing Date (including the amount of all
telephone bills for all periods through and including July 31, 1996, whenever
received). In the event the amount specified in clause (ii) above exceeds the
amount in clause (i) above, the Purchase Price shall be decreased by the amount
of such excess; minus
(e) the Permit Shortfall; and, minus
(f) all Liabilities paid or assumed by Buyer or by
Berthel-Fisher at the Closing pursuant to Section 1.8 hereof.
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1.3 CONSIDERATION. The Purchase Price shall be paid in the
form of cash (wire transferred to the accounts of Sellers designated in writing
to Buyer not later than two business days prior to the Closing), certificates
representing Buyer Shares, valued at $4.50 per Buyer Share, and promissory notes
in the form attached as Exhibit L hereto ("Buyer Notes") as follows:
(a) Cash in an amount equal to the sum of $200,000;
(b) Buyer Notes and Buyer Shares having an aggregate
value representing the balance of the Purchase Price, as specified in Exhibit 1
hereto.
1.4 THE CLOSING; CLOSING PAYMENT. (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
simultaneously with the execution hereof (the "Closing Date") and 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"). At the Closing, the actions described in Sec-
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tions 1.6, 1.7 and 1.8 hereof shall take place. All such actions shall be deemed
to have occurred simultaneously.
(b) Attached hereto as Exhibit 1 is Sellers' good faith
estimate of the Purchase Price as of the Closing Date, including all the detail
required by Section 1.2 hereof.
(c) At the Closing, Buyer shall pay to Sellers, Pro
Rata, an amount equal to the Consideration (using the good faith estimates
delivered pursuant to paragraph (b) above); provided that the stock certificates
to be issued pursuant to Section 1.3(a) shall be delivered as soon as
practicable after the Closing.
1.5 CONSIDERATION ADJUSTMENTS. As soon as practicable after
the Closing Date (but in any event not more than 90 days after the Closing
Date), the Buyer shall cause to be prepared and delivered to Sellers a schedule
(the "Adjustment Schedule") which shows, as of the Closing Date, the calculation
of the Purchase Price as provided in Section 1.2.
(i) Upon receipt of the Adjustment Schedule,
Sellers shall have the right during the succeeding 10-day period to examine
the Adjustment Schedule and all records used to prepare such Adjustment
Schedule. Sellers
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shall notify Buyer 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 Sellers in good faith object to the
Adjustment Schedule, Sellers and Buyer shall attempt to resolve any
such objections within 10 days of Buyer's receipt of such objections.
If Buyer and Sellers 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 of such independent certified public
accountants shall be divided equally between Buyer and the Sellers.
Such firm's resolution of the dispute shall be conclusive and binding
upon the Sellers and Buyer.
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(iii) The Adjustment Schedule shall be deemed
complete upon the earlier of (A) the eleventh (11th) day after Buyer's
delivery of the Adjustment Schedule to Sellers, unless prior to such day
Sellers shall have notified Buyer 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) Buyer shall pay Sellers, Pro Rata, the amount, if
any, by which the Consideration (as adjusted) exceeds
the amount paid pursuant to Section 1.3 by increasing
the principal amount of the Buyer Notes, with such
increased amount being due as part of the final payment
of principal hereunder; PROVIDED, that, in the case of
an adjustment pursuant to Section 1.2(d), such payment
shall be made in cash; or (B) Sellers shall pay to
Buyer the amount, if any, by which the amount paid
pursuant to Section 1.3 exceeds the Consideration (as
adjusted) by forgiving, in the inverse
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order of maturity, such amount due under the Buyer
Notes.
In either case, the Consideration shall be adjusted in the
proportions specified in Section 1.3.
1.6 DELIVERIES BY THE SELLERS. At the Closing, the Sellers
shall deliver 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) a receipt for the payments provided for by Section
1.3 hereof;
(c) a Certificate of Non-Foreign Status, duly executed
by each Seller, in the form attached hereto as Exhibit B;
(d) certified resolutions of the Board of Directors of
POA approving this Agreement and the Other Documents and the transactions
contemplated hereby and thereby;
(e) all consents, assignments or waivers required to be
obtained in connection with the Contracts, as specified in Exhibit C hereto, in
order for the Buyer
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to assume the operations and conduct the business of Seller without the
breaching provisions of any Contract listed on Schedule 3.12 hereto;
(f) an executed Consulting and Non-Competition
Agreement between Buyer and Sue Harvey in the form attached hereto as Exhibit D;
(g) an executed Consulting and Non-Competition
Agreement between Buyer and William J. Brinkmeier in the form attached hereto as
Exhibit E;
(h) an executed Consulting and Non-Competition
Agreement between Buyer and Stanley Rojeski in the form attached hereto as
Exhibit F;
(i) a Certificate of Good Standing for POA from the
Tennessee Secretary of State;
(j) the resignations of all of the officers and
directors of POA;
(k) the stock books, stock ledgers and minute books of
POA (all other records of POA being located on the premises of POA being
retained by POA at the Closing);
(l) a certificate in substantially the form attached
hereto as Exhibit G, duly executed by each Seller, representing to the Buyer
certain matters in connection with the Securities Act;
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(m) all Permits required to be obtained before the Buyer
may legally operate POA's Business;
(n) A certificate from an officer of POA certifying that
all representations and warranties contained in Article III are true and correct
in all material respects as of the Closing Date;
(o) A certificate from each Seller certifying that all
representations and warranties contained in Articles II and III are true and
correct in all material respects as of the Closing Date; and
(p) an executed Registration Rights Agreement among
Buyer and each of the Sellers in the form attached hereto as Exhibit H (the
"Registration Rights Agreement").
1.7 DELIVERIES BY THE BUYER. At the Closing, the Buyer is
delivering (unless previously delivered) the following:
(a) To the Sellers, Pro Rata, the Consideration
provided for in Section 1.3 hereof;
(b) To the Sellers, a certificate evidencing the good
standing of the Buyer under the laws of the state of Ohio;
(c) To the Sellers, certified resolutions of the Board
of Directors of the Buyer and PhoneTel
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Technologies, Inc. ("Parent") approving this Agreement and the transactions
contemplated hereby;
(d) To the Sellers, an executed Registration Rights
Agreement;
(e) To the Sellers, an executed letter of intent between
Buyer and Rauscher Pierce Refsnes, Inc.;
(f) To Messrs. Brinkmeier and Rojeski and Ms. Harvey,
the executed contracts attached as Exhibits E, F and D, respectively;
(g) To the Sellers, an executed Security Agreement in
the form attached hereto as Exhibit K; and
(h) To the Sellers, the executed Buyer Notes.
1.8 PAYMENT OF LIABILITIES. At the Closing, Buyer and
Sellers shall pay or cause to be paid, all Liabilities specified in Exhibit 1
hereto to be paid by them, including all principal, interest, penalties and
other amounts and all per diem interest due after the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
---------------------------------------------
Each Seller severally represents and warrants to the Buyer as follows:
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2.1 AUTHORIZATION; BINDING OBLIGATION. Each of this
Agreement and the Other Documents has 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. Each Seller has
the legal capacity and all requisite power and authority to execute and deliver
this Agreement and the Other Documents and to consummate the transactions
contemplated hereby and thereby and to perform such Seller's obligations hereun-
der and thereunder. Such execution, delivery and consummation has been duly
and validly authorized by all necessary action on the part of such Seller. No
power of attorney has been granted by such Seller with respect to any matter
relating to POA or the Shares, or POA's business, operations or assets.
2.2 TITLE TO THE SHARES. Immediately prior to the Closing,
each Seller was the record and beneficial owner of, and had good and marketable
title to, the number of Shares set forth next to each such Seller's name on
Exhibit A hereto, free and clear of all Encumbrances. Such Shares are not
subject to any restrictions on transferability other than those imposed by the
Secu-
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rities Act and applicable state securities laws and there are no options,
warrants, calls, commitments or rights of any character to purchase or otherwise
acquire Shares from such Seller pursuant to which such Seller may be obligated
to sell or transfer any of such Shares. At the Closing, the Buyer is acquiring
good and marketable title to such Shares, free and clear of all Encumbrances.
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) 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, except for filings required to transfer
rights under the Permits, (b) 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
Shares) may be bound or affected or (c) violate, breach, or conflict with, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise
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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
(including, without limitation, such Seller's 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 Shares) may be bound or affected.
2.4 BROKERS. Neither the Buyer, Sellers nor POA has or will
have any obligation to pay any broker's, finder's, investment banker's,
financial advisor's or similar fee in connection with this Agreement or the
Other Documents, or the transactions contemplated hereby or thereby, by reason
of any action taken by or on behalf of such Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF POA AND SELLERS
-------------------------------------------------
POA and the Sellers jointly and severally represent and
warrant to the Buyer as follows:
3.1 ORGANIZATION AND STANDING; SUBSIDIARIES. POA is a
corporation duly organized, validly existing and
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in good standing under the laws of the State of Tennessee. POA has no
subsidiaries except as set forth on Schedule 3.1 attached hereto and made a part
hereof. None of the subsidiaries of POA is engaged, or has engaged, in any
business. POA has all requisite power and authority, corporate or otherwise, to
own, lease and operate the properties and assets it now owns, operates and
leases and to carry on its business and operations as currently and heretofore
conducted. POA 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 POA owns, leases or operates, (ii) the conduct of the
POA's businesses and operations as currently and heretofore conducted or (iii)
any other circumstance makes such qualification necessary.
3.2 ORGANIZATIONAL DOCUMENTS AND CORPORATE RECORDS.
(a) Either the Sellers or POA have heretofore
delivered to the Buyer complete and correct copies, with all amendments thereto,
of the Certificate of Incorporation, Articles of Incorporation and By-laws of
POA, as currently in effect. The minute books of POA have been made available to
the Buyer for its inspection,
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and such minute books contain complete and correct records of all meetings, and
consents in lieu of a meeting, of POA's Board of Directors (and any committees
thereof) and its shareholders since POA's incorporation, and accurately reflect
all transactions referred to therein. The stock books and ledgers of POA have
been made available to the Buyer for its inspection, and such books and ledgers
are complete and correct in all respects.
(b) Either the Sellers or POA have made available to the
Buyer all accounting, corporate and financial books and records (the "Accounting
Books and Records") which relate to POA. Such books and records are true,
accurate and complete, have been maintained on a basis consistent with past
practice, and fairly reflect the basis for POA's financial condition and results
of operations as set forth in the Audited Financial Statements.
3.3 AUTHORIZATION. POA has the requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the Other Documents and to consummate the
transactions contemplated hereby and thereby. All corporate proceedings on the
part of Seller which are necessary to execute, deliver and perform this
Agreement and the Other
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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 POA, and constitute valid and binding
obligations of POA, enforceable against POA in accordance with their terms. No
power of attorney has been granted and is currently in force by POA with respect
to any matter relating to the Business.
3.4 POA CAPITALIZATION. The authorized capital stock of POA
consists of 10,000,000 Shares, $.01 par value, 2,567,324 of which are issued and
outstanding and owned by the Sellers as set forth on Exhibit A hereto. POA has
no other class of capital stock authorized or outstanding. None of POA's shares
of capital stock has been reserved for any purpose except for 1,000,000 shares
reserved for issuance to employees which have not been issued to date and which
POA is under no obligation to issue. All of the Shares are duly authorized and
validly issued, fully paid, nonassessable and were not issued in violation of
any preemptive rights. At the Closing, there will be no (i) options, warrants,
calls, commitments or rights of any character to purchase or otherwise acquire
from POA shares of capital stock of any class, (ii) outstanding securities of
POA that are convertible
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into or exchangeable or exercisable for shares of any class of capital stock of
POA, (iii) options, warrants or other rights to purchase from POA 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 POA, any options, warrants or rights, pursuant to which,
in any of the foregoing cases, POA is or would be subject or bound.
3.5 CONSENTS AND APPROVALS; NO VIOLATION. 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, nor operation of the Business (consistent
with such practice) by POA after the Closing, will (a) conflict with any
provision of the Articles of Incorporation or By-laws (or other similar
organizational documents) of POA, (b) except as set forth on Schedule 3.5(b) of
the Disclosure Schedule, require any consent, waiver, approval, authorization or
permit of, or filing with or notification to, or any other action by, any
Governmental Authority by POA, (c) violate any Law of any Governmental Authority
applicable to POA, or by which any of POA's business, properties or assets may
be bound or affected or (d) violate, breach, or
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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 POA is a party or by
which any of POA's business, properties or assets may be bound or affected.
3.6 FINANCIAL STATEMENTS. The Sellers are furnishing to the
Buyer the audited financial statements of POA as of December 31, 1994 and 1995
and for the years then ended (together with the notes thereto), certified by
POA's independent public accountants, and accompanied by their reports thereon
(collectively, the "Audited Financial Statements"). The Sellers are furnishing
to the Buyer the unaudited pro forma financial statements for POA, LP One and
the Berthel Fisher Phones as of March 31, 1996 (together with the notes thereto)
(collectively, with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements are attached hereto as Exhibit J. The
Financial Statements have been prepared from and in accordance with the books
and re-
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cords of POA and LP One in accordance with past practices and GAAP, and, except
as noted therein, consistently applied and maintained throughout the periods
indicated. The Financial Statements fairly present, in all material respects,
(i) the assets, liabilities and financial condition of POA and LP One (and, in
the case of the pro forma financial statements, the Berthel Fisher Phones), 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 POA and LP One
(and, in the case of the pro forma financial statements, the Berthel Fisher
Phones) 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
Exhibit I, POA has no Liabilities or obligations arising from or relating to its
business and operations of any nature (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise
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and whether due or to become due), except for liabilities or obligations
incurred since March 31, 1996 in the ordinary course of business and consistent
with past practice. Schedule 3.7(b) of the Disclosure Schedule sets forth a
true, complete and accurate list of all liabilities or obligations of POA at
December 31, 1995 and March 31, 1996 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 lease of POA. As of the Closing,
POA (or Buyer or Berthel-Fisher on behalf of POA) will be entitled to pay and
discharge all liabilities set forth in Exhibit I hereto without payment of any
premium or penalty.
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 connection with POA Phones as of March 31, 1996. All
Accounts Receivable reflected in the Financial Statements and all Accounts
Receivable acquired or generated since March 31, 1996 by POA (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
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subject to any Encumbrance (other than Permitted Encumbrances). Except as set
forth on Schedule 3.8 of the Disclosure Schedule, as of the Closing Date (i) no
Account Receivable has been outstanding for more than 90 days (other than, as to
LEC receivables, in the ordinary course of business), (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 EQUIPMENT.
(a) All Equipment is (or, with respect to the LP
One Phones, the Berthel Fisher Phones and all related Equipment, will be at the
Closing) owned by POA free and clear of any Encumbrance except for the Permitted
Encumbrances. All Equipment which is reflected in the Financial Statements is
valued at the lesser of cost or fair market value. All Equipment disposed of by
POA since March 31, 1996 has been disposed of only (i) in the ordinary course of
POA's business and (ii) at prices and under terms that are consistent with past
practice.
(b) There are no Purchase Money Security Agreements
relating to any item of Equipment.
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(c) 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.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31,
1996, except as specifically contemplated in this Agreement:
(i) POA has operated its business in the ordinary
course consistent with past practice;
(ii) there has not been any material adverse change
in the business, 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
POA;
(iii) POA has not entered into any agreements
binding POA, 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
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affect the position of Buyer in the business of POA as heretofore
operated;
(iv) POA 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) since December 31, 1995
or any material election with respect to Taxes;
(v) POA has not terminated or amended, breached, or
failed to perform in all material respects all of its obligations
under, any Material 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;
(vi) POA has not experienced any actual or, to the
knowledge of POA, threatened employee disputes, work stoppages or
slowdowns or had any material change in its relationship with its
employees, salesmen, distributors, or independent contractors;
(vii) POA has not failed to replenish its
Inventories and supplies in a
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normal and customary manner consistent with past practice;
(viii) POA 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;
(ix) POA has not incurred any liabilities or
obligations with respect to borrowed money, letters of credit or any
notes, bonds or similar instruments under any capitalized lease; and
(x) POA has not agreed, whether in writing or
otherwise, to take any action described in this Section 3.10.
3.11 PROPERTIES AND ASSETS. POA has (or, with respect to the
Berthel Fisher Phones, the LP One Phones and all related Assets, will at the
Closing have) good, valid and marketable title to all Equipment and other assets
(whether personal or mixed, tangible or intangible) used in the Business, and
such items are subject to no Encumbrance or arrangement for use by any third
party, other than the Permitted Encumbrances.
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3.12 CONTRACTS. Schedule 3.12 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 available for inspection by the Buyer. All written Contracts and all oral
Material Contracts (x) are valid and binding obligations of POA and the other
parties thereto, (y) are in full force and effect and are enforceable as to POA
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. POA is not in default under, and has not
breached in any material respect, any Contract. The aggregate obligation of POA
with respect to oral Contracts which do not constitute Material Contracts does
not exceed $10,000. To the best of POA's and Sellers' knowledge, 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 POA, its performance under such Contract. No
event or condition has occurred (or is alleged by any other party to a Contract
to have oc-
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curred) which, with or without due notice or lapse of time or both, would
constitute a breach or event of default on the part of POA, would provide a
basis for a valid claim or acceleration under any Contract as against POA or
would prevent POA from exercising and obtaining the full benefits of any rights
or options contained therein.
3.13 COMPLIANCE WITH LAWS AND PERMITS.
(a) The business and operations of Seller has been
conducted and is now being conducted in all material respects in compliance with
all Laws and Orders of all Governmental Authorities having jurisdiction over POA
and all Permits relating to any of its properties or applicable to its business.
(b) POA possesses all Permits necessary to own and
operate its property and assets and to conduct their businesses as it is
currently conducted. Such Permits are valid, subsisting in full force and
effect, and POA 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 proceed-
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ing which might involve the revocation or termination of any such Permits is
pending or, to the knowledge of POA or the Sellers, threatened.
(c) At or prior to the Closing POA will have made all
filings and received all approvals in connection with the Permits, which the
failure to obtain would have a material adverse effect on the ability of Buyer
to own and operate the property and assets of POA and to conduct the POA
Business as it is currently and has heretofore been conducted.
3.14 LITIGATION AND ARBITRATION.
(a) Except as set forth in Schedule 3.14 of the
Disclosure Schedule, there is no pending or threatened claim, action, cause of
action, suit, proceeding, inquiry, investigation or Order, against POA or
affecting its business, operations or assets (including actions by or before any
administrative body, arbitration or mediation panel or Governmental Authority).
No Order of any Governmental Authority, arbitrator or mediator is outstanding
against POA, its businesses, operations or assets. Neither POA nor the Sellers
has any 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
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against POA or affecting its businesses, 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.
3.15 EMPLOYEE MATTERS. POA has no employee plans or agreements
in effect. POA 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 POA
or any ERISA Affiliate thereof 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 POA.
3.16 LABOR RELATIONS. There are no labor issues affecting POA.
POA has at all times been in compliance with all applicable Laws in respect of
employment and employment practices.
3.17 TAXES.
(a) POA has duly and timely filed all Tax Returns
required to be filed by it on or before the
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Closing Date (except for the 1995 federal and state income tax returns, which
will be filed on or before August 31, 1996), and all such Tax Returns are, and
the 1995 Tax Return will be by October 15, 1996, complete and correct in all
material respects.
(b) POA has timely paid all Taxes due or claimed to be
due from it by any taxing authority.
(c) POA has complied in all respects with all applicable
Laws relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign Laws) and has, 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.
(d) There are no Encumbrances for Taxes upon any of the
POA's assets except for statutory liens for current Taxes not yet due.
(e) POA 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 in respect of 1995 income taxes. There are no outstanding
waivers or comparable consents regarding the application
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of the statute of limitations with respect to any Taxes or Tax Returns that has
been given by POA.
(f) Except as set forth on Schedule 3.17(f) 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 POA.
(g) POA 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
POA any such adjustment or change of accounting method).
(h) POA is not a party to, is not bound by, and has no
obligation under, any Tax sharing agreement or similar contract or
arrangement.
(i) No power of attorney has been granted by POA with
respect to any matter relating to Taxes which is currently in force.
(j) POA 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
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subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by POA.
(k) POA 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.
(l) None of the income recognized for federal, state,
local or foreign Income Tax purposes by POA during the period beginning from
January 1, 1996 to the date hereof will be derived other than in the ordinary
course of business.
3.18 INTELLECTUAL PROPERTY. Except as set forth in Schedule
3.18(a) of the Disclosure Schedule, POA owns or has the right to use all
Intellectual Property used in or necessary to conduct its business as currently
conducted, in each case without the payment of any royalties and, except as set
forth on Schedule 3.18(b), POA is the sole and exclusive owner of the name
"Payphones of America, Inc.", free and clear of all Encumbrances. The activities
and products of POA do not infringe upon the Intellectual Property rights of any
other Person. To the knowledge of POA, there are no infringements by third
parties of any Intellectual Property owned by POA.
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3.19 ENVIRONMENTAL MATTERS. POA is and has been in
compliance with, and there are no outstanding allegations (for which POA has
been provided notice) by any Person that POA 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").
POA does not require any environmental permits to conduct its
business and operations. POA has not indemnified or agreed to indemnify any
other Person for any liability under, or violation of, Environmental Laws.
3.20 INSURANCE. Schedule 3.20(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 POA (copies of which have previously been provided to the Buyer),
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
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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 3.20(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.
3.21 CUSTOMERS AND SUPPLIERS. No customer of POA was
responsible for generating more than 5% of POA's total revenues in the fiscal
year ended December 31, 1995 or in the three months ended March 31, 1995.
Schedule 3.21(a) sets forth a complete and correct list of the names of
suppliers (other than telephone companies) to whom POA paid more than $25,000 in
the fiscal year ended December 31, 1995 and the approximate total purchases by
POA 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 POA and its customers and suppliers since
March 31, 1996. Except as set forth in Schedule 3.21(b) of the Disclosure
Schedule, POA has not been provided with any notice that any supplier, manufac-
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turer or customer intends to cease doing business with POA. To the knowledge of
POA or 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 POA's
relationships with its customers, suppliers and manufacturers.
3.22 WARRANTIES; RETURNS AND CANCELLATIONS. Schedule 3.22(a)
of the Disclosure Schedule sets forth a complete and correct list of all express
warranties with respect to any products or services sold, distributed, serviced
or licensed by POA. Except as set forth on Schedule 3.22(b) of the Disclosure
Schedule, there are no express or implied warranties outstanding with respect to
any products or services sold, distributed, serviced or licensed by POA (other
than those imposed by applicable Law).
3.23 AFFILIATE TRANSACTIONS. Schedule 3.23 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 POA) between POA 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
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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 POA or such Sellers' Affiliate of more than $5,000 in any calendar
year (the "Affiliate Transactions").
3.24 BROKERS. Neither the Buyer nor POA has or will have any
obligation to pay any broker's, finder's, investment banker's, financial
advisor's or similar fee in connection with this Agreement or the Other
Documents, or the transactions contemplated hereby or thereby, by reason of any
action taken by or on behalf of the Sellers or POA.
3.25 DISCLOSURE. Neither the Sellers nor POA has failed to
disclose to the Buyer any facts material to POA's business, results of
operations, assets, liabilities, financial condition and prospects. No
representation or warranty by the Sellers or POA in this Agreement and no
statement by the Sellers or POA in any Other Document (including the Disclosure
Schedules), contain any untrue statement of a material fact or omit 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.
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3.26 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 POA,
except as already recorded on the Financial Statements heretofore delivered to
the Buyer.
3.27 POA PHONES. There were at least 3100 POA Phones in
operation as of the close of business on August 1, 1996. The average life of the
location contracts for such POA Phones as of August 1, 1996 was at least 36
months per phone.
3.28 CONSENTS; WAIVERS; ASSIGNMENTS; PERMITS. Either POA or
the Sellers has obtained and delivered (or will have obtained and delivered
prior to the Closing) (i) all Permits or consents to transfer which are required
to be obtained before the Buyer may legally operate POA's businesses, except
that required by the Public Utilities Commission of the State of Minnesota,
which requires a petition jointly filed by Buyer and POA after the Closing Date
(the "Minnesota Permit"), (ii) all consents or waivers which would be required
in order to not breach any Contracts to which POA is a party and (iii) all
consents, waivers, assignments and assumptions pertaining to the Buyer's
assumption of POA's debts, a
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complete listing of which is set forth on Schedule 3.28 of the Disclosure
Schedule.
3.29 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth
on Schedule 3.29 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) require any consent, waiver, approval, authorization
or permit of, or filing with or notification to, or any other action by, any
Governmental Authority by POA, (b) violate any Law of any Governmental Authority
which may be applicable to POA, or by which any of POA's businesses, properties
or assets may be bound or affected or (c) 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 POA is a party or by which any of POA's businesses,
properties or assets may be bound or affected.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer represents and warrants to the Seller as follows:
4.1 ORGANIZATION AND STANDING. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. The Buyer 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 Buyer has all
requisite corporate power and authority to execute and deliver this Agreement
and the Other Docu- ments 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 Buyer
and the consummation of the transactions contemplated hereby and thereby by the
Buyer have been duly and validly authorized by the Board of Directors of the
Buyer. This Agreement and the Other Documents have been validly executed and
delivered by the Buyer and, assuming due authorization, execution and delivery
by the Sellers,
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44
constitute legal, valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their terms.
4.3 BROKERS. Buyer does not have or will not have any
obligation to pay any broker's, finder's, investment banker's, financial
advisor's or similar fee in connection with this Agreement or the Other
Documents, or the transactions contemplated hereby or thereby, by reason of any
action taken by or on behalf of Buyer.
4.4 REGISTRATION. Parent is preparing a registration statement
with the assistance of Rauscher Pierce Refsnes, Inc. and intends to diligently
pursue the registration and sale of the securities intended to be sold pursuant
to such registration statement, subject in all respects to the exercise by
Parent's management and board of directors of their business judgment and the
observance and performance by Parent's management and board of directors of all
duties owing to the Parent's shareholders.
4.5 RULE 144. Parent is registered under the Securities
Exchange Act of 1934 and meets the "current public information" requirement of
Rule 144 under the Securities Act of 1933.
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ARTICLE V
ADDITIONAL COVENANTS
--------------------
5.1 CONDUCT OF BUSINESS OF THE SELLER. Except as provided in
Exhibit K hereto, POA and each of the Sellers agrees that from the date of
execution of this Agreement until the Closing (unless otherwise expressly
consented to in writing by the Buyer):
(a) POA shall carry on the Business
diligently and substantially in the same manner as heretofore conducted and
shall not institute any changes not in the ordinary course of business and
consistent with past practice. Without limiting the generality of the foregoing,
POA will not, with respect to the Business (i) change the accounting methods,
principles or practices of the Business in any material respect, (ii) revalue
any of the assets of the Business, (iii) sell, lease, transfer or otherwise
dispose of any assets of the Business, except as set forth in Exhibit K hereto
or (iv), except as may be required by location contracts previously approved by
Buyer, install any telephones which will become POA Phones without the prior
written consent of Buyer, which consent will not be unreasonably withheld.
(b) POA shall take such action as may be
necessary (i) to maintain, preserve, renew and keep in
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full force and effect the Business and its rights, including the Licenses and
Permits; and (ii) to maintain all of the assets in good operating condition.
(c) POA shall not take or omit to take
any act, or permit any act or omission to occur, which may cause a breach of any
Material Contract, commitment or obligation of POA in connection with the
Business or its operations, or any breach of any representation, warranty,
covenant or agreement made by POA herein.
(d) POA shall duly comply with (i) all
laws applicable to the Business and its operations the failure to so comply with
would have a material adverse effect on the Business and (ii) all laws
compliance with which is required for the valid consummation of the transactions
contemplated by this Agreement.
(e) POA shall not authorize for issuance, issue,
sell, deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of the capital stock of POA 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;
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(f) POA shall not amend or propose to
amend the certificate of incorporation or by-laws of POA;
(g) POA shall not (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 or (iii) make any loans, advances or capital contributions to, or
investments in, any other person;
(h) POA shall not permit any assets of
POA to suffer any lien thereupon other than the Permitted
Encumbrances;
(i) POA shall not 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;
(j) POA shall not enter into or offer to
enter into any employment or consulting agreement with any person;
(k) POA shall not declare or pay any
dividend or other distribution to its stockholders.
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(l) POA shall not (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
(m) POA shall not 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 POA 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.
5.2 FURTHER ASSURANCES; COOPERATION.
(a) The parties shall, from time to time
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 POA
and the Buyer in connection with any claim, action, suit, proceeding, inquiry or
investigation with any other Person which relates to the execution and delivery
of
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this Agreement or the Other Documents, or the consummation of the transactions
contemplated hereunder and thereunder.
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. POA and the Sellers agree that they will
not (and will cause its officers and directors to not) at any time after the
Closing, without
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the prior written consent of the Buyer, disclose or use any information obtained
during the negotiation or due diligence process nor any other confidential
information (relating to either the Buyer or POA) 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.
5.5 PUBLICITY. None of the parties hereto shall issue any
press release or make any public statement regarding the transactions
contemplated hereby, without the prior approval of the other parties, which
approval shall not be unreasonably withheld, except as may be required by Law or
as necessary to secure financing, in which case the issuing party shall furnish
copies to the other parties hereto contemporaneously with such release.
5.6 EXPENSES.
(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
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of its counsel, accountants, brokers, finders, financial advisors and other
representatives, except that POA shall pay the fees of its counsel at or prior
to the Closing.
(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 FORWARDING OF PAYMENTS RECEIVED. The Sellers shall
immediately remit to POA any monies received which should have been directed to
POA.
5.8 TRANSFER OF TELEPHONES. Prior to the Closing, POA shall
acquire the Berthel Fisher Phones, the LP One Phones, and all assets related to
the operations thereof.
5.9 TRANSFER AND SIMILAR TAXES; TAX RETURNS. (a)
Notwithstanding any other provision of this Agreement to the contrary, the
Sellers shall
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assume and promptly pay all sales, use, privilege, transfer, documentary, gains,
stamp, duties, recording and similar Taxes and fees (including any penalties,
interest or additions) imposed upon any party incurred in connection with the
sale of the Shares by the Sellers to the Buyer (collectively, the "Transfer
Taxes"), and the 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 the 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) Buyer shall prepare or cause to be prepared,
and file or cause to be filed on a timely basis all Tax Returns of POA other
than those provided for in Section 5.9(b) hereof. Subject to Article VI, Buyer
shall cause POA to pay all Taxes shown to be due and payable thereon. In
connection with any Tax Return relating to a Straddle Period, no later than ten
(10)
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Business Days before such Tax Returns are filed, Buyer shall provide drafts of
such Tax Returns to the Sellers for their reasonable review and consent.
(d) The Sellers and the Buyer 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 in connection with any Tax Returns of POA for periods (or any
portion thereof) ending on or before the Closing Date, in each case including
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 and Taxes.
No election may be made by POA with respect to the Taxes of POA without the
Buyer's written consent if such election will adversely affect the Buyer.
(e) POA and the Sellers shall promptly
notify the Buyer of any notices or materials received from any Governmental
Authority which relate to the business, operations or filings of POA, and Buyer
shall promptly notify Sellers of any notices or materials
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received from any Governmental Authority which affects Sellers.
5.10 DELIVERY OF FINANCIAL STATEMENTS.
(a) POA shall continue to prepare financial statements
as of the end of April, May, June, and July consistent with its prior practice,
and shall deliver such statements to Buyer within one day after such statements
have been prepared.
(b) Sellers shall cause to be prepared at their own
expense, and delivered to Buyer at Closing, audited consolidated financial
statements of POA (including the Berthel Fisher Phones) as of December 31, 1995
and for the year then ended, certified by POA's independent public accounts, and
accompanied by their reports therein. Buyer shall provide to Sellers and to
POA's independent public accountants such access to the books, records and
facilities of POA as shall be reasonably necessary for Sellers to satisfy their
obligations under this Section 5.11(b).
ARTICLE VI
CONDITIONS TO CLOSING
---------------------
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The
obligation of the Buyer to consummate the
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transactions contemplated hereby is subject to the satisfaction or waiver
(subject to applicable law) on or before the Closing of each of the following
conditions:
(a) ACCURACY OF REPRESENTATIONS AND
WARRANTIES. Each of the representations and warranties of the Sellers and POA
contained in this Agreement, the Disclosure Schedule, or in any Other Document
to be executed and delivered by the Sellers or POA on or before the Closing
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 POA
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, to effect the transactions
contemplated by this Agreement and the Other Documents to be executed and
delivered pursuant hereto.
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(d) CONSENTS AND APPROVALS. All neces-
sary consents, approvals or waivers from third parties and Governmental
Authorities shall have been received, including, without limitation, all Permits
except the Minnesota Permit.
(e) POA shall receive from the lessor of
the POA headquarters (as defined in Exhibit K hereto) a release of all liability
in respect of such facility and the lease therefor.
(f) Buyer and Berthel Fisher shall have entered into
an agreement whereby Berthel Fisher shall have agreed to, among other things, to
assume and pay, pursuant to Section 1.8 hereof, liabilities of POA in an amount
equal to at least the product of $2,500 and the number of POA Phones as of the
Closing Date, but not more than an aggregate of $7,750,000.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to consummate the transactions contemplated
hereby are subject to the satisfaction or waiver (subject to applicable Law) on
or before the Closing of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
of the representations and warranties of the Buyer contained in this Agreement
or in any Other
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Document to be executed and delivered by the Buyer on or before the Closing
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 Buyer shall have
performed and complied with all of the covenants and agreements contained in
this Agreement to be performed or complied with by the Buyer 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 Buyer contained herein or
made pursuant hereto
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shall survive the Closing and any investigation at any time made by or on behalf
of any party hereto until January 31, 1998, except that the representations and
warranties contained in Section 3.17 (Taxes) shall survive until 90 days
following the expiration of the applicable statute of limitations, giving effect
to any extension. 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 7.7 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 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, im-
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posed upon or incurred by such 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 POA 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 POA contained in or made pursuant to this
Agreement or any facts or circumstances constituting such breach or
nonperformance;
(iii) any failure by Sellers or POA to comply with the
applicable provisions of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, at or prior to the Closing, including, but not
limited to, Losses in respect of the loss of any tax deductions or
other favorable tax treatment directly or indirectly attributable to or
resulting from such failure;
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(iv) the transfer of the LP One Phones, the Berthel
Fisher Phones and all related assets to POA;
(v) all Liabilities of POA assumed by Sellers or
VisionComm, Inc. as provided in Exhibit I hereto;
(vi) all Liabilities of POA to be paid by Sellers at
the Closing, as set forth in Exhibit I hereto;
(vii) any and all Tax Liabilities of POA arising out
of the asset dispositions described in Exhibit K;
(viii) any and all Liabilities arising out of the
lawsuit captioned Julie Bitzer v. POA, et al.; and
(ix) any and all Liabilities arising out of the case
captioned Commonwealth of Virginia v. POA, case no. PUC940049.
7.4 INDEMNIFICATION BY THE BUYER. Subject to the provisions of
this Article VII, the Buyer 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
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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 Buyer contained in or made
pursuant 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 Buyer contained in or made pursuant to this Agreement or any
facts or circumstances constituting such breach or nonperformance.
7.5 TAX INDEMNIFICATION EVENT.
(a) A "Tax Indemnification Event" means any and all
Losses asserted against, resulting to, imposed upon or incurred by a Buyer
Indemnified Party directly or indirectly, by reason of or resulting from any and
all Taxes imposed upon POA or the Sellers (i) with respect to any taxable period
(or any portion thereof) ending on or before the Closing Date (such Taxes are
hereinafter referred to as "Pre-Closing Taxes" and such
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periods as "Pre-Closing Periods") and (ii) with respect to any taxable period
beginning before the Closing Date and ending after the Closing Date (such Taxes
are hereinafter referred to as "Straddle Taxes" and such periods as "Straddle
Periods") but only with respect to the portion of such Straddle Period ending on
the close of the Closing Date and in the manner provided in paragraph 7.5(d)
hereof.
(b) Buyer shall indemnify, defend and hold each of
the Seller Indemnified Parties harmless, at any time after the Closing, 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 any and all Taxes imposed upon POA with respect to (i) any
taxable period beginning after the Closing Date (such Taxes are hereinafter
referred to as "Post-Closing Taxes" and such periods as "Post-Closing Periods")
and (ii) any Straddle Taxes for any Straddle Period, but only with respect to
the portion of such Straddle Period beginning the day after the Closing Date and
in the manner provided for in paragraph 7.5(c) hereof.
(c) For purposes of determining the amount of Taxes
for or which relate to a Straddle Period,
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the Closing Date shall be treated as the last day of a taxable period, and the
portion of any such Tax that is allocable to the taxable period that is so
deemed to end on and include the Closing Date: (i) in the case of Taxes that are
either (x) based upon or related to income or receipts or (y) imposed in
connection with any sale or other transfer or assignment of property (real or
personal, tangible or intangible), shall be deemed equal to the amount which
would be payable if the period for which such tax is assessed ended on and
included the Closing Date, and (ii) in the cases of Taxes other than Taxes
described in clause (i) hereof, shall be computed on a per diem basis.
(d) If a notice of deficiency, proposed
adjustment, adjustment, assessment, audit, examination, suit, dispute or other
claim (a "Tax Claim") shall be delivered, sent, commenced, or initiated to or
against POA by any taxing authority with respect to Taxes for which any person
is entitled to indemnification hereunder, POA shall promptly notify the Sellers
in writing of the Tax Claim. If a Tax Claim with respect to Taxes for which any
person is entitled to indemnification shall be delivered, sent, commenced or
initiated to or against the
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Sellers by the relevant taxing authority, the Sellers shall promptly notify
Buyer in writing of such Tax Claim.
(e) The Sellers may, upon timely notice to Buyer, assume
and control the defense of a Tax Claim involving only Pre-Closing Taxes at their
own cost and expense and with their own counsel. If the Sellers elect to assume
the defense of any such Tax Claim, notwithstanding anything to the contrary
contained herein, (i) the Sellers shall consult with Buyer and shall not enter
into any settlement with respect to any such Tax Claim without the Buyer's prior
written consent if the effect of such settlement would be to increase the
liability for Taxes of POA for any Post-Closing Period or Straddle Period; (ii)
the Sellers shall keep the Buyer informed of all material developments and
events relating to such Tax Claim; and (iii) at its own cost and expense, Buyer
shall have the right to participate in (but not to control) the defense of such
Tax Claim.
(f) In connection with the contest of any Tax Claim that
relates to (i) any taxable period ending after the Closing Date (to the extent
such periods do not constitute Straddle Periods), (ii) any Straddle Period and
(iii) any Tax Claim that the Sellers have the ability to control but do not
timely elect to control pursuant to
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Section 7.5(e), such contest shall be controlled by the Buyer, and the Sellers
agree to cooperate with the Buyer and its affiliates in pursuing such contest.
In connection with any such contest that relates to (ii) or (iii) above, the
Buyer 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 Buyer's right to
indemnification under this Article VII.
7.6 LIMITATIONS ON INDEMNIFICATION.
(a) The indemnifications in favor of the Buyer
Indemnified Parties contained in Section 7.3 hereof shall not be effective until
the aggregate dollar amount of all Losses indemnified against under such Section
exceeds $10,000 (the "Sellers' Threshold Amount"), in which case all indemnified
Losses shall be paid.
(b) The indemnifications in favor of the Seller
Indemnified Parties contained in Section 7.4 hereof shall not be effective until
the aggregate dollar amount of all Losses indemnified against under such Section
exceeds $10,000 (the "Buyer's Threshold Amount"), in which case all indemnified
Losses shall be paid.
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7.7 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 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
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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 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
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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 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 by wire
transfer, certified or bank
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cashier's check within 10 days after the date of such notice.
7.8 REMEDIES. Except for Losses resulting from fraud or
violations of the securities laws, the sole and exclusive remedy for any breach
of this Agreement shall be pursuant to this Article VII.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 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 Buyer 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
Buyer may assign its rights and obligations hereunder to any Designated
Subsidiary, PROVIDED, HOWEVER, that the Buyer shall remain liable for all of its
obligations and those of any Designated Subsidiary hereunder, and, from and
after the Closing Date, Buyer may assign its rights hereunder to any party
providing financing to Buyer.
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(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.
8.2 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.
8.3 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, including the Agreement dated as
of November 15, 1995 which this Agreement amends and restates.
8.4 WAIVER OF COMPLIANCE. No amendment, modification,
alteration, supplement or waiver of compliance with any obligation, covenant,
agreement, provision
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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.
8.5 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.
8.6 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.
8.7 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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8.8 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.
8.9 TERMINATION. This Agreement may be terminated by either
the Buyer or the Sellers if the Closing has not occurred on or prior to August
16, 1996.
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 III, Inc.
c/o PhoneTel Technologies, Inc.
650 Statler Officer Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone: (216) 241-2555
Telecopy: (216) 241-2574
Attention: Chief Executive Officer
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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.
(b) If to a Seller:
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Telephone: (314) 939-0550
Telecopy: (314) 947-6488
Attention: William J. Brinkmeier
Copy to:
Scher & Miller L.L.P.
2828 Routh Street
Suite 725
Dallas, TX 75201
Telephone: (214) 871-0725
Telecopy: (214) 871-0020
Attention: Charles P. Miller, 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.
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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 Sellers.
"AFFILIATE TRANSACTIONS" shall have the meaning set forth in
Section 3.23 hereof.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 3.6 hereof.
"BERTHEL FISHER" shall mean Berthel Fisher & Company Leasing,
Inc., an Iowa corporation.
"BERTHEL FISHER PHONES" shall mean the microprocessor based
pay telephones owned by Berthel Fisher and operated by Seller.
"BUSINESS" shall have the meaning set forth in the preamble
hereof.
"BUYER" shall mean PhoneTel Technologies, Inc., an Ohio
corporation.
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"BUYER INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.3(i) hereof.
"BUYER SHARES" shall mean shares of the Common Stock, $.01 par
value, of the Buyer.
"BUYER'S THRESHOLD AMOUNT" shall have the meaning set forth in
Section 7.6(b) hereof.
"CLOSING" shall have the meaning set forth in
Section 1.4 hereof.
"CLOSING DATE" shall have the meaning set forth
in Section 1.4 hereof.
"CODE" shall mean the Internal Revenue Code of
1986, as amended.
"CONSIDERATION" shall have the meaning set
forth in Section 1.3 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 Seller is a party or by which Seller is bound.
"DESIGNATED SUBSIDIARY" shall mean one or more
existing or to be formed Subsidiaries of the Buyer desig-
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nated to carry out all or part of the transactions contemplated by this
Agreement and the Other Documents.
"DISCLOSURE SCHEDULE" shall mean the disclosure schedule
delivered in connection herewith.
"ENCUMBRANCE" shall mean any lien, encumbrance, proxy, voting
trust arrangement, pledge, security interest, collateral security agreement,
financing statement (and similar notices) filed with any 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" has the meaning set forth in Section
3.19 hereof.
"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 any Seller, be deemed a "single employer".
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"EQUIPMENT" shall mean all POA Phones and all other equipment
which are owned, leased or otherwise used by POA in the operations of its
Business.
"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.
"INDEMNITOR" shall have the meaning set forth
in Section 7.7(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, trade names and similar business identifiers, including, in each
case, all registrations and applica-
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tions 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 POA 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.
"LP ONE" shall mean Payphones of America Limited
Partnership I.
"LP ONE PHONES" shall mean the microprocessor based telephones
owned by LP One.
"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, accrued, absolute, contingent or otherwise, and
whether due or to become due of POA or its affiliates.
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"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 POA's financial
condition, results of operations, assets, liabilities, business or, to the
knowledge of Seller, POA's prospects.
"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
1.4 hereof.
"POA" shall mean Payphones of America, Inc., a Tennessee
corporation, and all of its subsidiaries.
"POA CONTRACT PHONES" shall mean the number of telephones to
be installed by POA pursuant to location
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contracts entered into by POA after the date hereof, provided Buyer approves
such number within two business days prior to the Closing.
"POA MANAGED PHONES" shall mean any customer owned phones
which are managed by POA and for which, prior to Closing, there are signed
management agreements which include rights of first refusal for the purchase of
the managed phones by POA.
"POA PHONES" shall mean the microprocessor-based pay
telephones owned by POA which are active and generating income, including the
Berthel Fisher Phones and the LP One Phones, but not including any telephones
installed after the date hereof without the prior written approval of Buyer and
not including any telephones for which there is not, as of August 1, 1996, a
valid site location agreement; PROVIDED, that, for purposes of Sections 1.2 and
1.5 hereof, any such telephone will constitute a POA Phone if a valid site
location agreement is in place by September 30, 1996 or if such telephone has
continuously been in operation in its current location for a period of at least
twelve months.
"POA PHONES AMOUNT" shall mean the aggregate number of POA
Phones in operation at the close of business on August 1, 1996, totalling at
least 3,100 Phones.
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"PERMIT" shall mean any franchise, license, certificate,
approval, identification number, registration, permit, authorization, order or
approval of, and any required registration with, any Governmental Authority.
"PERMIT SHORTFALL" shall mean an amount equal to the product
of (a) $4,000 and (b) the number of POA Phones as to which, as of the Closing
Date, POA and Sellers have not satisfied the representation and warranty
contained in Section 3.28(i) hereof.
"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 in accordance with the percentages set
forth in Exhibit A hereto, unless both Sellers shall have agreed to different
percentages and furnished notice thereof to Buyer.
"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.
77
82
"SELLER" shall have the meaning set forth in the preamble.
"SELLERS' AFFILIATES" shall have the meaning set forth in
Section 3.23 hereof.
"SELLERS' THRESHOLD AMOUNT" shall have the meaning set forth
in Section 7.6(a) hereof.
"STRADDLE PERIOD" shall have the meaning set forth in
Section 7.5(a) hereof.
"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 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 7.7(b) hereof.
78
83
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, on the day and year first above written.
PAYPHONES OF AMERICA, INC.
By: /s/ William J. Brinkmeier
----------------------------------
William J. Brinkmeier
Vice President
THE SELLERS
-------------------------------------
Stanley Rojeski
/s/ William J. Brinkmeier
-------------------------------------
William J. Brinkmeier
PHONETEL III, INC.
By: /s/ Peter G. Graf
----------------------------------
Name: Peter G. Graf
Title: Chairman and CEO
84
EXHIBIT "1"
CALCULATION OF PORTION OF PURCHASE PRICE PAYABLE AT CLOSING
AND SOURCES OF FUNDS AND ALLOCATION OF FUNDS
FOR PAYMENT OF PORTION OF PURCHASE PRICE PAYABLE AT CLOSING
1. CALCULATION OF PORTION OF PURCHASE PRICE
----------------------------------------
PAYABLE AT CLOSING:
-------------------
1.1 3,115 PAYPHONES X $4,000 EACH(1)= $12,460,000.00
1.2 95 CUSTOMER OWNED PHONES X $1,000 EACH(2)= 95,000.00
1.3 19 Contracts For Phones to be Installed x $1,000(3)= 19,000.00
TOTAL PURCHASE PRICE PAYABLE AT CLOSING: $12,574,000.00
2. SOURCES OF FUNDS AND ALLOCATION OF FUNDS FOR
---------------------------------------------
PAYMENT OF PORTION OF PURCHASE PRICE PAYABLE
--------------------------------------------
AT CLOSING:
-----------
2.1 BUYER SHARES (4): $ 749,997.00
2.2 LIABILITIES TO BE PAID OR ASSUMED AT CLOSING(5): 8,100,828.64
2.3 CASH PAID TO SELLLERS AT CLOSING: 78,061.08
2.4 BUYER NOTES TO SELLERS(6): 3,645,113.28
TOTAL SOURCES OF FUNDS: $12,574,000.00
- ----------------------
(1)Calculated in accordance with SECTION 1.2(a).
(2)Calculated in accordance with SECTION 1.2(c).
(3)Calculated in accordance with SECTION 1.2(b).
(4)The Buyer Shares are to be issued as follows:
William J. Brinkmeier 42,233 shares
Stanley H. Rojeski 54,211 shares
Berthel Fisher & Company Leasing, Inc. 70,222 shares
(5)The following sets forth the sources of funds for
payment/assumptions of these amounts:
$7,750,000.00 Provided by Berthel Fisher Financing
33,253.36 Vehicle Leases/Notes Assumption
195,636.36 Assumption of Midwest Note
121,938.92 Cash paid by Buyers on POA Liabilities
-------------
$8,100,828.64
=============
(6)The principal amount of the Promissory Note shall be adjusted in
accordance with SECTION 1.3(b).
85
EXHIBIT A
---------
SELLERS
-------
NAME AND ADDRESS NUMBER OF PERCENTAGE
- ---------------- SHARES ----------
---------
William Brinkmeier 1,124,105 43.79%
124 Point West Boulevard
St. Charles, MO 63301
Stanley Rojeski 1,443,219 56.21%
124 Point West Boulevard ---------
St. Charles, MO 63301
2,567,324
86
EXHIBIT B
---------
SECTION 1445(b)(2) TAX CERTIFICATE
Section 1445 of the Internal Revenue Code of 1986, as amended,
provides that a transferee (buyer) of a U.S. real property interest must
withhold tax if the transferor (seller) is a foreign person. To inform PhoneTel
III, Inc., an Ohio Corporation, ("Buyer"), that withholding of tax is not
required upon my disposition of a U.S. real property interest pursuant to the
Amended and Restated Share Purchase Agreement dated August 1, 1996, I, William
J. Brinkmeier , a shareholder of Payphones of America, Inc., hereby certify
the following:
1. I am not a nonresident alien for purposes of U.S. income
taxation;
2. My U.S. taxpayer identification (Social Security) number
is ###-##-####; and
3. My home address is
Number 5
- -------------------------------------------------------------------------------
Shelbourne Wood Court
- -------------------------------------------------------------------------------
St. Charles Mo 63304
- --------------------------------------------------------------------------------
I understand that this certification may be disclosed to the
Internal Revenue Service by Buyer and that any false statement I have made here
could be punished by fine, imprisonment or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete.
Dated: /s/ William J. Brinkmeier
--------------------------
Name: William J. Brinkmeier
87
EXHIBIT B
---------
SECTION 1445(b)(2) TAX CERTIFICATE
Section 1445 of the Internal Revenue Code of 1986, as amended,
provides that a transferee (buyer) of a U.S. real property interest must
withhold tax if the transferor (seller) is a foreign person. To inform PhoneTel
III, Inc., an Ohio Corporation, ("Buyer"), that withholding of tax is not
required upon my disposition of a U.S. real property interest pursuant to the
Amended and Restated Share Purchase Agreement dated August 16, 1996, I,
Stan Rojeski, a shareholder of Payphones of America, Inc., hereby certify the
following:
1. I am not a nonresident alien for purposes of U.S.
income taxation;
2. My U.S. taxpayer identification (Social
Security) number is ###-##-####; and
3. My home address is
P.O. Box 41303
- ---------------------------------------------------------
Memphis, TN. 38174
- ---------------------------------------------------------
I understand that this certification may be disclosed to the
Internal Revenue Service by Buyer and that any false statement I have made here
could be punished by fine, imprisonment or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete.
Dated:
8-16-96
/s/ Stan Rojeski
------------------------------
Name: Stan Rojeski
88
EXHIBIT C
---------
NONE
89
EXHIBIT D
---------
CONSULTING AND NON-COMPETITION AGREEMENT
----------------------------------------
CONSULTING AND NON-COMPETITION AGREEMENT (this "Agree ment"), dated as
of August 1, 1996, by and between PhoneTel III, Inc., an Ohio corporation
("PhoneTel"), and Sue Harvey ("Harvey").
WHEREAS, Harvey has heretofore acted as an employee and officer of
Payphones of America, Inc., a Tennessee corporation ("Payphones") and has acted
as the liaison with the Missouri Petroleum Marketers Association;
WHEREAS, PhoneTel and Payphones have entered into an Amended and
Restated Share Purchase Agreement (the "Purchase Agreement"), dated as of
August 1, 1996, pursuant to which, at the "Closing" (as such term is defined in
the Purchase Agreement) PhoneTel will purchase all the capital stock of
Payphones (the "Shares").
WHEREAS, Payphones and PhoneTel are in the business of owning, leasing,
operating and maintaining pay telephones;
WHEREAS, PhoneTel recognizes that Harvey possesses trade secrets and
confidential business information relating to Payphones as well as knowledge and
experience relating to the pay telephone industry and desires to prevent Harvey
from (1) competing with the business operated by PhoneTel (or any subsidiary
thereof), (2) soliciting the former, current or future customers or employees of
PhoneTel (or any subsidiary thereof) or (3) soliciting PhoneTel to sell its
assets (or the assets of any subsidiary thereof);
WHEREAS, Phonetel has required Harvey to enter into this Agreement as a
condition to the Closing; and
WHEREAS, Harvey is agreeable to restrictions on her ability to compete
against and solicit from PhoneTel in accordance with the terms of this
Agreement;
NOW, THEREFORE, in consideration of the execution, delivery and
performance of the Purchase Agreement,
90
and mutual premises and covenants herein and therein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, PhoneTel and Harvey hereby agree as follows:
1. TERM. The term of this agreement shall commence on the date hereof
and continue for a period of five (5) years hereafter (the "Term").
2. NON-COMPETITION. (a) For a period of two years commencing on the
date hereof, neither Harvey nor any member of her family shall, without the
prior written consent of PhoneTel, directly or indirectly, own, operate,
manage, be employed by, be an agent of, act as a consultant for, financially
support, lease property to or from or have a proprietary interest in, any
enterprise or business which sells, leases, maintains, owns or operates pay
telephones in any part of the states listed in Schedule 2 hereto. Harvey
acknowledges that the business of PhoneTel and its affiliates will be conducted
throughout such states and agrees that such geographic scope is reasonable.
(b) Notwithstanding any provision to the contrary contained herein,
Harvey shall not be prohibited from (i) owning less than 2% of the outstanding
equity securities of any publicly-held corporation, (ii) engaging in the
activities contemplated by Section 4 hereof, but only on behalf of PhoneTel or
Payphones, or (iii) serving as an employee, officer, or director of VisionComm,
Inc., a Delaware Corporation ("VisionComm"), provided that VisionComm does not
(and does not have any proprietary interest in any enterprise or business which
does) sell, lease, maintain or operate pay telephones in any part of the states
listed in Schedule 2 hereto, except for (A) one phone in Illinois for purposes
of complying with the regulations of the Illinois Payphone Association Settle-
ment LLC, (B) telephones operated under the Columbia/HCA Contract and (C) any
hospitality payphones tied in with cable, pay-per-view, or a hospitality room
phone, which may include the provision of operator services.
3. NON-SOLICITATION. Harvey agrees that, during the Term of this
agreement, she will not, directly or indirectly, (i) purchase or otherwise
acquire, or attempt to purchase or otherwise acquire, any of the
2
91
assets of PhoneTel (or any subsidiary thereof); (ii) solicit, entice or
persuade, or attempt to solicit, entice or persuade, any employee of PhoneTel
or its affiliates, or any client then under contract with PhoneTel or any of its
affiliates to terminate his employment by or contractual relationship with
PhoneTel or its affiliates or to become employed by or to enter into
contractual relations with a competitor of PhoneTel or its affiliates; or (iii)
persuade or attempt to persuade customers, potential customers, suppliers or
potential suppliers of PhoneTel and its affiliates to divert their business to
any other entity or individual.
4. COMPENSATION. In consideration for the agreements of Harvey contained
herein, Phonetel agrees to pay or cause Payphones to pay Harvey (i) $200
multiplied by the number of telephones contained in any location contract which
Harvey secures, with either (A) a member of the Missouri Petroleum Marketers
Association or (B) anyone else, on PhoneTel's behalf during the two years
following the Closing, provided PhoneTel accepts and enters into such location
contract, and provided further that such amount shall be reduced by any amount
payable pursuant to clause (ii) below, and (ii) $1,000 per month for the six
months following the Closing, but such amount will be reduced by any amount paid
to Harvey pursuant to clause (i) above.
5. CONFIDENTIALITY. Harvey acknowledges that PhoneTel would be
irreparably damaged if confidential information about PhoneTel, its affiliates
or the Assets were disclosed to or utilized on behalf of any person, firm,
corporation or other business organization which is in competition in any
respect with PhoneTel or its affiliates. Harvey covenants and agrees that she
will not at any time, and will cause her agents, affiliates and associates not
to at any time, without the prior written consent of PhoneTel, disclose any such
confidential information, except to employees and authorized representatives of
PhoneTel.
6.NECESSITY. Harvey acknowledges that due to the uniqueness of her
skills and abilities and the uniqueness of the trade secrets, confidential
business lists, customer requirements and preferences, records and information
she possesses, the covenants set forth herein are reasonable and necessary for
the protection of
3
92
PhoneTel. Harvey further acknowledges that enforcement of the covenants
herein will not deprive her of her ability to earn a livelihood.
7. SPECIFIC PERFORMANCE. Harvey acknowledges that the rights and
privileges granted to PhoneTel herein are of a special and unique character,
which gives them a peculiar value, the loss of which may not be reasonably or
adequately compensated for by damages in an action at law, and that a breach by
Harvey of this Agreement will cause PhoneTel irreparable injury and damage.
Accordingly, Harvey hereby agrees that PhoneTel shall be entitled to remedies of
injunction, specific performance or other equitable relief, to prevent or cure a
breach of this Agreement. This provision shall not be construed as a waiver of
any other rights or remedies PhoneTel may have for damages or otherwise.
8. PARTIAL INVALIDITY. The parties have entered into this Agreement in
good faith and for the reasons set forth in the recitals hereto and assume and
intend that this Agreement is legally binding. If, for any reason, this
Agreement is not binding because of its geographical scope or because of its
term, then the parties agree that this Agreement shall be deemed effective for
the widest geographical area and/or the longest period of time as may be legally
enforceable, it being understood that the compensation payable hereunder is for
the full Term and geographic area stated herein, and for all the covenants of
Harvey. Any provision which is determined to be prohibited or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof. The provisions of this
Section 7 shall not be construed as a waiver of any other rights or remedies
PhoneTel may have for damages or otherwise.
9. BINDING EFFECT; MODIFICATIONS. This Agreement shall be binding upon
and shall inure to the benefit of the personal representatives, executors,
administrators, successors and assigns of the parties to this Agreement. This
Agreement contains the entire agreement of the parties and supersedes any and
all prior written agreements between the parties, and all prior and
contemporaneous oral statements with respect to the transactions contemplated
hereby. This Agreement may not be changed or terminated orally, but may only be
changed
4
93
by an agreement in writing signed by each of the parties hereto.
10. SECTION CAPTIONS; COUNTERPARTS. Section and other captions
contained in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof. This Agreement may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
11. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York, applied without giving effect to any
conflict of laws principles.
12. NO RULE OF CONSTRUCTION. The parties acknowledge and agree that no
rule of construction shall apply to this Agreement which construes any language,
whether ambiguous, unclear or otherwise, in favor of or against any party by
reason of that party's role in drafting this Agreement.
13. NOTICES. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company:
PhoneTel III, Inc.
c/o PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chairman
If to Harvey:
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
5
94
Attention: Sue Harvey or to such other address as each party may have
furnished to the others in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
6
95
IN WITNESS WHEREOF, the undersigned parties have hereunto set their
hands as of the day and year first above written.
PHONETEL III, INC.
By: /s/ Peter Graf
-------------------------------
Name: Peter Graf
Title: Chairman
/s/ Sue Harvey
-------------------------------
SUE HARVEY
96
CONSULTING AGREEMENT SCHEDULE 2
AL
CA
CO
CT
DC
FL
GA
IA
IL
IN
KS
LA
MA
MD
MI
MN
MO
MS
MT
NC
NE
NY
OH
OK
OR
PA
SC
SD
TN
TX
VA
WA
97
EXHIBIT E
---------
CONSULTING AND NON-COMPETITION AGREEMENT
----------------------------------------
CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement"),
dated as of August 1, 1996, by and between PhoneTel III, Inc., an Ohio
corporation ("PhoneTel"), and William J. Brinkmeier ("Brinkmeier").
WHEREAS, Brinkmeier has heretofore served as Vice-President of
Payphones of America, Inc., a Tennessee corporation ("Payphones");
WHEREAS, PhoneTel and Payphones have entered into an Amended
and Restated Share Purchase Agreement (the "Purchase Agreement"), dated as of
August 1, 1996, pursuant to which, at the "Closing" (as such term is defined in
the Purchase Agreement) PhoneTel will purchase all the capital stock of
Payphones (the "Shares").
WHEREAS, Payphones and PhoneTel are in the business of owning,
leasing, operating and maintaining pay telephones;
WHEREAS, PhoneTel recognizes that Brinkmeier possesses trade
secrets and confidential business information relating to Payphones as well as
knowledge and experience relating to the pay telephone industry and desires to
prevent Brinkmeier from (1) competing with the business operated by PhoneTel (or
any subsidiary thereof), (2) soliciting the former, current or future custom-
ers or employees of PhoneTel (or any subsidiary thereof) or (3) soliciting
PhoneTel to sell its assets (or the assets of any subsidiary thereof);
WHEREAS, Phonetel has required Brinkmeier to enter into this
Agreement as a condition to the Closing; and
WHEREAS, Brinkmeier is agreeable to restrictions on his
ability to compete against and solicit from PhoneTel in accordance with the
terms of this Agreement;
NOW, THEREFORE, in consideration of the execution, delivery
and performance of the Purchase Agreement, and mutual premises and covenants
herein and therein contained and other good and valuable consideration, the
98
receipt and sufficiency of which are hereby acknowledged, PhoneTel and
Brinkmeier hereby agree as follows:
1. TERM. The term of this agreement shall commence on the date
hereof and continue for a period of five (5) years hereafter (the "Term").
2. NON-COMPETITION. (a) Subject to and expressly conditioned
upon PhoneTel's timely payment of all amounts due to Brinkmeier hereunder, for a
period of three years commencing on the date hereof, neither Brinkmeier nor any
member of his family shall, without the prior written consent of PhoneTel,
directly or indirectly, own, operate, manage, be employed by, be an agent of,
act as a consultant for, financially support, lease property to or from or have
a proprietary interest in, any enterprise or business which sells, leases,
maintains, owns or operates pay telephones in any part of the states listed on
Schedule 2 hereto. Brinkmeier acknowledges that the business of PhoneTel and
its affiliates will be conducted throughout such states and agrees that such
geographic scope is reasonable.
(b) Notwithstanding any provision to the contrary contained
herein, Brinkmeier shall not be prohibited from (i) owning less than 2% of the
outstanding equity securities of any publicly-held corporation or (ii) holding
an interest in VisionComm, Inc., a Delaware corporation ("VisionComm"), and
serving as a director, employee, and officer of VisionComm, provided that
VisionComm does not (and does not have any proprietary interest in any
enterprise or business which does) sell, lease, maintain or operate pay
telephones in any part of the states listed on Schedule 2 hereto, except for (A)
telephones operated under the Columbia/HCA Contract and (B) installing any
hospitality payphones tied in with cable, pay-per-view, or a hospitality room
phone, which may include the provision of operator services.
3. NON-SOLICITATION. Brinkmeier agrees that, during the Term
of this agreement, he will not, directly or indirectly, (i) purchase or
otherwise acquire, or attempt to purchase or otherwise acquire, any of the
assets of PhoneTel (or any subsidiary thereof); (ii) solicit, entice or
persuade, or attempt to solicit, entice or persuade, any employee of PhoneTel or
its affiliates, or any client then under contract with
2
99
PhoneTel or any of its affiliates to terminate his employment by or contractual
relationship with PhoneTel or its affiliates or to become employed by or to
enter into contractual relations with a competitor of PhoneTel or its
affiliates; or (iii) persuade or attempt to persuade customers, potential
customers, suppliers or potential suppliers of PhoneTel and its affiliates to
divert their business to any other entity or individual.
4. CONFIDENTIALITY. Brinkmeier acknowledges that PhoneTel
would be irreparably damaged if confidential information about PhoneTel, its
affiliates or the Assets were disclosed to or utilized on behalf of any person,
firm, corporation or other business organization which is in competition in any
respect with PhoneTel or its affiliates. Brinkmeier covenants and agrees that he
will not at any time, and will cause his agents, affiliates and associates not
to at any time, without the prior written consent of PhoneTel, disclose any such
confidential information, except to employees and authorized representatives of
PhoneTel.
5. CONSULTING. For a period of three years commencing on the
date hereof, Brinkmeier shall make himself available to perform consulting and
other related services with respect to matters involving the business and
affairs of PhoneTel or any of its affiliates as requested; PROVIDED, HOWEVER,
that Brinkmeier shall perform such services no more frequently than the equiva-
lent of three business days per month. Brinkmeier shall devote reasonable time
and his reasonable best efforts, skill and attention to the performance of such
consulting services, including travel reasonably required in the performance of
such consulting services. PhoneTel shall reimburse Brinkmeier for all reasonable
travel expenses incurred in connection with such consulting services pursuant to
PhoneTel's expense reimbursement policy.
6. COMPENSATION; TAXES. In consideration for the agreements of
Brinkmeier contained herein, PhoneTel agrees to pay or cause Payphones to pay
Brinkmeier a total of $187,500, without interest, to be paid (a) in equal
monthly installments of $6,696.43 beginning April 1, 1997 or, if earlier, (b)
promptly following the public sale of equity securities by PhoneTel
Technologies, Inc. pursuant to a registration under the Securities Act of 1933;
PROVIDED, HOWEVER, that if Brinkmeier violates the
3
100
terms of this Agreement, such installment payments will be withheld. Brinkmeier
hereby acknowledges that by virtue of this Agreement he is not and will not
become an employee of PhoneTel. Brinkmeier further acknowledges his separate
responsibility for all federal and state withholding taxes, Federal Insurance
Contribution Act taxes and workers' compensation and unemployment compensation
taxes, if applicable, and agrees to indemnify and hold PhoneTel harmless from
any claim or liability therefor.
7. NECESSITY. Brinkmeier acknowledges that due to the
uniqueness of his skills and abilities and the uniqueness of the trade secrets,
confidential business lists, customer requirements and preferences, records and
information he possesses, the covenants set forth herein are reasonable and
necessary for the protection of PhoneTel. Brinkmeier further acknowledges that
enforcement of the covenants herein will not deprive him of his ability to earn
a livelihood.
8. SPECIFIC PERFORMANCE. Brinkmeier acknowledges that the
rights and privileges granted to PhoneTel herein are of a special and unique
character, which gives them a peculiar value, the loss of which may not be
reasonably or adequately compensated for by damages in an action at law, and
that a breach by Brinkmeier of this Agreement will cause PhoneTel irreparable
injury and damage. Accordingly, Brinkmeier hereby agrees that PhoneTel shall be
entitled to remedies of injunction, specific performance or other equitable
relief, to prevent or cure a breach of this Agreement. This provision shall not
be construed as a waiver of any other rights or remedies PhoneTel may have for
damages or otherwise.
9. PARTIAL INVALIDITY. The parties have entered into this
Agreement in good faith and for the reasons set forth in the recitals hereto and
assume and intend that this Agreement is legally binding. If, for any reason,
this Agreement is not binding because of its geographical scope or because of
its term, then the parties agree that this Agreement shall be deemed effective
for the widest geographical area and/or the longest period of time as may be
legally enforceable, it being understood that the compensation payable hereunder
is for the full Term and geographic area stated herein, and for all the
covenants of Brinkmeier. Any provision which is
4
101
determined to be prohibited or unenforceable shall be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof. The provisions of this Section 9 shall not be construed as a
waiver of any other rights or remedies PhoneTel may have for damages or
otherwise.
10. BINDING EFFECT; MODIFICATIONS. This Agreement shall be
binding upon and shall inure to the benefit of the personal representatives,
executors, administrators, successors and assigns of the parties to this
Agreement. This Agreement contains the entire agreement of the parties and
supersedes any and all prior written agreements between the parties, and all
prior and contemporaneous oral statements with respect to the transactions
contemplated hereby. This Agreement may not be changed or terminated orally, but
may only be changed by an agreement in writing signed by each of the parties
hereto.
11. SECTION CAPTIONS; COUNTERPARTS. Section and other captions
contained in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof. This Agreement may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
12. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of New York, applied without giving effect
to any conflict of laws principles.
13. NO RULE OF CONSTRUCTION. The parties acknowledge and agree
that no rule of construction shall apply to this Agreement which construes any
language, whether ambiguous, unclear or otherwise, in favor of or against any
party by reason of that party's role in drafting this Agreement.
14. NOTICES. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States
5
102
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
PhoneTel III, Inc.
c/o PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chairman
If to Brinkmeier:
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Attention: William J. Brinkmeier
or to such other address as each party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. AGENT'S FEES. PhoneTel agrees to pay Brinkmeier a fee for
any telephone location contract that, after the Closing, he generates for
PhoneTel and which PhoneTel chooses to accept. The fee will be paid to
Brinkmeier as follows: (i) $200 for every telephone in any such contract, to be
paid at the time PhoneTel enters into such contract and (ii) $200 additional for
every telephone that, pursuant to an accepted contract, generates average
revenue greater than $125 per month for the first three months that such
telephone is in operation.
6
103
IN WITNESS WHEREOF, the undersigned parties have hereunto set
their hands as of the day and year first above written.
PHONETEL III, INC.
By: /s/ Peter Graf
------------------------------
Name: Peter Graf
Title: Chairman
/s/ William J. Brinkmeier
------------------------------
WILLIAM J. BRINKMEIER
104
CONSULTING AGREEMENT SCHEDULE 2
AL
CA
CO
CT
DC
FL
GA
IA
IL
IN
KS
LA
MA
MD
MI
MN
MO
MS
MT
NC
NE
NY
OH
OK
OR
PA
SC
SD
TN
TX
VA
WA
105
EXHIBIT F
---------
CONSULTING AND NON-COMPETITION AGREEMENT
----------------------------------------
CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement"),
dated as of August 1, 1996, by and between PhoneTel III, Inc., an Ohio corpo-
ration ("PhoneTel"), and Stanley Rojeski ("Rojeski").
WHEREAS, Rojeski has heretofore served as President of
Payphones of America, Inc., a Tennessee corporation ("Payphones");
WHEREAS, PhoneTel and Payphones have entered into an Amended
and Restated Share Purchase Agreement (the "Purchase Agreement"), dated as of
August 1, 1996, pursuant to which, at the "Closing" (as such term is defined in
the Purchase Agreement) PhoneTel will purchase all the capital stock of
Payphones (the "Shares").
WHEREAS, Payphones and PhoneTel are in the business of owning,
leasing, operating and maintaining pay telephones;
WHEREAS, PhoneTel recognizes that Rojeski possesses trade
secrets and confidential business information relating to Payphones as well as
knowledge and experience relating to the pay telephone industry and desires to
prevent Rojeski from (1) competing with the business operated by PhoneTel (or
any subsidiary thereof), (2) soliciting the former, current or future customers
or employees of PhoneTel (or any subsidiary thereof) or (3) soliciting PhoneTel
to sell its assets (or the assets of any subsidiary thereof);
WHEREAS, Phonetel has required Rojeski to enter into this
Agreement as a condition to the Closing; and
WHEREAS, Rojeski is agreeable to restrictions on his ability
to compete against and solicit from PhoneTel in accordance with the terms of
this Agreement;
NOW, THEREFORE, in consideration of the execution, delivery
and performance of the Purchase Agreement, and mutual premises and covenants
herein and therein contained and other good and valuable consideration, the
106
receipt and sufficiency of which are hereby acknowledged, PhoneTel and Rojeski
hereby agree as follows:
1. TERM. The term of this agreement shall commence on the date
hereof and continue for a period of five (5) years hereafter (the "Term").
2. NON-COMPETITION. (a) Subject to and expressly conditioned
upon PhoneTel's timely payment of all amounts due to Rojeski hereunder, for a
period of three years commencing on the date hereof, neither Rojeski nor any
member of his family shall, without the prior written consent of PhoneTel,
directly or indirectly, own, operate, manage, be employed by, be an agent of,
act as a consultant for, financially support, lease property to or from or have
a proprietary interest in, any enterprise or business which sells, leases,
maintains, owns or operates pay telephones in any part of the states listed on
Schedule 2 hereto. Rojeski acknowledges that the business of PhoneTel and its
affiliates will be conducted throughout such states and agrees that such
geographic scope is reasonable.
(b) Notwithstanding any provision to the contrary contained
herein, Rojeski shall not be prohibited from (i) owning less than 2% of the
outstanding equity securities of any publicly-held corporation or (ii) holding
an interest in VisionComm, Inc., a Delaware corporation ("VisionComm"), and
serving as a director and officer of VisionComm, provided that VisionComm does
not (and does not have any proprietary interest in any enterprise or business
which does) sell, lease, maintain or operate pay telephones in any part of the
states listed on Schedule 2 hereto, except for (A) telephones operated under the
Columbia/HCA Contract and (B) installing any hospitality payphones tied in with
cable, pay-per-view, or a hospitality room phone, which may include the
provision of operator services.
3. NON-SOLICITATION. Rojeski agrees that, during the Term of
this agreement, he will not, directly or indirectly, (i) purchase or otherwise
acquire, or attempt to purchase or otherwise acquire, any of the assets of
PhoneTel (or any subsidiary thereof); (ii) solicit, entice or persuade, or
attempt to solicit, entice or persuade, any employee of PhoneTel or its
affiliates, or any client then under contract with
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107
PhoneTel or any of its affiliates to terminate his employment by or contractual
relationship with PhoneTel or its affiliates or to become employed by or to
enter into contractual relations with a competitor of PhoneTel or its
affiliates; or (iii) persuade or attempt to persuade customers, potential
customers, suppliers or potential suppliers of PhoneTel and its affiliates to
divert their business to any other entity or individual.
4. CONFIDENTIALITY. Rojeski acknowledges that PhoneTel would
be irreparably damaged if confidential information about PhoneTel, its
affiliates or the Assets were disclosed to or utilized on behalf of any person,
firm, corporation or other business organization which is in competition in any
respect with PhoneTel or its affiliates. Rojeski covenants and agrees that he
will not at any time, and will cause his agents, affiliates and associates not
to at any time, without the prior written consent of PhoneTel, disclose any such
confidential information, except to employees and authorized representatives of
PhoneTel.
5. CONSULTING. For a period of three years commencing on the
date hereof, Rojeski shall make himself available to perform consulting and
other related services with respect to matters involving the business and
affairs of PhoneTel or any of its affiliates as requested; PROVIDED, HOWEVER,
that Rojeski shall perform such services no more frequently than the equivalent
of three business days per month. Rojeski shall devote reasonable time and his
reasonable best efforts, skill and attention to the performance of such
consulting services, including travel reasonably required in the performance of
such consulting services. PhoneTel shall reimburse Rojeski for all reasonable
travel expenses incurred in connection with such consulting services pursuant
to PhoneTel's expense reimbursement policy.
6. COMPENSATION; TAXES. In consideration for the agreements of
Rojeski contained herein, PhoneTel agrees to pay or cause Payphones to pay
Rojeski a total of $187,500, without interest, to be paid (a) in equal monthly
installments of $6,696.43 beginning April 1, 1997 or, if earlier, (b) promptly
following the public sale of equity securities by PhoneTel Technologies, Inc.
pursuant to a registration under the Securities Act of 1933; PROVIDED, HOWEVER,
that if Rojeski violates the terms of
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108
this Agreement, such installment payments will be withheld. Rojeski hereby
acknowledges that by virtue of this Agreement he is not and will not become an
employee of PhoneTel. Rojeski further acknowledges his separate responsibility
for all federal and state withholding taxes, Federal Insurance Contribution
Act taxes and workers' compensation and unemployment compensation taxes, if
applicable, and agrees to indemnify and hold PhoneTel harmless from any claim
or liability therefor.
7. NECESSITY. Rojeski acknowledges that due to the uniqueness
of his skills and abilities and the uniqueness of the trade secrets, confi-
dential business lists, customer requirements and preferences, records and
information he possesses, the covenants set forth herein are reasonable and
necessary for the protection of PhoneTel. Rojeski further acknowledges that
enforcement of the covenants herein will not deprive him of his ability to earn
a livelihood.
8. SPECIFIC PERFORMANCE. Rojeski acknowledges that the rights
and privileges granted to PhoneTel herein are of a special and unique character,
which gives them a peculiar value, the loss of which may not be reasonably or
adequately compensated for by damages in an action at law, and that a breach by
Rojeski of this Agreement will cause PhoneTel irreparable injury and damage.
Accordingly, Rojeski hereby agrees that PhoneTel shall be entitled to remedies
of injunction, specific performance or other equitable relief, to prevent or
cure a breach of this Agreement. This provision shall not be construed as a
waiver of any other rights or remedies PhoneTel may have for damages or
otherwise.
9. PARTIAL INVALIDITY. The parties have entered into this
Agreement in good faith and for the reasons set forth in the recitals hereto and
assume and intend that this Agreement is legally binding. If, for any reason,
this Agreement is not binding because of its geographical scope or because of
its term, then the parties agree that this Agreement shall be deemed effective
for the widest geographical area and/or the longest period of time as may be
legally enforceable, it being understood that the compensation payable hereunder
is for the full Term and geographic area stated herein, and for all the
covenants of Rojeski. Any provision which is determined to be prohibited or
unenforceable shall be
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109
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. The provisions of this Section 9
shall not be construed as a waiver of any other rights or remedies PhoneTel may
have for damages or otherwise.
10. BINDING EFFECT; MODIFICATIONS. This Agreement shall be
binding upon and shall inure to the benefit of the personal representatives,
executors, administrators, successors and assigns of the parties to this
Agreement. This Agreement contains the entire agreement of the parties and
supersedes any and all prior written agreements between the parties, and all
prior and contemporaneous oral statements with respect to the transactions
contemplated hereby. This Agreement may not be changed or terminated orally, but
may only be changed by an agreement in writing signed by each of the parties
hereto.
11. SECTION CAPTIONS; COUNTERPARTS. Section and other captions
contained in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof. This Agreement may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
12. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of New York, applied without giving effect
to any conflict of laws principles.
13. NO RULE OF CONSTRUCTION. The parties acknowledge and agree
that no rule of construction shall apply to this Agreement which construes any
language, whether ambiguous, unclear or otherwise, in favor of or against any
party by reason of that party's role in drafting this Agreement.
14 NOTICES. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States
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110
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
PhoneTel III, Inc.
c/o PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chairman
If to Rojeski:
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Attention: Stanley Rojeski
or to such other address as each party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. AGENT'S FEES. PhoneTel agrees to pay Rojeski a fee for any
telephone location contract that, after the Closing, he generates for PhoneTel
and which PhoneTel chooses to accept. The fee will be paid as follows: (i) $200
for every telephone in any such contract, to be paid at the time PhoneTel enters
into such contract and (ii) $200 additional for every telephone that, pursuant
to an accepted contract, generates average revenue greater than $125 per month
for the first three months that such telephone is in operation.
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IN WITNESS WHEREOF, the undersigned parties have hereunto set
their hands as of the day and year first above written.
PHONETEL III, INC.
By: /s/ Peter Graf
------------------------------
Name: PETER GRAF
Title: Chairman
/s/ Stanley Rojeski
------------------------------
STANLEY ROJESKI
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EXHIBIT G
---------
STOCKHOLDER REPRESENTATIONS AND WARRANTIES
------------------------------------------
This document is being delivered in connection with the proposed
purchase (the "Purchase") of Payphones of America, Inc. ("POA") by PhoneTel III,
Inc. ("PhoneTel III") pursuant to the Amended and Restated Share Purchase
Agreement (the "Purchase Agreement") to be entered into among PhoneTel III, POA,
and the stockholders of POA. The undersigned holder of shares of POA Common
Stock (the "Stockholder") understands that, pursuant to the Purchase, he/she
will receive shares of PhoneTel Technologies, Inc. Common Stock ("Shares").
NAME: /s/ William J. Brinkmeier
----------------------------------
(Please Type or Print)
ADDRESS: 5 Shelbourne Wood Court
St. Charles MO 63304
---------------------------------
SOCIAL SECURITY NUMBER: ###-##-####
--------------------
NUMBER OF POA SHARES HELD BY STOCKHOLDER:
1,124,105
- ---------
DATE: 8/1/96
------
================================================================================
113
PART I: ACCREDITED INVESTORS
(Based upon the definition of "accredited investor" in Exhibit A hereto, please
check one box bejow.)
/x/ Stockholder is an "accredited investor"
Stockholder Initials: /s/ WJB
-------
PART II: ADDITIONAL REPRESENTATIONS AND WARRANTIES
(a) The stockholder is acquiring the Shares solely for his/her
own beneficial account, for investment purposes, and not with a view to, or for
resale in connection with, any distribution of the Shares. The undersigned
understands that the Shares have not been registered under the Securities Act of
1933 or the securities laws of any state by reason of specific exemptions under
the provisions thereof which depend in part upon the investment intent of the
undersigned and of the other representations made by the Stockholder. The
Stockholder understands that PhoneTel is relying upon the representations
contained herein for the purpose of determining whether the Purchase meets the
requirements for such exemptions.
(b) The stockholder has had an opportunity to ask questions,
receive answers and discuss the business, management and financial affairs of
PhoneTel and the terms and conditions of an investment in the Shares with, and
has had access to, the management of PhoneTel and the Stockholder has had the
opportunity to review the information received in connection with this
investment. The Stockholder is familiar with the business and financial
condition, properties, operations and prospects of PhoneTel and POA and with the
terms of the Purchase and the Purchase Agreement.
(c) Neither Phonetel nor any person acting on its behalf has
offered the Shares to the Stockholder by any form of general solicitation or
general advertising.
(d) (i) The Stockholder's financial situation is such that
he/she can afford to bear the economic risk
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114
of holding the Shares for an indefinite period of time, has adequate means for
providing for his/her current needs and personal contingencies, and can afford
to suffer the complete loss of his/her investment in the Shares; (ii) in making
his/her decision to acquire the Shares pursuant to the Purchase, the Stockholder
has relied upon independent investigations made by him/her and, to the extent
believed by the Stockholder to be appropriate, his/her representatives,
including his/her own professional, financial, tax and other advisors; and (iii)
all information which the Stockholder has provided to Phonetel and its
representatives including, without limitation, information concerning the
Stockholder and his/her financial position is true, complete and correct as of
the date hereof, and the Stockholder agrees to promptly notify PhoneTel if at
any time this ceases to be the case.
(e) The Stockholder hereby represents and warrants that the
Stockholder has such knowledge, experience and skill in evaluating and investing
in issues of both equity and debt securities, including securities of new and
speculative companies, such that he/she is capable of evaluating the merits and
risks of an investment in the Shares, and has such knowledge, experience and
skill in financial and business matters that he/she is capable of evaluating the
merits and risks of the prospective investment in the Shares and the suitability
of the Shares as an investment.
IN WITNESS WHEREOF, the Stockholder has executed this document
as of the date set forth above.
/s/ William J. Brinkmeier
---------------------------
Stockholder
Accepted and Agreed:
PHONETEL TECHNOLOGIES, INC.
By:________________________
Date: , 1996
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EXHIBIT A
---------
"Accredited investor" shall mean any person who comes within any
of the following categories, or who the issuer of the securities being offered
or sold reasonably believes comes within any of the following categories, at the
time of the sale of the securities to that person:
(1) Any bank as defined in Section 3(a) (2) of the Securities
Act of 1933 (the "Act") or any savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Act whether acting in its individual
or fiduciary capacity; any broker dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as defined in Section
2(13) of the Act; any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a) (48) of
that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000, or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors;
(2) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c) (3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
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116
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds $1,000,000;
(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; and
(8) Any entity in which all of the equity
owners are accredited investors.
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EXHIBIT G
---------
STOCKHOLDER REPRESENTATIONS AND WARRANTIES
------------------------------------------
This document is being delivered in connection with the proposed
purchase (the "Purchase") of Payphones of America, Inc. ("POA") by PhoneTel III,
Inc. ("PhoneTel III") pursuant to the Amended and Restated Share Purchase
Agreement (the "Purchase Agreement") to be entered into among PhoneTel III,
POA, and the stockholders of POA. The undersigned holder of shares of POA
Common Stock (the "Stockholder") understands that, pursuant to the Purchase,
he/she will receive shares of PhoneTel Technologies, Inc. Common Stock
("Shares").
NAME: Stan Rojeski
--------------------------------------
(Please type or print)
ADDRESS: P.O. Box 41303, Memphis, TN 38174
--------------------------------------
SOCIAL SECURITY NUMBER: ###-##-####
-----------------------
NUMER OF POA SHARES HELD BY STOCKHOLDER:
1,443,219
- ---------
DATE: 8-16-96
--------------------
====================================================
118
PART I: ACCREDITED INVESTORS
(Based upon the definition of "accredited investor" in Exhibit A hereto, please
check one box below.)
/X/ Stockholder is an "accredited investor"
Stockholder Initials: /s/ SR
-------------
PART II: ADDITIONAL REPRESENTATIONS AND WARRANTIES
(a) The Stockholder is acquiring the Shares solely for his/her
own beneficial account, for investment purposes, and not with a view to, or for
resale in connection with, any distribution of the Shares. The undersigned
understands that the Shares have not been registered under the Securities Act
of 1933 or the securities laws of any state by reason of specific exemptions
under the provisions thereof which depend in part upon the investment intent of
the undersigned and of the other representations made by the Stockholder. The
Stockholder understands that PhoneTel is relying upon the representations
contained herein for the purpose of determining whether the Purchase meets the
requirements for such exemptions.
(b) The Stockholder has had an opportunity to ask questions,
receive answers and discuss the business, management and financial affairs of
PhoneTel and the terms and conditions of an investment in the Shares with, and
has had access to, the management of PhoneTel and the Stockholder has had the
opportunity to review the information received in connection with this
investment. The Stockholder is familiar with the business and financial
condition, properties, operations and prospects of PhoneTel and POA and with
the terms of the Purchase and the Purchase Agreement.
(c) Neither PhoneTel nor any person acting on its behalf has
offered the Shares to the Stockholder by any form of general solicitation or
general advertising.
(d) (i) The Stockholder's financial situation is such that
he/she can afford to bear the economic risk
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119
of holding the Shares for an indefinite period of time, has adequate means for
providing for his/her current needs and personal contingencies, and can afford
to suffer the complete loss of his/her investment in the Shares; (ii) in making
his/her decision to acquire the Shares pursuant to the Purchase, the Stockholder
has relied upon independent investigations made by him/her and, to the extent
believed by the Stockholder to be appropriate, his/her representatives,
including his/her own professional, financial, tax and other advisors; and (iii)
all information which the Stockholder has provided to PhoneTel and its
representatives including, without limitation, information concerning the
Stockholder and his/her financial position is true, complete and correct as of
the date hereof, and the Stockholder agrees to promptly notify PhoneTel if at
any time this ceases to be the case.
(e) The Stockholder hereby represents and warrants that the Stockholder
has such knowledge, experience and skill in evaluating and investing in issues
of both equity and debt securities, including securities of new and speculative
companies, such that he/she is capable of evaluating the merits and risks of an
investment in the Shares, and has such knowledge, experience and skill in
financial and business matters that he/she is capable of evaluating the merits
and risks of the prospective investment in the Shares and the suitability of the
Shares as an investment.
IN WITNESS WHEREOF, the Stockholder has executed this document as of
the date set forth above.
/s/ Stan Rojeski
------------------------------
Stockholder
Accepted and Agreed:
PHONETEL TECHNOLOGIES, INC.
By: _______________________
Date: , 1996
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of holding the Shares for an indefinite period of time, has adequate means for
providing for his/her current needs and personal contingencies, and can afford
to suffer the complete loss of his/her investment in the Shares; (ii) in making
his/her decision to acquire the Shares pursuant to the Purchase, the Stockholder
has relied upon independent investigations made by him/her and, to the extent
believed by the Stockholder to be appropriate, his/her representatives,
including his/her own professional, financial, tax and other advisors; and (iii)
all information which the Stockholder has provided to PhoneTel and its
representatives including, without limitation, information concerning the
Stockholder and his/her financial position is true, complete and correct as of
the data hereof, and the Stockholder agrees to promptly notify PhoneTel if at
any time this ceases to be the case.
(e) The Stockholder hereby represents and warrants that the Stockholder
has such knowledge, experience and skill in evaluating and investing in issues
of both equity and debt securities, including securities of new and speculative
companies, such that he/she is capable of evaluating the merits and risks of an
investment in the Shares, and has such knowledge, experience and skill in
financial and business matters that he/she is capable of evaluating the merits
and risks of the prospective investment in the Shares and the suitability of the
Shares as an investment.
IN WITNESS WHEREOF, the Stockholder has executed this document as of
the date set forth above.
____________________________
Stockholder
Accepted and Agreed:
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter Graf
---------------------
PETER GRAF
Chairman, CEO
Date: August 1, 1996
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EXHIBIT A
---------
"Accredited investor" shall mean any person who comes within any
of the following categories, or who the issuer of the securities being offered
or sold reasonably believes comes within any of the following categories, at the
time of the sale of the securities to that person:
(1) Any bank as defined in Section 3(a)(2) of the Securities
Act of 1933 (the "Act") or any savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Act whether acting in its individual
or fiduciary capacity; any broker dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as defined in Section
2(13) of the Act; any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000, or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors;
(2) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
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122
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds $1,000,000;
(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; and
(8) Any entity in which all of the equity
owners are accredited investors.
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EXHIBIT H
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") made and
entered into as of this 1st day of August, 1996, by and between PhoneTel
Technologies, Inc. ("PhoneTel") an Ohio corporation, William J. Brinkmeier and
Stanley Rojeski (the "Shareholders") .
WHEREAS, PhoneTel III, Inc. ("PIII") , Shareholders and
Payphones of America, Inc. ("POA") are parties to the Amended and Restated Share
Purchase Agreement (the "Purchase Agreement") pursuant to which PIII is
purchasing all the capital stock of POA (the "Purchase") and the Shareholders of
POA will receive shares of PhoneTel common stock $.0l par value ("Shares") .
WHEREAS, the Shareholders have requested that, in connection
with the Purchase Agreement, PhoneTel provide a means of registering PhoneTel
Common Shares under the Securities Act of 1933, as amended (the "Securities
Act"), and PhoneTel is willing to provide such registration as provided herein;
NOW, THEREFORE, in consideration of the premises and the
agreements herein contained, the parties hereto agree as follows:
1. Piggyback Registrations.
-----------------------
(a) RIGHT TO PIGGYBACK. Whenever PhoneTel proposes
to register any of its equity securities under the Securities Act
(other than the first registration after the date hereof) and the
registration form to be used may be used for the registration of
Shares (a "Piggyback Registration"), PhoneTel will give prompt
written notice (in any event within five business days after its
receipt of notice of any exercise of other demand registration
rights) to all Shareholders of its intention to effect such a
registration and will, subject to paragraphs (b), (c) and (d)
below, include in such registration all Shares with respect to
which PhoneTel has received written requests for inclusion
therein within 15 days after the receipt of PhoneTel's notice.
PhoneTel may satisfy its obligation under this Section 1(a) by
registering the Shares on a shelf registration and, subject to
normal holdback and blackout periods, cause such
124
shelf registration to remain effective until the second
anniversary hereof.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a
Piggyback Registration is an underwritten primary registration on
behalf of PhoneTel (whether or not also on behalf of holders of
PhoneTel's securities), and the managing underwriters advise
PhoneTel in writing that in their opinion the number of
securities requested to be included in such registration exceeds
the number which can be sold in such offering, PhoneTel will
include in such registration (i) first, the securities PhoneTel
proposes to sell, (ii) second, Shares requested to be registered
by shareholders whose registration rights are, by their terms,
senior to the rights granted hereby, (iii) third, the Shares
requested to be included in such registration, pro rata among the
Shareholders and others having similar registration rights on the
basis of the number of Shares then owned by each of them, and
(iv) fourth, other securities requested to be included in such
registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a
Piggyback Registration is an underwritten secondary registration
on behalf of holders of PhoneTel's securities, and the managing
underwriters advise PhoneTel in writing that in their opinion the
number of securities requested to be included in such
registration exceeds the number which can be sold in such
offering, PhoneTel will include in such registration (i) first,
the securities requested to be included therein by the holders
demanding such registration, (ii) second, Shares requested to be
registered by shareholders whose registration rights are, by
their terms, senior to the rights amended hereby, (iii) third,
the Shares requested to be included in such registration, pro
rata among such Shareholders and others having similar
registration rights on the basis of the number of Shares then
owned by each of them and (iv) fourth, other securities requested
to be included in such registration.
2
125
(d) Nothing in this Section 1 will prohibit
PhoneTel from determining, at any time, not to file a
registration statement or, if filed, to withdraw such
registration or terminate the registration related thereto.
02. SELECTION OF UNDERWRITERS. If any offering pursuant to a
Registration Statement is an underwritten offering, PhoneTel will select a
managing underwriter or underwriters to administer the offering.
3. REGISTRATION EXPENSES. PhoneTel will pay all of its expenses
in connection with the registration of Shares (including registration and filing
fees, printing costs, listing fees and the fees and expenses of its counsel),
and each Shareholder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such
Shareholder's Shares pursuant to any registration statement filed pursuant to
Section 1 above (a "Registration Statement") .
4. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY PHONETEL. PhoneTel agrees to indemnify
each Shareholder and any agent or investment adviser thereof against
all losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees and expenses of investigation) incurred by
such party pursuant to any actual or threatened action, suit,
proceeding or investigation arising out of or based upon (i) any
untrue or alleged untrue statement of material fact contained in the
Registration Statement, any prospectus or preliminary prospectus, or
any amendment or supplement to any of the foregoing or (ii) any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in
the case of a prospectus or a preliminary prospectus, in light of the
circum stances then existing) not misleading, except in each case
insofar as the same arise out of or are based upon, any such untrue
statement or omission made in reliance on and in conformity with
information with respect to such indemnified party furnished in
writing to PhoneTel by such indemnified party or its counsel expressly
3
126
for use therein. Notwithstanding the foregoing provisions of this
paragraph (a), PhoneTel will not be liable to any Shareholder, any
person who participates as an underwriter in the offering or sale of
Shares or any other person, if any, who controls such holder or
underwriter (within the meaning of the Securities Act), under the
indemnity agreement in this paragraph (a) for any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or
expense that arises out of such holder's or other person's fail ure to
send or give a copy of the final prospectus to the person asserting an
untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of the
Shares to such person if such statement or omission was corrected in
such final prospectus and PhoneTel has previously furnished copies
thereof to such Shareholder.
(b) INDEMNIFICATION BY SHAREHOLDERS. In connection with the
Registration Statement, each Shareholder will furnish to PhoneTel in
writing such information, including with respect to the name, address
and the amount of Shares held by such Shareholder, as PhoneTel
reasonably requests for use in such Registration Statement or the
related prospectus and agrees to indemnify and hold harmless
PhoneTel, all other prospective holders or any underwriter, as the
case may be, and any of their respective affiliates, directors,
officers and controlling Persons (within the meaning of the Securities
Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required
to be stated in such Registration Statement or prospectus or any
amendment or supplement to either of them or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances then existing) not misleading, but only to the extent
that any such untrue statement or omission is made in reliance on
and in conformity with information with respect to such
4
127
Shareholder furnished in writing to PhoneTel by such Shareholder or
its counsel specifically for inclusion therein.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such indemnified
party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for
which such indemnified party may claim indemnification or contribution
pursuant to this Agreement (provided that failure to give such
notification shall not affect the obligations of the indemnifying
person pursuant to this Section 4 except to the extent the
indemnifying party shall have been actually prejudiced as a result of
such failure). In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party
(who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable
to such indemnified party under these indemnification provisions for
any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of investigation,
unless in the reasonable judgment of any indemnified party a conflict
of interest is likely to exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the reasonable
fees and expenses of such additional counsel or counsels. The
indemnifying party will not be subject to any liability for any
settlement made without its consent (which will not be unreasonably
withheld).
5
128
(d) CONTRIBUTION. If the indemnification from the
indemnifying party provided for in this Section 4 is unavailable to
the indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection
with the actions which resulted in such losses, claims, damages,
liabilities and expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) above, any legal
and other fees and expenses reasonably incurred by such indemnified
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4 were determined
by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section 4, no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Shares underwritten by it and distributed to the public were offered
to the public exceeds the amount of any damages which such underwriter
has otherwise been required to pay by reason
6
129
of such untrue or alleged untrue statement or omission or alleged
omission, and no Shareholder shall be required to contribute any
amount in excess of the amount by which the total price at which the
Shares of such Shareholder were offered to the public (net of all
underwriting discounts and commissions) exceeds the amount of any
damages which such Shareholder has otherwise been required to pay by
reason of such untrue statement or omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indeminification is available under this Section 4, the
indemnifying parties shall indemnify each indemnified party to the
full extent provided in Section 4(a) or (b), as the case may be,
without regard to the relative fault of said indemnifying parties or
indemnified party or any other equitable consideration provided for in
this paragraph (d).
5. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Shareholder
may participate in any underwritten offering hereunder unless such Shareholder
(i) agrees to sell his Shares on the basis provided in any underwriting
arrangements approved by PhoneTel in its reasonable discretion and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
6. RULE 144. For a period of three years following the date
hereof (or such shorter period as may permit the sale of Shares under Rule 144
under the Securities Act without regard to the requirement of "current public
information"), PhoneTel covenants that it will file the reports required to be
filed by it under the Securities Act and the Securities Exchange Act of 1934, as
amended, and the rules and regulations adopted by the Securities and Exchange
Commission ("SEC") thereunder (or, if PhoneTel is not required to file such
reports, it will, upon the request of any Shareholder make publicly available
other information so long as necessary to permit sales under Rule 144 under the
Securities Act),
7
130
and it will take such further action as any Shareholder may reasonably request,
all to the extent required from time to time to enable such Shareholder to sell
Shares - without registration under the Securities Act within the limitation of
the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any Shareholder PhoneTel will
deliver to such Shareholder a written statement as to whether it has complied
with such requirements.
7. REMEDIES. Each Shareholder in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
8. 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 PhoneTel
and the Shareholders hereunder may not be assigned by any of the parties hereto
without the prior written consent of the other parties.
(b) This Agreement is not intended, nor shall it be construed,
to confer any rights or remedies under or by reason of this Agreement upon any
person except the parties hereto and their heirs, successors and permitted
assigns.
9. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof. This Agreement supersedes all prior agreements, arrangements and
understandings of the parties with respect to such subject matter.
10. 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
131
11. HEADINGS. The 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.
12. 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.
13. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given at the time of delivery if personally delivered or telecopied (with
confirmation of receipt), the next day, if delivered by nationally-recognized
overnight express service, or five (5) days, if sent by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses:
(a) If to PhoneTel to:
PhoneTel Technologies, Inc.
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone Number: (216) 241-2555
Facsimile Number: (216) 241-2574
Attn: Daniel Moos
with copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telephone Number: (212) 735-3000
Facsimile Number: (212) 735-2000
Attn: Stephen M. Banker, Esq.
9
132
(b) If to Shareholders:
William J. Brinkmeier
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Telephone Number: (314) 939-0550
Telecopy Number: (314) 947-6488
Stanley Rojeski
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Telephone Number: (314) 939-0550
Telecopy Number: (314) 947-6488
with copy to:
Scher & Miller L.L.P.
2828 Routh Street
Suite 725
Dallas, TX 75201
Telephone Number: (214) 871-0725
Telecopy Number: (214) 871-0020
Attention: Charles P. Miller, 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.
10
133
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on
the day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter Graf
----------------------------
Name: Peter Graf
Title: Chairman
William J. Brinkmeier
----------------------------
William J. Brinkmeier
Stanley Rojeski
----------------------------
Stanley Rojeski
134
EXHIBIT "I"
POA LIABILITIES TO BE PAID OR ASSUMED BY BUYER AT CLOSING
1. POA LIABILITIES TO BE PAID OR ASSUMED BY BUYER AT CLOSING AS
------------------------------------------------------------
REDUCTION OF PORTION OF PURCHASE PRICE PAYABLE TO SELLERS AT CLOSING AS
-----------------------------------------------------------------------
PROVIDED IN SECTION 1.2(f):
---------------------------
1.1 POA-Berthel Fisher Leases (Pay-off letter attached as EXHIBIT I-1) $5,196,996.94
1.2 Berthel Fisher Phones Acquisition Note 1,600,001.00
1.3 LP-1 Phones Acquisition Note 300,000.00
1.4 Notes payable to Ron Coleman (Pay-off letter attached as EXHIBIT I-2) 208,835.18
1.5 Notes payable to R. Greg Kintz
(Pay-off letter attached as EXHIBIT I-3) 112,948.99
1.6 Note payable to Paul Wm. Schindler
(Pay-off letter attached as EXHIBIT I-4) 27,381.40
1.7 Eastern Telecom Consulting Agreement
(Pay-off letter attached as EXHIBIT I-5) 175,869.41
1.8 Pay-Tele Communications, Inc. d/b/a Midwest Telecom 195,636.36
1.9 Pay off of Mark Twain Bank Line of Credit 244,000.00
(Pay-off letter attached EXHIBIT I-6)
1.10 Intellicall Lease 5,906.00
1.11 Vehicle Notes/Leases 33,253.36
---------
TOTAL LIABILITIES TO BE PAID AT CLOSING BY BUYER
AS REDUCTION OF PURCHASE PRICE PAYABLE TO SELLERS AT CLOSING: $8,100,828.64
2. POA LIABILITIES TO BE ASSUMED BY BUYER AT CLOSING AND WHICH
-----------------------------------------------------------
DO NOT REDUCE THE PURCHASE PRICE PAYABLE TO SELLERS:
----------------------------------------------------
2.1 License fees due to Intellicall, Inc. for use of Intelli*Star call
processing boards in Intellicall pay telephones. Said remaining
licensing fees shall be assumed by Buyer at Closing without
reduction of the Purchase Price payable to Sellers.
135
REVISED 9/22/96 PER DIEM INTEREST IS CALCULATED BASED ON A 9/16/96 FUNDING DATE
WIRE INSTRUCTIONS FOR LIABILITIES TO BE PAID AT CLOSING AND PAYMENTS TO SELLERS
1. STANLEY ROJESKI $54,557,53 WIRED BY BERTHEL
Northern Trust Company
Chicago, IL
ABA Routing No. 071600152
Account No. 78174
Client Name:
Stanley Henry Rojeski
Account 2320230416
2. WILLIAM J. BRINKMEIER $42,502.65 WIRED BY BERTHEL
Magna Bank, N.A.
ABA Routing No. 081001387
Account No. 0008007121
3. EASTERN TELECOM $171,872.38 WIRED BY BERTHEL
First Union National Bank
of Virginia
Newport News, VA
ABA Routing No. 051400549
Account No. 2050000277645
4. R. GREG KINTZ $102,880.77
Mark Twain State Bank 1,129.44 PER DIEM INTEREST
ABA Routing No. 80-340-810 -----------
Account No. 321222108 $104,010.21 WIRED BY BERTHEL
5. PAUL WM. SCHINDLER $ 24,525.00
First Community Credit Union 283.40 PER DIEM INTEREST
ABA Routing No. 281081877 -----------
Account No. 700978004 $ 24,808.40 WIRED BY BERTHEL
6. PAYPHONES OF AMERICA
LIMITED PARTNERSHIP-I $300,000.00 WIRED BY BERTHEL
First American Bank
Ronald L. Coleman
Trust Account
Account No. 101177747
ABA No. 064000017
7. RONALD L. COLEMAN, TRUSTEE $208,271.44
First American Bank 2,302.68 PER DIEM INTEREST
Ronald L. Coleman -----------
Trust Account $210,574.12 WIRED BY BERTHEL
Account No. 101177747
ABA No. 064000017
8. MARK TWAIN BANK $244,000.00 $199,737.71 WIRED BY PHONETEL
Account No. 2917006604 396.48 PER DIEM $ 44,676.77 WIRED BY BERTHEL
ABA Routing No. 081003408 18.00 RELEASE FEE
Special Instructions: -----------
Notify Sean Hagan $244,414.48
9. BERTHEL FISHER $5,196,996.94 PAY OFF AMOUNT DEDUCTED FROM BERTHEL LEASE
$1,600,001.00 PAY OFF AMOUNT DEDUCTED FROM BERTHEL LEASE
$ 108,559.66 PER DIEM DEDUCTED FROM 9/15 ICL CHECK
-------------
$6,905,557.60
TOTAL WIRED BY BERTHEL: $953,002.06
TOTAL WIRED BY PHONETEL: $199,737.71
TOTAL CHECKS BY PHONETEL: $ 4,392.29 (Intelicall Lease Pay-off)
136
[LOGO] PAYPHONES OF AMERICA
124 Point West Blvd. - St. Charles, MO 63301 - (314) 947-8711 -
Fax (314) 947-6488
July 3, 1996
Lynn Whiteman
Vice President-Operations
Berthel Fisher & Company Leasing, Inc.
425 Second Street S.E.
Cedar Rapids, IIA 52401-1819
Dear Lynn:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PhoneTel") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the net investment amount to be paid to
Berthel Fisher & Company Leasing, Inc. and its affiliates Telecommunications
Income Fund IX and X (collectively, "BERTHEL") in satisfaction of all
indebtedness and obligations of POA to Berthel is $6,796,996.94 (the "PAY-OFF
AMOUNT"). After July 31, 1996, the per diem interest cost is $2309.78.
Upon receipt of the Pay-Off Amount, it is our understanding that Berthel will
(a) immediately execute and deliver to PhoneTel UCC-3 termination statements for
all UCC-1 Financing Statements listing Berthel as secured party and POA, or any
subsidiary of POA, as debtor; and (b) execute such other documents as PhoneTel
may require to evidence Berthel's release of any lien, encumbrance or security
interest in POA's assets.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours,
/s/ William J. Brinkmeier/BPM
William J. Brinkmeier
Vice President
AGREED AND ACCEPTED:
BERTHEL FISHER & COMPANY
LEASING, INC.
BY:/s/ Lynn Whiteman
- -------------------------
Lynn Whiteman, V.P.
137
EXHIBIT I-2
[PAYPHONES LOGO]
PAYPHONES OF AMERICA
124 Point West Blvd.
St. Charles, MO 63301
(314) 947-8711
Fax (314) 947-6488
July 23, 1996
Mr. Ronald L. Coleman, Trustee
Attorney at Law
3408 Democrat Road
Memphis, TN 38118
Dear Ron:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PHONETEL") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the amount (principal and accrued
interest) to be paid to Ronald L. Coleman, Trustee in satisfaction of all
indebtedness and obligations of POA to Ronald L. Coleman, Trustee is $208,835.18
($178,835.18 Note and $30,000 Consulting) (the "PAY-OFF AMOUNT"). After July 31,
1996, the per diem interest cost is $74.51.
Upon receipt of the Pay-Off Amount, it is our understanding that you will
immediately (a) execute and deliver to PhoneTel UCC-3 termination statements
for all UCC-1 Financing Statements listing Ronald L. Coleman, Trustee as
secured party and POA, or any subsidiary of POA, as debtor; and (b) execute
such other documents as PhoneTel may require to evidence your release of any
lien, encumbrance or security interest in POA's assets.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours,
/s/ William J. Brinkmeier
William J. Brinkmeier
Vice President
AGREED AND ACCEPTED:
/s/ Ronald L. Coleman
- --------------------------
RONALD L. COLEMAN, TRUSTEE
138
[LOGO] PAYPHONES OF AMERICA
124 Point West Blvd. - St.Charles, MO 63301 - (314) 947-8711 -
Fax (314) 947-6488
July 23, 1996
Mr. R. Greg Kintz
620 Eatherton
Chesterfield, MO 63017
Dear Greg:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PHONETEL") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the amount (principal and accrued
interest) to be paid to you in satisfaction of all indebtedness and obligations
of POA to you is $107,525.00 (the "PAY-OFF AMOUNT"). After July 31, 1996, the
per diem interest cost is $47.79.
Upon receipt of the Pay-Off Amount, it is our understanding that you will
immediately (a) execute and deliver to PhoneTel UCC-3 termination statements
for all UCC-1 Financing Statements listing R. Greg Kintz as secured party and
POA, or any subsidiary of POA, as debtor and (b) execute such other documents
as PhoneTel may require to evidence your release of any lien, encumbrance or
security interest in POA's assets. In addition, you will release the pledge of
the POA shares currently held by you as collateral for your note; and surrender
any POA share certificates in your possession.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours,
/s/ William J. Brinkmeier/ CBM
William J. Brinkmeier
Vice President
AGREED AMD ACCEPTED: PROVIDING MARK TWAIN STATE BANK IS PAID IN FULL
/s/ R. Greg Kintz
- ---------------------------
R. Greg Kintz
139
[LOGO] PAYPHONES OF AMERICA
124 Point West Blvd. - St. Charles, MO 63301 - (314) 947-8711 -
Fax (314) 947-6488
July 23, 1996
Mr. Paul Wm. Schindler
4134 Bugle Bend Rd.
Chesterfield, MO 63017
Dear Paul:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PHONETEL") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the amount (principal only) to be paid
to you in satisfaction of all indebtedness and obligations of POA to you is
$27,250.00 (the "PAY-OFF AMOUNT"). After July 31, 1996, the per diem interest
cost accrued is to be calculated at time of payoff.
Upon receipt of the Pay-Off Amount, it is our understanding that you will
immediately (a) execute and deliver to PhoneTel UCC-3 termination statements for
all UCC-1 Financing Statements listing Paul Wm. Schindler as secured party and
POA, or any subsidiary of POA, as debtor; and (b) execute such other documents
as PhoneTel may require to evidence your release of any lien, encumbrance or
security interest in POA's assets. In addition, you will release the pledge of
the POA shares currently held by you as collateral for your note; and surrender
any POA share certificates in your possession.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours,
/s/ William J. Brinkmeier
William J. Brinkmeier/CBM
Vice President
AGREED AND ACCEPTED: accept as noted: Provided all indebtedness to Mark Twain
Bank is paid in full.
/s/ Paul Wm. Schindler
- ----------------------
Paul Wm. Schindler
140
[LOGO] PAYPHONES OF AMERICA
124 Point West Blvd. - St. Charles, MO 63301 - (314) 947f871 -
Fax (314) 947-6488
July 23, 1996
Mr. John Crawford
President
Eastern Telecom Corporation
11817 Canon Boulevard
Newport News, VA 23606
Dear John:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PHONETEL") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the amount to be paid to Eastern
Telecom Corporation ("Eastern") in satisfaction of all indebtedness and
obligations of POA to Eastern, including all amounts owing under the Consulting
Agreement, is $175,869.41 (the "PAY-OFF AMOUNT").
Upon receipt of the Pay-Off Amount, it is our understanding that Eastern will
immediately (a) execute and deliver to PhoneTel UCC-3 termination statements for
all UCC-1 Financing Statements listing Eastern as secured party and POA, or any
subsidiary of POA, as debtor; and (b) execute such other documents as PhoneTel
may require to evidence Eastern's release of any lien, encumbrance or security
interest in POA's assets.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours
/s/ William J. Brinkmeier/CBM
William J Brinkmeier
Vice President
AGREED AND ACCEPTED:
Eastern Telecom Corporation
By: /s/ John Crawford
----------------------
John Crawford, President
141
[MARK TWAIN LOGO]
MARK TWAIN BANKS
MARK TWAIN BANK - STATE
12375 St. Charles Rock Road
Bridgeton, Missouri 63044
Telephone: 314-291-1600
DATE: 8/14/96
TO:
ACCOUNT/NOTE NUMBER: 9348459-65896
BORROWER: K & S Enterprises
PROPERTY:
PRINCIPAL BALANCE..............................................$244,000.00
------------
INTEREST THROUGH 8-15-96 at 1:30 p.m. .........................$ 330.41
------- ------------
PER DIEM $66.08................LATE FEES.......................$ N/A
----- ------------
RELEASE FEES PAYABLE TO COUNTY RECORDER........................$ 18.00
--------------- ------------
TOTAL CHARGES THROUGH 8-15-96 .................................$244,348.41
------- ------------
Our interest in the above referenced property will be satisfied upon receipt of
the total charges. All figures are subject to final audit of this account.
Should you require any additional information regarding this account, please do
not hesitate to contact the Bank.
Sincerely,
MARK TWAIN BANK
/s/ ???
---------------------
cc: Central Discount
File
142
EXHIBIT J
FINANCIAL STATEMENTS
143
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
ASSETS Mar-96
- ------ ------
Current Assets
--------------
Checking/Savings
----------------
1015 Cash - Mark Twain Bank (249,262.64)
1021 Refunds II - Mark Twain Bank (352.30)
1022 Cash - UMB/Kansas City 1,004.63
1024 Cash - Bank IV Kansas 1,238.74
1025 Cash - Crestar Bank/NewportNews (42,910.74)
1027 Cash - Nations Bank (BF) (112.00)
1028 Cash - Magna Bank (BF Ops) 2,581.22
1029 Cash - Magna Bank (BF Commission) (198.66)
1100 Petty Cash 200.00
1101 Petty Cash - Virginia 639.08
1102 Petty Cash - Western Missouri 65.58
-----------
TOTAL CHECKING/SAVINGS (287,107.09)
Accounts Receivable
- -------------------
1201 Accounts Receivable 3,082.50
1202 Due To/From LP1 (48,595.39)
1203 Accounts Receivable: Service 3,760.64
1206 Accts Receivable: Intellistar 130,892.50
1208 Due to/Fr Berthel Fisher 189.97
1210 Accounts Receivable: Teltrust 33,694.78
1211 Accounts Receivable: Mgmnt Fees 21,235.95
1214 Accnts Receivable: Dial Around 61,580.25
1215 Accounts Receivable: BF Teltrust 738.38
1216 Accounts Receivable: QCC 12,457.67
1217 Accounts Receivable: BF 11,196.66
1300 Notes Receivable: MICPA 21,510.19
1302 Notes Receivable: Scott Lapp 426.65
-----------
TOTAL ACCOUNTS RECEIVABLE 252,170.75
Page 1
144
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
Other Current Assets Mar-96
- -------------------- ------
1400 Inventory: Pay Telephones 40,210.91
1500 Prepaid Expenses 1,412.20
1501 Prepaid Deposits 5,162.56
1504 Prepaid Taxes 4,670.35
---------
TOTAL OTHER CURRENT ASSETS 54,456.02
TOTAL CURRENT ASSETS 19,519.68
---------
Fixed Assets
------------
1600 Fixed Assets: Pay Telephones 96,152.69
1601 Accum Depr: Pay Telephones (25,075.88)
1604 Fixed Assets: Phone Booths 1,190.72
1605 Accum Depr: Phone Booths (643.64)
1606 Fixed Assets: Payphones(Merger) 83,700.00
1607 Accum Depr: Payphones (Merger) (62,513.89)
1608 Fixed Assets: Protel Phn Boards 7,230.46
1609 Accum Depr: Protel Phone Boards (4,246.87)
1610 Fixed Assets: Office Equipment 27,024.99
1611 Accum Depr: Office Equipment (22,616.89)
1615 Fixed Assets: PBX/Switch Equipment 1,824.11
1616 Accum Depr: PBX/Switch Equipment (1,824.10)
1620 Fixed Assets: Acquisitions 20,420.25
1621 Accum Depr: Acquisitions (20,420.25)
1622 Fixed Assets: Trucks/Vans/Cars 184,673.40
1623 Accum Depr: Trucks/Vans/Cars (147,294.21)
1626 Fixed Assets: Pedestals & Enclosures 9,220.00
1627 Accum Depr: Pedestals & Enclosures (5,158.80)
1628 Fixed Assets: Suspense 20,684.45
1629 Fixed Assets: K & S/BF 1 561,040.12
1630 Accum Depr: K & S/BF 1 (313,921.44)
1631 Fixed Assets: Ameritel - 1 of 3 248,400.00
1632 Accum Depr: Ameritel - 1 of 3 (115,326.60)
1633 Fixed Assets: Ameritel-2a of 3 300,600.00
1634 Accum Depr: Ameritel - 2a of3 (132,405.95)
1635 Fixed Assets: Ameritel 2b of 3 20,000.00
1636 Accum Depr: Ameritel 2b of 3 (8,809.51)
1639 Fixed Assets: MW Telecom 383,400.00
1640 Accum Depr: Midwest Telecom (168,877.05)
1641 Fixed Assets: Intellicall 65,369.20
1642 Accum Depr: Intellicall (28,015.00)
1643 Fixed Assets: Protels - BF 28,675.61
1644 Accum Depr: Protel - BF (11,947.95)
Page 2
145
I
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
March 1996
----------
1645 Fixed Assets: West Mo - BF6 250,000.00
1646 Accum Depr: West Mo - BF6 (98,214.70)
1647 Fixed Assets: Intellicall 2 45,570.50
1648 Accum Depr: Intellicall 2 (14,647.50)
1649 Fixed Assets: E. Telecom (1) 277,200.00
1650 Accum Depr: Eastern Telecom(1) (62,699.56)
1651 Fixed Assets: BF/E.Telecom(1) 462,600.00
1652 Accum Depr: BF/E.Telecom(1) (104,634.98)
1653 Fixed Assets: BF/E.Telecom(2) 970,200.00
1654 Accum Depr: BF/E.Telecom(2) (219,448.46)
1657 Fixed Assets: BerthelFisher 60,000.00
1658 Accum Depr: Berthel Fisher Q (5,714.40)
----------
TOTAL FIXED ASSETS 2,550,718.87
Other Assets
------------
1801 Contract Intangible 39,272.32
1802 Accum Depr: Contract Intangible (33,776.04)
1803 Goodwill Intangible 779,502.18
1804 Accum Depr: Goodwill Intangible (75,248.90)
1805 Non-Compete Intangible 825,000.00
1806 Accum Depr: Non-Compete (586,668.67)
1807 Deferred Financing Cost - BF 25,687.50
1808 Accum Amrt: Deferred Financing (20,121.87)
1811 Deferred Financing - Merger 93,664.98
1812 Accum Amrt: Merger (20,673.90)
1813 MWT Contract Intangible 327,316.80
1814 Accum Amrt: MWT Contract Intangible (201,842.70)
1815 E. Telecom Contract Intangible 2,276,160.24
1816 Accum Amrt: ET Contract Intangible (720,977.26)
1817 Ameritel-1 Intangible Assets 218,600.00
1818 Ameritel-1 In Assets Accum Amortization (142,416.02)
1819 Ameritel-2 Intangible Assets 79,400.00
1820 Ameritel-2 In Assets Accum Amortization (43,670.50)
1823 Bell Atlantic Intangible Assets 1,000.00
1824 Bell Atlantic Accum Amortization (66.66)
1825 BF/QT Intangible Assets 40,000.00
1826 BF/QT Intan Asset Accum Amortization (5,333.20)
1850 Intellistar License Agreement 38,837.50
1851 Accum Amrt: Intelli*LicenseAgrement (19,363.33)
1901 IPTA LLC Investment 521.27
------------
TOTAL OTHER ASSETS 2,874,805.72
------------
TOTAL ASSETS 5,445,044.27
============
Page 3
146
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
LIABILITIES Mar-96
- ----------- ------
Current Liabilities
-------------------
Accounts Payable
---------------
2000 Accounts Payable: Operating Expenses 50,936.08
2001 Accounts Payable: I-Star 185,582.47
2002 Accounts Payable: LEC & LD 95,485.59
2003 Accounts Payable: Commission 189,827.82
2008 Accounts Payable: Accrued Interest 114,403.33
2010 Accounts Payable: Teltrust 374.02
2011 Accounts Payable: BF General 465.34
2120 Miscellaneous P/R Deduction 769.42
2150 Sales Tax Payable 1,021.58
2151 St. Charles Cnty Sales Tax 422.13
-----------
TOTAL ACCOUNTS PAYABLE 639,287.76
Other Current Liabilities
-------------------------
2200 Note Payable: Ford Motor Cr. 61,172.48
-----------
TOTAL OTHER CURRENT LIABILITIES 61,172.48
TOTAL CURRENT LIABILITES 700,460.24
-----------
Long Term Liabilities
---------------------
2601 Note Payable: Mark Twain LOC 243,750.00
2620 Note Payable: Ron Coleman #1 181,021.40
2621 Note Payable: Ron Coleman #2 129,544.93
2622 Promissory Note (2) Payable 117,300.00
2628 Note Payable: PayTele Comm. 284,909.13
2632 Note Payable: W. Brinkmeier 124,091.80
2633 Note Payable: S. Rojeski(4) 25,000.00
2634 Note Payable: Berthel Fisher 407,499.75
2635 Note Payable: S. Rojeski(5) 50,000.00
2636 Note Payable: S. Rojeski(6) 40,000.00
2637 Note Payable: S. Rojeski(7) 14,591.51
2638 Note Payable: S. Rojeski(8) 87,500.00
2639 Note Payable: S. Rojeski(9) 22,621.81
Page 4
147
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
Mar-96
------
2640 Note Payable: S. Rojeski(10) (43,363.26)
2641 Note Payable: W. Brinkmeier( (37,164.02)
2643 Note Payable: W. Brinkmeier( 120,815.46
2644 Note Payable: S. Rojeski(12) 155,112.89
2645 Note Payable: S. Rojeski(13) 15,000.00
2646 Note Payable: S. Rojeski 20,000.00
2650 Capl Lease Obl:BF (1) 206,072.67
2652 Capl Lease Obl:BF (2) 150,407.88
2653 Capl Lease Obi:BF (3) 220,569.54
2654 Capl Lease Obl:BF (4) 223,596.59
2655 Intellicall Capital Lease (592.48)
2656 Capl Lease Obl:BF (5) 16,066.90
2657 Capl Lease Obl:BF (6) 144,791.15
2658 Intellicall (2) Capital Lease 11,581.48
2659 Capl Lease Obl:BF (7) 885,389.13
2660 Capl Lease Obl:BF (8) 2,221,237.44
2661 Capl Lease Obl:BF (10) 53,502.82
2662 Capl Lease Obl:BF (11) 55,479.08
2663 Capl Lease Obl:BF (12) 83,503.76
-------------
TOTAL LONG TERM LIABILITIES 6,229,837.36
TOTAL LIABILITIES 6,930,297.60
-------------
CAPITAL
-------
3000 Shareholders Equity 348,756.03
3001 Additional Paid-in Capital 446,106.57
3002 Scrip Dividends (446,106.57)
3901 Prior Period Adj: FY94 5.00
3902 Prior Period Adj: FY95 (502.08)
3999 Retained Earnings (1,324,814.85)
Net Income (508,697.43)
-------------
TOTAL CAPITAL (NET WORTH) (1,485,253.33)
-------------
TOTAL LIABILITIES & CAPITAL 5,445,044.27
=============
Page 5
148
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter FY 1996
Revenue Mar-96 Year to Date
------- ------ ------------
4000 Phone Revenue: StL Collection 81,997.70 205,458.40
4002 Phone Revenue: WMO Collection 49,073.50 120,169.25
4003 Phone Revenue: Va Collection 123,400.00 315,676.50
4004 Phone Revenue: Tn Collection 6,214.84 7,315.74
4005 Phone Revenue: Intellistar 123,843.04 336,067.91
4010 Phone Revenue: Oncor (AOS) 22.93 98.10
4012 Phone Revenue: Intellicall-AOS 9.75 9.75
4015 Phone Revenue: LD Communicatio 59.85 248.18
4019 Phone Revenue: Telecom*USA 291.19 1,029.88
4020 Phone Revenue: Teltrust- MO 35,432.54 115,064.76
4021 Phone Revenue: Teltrust - IL 11,661.98 26,863.07
4022 Phone Revenue: Teltrust - VA 65,703.85 144,195.61
4023 Phone Revenue: Teltrust - KS 3,436.69 18,156.29
4024 Phone Revenue: Teltrust - Can 644.59 644.59
4030 Phone Revenue: Coin Tel Intn'l - 2,863.66
4031 Phone Revenue: Teleserve 90.20 280.42
4032 Phone Revenue: Ga Collection 792.95 792.95
4033 Phone Revenue: Ms Collection (119.90) (119.90)
4203 Phone Revenue: Payphone Misc - 672.00
4300 APCC Dial Around Compensation - 22,960.87
4303 Phone Revenue: IPTA LLC Distr 4,463.54 4,463.54
4304 Phone Revenue: FPTA 1,831.73 3,962.39
4305 Phone Revenue: Berthel Fisher/TCC 88,789.98 88,789.98
4400 Management Fees:Ltd Partnershp 1,300.00 3,925.00
4401 Management Fees: BerthelFisher 101,235.95 135,000.00
4402 Management Fees:VisionComm, Inc - 10,000.00
4700 Interest Revenue 15.20 46.88
---------- ------------
Total Revenue 700,192.10 1,564,655.82
Page 1
149
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter FY 1996
Cost of Sales Mar-96 Year to Date
------------- ------ ------------
5000 Southwestern Bell LEC Expense 61,959.37 110,303.68
5001 Ameritech(lI Bell)Lec Expense 9,743 97 12,860.92
5002 Illinois Consolidated LEC Exp. 466.23 704.48
5003 Centel LEC Expense 156.91 462.40
5004 Harrisonville LEC Expense 942.75 1,574.15
5005 Frontier Telephone LEC Expense 207.99 638.57
5006 Madison Telephone LEC Expense 166.73 511.29
5007 Alltel LEC Expense 913.65 2,059.59
5008 Fidelity LEC Expense 168.85 370.64
5011 United Telephone LEC Expense 10,553.23 19,910.41
5030 GTE Illinois LEC Expense 2,699.75 2,699.75
5031 GTE Midwest Inc LEC Expense 7,170.13 13,846.16
5032 GTE Iowa LEC Expense 76.42 114.63
5033 GTE North-Illinois Op LEC Exp 584.36 1,215.69
5036 Mid-Missouri LEC Expense 261.33 261.33
5037 Citizens Telephone LEC Expense 557.93 1,128.38
5038 KLM Telephone LEC Expense 109.06 631.01
5040 Lathrop Telephone Co. LEC Exp 94.85 297.69
5041 SoCentral Bell Miss-Ph 84.40 255.35
5042 GTE - South Va LEC Expense 5,735.76 9,008.94
5043 Bell Atlantic LEC Expense 67,563.21 121,249.61
5044 New Florence Telephone Expense 441.51 1,211.02
5045 McDonald Cnty Telephone Expens 83.41 168.67
5046 Kingdom Telephone Company 367.38 729.84
5047 Gulf Telephone Company 51.76 106.47
5048 Southern Bell-FL Expense - 333.30
5049 SoCent Bell Ala - LEC Expense 50.19 140.02
5050 Southern Bell-GA LEC Expense 66.52 143.05
5051 South Central Bell - Tenn 4,941.39 9,283.07
5052 Grand River Mutual LEC Expense 450.79 859.63
5099 SBMS Cellular Phone Expense - 0.44
5201 AT&T LD Expense 236.39 569.10
5205 MCI LD Phone Expense 15,216.56 46,227.42
5207 Eastern Telecom 0+LD Expense 16.60 16.60
5300 Intellistar World Line Exp 178.74 178.74
5301 Intellistar Rejected Calls 2,113.59 3,385.32
5302 Intellistar Unbillable Calls 14.25 (200.98)
5305 Intellistar License Fee 4,073.86 12,842.01
5306 Intellistar Validation Fees 4.45 73.94
5307 Intellistar Ez Pymnt Proration 42,476.12 112,476.55
5322 Teltrust Reserve Expense 14,969.01 39,019.92
5323 Teltrust Network Expense 19,752.42 57,154.49
5324 Teltrust Charges & Fees 16,341.65 45,085.69
5327 Teltrust Status Charge Expense 55.20 170.90
5328 Teltrust Bank & Finance Charge 2,380.81 6,695.23
5329 T & E Chargeback Expense 170.09 509.04
Page 2
150
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter Fy 1996
Cost of Sales(cont) Mar 1996 Year to Date
------------------- -------- ------------
5330 Teltrust Customer SVC Adjust 1,207.85 4,437.68
5331 Teltrust Unbillable Expense 589.86 3,266.12
5332 Teltrust Ancillary Fee Expense 1,857.82 4,469.84
5333 Teltrust-Telecom Canada 2,132.93 5,002.69
5335 ZPDI Virginia Processing Chrg 357.00 357.00
5400 POA/BFL Phone Maintenance Exp 14,846.83 42,265.00
5403 BF/TCC Cost of Sales 74,559.88 74,559.88
5404 POA Income Distibution 346.48 346.48
5500 Commission Expense: Missouri 42,634.95 108,792.40
5502 Commission Expense: Virginia 30,184.50 83,947.89
5600 Regulatory Assessment Expense 14,818.00 14,818.00
5800 Coin Refund Expense 326.76 825.21
5802 Outside Service/Phone Expense 6,941.98 33,135.96
5803 Payphone Utility Expense 94.50 309.06
5804 Payphone Collection Expense 2,849.00 8,488.00
---------- ------------
Total Cost of Sales 488,417.91 1,022,305.36
---------- ------------
Gross Profit 211,774.19 542,350.46
Operating Expenses Mar 1996 Year to Date
------------------ -------- ------------
6000 Tool & Test Equipment Expense 2,076.09 4,478.94
6001 Phone Enclosures Expense 245.06 625.91
6002 Phone Software Expense 73.82 73.82
6003 Phone Repairs & Maint Expense 32.00 845.12
6004 Installation Supplies Expense 95.82 312.81
6005 Phone Equipment Expense 32,354.70 40,196.10
6020 Vehicle Maintenance Expense 1,327.74 4,491.42
6021 Vehicles Gas & Oil Expense 5,425.67 12,016.39
6022 Vehicle Travel Allowance Expen 400.00 1,200.00
6080 Commission Expense: Sales 2,325.00 7,825.00
6081 Commission Expense: Repayment (100.00) (100.00)
6082 Commission Expense: Install 1,000.00 4,900.00
6102 Outside Service/Condo Expense 989.36 1,220.16
6103 Outside Service/Office Expense 5,212.55 11,594.73
6104 Entertainment Expense 137.39 1,275.35
6105 Travel Expense/Meals - 63.36
6106 Travel Expense/Lodging 470.05 1,291.15
6110 Travel Expense/Planes/Rentals 1,791.31 4,778.03
6111 Travel Expense/Parking Fees 6.00 26.00
6112 Fees & Licenses Expenses 30.00 40.00
6113 Bad Debt Expenses 650.00 (450.92)
6116 Professional Services & Fees 4,902.18 16,105.76
6117 Office Equipment Expense 4.32 327.55
6118 Office Supplies Expense 1,652.42 3,867.59
Page 3
151
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter FY 1996
Operating Expenses Mar 1996 Year to Date
------------------ -------- ------------
6119 Office Phone Expense 4,322.21 11,011.12
6120 Office Rent Expense 14,216.66 24,374.53
6121 Office Utilities Expense 2,097.94 3,379.76
6122 Health Insurance Expense 2,468.10 4,570.30
6123 Dental Insurance Expense (16.00) (80.00)
6124 Workers Compensation Insurance - 1,254.00
6125 Property Insurance Expense - 4,582.00
6126 Health Insurance - Virginia (223.80) 1,161.12
6128 Freight UPS 421.42 1,807.55
6129 US Postal Expense - 1,339.91
6130 Federal Express Expense 965.85 1,696.60
6132 Bank Charges Expense 86.85 1,720.69
6133 Office Software Expenses 844.17 2,428.16
6134 Office Personnel Expense 198.72 198.72
6136 Equipment Rental Expense 36.93 73.51
6137 Equipment Lease Expense 159.63 318.26
6144 Mobile Phone & Pager Expense 982.07 2,276.53
6502 Personal Property Tax Expense - 37,638.40
6504 Sales Tax Berthel Fisher 1 - 698.67
6505 Sales Tax Berthel Fisher 2 - 630.84
6506 Sales Tax Berthel Fisher 3 - 877.70
6507 Sales Tax Berthel Fisher 4 - 618.82
6508 Sales Tax Berthel Fisher 5 - 50.12
6509 Sales Tax Berthel Fisher 6 - 711.50
6510 Sales Tax Berthel Fisher 7 107.50 1,770.03
6511 Sales Tax Berthel Fisher 8 2,253.68 2,253.68
6512 Sales Tax Berthel Fisher 10 92.66 185.32
6513 Sales Tax Berthel Fisher 11 98.70 98.70
6514 Sales Tax Berthel Fisher 12 220.27 2,038.59
6517 Tennessee State Taxes 10.00 200.00
6520 District of Columbia Taxes 100.00 100.00
6523 Michigan State Taxes 100.00 100.00
6530 City of Newport News Taxes - 236.43
6550 Payroll Expense 84,010.50 220,622.25
6551 Employer Fica Tax Expense 6,409.70 16,833.19
6552 SUTA - MO Expense - 452.76
6553 SUTA-VA Expense - 198.59
6555 SUTA -MI Expense - 161.91
6556 SUTA - SD Expense - 31.92
6559 FUTA Expense - 187.01
6560 United Satelite P/R Expense - (9,418.37)
6700 Dues & Subscriptions Expense (4,002.31) 45.79
6701 APCC Processing Expense - 2,949.00
6702 MICPA Expense 3,082.52 6,082.52
67O3 IPTA Expense 2,914.65 3,261.85
6804 BF/TCC Operating Expenses (201.55) (201.55)
Page 4
152
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter Fy 1996
Operating Expenses Mar 1996 Year to Date
------------------ -------- ------------
6900 Interest Expense/Mark Twain 1,755.85 6,406.70
6901 Interest Expense/Ford Motor Cr 541.78 1,676.01
6902 Interest Expense/Prom. #2 1,590.00 6,996.00
6903 Interest Expense/Berthal-Fishe - 6,251.74
6905 Interest Expense/Ron Coleman 3,137.05 9,442.67
6906 Interest Expense/Berth-Fish 2 - 5,194.97
6907 Interest Expense/Credit Card - 11.31
6908 Interest Expense/Berth-Fish 3 - 6,947.34
6909 Interest Expense/Berth-Fish 4 - 6,948.17
691Q Interest Expense/Intellicall - 409.41
6911 Interest Expense Pay-Tele 3,636.37 6,181.83
6912 Interest Expense/Berth-Fish 5 - 424.91
6913 Interest Expense/Berthel-Fish6 - 5,821.92
6914 Interest Expense/Miscellaneous - 30.12
6915 Interest Expense/RGK & PWS 2,033.31 9,352.69
6916 Int Exp/Intellicall2 Leas 129.66 600.30
6921 Interest Expense/Berth-Fish 7 2,344.63 19,399.92
6922 Interest Expense/Berth-Fish 8 28,007.29 56,264.40
6923 Interest Expense/Berth-Fish NP 10,130.53 11,894.97
6924 Interest Expense/Berth-Fish 10 823.06 1,656.06
6925 Interest Expense/Berth-Fish 11 814.50 1,639.45
6926 Interest Expense/Accr. Interest - 888.39
6927 Interest Expense/Berth-Fish 12 1,118.56 2,266.27
-------- ----------
Total Expenses 238,921.14 635,238.25
Net Ordinary Income (27,146.95) (92,887.79)
---------- ----------
Page 5
153
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter FY 1996
Extraordinary Income Mar-96 Year to Date
--------------------
7000 Miscellaneous Revenue 74.00 122.00
----- ------
Total Extraordinary Income 74.00 122.00
Extraordinary Expenses
----------------------
8000 Gain/Loss On Disposal of Asset 64,867.57 64,867.57
8010 Depr Expense/Payphones 45,923.84 137,753.11
8011 Depr Expense/Phone Booths 10.41 31.21
8012 Depr Expense/PBX-Switch Equip 38.82 116.43
8013 Depr Expense/TruckS/Vans/Cars 3,152.34 12,091.85
8015 Depr Expense/Wrigley Group 209.42 628.26
8016 Depr Expense/Pedestal & Encl 109.76 329.28
8017 Depr Expense/Office Equipment 979.50 2,938.28
8018 Depr Expense/Real Estate (897.01) (628.26)
8100 Amort Expense/Deferred Finance 861.76 2,585.27
8103 Amort Expense/Deferred Goodwil 1,623.96 4,871.88
8104 Amort Exp/Deferred Non-Compete 13,750.01 41,250.00
8105 Amort Expense/Prepaid License 647.30 1,941.87
8106 Amort Expense/Contracts 49,052.89 147,154.89
----------- -----------
Total Extraordinary Expenses 180,330.57 415,931.64
Net Extraordinary Income (180,256.57) (415,809.64)
----------- -----------
Net Income (207,403.52) (508,697.43)
----------- -----------
Page 6
154
Limited Partnership One
Unaudited Balance Sheet
1st Quarter FY 1996
ASSETS Mar 1996
Current Assets
- --------------
Checking/Savings
----------------
1000 Cash - UMB/St. Charles (1,192.69)
1001 Cash - SouthTrust Bank 10,761.62
-------------
TOTAL CHECKING/SAVINGS 9,568.93
Accounts Receivable
1200 Due To/From Peyphones of America 40,825.74
1201 Accounts Receivable 290.75
1202 Accounts Receivable:Teltrust 4,292.50
-------------
TOTAL ACCOUNTS RECEIVABLE 45,408.99
-------------------------
Other Current Assets
--------------------
1500 Telephone Pre-Paid Deposits 240.00
-------------
TOTAL OTHER CURRENT ASSETS 240.00
Total Current Assets 55,217.92
-------------
Fixed Assets
- ------------
1600 Fixed Assets: UNI Purchase 290,933.91
1601 Accum Depr UNI Purchase (86,587.07)
1602 Fixed Assets: Payphones 168,910.00
1603 Accum Depr: Payphones (38,793.74)
1604 Fixed Assets: CCI Purchase 39,800.00
1605 Accum Depr: CCI Purchase (8,528.54)
1699 Fixed Assets: Suspense 1,370.29
-------------
TOTAL FIXED ASSETS 367,104.85
------------------
Page 1
155
Limited Partnership One
Unaudited Balance Sheet
1st Quarter FY 1996
Other Assets
- ------------
1800 Intangible Assets:UNI Contracts 62,000.00
1801 Accum Amort: UNI Contracts (25,832.92)
1802 Intangible Assets:CCI Contracts 13,500.00
1803 Accum Amort: CCI Contracts (4,050.00)
1810 Intangible Assets: I* License Fees 1,750.00
1811 Accum Amort: I* License Fees (704.17)
---------------
TOTAL OTHER ASSETS 46,662.91
---------------
TOTAL ASSETS 468,985.68
---------------
Page 2
156
Limited Partnership One
Unaudited Balance Sheet
1st Quarter FY 1996
Liabilities Mar 1996
- -----------
Current Liabilities
- -------------------
Accounts Payable
----------------
2000 Accounts Payable:Miscellaneous 17,713.90
2001 Accounts Payable:LEC/LD 0.46
2002 Accounts Payable:Commissions 27,923.11
2003 Accounts Payable: WJB Distribution 28,904.51
2004 Accounts Payable: SHR Distribution 28,904.47
-----------
TOTAL ACCOUNTS PAYABLE 103,446.45
TOTAL CURRENT LIABILITIES 103,446.45
Long Term Liabilities
---------------------
2600 Ron Coleman: Promissory Note 32,088.33
-----------
TOTAL LONG TERM LIABILITIES 32,088.33
-----------
TOTAL LIABILITIES 135,534.78
CAPITAL
3000 Ownership Equity:LP 1 498,446.79
3001 Owners Equity: General Partner 3,000.00
3999 Income Summary (170,220.41)
Net Income 2,224.52
-----------
TOTAL CAPITAL(NET WORTH) 333,450.90
-----------
TOTAL LIABILITIES & CAPITAL 468,985.68
-----------
Page 3
157
LIMITED PARTNERSHIP ONE
UNAUDITED INCOME STATEMENT
1ST QUARTER FY 1996
Mar 96 Year to Date
------ ------------
Phone Revenue
-------------
4000 Phone Revenue: Coin Collection 29,201.70 77,906.35
4001 Phone Revenue: Teletrust(AOS) 7,874.70 20,535.47
4002 Phone Revenue: Teletrust - MO 1,057.14 3,110.16
4003 Phone Revenue: Teletrust - IL 334.76 1,162.29
4008 Phone Revenue: Intellistar 4,615.97 10,968.72
4015 Phone Revenue: FPTA -AL 1,661.00 1,661.00
--------- ----------
TOTAL PHONE REVENUE 44,745.27 115,343.99
Cost of Sales
-------------
5000 South Central Bell - Alabama 5,046.13 10,049.39
5001 South Central Bell - Miss 4,118.32 8,186.30
5002 United Telephone - Florida 465.42 697.05
5003 Gulf Telephone Company 649.54 1,285.02
5004 South Central Bell - Tennessee 186.66 260.71
5005 Southern Bell - GA 197.98 356.46
5006 Southern Bell - Florida 950.46 1,277.45
5007 Centel - Florida 33.19 66.51
5008 Frontier Communications 97.70 193.36
5009 Ameritech - LEC Expense 1,693.02 2,564.94
5010 Southwestern Bell - LEC Expens 1,359.62 2,952.03
5011 GTE North II. Operations 43.60 128.86
5013 GTE Midwest - LEC Expense 646.30 1,107.40
5202 AT&T Long Distance Expense (29.14) (28.84)
5300 Payphone Management Fees 1,250.00 3,875.00
5301 Payphone Utilities Expense -- 11.15
5800 Coin Refund Expense -- (26.00)
--------- ---------
TOTAL COST OF SALES 16,708.80 32,956.79
--------- ---------
GROSS PROFIT 28,036.47 82,387.20
Expenses Mar 96 Year to Date
-------- ------ ------------
6001 Phone Enclosure Expense 1,640.00 1,640.00
6005 Phone Equipment Expense -- 832.54
6006 Phone Installation Expense 909.00 909.00
6101 Freight & Shipping: Ups 274.71 365.34
6150 Bank Service Charges Expense 36.14 100.48
6175 Payphone Commissions 9,679.64 27,923.11
6176 Salesmen Commission 200.00 200.00
6200 Office Supplies -- 87.45
6230 Dues & Membership Expenses -- 27.50
Page 1
158
Limited Partnership One
Unaudited Income Statement
1st Quarter FY 1996
Expenses(cont) Mar 96 Year to Date
-------------- --- -- --------------
6300 Ext Phone Maintenace Expense 8,253.30 19,970.90
6400 Intellistar License Fee Expens 383.18 1,007.71
6401 Intellistar EZ Pymnt Proration 1,523.25 3,536.33
6900 Interest Expense: Ron Coleman 574.77 1,841.58
-------------- -------------
TOTAL EXPENSES 23,473.99 58,441.94
-------------- -------------
NET ORDINARY INCOME 4,562.48 23,945.26
============== =============
Extraordinary Revenue
---------------------
7000 Miscellaneous Income -- 0.50
7001 SWB Refund -- --
------------ ------------
TOTAL EXTRAORDINARY REVENUE -- 0.50
Extraordinary Expenses
----------------------
8000 Gain/Loss on Disposal of Asset -- --
8100 Depreciation Expense: Payphones 5,953.63 17,858.74
8200 Amort Expense: Contracts 1,259.34 3,775.00
8300 Amort Expense: I* License Fees 29.17 87.50
-------------- -------------
Total Extraordinary Expenses 7,242.14 21,721.24
NET EXTRAORDINARY INCOME (7,242.14) (21,720.74)
-------------- -------------
NET INCOME (2,679.66) 2,224.52
-------------- -------------
Page 2
159
Limited Partnership 1
Balance Sheet
April 16, 1996
Fiscal Year 1995
Account Dec 95
------- ----------------
Assets
- ------
Current Assets
------- ------
Checking/Savings
----------------
1000 Cash - UMB/St. Charles 7,899.66-
1001 Cash - SouthTrust Bank 78.04
1002 Cash - Coin Refund Account/L 0.00
------------
Total Checking/Savings 7,821.62-
Accounts Receivable
-------- ----------
1200 Due To/From Payphones of Ame 41,425.78
1201 Accounts Receivable 7,297.26
1202 Accounts Receivable:Teltrust 5,222.12
------------
Total Accounts Receivable 53,945.16
Other Current Assets
----- ------- ------
1500 Telephone Pre-Paid Deposits 240.00
------------
Total Other Current Assets 240.00
------------
Total Current Assets 46,363.54
Fixed Assets
----- ------
1600 Fixed Assets: UNI Purchase 290,933.91
1601 Accum Depr: UNI Purchase 90,802.05-
1602 Fixed Assets: Payphones 101,780.00
1603 Accum Depr: Payphones 8,324.60-
1604 Fixed Assets: CCI Purchase 39,800.00
1605 Accum Depr: CCI Purchase 7,106.22-
1699 Fixed Assets:Suspense 68,500.29
------------
Total Fixed Assets 394,781.33
Other Assets
----- ------
1800 Intangible Assets:UNI Contra 62,000.00
1801 Accum Amort: UNI Contracts 25,426.88-
1
160
Limited Partnership 1
Balance Sheet
April 16, 1996
Fiscal Year 1995
Account Dec 95
- ------- ------------
1802 Intangible Assets: CCI Contra 13,500.00
1803 Accum Amort: CCI Contracts 675.00-
1810 Intangible Assets: I* Licens 1,750.00
1811 Accum Amort: I* License Fees 616.71-
-----------
Total Other Assets 50,531.41
-----------
Total Assets 491,676.28
===========
2
161
Limited Partnership 1
Balance Sheet
April 16, 1996
Fiscal Year 1995
Account Dec 95
- ------- ----------
Liabilities
- -----------
Current Liabilities
-------------------
Accounts Payable
-----------------
2000 Accounts Payable: Miscellaneo 2,942,50
2001 Accounts Payable: LEC/LD 11,487,03
2002 Accounts Payable: Commissions 21,472.49
2003 Accounts Payable: WJB Distri 20,029.03
2004 Accounts Payable: SHR Distri 20,029.01
-----------
Total Accounts Payable 75,960.06
Other Current Liabilities
-------------------------
-----------
Total Other Current Liabilities 0.00
-----------
Total Current Liabilities 75,960.06
Long Term Liabilities
---------------------
2600 Ron Coleman: Promissory Note 39,164.22
2999 LP-1 TAD Account 0.00
-----------
Total Long Term Liabilities 39,164.22
-----------
Total Liabilities 115,124.28
Capital
- -------
3000 Ownership Equity: LP 1 498,446.79
3001 Owners Equity: General Partn 3,000.00
3999 Income Summary 180,977.73-
Net Income 56,082.94
-----------
Total Capital (Net Worth) 376,552.00
-----------
Total Liabilities & Capital 491,676.28
3
162
Limited Partnership 1
Income Statement
April 16, 1996
Fiscal Year 1995
Account Dec 95 % Year to Date %
- ------- --------- ---- ------------ -----
Income
------
4000 Phone Revenue: Coin Collection 40,492.70 60.9 348,487.46 50.8
4001 Phone Revenue: Teletrust (AOS) 9,990.42 15.0 133,415.23 19.4
4002 Phone Revenue: Teletrust - MO 1,170.00 1.8 7,674.12 1.1
4003 Phone Revenue: Teletrust - IL 477.50 0.7 1,477.34 0.2
4004 Phone Revenue: Teltrust Suspen 0.00 0.0 32,472.57 4.7
4006 Phone Revenue: AT&T Commission 1,793.98 2.7 42,896.89 6.2
4007 Phone Revenue: MCI 0.00 0.0 28.84 0.0
4008 Phone Revenue: Intellistar 10,500.00 15.8 114,922.84 16.7
4009 Phone Revenue: AT&T True Up 0.00 0.0 0.00 0.0
4010 APCC Dial Around Compensation 0.00 0.0 0.00 0.0
4011 Phone Revenue: MSPCA 671.91 1.0 3,707.07 0.5
4012 Phone Revenue: Southnet 0.00 0.0 0.00 0.0
4013 Phone Revenue: Telecom*USA 0.00 0.0 29.09 0.0
4014 Phone Revenue: Phone Repair 1,400.00 2.1 1,400.00 0.2
--------- ----- ---------- -----
Total Income 66,496.51 100.0 686,511.45 100.0
Cost of Sales
- -------------
5000 South Central Bell - Alabama 10,175.30 15.3 60,788.91 8.9
5001 South Central Bell - Miss. 8,483.96 12.8 54,624.01 8.0
5002 United Telephone - Florida 315.35 0.5 3,856.90 0.6
5003 Gulf Telephone Company 1,276.43 1.9 7,736.03 1.1
5004 South Central Bell - Tennessee 199.37 0.3 1,513.02 0.2
5005 Southern Bell - GA 166.02 0.2 1,898.64 0.3
5006 Southern Bell - Florida 760.36 1.1 8,517.64 1.2
5007 Centel - Florida 66.86 0.1 416.04 0.0
5008 Frontier Communications 203.32 0.3 1,183.73 0.2
5009 Ameritech - LEC Expense 1,037.33 1.6 13,263.28 1.9
5010 Southwestern Bell - LEC Expens 1,626.67 2.4 20,903.90 3.0
5011 GTE North Il. Operations 0.00 0.0 331.31 0.0
5012 Kingdom Telephone Company 0.00 0.0 1,126.36 0.2
5013 GTE Midwest - LEC Expense 561.30 0.8 5,868.40 0.9
5014 Fidelity - LEC Expense 0.00 0.0 114.29 0.0
5015 GTE South - LEC Expense 0.00 0.0 320.78 0.0
5016 GTE Southwest - LEC Expense 0.00 0.0 907.69 0.1
5017 United Telephone - Missouri 0.00 0.0 100.35 0.0
5018 SBMS Casino Phone - Expense 0.00 0.0 586.09 0.0
5200 LDDS Long Distance Expense 0.00 0.0 4,609.37 0.7
5201 MCI Long Distance Expense 0.00 0.0 1,782.19 0.3
5202 AT&T Long Distance Expense 59.20 0.0 2,519.88 0.4
5203 USSprint Long Distance Expense 5.84- 0.0 23.37 0.0
1
163
Limited Partnership 1
Income Statement
April 16, 1996
Fiscal Year 1995
Account Dec 95 % Year to Date %
- ------- ---------- ---- ------------ -----
Income
- ------
5250 VRS Billing System Expense 0.00 0.0 0.00 0.0
5300 Payphone Management Fees 1,750.00 2.6 21,100.00 3.1
5301 Payphone Utilities Expense 0.00 0.0 44.38 0.0
5800 Coin Refund Expense 33.10- 0.0 5.40 0.0
---------- ----- ---------- -----
Total Cost of Sales 26,642.53 40.1 214,141.96 31.2
---------- ----- ---------- -----
Gross Profit 39,853.98 59.9 472,369.49 68.8
Expenses
- --------
6000 Tools/Test Equipment 0.00 0.0 12.46 0.0
6001 Phone Enclosure Expense 252.00 0.4 602.60 0.0
6002 Phone Software Expense 0.00 0.0 0.00 0.0
6003 Phone Repairs & Maint Expense 0.00 0.0 269.96 0.0
6004 Installation Supplies Expense 0.00 0.0 0.00 0.0
6005 Phone Equipment Expense 797.33 1.2 8,058.37 1.2
6006 Phone Installation Expense 1,034.13 1.6 18,962.58 2.8
6050 Travel Expense: Installation 0.00 0.0 0.00 0.0
6100 Freight & Shipping: FedExpress 0.00 0.0 0.00 0.0
6101 Freight & Shipping: Ups 73.18 0.1 398.83 0.0
6102 Freight & Shipping: Misc 0.00 0.0 56.44 0.0
6103 US Postal Service Expense 0.00 0.0 2.44 0.0
6150 Bank Service Charges Expense 777.06 1.2 1,042.81 0.2
6151 Bad Debt Expense 0.00 0.0 0.00 0.0
6175 Payphone Commissions 10,677.97 16.1 131,958.27 19.2
6176 Salesmen Commission 600.00 0.9 12,124.00 1.8
6177 Salesmen Commission Repayment 0.00 0.0 0.00 0.0
6200 Office Supplies 0.00 0.0 325.34 0.0
6221 Professional Fees & Services 20.85 0.0 6,793.20 1.0
6230 Dues & Membership Expenses 27.50 0.0 55.00 0.0
6231 Gulf States IPP Association 0.00 0.0 990.00 0.1
6232 Illinois Coin Payphone Assoc 0.00 0.0 27.90 0.0
6233 Michigan Payphone Association 0.00 0.0 84.75 0.0
6300 Ext Phone Maintenace Expense 9,004.50 13.5 96,464.29 14.1
6400 Intellistar License Fee Expens 550.00 0.8 6,805.83 1.0
6401 Intellistar EZ Pymnt Proration 3,600.00 5.4 38,240.88 5.6
6500 Fees and License Expense 0.00 0.0 1,868.00 0.3
6700 Missouri Sales Tax Expense 0.00 0.0 0.00 0.0
6701 Florida Gross Receipts Tax 192.07 0.3 911.31 0.1
6702 Mississippi Tax Commission 0.00 0.0 1,971.42 0.3
6703 Florida Sales & Use Tax 0.00 0.0 10.00 0.0
6710 Tn Franchise/Excise Tax Expens 0.00 0.0 30.00 0.0
6725 Alabama Public Svc Commission 0.00 0.0 113.89 0.0
2
164
Limited Partnership 1
Income Statement
April 16, 1996
Fiscal Year 1995
Account Dec 95 % Year to Date %
- ------- ---------- ---- ------------ -----
Income
- ------
6780 Illinois Income Tax Expense 0.00 0.0 41.00 0.0
6781 Missouri Income Tax Expense 0.00 0.0 135.38 0.0
6900 Interest Expense: Ron Coleman 690.77 1.0 10,627.88 1.5
6902 Interest Expense: Miscellaneou 0.00 0.0 6.00 0.0
---------- ----- ---------- -----
Total Expenses 28,297.36 42.6 338,990.83 49.4
---------- ---- ---------- -----
Net Ordinary Income 11,556.62 17.4 133,378.66 19.4
========= ==== ========== =====
3
165
Limited Partnership 1
Income Statement
April 16, 1996
Fiscal Year 1995
Account Dec 95 x Year to Date %
------- ------ --- ------------ ---
Extraordinary Income
- ------------- ------
7000 Miscellaneous Income 0.OO 0.0 0.00 0.0
7001 SWB Refund 0.00 0.0 0.00 0.0
---- --------- --- -------- ----
Total Extraordinary Income 0.00 0.0 0.00 0.0
Extraordinary Expenses
- ------------- --------
8000 Gain/Loss on Disposal of Asset 0.00 0.0 0.00 0.0
8100 Depreciation Expense:Payphones 5,154.31 7.8 61,851.72 9.0
8200 Amort Expense: Contracts 1,257.83 1.9 15,093.96 2.2
8300 Amort Expense: I* License Fees 29.17 0.0 350.04 0.0
---------- --- --------- ----
Total Extraordinary Expenses 6,441.31 9.7 77,295.72 11.3
Net Extraordinary Income 6,441.31- 9.7 77,295.72- 11.3
---------- --- --------- ----
Net Income 5,111.31 7.7 56,082.94 8.2
========== === ========= ====
4
166
SECURITY AGREEMENT
------------------
AGREEMENT dated as of August 1, 1996 between PAYPHONES OF
AMERICA, INC., a Tennessee corporation (together with its successors, the
"Company"), and STANLEY ROJESKI, RONALD L. COLEMAN, TRUSTEE, and WILLIAM J.
BRINKMEIER, as Agent (collectively, the "Secured Parties").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, PhoneTel III, Inc., an Ohio corporation ("PhoneTel"),
the Company, the shareholders of the Company prior to the acquisition of the
Company by PhoneTel, and the Secured Parties are parties to an Amended and
Restated Share Purchase Agreement of even date herewith (as the same may be
amended from time to time, the "Purchase Agreement"); and
WHEREAS, pursuant to the Purchase Agreement, PhoneTel will
acquire all of the outstanding shares of capital stock of the Company (the
"Acquisition"); and
WHEREAS, as part of the purchase price for the Acquisition,
PhoneTel has agreed to deliver to Sellers one or more promissory notes,
evidencing certain of the Purchase Price (as defined in the Purchase Agreement
and, as collateral therefor, the Company has agreed to grant a continuing
security interest in and to the Collateral (as hereafter defined) to secure the
obligations of PhoneTel under the Buyer Notes referred to in the Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions
-----------
Terms defined in the Purchase Agreement and not otherwise
defined herein have, as used herein, the respective meanings provided for
therein. The following additional terms, as used herein, have the following
respective meanings:
"Accounts" means all "accounts" (as defined in the UCC) now
owned or hereafter acquired by the Company, and shall also mean and include all
accounts receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to the Company arising from the sale, lease or
exchange of goods or other property by it and/or the performance of services by
it (including any such obligation which might be characterized as an account,
contract right or general intangible under the Uniform Commercial Code in effect
in any jurisdiction) and all of the Company's rights in, to and under all
purchase orders for goods, services or other property, and all of the Company's
rights to any goods, services or other
167
property represented by any of the foregoing (including returned or repossessed
goods and unpaid sellers' rights of rescission, replevin, reclamation and rights
to stoppage in transit) and all monies due to or to become due to the Company
under all contracts for the sale, lease or exchange of goods or other property
and/or the performance of services by it (whether or not yet earned by
performance on the part of the Company), in each case whether now in existence
or hereafter arising or acquired including, without limitation, the right to
receive the proceeds of said purchase orders and contracts and all collateral
security and guarantees of any kind given by any person or entity with respect
to any of the foregoing.
"Collateral" has the meaning set forth in Section 3.
"Documents" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods, now owned or
hereafter acquired by the Company.
"Equipment" means all "equipment" (as defined in the UCC) now
owned or hereafter acquired by the Company.
"Event of Default" shall have the meaning set forth in the
Buyer Notes.
"General Intangibles" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by the Company, including
(i) all obligations or indebtedness owing to the Company (other than Accounts)
from whatever source arising, (ii) all patents, patent licenses, trademarks,
trademark licenses, rights in intellectual property, goodwill, trade names,
service marks, trade secrets, copyrights, permits and licenses, and (iii) all
rights or claims in respect of refunds for taxes paid.
"Instruments" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC), including those evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now owned or hereafter acquired by the Company.
"Inventory" means all "inventory" (as defined in the UCC), now
owned or hereafter acquired by the Company, wherever located, and shall also
mean and include all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, lien (statutory or other), adverse
claim or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever;
"Permitted Liens" means each of the following:
(a) Liens in favor of the Agent or the Secured Parties
granted pursuant to this Agreement;
(b) Liens evidencing rights of lessors in leased
equipment and/or purchase money liens on specific
items of equipment;
(c) Liens in favor of Berthel-Fisher & Company Leasing,
Inc., individually or as agent;
2
168
(d) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or
thereafter payable with penalty or being contested in
good faith by appropriate proceedings and for which
adequate reserves have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics, and
materialmen incurred in the ordinary course of
business for sums not overdue or being contested in
good faith by appropriate proceedings (which
proceedings have the effect of preventing the
forfeiture or sale of the asset subject to such Lien)
and for which adequate reserves shall have been set
aside on its books;
(f) Liens incurred in the ordinary course of business in
respect of deposits made in connection with workmen's
compensation, unemployment insurance or other forms
of governmental insurance of benefits, or to secure
performance of tenders, statutory obligations, leases
and contracts (other than for borrowed money) entered
into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(g) judgment Liens with respect to judgments to the
extent such judgments do not exceed $50,000.
(h) Liens which arise by operation of law under Article 2
of the UCC in favor of unpaid sellers of goods, or
liens in items or any accompanying documents or
proceeds of either arising by operation of law under
Article 4 of the UCC in favor of a collecting bank;
(i) easements (including, without limitation, reciprocal
easement agreements and utility agreements),
rights-of-way, covenants, consents, reservations,
encroachments, variations and other restrictions,
charges or encumbrances (whether or not recorded)
affecting the use of property, which do not
materially detract from the value of such property or
impair the use thereof;
(j) Liens securing purchase money, indebtedness and
capitalized lease obligations;
(k) Leases and subleases granted to others in the
ordinary course of business not interfering in any
material respect with any business of the Borrower or
any of its subsidiaries:
(l) Liens which constitute rights of set-off of a
customary nature or bankers' liens with respect to
amounts on deposit, whether arising by operation of
law or by contract, in connection with deposit
accounts established with banks in the ordinary
course of business; and
(m) extensions renewals or replacements of any Lien
referred to in paragraphs (a) through (l) above,
provided that the principal amount of the obligation
secured thereby is not increased and that any such
extension, renewal or replacement is limited to the
property originally encumbered thereby.
3
169
"Proceeds" means all proceeds of, and all other profits,
products, rents or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or other
realization upon, collateral, including all claims of the Company against third
parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance in respect of, any
collateral, and any condemnation or requisition payments with respect to any
collateral, in each case whether now existing or hereafter arising.
"Required Sellers" means Sellers holding at least 66-2/3% of
the aggregate outstanding principal amount of the Buyer Notes;
"Secured Obligations" means all principal of and interest
(including any interest which accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company) on the Buyer Notes together with any and all
other amounts now or at any time hereafter owing by the Company to any of the
Secured Parties.
"Secured Parties" means the Agent and the Sellers.
"Security Interests" means the security interests in the
Collateral granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
SECTION 2. Representations and Warranties
------------------------------
The Company represents and warrants as follows:
(A) The Company has good and marketable title to all of the
Collateral, free and clear of any Liens other than the Permitted Liens.
(B) The Company has not performed any acts which might prevent
the Secured Parties from enforcing any of the terms of this Agreement or which
would limit the Agent in any such enforcement. Other than financing statements
or other similar or equivalent documents or instruments with respect to the
Security Interests and Permitted Liens, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument covering all
or any part of the Company's interests, the Collateral is on file or of record
in any jurisdiction in which such filing or recording would be effective to
perfect a Lien on such Collateral.
(C) The Security Interests constitute valid security interests
under the UCC securing the Secured Obligations. Within 30 days following the
Closing, UCC financing statements shall be filed in the appropriate offices in
the jurisdictions in which the Collateral is located, the Security Interests
shall constitute perfected security interests in the Collateral (except
Inventory in transit) to the extent that a security interest therein may be
perfected by filing pursuant to the UCC, prior to all other Liens and rights of
others therein except for the Permitted Liens.
4
170
SECTION 3. The Security Interests
----------------------
(A) In order to secure the full and punctual payment and
performance of the Secured Obligations in accordance with the terms thereof, the
Company hereby grants to the Agent for the ratable benefit of the Secured
Parties a continuing security interest in and to all of the following property
of the Company, whether now owned or existing or hereafter acquired or arising
and regardless of where located (all being collectively referred to as the
"Collateral"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) Equipment;
(7) All books and records (including customer lists, credit
files, computer programs, printouts and other computer
materials and records) of the Company pertaining to any of the
Collateral; and
(8) All Proceeds of all or any of the Collateral described in
Clauses 1 through 7 hereof.
(B) The Security Interests are granted as security only and
shall not subject any Secured Party to, or transfer or in any way affect or
modify, any obligation or liability of the Company with respect to any of the
Collateral or any transaction in connection therewith.
SECTION 4. Further Assurances; Covenants
-----------------------------
(A) The Company will not change its name, identity or
corporate structure in any manner unless it shall have given the Agent prior
notice thereof. The Company will not change the location of its chief executive
office or chief place of business unless it shall have given the Agent 45 days
prior notice thereof. The Company shall not in any event change the location of
any Collateral if such change would cause the Security Interests in such
Collateral to lapse or cease to be perfected.
(B) The Company will, from time to time, at its expense,
execute, deliver, file and record any statement, assignment, instrument,
document, agreement or other paper and take any other action (including any
filings of financing or continuation statements under the UCC) that from time to
time may be necessary or desirable in order to create, preserve, perfect,
confirm or validate the Security Interests or to enable the Secured Parties to
obtain the full benefits of this Agreement, or to enable the Agent to exercise
and enforce any of its rights, powers and remedies hereunder with respect to any
of the Collateral. The Company agrees that a carbon, photographic, photostatic
or other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement.
(C) The Company shall keep full and accurate books and records
relating to the Collateral.
5
171
(D) The Company will immediately deliver and pledge each
Instrument to the Agent, appropriately endorsed to the Agent, provided that so
long as no Event of Default shall have occurred and be continuing, the Company
may retain for collection in the ordinary course any Instruments received by it
in the ordinary course of business and the Agent shall, promptly upon request of
the Company, make appropriate arrangements for making any other Instrument
pledged by the Company available to it for purposes of presentation, collection
or renewal (any such arrangement to be effected, to the extent deemed
appropriate to the Agent, against trust receipt or like document).
(E) The Company shall use its reasonable best efforts to cause
to be collected from its account debtors, as and when due, any and all amounts
owing under or on account of each Account (including Accounts which are
delinquent, such Accounts to be collected in accordance with lawful collection
procedures) and shall apply forthwith upon receipt thereof all such amounts as
are so collected to the outstanding balance of such Account. Subject to the
rights of the Secured Parties hereunder upon the occurrence and during the
continuance of an Event of Default, the Company may allow in the ordinary course
of business as adjustments to amounts owing under its Accounts (i) an extension
or renewal of the time or times of payment, or settlement for less than the
total unpaid balance, which the Company finds appropriate in accordance with
sound business judgment and (ii) a refund or credit due as a result of returned
or damaged merchandise or as a discount for prompt payment, all in accordance
with the Company's ordinary course of business consistent with its historical
collection practices.
(F) Upon the occurrence and during the continuance of any
Event of Default, upon request of the Sellers through the Agent, the Company
will promptly notify (and the Company hereby authorizes the Agent so to notify)
each account debtor in respect of any Account or Instrument that such Collateral
has been assigned to the Agent hereunder, and that any payments due or to become
due in respect of such Collateral are to be made directly to the Agent or its
designee.
(G) The Company will, promptly upon request, provide to the
Agent all information and evidence it may reasonably request concerning the
Collateral to enable the Agent to enforce the provisions of this Agreement.
SECTION 5. General Authority
-----------------
The Company hereby irrevocably appoints the Agent its true and
lawful attorney, with full power of substitution, in the name of the Company,
the Secured Parties or otherwise, for the sole use and benefit of the Secured
Parties, but at the Company's expense, to the extent permitted by law to
exercise, at any time and from time to time while an Event of Default has
occurred and is continuing, all or any of the following powers with respect to
all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due thereon or by virtue
thereof, and
(ii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually as
if the Agent were the absolute owner thereof;
PROVIDED that the Agent shall give the Company not less than twenty days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily
6
172
sold on a recognized market. The Company agrees that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 6. Remedies upon Event of Default
------------------------------
(A) If any Event of Default has occurred and is continuing,
the Agent may exercise on behalf of the Secured Parties all rights of a secured
party under the UCC (whether or not in effect in the jurisdiction where such
rights are exercised). The Agent or any other Secured Party may be the purchaser
of any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations, at any
private sale). The Company will execute and deliver such documents and take such
other action as the Agent deems necessary or advisable in order that any such
sale may be made in compliance with law. Upon any such sale the Agent shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the Collateral so
sold to it absolutely and free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Company which may be waived,
and the Company, to the extent permitted by law, hereby specifically waives all
rights of redemption, stay or appraisal which it has or may have under any law
now existing or hereafter adopted. The notice (if any) of such sale required by
Section 6 shall (1) in case of a public sale, state the time and place fixed for
such sale, and (2) in the case of a private sale, state the day after which such
sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the Agent
may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Agent may determine.
The Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Agent until the selling price is paid by the
purchaser thereof, but the Agent shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
case of any such failure, such Collateral may again be sold upon like notice.
The Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and
remedies under this Agreement the Agent may (i) require the Company to, and the
Company agrees that it will, at its expense and upon the request of the Agent,
forthwith assemble all or any part of the Collateral as directed by the Agent
and make it available at a place designated by the Agent which is, in its
opinion, reasonably convenient to the Agent and the Company, whether at the
premises of the Company or otherwise, (ii) to the extent permitted by applicable
law, enter, with or without process of law and without breach of the peace, any
premise where any of the Collateral is or may be located, and without charge or
liability to it seize and remove such Collateral from such premises, (iii) have
access to and use the Company's books and records relating to the Collateral and
(iv) prior to the disposition of the Collateral, store or transfer it without
charge in or by means of any storage or transportation facility owned or leased
by the Company, process, repair or recondition it or otherwise prepare it for
disposition in any manner and to the extent the Agent deems appropriate and, in
connection with such preparation and disposition, use without charge any
trademark, trade name, copyright, patent or technical process used by the
Company.
7
173
SECTION 7. Limitation on Duty of Agent in Respect of Collateral
----------------------------------------------------
Beyond the exercise of reasonable care in the custody thereof,
the Agent shall have no duty as to any Collateral in its possession or control
or in the possession or control of any agent or bailee or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent shall be deemed to have exercised reasonable care
in the custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Agent in good faith.
SECTION 8. Application of Proceeds
-----------------------
Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Collateral and any cash held in the Collateral Accounts shall be applied
by the Agent in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, and all expenses, incurred or made by the Agent in
connection therewith;
SECOND, to the ratable payment of unpaid principal of the
Secured Obligations;
THIRD, to the ratable payment of accrued but unpaid interest
on the Secured Obligations in accordance with the provisions of the
Purchase Agreement;
FOURTH, to the ratable payment of all other Secured
Obligations, if any, until all Secured Obligations shall have been paid
in full; and
FINALLY, to payment to the Company or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a ratable
basis, in any combination thereof.
SECTION 9. Termination of Security Interests; Release of Collateral
--------------------------------------------------------
Upon the repayment in full of all Secured Obligations, the
Security Interests shall terminate and all rights to the Collateral shall revert
to the Company. At any time and from time to time prior to such termination of
the Security Interests, the Agent may release any of the Collateral with the
prior written consent of the Required Sellers. Upon any such termination of the
Security Interests or release of Collateral, the Agent will, at the expense of
the Company, execute and deliver to the Company such documents as the Company
shall reasonably request to evidence the termination of the Security Interests
or the release of such Collateral, as the case may be.
8
174
SECTION 10. Notices
-------
All notices, communications and distributions hereunder shall
be given in accordance with Section 8.10 of the Purchase Agreement.
SECTION 11. Waivers, Non-Exclusive Remedies
-------------------------------
No failure on the part of the Agent to exercise, and no delay
in exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent or any Secured Party of any right under the Purchase
Agreement, or this Agreement preclude any other or further exercise thereof or
the exercise of any other right. The rights in this Agreement are cumulative and
are not exclusive of any other remedies provided by law.
SECTION 12. Successors and Assigns
----------------------
This Agreement is for the benefit of the Agent and the Secured
Parties and their successors and assigns, and in the event of an assignment of
all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding on the Company and its successors
and assigns.
SECTION 13. Changes in Writing
------------------
Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only in writing signed by
the Company and the Agent with the consent of the Required Sellers.
SECTION 14. NEW YORK LAW
------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO PRINCIPLES
OR CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF
LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY
JURISDICTION OTHER THAN NEW YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 15. Severability
------------
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the other Secured Parties
in order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
9
175
SECTION 16. Counterparts
------------
This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
10
176
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
PAYPHONES OF AMERICA, INC.
PETER GRAF
By /s/ Peter Graf
----------------------------
Title: Chairman and CEO
WILLIAM J. BRINKMEIER
/s/ William J. Brinkmeier
---------------------------
STANLEY ROJESKI
/s/ Stanley Rojeski
---------------------------
RONALD L. COLEMAN, TRUSTEE
/s/ Ronald L. Coleman
---------------------------
Trustee
11
177
PROMISSORY NOTE
$1,382,790.61 August 1, 1996
FOR VALUE RECEIVED, the undersigned PHONETEL III, INC., an Ohio
corporation (the "Buyer") promises to pay to WILLIAM J. BRINKMEIER (the
"Seller") in lawful money of the United States of America and in immediately
available funds the principal amount of ONE MILLION THREE HUNDRED EIGHTY TWO
THOUSAND SEVEN HUNDRED NINETY DOLLARS and SIXTY ONE CENTS ($1,382,790.61) plus
the Added Principal Amount (as defined below) (the "Loan") or, if less, the
unpaid principal amount of the Loan, at Seller's account notified in writing to
Buyer (the "Payment Account"), in installments as described in Section 1 below
on the last Business Day of each month (each, a "Payment Date") commencing July
31, 1998 (or if such day is not a Business Day, on the next succeeding Business
Day), with all outstanding amounts becoming due and payable on May 31, 2002 (the
"Maturity Date"). As used herein "Business Day" shall mean any day which is
neither a Saturday or Sunday nor a legal holiday on which banks are authorized
or required to be closed in New York, New York.
1. PAYMENT. The Buyer also promises to pay principal and interest on the
unpaid principal amount of the Loan prior to maturity at the rates set forth
below:
1.1 Interest shall accrue on the outstanding amount of the Loan for the
period from the date hereof to and including December 31, 1996 at the rate of
10% per annum (the "First Interest Period"). Interest shall accrue on the
outstanding Loan for the period from and after January 1, 1997 to June 30, 1998
at the rate of 14% per annum (the "Second Interest Period"). Interest shall
accrue on the outstanding amount of the Loan after June 30, 1998 at the rate of
14% per annum.
1.2 Payments of accrued interest during and in respect of the First
Interest Period shall be payable in the amount of $3,569 per month, commencing
August 31, 1996 and on the last Business Day of each month thereafter to and
including December 31, 1997, with the remainder of the accrued and unpaid
interest during the First Interest Period being added to the principal balance
of this Note (such additional amount, the "First Interest Period Added Amount").
1.3 Payments of accrued interest during and in respect of the Second
Interest Period shall be payable in the amount of zero dollars and zero cents
per month, commencing January 31, 1997 and on the last Business Day of each
month thereafter to and including June 30, 1998, with the remainder of the
accrued and unpaid interest during the Second Interest Period being added to the
principal balance of this Note (such additional amount, together with the First
Interest Period Added Amount, the "Added Principal Amount").
178
1.4 Buyer shall make payments of $40,082.13 per month commencing July
31, 1998 and on the last Business Day of each month thereafter to and including
April 30, 2002, which shall be applied first to accrued and unpaid interest and
second to the unpaid principal amount of this Note.
1.5 On the Maturity Date, Buyer shall pay the remaining principal
balance and all accrued and unpaid interest on this Note.
1.6 Interest payable hereunder shall be payable in lawful money of the
United States of America at the Payment Account. Interest shall be based on the
basis of a year of 365 or 366 days, as applicable, and the exact number of days
elapsed.
2. PURPOSE. This Note is given to evidence a portion of the Purchase Price
as defined in that certain Amended and Restated Share Purchase Agreement, dated
as of August 1, 1996 (the "Purchase Agreement"), among the Buyer, Payphones of
America, Inc., Seller and the other shareholders of the Seller.
3. VOLUNTARY PREPAYMENT. The Loan may be prepaid by the Buyer in whole or
in part, at any time and from time to time, without premium or penalty.
4. EVENT OF DEFAULT. Upon the occurrence of any of the following events (each an
"EVENT OF DEFAULT"):(i) nonpayment when due of any payment when due hereunder
and such payment shall not have been made within five (5) Business Days when
due; or (ii) the institution of any proceeding by or against the Buyer seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or the appointment of a receiver, trustee, custodian or
other similar official for the Buyer, or for any substantial part of its
property and, in the case of institution of any such proceeding against the
Buyer, either such proceeding remaining undismissed or unstayed for a period of
120 days or any of the actions sought in the proceeding occurring, or the Buyer
taking any corporate or other authorizing action in respect of the foregoing; or
(iii) any other material breach or misrepresentation hereunder or under the
Security Agreement referred to in Section 7 hereof that is not cured within 30
days following written notice thereof; THEN AND IN ANY SUCH EVENT, the Seller in
its discretion may, by written notice to the Buyer, declare the principal of and
accrued interest on the Loan to be, whereupon the same shall become, forthwith
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Buyer, PROVIDED, that upon
the occurrence of any event specified in clause (ii) such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Buyer.
5. COSTS OF COLLECTION. In the case of any non-payment when due of any
amounts due hereunder, the Buyer shall pay all costs and expenses of every kind
for collection, including all reasonable attorneys' fees.
2
179
6. MANDATORY REPAYMENT. The Loan, together with all accrued but unpaid interest
thereon, shall be subject to mandatory prepayment upon the occurrence of either
(i) an offering of any class of capital stock of PhoneTel Technologies, Inc.
("PhoneTel"), (ii) a debt offering of PhoneTel or (iii) any refinancing of the
indebtedness under that certain Credit Agreement, dated as of March 15, 1996 (as
amended, the "Credit Agreement"), among PhoneTel, Internationale Nederlanden
(U.S.) Capital Corporation ("ING"), the lenders party thereto (the "Lenders")
and ING as agent for the Lenders, which, in the case of the event set forth in
(i) results in a prepayment of the loans under the Credit Agreement to the
Lenders in an aggregate amount of not less than $10,000,000 and in the case of
clauses (ii) and (iii) results in a prepayment of all amounts outstanding under
the Credit Agreement; provided that the total amount of such prepayment shall be
limited to the amount of funds received by PhoneTel (A) in excess of
$10,000,000, in the case of clause (i), or (B) the amounts outstanding under the
Credit Agreement, in the case of clauses (ii) and (iii); provided further,
however, that any partial prepayment shall be applied to the amounts due
hereunder in the inverse order of their maturities.
7. SECURITY. The obligations hereunder are to be secured by a lien and
security interest in all of the assets of the Buyer pursuant to a certain
Security Agreement by the Buyer in favor of, or for the benefit of, Seller.
8. NO SET-OFF, ETC. All payments to be made hereunder by the Buyer shall
be made without set-off or counterclaim.
No delay on the part of the Seller in exercising any of its options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof. The options, powers and rights of the Seller specified herein
are in addition to those otherwise created.
By acceptance of this Note, Seller acknowledges and agrees that this
Note is the obligation solely of the Buyer, and that no officer, director,
shareholder, direct or indirect parent company or affiliate of the Buyer will
have any liability or obligation under this Note. By acceptance of this Note,
Seller further acknowledges that the Buyer is an entity separate and distinct
from PhoneTel Technologies, Inc. and its other subsidiaries and that it is not
seeking payment or performance of this Note from PhoneTel Technologies, Inc. or
any of its subsidiaries other than Buyer.
3
180
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. EACH OF THE BUYER AND, BY ITS ACCEPTANCE HEREOF, THE
SELLER HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY
MATTER ARISING HEREUNDER.
PHONETEL III, INC.
By: /s/ Peter Graf
-----------------------------
Name: Peter Graf
Title: Chairman
4
181
DATE (MM/DD/YY)
08/12/96
CERTIFICATE OF LIABILITY INSURANCE
Producer THIS CERTIFICATE IS ISSUED AS A MATTER OF
INFORMATION ONLY AND CONFERS NO RIGHTS
UPON THE CERTIFICATE HOLDER, THIS
The O'Connor Group CERTIFICATE DOES NOT AMEND, EXTEND OR
12140 Woodcrest Exec. #225 ALTER THE COVERAGE AFFORDED BY THE
St. Louis MO 63141 POLICIES BELOW.
COMPANIES AFFORDING COVERAGE
Michael O'Connor Sr. Prop/Cas
Phone No. 314-576-7080 Fax No. COMPANY
A American States
Insured COMPANY
B
PayPhones of America, Inc. K&S COMPANY
Enterprises, a Wholly Owned Sub C
1245 Point West Blvd.
St. Charles MO 63301 COMPANY
D
Coverages
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED,
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT OT WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN,
THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE
TERMS. EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN
REDUCED BY PAID CLAIMS.
CO POLICY EFFECTIVE POLICY EXPIRATION
LTR TYPES OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
- --- ------------------ ------------- --------------- --------------- ------
GENERAL LIABILITY GENERAL AGGREGATE $ 1000000
A X COMMERCIAL GENERAL LIABILITY 01CE059478 06/04/96 06/04/97 PRODUCTS-COMP/OP AGG $ 1000000
CLAIMS MADE X OCCUR PERSONAL & ADV INJURY $ 500000
OWNER'S & CONTRACTOR'S PROT EACH OCCURRENCE $ 500000
FIRE DAMAGE (Any one fire)$ 50000
MED EXP(Any one person) $ 5000
AUTOMOBILE LIABILITY COMBINED SINGLES LIMIT $
A ANY AUTO 01CE059478 06/04/96 06/04/97
ALL OWNED AUTOS 02BA390540 06/04/96 06/04/97 BODILY INJURY $ 500,000
X SCHEDULED AUTOS (Per Person)
X HIRED AUTOS BODILY INJURY $
X NON-OWNED AUTOS (Per accident) $
PROPERTY DAMAGE $
GARAGE LIABILITY AUTO ONLY-EACH ACCIDENT $
ANY AUTO OTHER THAN AUTO ONLY $
EACH ACCIDENT $
AGGREGATE $
EXCESS LIABILITY EACH OCCURRENCE $
UMBRELLA FORM AGGREGATE $
OTHER THAN UMBRELLA FORM $
WORKERS' COMPENSATION AND WC STATU- OTH-
EMPLOYERS' LIABILITY TORY LIMITS ER
EL EACH ACCIDENT $ 100,000
A THE PROPRIETOR/ INCL 01WC781236-10 06/04/96 06/04/97 EL DISEASE-POLICY LIMIT $ 500,000
PARTNERS/EXECUTIVE EL DISEASE-EA EMPLOYEE $ 100,000
OFFICERS ARE: EXCL
OTHER
A Comm Application 01CE059478 06/04/96 06/04/97
A Property 01CE059478 06/04/96 06/04/97
- ------------------------------
DESCRIPTION OF OPERATIONS
CERTIFICATE HOLDER CANCELLATION
INSURAN SHOULD ANY OF THE ABOVE DESCRIBED
POLICIES BE CANCELLED BEFORE THE
EXPIRATION DATE THEREOF, THE ISSUING
COMPANY WILL ENDEAVOR TO MAIL
DATE WRITTEN NOTICE TO THE
CERTIFICATE HOLDER NAMED TO THE LEFT,
BUT FAILURE TO MAIL SUCH NOTICE SHALL
IMPOSE NO INSURANCE VERIFICATION
OBLIGATION OR LIABILITY OF ANY KIND
UPON THE COMPANY, ITS AGENTS OR
REPRESENTATIVES.
---------------------------------
AUTHORIZED REPRESENTATIVE
/s/ Michael E. O'Connor
---------------------------------
Michael O'Connor Sr. Prop/Cas
ACORD 25-S (I/95) ACORD CORPORATION 1988
182
Schedule 3.21 (A)
Payphones of America's Vendors (25K or Greater)
AS OF AS OF
VENDOR MARCH 31, 1996 JUNE 30, 1996
Intellicall, Inc 97,083.07 72,862.44
Kerber, Eck, & Braeckel 22,500.00
MCI 47,227.42 37,085.41
--------- ---------
Total 143,310.49 132,447.85
========== ==========
183
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
PAYPHONES OF AMERICA, INC.
AND SUBSIDIARY
December 31, 1995 and 1994
KERBER, ECK & BRAECKEL LLP
CERTIFIED PUBLIC ACCOUNTANTS
184
[KERBER, ECK & BRAECKEL LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Payphones of America, Inc.
We have audited the accompanying consolidated balance sheets of Payphones
of America, Inc. (a Tennessee corporation) and subsidiary as of December 31,
1995 and 1994, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Payphones of
America, Inc. and subsidiary as of December 31, 1995 and 1994, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with generally accepted accounting
principles.
185
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As described in Note
B, the Company has suffered recurring losses from operations and has limited
liquidity which raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note B. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Kerber, Eck & Braeckel LLP
St. Louis, Missouri
January 30, 1996 (except for Note L, as
to which the date is February 7, 1996)
186
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1995 1994
----------- -----------
Net sales
Coin calls $ 3,747,247 $ 2,153,974
Non-coin caLls 4,418,667 3,692,117
Other 49,221 22,053
----------- -----------
Total net sales 8,215,135 5,868,144
Cost of sales
Telephone charges 3,599,271 2,676,604
Commissions 1,178,156 722,746
Service, maintenance and network expense 289,036 214,636
Depreciation and amortization 1,218,095 723,516
----------- -----------
6,284,558 4,337,502
----------- -----------
Gross profit 1,930,577 1,530,642
Selling, general and administrative expenses
Salaries, wages and benefits 823,430 488,913
Depreciation and amortization 200,095 198,398
Dues and subscriptions 53,905 50,960
Outside services 40,521 63,736
Phone maintenance 118,824 -
Professional services 171,303 85,920
Taxes
Personal property 75,785 4,295
Sales 63,948 37,907
Telephone 69,137 24,696
Rent 71,511 31,389
Other 223,165 120,105
----------- -----------
1,911,624 1,106,319
----------- -----------
Earnings from operations 18,953 424,323
Other income (expense)
Interest income 415 14,741
Interest expense (971,141) (600,624)
Gain (loss) on sale of assets (80,652) 98,904
Other income 12,135 9,366
----------- -----------
(1,039,243) (477,613)
----------- -----------
Loss before income taxes (1,020,290) (53,290)
Income taxes
Current (6,280) (8,856)
Deferred 284,000 (128,000)
----------- -----------
277,720 (136,856)
----------- -----------
NET LOSS $ (742,570) $ (190,146)
=========== ===========
The accompanying notes are an integral part of these statements.
187
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Period indicated below
Additional Retained
Common contributed earnings
stock capital (deficit) Total
-------- --------- ----------- ---------
Balance at January 1, 1994
As originally reported $339,423 $ 210,219 $ (153,727) $ 395,915
Prior period adjustment -- 55,192 (238,373) (183,181)
-------- --------- ----------- ---------
As restated 339,423 265,411 (392,100) 212,734
Net loss for the year ended
December 31, 1994 -- -- (190,146) (190,146)
Cash dividends -- (133,181) -- (133,181)
-------- --------- ----------- ---------
Balance at December 31, 1994 339,423 132,230 (582,246) (110,593)
Net loss for the year ended
December 31, 1995 -- -- (742,570) (742,570)
Stock warrants exercised 9,333 -- -- 9,333
Cash dividends -- (132,230) -- (132,230)
-------- --------- ----------- ---------
Balance at December 31, 1995 $348,756 $ -- $(1,324,816) $(976,060)
======== ========= =========== =========
The accompanying notes are an integral part of this statement.
188
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1995 1994
----------- -----------
Increase (decrease) in cash
Cash flows from operating activities
Net loss $ (742,570) $ (190,146)
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization 1,418,191 921,914
(Gain) loss on sale of assets 80,652 (98,904)
Changes in assets and liabilities
(Increase) decrease in accounts receivable (9,352) 9,040
(Increase) decrease in prepaid expenses (11,439) 72
Increase in other asset (2,822) -
Increase in accounts payable 183,338 244,517
Increase in accrued expenses 127,407 18,554
Increase (decrease) in deferred income taxes (284,000) 128,000
----------- -----------
Total adjustments 1,501,975 1,223,193
----------- -----------
Net cash provided by operating activities 759,405 1,033,047
Cash flows from investing activities
Capital expenditures (203,112) (229,613)
Proceeds from sale of assets 54,297 195,714
----------- -----------
Net cash used in investing activities (148,815) (33,899)
Cash flows from financing activities
Proceeds from long-term obligations 507,239 123,355
Payments on notes payable to bank (19,000) (11,900)
Payments on long-term obligations (1,119,990) (696,191)
Stock warrants exercised 9,333 -
Dividends paid (132,230) (133,181)
----------- -----------
Net cash used in financing activities (754,648) (717,917)
----------- -----------
Net increase (decrease) in cash (144,058) 281,231
Cash (overdraft) at beginning of period 147,910 (133,321)
----------- -----------
Cash at end of period $ 3,852 $ 147,910
=========== ===========
The accompanying notes are an integral part of these statements.
189
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. THE COMPANY
Payphones of America, Inc. operates, services and maintains a system of
approximately 2,800 pay telephones in the Southeastern and Midwestern United
States.
2. PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company and
its wholly-owned subsidiary. Intercompany transactions and balances have been
eliminated in consolidation .
3. ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required. If amounts become uncollectible,
they will be charged to operations when that determination is made.
4. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization are
provided for in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated service lives. Leased property under capital
leases is amortized over the service lives of the assets for those leases which
substantially transfer ownership. The straight-line method of depreciation is
followed for substantially all assets for financial reporting purposes, but
accelerated methods are used for tax purposes. Future income taxes resulting
from depreciation temporary differences have been provided for.
5. INTANGIBLE ASSETS
Site location contracts are exclusive rights to operate pay telephones at
various locations acquired through business combinations and are stated at cost.
Amortization of site contract costs is recorded using the straight-line method
over five years, the expected average lives of the contracts.
The Company has classified as goodwill the cost in excess of fair value of the
net assets of companies acquired in purchase transactions. Goodwill is amortized
on a straight-line method over 40 years. The covenants not to compete are being
amortized over their contractual lives of five years. Other intangible assets,
including license agreements and deferred financing costs, are amortized over
the life of the agreements.
190
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. RECOGNITION OF REVENUE
Revenues from coin calls and non-coin calls are recognized as calls are made.
When revenue on a telephone call is recorded, an expense is also recorded for
fees associated with the call.
7. CONCENTRATIONS OF CREDIT RISK
Revenues have a significant concentration of credit risk in the
telecommunications industry. In addition, a significant amount of 1995 revenues
were generated by the Company's pay telephones located in the states of Missouri
(36%) and Virginia (33%). No other area has a disproportionate credit risk.
8. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B - GOING CONCERN
The Company has experienced recurring losses and has accumulated losses since
inception of $1,324,816. As of December 31, 1995, the Company's current
liabilities exceed its current assets by $2,196,559. These factors raise doubt
about the Company's ability to continue as a going concern. The Company's
continued existence as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to comply with
the terms of its debt and lease obligations and to obtain additional financing
or refinancing as may be required. Historically, the Company has generated
sufficient cash flow to meet its obligations and to pay its debt and lease
obligations, and, although it cannot be assured that the Company will be able to
continue as a going concern in view of its present financial condition,
management believes that continued strategic business acquisitions and
improvements in planning and budgeting should enable the Company to meet its
obligations and sustain its operations.
191
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE C - NOTE PAYABLE TO BANK
Note payable to bank is comprised of a $245,000 revolving line of credit
agreement with Mark Twain Bank. Interest is payable monthly at 1.50% over
the bank's corporate base rate (8.50% at December 31, 1995). The line of
credit is secured by certain equipment of the Company and other accounts
receivable and matures on February 10, 1996.
NOTE D - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at December 31,:
1995
----------------------------------
Current Long-term 1994
portion portion Total Total
-------- --------- --------- -------
Notes payable to stockholders $ 248,333 $ 184,276 $ 432,609 $ 149,000
Note payable to Mark Twain Bank 1,594 26,988 28,582 29,683
Notes payable to Ford Motor
Credit Company 36,098 36,389 72,487 63,582
Notes payable to Ronald L. Coleman 14,069 299,868 313,937 426,517
Note payable to Pay-Tele
Communications, Inc. d/b/a
Midwest Telecom 105,454 185,273 290,727 397,818
Note payable to Communications
Finance Corporation 87,466 320,034 407,500 482,853
Note payable to R. Greg Kintz and
Paul Wm. Schindler 103,350 45,750 149,100 236,550
Capital lease obligations
Berthel, Fisher & Company
Leasing, Inc. 717,554 3,655,275 4,372,829 4,749,921
Intellicall, Inc. 17,036 -- 17,036 59,466
Copying Concepts Office Systems -- -- -- 2,168
---------- ---------- ---------- ----------
$1,330,954 $4,753,853 $6,084,807 $6,597,558
========== ========== ========== ==========
192
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE D - LONG-TERM OBLIGATIONS - Continued
The notes payable to stockholders consist of eight unsecured loans maturing
at various dates through April 30, 2000. Interest is payable at the rate of
10%.
The note payable to Mark Twain Bank requires payments of $326 per month
including interest at the rate of 8.75 %. The final payment of the entire
unpaid balance of principal and interest will be due October 15, 1998. This
note is secured by a deed of trust for a condominium.
The notes payable to Ford Motor Credit Company consist of ten loans secured
by automobiles and trucks maturing at various dates through April 22, 1999.
The notes require monthly payments of $4,329 including interest at rates
from 8.12% to 10.54%.
The notes payable to Ronald L. Coleman consist of two loans. The notes are
unsecured and mature in April, 2007. These notes require monthly payments
of $4,271 including interest at rates from 8% to 15%.
The note payable to Pay-Tele Communications, Inc. d/b/a Midwest Telecom is
secured by telephone equipment and site location contracts. The note
requires annual principal payments of $100,000 with interest at the rate
of 10% through maturity on June 1, 1998. The note is personally guaranteed
by the stockholders of the Company.
The note payable to Communications Finance Corporation is secured by
telephone equipment and site location contracts. The note requires monthly
payments of $11,895 including interest at the rate of 15% through maturity
on September 15, 1999. The note is personally guaranteed by the
stockholders of the Company.
The note payable to R. Greg Kintz and Paul Wm. Schindler requires monthly
principal payments of $7,950 plus interest at rates from 12% to 16% through
maturity on May 1, 1997. The stockholders of the Company have personally
pledged some of their common stock to the lenders as security.
The Company conducts a portion of its business using leased pay telephone
equipment and other intangible assets. For financial and tax reporting
purposes, the present values of minimum lease payments have been
capitalized. Implicit interest rates for these leases range from 14% to
18%.
193
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE D - LONG-TERM OBLIGATIONS - Continued
The leases, which are noncancelable, expire at various dates through 2001.
The following is a schedule of leased property and other assets under
capital leases included on the accompanying balance sheets:
Telephone equipment $ 3,871,519
Site location contracts 2,980,749
---------
6,852,268
Less accumulated depreciation
and amortization (2,256,701)
-----------
$ 4,595,567
===========
Annual maturities of all long-term obligations are as follows for years
following December 31, 1995:
1996 $ 1,330,954
1997 1,087,032
1998 1,024,518
1999 998,138
2000 771,115
2001 and thereafter 873,050
-----------
$ 6,084,807
===========
NOTE E - INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No.109 "Accounting For Income Taxes" (SFAS).
Under the liability method specified by SFAS 109, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities as measured by the
enacted tax rates which will be in effect when these differences reverse.
Deferred tax income and expense is the result of changes in deferred tax
assets and liabilities. The principal types of differences between assets
and liabilities for financial statement and tax return purposes are
accumulated depreciation and accumulated amortization.
194
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE E - INCOME TAXES - Continued
The provision for income taxes consists of the following for the year ended
December 31,:
1995 1994
--------- ---------
Current $ (6,280) $ (8,856)
Deferred 284,000 (128,000)
--------- ---------
$ 277,720 $(136,856)
========= =========
Deferred tax assets and liabilities are attributable to the following at
December 31,:
1995 1994
--------- ---------
Deferred tax assets (liabilities)
Noncurrent
Accumulated depreciation $(472,000) $(365,000)
Accumulated amortization 262,000 81,000
Tax benefit of net operating loss
carryforward 460,000 --
--------- ---------
250,000 (284,000)
Less valuation allowance (250,000) --
--------- ---------
Net deferred tax asset (liability) $ -- $(284,000)
========= =========
A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The net deferred
assets reflect management's estimate of the amount which will be realized
from future profitability which can be predicted with reasonable certainty.
The Company has net operating loss carryforwards for Federal income tax
purposes which are available to offset future Federal taxable income. These
carryforwards expire as follows:
2008 $ 9,194
2009 332,849
2010 836,510
----------
$1,178,553
==========
195
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE F - COMMITMENTS
The Company conducts a substantial portion of its operations utilizing
leased facilities and equipment. The minimum rental commitments under
operating leases are as follows for the year ended December 31,:
1996 $ 95,091
1997 93,246
1998 60,550
1999 59,000
2000 64,400
2001 and thereafter 310,500
--------
Total minimum lease payments $682,787
========
Rent expense for all operating leases for the years ended December 31, 1995
and 1994,was $71,512 and $31,389, respectively.
NOTE G - STOCK WARRANTS
The Company has issued various warrants which are exercisable for common
stock as follows:
Warrant Number Exercise Expiration
number of shares price date
------- --------- -------- ----------------
6 319,114 $1.00 October 24, 2004
9 250,000 $2.00 July 28, 2000
Warrant six has been issued to the Company's vice president and warrant
nine has been issued to a lender.
NOTE H - STATEMENT OF CASH FLOWS
Cash paid for interest and income taxes was as follows during the year
ended December 31,:
1995 1994
-------- --------
Interest $852,612 $597,956
Income taxes 6,280 16,388
During 1995 and 1994, the Company entered into capital lease obligations
totalling $100,000 and $4,000,000, respectively, which represent noncash
financing activities.
196
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE I - PRIOR PERIOD ADJUSTMENT
Retained earnings at December 31, 1994, were restated following completion
of the Company's first audit to reflect the correction of the following
account balances:
Accounts receivable $ (14,061)
Property and equipment 15,307
Other assets 20,521
Accumulated depreciation and
amortization 21,219
Accounts payable (94,965)
Income taxes payable (20,639)
Notes payable 49,112
Deferred income taxes (156,000)
Additional contributed capital (55,192)
Other (3,675)
---------
$ 238,373
=========
NOTE J - ACQUISITION
On September 23, 1994, the Company purchased certain assets of Eastern
Telecom Corporation, operators of pay telephones in the Southeastern region
of the United States. The acquisition was accounted for using the purchase
method. The purchase price of $4,000,000 was allocated as follows:
Fair market value of assets acquired
Inventories $ 2,000
Equipment 1,721,839
Site contracts 2,276,161
----------
Purchase price $4,000,000
==========
In connection with the asset purchase, the Company entered into a purchase
commitment with the seller for services of $500,000. In 1995, the
commitment decreased to approximately $192,000 based on actual revenues
generated by the assets acquired. The Company's annual obligation under
this agreement is $32,000 through 2001.
NOTE K - RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 financial statements
to conform to the 1995 presentation.
197
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE L - SUBSEQUENT EVENT
On February 7, 1996, the Telecommunications Act of 1996 was signed into
law. The Act recognizes that independent public payphone providers are
entitled to fair rules to compete with the Regional Bell Operating
Companies and other local exchange companies. For instance, the Act
prohibits Bell operating companies from subsidizing payphone service
directly or indirectly with revenues generated from their exchange or
access services. Bell companies are also prohibited from discriminating in
favor of their payphone services. The legislation directs the Federal
Communications Commission to develop fair rules in implementing the
payphone provision within nine months. The potential impact of this Act on
the financial position of the Company is unknown at this time.
NOTE M - FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, trade
receivables, trade payables and debt instruments. The book values of cash
and trade payables are representative of their fair values due to the
short-term maturity of these instruments. The book value of the Company's
debt instruments is considered to approximate their fair value at December
31, 1995, based on market rates and conditions.
198
PROMISSORY NOTE
$522,000 August 1, 1996
FOR VALUE RECEIVED, the undersigned PHONETEL III, INC., an Ohio corporation
(the "Buyer") promises to pay to RONALD L. COLEMAN, TRUSTEE (the "Seller") in
lawful money of the United States of America and in immediately available funds
the principal amount of FIVE HUNDRED TWENTY TWO THOUSAND DOLLARS ($522,000) plus
the Added Principal Amount (as defined below) (the "Loan") or, if less, the
unpaid principal amount of the Loan, at Seller's account notified in writing to
Buyer (the "Payment Account"), in installments as described in Section 1 below
on the last Business Day of each month (each, a "Principal Payment Date ")
commencing July 31, 1998 (or if such day is not a Business Day, on the next
succeeding Business Day), with all outstanding amounts becoming due and payable
on May 31, 2002 (the "Maturity Date"). As used herein "Business Day" shall mean
any day which is neither a Saturday or Sunday nor a legal holiday on which banks
are authorized or required to be closed in New York, New York.
1. PAYMENTS. The Buyer also promises to pay principal and interest on the
unpaid principal amount of the Loan prior to maturity at the rates set forth
below:
1.1 Interest shall accrue on the outstanding amount of the Loan for the
period from the date hereof to and including December 31, 1996 at the rate of
10% per annum (the "First Interest Period"). Interest shall accrue on the
outstanding Loan for the period from and after January 1, 1997 to June 30, 1998
at the rate of 14% per annum (the "Second Interest Period"). Interest shall
accrue on the outstanding amount of the Loan after June 30, 1998 at the rate of
14% per annum.
1.2 Payments of accrued interest during and in respect of the First
Interest Period shall be payable in the amount of $4,350 per month, commencing
August 31, 1996 and on the last Business Day of each month thereafter to and
including December 31, 1997, with the remainder of the accrued and unpaid
interest during the First Interest Period being added to the principal balance
of this Note (such additional amount, the "First Interest Period Added Amount").
1.3 Payments of accrued interest during and in respect of the Second
Interest Period shall be payable in the amount of $6,000 per month, commencing
January 31, 1997 and on the last Business Day of each month thereafter to and
including June 30, 1998, with the remainder of the accrued and unpaid interest
during the Second Interest Period being added to the principal balance of this
Note (such additional amount, together with the First Interest Period Added
Amount, the "Added Principal Amount").
1.4 Buyer shall make payments of $14,728.39 per month commencing July
31, 1998 and on the last Business Day of each month thereafter to and including
April 30, 2002, which shall be applied first to accrued and unpaid interest and
second to the unpaid principal amount of this Note.
199
1.5 On the Maturity Date, Buyer shall pay the remaining principal
balance and all accrued and unpaid interest on this Note.
1.6 Interest payable hereunder shall be payable in lawful money of the
United States of America at the Payment Account. Interest shall be based on the
basis of a year of 365 or 366 days, as applicable, and the exact number of days
elapsed.
2. PURPOSE. This Note is given to evidence a portion of the Purchase Price
as defined in that certain Amended and Restated Share Purchase Agreement, dated
as of August 1, 1996 (the "Purchase Agreement"), among the Buyer, Payphones of
America, Inc., Seller and the other shareholders of the Seller.
3. VOLUNTARY PREPAYMENT. The Loan may be prepaid by the Buyer in whole or
in part, at any time and from time to time, without premium or penalty.
4. EVENT OF DEFAULT. Upon the occurrence of any of the following events
(each an "EVENT OF DEFAULT"):(i) nonpayment when due of any payment when due
hereunder and such payment shall not have been made within five (5) Business
Days when due; or (ii) the institution of any proceeding by or against the Buyer
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or the appointment of a receiver,
trustee, custodian or other similar official for the Buyer, or for any
substantial part of its property and, in the case of institution of any such
proceeding against the Buyer, either such proceeding remaining undismissed or
unstayed for a period of 120 days or any of the actions sought in the proceeding
occurring, or the Buyer taking any corporate or other authorizing action in
respect of the foregoing; or (iii) any other material breach or
misrepresentation by Buyer hereunder or under the Security Agreement referred to
in Section 7 hereof which is not cured within 30 days following written notice
thereof; THEN AND IN ANY SUCH EVENT, the Seller in its discretion may, by
written notice to the Buyer, declare the principal of and accrued interest on
the Loan to be, whereupon the same shall become, forthwith due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Buyer, PROVIDED, that upon the occurrence of
any event specified in clause (ii) such amounts shall automatically become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Buyer.
5. COSTS OF COLLECTION. In the case of any non-payment when due of any
amounts due hereunder, the Buyer shall pay all costs and expenses of every kind
for collection, including all reasonable attorneys' fees.
6. MANDATORY REPAYMENT. The Loan, together with all accrued but unpaid
interest thereon, shall be subject to mandatory prepayment upon the occurrence
of either (i) an offering of any class of capital stock of PhoneTel
Technologies, Inc. ("PhoneTel"), (ii) a debt offering of PhoneTel or (iii) any
refinancing of the indebtedness under that certain Credit Agreement, dated as of
March 15, 1996 (as amended, the "Credit Agreement"), among PhoneTel,
Internationale Nederlanden (U.S.) Capital
2
200
Corporation ("ING"), the lenders party thereto (the "Lenders") and ING as agent
for the Lenders, which, in the case of the event set forth in (i) results in a
prepayment of the loans under the Credit Agreement to the Lenders in an
aggregate amount of not less than $10,000,000 and in the case of clauses (ii)
and (iii) results in a prepayment of all amounts outstanding under the Credit
Agreement; provided that the total amount of such prepayment shall be limited to
the amount of funds received by PhoneTel (A) in excess of $10,000,000, in the
case of clause (i), or (B) the amounts outstanding under the Credit Agreement,
in the case of clauses (ii) and (iii); provided further, however, that any
partial prepayment shall be applied to the amounts due hereunder in the inverse
orders of their maturities.
7. SECURITY. The obligations hereunder are to be secured by a lien and
security interest in all of the assets of the Buyer pursuant to a certain
Security Agreement by the Buyer in favor of, or for the benefit of, Seller.
8. NO SET-OFF, ETC. All payments to be made hereunder by the Buyer shall be
made without set-off or counterclaim.
No delay on the part of the Seller in exercising any of its options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof. The options, powers and rights of the Seller specified herein
are in addition to those otherwise created.
By acceptance of this Note, Seller acknowledges and agrees that this
Note is the obligation solely of the Buyer, and that no officer, director,
shareholder, direct or indirect parent company or affiliate of the Buyer will
have any liability or obligation under this Note. By acceptance of this Note,
Seller further acknowledges that the Buyer is an entity separate and distinct
from PhoneTel Technologies, Inc. and its other subsidiaries and that it is not
seeking payment or performance of this Note from PhoneTel Technologies, Inc. or
any of its subsidiaries other than Buyer.
3
201
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. EACH OF THE BUYER AND, BY ITS ACCEPTANCE HEREOF, THE
SELLER HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY
MATTER ARISING HEREUNDER.
PHONETEL III, INC.
By: /s/ Peter Graf
---------------------------
Name: Peter Graf
Title: Chairman
4
202
PROMISSORY NOTE
$1,729,322.67 August 1, 1996
FOR VALUE RECEIVED, the undersigned PHONETEL III, INC., an Ohio
corporation (the "Buyer") promises to pay to STANLEY ROJESKI (the "Seller") in
lawful money of the United States of America and in immediately available funds
the principal amount of ONE MILLION SEVEN HUNDRED TWENTY-NINE THOUSAND THREE
HUNDRED TWENTY TWO DOLLARS and SIXTY SEVEN CENTS ($1,729,322.67) plus the Added
Principal Amount (as defined below) (the "Loan") or, if less, the unpaid
principal amount of the Loan, at Seller's account notified in writing to Buyer
(the "Payment Account"), in installments as described in Section 1 below on the
last Business Day of each month (each, a "Payment Date") commencing July 31,
1998 (or if such day is not a Business Day, on the next succeeding Business
Day), with all outstanding amounts becoming due and payable on May 31, 2002 (the
"Maturity Date"). As used herein "Business Day" shall mean any day which is
neither a Saturday or Sunday nor a legal holiday on which banks are authorized
or required to be closed in New York, New York.
1. PAYMENTS. The Buyer also promises to pay principal and interest on the
unpaid principal amount of the Loan prior to maturity at the rates set forth
below:
1.1 Interest shall accrue on the outstanding amount of the Loan for the
period from the date hereof to and including December 31, 1996 at the rate of
10% per annum (the "First Interest Period"). Interest shall accrue on the
outstanding Loan for the period from and after January 1, 1997 to June 30, 1998
at the rate of 14% per annum (the "Second Interest Period"). Interest shall
accrue on the outstanding amount of the Loan after June 30, 1998 at the rate of
14% per annum.
1.2 Payments of accrued interest during and in respect of the First
Interest Period shall be payable in the amount of $4,581 per month, commencing
August 31, 1996 and on the last Business Day of each month thereafter to and
including December 31, 1997, with the remainder of the accrued and unpaid
interest during the First Interest Period being added to the principal balance
of this Note (such additional amount, the "First Interest Period Added Amount").
1.3 Payments of accrued interest during and in respect of the Second
Interest Period shall be payable in the amount of zero dollars and zero cents,
per month, commencing January 31, 1997 and on the last Business Day of each
month thereafter to and including June 30, 1998, with the remainder of the
accrued and unpaid interest during the Second Interest Period being added to the
principal balance of this Note (such additional amount, together with the First
Interest Period Added Amount, the "Added Principal Amount").
203
1.4 Buyer shall make payments of $51,450.48 per month commencing July
31, 1998 and on the last Business Day of each month thereafter to and including
April 30, 2002, which shall be applied first to accrued and unpaid interest and
second to the unpaid principal amount of this Note.
1.5 On the Maturity Date, Buyer shall pay the remaining principal
balance and all accrued and unpaid interest on this Note.
1.6 Interest payable hereunder shall be payable in lawful money of the
United States of America at the Payment Account. Interest shall be based on the
basis of a year of 365 or 366 days, as applicable, and the exact number of days
elapsed.
2. PURPOSE. This Note is given to evidence a portion of the Purchase Price
as defined in that certain Amended and Restated Share Purchase Agreement, dated
as of August 1, 1996 (the "Purchase Agreement"), among the Buyer, Payphones of
America, Inc., Seller and the other shareholders of the Seller.
3. VOLUNTARY PREPAYMENT. The Loan may be prepaid by the Buyer in whole or
in part, at any time and from time to time, without premium or penalty.
4. EVENT OF DEFAULT. Upon the occurrence of any of the following events
(each an "EVENT OF DEFAULT"):(i) nonpayment when due of any payment when due
hereunder and such payment shall not have been made within five (5) Business
Days when due; or (ii) the institution of any proceeding by or against the Buyer
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or the appointment of a receiver,
trustee, custodian or other similar official for the Buyer, or for any
substantial part of its property and, in the case of institution of any such
proceeding against the Buyer, either such proceeding remaining undismissed or
unstayed for a period of 120 days or any of the actions sought in the proceeding
occurring, or the Buyer taking any corporate or other authorizing action in
respect of the foregoing; or (iii) any other material breach or
misrepresentation by Buyer hereunder or under the Security Agreement referred to
in Section 7 hereof which is not cured within 30 days following written notice
thereof; THEN AND IN ANY SUCH EVENT, the Seller in its discretion may, by
written notice to the Buyer, declare the principal of and accrued interest on
the Loan to be, whereupon the same shall become, forthwith due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Buyer, provided, that upon the occurrence of
any event specified in clause (ii) such amounts shall automatically become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Buyer.
5. COSTS OF COLLECTION. In the case of any non-payment when due of any amounts
due hereunder, the Buyer shall pay all costs and expenses of every kind for
collection, including all reasonable attorneys' fees.
2
204
6. MANDATORY REPAYMENT: The Loan, together with all accrued but unpaid
interest thereon, shall be subject to mandatory prepayment upon the occurrence
of either (i) an offering of any class of capital stock of PhoneTel
Technologies, Inc. ("PhoneTel"), (ii) a debt offering of PhoneTel or (iii) any
refinancing of the indebtedness under that certain Credit Agreement, dated as of
March 15, 1996 (as amended, the "Credit Agreement"), among PhoneTel,
Interriationale Nederlanden (U.S.) Capital Corporation ("ING"), the lenders
party thereto (the "Lenders ") and ING as agent for the Lenders, which, in the
case of the event set forth in (i) results in a prepayment of the loans under
the Credit Agreement to the Lenders in an aggregate amount of not less than
$10,000,000 and in the case of clauses (ii) and (iii) results in a prepayment of
all amounts outstanding under the Credit Agreement; provided that the total
amount of such prepayment shall be limited to the amount of funds received by
PhoneTel (A) in excess of $10,000,000, in the case of clause (i), or (B) the
amounts outstanding under the Credit Agreement, in the case of clauses (ii) and
(iii); provided further, however, that any partial prepayment shall be applied
to the amounts due hereunder in the inverse orders of their maturities.
7. SECURITY. The obligations hereunder are to be secured by a lien and
security interest in all of the assets of the Buyer pursuant to a certain
Security Agreement by the Buyer in favor of, or for the benefit of, Seller.
8. NO SET-OFF, ETC. All payments to be made hereunder by the Buyer shall be
made without set-off or counterclaim.
No delay on the part of the Seller in exercising any of its options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof. The options, powers and rights of the Seller specified herein
are in addition to those otherwise created.
By acceptance of this Note, Seller acknowledges and agrees that this
Note is the obligation solely of the Buyer, and that no officer, director,
shareholder, direct or indirect parent company or affiliate of the Buyer will
have any liability or obligation under this Note. By acceptance of this Note,
Seller further acknowledges that the Buyer is an entity separate and distinct
from PhoneTel Technologies, Inc. and its other subsidiaries and that it is not
seeking payment or performance of this Note from PhoneTel Technologies, Inc. or
any of its subsidiaries other than Buyer.
3
205
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK: EACH OF THE BUYER AND, BY ITS ACCEPTANCE HEREOF, THE SELLER
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY MATTER
ARISING HEREUNDER.
PHONETEL III, INC:
By: /s/ Peter Graf
----------------------------
Name: Peter Graf
Title: Chairman
4
206
SCHEDULE 2.3
VIOLATIONS
----------
POA and BUYER must file a joint application with the Minnesota PUC and
PSC seeking approval for the change of control of POA.
207
SCHEDULE 3.1
SUBSIDIARIES
------------
W.J.B. & Associates, Inc., a Tennessee corporation
KNS Enterprises, Inc., a Missouri corporation
208
SCHEDULE 3.5(b)
CONSENTS, WAIVERS OR APPROVALS
------------------------------
See Schedule 2.3.
209
SCHEDULE 3.6(a)
EXCEPTIONS/SUPPLEMENTS TO FINANCIAL STATEMENTS
----------------------------------------------
NONE
210
SCHEDULE 3.6(b)
EXTRAORDINARY ITEMS
-------------------
None other than as disclosed in the Financial Statements and POA's 1993, 1994
and 1995 Federal Corporate Income Tax Returns.
211
SCHEDULE 3.7
UNDISCLOSED LIABILITIES
-----------------------
NONE
212
SCHEDULE 3.8
Payphones of America, Inc Outstanding A/R as of 06/30/96
Account Amount
------- ------
A/R General 3,082.50
LP1 (1,706.29)
C/O Payphones 3,760.64
Intellicall 174,698.63
Teletrust 27,090.45
BF Mgmnt Fees 21,235.95
BF Teltrust 738.38
QCC 12,457.67
BF 11,386.63
---------
252,744.56
==========
Page 1
213
SCHEDULE 3.8
ACCOUNTS RECEIVABLE AGING-3/3 1/96
----------------------------------
ATTACHED
214
SCHEDULE 3.12
MATERIAL CONTRACTS
------------------
1. All Payphone Location Contracts, all of which have been made
available for review by POA to Buyer as an integral part of the Buyer's due
diligence process.
2. Long Distance Services Agreement, dated May 23, 1995, between
POA and MCI.
3. Oral Agreement, between Teltrust, Inc. and PQA with respect to
the provision of live operator services by Teltrust, Inc. to POA.
4.. Asset Purchase Agreement, dated September 23, 1994, between POA
and Eastern Telecom Corporation, and all documents and agreements executed in
connection therewith.
5. Stock Purchase Agreement, dated April 28, among KNS Enterprises,
Inc., the shareholders of KNS Enterprises, Inc. and POA, and all documents and
agreements executed in connection therewith.
6. Asset Purchase Agreement, dated December 2, 1992, between
Ameritel and POA with closings on January 29, 1993 and March 31, 1993, and all
documents and agreements executed in connection therewith.
7. Asset Purchase Agreement, dated March 31, 1993, between Pay
TeleCommunications, Inc. and POA, and all documents and agreements executed in
connection therewith.
8. Intellicall License Agreement, dated March 29, 1994, between POA
and Intellicall, Inc.
9. Vehicle Financing Agreements between POA and Ford Motor Credit
(list attached).
10. Equipment Lease Agreements between Berthel Fisher & Company
Leasing, Inc. and POA.
11. Asset Purchase Agreement between POA and LP1 to be entered
into prior to closing and the consideration for which shall be paid at the
Closing.
12. Equipment Lease Agreements, dated September 24, 1993 and March
29, 1993, POA and Intellicall, Inc.
215
SCHEDULE 3.14
LITIGATION
----------
1. Julie Bitzer v. Pay Phone of America, Inc., Case No. 95C3783,
District Court of Wyandotte County, Kansas (dismissed by judge without prejudice
with option of plaintiff to refile).
2. Suit to be filed by POA against Eastern and John Crawford,
individually with respect to the Asset Purchase Agreement, dated September 23,
1994, between POA and Eastern and the Consulting Agreement, dated September 16,
1994 between POA and John Crawford.
3. Commonwealth of Virginia, ex rel. State Corporation Commission
v. Payphones of America, Inc. d/b/a Eastern Telecom Pay Telephone Co. Case No.
PUC940049 (SETTLED AND ORDER OF DISMISSAL ENTERED).
4. Potential Arbitration Proceeding between St. Charles Riverfront
Station, Inc. and POA regarding whether the contract expires 12/1/95 or 12/1/96
(SETTLED).
5. Petition of Payphones of America, Inc. for the Approval of the
Acquisition of certain Assets of Continental Payphone Services, Inc., Docket No.
P5071,5219/PA-95-879 (APPROVED).
6. Advance Pay Systems, Inc. V. Pay Phone Company of America T/A
Eastern Telecom Pay Telephone Company, Circuit Court of Portsmouth VA Case No.
CH96000456-00 (dispute over Family Market phone location--2 phones).
7. LDDS/WORLDCOM v. Payphones of America, Inc. POA has received
correspondence from LDDS' counsel in Kansas City alleging that POA owes
LDDS/WorldCom @$81,000. POA has responded in writing that it does not owe LDDS
any money and that it has paid LDDS in accordance with the agreement (NOTE: LDDS
has already sued PhoneTel over this same issue). All documentation evidencing
payment and account reconcilations have been provided to LDDS' counsel, but he
chooses to ignore it (he's just a collection attorney trying to collect a
contingent fee). No suit has been filed at this time. The Sellers intend to
vigorously defend this action if it is filed.
216
SCHEDULE 3.17(f)
TAX AUDITS AND INQUIRIES
------------------------
NONE
217
SCHEDULE 3.18(a)
ROYALTIES/LICENSE FEES
----------------------
License Fees due to Intellicall, Inc. for use of Intelli*Star call processing
boards in Intellicall pay telephones.
218
SCHEDULE 3.18(b)
RESTRICTIONS ON USE OF NAME POA
-------------------------------
In the jurisdictions in which POA has attempted to obtain qualification to do
business as a foreign corporation, only the District of Columbia has refused to
allow POA to conduct its business under the name "Payphones of America" or
"Payphones of America, Inc."
219
SCHEDULE 3.20(a)
INSURANCE
---------
Copies of all of PQA's insurance policies have been provided by POA to Buyers.
For convenience, the policies are summarized below. All such policies have been
issued by American States.
1. Policy No. 01CE059478, General Commercial Liability Policy, $1
Million Aggregate Limit, Other Limitations and Deductibles as set forth in the
Policy.
2. Policy No. 01CE059478, Business Auto Coverage for Form
Declarations, $500,000 Aggregate Liability Coverage (Missouri Vehicles), Other
Limitations and Deductibles as set forth in the Policy.
3. Policy No. 02BA390540, Common Policy Declarations (Auto
Virginia), $500,000 Aggregate Liability Coverage, Other Limitations and
Deductibles as set forth in the Policy.
4. Policy No. 01CE059478, Common Policy Declarations (Auto
Virginia), $500,000 Aggregate Liability Coverage, Other Limitations and
Deductibles as set forth in the Policy.
5. Policy No. 01CE059478, Commercial Policy Declaration, $1 Million
Aggregate Limit, Other Limitations and Deductibles as set forth in the Policy.
6. Policy No. 01WC781236-10, Workers' Compensation and Employer
Liability Policy, Limits and Deductibles as set forth in the Policy.
220
SCHEDULE 3.20(b)
CLAIMS AGAINST INSURANCE POLICIES
---------------------------------
Claim against General Liability Policy in Julie Bitzer v. Pay Phone of America,
Inc., Case No. 95C3783, District Court of Wyandotte County, Kansas.
221
SCHEDULE 3.21(a)
LARGE SUPPLIERS
---------------
ATTACHED
222
SCHEDULE 3.21(b)
ADVERSE CHANGES IN CUSTOMER RELATIONSHIPS
-----------------------------------------
SEE SCHEDULE 3.14
223
SCHEDULE 3.22(a)
EXPRESS WARRANTIES
------------------
NONE
224
SCHEDULE 3.22(b)
WARRANTIES OBLIGATIONS
----------------------
NONE
225
SCHEDULE 3.23
AFFILIATE TRANSACTIONS
----------------------
1. From time to time Mr. Rojeski and Mr. Brinkmeier have made short term
loans to POA.
2. Mr. Rojeski and Mr. Brinkmeier own 50% of LP1. Certain accounting and
administrative functions have been handled in the past by POA for LP1 at no
charge
3. LP2 was previously owned by Mr. Rojeski and Mr. Brinkmeier and was sold
to POA in 1995.
4. POA has performed and will continue to perform certain accounting and
administrative services for VisionComm, Inc. and pay certain operating expenses
on behalf of VisionComm, Inc. In addition, POA provides and will continue to
provide until the Closing installation and service of payphones installed
pursuant to the Columbia/HCA contract at no cost to VisionComm. Inc.
226
SCHEDULE 3.28
CONSENTS TO DEBT ASSUMPTIONS
----------------------------
Equipment Leases between POA and Berthel Fisher & Company Leasing, Inc. which
shall be provided at Closing.
All obligations set forth on EXHIBIT I must be paid at closing unless otherwise
indicated thereon. Certain on these obligations have automatic acceleration
provisions as a result of a change in control of POA.