SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10\A - No.2
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12 (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
PICK COMMUNICATIONS CORP.
(Exact name of the registrant as specified in its charter)
0-27604
(SEC Registration Number)
NEVADA 75-2107261
(State or other jurisdiction of (I.R.S. employer
Incorporation or Organization) identification no.)
155 Route 46 West, Third Floor
Wayne, NJ 07470
(Address of principal executive offices) (Zip code)
Registrant's Telephone number, including area code (201) 812-7425
------------------------
Securities to be registered pursuant to Section 12(b)
of the Act:
Title of each class Names of each exchange on which
to be so registered each class is to be registered
None N/A
Securities to be registered pursuant to Section 12(g)
of the Act:
Common Stock, $.002 Par Value
(Title of Class)
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Item 1: Business
(a) General Development of Business
Pick Communications Corp. was incorporated in April 1984 under the laws of
Utah as S.T.V., Inc. ("STV"). STV was formed by Fred L. Sumner, Steven P. Todd,
and Stephen H. Harkness to develop videos for golf instruction and instruction
in other sports skills. In February 1986, STV changed its name to Adolphus
Companies, Inc. ("Adolphus"). Adolphus was engaged in marketing and distributing
various wholesale food products. On December 31, 1987, Adolphus acquired
American Italian Food Processing Co., in a stock for stock exchange. In May
1988, Adolphus changed its name to Prime International Products, Inc. ("Prime").
Prime ceased operations in late 1990.
In July 1995, Prime changed its state of organization from Utah to
Nevada. On September 12, 1995, Prime executed a Stock Purchase Agreement to
exchange 16,500,000 shares of Prime's Common Stock for all of the outstanding
shares of common stock and warrants of Public Info/Comm Kiosk, Inc. ("Pick"),
which made Pick a subsidiary of Prime. Pick was incorporated under the laws of
the State of New Jersey in August 1992. Prime changed its name to Pick
Communications Corp. in December 1995. Unless otherwise indicated, all
references to the "Company" hereinafter include the business and operations of
Pick prior to the September 12, 1995 transaction, and the combined companies
thereafter. The transaction was a reverse acquisition accounted for as a
recapitalization of Pick. The financial statements contained herein represent
the operations of Pick prior to September 12, 1995 and the consolidated
operations of the Company thereafter.
The Company is engaged in the design, development and marketing of
various telecommunications products. To date, the Company's operations have
primarily consisted of sales of prepaid telephone debit cards ("Debit Cards").
Telephone Debit Cards provide users with access to local calls and to long
distance domestic as well as international service through switching facilities
and long distance network arrangements. The major portion of the Company's
operations since January 1, 1994 have involved the issuance and sale of
telephone Debit Cards. In October 1995, the Company purchased the worldwide
rights to a prepaid cellular telephone technology and has since entered into
various marketing arrangements for this telephone technology, as described
below. The Company plans to expand operations into the related areas of resale
of long distance service to carriers and prepaid cellular phone production and
licensing for sales.
(b) Financial Information About Industry Segments
The Company operates in one business segment, the design, development
and sale of telecommunications products.
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(c) Narrative Description of Business
Telephone Debit Card Market Overview
The telephone Debit Card was developed in Italy in 1976, and became
readily available throughout Europe in the mid-1980's. In 1987, the concept was
introduced in the United States where it continues to gain consumer acceptance.
The Company commenced business as a long distance sales agency where it
sold long distance phone service on a commission basis. In 1993, the Company
recognized that the telephone Debit Card concept was a viable product to market
to the many Americans that use public telephones. The Company tested this
concept by issuing a limited number of Communicards, as described below, early
in the year. To commercialize the telephone Debit Card concept, the Company
acquired a working knowledge of the technology available in the public domain.
Accordingly, the Company utilizes such technology and does not own it. The
Company brought the concept to reality in December 1993 with an initial run of a
telephone Debit Card. The card proved to be a technical success and the Company
improved its debit card by developing the COMMUNICASH card which was introduced
in August 1994. The development of the COMMUNICASH card provided a single
product which allowed for a cohesive and targeted marketing program.
The market for telephone Debit Cards (also known as "calling cards")
consists of retail customers, distributor customers, promotional customers and
the collector market. Retailers sell directly to the ultimate consumers, while
distributors serve as middle-men and brokers which sell to chain stores or other
retail sellers. The promotional market consists primarily of corporate customers
who use telephone Debit Cards as premiums to enhance sales of their own products
through more recognition. Many companies are offering consumers free long
distance (through telephone Debit Cards which contain their corporate names) if
they try or purchase a certain product (or amount of products) made by that
company. The collector market consists of cards containing pictures of sports or
entertainment celebrities or commemorating a particular event. Customers of such
cards do not expect to use the telephone time associated with the telephone
Debit Cards, but rather save the telephone Debit Cards for potential sales at
appreciated values to other collectors at future dates.
The Company serves the retail, distributor and promotional markets
through the use of its trademarked line of "COMMUNICASH" and "las Americas"
telephone Debit Cards, as well as with co-branded promotional cards. The Company
has entered the collector market on a very limited basis.
COMMUNICASH
The Company brought its first prepaid telephone Debit Card, Communicard
Phone Money, to market in December 1993 in controlled distribution. During a
seven-month trial period in 1994, the Company learned much information
concerning the product category, the needs of the distribution chain in the
retail environment and the retail market itself, which led to the development
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and introduction of the current COMMUNICASH telephone Debit Card in August 1994.
The Company has taken a comprehensive approach with regard to research,
development, market analysis, production and distribution for its products which
the Company believes is evident in both the product and the point of sale
materials.
COMMUNICASH cards are non-rechargeable, disposable prepaid telephone
Debit Cards (also known as prepaid telephone calling cards) specifically
designed for the retail sales environment. The Company issues COMMUNICASH in
denominations of $5, $10, $20, $50 and $100 which can be used for local, long
distance and international calling from any touch-tone phone in the United
States at any time. An 800 number printed on the back of the COMMUNICASH card
provides the consumer with network access and a Personal Identification Number
("PIN"), also printed on the back of the card, allows the computerized switch to
identify and track card usage. Printed instructions and voice prompts in English
and Spanish provide the consumer with step by step instructions for card use,
information regarding the amount of money remaining on the card and the number
of minutes the consumer can talk to the destination number dialed. Calls in a
series can be made without hanging up and re-dialing, simply by pressing the
pound sign (#) at the conclusion of each call. To assist the consumer further,
the Company has contracted with Telecommunications Service Center, Inc. and
Innovative Telecom Corp., the companies which provide telephone switching
services to the Company, to provide a 24-hour customer service line.
las Americas
The Company's comprehensive approach to research, development and
market analysis for its products has led to the identification of certain ethnic
or niche markets where retail sales are most profitable. The first niche market
targeted is the Hispanic consumer, and to access this market, the Company has
recently introduced the las Americas card. This Spanish-language version of
COMMUNICASH features especially attractive international rates to countries in
Central and South America as well as the Caribbean. The las Americas card is
issued by the Company in $10 and $25 denominations for distribution primarily in
New York, New Jersey, California and Florida.
COMMUNICASH Co-Branded
COMMUNICASH Co-Branded is designed to address the promotional segment
of the market with prepaid calling cards for such clients as Webcraft
Technologies and Value Line. Co-branded cards can also be sold in a retail
environment such as through existing outlets of a corporate sponsor. This
product features the logo of the corporate sponsor or its product(s), as well as
the COMMUNICASH logo. Management believes co-branding also provides
reinforcement to the consumer of the COMMUNICASH retail product since the
Co-Branded product includes the name "COMMUNICASH", both on the packaging and on
the card itself.
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Acquisition of Telephone Time
The Company has entered into interconnect agreements with AT&T, Com
Tech International Corp., and National Telecom Corp., among others, to purchase
800 and long distance services for use with all COMMUNICASH, las Americas, and
COMMUNICASH Co-Branded telephone Debit Cards. These agreements allow the Company
to direct domestic, long distance and international calls over the networks of
these carriers. Calls are routed through the Company's own switching facility
(located in Tampa, Florida and managed by Telecommunications Service Center
Inc.), and as of April 1996, through a switch located in New York City, owned
and managed by Innovative Telecom Corporation. The distribution of time
purchased is determined by the destination of calls placed and based upon the
most favorable rate to each destination.
Sales and Marketing of Telephone Debit Cards
The Company targets sales to retail outlets in two principal ways: by
further developing an experienced direct sales force that is familiar with the
outlets which have the clients that use the Company's telephone Debit Cards and,
by using wholesale distributors that have relationships with many retail outlets
(for a wide variety of products). Two employees of the Company (the President
and the Vice President of Operations) are directly involved in the sales effort
and the management of the brokers, agents and independent contractors who sell
the Company's telephone debit card products, primarily in Florida, New York, New
Jersey, Oklahoma, Texas, Ohio and California. The Company's outside sales force
is comprised of approximately 50 brokers, agents and independent contractors on
both an exclusive and non-exclusive basis. Certain of the Company's
non-exclusive distibutors may market the products of the Company's competitors.
The Company's retail cards are sold in more than 30 retail locations at
Miami International Airport through an arrangement with Sirgany International,
Inc. Other retail outlets include approximately 50 SSP-Circle K stores in
Oklahoma and Texas pursuant to an arrangement with the Southguard Corp. and more
than 2,000 outlets serviced by Blackstone Calling Card Inc. in Florida.
The Company targets large distributors that also provide candy, chewing
gum, tobacco and other sundries to retail outlets. The Company believes that
there has been a decline in recent years in distributors' sales in the cigarette
market, and the Company hopes to take advantage of such distributors' lost sales
by providing an alternate product. Distributors generally possess a relationship
with a large number of retailers and can readily introduce a new product. By
employing a small number of large distributors, the Company is able to deliver
its products into many retail stores, with only one account receivable for each
distributor, rather than thousands for individual retail customers. However, the
loss of any one distributor would be expected to have an adverse impact on the
Company's revenues. During the year ended December 31, 1995, Best Telecom, Inc.
accounted for 39% of the Company's revenues.
The Company mainly sells to large distributors that have an established
network of independent retail outlets such as candy stores and bodegas (Spanish
grocery stores). The
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Company's distributors include Anpesil International Corporation, which has more
than 5,000 customers, primarily bodegas in New York City and New Jersey; North &
South Distributors, which distributes to more than 1,000 stores in South Florida
(Miami), Jetro Cash & Carry Enterprises, Inc., whose customers are approximately
40,000 "mom & pop" small retail stores in New York City (Manhattan, Brooklyn and
Bronx locations), Jersey City, Philadelphia, Miami and Los Angeles and Best
Telecom, Inc., which distributes to 600 locations in New York, New Jersey,
Florida and California.
The Company's COMMUNICASH is also represented by sales organizations
which broker brand name products primarily to large chain grocers and
supermarkets, chain drug and mass merchandisers. The Company has signed
brokerage agreements with two brokers, Hynes Sales Company, Inc. and Pankow
Associates, Inc., to sell COMMUNICASH on an exclusive basis to their existing
retail chain customers on a commission basis.
In January 1996, the Company entered into an agreement with
International Executive Services for the procurement of advertising through
various media. Under the agreement the Company exchanged $420,000 of pre-paid
telephone time for $2,000,000 in advertising. This agreement superseded an
agreement that the Company entered into with an individual whereby the Company
would pay $420,000 for 5,137,000 minutes of United States domestic telephone
time. Under this exchange agreement, the Company continues to pay for the
telephone time at the rate of $35,000 per month. The Company expects to pay for
these minutes out of operating cash flows during 1996.
Manufacturing/Production of COMMUNICASH Cards
All COMMUNICASH, las Americas and COMMUNICASH Co-Branded telephone
Debit Cards have been designed by Roland Gebhardt Design in New York City and
are printed by Webcraft Technologies, Inc. Webcraft has over 35 press lines in
five states capable of unique formatting and product design capabilities for the
production of prepaid telephone calling cards. Webcraft also provides the
highest level of plant and press security along with waste destruction and
finished product security. The Company procures card print runs on a purchase
order basis. No formal contract exists between the Company and Webcraft
Technologies, Inc.
Secure PINs are transmitted by tape from the Company's selected
interconnect carrier to Webcraft prior to press date, and design information is
submitted by Roland Gebhardt Design ("Roland"). During a press run, the
Company's designated Webcraft sales account manager as well as representatives
from the Company and Roland Gebhardt are present in the plant to insure smooth
and effective production.
The Company's collector cards are printed in plastic and manufactured
by Brilliant Color Cards, Inc. in San Rafael, California. Art design and PIN
Submission are the same as with a Webcraft press run. The Company procures card
print runs on a purchase order basis. No formal contract exists between the
Company and Brilliant Color Cards, Inc.
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The Company has an agreement with Players Computer, Inc. ("Players"),
located in New York, for the fulfillment of all orders for the COMMUNICASH and
las Americas products. Players provides a 100% secure storage for all of the
cards and handles the activation process with the switch so that the cards can
be used, receives and ships all orders to customers, performs accounts
receivable functions and provides the Company with weekly reports.
Prepaid Cellular Telephone
In October 1995, the Company entered into an agreement with The Next Edge,
Inc. ("TNE") whereby the Company purchased the worldwide rights to market,
distribute, sell and develop a delivery system to support a prepaid cellular
telephone system. This agreement has an initial term of five years with an
option for an additional five years. The agreement requires the Company to pay
TNE a total of $500,000, payable at a rate of $25,000 per quarter for a period
of five years beginning on January 1, 1996. To date the Company has paid $75,000
to TNE under this agreement. These payments are to be secured by an irrevocable
letter of credit. The Company is also required to issue a total of 100,000
shares of its common stock to TNE in increments of 20,000 shares each year for
five years beginning on January 1, 1996. The agreement also requires the Company
to purchase the circuit chips for the system from TNE, at TNE's cost. The
agreement stipulates that the Company will be recorded as co-owner of the final
United States patent issued relating to this technology for which an application
is pending. The agreement requires the Company to implement the international
patent applications.
The Company's prepaid cellular telephone resulted from the explosion of
the use of cellular telephones on a worldwide basis. Not everyone is
sufficiently credit-worthy to own or lease a cellular telephone. Once a person
has a cellular phone activated, that consumer has an unlimited line of credit.
The Company believes that approximately one-third of all applicants for cellular
service are rejected by the cellular carriers as a result of enforcing stringent
credit requirements. Other consumers whose credit is "borderline" by these
standards are required to pay exorbitant deposits to secure a line.
The Company's prepaid cellular phone brings prepaid debit technology to
cellular phone users and makes it available to practically everyone. The system
works by automatically shutting off a programmed cellular telephone when the
subscriber has reached the limit of prepaid air-time. Additionally, this system
can be used with a variety of cellular telephones.
There are other cellular systems available which promote themselves as
prepaid because the consumer has to actually purchase time with a credit card
prior to using the phone. In these instances, however, access is still limited
to consumers with a level of credit-worthiness which allows them to have a
credit card, calls are limited to outbound only and a special 800 number
(sometimes pre-programmed into the phone) must be dialed before the destination
number can be accessed.
The Company's system is the first integrated system consisting of a
cellular phone with an internal programmable computer chip that allows the phone
to operate only for a prepaid amount of
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time. This tamper resistant security technology provides the highest degree of
protection from fraudulent charges. To date, 500 units have been produced and
successfully tested in both the United States and in South America. Further, the
Company's system allows the consumer to receive calls as well as to place them
and the destination number can be directly dialed. There is no behavioral
difference between the Company's system and a standard cellular phone, but the
Company's system will be available to virtually any consumer who desires
cellular technology anywhere in the world.
A consumer will be able to obtain one of the Company's specially
equipped cellular phones at a convenient retail location by completing a simple
registration form and purchasing a fixed amount of air-time which is loaded into
the phone. When the air-time reaches its limit, the customer can return to any
authorized retail location and buy more. Additionally, the consumer does not
purchase the phone itself so there is no equipment obsolescence; the phone is
essentially disposable. The Company's system also provides the consumer with the
ability to place international calls -- a feature not available in standard
cellular systems -- by using one of the Company's telephone debit cards with the
phone.
In order to commercialize the Company's prepaid cellular telephone
technology, the Company will first be required to extensively test market the
product and develop and test the supporting systems to distribute, bill, collect
and monitor equipment, software and air-time. Once the testing has been
successfully completed, the Company will likely require additional working
capital to bring the product to market. Assuming such capital is available, the
Company expects to begin marketing the product in the latter part of 1996. In
anticipation of bringing the product to market, the Company has entered into
agreements to license the rights to market and distribute the technology on a
worldwide basis.
The Company has granted an exclusive license to market and sell its
prepaid cellular telephone in the United States and Canada to P.C.T. Prepaid
Telephone, Inc. ("PCT"), which recently commenced operations. Upon the full
capitalization of PCT, the Company will maintain a majority ownership of PCT's
stock with the remainder to be owned by Firenze, Ltd. ("Firenze"), as described
below, and other private investors. PCT will purchase the licensed technology
and equipment from the Company on the basis of cost plus ten percent (10%). The
Company and PCT are currently engaged in contract negotiations with AT&T
Wireless Services with regard to the use of that particular cellular telephone
company's network by PCT's end users.
The Company's prepaid cellular telephone system will also be available
for use outside the United States because the Company's technology can interface
with any cellular network without modification. In European cities, where the
use of credit cards is less common than it is in the United States and currency
is the more accepted manner of payment, this system provides an attractive means
for cellular access. The Company has granted exclusive licenses to Firenze,
located in New York, to market and sell its prepaid cellular telephone in
various countries in Europe and to Yakimoto Investment, Ltd. ("Yakimoto"),
located in Nassau, Bahamas, to market and sell its prepaid cellular telephone in
various countries in Europe, as well as, all of Asia, Australia and Africa. On
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October 24, 1995, the Company exchanged 5,000,000 restricted shares of Common
Stock of the Company for 5,000,000 restricted shares of Common Stock of Firenze,
giving the Company a ten percent (10%) ownership in Firenze.
In addition, both Yakimoto and Firenze agreed to purchase the licensed
technology and equipment from the Company on the basis of cost plus ten percent
(10%). They also agreed to pay the Company, on a monthly basis, a royalty fee of
five percent (5%) of all gross sales revenues from equipment and air-time. The
Company has not finalized any long term contracts for the manufacture of the
various components and the assembly of same.
The Company has retained the exclusive rights to market and sell the
prepaid cellular telephones in Mexico, Central America and the Caribbean. The
Company will compete with numerous other companies engaged in the sale and/or
rental of cellular telephones including regional cellular telephone companies.
The Company expects to finance its agreement with The Next Edge, Inc.,
through the use of a letter of credit, initially to be provided by its agreement
with Yakimoto, which provides for a $475,000 letter of credit in exchange for
its license to market the product in South America, and subsequently, out of
operating cash flows. After the initial five-year term of the contract, at the
Company's sole option, the Company may extend the agreement for five additional
periods of five years each, at a cost of $100,000 per year. If the product
proves itself to be commercially viable, the Company will extend the agreement
and make those payments out of operating cash flows. In the event the contract
is not renewed, the Company would be entitled to royalties on the residual sales
made, prior to cancellation of The Next Edge, Inc., contract.
The various companies joining forces to bring the pre-paid cellular
concept to market in the Company include PCT, Firenze, and Yakimoto. The
relationships between these companies are as follows: PCT, is a majority owned
(50.4% ) subsidiary of the Company, which was established as the Company's
licensee for the United States and Canada. Firenze, is a marketing company which
expected to acquire Fonlem, in France, and be able to support the marketing
effort for the prepaid cellular product in Europe, Africa, Asia and Australia.
However, the French Treasury disallowed the acquisition of Fonlem, and it became
apparent to the Company that Firenze, would not be able to raise funds to
support the cellular product marketing in accordance with its license. In an
effort to engage a licensee with more potential to market the product, a
material portion of the licensed territories were transferred to Yakimoto, in
exchange for 500,000 restricted shares of Ultimistics, Inc. ("Ultimistics"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for information regarding the Company's interest in Ultimistics. As
a result, Firenze, retained only the right to market, sell and distribute the
product in France, Great Britain, Italy, Spain, Germany, Switzerland, Belgium
and Luxembourg. The remainder of Europe, and all of Africa, Asia and Australia
were transferred to Yakimoto. Yakimoto, in a separate agreement with the
Company, obtained the license for South America. No relationship exists between
the Next Edge, Inc. and Firenze, Yakimoto, PCT or Ultimistics, other than as
described above.
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Government Regulations
Long distance telecommunication services are subject to regulation by
the FCC and by state regulatory authorities. Among other things, these
regulatory authorities impose regulations governing the rates, terms and
conditions for interstate and intrastate telecommunication services. The federal
law governing regulation of interstate telecommunications are the Communications
Acts of 1934 and 1996 (the "Communications Acts"), which applies to all "common
carriers," including AT&T, MCI and Sprint, as well as entities, such as the
Company, which resell the transmission services provided through the facilities
of other common carriers. In general, under the Communications Acts, common
carriers are required to charge reasonable rates and are prohibited from
engaging in unreasonable practices in the provision of their services. Common
carriers are also prohibited from engaging in unreasonable discrimination in
their rates, charges and practices.
The Communications Acts require each common carrier to file tariffs
with the FCC. A tariff is a list of services offered, the terms under which the
services are offered, and the rates, or range of rates, charged for services.
Upon filing a tariff, the service provider is required to provide the services
at the rates and under the terms and conditions specified in the tariff. Failure
to file a tariff could result in fines and penalties. The Company believes it
has filed all required tariffs with the FCC.
In addition to federal regulation, resellers of long distance services
may be subject to regulation by the various state regulatory authorities. The
scope of such regulation varies from state to state, with certain states
requiring the filing and regulatory approval of various certifications and state
tariffs. As the Company expands the geographic scope of its long distance
operations, it intends to obtain operating authority as may be required to
provide long distance service.
The Company believes that it is in substantial compliance with all
material laws, rules and regulations governing its operations and has obtained
or is in the process of obtaining all licenses, tariffs and approvals necessary
for the conduct of its business. In the future, legislation enacted by Congress,
court decisions relating to the telecommunications industry, or regulatory
actions taken by the FCC or the states in which the Company operates could
adversely impact the Company's business. Changes in existing laws and
regulations, particularly currently proposed relaxation of existing regulations
resulting in significantly increased price competition, may have a significant
impact on the Company's activities and on the Company's operating results.
Adoption of new statutes and regulations and the Company's expansion into new
geographic markets could require the Company to alter its methods of operations,
at costs which could be substantial, or otherwise limit the types of services
offered by the Company. There can be no assurance that the Company will be able
to comply with additional applicable laws, regulations and licensing
requirements.
Competition
The Company faces intense competition in the marketing and sale of its
prepaid telephone calling card products and services. The Company's telephone
Debit Cards and long distance services
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compete for consumer recognition with other prepaid phone cards, credit calling
cards and long distance telephone services which have achieved significant
international, national and regional consumer loyalty. Many of these products
and services are marketed by companies which are well-established, have
reputations for success in the development and sale of products and services and
have significantly greater financial, marketing, distribution, personnel and
other resources than the Company, thereby permitting such companies to implement
extensive advertising and promotional campaigns, both general and in response to
efforts by additional competitors to enter into new markets and introduce new
products and services. Certain of these competitors, including AT&T, MCI, Sprint
and the "Baby Bells," such as Bell Atlantic and Bell South, dominate the
telecommunications industry and have the financial resources to enable them to
withstand substantial price competition, which is expected to increase
significantly. These and other large telephone companies, as well as retailers,
such as Southland Corp., and companies engaged in the marketing of collectibles,
have also entered or have announced their intention to enter into the telephone
Debit Card segment of the industry. In addition, because the prepaid phone card
segment of the industry has no substantial barriers to entry, competition from
smaller competitors in the Company's target markets is also expected to continue
to increase significantly.
The telecommunications industry is characterized by frequent
introduction of new products and services, and is subject to changing consumer
preferences and industry trends, which may adversely affect the Company's
ability to plan for future design, development and marketing of its products and
services. The markets for telecommunications products and services are also
characterized by rapidly changing technology and evolving industry standards,
often resulting in product obsolescence or short product life cycles. The
proliferation of new telecommunications technologies, including personal
communication services, cellular telephone products and services and telephone
Debit Cards employing alternative technologies, may reduce demand for telephone
Debit Cards generally.
The Company is not presently aware of any competitor offering the same
prepaid cellular telephone technology. Although the product has a patent
pending, larger, more established entities with greater financial and personnel
resources than those of the Company may nevertheless enter into direct
competition with the Company. However, the Company reasonably expects it has a
one or two year lead and will be able to capture a significant market share.
Despite the foregoing, there can be no assurance that the Company will be able
to capture such market share and/or compete effectively.
The Company believes that it competes on the basis of price and
service. The Company's success will depend on the Company's ability to
anticipate and respond to rapid changes in consumer preferences and the
introduction of new products. There can be no assurance that the Company will be
able to compete successfully in its markets.
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Trademarks
The Company has obtained a trademark registration for its "Communicard
by Pick" trademark. The Company has filed the following additional trademark
applications for use in connection with the following telephone Debit Cards:
COMMUNICASH, las Americas and Love Call.
Patents
The Company is a co-owner of a patent (together with The Next Edge,
Inc.) that is pending concerning the technology for a prepaid cellular telephone
system and expects to implement international patent filings and/or
registrations pertaining to such patent during 1996.
Employees
The Company employs a full-time staff of nine, one person on a
part-time basis, and has made arrangements with independent contractors for
various purposes, including selling the Company's telephone Debit Cards on a
commission basis. The Company considers its relations with its employees to be
satisfactory.
Item 2: Financial Information
The following selected financial data should be read in conjunction
with the Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Registration Statement. The selected data presented for, and as of the
end of, the years ended December 31, 1993, 1994 and 1995 are derived from the
consolidated financial statements of the Company, which financial statements
have been audited by Durland & Company CPAs, P.A., independent certified public
accountants. The consolidated balance sheet as of December 31, 1993, 1994 and
1995, and the consolidated statement of operations for the years ended December
31, 1993 1994 and 1995 and the accountants' reports thereon, are included
elsewhere in this Registration Statement.
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Selected Financial Data:
Statement of Operations Data (1):
Years Ended December 31
1993 1994 1995
---- ---- ----
Net sales ................... $ 23,301 $ 529,913 $ 1,565,039
Product cost of sales ....... $ 10,067 $ 753,346 $ 1,387,459
Gross profit/(loss) ......... $ 13,234 ($ 223,433) $ 177,580
Operating expenses .......... $ 171,340 $ 1,027,147 $ 1,200,918
Net Profit/(Loss) ........... ($ 158,106) ($ 1,250,580) ($ 1,068,371)
Net Profit/(Loss) per ....... -- -- ($ 0.03)
Share
Weighted average ............ -- -- ($40,130,516)
number of shares
outstanding(2)
Cash ........................ $ 6,453 $ 17,659 $ 110,715
Working Capital ............. ($ 47,129) ($ 1,127,590) ($ 1,074,159)
Total Assets ................ $ 27,492 $ 319,835 $ 2,661,524
Total Liabilities ........... $ 59,598 $ 1,341,521 $ 3,079,923
Minority Interest ........... -- -- $ 215,508
Shareholders Equity ......... ($ 158,106) ($ 1,021,686) ($ 633,907)
(1) - PICK was incorporation in August 1992, and commenced operations in
January 1993.
(2) - Shares are expressed on a fully diluted basis , as of September 12, 1995,
the date of the Company's recapitalization.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this Report.
Pick Communications Corp. was incorporated in April 1984 under the laws of
Utah as S.T.V., Inc. ("STV"). STV was formed by Fred L. Sumner, Steven P. Todd,
and Stephen H. Harkness to develop videos for golf instruction and instruction
in other sports skills. In February 1986, STV changed its name to Adolphus
Companies, Inc. ("Adolphus"). Adolphus was engaged in marketing and distributing
various wholesale food products. On December 31, 1987, Adolphus acquired
American Italian Food Processing Co., in a stock for stock exchange. In May
1988, Adolphus changed its name to Prime International Products, Inc. ("Prime").
Prime ceased operations in late 1990.
In July 1995, Prime changed its state of incorporation from Utah to
Nevada. On September 12, 1995, Prime executed a Stock Purchase Agreement to
exchange 16,500,000 shares of the Company's Common Stock for all of the
outstanding shares of common stock and warrants of Public Info/Comm Kiosk, Inc.
("Pick"), which made Pick a subsidiary of Prime. The transaction was a reverse
acquisition accounted for as a recapitalization of Pick, since the management of
Pick retained control of Prime subsequent to the merger. As such, no goodwill
was recognized in the transaction. Prime changed its name to Pick Communications
Corp. (the "Company") in December 1995.
All activities are presented, based on the actual operations of Pick, Inc.,
for periods prior to September 12, 1995. PICK Communications Corp., (f/k/a Prime
International Products, Inc.), had no operations 1995 prior to September 12,
1995. PCT was incorporated in October 1995, and very limited operations from
founding through December 31, 1995. As of December 31, 1995, the Consolidated
Financial Statements include the Company, Pick and PCT. The Company owns all of
Pick, Inc. and 50.4% of PCT. Accordingly, Pick and PCT are included in the
Consolidated Financial Statements of the Company.
Results of Operations
Pick generates revenues from sales of prepaid telecommunications,
primarily in the form of prepaid phone cards, otherwise referred to as telephone
Debit Cards. Despite having achieved steadily increasing levels of revenues
since inception, the Company's expenses have exceeded revenues, resulting in
losses of $158,106, $1,250,580, and $1,068,371 for the years ended December 31,
1993, 1994 and 1995 on a consolidated basis, respectively. Losses incurred since
inception have been primarily attributable to start-up costs, costs incurred in
connection with the development and promotion of the Company's products and the
hiring of additional personnel to support the Company's operations. The
Company's primary costs are incurred in connection with telephone air-time and
the design, printing, distribution, sales commissions and advertising expenses
relating to telephone Debit Cards.
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Generally Accepted Accounting Principles requires the Company to recognize
telephone Debit Card revenue based on air time useage. The Company recognizes
revenue based on its analysis of historical useage. While there is no way to
ensure that interpretations of historical usage will continue into the future,
the Company has chosen to recognize approximately 82% of sales in the first
twelve months after sale, with the remaining 18% recognized over the following
six months, totaling an eighteen month life of the cards. To the extent patterns
change, the Company will make the appropriate adjustments to the calculation of
revenues allocated to each month over the eighteen month revenue recognition
period. At the time of initial telephone Debit Card sales to wholesalers and
retailers, the Company recognizes all associated up-front costs, (e.g. design
royalties, printing, fulfillment, shipping, sales commissions, etc.), as well as
standard air-time costs associated with recognized revenues, and establishes
liabilities to vendors. As revenues are recognized in subsequent months, the
related air-time costs are recognized. Card stock purchases are recorded as
supplies in Prepaid Expenses, when purchased and valued at the cost of printing
and freight. The cards are expensed against Prepaid Expenses, as they are issued
(sold to wholesalers). Sales commissions are calculated and accrued to expense,
based on gross billings, prior to the deferrals of revenue, for each sales
representative at the agreed-upon rate. When the commissions are paid, they are
charged against the accrued commissions payable accounts, by sales
representative.
At the time actual usage is billed and paid to long distance carriers,
accrued liabilities are relieved. The Company plans to recognize revenue for the
value of unused calling time remaining upon each card's expiration (generally 12
- - 18 months after issuance). At such date, subject to the applicability, if any,
of escheat laws, that recognition will take place, although no such entries have
been recorded, to date.
The Company's revenues were primarily derived from the sale of
telephone Debit Cards for immediate consumption by the ultimate consumers.
Accordingly, Management does not expect a significant amount of unused time
(breakage) to accrue to the Company as a result of card expiration.
The Company depends on its switches to track the time activated on each
card and to properly decrease the amounts assigned to customer calls, based on
the termination points. The Company periodically tests the open balances to
determine if the switches are accurately tracking the appropriate rates and
times, by destination. If shipments of activated cards are lost or stolen prior
to sale to consumers, the Company has the ability to deactivate those cards by
notifying the switch managers and thereby limiting fraudulent use. To the extent
that a customer gives card PIN's (Personal Identification Numbers) to others,
the customers are responsible for unauthorized or fraudulent use of the cards.
Inasmuch as the cards are of relatively small value, normally $25 or less,
management does not consider this to be a major exposure.
The Company acts as a commission based agent for a provider of long
distance telephone services. To the extent that the Company sells such services,
the provider pays the Company a commission for realized sales. The Company
recognizes commission income as reported and paid by the carrier. Concurrently,
the Company accrues sales commission expenses payable to the Company's sales
agents.
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Years ended December 31, 1995 and December 31, 1994:
On a consolidated basis, the Company generated revenues of $1,565,039
and $529,913 for the years ended December 31, 1995 and 1994, respectively. These
revenues (and related costs) primarily represent the activity of Pick, inasmuch
as the parent company Pick Communications Corp., was inactive until the reverse
acquisition on September 12, 1995 and PCT, was established on October 24, 1995
and had no operations in 1995.
The increase in revenues of $1,035,126, or 195.3%, was primarily the
result of an expansion in the Company's customer base. The Company believes that
the growth in its customer base is attributable to the growing acceptance of
telephone debit cards in the United States. The gross profit margin of,
$177,580, was 11.3% of net sales for the year ended December 31, 1995, compared
to a gross margin loss of $223,443 for the year ended December 31, 1994. The
gross margin reflects the deferral of revenues until services are expected to be
rendered and front-loading of all expenses except time, as described previously.
As a result, the 1995 gross margin percentage is 11.3%, while it resulted in a
negative 42.2% in 1994. The improvement in 1995 over 1994 occurred primarily
because significant one-time development expenses associated with the
development of the telephone Debit Card product was charged to cost of sales in
1994. The vast proportion of the sales activity (98.8% in 1995 and 95.7% in
1994) relates to telephone Debit Card sales, and the Company believes the 11%
gross margin rate can be achieved, on a going forward basis. The 44.2% loss rate
in 1994 was attributable to the incurrence of disproportionate start-up costs.
To the extent that the same sales mix continues into the future, the Company
believes the aggregate gross margin rate could remain at the 11% level. The
gross margin rate could change in the future, however, to the extent the long
distance reseller business (which typically produces a slightly lower gross
margin rate) increased in proportion to telephone Debit Card sales, the margin
rate would be expected to be lower. To the extent the cellular licensing,
royalties and sales (which are expected to generate a higher gross margin rate)
increase proportionate to the telephone Debit Card and Long Distance sales, the
margin rate would be expected to rise.
Operating expenses were $1,200,918 (net of minority interest of $37)
and $1,027,147 for the years ended December 31, 1995 and 1994, respectively,
representing an increase of $173,771, or 16.9%. This increase is due to higher
administrative expenses of $443,878, or 104.1%, associated with the
establishment of a staff ($254,135), travel expenses ($99,189) and facility and
communications ($47,215), off-set by reduced sales and marketing expenses of
$316,237, or 55.2%. Sales and marketing expenses were reduced, at the direction
of management, to conserve cash and establish the administrative support. In
connection with the Company's recapitalization in September 1995, the Company
received additional working capital which it used to increase its level of
business activity. As a result, general and administrative expenses increased
substantially in the fourth quarter of 1995.
Operating expenses include depreciation of $30,475 and $11,967 for the
years ending December 31, 1995 and 1994, respectively. They include provisions
for bad debts or $42,650, and $15,028 for the years ended December 31, 1995 and
1994, respectively. The interest expense
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represents an accrual of interest relating to a dispute with a vendor, which was
not settled as of December 31, 1995. The Company expects to settle this matter
in 1996.
For the reasons itemized above, the Company incurred net operating
losses of $1,068,371 for the year ended December 31, 1995, compared to
$1,250,580 for the year ended December 31, 1994, representing an improvement of
$182,209 or 14.6%.
The Company expects that the development of the long distance reseller
business and the prepaid cellular telephone business can generate enough
revenues to provide break-even operations based on sales of $13,400,000,
supported by indirect expenses of $2,000,000, although there can be no assurance
that the Company will, in fact, achieve such results.
This Registration Statement contains certain forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
elsewhere in this document. The Assumptions of break-even could differ
materially from those stated above if recognized revenues vary from the
$13,400,000 projection, if the actual gross margin rate differs from the 15%
projection, or if indirect expenses vary from the $2,000,000 projection.
Years ended December 31, 1994 and December 31, 1993 on a consolidated basis:
The Company generated sales of $529,913 for the year ended December 31,
1994, compared to $23,301 for the year ended December 31, 1993, an increase of
$506,612. This significant increase reflects a general development of the
customer base and the introduction of the COMMUNICASH cards in August 1994. A
limited number of cards were available for sale in 1993.
The gross margin loss of $223,433, decreased to 42.2% of net sales for
the year ended December 31, 1994, compared to $13,234 (or 56.8%) for the year
ended December 31, 1993. The gross margin percentage decrease is due to the
switch in emphasis from commission revenue earned long distance sales (with a
higher gross margin), to the telephone Debit Card with significant start-up
costs associated with the product roll-out in August 1994 being charged directly
to the product.
While sales have increased, expenses have exceeded sales, resulting in
losses of $1,250,580 and $158,106 for the years ended December 31, 1994 and
1993, respectively.
Selling and marketing expenses were $573,724 for the year ended
December 31, 1994, compared to $4,903 for 1993 representing an increase of
$568,821 (or 11,601%). This variance is due primarily to the extensive placement
of advertising and promotional expenses in the fourth quarter of 1994 to support
the August 1994 product roll-out and the increase in sales commissions which
vary directly with sales activity. In 1994, the major portion of the operating
expenses were made in the last part of the year, principally, in support of a
major customer that has since developed its own telephone Debit Card.
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Operating expenses include depreciation of $11,967 and $1,669 for the
years ended December 31, 1994 and 1993, respectively. They include provisions
for bad debts of $15,028, and $0 for the years ending December 31, 1994 and
1993, respectively.
For the reasons itemized above, the Company, in a start-up phase,
incurred net operating losses of $1,250,580 for the year ended December 31, 1994
and $158,106 for the year ended December 31, 1993, representing an increase of
$1,092,474, or 691.0%.
The Company acquired 4,700,000 shares of Common Stock of Ultimistics., Inc.
, subsequent to December 31, 1995, which represents approximately 16.5% of
Ultimistics' outstanding shares. The shares are restricted securities under Rule
144 of the Securities Act of 1933, as amended, and cannot be sold in the open
market until 1997. At December 31, 1995, the Company also holds 5,000,000 shares
of Firenze, Ltd., which also are restricted securities under Rule 144 and cannot
be traded in the open market until 1998. The Firenze shares are valued at
$10,000 on the balance sheet of the Company. Please see the discussion of
investment in marketable equity securities in "Liquidity and Capital Resources,"
for further information. The Company owns 22,750,000 shares or (50.4%) PCT which
was established in October 1995 to market and distribute the Company's prepaid
cellular technology in the United States and Canada. The Company intends to hold
its investment in PCT Prepaid Telephone, Inc., as an operating subsidiary for
that purpose. No other significant investment activity has occurred.
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock
Based Compensation". The Company will have to implement SFAS 123 for the fiscal
year ending December 31, 1996. The Company has not yet had sufficient time to
evaluate the impact, if any, of the provisions of SFAS 123.
Liquidity and Capital Resources
The Company has generated a deficit of $2,143,602 since inception of its
telecommunications activities in 1993. During the current year, it generated a
cash increase $93,056, which resulted primarily from the sale of stock
($1,015,400), offset by the net loss from operations of $1,068,371. The
increases in the Company's operating activities causing revenues and expenses to
rise in tandem, have also increased the associated current assets and
liabilities. Accounts receivable increased by $693,856, prepaid telephone card
inventory increased by $136,991, and the inventory of prepaid telephone time
increased by $485,697, requiring uses of cash. Increases in accruals for direct
cost telephone time of $634,547 and deferred revenue of $479,786 contributed to
cash. In addition, $250,000 was provided by the receipt of third-party debt. The
Company anticipates operating cash flows will primarily arise from the resale of
long distance telephone time to carriers, while cash flows from the telephone
Debit Card business will be marginal, due to heavy competition. In support of
these businesses, additional monthly fixed costs of $25,000 - $75,000 will be
required to increase capacity, but they are expected to be more than off-set by
increased gross margins, once volumes build to expected levels. With respect to
the Company's plans to implement the prepaid cellular telephone business, the
Company will likely require additional working capital
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<PAGE>
to bring this product to market. The Company intends to raise this capital
through a combination of prepaid sales, acceptance of cash or letters of credit
as deposits toward equipment purchases and productive expenses, co-ventures
and/or the possible public or private sale of the Company's debt of equity
securities, for none of which does the Company have any agreement, understanding
or commitment.
In April 1996, the Company arranged for the use of an alternate switch
through which it resells telephone time to other carriers. In this connection,
the Company intends to aggregate volumes necessary to obtain more favorable
air-time rates, which will apply to all of its lines of business. The Company
will seek to expand its existing telephone debit card business to selected
target markets which can provide the greatest return on investment.
The Company intends to implement arrangements for the production,
licensing for sale and distribution of prepaid cellular telephones, pursuant to
its agreement with The Next Edge ("TNE"). This is expected to cost $925,000 over
the next five years ($500,000 in cash at $25,000 per quarter, and $425,000 in
stock at the rate of 20,000 shares per year, equal to the bid price at October
24, 1995 of $4.25 multiplied by 100,000 restricted shares of Prime) TNE for the
commercialization of its prepaid cellular telephone control system technology.
In this connection, it intends to solidify initial licensing agreements, obtain
financing and distribute to selected market segments on a controlled basis.
In October 1995, the Company obtained co-ownership in the patent
pending from TNE, for the technology for a prepaid cellular telephone system and
the exclusive rights to manufacture, market, sell and distribute the system
worldwide. To develop the prepaid cellular telephone system, the Company will be
required to procure software, microchips and cellular telephones and establish
the necessary assembly plant and distribution and marketing networks. In this
regard, the Company is the process of, or has:
(a) finalizing the patents, copyrights and trademarks for the prepaid
cellular product;
(b) licensed the rights to market and sell the prepaid telephone in the US
and Canada to PCT for a majority ownership of PCT.
(c) licensing the rights to market and sell the prepaid cellular telephone
in various countries in Europe, as well as all of Asia, Africa and Australia to
Firenze, a non-affiliated company for a 5% royalty on gross sales (micro-chips,
software and air time). In addition, the company, to provide micro-chips and
software to Firenze at 10% over the company's cost of procurement. In the first
quarter of 1996, the company was determined that firenze would not be able to
finance the marketing of the product to its territory. Therefore, a significant
portion of the licensed territories were transferred to Yakimoto, a
non-affiliated company, for the same 5% royalty rate and 10% mark-up over cost.
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(d) licensing the rights to market and sell the prepaid cellular telephone
in South America to Yakimoto, for a 5% royalty fee based on gross sales of
micro-chips, software and air time. In addition, the agreement requires the
Company to provide micro-chips software and air time to Yakimoto, at 10% over
the Company's cost of procurement; and
(e) retain or license exclusive rights to distribute the prepaid cellular
phones in Mexico, Central America, and the Caribbean.
The Company expects to finance the letter of credit in support of the
$500,000 cash payments to TNE, out of operating cash flows. Subsequent to the
initial five-year period, at the Company's sole option, it may extend the
agreement for five additional periods of five years each, at a cost of $100,000
per year. If the product proves to be commercially viable, the Company will
extend the agreement and make those payments out of operating cash flows.
The Company hopes to maintain and expand its telephone Debit Card
business, while simultaneously developing and expanding into the resale of long
distance to other carriers, and prepaid cellular telephone businesses. As a
strategic matter, the Company believes that it is advantageous to operate in
three related lines of business to spread its risk. The Company will direct
resources to those segments, as available, to build the strongest base to
support the Company's long term growth objectives. At this time, while the
Company cannot currently project which segment will take precedence, it sees
potential for growth in all areas.
The Company has entered into commitments to obtain blocks of telephone
air time at favorable rates (amounting to $420,000) over the next twelve months.
Subsequent to year end, the Company exchanged that telephone air time for
$2,000,000 in advertising time that may be used over the next two years. The use
of this advertising will reduce the cash out-flow requirements in the periods
used. In 1996, based upon the actual usage of the advertising time, the Company
expects to recognize income for the advertising time earned, to the extent it
exceeds the cost of the air time given up. The gross value of barter advertising
will be charged to advertising expense in the period, as used.
In January 1996, the Company entered into an agreement to obtain
$3,000,000 of prepaid advertising in exchange for 1,150,000 shares of its stock.
This prepaid advertising may be used for any of the Company's marketing efforts,
including the prepaid cellular business. The Company plans to use the prepaid
advertising extensively, to support both the telephone Debit Card and the
prepaid cellular telephone activities.
During 1995, the Company retained a consultant who received the right to
purchase 1,500,000 shares of the Company's stock as of September 12, 1995 at
$.055 per share. The consultant declined to exercise that right, and because the
Company was in need of additional cash, the Company's President was willing and
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able to provide the operating cash to the Company, the consultant
transferred his rights to the President and the Company's Board of Directors
authorized subsequently the transfer of the right from the consultant to the
President and for the President to purchase those shares from the Company.
The Company has no significant commitments for real estate or equipment
purchases. See Item 3: "Roperties" for a description of the Company's office
lease.
The Company is dependent upon receiving the proceeds from the sale of
1,250,000 shares of Common Stock of the Company to two non-affiliated investors.
To date, the Company has received $525,000 and the remaining $725,000 is
expected to be paid during the following twelve months. Such monies are expected
to be used to implement the proposed expansion of the long distance reseller
business. If and when implemented, these products (telephone Debit Cards and
resale of long distance to carriers business) will aggregate to significant
volumes of traffic by which the Company expects to obtain more favorable costs
across those lines of business. In addition, if the Company's telephone Debit
Card is used in conjunction with the prepaid cellular phones, to make
international calls, that traffic will also add to the aggregate minutes of
traffic for volume discount purposes.
The Company plans to spend between $700,000 and $900,000 in capital
expenditures over the next twelve months. These expenditures will be made in
support of the growth of all three lines of business, in the form of computer
equipment and communications, as well as for expanded office space, furniture
and office equipment.
The Company owns 4,700,000 shares of Common Stock of Ultimistics.
Ultimistics is a commercial/residential real estate company in France. On June
28, 1996 the bid price was 4.125 and the ask price was 5.125 for Ultimistics
stock.
In accordance with FAS 115, Management anticipates discounting those
shares by 70% when it values the various transactions by which it receives
Ultimistics, stock in 1996. They include:
(a) Exchange of 1,000,000 shares of Foxwedge, Inc., for 500,000 shares of
Ultimistics. As of December 31, 1995, the Company owned 1,000,000 shares of
Foxwedge, Inc., which it acquired at the time on September 12, 1995 in exchange
for 3,000,000 shares of the Company's Common Stock. The Company has valued those
shares nominally, at $6,000, the par value of the Company's shares issued, due
to concerns by the Company about the Foxwedge operations and viability. As of
December 23, 1995, the Company entered into an agreement to exchange the
1,000,000 shares of Foxwedge, Inc., for 500,000 shares of Ultimistics, which
occurred on January 12, 1996. The Company expects to record a book gain of
$1,194,000 on this exchange. This transaction is expected to be recorded as a
non-taxable exchange of like-kind assets in 1996 for tax purposes.
(b) Exchange of 1,250,000 shares of the Company's Common Stock for 500,000
shares of Ultimistics. The Company's Board of Directors authorized this
transaction on January 25, 1996. This transaction will be treated as a
contribution of capital.
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(c) Sale of license to market and distribute the prepaid cellular telephone
technology in various countries in South America to Yakimoto, in exchange for
1,000,000 shares of Ultimistics. The Company's Board of Directors authorized
this transaction on January 25, 1996. This transaction is expected to be treated
as a taxable sale of licenses.
(d) Transfer of license to market and distribute the prepaid cellular
telephone technology in Asia, Africa, Australia and various countries in Europe,
from Firenze, to Yakimoto, in exchange for 500,000 shares of Ultimistics. The
Company's Board of Directors authorized this transaction on January 25, 1996.
This transaction will be treated as a taxable sale of licenses.
(e) Exchange of 5,000,000 shares of Firenze, with an officer of Firenze,
for 2,000,000 shares of Ultimistics. The Company acquired the 5,000,000 shares
of Firenze, for 5,000,000 shares of the Company's Common Stock and granted a
license to Firenze to market the prepaid cellular phone technology in Europe,
Asia, Africa and Australia. The Company has valued the Firenze shares nominally
at $10,000, the par value of the Company's shares issued. As of March 22, 1996,
the Company exchanged 5,000,000 shares of Firenze, for 2,000,000 shares of
Ultimistics, after the Company became concerned about Firenze's ability to
perform under its agreement. The transaction occurred in April 1996. This
transaction is expected to be recorded as a non-taxable exchange of like-kind
assets in 1996.
The Company has acquired a total of 4,700,000 shares of Ultimistics in
1996. Its valuation of those shares, which have a 4.125 bid price and a 5.125
ask price as of June 28, 1996, bear the restrictive legend under Rule 144 of the
Securities Act of 1933, as amended, are thinly traded, and currently represent
approximately 16.5% of the outstanding shares. Accordingly, these shares will be
discounted by 70%. On a consolidated basis, Ultimistics transactions were nil
for the years preceding 1995. The Company believes that it is in its best
interest to hold these shares for the foreseeable future, in the hope that they
will appreciate in value and become more liquid over time.
All bid/ask price quotes within this document are from the OTC Bulletin
Board System, where all these equity securities currently are listed.
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Statement of Operations Data for Ultimistics, Inc.
Since a substantial portion of the Company's assets include shares of
Ultimistics, the following table sets forth selected financial data of
Ultimistics, derived from its audited financial statements, and are in US
Dollars.
Year Ended
December 31
1995
Total Revenues ........................................... $ 3,384,436
Operating Expenses ....................................... 2,556,527
Income/(Loss) from Operations ............................ 827,909
Interest expense ......................................... 836,791
Loss Before Taxes, Minority Interest &
Pre-Acquisition Costs ............................. (96,031)
Minority Interests in Subsidiary Loss..................... 1,538
Pre-Acquisition Loss ..................................... 54,326
Income taxes ............................................. -0-
Net Loss ................................................. (40,122)
Weighted average number of
shares outstanding ................................ 24,613,915
Cash ..................................................... 524,089
Working Capital .......................................... 1,578,595
Total Assets ............................................. 44,260,267
Total Liabilities ........................................ 11,632,651
Minority Interest ........................................ 823,125
Shareholders' Equity ..................................... 31,804,491
The Company anticipates, based on its current plans and assumptions
relating to its operations, that its cash balances, together with projected cash
flows from operations, will be sufficient to satisfy the Company's contemplated
cash requirements for the next 12 months. In the event that the Company's plans
change, its assumptions change or prove to be inaccurate or cash flows otherwise
prove to be insufficient to fund operations, the Company may be required to seek
financing or curtail its proposed expansion. The Company has no current
arrangements with respect to, or sources of, additional financing, and it is not
anticipated that existing stockholders will provide any portion of the Company's
future financing requirements. There can be no assurance that additional
financing will be available to the Company on commercially reasonable terms, if
at all.
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Item 3: Properties
The Company leases office space in Wayne, New Jersey on a 63 month
lease at a current monthly rental of $8,620.
Item 4: Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the date of this filing, the
number of shares of the Company's outstanding Common Stock, $.002 par value,
beneficially owned (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934) by each director of the Company, by each named executive
officer of the Company, by each beneficial owner of more than 5% of the
Company's Common Stock and by all of the Company's officers and directors as a
group.
Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership (1) of Class (2)
- ------------------- ------------------------ ------------
Diego Leiva ......................... 12,181,500 27.9%
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
Robert Sams ......................... 665,000 1.5%
The Lodge - South Park
Penshurst, Tonbridge
Kent, TN11 8EA
England
Ricardo Maranon ..................... 938,750(4) 2.1%
1400 Stillwater Drive
Miami Beach, FL 33141
Greg Manning ........................ 5,000,000 11.4%
775 Passaic Avenue
West Caldwell, NJ 07006
Raymond M. Brennan .................. 1,011,500 2.3%
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
Karen M. Quinn ...................... 871,250 2.0%
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
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Name and Address Amount and Nature of Percentage
of Beneficial Owner Beneficial Ownership (1) of Class (2)
- ------------------- ------------------------ ------------
Karl R. Petersson ................... 871,250 2.0%
115 Route 46 West, Suite A-2
Mountain Lakes, NJ 07046
Firenze, Ltd. ....................... 5,000,000 11.5%
230 Park Avenue, Suite 1000
New York, NY 10022
All officers and directors as a ..... 21,539,250 46.1%
group (7 persons)
(1) Unless otherwise noted, all shares are beneficially owned and the sole
voting and investment power is held by the person indicated.
(2) Based on 43,192,516 shares outstanding as of the date of this filing. Each
beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person and which are convertible
or exercisable within sixty (60) days of the date hereof (pursuant to Rule
13d-3 under the Securities Exchange Act of 1934) have been converted or
exercised.
(3) Includes 4,290,000 shares beneficially owned by Mr. Leiva's wife, 792,000
shares beneficially owned by a trust for Mr. Leiva's son for which Mr.
Leiva serves as trustee and 792,000 shares beneficially owned by a trust
for Mr. Leiva's daughter for which Mr. Leiva serves as trustee.
(4) Includes options to purchase 500,000 shares of the Company's Common Stock
at a price of $2.75.
(5) Includes 150,000 shares owned by All Florida Advertising, Inc., a company
of which Mr. Maranon is an officer.
(6) These shares are held by Greg Manning Auctions, Inc., a company controlled
by Greg Manning, a director of the Company.
(7) Includes 250,000 shares beneficially owned by Mr. Brennan's wife.
(8) Includes an aggregate of 3,500,000 options held by the Company's directors
and officers to purchase a like number of shares of the Company's Common
Stock at a price of $2.75 per share.
25
<PAGE>
Item 5: Directors and Executive Officers
Set forth below are the names of all directors and executive officers
of the Company along with certain information relating to the business
experience of each of the listed officers.
Name Age Position
Diego Leiva 45 President, Chief Executive Officer and Chairman
Karl R. Petersson 50 Vice President and Chief Financial Officer
Raymond M. Brennan 58 Vice President, Secretary and Director
Karen M. Quinn 48 Vice President of Corporate Communications and
Operations
Robert R. Sams 57 Director
Ricardo Maranon 51 Director
Greg Manning 49 Director
Directors are elected to serve until the next annual meeting of
stockholders or until their successors are elected and qualified. Officers serve
at the discretion of the Board of Directors subject to any contracts of
employment.
Diego Leiva has been Chief Executive Officer, President and Chairman of
the Company since September 1995. Mr. Leiva founded Pick in August, 1992, and
has been its President, Chief Executive Officer and Chairman since its
inception. From 1989 to July 1992, he was Director of Sales for Apertus
Technologies, Inc., a computer telecommunications sales firm. Prior thereto, he
was Vice president of Marketing and Sales for Market Makers, Inc., Chief
Operating Officer of Silo, Inc., and President of Astroglow Lamps Company.
Karl R. Petersson has been Vice President and Chief Financial Officer of
the Company since September 1995. Since September 1994, Mr. Petersson has served
as Vice President and Chief Financial Officer of Pick. From June 1994 to August
1995, Mr. Petersson was employed by United Jewish Appeals Federation of Jewish
Philanthropies of New York, a charitable organization, as its Director of
Internal Audit. From November 1991 to May 1994, Mr. Petersson served as Vice
President of Finance and Administration of the Telecommunications Cooperative
Network of New York, Inc. From August 1981 to October 1991, Mr. Petersson served
as Vice President of Finance and Controller of Radio City Music Hall
Productions, Inc., where he administered both the Accounting and Finance
Departments.
Raymond M. Brennan has been Vice President, Secretary and a Director of the
Company since September 1995. Since May 1994, Mr. Brennan has served as Vice
President, Secretary, and General Counsel of Pick. From April 1990 to April
1994, Mr. Brennan served as Executive Vice President and General Counsel of EOL,
Inc., a full service event production and marketing
26
<PAGE>
company. From January 1982 to March 1990, Mr. Brennan served as Vice President
of Business Affairs for Radio City Music Hall Productions, Inc., where he
administered both the Purchasing and Legal Departments.
Karen M. Quinn has been Vice President of Corporate Communications and
Operations of the Company since September 1995. Since December 1992, Ms. Quinn
has been employed at Pick, and was appointed Vice President of Operations in May
1994. From September 1989 to April 1995, Ms. Quinn served as Business Manager
for George M. Glassman, M.D., P.C.
Robert R. Sams has been a Director of the Company since September 1995. Mr.
Sams formed Saicol Limited in 1983, where he engages in merchant banking,
corporate finance, acquisitions and financial advisory services.
Ricardo Maranon has been a Director of the Company since September
1995. Mr. Maranon founded Maranon & Associates Advertising., an advertising
agency based in Miami, Florida, in 1985, and has served as its President since
its inception.
Greg Manning has been a Director of the Company since September 1995. Mr.
Manning has been Chairman of Greg Manning Auctions, Inc. ("Auctions"), since its
inception in 1981 and Chief Executive Officer since December, 1992. Mr. Manning
served as Auctions' President from 1981 until August 1993. Mr. Manning has been
President and Chairman of CRM, formerly Greg Manning Company, Inc. since its
inception in 1961.
Item 6: Executive Compensation
The following table sets forth all compensation awarded to, earned by,
or paid for all services rendered to the Company by the Company's Chief
Executive Officer. No other executive officer of the Company received total
compensation in excess of $100,000 during the last three years.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Payouts Awards
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-
term
Other Restrict- incen-
Name Annual ed tive All
and Compen- Stock Options/ Plan Other
Principal sation Award(s) SARs Payouts Com-
Position Year Salary ($) Bonus ($) ($) ($) (#) ($) pensation
- --------- ---- ---------- --------- ------- --------- ----- ------- ---------
Diego Leiva, 1995 $ 93,750 (1) $ 0 0 0 0 0 0
Chief Executive 1994 $ 76,523 (1) $ 0 0 0 0 0 0
Officer and 1993 $ 0 (2) $ 0 0 0 0 0 0
Chairman of the
Board of Directors
</TABLE>
27
<PAGE>
- --------------------------------
(1) Mr. Leiva was entitled to compensation of $150,000. The Company has been
accruing for the amounts not paid to Mr. Leiva.
(2) Mr. Leiva was entitled to compensation of $125,000, all of which was waived
by Mr. Leiva.
Compensation of Directors
No compensation is paid by the Company to any of its Directors, who
are not employees of the Company. However, each Director is entitled to receive
reimbursement for travel expenses for attendance at meetings of the Board.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was an officer or employee
of the Company or of any of its subsidiaries during the prior year or was
formerly an officer of the Company or of any of its subsidiaries. None of the
Executive Officers of the Company has served on the Compensation Committee
during the last fiscal year of any other entity, any of whose officers served on
the Compensation Committee of the Company.
Item 7: Certain Relationships and Related Transactions
On September 12, 1995, Diego Leiva, the Company's President and
Chief Executive Officer, and certain members of Mr. Leiva's family entered into
an Agreement and Plan of Reorganization (the "Agreement") with the Company
pursuant to which Mr. Leiva and his family members exchanged an aggregate of
701,000 shares of the Common Stock of Pick owned by them for 11,566,500 shares
of the Company's Common Stock. The Agreement further provided that the Company
would undertake to cause the remaining shareholders of Pick to exchange each of
their shares of Pick Common Stock for 16.5 shares of the Company (the "Pick
Exchange"). The Pick Exchange commenced in October 1995 and as of May 1996 all
former stockholders of Pick had exchanged their shares, except for one.
In connection with the Pick Exchange: (1) Diego Levia received
11,566,500 shares of Common Stock of the Company, including 4,290,000 shares
beneficially owned by Mr. Leiva's wife, 792,000 shares beneficially owned by a
trust for Mr. Leiva's son for which Mr. Leiva serves as trustee and 792,000
shares beneficially owned by a trust for Mr. Leiva's daughter for which Mr.
Leiva serves as trustee; (2) Karl R. Petersson, Vice President and Chief
Financial Officer of the Company, received 371,250 shares of Common Stock of the
Company; (3) Raymond M. Brennan, Vice President, Secretary and a Director of the
Company, received
28
<PAGE>
511,500 shares of Common Stock of the Company, including 250,000 shares
beneficially owned by Mr. Brennan's wife; and (4) Karen M. Quinn, Vice President
of Corporate Communications and Operations of the Company, received 371,250
shares of Common Stock of the Company.
Robert R. Sams, a Director of the Company, received 165,000 shares
of Common Stock of the Company in the Pick Exchange. Ricardo Maranon, a Director
of the Company, received 288,750 shares of Common Stock of the Company in the
Pick Exchange.
On September 12, 1995, in accordance with the Agreement, Greg
Manning Auctions, Inc., a company controlled by Greg Manning, a Director of the
Company, acquired 4,500,000 shares of Common Stock of the Company in exchange
for $250,000. The purchase price for the foregoing shares was determined as a
result of arm's length negotiations between the Company and Greg Manning
Auctions.
During the years ended December 31, 1993 and December 31, 1994,
Diego Leiva, the Company's President and Chief Executive Officer, advanced the
Company $52,035 and $114,500, respectively. The Company repaid $9,500 in 1994
and $3,035 in 1995.
Mr. Leiva, the Company's President, was entitled to receive a salary of
$150,000 and $125,000 for 1994 and 1993, respectively. He waived the 1993 salary
in total.
The Company purchased advertising services (approximately $144,000
in 1994 and $10,500 in 1995) from an entity controlled by Ricardo Maranon, who
became a stockholder of the Company and a member of its Board of Directors in
1995.
On January 31, 1996, the Company issued 150,000 shares to All Florida
Advertising, Inc., a company for which Richard Maranon, a Director of the
Company, serves as an officer, at a price of $2.35 per share as part of the
1,150,000 shares issued for the acquisition of $3.0 million prepaid advertising
services.
On January 25, 1996, the Company's Board of Directors approved the
reservation of 5,000,000 shares of the Company's Common Stock for the granting
of the stock options to the Company's directors, officers and employees, as an
incentive. The Company granted 500,000 shares each to Messrs. Leiva, Maranon,
Manning, Sams, Brennan, and Petersson, and Ms. Quinn, accounting for 3,500,000
of the authorized 5,000,000 shares set aside for this purpose. Each grantee has
the right to purchase shares at $2.75 each, (10% over the market value on
January 25, 1996), and may exercise these grants within the three-year period
ending January 25, 1999.
29
<PAGE>
Item 8: Legal Proceedings
The Company is not currently subject to any legal proceedings.
Item 9: Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
The Company's Common Stock has been traded in the over-the-market
and reported on the NASD electronic bulletin board, under the symbol "PRMF"
since August 17, 1995. Prior to that date, the Company's Common Stock had been
traded in the National Quotation Bureau "pink sheets" under the symbol "PRIT";
however, no trading was reported prior to such date. The following table sets
forth the high and low bid prices of the Company's Common Stock as reported on
the over-the-counter market for the periods indicated. The prices represent
inter-dealer quotations, without retail mark-up, mark-down or commission, and
may not necessarily represent actual transactions.
Bid Prices
Period High Low
Calendar Year 1995
Third Quarter $6.625 $1.00
(August 17, 1995 to
September 30, 1995)
Fourth Quarter $6.25 $2.00
Calendar Year 1996
First Quarter $4.50 $3.00
As of May 13, 1996, there were approximately 177 record holders of the
Company's Common Stock.
The Company has never paid any cash dividends on its Common Stock and
has no present intention to do so. The Company intends to retain all of its
earnings for use in its business.
Item 10: Recent Sales of Unregistered Securities
During the past three years, the Company has sold securities to a
limited number of persons, as described below. There were no underwriters
involved in the transactions and there were no underwriting discounts or
commissions paid in connection therewith, except as disclosed below. The
issuances of these securities were considered to be exempt from registration. As
to
30
<PAGE>
all issuances after September 12, 1995, when there was a change in control of
the Company, Management believes that such issuances were exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Act"), and the regulations promulgated thereunder. The purchasers of securities
in each such transaction represented their intention to acquire the securities
for investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the certificates
for the securities issued in such transactions. All purchasers of securities in
each such transaction had adequate access to information about the Company.
On January 25, 1994, the Company issued 106,952 shares of Common Stock
to R. Blair Lund in consideration for services valued at $40,544.
On March 1, 1994, the Company issued 6,685 shares of Common Stock to
Polycorp Industries, Inc. in consideration for the cancellation of a note
payable in the amount of $62,500.
On March 1, 1995, the Company issued 10,157 shares of Common Stock to
John Lund in consideration for services valued at $3,798.
On August 8, 1995, the Company issued 10,000 shares of Common Stock to
Michel Ladovitch in consideration for services valued at $10,464. Also, on
August 8, 1995, the Company sold in a private placement, an aggregate of
8,000,000 shares of Common Stock in consideration for $240,000 to a group of 20
investors.
On September 12, 1995, the Company issued 11,566,500 shares of Common
Stock to Diego Leiva, including 4,290,000 shares beneficially owned by Mr.
Leiva's wife, 792,000 shares beneficially owned by a trust for Mr. Leiva's son
for which Mr. Leiva serves as trustee and 792,000 shares beneficially owned by a
trust for Mr. Leiva's daughter for which Mr. Leiva serves as trustee, in
consideration for 701,000 shares of Common Stock of Pick. Also, on September 12,
1995, the Company issued 4,686,000 shares of Common Stock to Snow Becker Krauss
P.C., as escrow agent for the Pick stockholders participating in the Pick
Exchange; 4,500,000 shares of Common Stock to Greg Manning Auctions, Inc. in
consideration for $250,000; and 500,000 shares of Common Stock to Vienex
Holdings, Ltd. in consideration for the conversion of a $250,000 loan previously
made to Pick.
On September 12, 1995, the Company issued to Howard Silverman, a
consultant, the right to purchase 1,500,000 shares at an aggregate cost of
$82,500. Mr. Silverman declined to pay for these shares. The right to acquire
these shares was subsequently transferred to Diego Leiva by the Company's Board
of Directors, and Mr. Leiva paid the Company for these shares.
On October 30, 1995, the Company issued 5,000,000 shares of Common
Stock to Firenze, Ltd. ("Firenze") and granted Firenze an exclusive license to
market and sell the Company's prepaid cellular telephone in various countries in
Europe, Asia, Australia and Africa in
31
<PAGE>
consideration for 5,000,000 shares of Common Stock of Firenze. See "Item 1:
Business - Prepaid Cellular Telephone."
In connection with a contract dated November 21, 1995, the Company has
issued an aggregate of 350,000 shares of Common Stock to Sergio Pino in
consideration for $350,000 in accordance with the following schedule: November
24, 1995 -- 100,000 shares; November 27, 1995 -- 50,000 shares; December 29,
1995 -- 50,000 shares; January 4, 1996 -- 100,000 shares; February 12, 1996 --
25,000 shares; and February 20, 1996 -- 25,000 shares.
On December 11, 1995, the Company agreed to issue 412,500 shares of Common
Stock to Howard Silverman which were the subject of an amendment to a May 1995
consulting agreement and an amendment to the September 1995 merger agreement.
Mr. Silverman tendered his $250 check in June 1995 for payment in full of those
shares. See note 14f of Notes to Consolidated Financial Statements. These shares
were issued in January 1996.
On January 4, 1996, the Escrow Agent issued 20,000 shares of Common Stock
to The Next Edge, Inc. in connection with an agreement to obtain prepaid
Cellular technology. The Company issued 100,000 shares to the Escrow Agent in
October 1995. See "Item 1: Business - Prepaid Cellular Telephone" and "Note 9
of Notes to Consolidated Financial Statements."
In connection with a contract dated January 4, 1996, the Company sold
250,000 shares to Blackstone Calling Card, Inc. at a price of $1.00 per share.
Blackstone paid $100,000 for such shares on January 19, 1996, $25,000 on
February 23, 1996, 50,000 on April 16, 1996 and $75,000 on May 6, 1996.
In connection with a contract dated January 31, 1996, the Company issued
1,000,000 shares to International Executive Services at a price of $2.35 per
share in exchange for prepaid advertising services.
On January 31, 1996, the Company issued 150,000 shares to All Florida
Advertising, Inc., a company for which Richard Maranon, a Director of the
Company, serves as an officer, at a price of $.547 per share in connection with
the acquisition of prepaid advertising services.
On January 25, 1996, the Company issued 1,250,000 shares to Ultimistics,
Inc. in exchange for 500,000 shares of Ultimistics, Inc. common stock.
Item 11: Description of Registrant's Securities to be Registered.
The Company is authorized to issue up to 50,000,000 shares of Common
Stock, par value, $.002 per share. As of January 16, 1996, 43,192,516 shares of
Common Stock were issued and outstanding.
Each share of Common Stock is entitled to one vote per outstanding
share held on each matter submitted to a vote at a meeting of shareholders. Each
shareholder may exercise such vote
32
<PAGE>
either in person or by proxy. Shareholders are not entitled to cumulate their
votes for the election of Directors. There are no preemptive or other
preferential rights to purchase additional shares of Common Stock. Upon
liquidation, dissolution or winding-up of the Company, the holders of Common
Stock are entitled to receive, pro rata, the assets of the Company which are
legally available for distribution to shareholders subject to the prior rights
on liquidation of creditors and the holders of shares of Preferred Stock, if
any. All of the issued and outstanding shares of Common Stock are validly
authorized, fully paid and non-assessable.
Dividends
The Company has not paid any cash dividends on its Common Stock. The
present policy of the Board of Directors is to retain earnings to finance the
operations and development of the Company's business. Accordingly, it is
anticipated that no cash dividends will be paid in the foreseeable future.
Transfer Agent
The transfer agent for the Common Stock is Interwest Transfer Co.,
Inc. 1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117. Reports to
Stockholders The Company, by filing this Registration Statement, is
registering its Common Stock under the provisions of Section 12(g) of the
Securities Exchange Act of 1934, as amended. Such registration requires the
Company to comply with periodic reporting, proxy solicitation and certain other
requirements of the Securities Exchange Act of 1934, as amended. Item 12:
Indemnification of Directors and Officers.
The Company's By-laws provide for indemnification of officers and
directors to the fullest extent permitted by Nevada law. In addition, under the
Company's By-laws, no director shall be liable personally to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided that the Certificate of Incorporation does not eliminate the liability
of directors for (i) any breach of the director's duty of loyalty to the Company
or its stockholders; (ii) acts of omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) acts or omissions in
respect of certain unlawful dividend payments or stock redemptions or
repurchases; or (iv) any transaction from which such director derives improper
personal benefit.
33
<PAGE>
Item 13: Financial Statements and Supplementary Data.
The Company's financial statements are included in a separate Section
of this Report following Item 15.
Item 14: Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
On November 1, 1995, the Company dismissed the accounting firm of
Jones, Jensen, Orton & Company (the "Former Accountant") as the Company's
principal accountants.
The Former Accountant's report on the financial statements for the
fiscal years ended December 31, 1993 and 1994 did not contain an adverse opinion
or a disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles.
The decision to change accountants was approved by the Board of
Directors.
During the Company's last two fiscal years and the subsequent interim
period preceding the Former Accountant's dismissal, there were no disputes with
the Former Accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
Durland & Company, CPAs, P.A. Pick's previous auditor, was engaged as the
Company's principal accountant to audit the Company's financial statements for
the fiscal year ended December 31, 1995.
Item 15: Financial Statements and Exhibits.
Index to Financial Statements and Exhibits Page
Independent Auditors' Report ..................................... F-1
Balance Sheets as of December 31, 1993, 1994 and
1995 ...................................................... F-2
Statement of Operations for the years ended December 31, 1993,
1994 and 1995 ............................................. F-3
Statement of Stockholders' Equity for the years ended December 31,
1993, 1994 and 1995 ....................................... F-4
34
<PAGE>
Statement of Cash Flows for the years ended December 31, 1993, 1994
and 1995 ................................................... F-5
Notes to the Financial Statements ................................. F-6
Exhibits
2 Agreement and Plan or Reorganization by and among the Company,
Pick, Diego and Sylvia Leiva. (1)
3.1 Articles of Incorporation of PRIME (Utah) dated April 30, 1984.
(1)
3.2 Certificate of Merger by and between PRIME (Utah) and PRIME
(Nevada).(1)
3.3 Articles of Incorporation of PRIME (Nevada).(1)
3.4 By-laws of PRIME (Nevada).(1)
3.5 Certificate of Amendment to Certificate of Incorporation. (1)
10.1 Lease for the Company's offices dated March 30, 1995.(1)
10.2 Agreement between Pick and Telecommunications Service Center,
Inc. dated June 1, 1994.(1)
10.3 Agreement between Pick and Com Tech International Corporation
dated September 5, 1995.(1)
10.4 Agreement between Pick and Innovative Holding Corporation dated
November 17, 1995.(1)
10.5 Agreement between Pick and Roland Gebhardt Design dated January
1, 1994.(1)
10.6 Agreement between Pick and Players Computer, Inc. dated October
1, 1994.(1)
10.7 Form of Distributor Agreement.(1)
10.8 Agreement between the Company and Philippe Hababou dated October
3, 1995.(1)
10.9 Agreement between the Company and The Next Edge, Inc. dated
October 20, 1995.(1)
35
<PAGE>
10.10 Agreement between Pick and Hynes Sales Company, Inc. dated
December 1, 1994.(1)
10.11 Agreement between Pick and Pankow Associates, Inc. dated
December 15, 1994.(1)
10.12 Agreement between Trescom USA Inc. and Pick Inc. dated April 10,
1996.(1)
10.13 Agreement between P.C.T. Prepaid Telephone Inc. and Prime
International Products, Inc. dated October 24, 1995.(1)
10.14 Agreement between Firenze Ltd. and Prime International Products,
Inc. dated October 24, 1995.(1)
10.15 Agreement between Yakimoto Ltd. and Prime International Products,
Inc. dated January 6, 1996.(1)
10.16 Agreement between Yakimoto Investment Ltd. and Prime
International Products, Inc. dated January 25, 1996.(1)
10.17 Agreement between AT&T Corp. and Pick Communications Corp. dated
February 26, 1996.
10.18 Agreement between Cherry Communications, Inc. and Pick, Inc.
dated April 12, 1996,
10.19 Agreement between Star Vending Inc. and Pick, Inc. dated
March 18, 1996.
10.20 Agreement between Worldstar Communications Cop. and Pick, Inc.
dated April 2, 1996.
10.21 Agreement between Cellular Telephone Company and Pick
Communications Corp. dated March 11, 1996.
11 Statement of Computation of Earnings Per Share and Common Stock
Equivalents.(1)
16 Former Accountant's Letter
21 Subsidiaries of the Registrant.(1)
27 Financial Data Schedule.(1)
- ----------------------
(1) Filed as part of previous filing of this Report.
36
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
PICK COMMUNICATIONS CORP..
(Registrant)
Date: May 21, 1996 By: /s/ Diego Leiva
---------------
Diego Leiva, Chief Executive Officer
38
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
39
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Auditors F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To: The Board of Directors
PICK Communications Corp.
Mountain Lakes, New Jersey
We have audited the accompanying balance sheets of PICK Communications Corp.,
(f/k/a Prime International Products, Inc.), (the "Company") as of December 31,
1995, 1994 and 1993 and the related statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PICK Communications Corp. at
December 31, 1995, 1994 and 1993 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
/S/Durland & Company, CPAs, P.A.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
February 16, 1996; except to notes 13, 14f and 14g, as to which the date is
June 20, 1996
F-1
<PAGE>
<TABLE>
<CAPTION>
PICK Communications Corp.
Consolidated Balance Sheets
December 31,
ASSETS
<S> <C> <C> <C>
1993 1994 1995
----------- ----------- -----------
CURRENT ASSETS
Cash .......................................... $ 6,453 17,659 110,715
Accounts receivable, net (note 1g) ............ 6,016 148,374 824,463
Prepaid telephone card inventory (note 1d)..... 0 47,898 167,091
Prepaid telephone time (note 11)............... 0 0 420,000
Prepaid expenses and other current assets ..... 0 0 83,495
----------- ----------- -----------
Total Current Assets ....................... 12,469 213,931 1,605,764
----------- ----------- -----------
PROPERTY AND EQUIPMENT (note 1e)
Furniture and equipment ....................... 16,692 119,540 158,246
Less - Accumulated depreciation ............... (1,669) (13,636) (44,111)
----------- ----------- -----------
Total Property and Equipment ............... 15,023 105,904 114,135
----------- ----------- -----------
OTHER ASSETS
Pre-paid cellular patent and rights (note 9)... 0 0 712,500
Investment in marketable equity securities
(note 6) .................................. 0 0 16,625
----------- ----------- -----------
Total Other Assets ......................... 0 0 729,125
----------- ----------- -----------
Total Assets ...................................... $ 27,492 319,835 2,449,024
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable (note 5)...................... $ 0 486,885 191,891
Direct cost telephone time accrual (note 5).... 0 449,654 1,084,201
Pre-paid telephone time liability (note 11) ... 0 0 378,000
Accrued expenses and other current payables ... 7,563 0 0
Advances from stockholders .................... 52,035 3,035 0
Accrued compensation (note 1h)................. 0 76,350 145,448
Deferred revenue .............................. 0 325,597 805,383
Short-term portion of long-term debt .......... 0 0 75,000
----------- ----------- -----------
Total Current Liabilities .................. 59,598 1,341,521 2,679,923
----------- ----------- -----------
LONG-TERM LIABILITIES
Due to The Next Edge, Inc. (note 9) ........... 0 0 400,000
----------- ----------- -----------
Total Long-Term Liabilities ................ 0 0 400,000
----------- ----------- -----------
Total Liabilities ................................. 59,598 1,341,521 3,079,923
----------- ----------- -----------
Minority interest in consolidated subsidiary
(note 7) .......................... 0 0 215,508
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock, no par value; Authorized
1,000,000 shares; issued and
outstanding 743,000 and 100,000 at
December 31, 1994 and 1993: par value
$0.002; Authorized 50,000,000 shares; issued
and outstanding 40,542,516 at December 31,
1995 note 2)................................ 126,000 53,545 81,085
Additional paid in capital in excess of par
(note 2) ................................... 0 0 2,018,780
Stock subscription receivable (note 2) ........ 0 0 (800,000)
Marketable equity securities valuation reserve
(note 6) ................................... 0 0 0
Retained earnings (deficit) ................... (158,106) (1,075,231) (2,146,272)
----------- ----------- -----------
Total Stockholders' Equity ........................ (32,106) (1,021,686) (846,407)
----------- ----------- -----------
Total Liabilities and Stockholders' Equity ........ $ 27,492 319,835 2,449,024
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
PICK Communications Corp.
Consolidated Statements of Operations
Year ended December 31,
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Sales to related parties (note 5) .......... $ 0 116,924 361,077
Sales to others ............................ 23,301 412,989 1,203,962
---------- ---------- ----------
Total sales ............................ 23,301 529,913 1,565,039
Cost of sales - related parties (note 5) ... 0 542,417 896,264
Other cost of sales ........................ 10,067 210,929 491,495
---------- ---------- ----------
Total cost of sales ..................... 10,067 753,346 1,387,459
---------- ---------- ----------
Gross profit/loss ....................... 13,234 (223,433) 177,580
Operating Expenses
Sales and marketing - related party (note 5) 0 144,118 10,541
Sales and marketing - other ................ 4,903 429,606 246,946
---------- ---------- ----------
Total sales and marketing ............... 4,903 573,724 257,487
General and administrative ................. 164,768 426,428 873,013
Depreciation ............................... 1,669 11,967 30,475
Bad debt ................................... 0 15,028 42,650
---------- ---------- ----------
Total operating expenses ................ 171,340 1,027,147 1,203,625
---------- ---------- ----------
Loss from operations ....................... (158,106) (1,250,580) (1,026,045)
Interest expense ........................... 0 0 45,033
---------- ---------- ----------
Loss before taxes and minority interest
in subsidiary loss ....................... (158,106) (1,250,580) (1,071,078)
Minority interest in subsidiary loss ....... 0 0 37
Provision for income tax benefit (note 1i) . 0 0 0
---------- ---------- ----------
Net loss ................................... $ (158,106) (1,250,580) (1,071,041)
========== ========== ==========
Net loss per share ......................... $ -- -- (0.03)
========== ========== ==========
Shares outstanding ......................... -- -- 40,442,516
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
PICK Communications Corp.
Consolidated Statement of Stockholders' Equity
<S> <C><C> <C> <C> <C> <C> <C>
Additional Stock Mkt Sec Retained Total
Common Paid in Subscrip Valuation Earnings/ Stockholders'
Stock Capital Receivable Reserve (Deficit) Equity
BALANCE, January 1, 1993 $ 0 0 0 0 0 0
Capital transactions: A) 1,000 0 0 0 0 1,000
B) 125,000 0 0 0 0 125,000
Net income (loss) 0 0 0 0 (158,106) (158,106)
-------- --------- ------- ------- --------- ---------
BALANCE, Dec 31, 1993 126,000 0 0 0 (158,106) (32,106)
Capital transactions: C) 161,000 0 0 0 0 161,000
D)(333,455) 0 0 0 333,455 0
E) 100,000 0 0 0 0 100,000
Net (loss) 0 0 0 0 (1,250,580) (1,250,580)
--------- --------- ------- ------- --------- ---------
BALANCE, Dec 31, 1994 53,545 0 0 0 (1,075,231) (1,021,686)
Capital transactions: F) 2,420 0 0 0 0 2,420
G) (6,080) 238,980 0 0 0 232,900
H) 6,000 0 0 0 0 6,000
I) 9,000 241,000 0 0 0 250,000
J) 1,000 249,000 0 0 0 250,000
K) 3,000 79,500 (82,500) 0 0 0
L) 200 212,300 0 0 0 212,500
M) 10,000 0 0 0 0 10,000
N) 0 0 82,500 0 0 82,500
O) 2,000 998,000 (800,000) 0 0 200,000
Net (loss) 0 0 0 0 (1,071,041) 1,071,041)
--------- --------- ------- ------ --------- ---------
BALANCE, Dec 31, 1995 $ 81,085 2,018,780 (800,000) 0 (2,146,272) (846,407)
========= ========= ======= ====== ========= =========
<FN>
A) January 1993; 100,000 shares of common stock; $1,000 in cash.
B) Throughout 1993; 0 shares of common stock; contribution of President's
salary not paid in cash valued at $125,000.
C) Throughout 1994; 623,000 shares of common stock; conversion of debt by
stockholder to equity.
D) August 1, 1994; 0 shares of common stock; capitalization of undistributed
loss at conversion from S corp to C corp.
E) August 1994; 20,000 shares of common stock; telephone switch equipment and
tariffs valued at $100,000.
F) January 1995 through July 1995; 242,000 shares of common stock; services
valued at $0.01 per share, for a total value of $2,420.
G) September 12, 1995; 16,665,000 shares of common stock exchanged for 100% of
the issued and outstanding common stock of Public Info/Comm Kiosk, Inc,
accounted for as a reorganization of PICK, Inc., also reflects 8,277,516
shares outstanding of PICK Communications Corp. common stock at time of
reorganization. The Company had 24,942,516 shares outstanding subsequent
to this reorganization.
H) September 12, 1995; 3,000,000 shares of common stock, 1,000,000 shares of
Foxwedge, Inc. common stock.
I) September 12, 1995; 4,500,000 shares of common stock, $250,000 in cash,
with a formerly unrelated party, which subsequently became related through
a common director.
J) September 12, 1995; 500,000 shares of common stock, conversion of then
existing note payable exchanged for $250,000 cash.
K) September 12, 1995; 1,500,000 shares of common stock, $82,500 subscription
receivable.
L) October 20, 1995; 100,000 shares of common stock, prepaid cellular patent
and rights valued at $212,500.
M) October 24, 1995; 5,000,000 shares of common stock, 5,000,000 shares of
Firenze, Ltd. restricted common stock.
N) November 8, 1995; cash received from officer for subscription receivable.
O) November 21, 1995 through December 29, 1995; 1,000,000 shares of common
stock, $1,000,000 cash, $200,000 of which was paid in 1995, and the
$800,000 balance to be paid in 1996.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
PICK Communications Corp.
Consolidated Statements of Cash Flows
Year ended December 31,
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) .............................................. $ (158,106) (1,250,580) (1,071,041)
Adjustments to reconcile net loss to
net cash used for operating activities:
Compensation contributed by President ........................ 125,000 0 0
Stock issued for services ..................................... 0 0 2,420
Depreciation ................................................. 1,669 11,967 30,475
Bad debt expense ............................................. 0 15,028 42,650
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ................... (6,016) (157,386) (693,856)
(Increase) in prepaid telephone card inventory ............... 0 (47,898) (119,193)
(Increase) in prepaid and other current assets ............... 0 0 (503,495)
Increase (decrease) in accounts payable (note 5).............. 0 486,885 (294,994)
Increase (decrease) in direct cost telephone time accrual (note 5) 0 449,654 634,547
Increase (decrease) in prepaid telephone time liability (note 5) 0 0 378,000
Increase (decrease) in accrued compensation (note 1h)......... 0 76,350 69,098
Increase (decrease) in deferred revenue ...................... 0 325,597 479,786
Increase (decrease) in accrued expenses ...................... 7,563 (7,563) 0
---------- ---------- ----------
Net cash (used) provided by operating activities ............... (29,890) (97,946) (1,045,603)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets ....................................... (16,692) (2,848) (38,706)
---------- ---------- ----------
Net cash (used) provided by investing activities ............... (16,692) (2,848) (38,706)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash ................................... 1,000 0 1,015,400
Funds advanced on third-party debt ............................. 0 0 250,000
Payments on stockholder advances ............................... 0 (2,500) (3,035)
Payments on third-party debt ................................... 0 0 (85,000)
Funds advanced by stockholder .................................. 52,035 114,500 0
---------- ---------- ----------
Net cash provided (used) by financing activities ............... 53,035 112,000 1,177,115
---------- ---------- ----------
Net increase (decrease) in cash ................................ 6,453 11,206 93,056
---------- ---------- ----------
CASH, beginning of period ...................................... 0 6,453 17,659
---------- ---------- ----------
CASH, end of period ............................................ $ 6,453 17,659 110,715
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash financing activities:
Stock issued for investment in marketable equity securities $ 0 0 16,000
========== ========== ==========
Stock issued to retire note payable ....................... $ 0 161,000 250,000
========== ========== ==========
Stock issued to acquire fixed assets ...................... $ 0 100,000 0
========== ========== ==========
Stock issued to acquire intangible assets ................. $ 0 0 212,500
========== ========== ==========
Stock issued for subscription receivable .................. $ 0 0 882,500
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
PICK Communications Corp.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Principles
Organization - PICK Communications Corp., (f/k/a Prime International Products,
Inc.), (the Company) was incorporated in the State of Utah on April 30, 1984, as
S.T.V., Inc., changing its name to Adolphus Companies, Inc., in February 1986,
and then to Prime International Products, Inc., in May 1988. In December 1987,
the Company acquired American Italian Food Processing Co., Inc. in a stock for
stock exchange. All operations ceased in 1990. On September 12, 1995, the
Company acquired Public Info/Comm Kiosk, Inc. (PICK) in a stock for stock
exchange and currently conducts business from its headquarters in Mountain
Lakes, NJ.
Public Info/Comm Kiosk, Inc. (PICK) was incorporated in the state of New Jersey
on August 6, 1992. It was inactive from incorporation until January 1993, when
the founder began funding the operations of the Company. PICK operated in 1993,
as an agent for the sale of long distance services. In 1994, the founder
investigated the pre-paid telephone card industry and discovered a potential
niche market. PICK began selling its own brand of card in August 1994. PICK's
target market is primarily Hispanics located in New York, New Jersey, South
Florida and Texas. Pick expanded into California in 1995.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the dates of the statements of
financial condition and revenues and expenses for the years then ended. The
following summarize the more significant accounting and reporting policies and
practices of the Company:
a) Basis of presentation - The financial statements reflect the financial
position and results of operations of PICK, Inc., prior to the acquisition by
the Company, and on a consolidated basis subsequent to the acquisition. The
acquisition has been accounted for as a recapitalization by PICK, Inc.
b) Basis of consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiaries. Minority interest represents
minority shareholders' proportionate share of the equity and earnings/loss of
PCT Prepaid Telephone, Inc. Intercompany transactions have been eliminated.
c) Revenue recognition - The Company recognizes revenue and accrues for all
related direct costs upon the sale of prepaid telephone cards, based upon
recognizing revenue over the life of the cards. Related direct costs includes
relieving card inventory, other fullfillment costs and design costs/royalties.
The Company recognizes revenue over the 18 month life of the cards in accordance
with its determination of usage based on the information available. The Company
is evaluating replacement equipment which will provide more effective and
efficient management information. Should the Company acquire this equipment it
intends to update its revenue recognition calculations. The Company believes,
based on available information, that it is experiencing approximately 81.8%
usage within the first 12 months after sale. The cards carry expiration policies
of one year from first usage or 18 months after retail sale. The Company does
not have a written returns policy, but considers sales returns on a case by case
basis.
d) Prepaid telephone card inventory - Card inventory is composed of costs to
provide unactivated cards to the fulfillment company, which include printing and
freight, and is valued at the lower of cost or market. Inventory is relieved,
and charged to cost of sales, when activated cards are shipped from the
fullfillment company to the wholesale purchaser.
e) Fixed assets - Fixed assets, principally telephone equipment, are stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally 3, 5 and 7 years. Depreciation expense was
$1,669, $11,967 and $30,475 for the years ended December 31, 1993, 1994 and
1995.
f) Concentration of credit risk - In 1994, one customer accounted for
approximately 6% of sales and approximately
F-6
<PAGE>
PICK Communications Corp.
Notes to Consolidated Financial Statements
(1) Summary of significant accounting principles, continued
f) Concentration of credit risk, continued - 3% of accounts receivable at
December 31, 1994. In 1995, one customer accounted for approximately 35% of
gross sales and approximately 74% of accounts receivable at December 31, 1995.
Approximately 75% of the sales to this customer came in December 1995. Two other
customers, one new and one existing, accounted for approximately 5% and 15% of
gross sales in 1995, and approximately 8.5% and 2.5% of accounts receivable at
December 31, 1995. The Company performs periodic credit evaluations of its
customers, but generally does not require collateral.
g) Accounts receivable - The Company provides credit for open accounts in the
normal course of business. As of the dates of these statements, the Company has
established a reserve for doubtful accounts at a rate of approximately 5.2% of
outstanding accounts receivable or 2.73% of sales. The reserve amounts at
December 31, 1993, 1994 and 1995 were $0, $15,028 and $42,650. Bad debt expense
was $0, $15,028 and $42,650 for the years ended December 31, 1993, 1994 and
1995, respectively.
h) Accrued compensation - Accrued compensation at December 31, 1994 and 1995 is
composed of compensation accrued, but not yet paid to the President of the
Company.
i) Valuation of intangibles - Intangible assets are valued at cost and amortized
over their estimated remaining useful lives. The Company did not amortize the
pre-paid cellular patent and rights in 1995, as the intangible was acquired near
the end of the year, and the Company was not in a position to begin
commercialization development until the beginning of 1996. The Company expects
to amortize this intangible over five years.
j) Income taxes - Deferred income taxes are provided on elements of income that
are recognized for income tax purposes in periods different than such items are
recognized for financial accounting purposes. In February 1992, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
number 109 (SFAS 109) relating to the method of accounting for income taxes.
SFAS 109 requires companies to take into account changes in tax rates when
valuing the deferred income tax amounts carried on their Balance Sheets (the
"Liability Method"). The Company adopted SFAS 109 effective with the conversion
from Sub-S status. Through August 1, 1994, PICK had elected to be taxed under
Subchapter S of the Internal Revenue Code, when this election was terminated.
Accordingly, PICK's operating losses prior to this termination were passed
through to its stockholders. The Company had a deferred tax asset of $417,000
and $844,000 at December 31, 1994 and 1995. The Company has established a
valuation reserve in the amount of $417,000 and $844,000 at December 31, 1994
and 1995. This deferred tax asset is composed of the tax benefit of net
operating loss carryforwards totaling $1,042,125 and $2,110,746 at December 31,
1994 and 1995, which expire $1,042,125 in 2009 and $1,068,621 in 2010. The tax
benefit is comprised of approximately $354,000 and $717,600 in federal tax
benefit and $63,000 and $126,400 in state tax benefit at December 31, 1994 and
1995. Any income tax benefits related to the differences between methods of
depreciation is de minimus.
k) Net loss per share - Loss per share is computed by dividing the net loss by
the weighted average number of common shares outstanding during the period, less
the 100,000 shares placed in escrow for TNE (see note 9).
(2) Stockholders' equity - The Company has authorized 50,000,000 shares of
$0.002 par value common stock. In August 1995, the Company had 277,516 shares
outstanding. In August 1995, the Company completed a Regulation D Rule 504
private offering in which the Company issued 8,000,000 shares in exchange for
$232,650 in cash, net of offering expenses of $7,350.
PICK had authorized 1,000,000 shares of no par common stock. In January 1995,
PICK issued 100,000 shares in exchange for $1,000. At the end of 1993, the
President of PICK contributed his compensation to PICK, by way of waiving the
compensation accrued. During 1994, the President had loaned $161,000 to PICK,
which he exchanged for 623,000 shares of common stock. In August 1994, PICK
issued 20,000 shares to a then
F-7
<PAGE>
PICK Communications Corp.
Notes to Consolidated Financial Statements
(2) Stockholders' equity, continued - unrelated third-party in exchange for a
telephone switch and the tariffs required to operate the switch, valued at
$100,000. From January through July 1995, PICK issued 242,000 shares to various
parties for services provided, valued at $0.01 per share, for a total value of
$2,420. These shares were valued at this level because at the time of issuance,
there was no assurance that PICK would be able to stay in business and it had
negative book value. In August 1995, PICK sold 25,000 shares to an independent
consultant for $250, (see note 14g).
On September 12, 1995, the Company completed the acquisition of PICK, (see notes
1a and 7). The change in par value recorded on the face of the financial
statements relates to this merger. Pursuant to the agreement to effect this
transaction, the Company issued 3,000,000 shares in exchange for 1,000,000
shares of Foxwedge, Inc., 4,500,000 shares in exchange for $250,000 in cash with
a formerly unrelated party, which subsequently became related through a common
director, 500,000 shares in exchange for an outstanding note payable of
$250,000, which was pursuant to the original terms of the note payable,
1,500,000 shares in exchange for an $82,500 subscription receivable and
16,665,000 shares in exchange for 100% of the issued and outstanding shares of
PICK.
In October 1995, the Company issued 100,000 shares in partial exchange for
co-ownership of the prepaid cellular patent and exclusive commercialization
rights, valued at $212,500. In October 1995, the Company issued 5,000,000 shares
in exchange for 5,000,000 shares of Firenze, Ltd. common stock, valued at
$10,000. On November 21, 1995, the Company issued to an unrelated third party
1,000,000 shares in exchange for $200,000 cash and a note receivable for
$800,000 to be paid during 1996.
In 1994, PICK issued warrants for common stock to three individuals. The merger
agreement recognizes these PICK warrants and exchanges them for warrants for
common stock of the Company. Each of the warrants was for 5,000 shares of PICK
common stock at an excercise price of $5 per share, converted to 82,500 shares
per warrant, totalling 247,500 shares, at an excercise price of $0.30 per share
expiring on December 31, 1996.
(3) Commitments - The Company entered into an operating lease with a one year
term for the Company's facilities beginning in May 1995. Future minimum lease
payments under this operating lease in effect at December 31, 1995 are $1,285
per month, or $5,140 for the remaining lease term. Rent expense for the years
ended December 31, 1993, 1994 and 1995 was $0, $0 and $10,280, respectively.
(4) Notes payable - Short-term debt was made up entirely of advances to PICK by
the principal stockholder, which were not collateralized. These advances carried
no interest nor a stated maturity. The advances totalled $52,035 in 1993, and
$114,500 in 1994. PICK repaid $9,500 in 1994, and $3,035 in 1995. During 1994,
the stockholder converted $154,000 of these advances into equity. In 1995, the
Company acquired co-ownership of the prepaid cellular patent and exclusive
commercialization rights for stock and a $500,000 note payable to The Next Edge,
Inc. This note is to be paid at a rate of $25,000 per quarter for five years.
The Company made the January 1, 1996, payment in December 1995. This note is not
collateralized nor does it carry interest. The Company has not imputed a
discount for this note, as all the terms of the agreement have not been
completed, specificly, the collateral for the note payable, therefore the
Company did not recognize an interest expense in 1995. The Company expects to
impute an appropriate discount rate upon supplying acceptable collateral for the
note payable.
(5) Related party transactions - The Company's President, also its principal
stockholder, was entitled to receive a compensation of $125,000 for 1993, which
he waived in total. The Company purchased advertising services of $144,118 and
$10,541 in 1994 and 1995, from an entity controlled by an individual who is a
stockholder of the Company and a member of the Board of Directors. The accounts
payable balance to this stockholder was $144,118 and $0 at December 31, 1994 and
1995. The Company purchased substantially all of its telephone network services
in 1994 and 1995, from a vendor which also owns approximately 0.8% of the
Company's
F-8
<PAGE>
PICK Communications Corp.
Notes to Consolidated Financial Statements
(5) Related party transactions, continued - common stock. The accounts payable
balance to this stockholder was $276,669 and $385,255 at December 31, 1994 and
1995. The Company also purchased services which amounted to $88,064 and $126,552
in 1994 and 1995, from 2 other minor stockholders. The accounts payable balances
to these stockholders were $31,821 and $28,706 at December 31, 1994 and 1995.
The Company had gross sales of $116,924 in 1994, to 2 minor stockholders and
$289,255 in 1995, to 3 minor stockholders. The Company recorded gross sales of
$0 and $71,822 in 1994 and 1995, to the November 21, 1995 and January 1996, new
stockholders, (see notes 2 and 14a).
(6) Investment in marketable equity securities - The Company acquired 1,000,000
shares of common stock of Foxwedge, Inc. in the agreement to purchase PICK. The
Company issued 3,000,000 shares of its common stock to effect this portion of
the acquisition. The Company recognized that there was some concern as to the
continued viability of Foxwedge, therefore, the Company valued this transaction
based on the par value of the consideration given up, its stock, or $6,000. At
December 31, 1995, the fair market value of the Foxwedge stock was $3,250,000,
based on a $3.25 bid of the Foxwedge stock. Using a 70% discount due to
restrictions on resale of the Foxwedge stock, the market value is $975,000. In
December 1995, the Company entered into an agreement with a stockholder of
Ultimistics, Inc. (Ultimistics) to exchange its 1,000,000 shares of Foxwedge for
500,000 shares of Ultimistics restricted common stock.
This agreement was not consummated until January 1996.
In October 1995, the Company entered into a licensing agreement with Firenze,
Ltd. (FRNZ) This agreement called for the Company and FRNZ to exchange 5,000,000
shares of common stock between the companies. These shares bear a restrictive
legend under Rule 144 of the Securities Act of 1933, as amended. The Company
recognized that there was some concern as to the continued viability of Firenze,
therefore, the Company valued this transaction based on the par value of the
consideration given up, its stock, or $10,000. These concerns were related to
FRNZ's ability to consumate its acquisition of Fonlem Industries of France. The
fair market value of the FRNZ stock at December 31, 1995. is $27,500,000, based
on a $5.50 bid of the FRNZ stock. Using the same 70% discount, the market value
is $8,250,000.
In October 1995, P.C.T. Prepaid Telephone, Inc. (PCT), a subsidiary of the
Company, entered into an agreement with FNRZ to exchange 6,250,000 shares of PCT
common stock for 5,000,000 shares of FNRZ common stock and $250,000 in cash.
These shares, (PCT and FRNZ), bear a restrictive legend under Rule 144 of the
Securities Act of 1933, as amended. PCT has valued the FNRZ agreement at
$250,625. The valuation is comprised of the $250,000 cash plus the 5,000,000
shares of FNRZ common stock valued at $625 on the same basis of valuation of
FNRZ stock above, PCT's par value. The fair market value of the FRNZ stock at
December 31, 1995 is $27,500,000, based on a $5.50 bid of the FRNZ stock. Using
the same 70% discount, the market value is $8,250,000.
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting number 115 (SFAS 115) relating to the method of accounting
for certain investments in debt and equity securities. Although SFAS 115 does
not apply to the investments held by the Company as they are all restricted by
Rule 144 of the Securities Act of 1933, as amended, the Company has decided to
incorporate the disclosure requirements of SFAS 115.
(7) Aquisition of subsidiaries - On September 12, 1995, the Company acquired
virtually all of the issued and outstanding common stock of Public Info/Comm
Kiosk, Inc. (PICK) in a stock for stock exchange accounted for as a
recapitalization. The Company has recorded this transaction as a 100%
acquisition even though one of the former PICK stockholders has not yet tendered
their PICK shares to the escrow agent, (see note 14e). The Company expects this
situation to be resolved within a reasonable time period.
In October 1995, the Company granted P.C.T. Prepaid Telephone, Inc., (PCT), an
exclusive license to market
F-9
<PAGE>
PICK Communications Corp.
Notes to Consolidated Financial Statements
(7) Aquisition of subsidiaries, continued - and sell the debit cellular
telephone technology (see note 9) in the United States and Canada in exchange
for 12,750,000 shares of PCT common stock, which bear a restrictive legend under
Rule 144 of the Securities Act of 1933, as amended. These shares are 63.4% of
the issued and outstanding shares of PCT at December 31, 1995, giving the
Company control of PCT. PCT was incorporated on October 24, 1995, and had not
yet begun operations at December 31, 1995.
(8) Statement of Financial Accounting Standards not yet adopted - In March 1995,
the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 121, "Accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of." The Company will have to
implement SFAS 121 by the fiscal year ending December 31, 1996. The provisions
will require the Company to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If it is determined that an impairment loss has occurred
based on expected future cash flows, then the loss should be recognized in the
income statement and certain disclosures regarding the impairment should be made
in the financial statements. The Company has not yet had sufficient time to
evaluate the impact, if any, of the provisions of SFAS 121.
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for stock
based compensation." The Company will have to implement SFAS 123 by the fiscal
year ending December 31, 1996. The Company has not yet had sufficient time to
evaluate the impact, if any, of the provisions of SFAS 123.
(9) Debit cellular telephone technology agreement - In October 1995, the Company
entered into an agreement with The Next Edge, Inc. (TNE), whereby the Company
purchases the worldwide rights to market, distribute, sell and manufacture TNE's
Smart Tracker System (a debit cellular telephone system, with a patent
pending).This agreement has a term of five years with an option, at the
Company's sole discretion, for five additional five year periods.The agreement
requires the Company to pay TNE a total of $500,000, payable at a rate of
$25,000 quarterly over five years beginning on January 1, 1996. These payments
are to be secured by an Irrevocable Letter of Credit. The Company is also
required to issue a total of 100,000 shares of its restricted common stock to
TNE at the rate of 20,000 shares each year for five years beginning January 1,
1996. These shares have been issued into escrow. The agreement also requires the
Company to purchase the circuit chips for the system from TNE, at TNE's cost.
The agreement stipulates that the Company will be recorded as co-owner of the
final US patent relating to this technology. The agreement requires the Company
to implement the international patent applications. The Company has valued this
purchase ageement at $712,500. The valuation is comprised of the $500,000 cash
plus the 100,000 shares of common stock valued at $212,500 based on the $4.25
bid quote of the Company's stock, less a 50% discount. The letter of credit has
not been issued, (see note 14b).
(10) Firenze, Ltd. licensing agreement - On October 24, 1995, the Company
granted FRNZ an exclusive license for marketing and sales of the debit cellular
telephone technology (see note 9) in Europe, Asia, Australia and Africa. This
agreement calls for the Company and FRNZ to exchange 5,000,000 shares of common
stock between the companies. These shares bear a restrictive legend under Rule
144 of the Securities Act of 1933, as amended. The agreement requires FNRZ to
purchase the microchip, cellular equipment and software from the Company at the
Company's cost plus 10%. The agreement calls for FNRZ to pay the Company monthly
a 5% royalty on FNRZ's gross revenue from the technology under license. FRNZ had
not yet begun to commercialize this license at December 31, 1995, therefore no
royalties were received by the Company.
(11) World Tel Saver, Inc. agreement - In October 1995, the Company entered into
an agreement with an individual to purchase $1,000,000 worth of prepaid
telephone time, (consisting of 3,448,276 minutes at $0.29 per minute for
domestic use), for $300,000 total at a rate of $25,000 per month commencing on
November 1, 1995. In November 1995, the Company entered into an additional
agreement with the same individual to purchase an additional $490,000 worth of
telephone time (consisting of 1,689,654 minutes at $0.29 per minute for domestic
F-10
<PAGE>
PICK Communications Corp.
Notes to Consolidated Financial Statements
(11) World Tel Saver, Inc. agreement, continued - use), for $120,000 at a rate
of $10,000 per month commencing on December 1, 1995. All of this time is to be
provided by World Tel Saver, Inc., (WTS). Both the individual and WTS are
unrelated parties to the Company.
(12) Foxwedge, Inc. stock exchange - In December 1995, the Company entered into
an agreement to exchange all of the 1,000,000 shares of Foxwedge, Inc. common
stock it owns for 500,000 shares of common stock of Ultimistics, Inc.
(Ultimistics) with a stockholder of Ultimistics. The 500,000 shares of
Ultimistics will represent approximately 1.6% of the issued and outstanding
common stock of Ultimistics. At the time the agreement was entered into,
Foxwedge was $4.00 bid, $5.25 ask and Ultimistics was $11.00 bid, $12.50 ask.
This exchange was consummated in January 1996.
The Company expects to record a $1,194,000 gain from this transaction.
(13) Working capital deficiency - The accompanying consolidated financial
statements have been prepared asuuming that the Company will continue as a going
concern which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements, the Company incurred net losses for the years
ended December 31, 1993, 1994 and 1995. Additionally, the Company has a working
capital deficiency of $1,074,159 and a total stockholders' deficiency of
$846,407 at December 31, 1995.
In 1995, the Company raised $1,265,000 in cash through sales of common stock and
incurring additional debt. The Company retired the debt by issuing additional
common stock. This amount raised exceeded its operating cash flows used by
$93,056. At December 31, 1995, the Company has a note receivable, accounted for
as a stock subscription receivable, in the amount of $800,000, to be paid to the
Company during 1996. In January 1996, the Company sold additional common stock
for $250,000, (see note 14a). The Company's plans include controlling its cash
expenses, such that this inflow of capital may cover a cash flow shortfall in
1996.
In January 1996, the Company also entered into an agreement to exchange the
prepaid telephone time it aqcuired in October 1995, for advertising valued at $2
million, (see notes 14c and 11). The Company entered into this transaction, and
another January 1996, transaction, (see note 14d), in which it exchanged common
stock for an additional $3 million of advertising, because, advertising
expenditures are at the beginning of the Company's revenue generating process.
The Company believes it can generate a significant increase in cash flow
revenue, whether recognized or deferred, by increasing its advertising presence
in select target markets. The Company believes that to increase its advertising
without expending cash, will be beneficial to its cash flows from operations.
The Company is also in the process of negotiating lower telephone times rates,
along with higher volumes, expected to occur when its advertising/marketing
programs are instituted.
The Company has also begun negotiating with several investment banking firms to
consider raising additional funds, either through debt or equity offerings, or a
combination. Any funds raised would be employed to further increase its prepaid
telephone card business, and to develop its prepaid cellular telephone businees.
There are no assurances that the Company will be able to sucessfully raise
additional funds in this manner.
The Company believes that these plans will enable it to continue as a going
concern. However, there can be no assurances that the Company will be able to
successfully implement such plans. If such plans are not successfully
implemented, the Company could be required to seek additional financing from
sources not currently anticipated.
(14) Subsequent events
a) Stock subscribed - In January 1996, the Company entered into an agreement to
sell 250,000 shares of its common stock to an unrelated third party for $250,000
in cash.
b) Yakimoto Investment, Ltd. licensing agreements - In January and February
1996, the Company entered into two
F-11
<PAGE>
PICK Communications Corp.
Notes to Consolidated Financial Statements
(14) Subsequent events, continued
b) Yakimoto Investment, Ltd. licensing agreements, continued - licensing
agreement with Yakimoto Investment, Ltd. (Yakimoto). The first granted Yakimoto
an an exclusive license for marketing and sales of the debit cellular telephone
technology (see note 9) in South America. This agreement requires Yakimoto to
pay the Company 1,000,000 shares of common stock of Ultimistics, Inc.
(Ultimistics) as consideration for this license. These shares will bear a
restrictive legend under Rule 144 of the Securities Act of 1933, as amended. At
the time this agreement was entered into, Ultimistics was $8.50 bid. This values
these shares at $8,500,000. The Company then determined that it should discount
the fair market value of the transaction by approximately 50%. As a result this
investment will be recorded at $4,250,000. Yakimoto is also required to provide
the Company with a $475,000 declining balance Irrevocable Letter of Credit,
which the Company will use to secure the agreement discussed in note 9 above.
This letter of credit has not yet been issued. The agreement also requires
Yakimoto to purchase the microchip, cellular equipment and software from the
Company at the Company's cost plus 10%. The agreement calls for Yakimoto to pay
the Company monthly a 5% royalty on Yakimoto's gross revenue from the technology
under license. The second agreement transfers the bulk of the Firenze license
(see note 10) to Yakimoto in exchange for 500,000 shares of Ultimistics stock.
At the time this agreement was entered into, Ultimistics was $7.00 bid. This
values these shares at $3,500,000. The Company then determined that it should
discount the fair market value of the transaction by approximately 50%. As a
result this investment will be recorded at $1,750,000.
c) Telephone time exchange for prepaid advertising - In January 1996, the
Company entered into an agreement with International Executive Services (IES),
an unrelated party to the Company, but is a related party with respect to World
Tel Saver, to exchange all of its prepaid telephone time, (consisting of
5,137,930 minutes), for $2,000,000 of prepaid advertising. The advertising to be
provided is to be composed of print, television, radio and outdoor media. The
original agreement calls for the Company to use this advertising within two
years, however the Company has received verbal approval for a three year
extension. The Company will record a $1,580,000 gain on this exchange, which the
Company expects to amortize into income as the advertising is used.
d) Stock exchange for prepaid advertising - In January 1996, the Company entered
into an agreement with IES to issue 1,000,000 shares to IES, and 150,000 shares
to Richard Maranon, a director of the Company, of the Company's common stock in
exchange for $3,000,000 of prepaid advertising. The advertising to be provided
is to be composed of print, television, radio and outdoor media. The original
agreement calls for the Company to use this advertising within two years,
however the Company has received verbal approval for a four year extension. The
Company expects to record this stock issuance at $2,700,000, allowing for a 10%
discount for any advertising usage availablity the Company may not use.
e) Related party transactions - The 150,000 shares issued to Mr. Maranon, a
director, discussed in note 14d, were part and parcel to the IES contract, and
are for the time Mr. Maranon and his staff at All Florida Advertising to develop
and oversee the implementation of the advertising/marketing programs to be
instituted by the Company to use the entire $3,000,000 in prepaid advertising.
f) Former officer settlement - In early 1996, the Company began negotiating to
settle a dispute with a former officer. This former officer has the right to
exchange their 20,000 shares of PICK, Inc. into 330,000 shares of the Company
and owns a warrant for 5,000 shares of PICK, Inc. with an excercise price of $5
per share, which the board of directors has amended to a warrant for 82,500
shares of the Company with an excercise price of $0.30 per share. These shares
were part of the reorganization discussed in note 2 above.
g) Correction of accounting error - In June 1995, PICK, Inc. sold 25,000 shares
of its common stock to a third party consultant for $250, or $0.01 per share. At
the time the consultant tendered his check, the amount was inadvertantly
credited to consultant expense, rather than to common stock. This partially
occurred because at
F-12
<PAGE>
PICK Communications Corp.
Notes to Consolidated Financial Statements
(14) Subsequent events, continued
g) Correction of accounting error, continued - the time the actual issuance of
these shares would have resulted in PICK issuing more shares than were
authorized. The agreement at the time of this sale was that the consultant would
actually be issued shares in the public shell company that PICK hoped to merge
into, instead of PICK shares. The agreement further stated that should such
merger not occur, the consultant would be issued shares of PICK, Inc., as soon
as practicable after PICK increased its authorized shares. As the merger, then
under consideration, did occur, the shares to be issued were converted to shares
of the Company at the same rate, (16.5 to 1), and 412,500 shares of the Company
were issued in January 1996. The error was discovered subsequently, and the
financial statements as presented reflect the effects, as if the error had not
occurred.
h) Firenze, Ltd. stock exchange - In March 1996, the Company exchanged the
5,000,000 shares of Firenze, Ltd. it held for 2,000,000 shares of Ultimistics
Inc. common stock, with a stockholder of Ultimistics. The Company expects to
record a gain of $3,590,000 as a result of this transaction.
<PAGE>
Exhibit 10.12
INTERCARRIER AGREEMENT
AGREEMENT made this 10th day of April , 1996 by and between TRESCOM USA, INC.
(hereinafter "CUSTOMER"), located at, 200 East Broward Blvd., Fort Lauderdale,
Florida 33301 and PICK INC., located at 115 Route 46 West, Suite A2, Mountain
Lakes, New Jersey 07046 (hereinafter "PICK").
In consideration of the mutual promises contained herein the parties agree as
follows:
1. PICK agrees to sell to Customer and Customer hereby agrees to purchase
international long distance telecommunication services from PICK over dedicated
lines installed at PICK's Network at PICK's designated point- of-presence
facilities (PICK's "POP"). Customer at its sole expense shall be responsible for
the establishing of service interconnections, and Customer agrees to connect the
necessary equipment or port items needed to send traffic to PICK's location from
Customer's location. It is understood that all services provided by PICK under
this Agreement are provided to Customer for Customer's resale to Customer's end
users, customers or subscribers.
2. Customer shall provide PICK with a Security Deposit in the form of U.S.
currency made via wire transfer in accordance with PICK's instructions as set
forth in Exhibit 1 (attached to and hereby made a part of this Agreement). Such
security deposit shall be $250,000 at the commencement date and shall represent
two weeks of usage and be subject to periodic increases based on usage. As
traffic usage increases, the two-week usage security deposit will either stay at
the aforementioned minimum or be adjusted such that it will never be less than
$50,000 per DS-1 interconnected for services.
3. The billing period shall be defined as generally including all calls
completed after 12:00 A.M. on Thursday of each week and before 11:59 P.M. on the
following Wednesday. PICK shall invoice Customer on Friday of each week by not
later than 12:00 P.M. for the billing period ending such week. Such invoice
shall include raw CDR (unrated) and completely rated summaries by country
showing the number of calls, number of minutes and corresponding charges.
Payment shall be due by 12:00 noon on the Tuesday following the receipt of the
invoice for the previous billing period. In the event that Customer does not
receive such invoice by 12:00 noon on Friday, then payment shall be due not
later than 24 business hours after receipt of said invoice. Payment shall be
made in the form of U.S. currency via wire transfer in accordance with PICK's
instructions as set forth in Exhibit 1.
PICK will invoice Customer for all service charges in accordance with the rates
set forth in Exhibit B (attached to and hereby made a part of this Agreement) on
a monthly basis for each billing period. Payment shall be made in the form of
U.S. currency via wire transfer in accordance with PICK's instructions as set
forth in Exhibit 1.
4. Any applicable federal, state or local use, excise, sales or privilege taxes,
duties or similar liabilities, chargeable to or against PICK because of the
services provided to Customer shall be charged to Customer and shall be payable
to PICK in addition to the regular charges under this Agreement, as per
paragraph 3 above, unless Customer provides PICK with applicable tax exemption
documentation. Customer is solely liable for and hereby indemnifies and holds
PICK harmless from filing all applications, forms, reports, returns, statements,
and other documents and information with and payment of all taxes
<PAGE>
Exhibit 10.12
Page 2.
and/or assessments to all local, county, state, federal, and other taxing
authorities having jurisdiction with respect to any and all charges to
Customer's customers for the services, including, without limitation, any
governmental agency or authority in any foreign country.
5. Should Customer dispute any portion of the invoiced billing, Customer shall
then provide PICK with a written memorandum specifying the disputed portion and
the basis for such dispute. PICK agrees that it will research any dispute on an
expeditious basis in good faith with Customer in order to promptly resolve same.
Any refund due will be credited to Customer against the next payment due from
Customer after resolution. The Customer agrees to present in reasonable detail
any billing disputes within forty-five (45) days of the charge in question.
Customer agrees that PICK shall not be obligated to consider any Customer
billing discrepancies which are received by PICK more than forty-five (45) days
following the charge in question.
6. Rates are based on Customer's usage of $1,000,000 per month. If such usage is
not obtained in any month during the term of this Agreement, PICK shall have the
right to modify the rates in Exhibit A for that month.
7. Except for changes set forth in Paragraph 6 hereof, during the term of this
Agreement, PICK shall have the right to change the applicable rate(s) for any
countries set forth in Exhibit A attached upon giving Customer seven (7) days
notice. Increases in Customer's rates shall be based on increases in PICK's cost
of providing services.
8. Customer is solely responsible for billing and collection from its end users,
customers and subscribers. Customer is also solely responsible for obtaining and
maintaining all licenses, approvals and other authorizations necessary or
appropriate for the resale of services to its end users, customers or
subscribers. Customer represents to PICK that it has and will maintain during
the term of this Agreement all such licenses, tariffs, approvals and
authorizations and if it does not, PICK may terminate this Agreement upon
providing five (5) days notice to customer.
9. Customer will provide PICK with a valid tax exemption form to exempt
Customer, under applicable law, from taxes that would otherwise be paid by
Customer. PICK will invoice Customer for taxes that are not covered by a tax
exemption certificate properly filed with PICK.
10. Customer shall indemnify and hold PICK harmless from all costs, expenses,
claims or actions arising from fraudulent calls of any nature which may comprise
a portion of the service to the extent that the party claiming the call(s) in
question to be fraudulent is (or has been at the time of the call) a customer or
end user of the service through Customer or an end-user of the service through
Customer's customer distribution channels. Customer shall not be excused from
paying PICK for service provided to Customer or any portion thereof on the basis
that fraudulent calls comprised a corresponding portion of the service.
11. Service provided by PICK to Customer hereunder is subject to the condition
that it may not be used for any unlawful purpose or in any improper manner and
may be terminated or suspended by PICK, at PICK's sole option and in its sole
discretion, if prohibited use occurs.
<PAGE>
Exhibit 10.12
Page 3
12. The term of this Agreement shall be for one (1) year commencing on May 1,
1996 and shall thereafter be automatically renewed on a year to year basis
unless specifically canceled by either party on thirty (30) days notice.
13. This Agreement and the relationship of the parties may be terminated by the
non-defaulting party in accordance with applicable provisions hereof and/or the
occurrence of any of the following events which shall constitute a default:
(A) Material breach of this Agreement after notice thereof and failure
of the breaching party to cure such breach within ten (10) days of receipt of
such notice.
(B) The adjudication of bankruptcy of either party under any Federal,
state or municipal bankruptcy or insolvency act, or the appointment of a
receiver or any act or action constituting a general assignment by a party of
its proprieties and interest for the benefit of its creditors.
(C) The determination by any governmental entity having jurisdiction
over the service provided under this Agreement that the relationship of the
parties and/or, services provided hereunder are contrary to then existing laws.
In the event of termination, as provided for herein above, PICK may immediately
recover from Customer all sums owed at the time of such termination.
14. It is understood that the provision of services to Customer by PICK will not
create a partnership or joint venture between the parties or result in a joint
communications service offering to any third parties, and PICK and Customer
agree that this Agreement, to the extent it is subject to regulation by the
Federal Communications Commission, is an intercarrier agreement which is not
subject to the filing requirements of Section 211 (a) of the Communications Act
of 1934 (47 U.S.C. 211 (a)) as implemented in 47 C.F.R. 43.51.
15. PICK will use reasonable efforts under the circumstances to maintain its
overall network quality. The quality of service provided hereunder shall be
consistent with other common carrier industry standards, government regulations
and sound business practices. PICK MAKES NO OTHER WARRANTIES ABOUT THE SERVICE
PROVIDED HEREUNDER, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY
WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.
16. IN NO EVENT WILL EITHER PARTY HERETO BE LIABLE TO THE OTHER PARTY FOR ANY
INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING
WITHOUT LIMITATION, LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS, LOSS OF
GOODWILL OR LOSS OF PROFITS ARISING IN ANY MANNER FROM THIS AGREEMENT AND THE
PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS HEREUNDER.
<PAGE>
Exhibit 10.12
Page 4
THE LIABILITY OF PICK WITH THE RESPECT TO THE INSTALLATION (INCLUDING DELAYS
THEREOF), PROVISION, TERMINATION, MAINTENANCE, REPAIR, INTERRUPTION, OR
RESTORATION OF ANY SERVICE OR FACILITIES OFFERED UNDER THIS AGREEMENT SHALL NOT
EXCEED AN AMOUNT EQUAL TO THE CHARGE APPLICABLE UNDER THIS AGREEMENT TO THE
PERIOD DURING WHICH SERVICES WERE AFFECTED. FOR THOSE SERVICES WITH MONTHLY
RECURRING CHARGES, THE LIABILITY OF PICK IS LIMITED TO AN AMOUNT EQUAL TO THE
PROPORTIONATE MONTHLY RECURRING CHARGES FOR THE PERIOD DURING WHICH SERVICE WAS
AFFECTED.
17. Customer and PICK agree to indemnify and hold each other harmless and their
respective officers, directors and employees from any and all claims,
liabilities, damages, losses, costs and expenses (including reasonable
attorney's fees) arising out of any breach of warranty, representation or
obligation under this Agreement.
18. Should any provision(s) of this Agreement be found to be illegal or
unenforceable, the remaining provisions of this Agreement shall remain in full
force and effect.
19. Neither party may assign or transfer this Agreement in whole or in part to
any third party without the express written permission of the other party and
any attempt to assign or transfer this Agreement without such permission shall
be void and of no effect; however, PICK may assign this Agreement to a
subsidiary of PICK, or to a corporation in which PICK holds the controlling
interest, for the purposes of conducting business hereunder.
20. The parties agree that the terms and conditions of this Agreement are
proprietary and confidential. All communications between the parties regarding
this Agreement or the service to be provided, and all information regarding the
pricing and customers of PICK and Customer are of a confidential nature and
cannot be disclosed or discussed with any third party without the written
consent of the parties.
21. All notices pursuant to this Agreement shall be deemed given when delivered
personally or sent by registered mail or facsimile or overnight carrier (such as
Federal Express), charges prepaid, as follows:
PICK INC. TRESCOM USA, INC.
115 Route 46 West, Suite A2 200 East Broward Blvd
Mountain Lakes, NJ 07046 Fort Lauderdale, Florida 33301
FAX (201) 335-7676 FAX (954) 627 6472
Attn: Diego Leiva, President Attn: Ariel Musibay
22. PICK shall not be liable for any loss or damage whatever caused by failure
to provide services to Customer hereunder caused by delays, failure of
performance, damage, destruction, or malfunction of switching equipment, or any
loss or damage occasioned by fire, the elements, labor disputes, shortages,
utility curtailments, power failures, explosions, civil cable cuts, acts of God,
government action or requisition, changes in government regulation, acts or
omissions of third parties or any other cause beyond PICK's reasonable control .
<PAGE>
Exhibit 10.12
Page 5
23. This Agreement shall be construed in accordance with the laws of the State
of New Jersey. However, any controversy or claim arising out of the parties, or
breach which has not been cured, shall be settled by binding arbitration in
accordance with Commercial Arbitration Rules of the American Arbitration
Association and judgment upon the award of the Arbitrators may be entered in any
court having jurisdiction. The prevailing party shall be entitled to
reimbursement of its reasonable attorney's fees.
24. This Agreement constitutes the entire understanding between the parties and
may not be changed or modified, nor may any of the terms hereof be waived,
except in writing signed by both parties.
ACCEPTED and AGREED:
PICK INC. TRESCOM USA, INC.
By: /s/ Diego Leiva By: /s/ Ariel Musibay
Diego Leiva, President Director of Network Services
<PAGE>
Exhibit 10.12
April 17, 1996
Mr. Ariel Musibay
TRESCOM USA, INC.
200 East Broward Blvd.
Ft. Lauderdale, FL 33301
Dear Mr. Musibay:
Reference is made to the Intercarrier Agreement between Trescom USA, Inc.
(Trescom) and PICK Inc. (PICK) dated April 10,1996.
Pursuant to Paragraph 24 of the terms of the referenced Agreement Trescom and
PICK hereby agree to amend the Agreement as follows:
1. Delete Paragraph 2 in its entirety and insert in lieu thereof the following:
"2. Customer shall provide PICK with a Security Deposit in the form of
U.S. currency made via wire transfer in accordance with PICK's
instructions as set forth in Exhibit 1 attached to and hereby made a
part of this Agreement. Such security deposit shall be $250,000 at the
commencement date and shall be subject to periodic increases based on
usage. As traffic usage increases, the security deposit will either
stay at the aforementioned minimum or be adjusted such that it will
never be less than $50,000 per DS-1 interconnected for services."
2. In the last subparagraph of Paragraph 3 in the second line change "Exhibit
B" to "Exhibits A and B".
<PAGE>
Mr. Ariel Musibay
TRESCOM USA, INC.
Page 2
3. Add under Paragraph 3:
"Customer agrees that in the event that Customer does not pay any
weekly invoice, PICK shall have the right to give Customer notice
thereof and, if Customer does not pay such invoice in two (2) days from
such notice, PICK shall have the right to draw down on the deposit to
pay such invoice and, if the amount owing exceeds said deposit PICK
shall have the right to suspend service to Customer. In any event,
Customer shall be required to replenish the deposit within three (3)
days of notice of draw down or PICK shall have the right to terminate
this Agreement under Paragraph 13 (A) hereof."
4. Delete the last sentence of Paragraph 6.
Except as set forth above, all of the other terms and conditions of the
referenced Agreement are hereby ratified and confirmed.
If the foregoing is in accordance with your understanding, please sign in the
space provided below and return one copy to my attention.
Sincerely,
PICK Inc.
By: /s/ Raymond M. Brennan
Raymond M. Brennan, Vice President
ACCEPTED and AGREED:
TRESCOM USA, INC.
By: /s/ Ariel Musibay
<PAGE>
Exhibit 10.13
AGREEMENT made as of this 24th day of October 1995 between PRIME INTERNATIONAL
PRODUCTS, INC. 115 Route 46 West, Suite A2, Mountain Lakes, New Jersey, 07046
(hereinafter referred to as "Licensor") and P.C.T. Prepaid Telephone Inc., 230
Park Ave., Suite 1000, New York, NY 10169 (hereinafter referred to as
"Licensee").
W I T N E S S E T H:
WHEREAS, Licensor has certain rights in and to a prepaid telephone,
inclusive of the microchip contained therein and software package to be
furnished therewith (individually and/or collectively referred to in this
Agreement as the "Product"); and
WHEREAS, License is in a position to provide marketing, distribution
and sales for the Product throughout the following countries: The United States
and Canada (hereinafter individually and/or collectively referred to as the
"Territory");
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises hereinafter set forth, it is agreed:
1. License of Product
Licensor hereby licenses to License, and Licensee hereby
accepts from Licensor the exclusive right to market, distribute and sell the
Product only in the Territory during the "Term" and the "Sell-off Period" (as
those terms are defined below). Except as provided for in this Agreement, all
rights of any nature whatsoever in the Product are reserved by Licensor.
Licensee undertakes to use all reasonable efforts, skill and ability in its
marketing, distribution and sale of the Product hereunder. Licensor represents
and warrants that at the time of delivery to Licensee of the Product hereunder,
Licensor will own or control all rights herein granted to Licensee hereunder.
2. Rights Granted
Licensor hereby grants to Licensee the following rights:
(a) The right to market, distribute, sell and advertise the
Product made available hereunder in the Territory, it being understood that such
right to market, distribute, sell and advertise shall be exclusive during the
Term and non-exclusive during the Sell-off Period.
(b) Licensee's right to release the Product at less than full
"top-line" retail prices (e.g., as any so-called "budget" products, as any
so-called "premium" products, as any so-called "mid-line" or any other
discounted Product) in connection with any merchandising schemes or commercial
tie-up arrangements, or through any direct mail or mail order method of
distribution or other similar merchandising methods, shall not be exercised
without the prior written consent of Licensor. Further, Licensee shall not be
permitted to assign or sub-license the Product, this Agreement of any of its
rights hereunder in whole or in part, without Licensor's prior written consent.
<PAGE>
Page 2
Licensor warrants and represents that it has not granted to any third parties
any rights in the Territory during the Term which are inconsistent with the
rights granted to Licensee hereunder.
3. Term
The "Term" of this Agreement shall commence as of the date
hereof and shall continue for a period of five (5) years providing, Licensee is
selling the Product in each country in the Territory by June 1, 1997. If
Licensee is not selling the Product in any country in the Territory by June 1,
1997, Licensor shall have the right to revoke the license granted hereunder to
that particular country of the Territory. Licensor hereby irrevocably grants
Licensee five (5) consecutive options to extend the Term for additional periods
of five (5) years for the Territory each under the terms and conditions of this
Agreement. Each such option shall be exercised by Licensee, if at all, by
Licensee giving Licensor written notice thereof no later than ninety (90) days
prior to the date that the then-current option would otherwise expire; provided,
however, if Licensee has failed to give such notice to Licensor within such
period, Licensor shall notify Licensee of such failure and Licensee shall have
an additional period of thirty (30) days from Licensee's receipt of such notice
within which to exercise such option(s).
4. Delivery of Product
Licensor shall deliver the Product (as ordered by Licensee no
less than fourteen (14) days prior to the delivery date) at Licensor's cost
price plus ten percent (10%), F.O.B. Licensor's plant. Title to all Product
passes to Licensee at F.O.B. point of shipment. Licensee shall pay Licensor for
the cost of such Product plus ten percent (10%) as well as packaging, shipping,
insurance, customs fees and duties (if any), and any other expenses actually
incurred by Licensor relating to the shipment to Licensee of all Products
ordered. It is expected that Licensor shall deliver such Product to Licensee's
export locations as specified by Licensee. All amounts due Licensor under this
paragraph shall be paid promptly by check or by irrevocable letter of credit but
not later than ten (10) days after the receipt by Licensee of any invoice
therefor. Licensee shall have the right, upon reasonable notice to Licensor
during normal business hours at Licensor's offices and not more than once a
year, to audit Licensor's financial books and records solely as the same pertain
to Licensor's aforesaid costs and expenses in connection with the Product.
5. Consideration
In consideration for this Agreement and the rights licensed hereunder:
(a) Licensee shall pay Licensor a royalty equal to five (5%)
percent of the retail selling price of all "Gross Sales" (as defined below) in
the country of sale of one hundred (100%) percent of the Product. As used herein
"Gross Sales" shall mean all Product manufactured and sold hereunder as well as
all air time sold in connection with the sales of all such Product. Licensee
agrees that the retail selling price of Products manufactured and sold hereunder
(and the price of the air time sold in connection therewith) shall not be less
than the suggested retail list price established by Licensor with Licensee with
regard to each country of the Territory of the Product sold hereunder, and the
parties shall agree to the basis which shall be used to calculate royalties
hereunder promptly, but prior to the first delivery of the Product to Licensee
hereunder. Licensee shall thereafter expeditiously notify Licensor of its desire
to make any change in pricing for the Products in any country of the Territory
for Licensor's approval.
<PAGE>
Page 3
(b) Licensee shall make arrangements to secure and pay for a
$500,000 declining balance irrevocable letter of credit on behalf of Licensor
which shall be used by Licensor to secure the payment of a transaction with a
third party over the period of January 1, 1996 through December 31, 2000.
(c) Licensee shall provide Licensor with twelve million seven
hundred and fifty thousand (12,750,000) shares of its restricted common stock
promptly (but not later than thirty [30] days) after the full execution of this
Agreement. It is understood that the aforementioned shares constitute Fifty-one
percent (51%) ownership of Licensee. Licensee respectively warrants that its
respective shares of such stock shall be free and clear of any encumbrances
whatsoever and that Licensee will execute and deliver to Licensor simultaneously
with such stock all other documents or instruments which may be reasonably
necessary or reasonably required to effectuate such transfer.
6. Licensor's Intellectual Property Rights
(a) Licensee agrees and acknowledges that it shall not acquire
any rights of ownership in the copyright(s), the renewal of copyright(s), the
trademark(s) and/or patent(s) (hereinafter individually and/or collectively
referred to as "Intellectual Property Rights") in and to the Product (or any
component thereof) as a result of Licensee's use of Licensor's Intellectual
Property Rights in and to the Product and that all such uses of any and all
Intellectual Property Rights in and to the Product by Licensee shall, as between
Licensee and Licensor, insure to the benefit of Licensor and be limited solely
to the marketing, distribution, sales and advertising of the Product. Licensee
shall not, directly or indirectly, during the term of this Agreement or
thereafter, do anything to interfere with Licensor's ownership of the Product or
attack the ownership by or control of Licensor in and to any and all of
Licensor's Intellectual Property Rights with respect to the Product or attack
the validity of the license herein granted to it. Without limiting the
generality of the provisions of this paragraph, except as set forth in this
Agreement, Licensee shall at no time use or authorize the use of any trademark,
"logo", trade name or other designation identical with or confusingly similar to
any of the trademarks, "logo", trade name or other designation (individually
and/or collectively referred to as "Trademarks") used by Licensor. Licensee
shall notify Licensor of any adverse use of a trademark or other designation
similar to any of the Trademarks of which Licensee is or becomes aware. Licensee
shall not at any time apply for any registration of any copyright, trademark or
"logo" or other designation which includes any of the Trademarks used by
Licensor, in whole or in part, and shall not file any document with any
government authority or take any other action which would affect Licensor's
ownership or control of any of Licensor's Intellectual Property Rights in and to
the Product including, without limitation, any of the Trademarks.
(b) The Licensor hereby authorizes, empowers and vests in the
Licensee the right, subject to Licensor's prior written approval, to enforce and
protect all rights to the Product and the Licensor's Intellectual Property
Rights therein in the Territory, whether standing in the name of the Licensor or
otherwise and subject to Licensor's prior written approval and in the reasonable
judgment of the Licensor, to join Licensor and such others as Licensor may deem
advisable as parties in any suits or proceedings in the name of the Licensor or
in the name of any other parties as Licensor may deem advisable and, subject to
Licensor's prior written approval, to proceed with or dispose of the same in the
same manner and to the same extent as could Licensor acting alone. In the event
of any recovery, fifty percent (50%) of the net proceeds therefrom (i.e.,
resulting after deducting from the gross proceeds therefrom any expenses of
litigation or other applicable costs which have been pre-approved in writing by
Licensor, including reasonable attorney's fees and court costs) shall be paid by
Licensee to Licensor and fifty percent (50%) of such net proceeds may be
retained by Licensee. Notwithstanding the foregoing, Licensor shall have the
right, exercisable at any time, to institute any action, suit or proceeding in
its own name and at its
<PAGE>
Page 4
own expense, in which case one hundred percent (100%) of the recovery shall be
retained by Licensor. In this regard, Licensee shall immediately notify Licensor
of : (1) any situation(s) or circumstance(s) which might reasonable warrant the
commencement by Licensor or Licensee hereunder of any such action, suite or
proceeding against any third parties; and/or (2) the institution by any third
party(ies) of any action, suit or proceeding against Licensee or otherwise
pertaining to the Product and/or Licensor's Intellectual Property Rights
therein.
(c) Notwithstanding anything to the contrary in this Agreement,
Licensee shall reimburse Licensor for its patent costs (including legal costs
for preparing and for patent filings and registration fees) incurred by Licensor
in Canada (if any); and, in addition, Licensee shall give Licensor every
assistance in filing the patent and registering same in Canada.
7. Export Control
Licensee acknowledges that any products software and technical information
(including, but not limited to the Product, and, if applicable, any services and
training) provided under this Agreement are subject to United States export laws
and regulations and any use or transfer of such products, software and technical
information must be authorized under those regulations. Licensee agrees that it
will not use, distribute, transfer or transmit the products, software or
technical information (even if incorporated into the Product or other products)
except in compliance with United State export regulations. Licensee also agrees
to give notice to Licensor and sign those export-related documents which may be
required for Licensor to comply with United States export regulations and to
indemnify and hold Licensor harmless from any losses, costs, expenses, fines or
penalties assessed against Licensor for failure to comply with such laws and
regulations. Notwithstanding anything expressed in or implied by this Agreement,
Licensee agrees that it shall be Licensee's sole responsibility at its sole cost
and expense to comply with any and all such Export Regulations or other
applicable laws or regulations.
8. Tax Provisions
As between Licensor and Licensee, Licensee is obligated to pay
all taxes, duties and other similar charges in connection with the sale of the
Product hereunder. In the event Licensee shall be obligated by the laws of any
country of the territory to deduct and withhold income or other similar tax from
royalties payable to Licensor hereunder, Licensee shall promptly supply
Licensor, if required, a certificate setting forth the amount of tax which shall
have been withheld, the rate of tax and any other necessary information which
shall assist Licensor, upon presentation of such certificate, to obtain income
tax credit from the United States Internal Revenue Service for the tax so
withheld.
9. Warranties and Indemnities
(a) Licensee warrants and represents that (1) it has the right
to enter into this Agreement and to fully perform all of its obligations
hereunder; (2) it shall not at any time use or disclose or permit the use or
disclosure of, directly or indirectly, any trade secrets, confidential or
proprietary information and/or all other knowledge, information, documents or
other materials, owned, developed or possessed by Licensor, whether in tangible
or intangible form, and which pertain to the subject matter of this Agreement.
Licensee agrees to defend, indemnify and hold Licensor harmless against any and
all liability, loss, damage, cost or expense including court costs and
reasonable attorney's fees, paid or incurred by reason of any breach of any of
Licensee's covenants, warranties or representations hereunder which are reduced
to final judgment or settled with Licensee's prior
<PAGE>
Page 5
written consent (not to be reasonable withhold) and not due to any violation or
breach by Licensor of Licensor's covenants, warranties or representations
hereunder. Licensee shall reimburse Licensor, on demand, for any payment made by
Licensor at any time with respect to any damage, liability, cost, loss or
expense to which the foregoing indemnity applies.
(b) Licensor represents and warrants that it possesses the
full right, power and authority to enter into and to perform the is Agreement.
Licensor agrees to defend, indemnify and hold Licensee harmless against any and
all liability, loss, damage, cost or expense including court costs and
reasonable attorneys' fees, paid or incurred by reason of any breach or claim of
breach of any of Licensor's convenants, warranties or representations hereunder
which re reduced to final judgment or settled with Licensor's prior written
consent (not to be unreasonable withheld) and not due to any violation or breach
by Licensee of Licensee's covenants, warranties or representations hereunder.
Licensor shall reimburse Licensee, on demand, for any payment made by Licensee
at any time with respect to any damage, liability, cost, loss or expense to
which the foregoing indemnity applies. NOTWITHSTANDING ANYTHING TO THE CONTRARY
EXPRESSED IN OR IMPLIED BY THIS AGREEMENT, LICENSEE ACKNOWLEDGES AND AGREES THAT
THERE ARE NO WARRANTIES, GUARANTEES, CONDITIONS, COVENANTS OR REPRESENTATIONS BY
LICENSOR WITH RESPECT TO THE PRODUCT AS TO MARKETABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR OTHER ATTRIBUTES, WHETHER EXPRESS OR IMPLIED (IN LAW OR IN
FACT), ORAL OR WRITTEN.
10. Rights of Termination of Licensor
In the event:
(a) Licensee shall fail to perform any of its obligations
required to its hereunder (except as set forth in subparagraphs 10(b) and 10(c)
below), and Licensor shall have notified Licensee in writing of such failure and
Licensee shall not have cured such failure within thirty (30) days after such
written notification; or
(b) Licensee shall fail to account and make purchase payments
to Licensor in a timely manner hereunder; or
(c) Licensee (by itself or through any third party including
without limitation, known exporters) causes or allows the Product hereunder (or
any component thereof) to be manufactured, distributed, sold, shipped,
trans-shipped, exported or exploited in any manner whatsoever, outside of the
Territory or otherwise in violation of applicable US. Export Administration
Regulations or other applicable laws, treaties or regulations or otherwise;then
and in any such events, Licensor may, in addition to all of its other rights and
remedies at law or otherwise, at its option, terminate this Agreement
immediately upon giving written notice to Licensee without prejudice to any
rights or claims which Licensor may have.
11. Insolvency
In the event Licensee shall make any assignment for the
benefit of creditors or make any compromises with creditors, or any action or
proceeding under any bankruptcy or insolvency law is taken by or against
Licensee, which is not discharged within thirty (30) days after it is commenced,
then in any such events the Licensor may, in addition to al of its other rights
and remedies at law or otherwise, its option, terminate this Agreement upon
giving Licensee not less than ten (10) days' written notice.
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Page 6
12. Effect of Expiration or Termination
(a) Upon the expiration or termination of this Agreement all
sales or distribution of the Product by Licensee (or by any third party
previously authorized in writing by Licensor to sell or otherwise distribute the
Product on behalf of Licensee) shall cease. All Product in Licensee's possession
or control (or in possession or control of any such authorized third party)
shall promptly, at the option of Licensor and upon its written instructions,
either:
(i) Be transferred by Licensee or Licensor's designee at
Licensee's actual directcost, plus shipment charges,; or
(ii) be destroyed by Licensee under the supervision of
Licensor or Licensor's designee, or at Licensor's written request, destroyed by
Licensee without such supervision provided Licensee provides Licensor with an
affidavit or such fact, sworn to by a principal officer of Licensee.
(b) Licensee shall submit to Licensor not later than thirty
(30) days after the expiration of this Agreement a written inventory of all the
then remaining product hereunder. Licensor or its designee shall have the
option, upon giving the Licensee written notice of its election to do so not
later than three (3) months after its receipt of such written inventory, to
purchase such Product which remain unsold at the time Licensor makes such
election, for an amount equal to Licensee's actual direct cost of such Product.
If Licensor or its designee elects to purchase such remaining Product, Licensee
shall promptly ship the same, at Licensee's cost, to Licensor or its designee,
or shall make them available at Licensee's place of business for Licensor or its
designee to take possession thereof.
(c) Subject to subparagraph (b) above, upon the expiration of
this Agreement, by reason of passage of time and not by reason of any
termination by Licensor , and provided further that Licensee submits the
aforesaid written inventory to Licensor within ten (10) days after such
expiration, Licensee shall continue to have the right to sell the then remaining
Product, on a non-exclusive basis only for an additional "Sell-off Period" of
six (6)months. Licensee agrees that it shall not order quantities of Product
hereunder in excess of reasonably anticipated market demand during the last six
(6) months of the Term of this Agreement.
(d) All sales of Product by Licensee subsequent to the
expiration of this Agreement shall, except as otherwise provided herein, be in
accordance with the terms and provisions hereof applicable to the sale of
Product during the term hereof. Without limiting the generality of the
foregoing, such sales shall be in Licensee's normal course of business and at
prices not less than the normal retail prices of such Product during the Term
hereof. Such sales (other than sales pursuant to subparagraph (b) hereof) shall
be subject to the payment of royalties by Licensee under the terms of this
Agreement. Upon the expiration of the six (6) month period referred to in
subparagraph (c) above, and at Licensor's sole direction in writing, Licensee
agrees to either transfer the then remaining Product to Licensor or Licensor's
designee or destroy all the then remaining Product under the supervision of
Licensor or Licensee's designee or, at Licensor's written request, Licensee
shall destroy said Product without such supervision provided that Licensee
provides Licensor with an affidavit of such fact, sworn to by a principal
officer of Licensee.
13. Notices
All statements and all notices to Licensor shall be addressed
to Licensor at the address set forth above or any other address hereinafter
designated by written notice by Licensor. All notices to Licensee shall be
addressed to Licensee at the address set forth above, or any other address
hereinafter designated by written notice
<PAGE>
Page 7
by Licensee. All notices to be given to either party hereto shall be in writing
and shall be delivered either personally to an officer of the addressee or by
certified mail, return receipt requested, postage prepaid, or by overnight
express (charges prepaid) or via facsimile (with a "hard" copy delivered in any
of the manners set forth in this sentence). Any notice which is mailed, sent via
overnight express or sent via facsimile shall be conclusively deemed to have
been given on the date of mailing or on the date of delivery to the overnight
express company or upon transmission by facsimile; provided notice of change of
address shall be deemed given when actually received.
14. Miscellaneous
(a) The covenants hereunder are subject to applicable laws and
treaties. This Agreement , its validity, construction and effect shall be
governed and construed under the laws of the State of New York applicable to
contracts executed therein and wholly to be performed therein. Any disputes
arising from this Agreement shall be subject to the exclusive jurisdiction of
the state or federal courts located in the City, County, and State of New York,
U.S.A.
(b) If any part of this Agreement shall be declared invalid or
unenforceable by a court of competent jurisdiction, it shall not effect the
validity of the balance of this Agreement, provided, however, that if any
provision of this Agreement pertaining to the payment of monies to Licensor
shall be declared invalid or unenforceable, Licensor shall have the right, at
its option, to terminate, this Agreement upon giving not less than ten (10)
days' written notice to Licensee.
(c) Except as provided for in this Agreement, all rights of
any nature in the Product licensed hereunder are reserved by Licensor.
(d) This Agreement may not be modified orally; no waiver,
amendment or modification shall be binding effective unless in writing and
signed by both parties.
(e) Paragraph headings used herein are for convenience only
and are nor part of this Agreement and shall not be used in construing it.
(f) This Agreement shall inure to the benefit of and be
binding upon Licensor and its successors and assigns and Licensee and any
permitted successors or assigns.
(g) In the event any payments due Licensor are delayed or
prohibited by currency restrictions or other governmental regulations, Licensor
shall be entitle to designate a local depository in the territory, in which
Licensee, at the direction of Licensor, shall deposit such monies to the credit
of Licensor subject to the laws of the Territory.
(h) In the event of any action, suit or proceeding hereunder
the prevailing party shall be entitled to recover reasonable attorneys' fees in
addition to the costs of said actions, suit or proceeding.
(i) Licensee agrees to comply with local law and, if required
by Licensor, register for copyright, trademark and/or patent protection as
applicable, on behalf of Licensor (or as Licensor otherwise directs) in the
Territory for the Product which is subject to this Agreement.
(j) This Agreement does not (and shall not be construed to)
create a partnership or joint venture between the parties.
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Page 8
(k) This Agreement constitutes the entire understanding between
the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed the day and year first et forth above.
PRIME INTERNATIONAL PRODUCTS, INC.
By: /s/ Diego Leiva
Diego Leiva
Title: President
ACCEPTED & AGREED:
P.C.T. Prepaid Telephone Inc.
B /c/ Christophe Giovannetti
Christophe Giovannetti
Title: Secretary
<PAGE>
Exhibit 10.14
AGREEMENT made as of this 24 day of October 1995 between PRIME INTERNATIONAL
PRODUCTS, INC. 115 Route 46 West, Suite A2, Mountain Lakes. New Jersey. 07046
(hereinafter referred to as "Licensor") and FIRENZE LTD., 230 Park Avenue, Suite
1000, New York, NY 10069 (hereinafter referred to as "Licensee")
W I T N E S S E T H:
WHEREAS, Licensor has certain rights in and to a prepaid telephone
system, inclusive of the microchip contained therein and software package to be
furnished therewith (individually and/or collectively referred to in this
Agreement as the "Product"); and
WHEREAS, Licensee is in a position to provide marketing, distribution
and sales for the Product throughout the following countries or continents:
Europe. Asia, Africa and Australia (hereinafter individually and/or collectively
referred to as the "Territory");
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises hereinafter set forth, it is agreed:
1. License of Product
Licensor hereby licenses to Licensee, and Licensee hereby
accepts from Licensor the exclusive right to market, distribute and sell the
Product only in the Territory during the Term and the Sell-off Period (as those
terms are defined below). Except as provided for in this Agreement, all rights
of any nature whatsoever in the Intellectual Property Rights (as defined below)
relating to the Product are reserved by Licensor Licensee undertakes to use all
reasonable efforts. skill and ability in its marketing. distribution and sale of
the Product hereunder. Licensor represents and warrants that at the time of
delivery to Licensee of the rights to the Product hereunder and during the Term
and the Sell-off Period (as those terms are defined below), Licensor will own or
control all rights herein granted to Licensee hereunder
2. Rights Granted
Licensor hereby grants to Licensee the following rights:
(a) The right to market, distribute, sell and advertise the
Product made available hereunder in the Territory, it being understood that such
right to market, distribute, sell and advertise shall be exclusive during the
Term and non-exclusive during the Sell-off Period.
(b) Licensee's right to release the Product at less than full
"top-line" retail prices (e.g. as any so-called "budget" products, as any
so-called "premium" products, as any so-called "mid-line" or any other
discounted Product) in connection with any merchandising schemes or commercial
tie-up arrangements. or through any direct mail or mail order method of
<PAGE>
distribution or other similar merchandising methods, shall not be exercised
without the prior written consent of Licensor, which shall not be unreasonably
withheld or delayed.
Licensor warrants and represents that it has not granted and shall not
grant to any third parties any rights in the Territory during the Term which are
inconsistent with the rights granted to Licensee hereunder; provided that unless
Licensee has entered into a contract for the sale of Product in each country or
continent in the Territory (other than France, Great Britain, Italy, Spain,
Germany, Switzerland, Belgium and Luxembourg) on or before February I, 1996, the
Licensor shall be entitled to grant rights in the Territory to third parties and
the provision of this Agreement relating to exclusivity shall have no force or
effect .
3. Term
The "Term" of this Agreement shall commence as of the date
hereof and shall continue for a period of five (5) years. Licensor hereby
irrevocably grants Licensee five (5) consecutive options to extend the Term for
additional periods of five (5) years each under the terms and conditions of this
Agreement. Each such option shall be exercised by Licensee, if at all, by
Licensee giving Licensor wrinen notice thereof no later than ninety (90) days
prior to the date that the then-current option would otherwise expire; provided,
however, if Licensee has failed to give such notice to Licensor within such
period, Licensor shall, upon expiration of said period, notify Licensee of such
failure and Licensee shall have an additional period of thirty (30) days from
Licensee's receipt of such notice within which to exercise such option(s).
4. De1ivery of Product
Licensor shall deliver the Product (as ordered by Licensee no
less than fourteen (14) days prior to the delivery date) at Licensor's cost
price plus ten percent (10%), to Licensee's premises. Title to all Product
passes to Licensee, upon delivery to Licensee's premises and Licensee shall pay
Licensor for the cost of such Product plus ten percent (10%). It is expected
that Licensor shall deliver such Product to Licensee's export locations as
specified by Licensee. All amounts due Licensor under this paragraph shall be
paid promptly by check or by irrevocable letter of credit but not later than
fifteen (15) days after the receipt by Licensee of any invoice therefor.
Licensee shall have the right, upon reasonable notice to Licensor during normal
business hours at Licensor's offices and not more than once a year, to audit
Licensor's financial books and records solely as the same pertain to Licensor's
aforesaid costs and expenses in connection with the Product.
5. Consideration
In consideration for this Agreement and the rights licensed
hereunder:
Licensee shall pay Licensor a royalty equal to five (5%)
percent of the retail selling price of all "Gross Sales" (as def ned below) in
the country of sale of one hundred (100%)
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<PAGE>
percent of the Product. As used herein "Gross Sales" shall mean all Product
manufactured and sold hereunder as well as all air time sold in connection with
the sales of all such Product. Licensee shall notify Licensor of the retail
selling price of Products manufactured and sold hereunder (and the price of the
air time sold in connection therewith) and Licensee shall use reasonable efforts
to ensure that said price is not less than the suggested retail list price
established by Licensor with Licensee with regard to each country of the
Territory of the Product sold hereunder, and the parties shall agree to the
basis which shall be used to calculate royalties hereunder promptly, but prior
to the first delivery of the Product to Licensee hereunder.
6. Accounting and Payment of Royalties
Within fourteen (14) days following the end of each calendar
month of each year. Licensee shall send to Licensor a statement setting forth in
detail the computation of royalties for the prior monthly period, setting forth
for each country in the Territory the Gross Sales of the Product (including the
number of Product distributed and sold, the retail price of each Product and the
price of all such air time), the royalties earned for each Product, and the
aggregate payable to Licensor hereunder. Each such statement shall be
accompanied by payment in United Stated Dollars of all royalty amounts payable
to Licensor. All payments hereunder shall be by bank wire transfer in United
States funds to Licensor as follows:
Bank: Chemical Bank New Jersey NA
Address: 57 Diamond Spring Road
Denville, NJ 07834
Account #: 6002 004149
Routing #: 021 202 337
7. Books and Records
Licensee shall keep true and correct accounts of the sale and
other distribution of Licensor's Product for each country, in the Territory.
Licensor or its representative shall have the right from time to time to appoint
an independent duly qualified accountant or auditor to inspect and make extracts
of the books and records of Licensee, whenever same may be, insofar as said
books and records pertain to the exercise by Licensee of any rights granted to
Licensee hereunder. Such inspections shall be made on reasonable prior written
notice, by such accountants or auditors as are chosen by Licensor, during normal
business hours or normal business days, and shall be at Licensor's expense
unless it is found that the amount of the total payments made to Licensor prior
to the date of such hispection is less than ninety (90%) percent of the total
payments which ought to have been made, in which event Licensee shall pay
Licensor an amount equal to all costs and expenses incurred by Licensor in
connection with such inspection and audit.
8. Licensor's Intellectual Property Rights
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<PAGE>
(a) Licensee agrees and acknowledges that it shall not acquire any
rights of ownership in the copyright(s), the renewal of copyright(s), the
trademark(s) and/or patent(s) (hereinafter individually and/or collectively
referred to as "Intellectual Property Rights") in and to the Product (or any
component thereof) as a result of Licensee's use of Licensor's Intellectual
Property Rights in and to the Product and that all such uses of any and all
Intellectual Property Rights in and to the Product by Licensee shall, as between
Licensee and Licensor, inure to the benefit of Licensor and be limited solely to
the marketing distribution, sales and advertising of the Product. Licensee shall
not, directly or indirectly, during the term of this Agreement or thereafter, do
anything to interfere with Licensor's ownership of the Intellectual Property
Rights relating to the Product or attack the ownership by or control of Licensor
in and to any and all of Licensor's Intellectual Property Rights with respect to
the Product or attack the validity of the license herein granted to it (unless
the attack on the validity of this License arises due to some act or omission of
the Licensor). Without limiting the generality of the provisions of this
paragraph. except as set forth in this Agreement. Licensee shall at no time use
or authorize the use of any trademark, "logo", trade name or other designation
identical with or confusingly similar to any of the trademarks, "logo", trade
name or other designation (individually and/or collectively referred to as
"Trademarks") used by Licensor at the date of this Agreement as set forth on
Schedule A attached hereto. Licensee shall notify Licensor of any adverse use of
a trademark or other designation similar to any of the Trademarks of which
Licensee is or becomes aware. Licensee shall not at any time apply for any
registration of any copyright. trademark or "logo" or other designation which
includes any of the Trademarks now used by Licensor and listed on Schedule A
attached hereto, in whole or in part, and shall not file any document with any
government authority or take any other action which would affect Licensor's
ownership or control of any of Licensor's Intellectual Property Rights relating
to the Product including, without limitation, any of the Trademarks listed on
Schedule A attached hereto.
(b) The Licensor hereby authorizes, empowers and vests in the Licensee
the right. to enforce and protect all of Licensor's Intellectual Property Rights
in the Product in the Territory, whether standing in the name of the Licensor or
otherwise and subject to Licensor's prior written approval and in the reasonable
judgment of the Licensor, to join Licensor and such others as Licensor may deem
advisable as parties in any suits or proceedings in the name of the Licensor or
in the name of any other parties as Licensor may deem advisable and. subject to
Licensor's prior written approval, to proceed with or dispose of the same in the
same manner and to the same extent as could Licensor acting alone. In the event
of any recovery, fifty percent (50%) of the net proceeds therefrom (i.e.,
resulting after deducting from the gross proceeds therefrom any expenses of
litigation or other applicable costs which have been pre-approved in writing by
Licensor, such approval not to be unreasonably withheld or delayed, including
reasonable attorney's fees and court costs) shall be paid by Licensee to
Licensor and fifty percent (50%) of such net proceeds may be retained by
Licensee. Notwithstanding the foregoing, Licensor shall have the right,
exercisable at any time, to institute any action, suit or proceeding in its own
name and at its own expense provided that any recovery of net proceeds shall be
divided in the same manner as set forth in the preceding sentence. In this
regard, Licensee shall immediately notify Licensor of: ( I ) any situation(s) or
circumstance(s) which might reasonably
4
<PAGE>
warrant the commencement by Licensor or Licensee hereunder of any such action,
suit or proceeding against any third parties; and/or (2) the institution by any
third party(ies) of any action, suit or proceeding against Licensee or otherwise
pertaining to the Licensor's Intellectual Property Rights in the Product.
9. Export Control
Licensee acknowledges that any products software and technical
information (including, but not limited to the Product, and, if applicable, any
services and training) provided under this Agreement are subject to United
States export laws and regulations and any use or transfer of such products,
software and technical infommation must be nuthorized under those regulations.
Licensee agrees that it will not use, distribute, transfer or transmit the
products, software or technical information (even if incorporated into the
Product or other products) except in compliance with United State export
regulations. Licensee also agrees to give notice to Licensor and sign those
export-related documents, the signature of which by Licensee may reasonably be
required for Licensor to comply with those United States export regulations
required to be complied with by Licensor in connection with this Agreement and
to indemnify and hold Licensor harmless from any losses, costs, expenses, fines
or penalties assessed against Licensor for failure by Licensee to comply with
such laws and regulations. Notwithstanding anything expressed in or implied by
this Agreement, Licensee agrees that it shall be Licensee's sole responsibility
at its sole cost and expense to comply with any and all export regulations or
other applicable laws or regulations required to be complied with by Licensee in
connection with this Agreement.
10. Tax Provisions
As between Licensor and Licensee, Licensee is obligated to pay
all taxes, duties and other similar charges in connection with the sale of the
Product hereunder (other than any taxes relating to the Licensor's receipt of
proceeds hereunder). In the event Licensee shall be obligated by the laws of any
country of the territory to deduct and withhold income or other similar tax from
royalties payable to Licensor hereunder, Licensee shall promptly supply
Licensor, if required, a certificate setting forth the amount of tax which shall
have been withheld, the rate ot tax and any other necessary information which
shall assist Licensor, upon presentation ot such certificate, to obtain income
tax credit trom the United States Intemal Revenue Service tor the tax so
withheld.
11. Warranties and Indemnities
(a) Licensee warrants and represents that ( I ) it has the right to
enter into this Agreement and to fully perform all of its obligations hereunder:
(2) it shall not at any time use or disclose or permit the use or disclosure of,
directly or indirectly,any trade secrets,confidential or proprietary information
and or all other confidential knowledge, information, documents or other
5
<PAGE>
materials. owned, developed or possessed by Licensor, whether in tangible or
intangible form, and which pertain to the subject matter of this Agreement,
except to its permitted sublicensees, assigns and successors. Licensee agrees to
defend, indemnify and hold Licensor harmless against any and all liability,
loss, damage. cost or expense including court costs and reasonable attorney's
fees, paid or incurred by reason of any breach of any of Licensee's covenants,
warranties or representations hereunder which are reduced to final judgment or
settled with Licensee's prior written consent (not to be unreasonably withheld)
and not due to any violation or breach by Licensor of Licensor's covenants,
warranties or representations hereunder. Licensee shall reimburse Licensor, on
demand, for any payment made by Licensor at any time with respect to any damage,
liability, cost, loss or expense payable to Licensor pursuant to the foregoing
indemnity.
(b) Licensor represents and warrants that it possesses the
full right, power and authority to enter into and to perform this Agreement.
Licensor agrees to defend, indemnify and hold Licensee harmless against any and
all liability, loss, damage, cost or expense including court costs and
reasonable attorneys' fees, paid or incurred by reason of any breach or claim of
breach of any of Licensor's covenants, warranties or representations hereunder
which are reduced to final judgment or settled with Licensor's prior written
consent (not to be unreasonably withheld) and not due to any violation or breach
by Licensee of Licensee's covenants, warranties or representations hereunder.
Licensor shall reimburse Licensee, on demand, for any payment made by Licensee
at any time with respect to any damage, liability, cost, loss or expense payable
to Licensee pursuant to the foregoing indemnity.
12. Rights of Termination of Licensor
In the event:
(a) Licensee shall fail to perform any of its obligations
required to be performed by it hereunder (except as set forth in subparagraphs
12(b) and 12(c) below), and Licensor shall have notified Licensee in writing of
such failure and Licensee shall not have cured such failure within thirty (30)
days after such written notification: or
(b) Licensee shall fail to account and make purchase and
royalty payments to Licensor in a timely manner hereunder and Licensor shall
have notified Licensee in writing of such failure and Licensee shall not have
cured such failure within ten (10) days after such written notification: or
(c) Licensee (by itself or through any third party including
without limitation, known exporters) causes or knowingly allows the Product
hereunder (or any component thereof) to be manufactured, distributed, sold,
shipped, trans-shipped, exported or exploited in any manner whatsoever, outside
of the Territory or otherwise in violation of applicable US export
administration regulations or other applicable laws, treaties or regulations or
otherwise,
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then and in any such events, Licensor may, in addition to all of its other
rights and remedies at law or otherwise, at its option, terminate this Agreement
immediately upon giving written notice to Licensee without prejudice to any
rights or claims which Licensor may have.
13. Insolvency
In the event Licensee shall make any assignment for the
benefit of creditors or make any compromises with creditors, or any action or
proceeding under any bankruptcy or insolvency law is taken against Licensee,
which is not discharged within thirty (30) days after it is commenced, then in
any such event the Licensor may, in addition to all of its other rights and
remedies at law or otherwise, at its option, terminate this Agreement upon
giving Licensee not less than ten ( 10) days' written notice.
14. Effect of Expiration or Termination
(a) Upon the expiration or termination of this Agreement all
sales or distribution of the Product by Licensee (or by any third party
previously authorized in writing by Licensor to sell or otherwise distribute the
Product on behalf of Licensee) shall cease. except as expressly set forth
herein. All Product in Licensee's possession or control (or in possession or
control of any such authorized third party) shall promptly, at the option of
Licensor and upon its written instructions, either:
(i) be transferred by Licensee to Licensor's designee at
Licensee's retail selling price, plus shipment charges; or
(ii) be sold by Licensee within a period of twelve (12)
months from the date of expiration or termination of this Agreement (the "Sell-
off Period").
(b) Licensee shall submit to Licensor not later than thirty
(30) days after the expiration of this Agreement a written inventory of all the
then remaining Product hereunder. Licensor or its designee shall have the
option, upon giving the Licensee written notice of its election to do so not
later than three (3) months after its receipt of such written inventory, to
purchase such Product which remain unsold at the time Licensor makes such
election, for an amount equal to Licensee's actual retail selling price of such
Product. If Licensor or its designee elects to purchase such remaining Product,
Licensee shall promptly ship the same, at Licensor's cost, to Licensor or its
designee or shall make them available at Licensee's place of business for
Licensor or its designee to take possession thereof.
(c) All sales of Product by Licensee subsequent to the
expiration of this Agreement shall, except as otherwise provided herein. be in
accordance with the terms and provisions hereof applicable to the sale of
Product during the Term hereof.
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15. Notices
All statements and all notices to Licensor shall be addressed
to Licensor at the address set forth above or any other address hereinafter
designated by written notice by Licensor. All notices to Licensee shall be
addressed to Licensee at the address set forth above, or any other address
hereinafter designated by written notice by Licensee All notices to be given to
either party hereto shall be in writing and shall be delivered either personally
to an officer of the addressee or by certified mail, retum receipt requested,
postage prepaid, or by overnight express (charges prepaid) or via facsimile
(with a "hard" copy delivered in any of the manners set forth in this sentence).
Any notice which is mailed, sent via ovemight express or sent via facsimile
shall be conclusively deemed to have been given on the date of mailing or on the
date of delivery to the overnight express company or upon transmission by
facsimile; provided notice of change of address shall be deemed given when
actually received.
16. Miscellaneous
(a) The covenants hereunder are subject to applicable laws and
treaties. This Agreement, its validity, construction and effect shall be
governed and constructed under the laws of the State of New York applicable to
contracts executed therein and wholly to be performed therein without regard to
conflict of laws principles. Any disputes arising from this Agreement shall be
subject to the exclusive jurisdiction of the state or federal courts located in
the City, County, and State of New York, U.S.A.
(b) If any part of this Agreement shall be declared invalid or
unenforceable by a court of competent jurisdiction, it shall not effect the
validity of the balance of this Agreement, provided. however, that if any
provision of this Agreement pertaining to the payment of monies to Licensor
shall be declared invalid or unenforceable. Licensor shall have the right. at
its option. to terminate, this Agreement upon giving not less than ten (10)
days' written notice to Licensee.
(c) Except as provided for in this Agreement all rights of any
nature in the Intellectual Property Rights relating to the Product licensed here
under are reserved by Licensor.
(d) This Agreement may not be modified orally; no waiver,
amendment or modification shall be binding effective unless in writing and
signed by both parties.
(e) Paragraph headings used herein are for convenience only
and are not part of this Agreement and shall not be used in construing it.
(f) This Agreement shall inure to the beneflt of and be
binding upon Licensor and its successors and assigns and Licensee and any
pemmitted successors or assigns.
(g) In the event any payments due to Licensor are delayed or
prohibited by currency restrictions or other govemmental regulations. Licensor
shall be entitle to designate a
8
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local depository in the territory in which Licensee, at the direction of
Licensor, shall deposit such monies to the credit of Licensor subject to the
laws of the Territory.
(h) In the event of any action, suit or proceeding hereunder
the prevailing party shall be entitled to recover reasonable attorneys' fees in
addition to the costs of said action suit or proceeding.
(i) Licensee agrees to comply with local law and, if required
by Licensor, register for copyright, trademark and/or patent protection as
applicable, on behalf of Licensor (or as Licensor otherwise directs) in the
Territory for the Product which is subject to this Agreement
(j) This Agreement does not (and shall not be construed to)
create a partnership or joint venture between the parties.
(k)This Agreement constitutes the entire understanding between
the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed the day and year first set forth above.
ACCEPTED & AGREED
FIRENZE LTD.
By: /s/ Christophe Giovannetti
Christophe Giovannetti
Title: President
PRIME INTERNATIONAL PRODUCTS, INC.
By: /s/ Diego Leiva
Diego Leiva
Title: President
9
<PAGE>
Prime International Products, Inc.
115 Route 46 West, Suite A2
Mountain Lakes, NJ 07046
Phone: (201) 334-2929
Fax: (201) 335-7676
February 2, 1996
Mr. Christophe Giovannetti
President
Firenze Ltd
230 Park Avenue, Suite 1000
New York NY 10169
Dear Mr. Giovannetti:
Pursuant to Paragraph 2 (b) of the Agreement bet\veen Prime International
Products, Inc. and Firenze Ltd. dated October 24, 1995, this letter is to notify
you that since Firenze has not entered into contracts for the sale of Product in
each country or continent in the Territory (except France, Great Britain, Italy,
Spain, Germany, Switzerlamd, Belgium and Luxembourg), Prime is granting the
Licenses to the rest of Europe, Asia, Africa and Australia to others.
We hereby request that you acknowledge your release of the aforementioned
Territory.
Very truly yours,
/s/ Diego Leiva
Diego Leiva
President
AGREED:
FIRENZE LTD.
By: /s/ Christophe Giovannetti
Christophe Giovannetti, President
<PAGE>
Exhibit 10.15
AGREEMENT made as of this 6th. day of January 1996 between PRIME INTERNATIONAL
PRODUCTS, INC. 115 Route 46 West, Suite A2, Mountain Lakes, New Jersey, 07046
(hereinafter referred to as "Licensor") and YAKIMOTO LTD., International
Building, Bank Lane, Nassau, Bahamas (hereinafter referred to as "Licensee").
W I T N E S S E T H:
WHEREAS, Licensor has certain rights in and to a prepaid telephone, inclusive of
the microchip contained therein and software package to be furnished therewith
(individually and/or collectively referred to in this Agreement as the
"Product"); and
WHEREAS, License is in a position to provide marketing, distribution and sales
for the Product throughout the following countries: Argentina, Greece, Turkey,
Europe (except European Economic Community), India China, and the countries of
the Middle East (e.g. Saudi Arabia, Kuwait, United Arab Emerites, Jordan,
Israel, etc.) and North Africa (e.g. Algeria, Libya, Mauritania, Morocco,
Tunisia, etc.) (hereinafter individually and/or collectively referred to as the
"Territory");
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and promises hereinafter set forth, it is agreed:
1. License of Product
Licensor hereby licenses to License, and Licensee hereby accepts from Licensor
the exclusive right to market, distribute and sell the Product only in the
Territory during the "Term" and the "Sell-off Period" (as those terms are
defined below). Except as provided for in this Agreement, all rights of any
nature whatsoever in the Product are reserved by Licensor. Licensee undertakes
to use all reasonable efforts, skill and ability in its marketing, distribution
and sale of the Product hereunder. Licensor represents and warrants that at the
time of delivery to Licensee of the Product hereunder, Licensor will own or
control all rights herein granted to Licensee hereunder.
2. Rights Granted
Licensor hereby grants to Licensee the following rights:
(a) The right to market, distribute, sell and advertise the Product made
available hereunder in the Territory, it being understood that such right to
market, distribute, sell and advertise shall be exclusive during the Term and
non-exclusive during the Sell-off Period.
(b) Licensee's right to release the Product at less than full "top-line" retail
prices (e.g., as any so-called "budget" products, as any so-called "premium"
products, as any so-called "mid-line" or any other discounted Product) in
connection with any merchandising schemes or commercial tie-up arrangements, or
through any direct mail or mail order method of distribution or other similar
merchandising methods, shall not be exercised without the prior written consent
of Licensor. Further, Licensee shall not be permitted to assign or sub-license
the Product, this Agreement of any of its rights hereunder in whole or in part,
without Licensor's prior written consent.
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Page 2
Licensor warrants and represents that it has not granted to any third parties
any rights in the Territory during the Term which are inconsistent with the
rights granted to Licensee hereunder.
3. Term
The "Term" of this Agreement shall commence as of the date hereof and shall
continue for a period of five (5) years providing, Licensee is selling the
Product in each country in the Territory by June 1, 1997. If Licensee is not
selling the Product in any country in the Territory by June 1, 1997, Licensor
shall have the right to revoke the license granted hereunder to that particular
country of the Territory. Licensor hereby irrevocably grants Licensee five (5)
consecutive options to extend the Term for additional periods of five (5) years
for the Territory each under the terms and conditions of this Agreement. Each
such option shall be exercised by Licensee, if at all, by Licensee giving
Licensor written notice thereof no later than ninety (90) days prior to the date
that the then-current option would otherwise expire; provided, however, if
Licensee has failed to give such notice to Licensor within such period, Licensor
shall notify Licensee of such failure and Licensee shall have an additional
period of thirty (30) days from Licensee's receipt of such notice within which
to exercise such option(s).
4. Delivery of Product
Licensor shall deliver the Product (as ordered by Licensee no less than fourteen
(14) days prior to the delivery date) at Licensor's cost price plus ten percent
(10%), F.O.B. Licensor's plant. Title to all Product passes to Licensee at
F.O.B. point of shipment. Licensee shall pay Licensor for the cost of such
Product plus ten percent (10%) as well as packaging, shipping, insurance,
customs fees and duties (if any), and any other expenses actually incurred by
Licensor relating to the shipment to Licensee of all Products ordered. It is
expected that Licensor shall deliver such Product to Licensee's export locations
as specified by Licensee. All amounts due Licensor under this paragraph shall be
paid promptly by check or by irrevocable letter of credit but not later than ten
(10) days after the receipt by Licensee of any invoice therefor. Licensee shall
have the right, upon reasonable notice to Licensor during normal business hours
at Licensor's offices and not more than once a year, to audit Licensor's
financial books and records solely as the same pertain to Licensor's aforesaid
costs and expenses in connection with the Product.
5. Consideration
In consideration for this Agreement and the rights licensed hereunder:
Licensee shall pay Licensor a royalty equal to five (5%) percent of the retail
selling price of all "Gross Sales" (as defined below) in the country of sale of
one hundred (100%) percent of the Product. As used herein "Gross Sales" shall
mean all Product manufactured and sold hereunder as well as all air time sold in
connection with the sales of all such Product. Licensee agrees that the retail
selling price of Products manufactured and sold hereunder (and the price of the
air time sold in connection therewith) shall not be less than the suggested
retail list price established by Licensor with Licensee with regard to each
country of the Territory of the Product sold hereunder, and the parties shall
agree to the basis which shall be used to calculate royalties hereunder
promptly, but prior to the first delivery of the Product to Licensee hereunder.
Licensee shall thereafter expeditiously notify Licensor of its desire to make
any change in pricing for the Products in any country of the Territory for
Licensor's approval.
<PAGE>
Page 3
6. Accounting and Payment of Royalties
Within fourteen (14) days following the end of each calendar month of each year,
Licensee shall send to Licensor a statement setting forth in detail the
computation of royalties for the prior monthly period, setting forth for each
country in the Territory the Gross Sales of the Product (including the number of
Product distributed and sold, the retail price of each Product and the price of
all such air time), the royalties earned for each Product, and the aggregate
payable to Licensor hereunder. Each such statement shall be accompanied by
payment in United States Dollars of all royalty amounts payable to Licensor. All
payments hereunder shall be by bank wire transfer in United States funds to
Licensor as follows:
Bank: Chemical Bank New Jersey NA
Address: 57 Diamond Spring Road
Denville, NJ 07834
Account #: 6002 004149
Routing #: 021 202 337
7. Books and Records
Licensee shall keep true and correct accounts of the sale and other distribution
of Licensor's Product for each country in the Territory. Licensor or its
representative shall have the right from time to time to appoint an independent
duly qualified accountant or auditor to inspect and make extracts of the books
and records of Licensee, whenever same may be, insofar as said books and records
pertain to the exercise by Licensee of any rights granted to Licensee hereunder.
Such inspections shall be made on reasonable prior written notice, by such
accountants or auditors as are chosen by Licensor, during normal business hours
or normal business days, and shall be at Licensor's expense unless it is found
that the amount of the total payments made to Licensor prior to the date of such
inspection is less than ninety (90%) percent of the total payments which ought
to have been made, in which event Licensee shall pay Licensor an amount equal to
all costs and expenses incurred by Licensor in connection with such inspection
and audit.
8. Licensor's Intellectual Property Rights
(a) Licensee agrees and acknowledges that it shall not acquire any rights of
ownership in the copyright(s), the renewal of copyright(s), the trademark(s)
and/or patent(s) (hereinafter individually and/or collectively referred to as
"Intellectual Property Rights") in and to the Product (or any component thereof)
as a result of Licensee's use of Licensor's Intellectual Property Rights in and
to the Product and that all such uses of any and all Intellectual Property
Rights in and to the Product by Licensee shall, as between Licensee and
Licensor, insure to the benefit of Licensor and be limited solely to the
marketing, distribution, sales and advertising of the Product. Licensee shall
not, directly or indirectly, during the term of this Agreement or thereafter, do
anything to interfere with Licensor's ownership of the Product or attack the
ownership by or control of Licensor in and to any and all of Licensor's
Intellectual Property Rights with respect to the Product or attack the validity
of the license herein granted to it. Without limiting the generality of the
provisions of this paragraph, except as set forth in this Agreement, Licensee
shall at no time use or authorize the use of any trademark, "logo", trade name
or other designation identical with or confusingly similar to any of the
trademarks, "logo", trade name or other designation (individually and/or
collectively referred to as "Trademarks") used by Licensor. Licensee shall
notify Licensor of any adverse use of a trademark or other designation similar
to any of the Trademarks of which Licensee is or
<PAGE>
Page 4
becomes aware. Licensee shall not at any time apply for any registration of any
copyright, trademark or "logo" or other designation which includes any of the
Trademarks used by Licensor, in whole or in part, and shall not file any
document with any government authority or take any other action which would
affect Licensor's ownership or control of any of Licensor's Intellectual
Property Rights in and to the Product including, without limitation, any of the
Trademarks.
(b) The Licensor hereby authorizes, empowers and vests in the Licensee the
right, subject to Licensor's prior written approval, to enforce and protect all
rights to the Product and the Licensor's Intellectual Property Rights therein in
the Territory, whether standing in the name of the Licensor or otherwise and
subject to Licensor's prior written approval and in the reasonable judgment of
the Licensor, to join Licensor and such others as Licensor may deem advisable as
parties in any suits or proceedings in the name of the Licensor or in the name
of any other parties as Licensor may deem advisable and, subject to Licensor's
prior written approval, to proceed with or dispose of the same in the same
manner and to the same extent as could Licensor acting alone. In the event of
any recovery, fifty percent (50%) of the net proceeds therefrom (i.e., resulting
after deducting from the gross proceeds therefrom any expenses of litigation or
other applicable costs which have been pre-approved in writing by Licensor,
including reasonable attorney's fees and court costs) shall be paid by Licensee
to Licensor and fifty percent (50%) of such net proceeds may be retained by
Licensee. Notwithstanding the foregoing, Licensor shall have the right,
exercisable at any time, to institute any action, suit or proceeding in its own
name and at its own expense, in which case one hundred percent (100%) of the
recovery shall be retained by Licensor. In this regard, Licensee shall
immediately notify Licensor of : (1) any situation(s) or circumstance(s) which
might reasonable warrant the commencement by Licensor or Licensee hereunder of
any such action, suite or proceeding against any third parties; and/or (2) the
institution by any third party(ies) of any action, suit or proceeding against
Licensee or otherwise pertaining to the Product and/or Licensor's Intellectual
Property Rights therein.
(c) Notwithstanding anything to the contrary in this Agreement, Licensee shall
reimburse Licensor for its patent costs (including legal costs for preparing and
for patent filings and registration fees) incurred by Licensor in each country
in the Territory; and, in addition, Licensee shall give Licensor every
assistance in filing the patent and registering same in each country in the
Territory.
9. Export Control
Licensee acknowledges that any products software and technical information
(including, but not limited to the Product, and, if applicable, any services and
training) provided under this Agreement are subject to United States export laws
and regulations and any use or transfer of such products, software and technical
information must be authorized under those regulations. Licensee agrees that it
will not use, distribute, transfer or transmit the products, software or
technical information (even if incorporated into the Product or other products)
except in compliance with United State export regulations. Licensee also agrees
to give notice to Licensor and sign those export-related documents which may be
required for Licensor to comply with United States export regulations and to
indemnify and hold Licensor harmless from any losses, costs, expenses, fines or
penalties assessed against Licensor for failure to comply with such laws and
regulations. Notwithstanding anything expressed in or implied by this Agreement,
Licensee agrees that it shall be Licensee's sole responsibility at its sole cost
and expense to comply with any and all such Export Regulations or other
applicable laws or regulations.
10. Tax Provisions
As between Licensor and Licensee, Licensee is obligated to pay all taxes, duties
and other similar charges in connection with the sale of the Product hereunder.
In the event Licensee shall be obligated by the laws
<PAGE>
Page 5
of any country of the territory to deduct and withhold income or other similar
tax from royalties payable to Licensor hereunder, Licensee shall promptly supply
Licensor, if required, a certificate setting forth the amount of tax which shall
have been withheld, the rate of tax and any other necessary information which
shall assist Licensor, upon presentation of such certificate, to obtain income
tax credit from the United States Internal Revenue Service for the tax so
withheld.
11. Warranties and Indemnities
(a) Licensee warrants and represents that (1) it has the right to enter into
this Agreement and to fully perform all of its obligations hereunder; (2) it
shall not at any time use or disclose or permit the use or disclosure of,
directly or indirectly, any trade secrets, confidential or proprietary
information and/or all other knowledge, information, documents or other
materials, owned, developed or possessed by Licensor, whether in tangible or
intangible form, and which pertain to the subject matter of this Agreement.
Licensee agrees to defend, indemnify and hold Licensor harmless against any and
all liability, loss, damage, cost or expense including court costs and
reasonable attorney's fees, paid or incurred by reason of any breach of any of
Licensee's covenants, warranties or representations hereunder which are reduced
to final judgment or settled with Licensee's prior written consent (not to be
reasonable withhold) and not due to any violation or breach by Licensor of
Licensor's covenants, warranties or representations hereunder. Licensee shall
reimburse Licensor, on demand, for any payment made by Licensor at any time with
respect to any damage, liability, cost, loss or expense to which the foregoing
indemnity applies.
(b) Licensor represents and warrants that it possesses the full right, power and
authority to enter into and to perform the is Agreement. Licensor agrees to
defend, indemnify and hold Licensee harmless against any and all liability,
loss, damage, cost or expense including court costs and reasonable attorneys'
fees, paid or incurred by reason of any breach or claim of breach of any of
Licensor's convenants, warranties or representations hereunder which re reduced
to final judgment or settled with Licensor's prior written consent (not to be
unreasonable withheld) and not due to any violation or breach by Licensee of
Licensee's covenants, warranties or representations hereunder. Licensor shall
reimburse Licensee, on demand, for any payment made by Licensee at any time with
respect to any damage, liability, cost, loss or expense to which the foregoing
indemnity applies.
NOTWITHSTANDING ANYTHING TO THE CONTRARY EXPRESSED IN OR IMPLIED BY THIS
AGREEMENT, LICENSEE ACKNOWLEDGES AND AGREES THAT THERE ARE NO WARRANTIES,
GUARANTEES, CONDITIONS, COVENANTS OR REPRESENTATIONS BY LICENSOR WITH RESPECT TO
THE PRODUCT AS TO MARKETABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHER
ATTRIBUTES, WHETHER EXPRESS OR IMPLIED (IN LAW OR IN FACT), ORAL OR WRITTEN.
12. Rights of Termination of Licensor
In the event:
(a) Licensee shall fail to perform any of its obligations required to its
hereunder (except as set forth in subparagraphs 12(b) and 12(c) below), and
Licensor shall have notified Licensee in writing of such failure and Licensee
shall not have cured such failure within thirty (30) days after such written
notification; or
(b) Licensee shall fail to account and make purchase and royalty payments to
Licensor in a timely manner hereunder; or
(c) Licensee (by itself or through any third party including without limitation,
known exporters) causes or allows the Product hereunder (or any component
thereof) to be manufactured, distributed, sold, shipped, trans-shipped, exported
or exploited in any manner whatsoever, outside of the Territory or otherwise in
<PAGE>
Page 6
violation of applicable US. Export Administration Regulations or other
applicable laws, treaties or regulations or otherwise;
then and in any such events, Licensor may, in addition to all of its other
rights and remedies at law or otherwise, at its option, terminate this Agreement
immediately upon giving written notice to Licensee without prejudice to any
rights or claims which Licensor may have.
13. Insolvency
In the event Licensee shall make any assignment for the benefit of creditors or
make any compromises with creditors, or any action or proceeding under any
bankruptcy or insolvency law is taken by or against Licensee, which is not
discharged within thirty (30) days after it is commenced, then in any such
events the Licensor may, in addition to al of its other rights and remedies at
law or otherwise, its option, terminate this Agreement upon giving Licensee not
less than ten (10) days' written notice.
14. Effect of Expiration or Termination
(a) Upon the expiration or termination of this Agreement all sales or
distribution of the Product by Licensee (or by any third party previously
authorized in writing by Licensor to sell or otherwise distribute the Product on
behalf of Licensee) shall cease. All Product in Licensee's possession or control
(or in possession or control of any such authorized third party) shall promptly,
at the option of Licensor and upon its written instructions, either:
(I) Be transferred by Licensee or Licensor's designee at Licensee's actual
direct cost, plus shipment charges,; or
(ii) be destroyed by Licensee under the supervision of Licensor or Licensor's
designee, or at Licensor's written request, destroyed by Licensee without such
supervision provided Licensee provides Licensor with an affidavit or such fact,
sworn to by a principal officer of Licensee.
(b) Licensee shall submit to Licensor not later than thirty (30) days after the
expiration of this Agreement a written inventory of all the then remaining
product hereunder. Licensor or its designee shall have the option, upon giving
the Licensee written notice of its election to do so not later than three (3)
months after its receipt of such written inventory, to purchase such Product
which remain unsold at the time Licensor makes such election, for an amount
equal to Licensee's actual direct cost of such Product. If Licensor or its
designee elects to purchase such remaining Product, Licensee shall promptly ship
the same, at Licensee's cost, to Licensor or its designee, or shall make them
available at Licensee's place of business for Licensor or its designee to take
possession thereof.
(c) Subject to subparagraph (b) above, upon the expiration of this Agreement, by
reason of passage of time and not by reason of any termination by Licensor , and
provided further that Licensee submits the aforesaid written inventory to
Licensor within ten (10) days after such expiration, Licensee shall continue to
have the right to sell the then remaining Product, on a non-exclusive basis only
for an additional "Sell-off Period" of six (6)months. Licensee agrees that it
shall not order quantities of Product hereunder in excess of reasonably
anticipated market demand during the last six (6) months of the Term of this
Agreement.
(d) All sales of Product by Licensee subsequent to the expiration of this
Agreement shall, except as otherwise provided herein, be in accordance with the
terms and provisions hereof applicable to the sale of
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Page 7
Product during the term hereof. Without limiting the generality of the
foregoing, such sales shall be in Licensee's normal course of business and at
prices not less than the normal retail prices of such Product during the Term
hereof. Such sales (other than sales pursuant to subparagraph (b) hereof) shall
be subject to the payment of royalties by Licensee under the terms of this
Agreement. Upon the expiration of the six (6) month period referred to in
subparagraph (c) above, and at Licensor's sole direction in writing, Licensee
agrees to either transfer the then remaining Product to Licensor or Licensor's
designee or destroy all the then remaining Product under the supervision of
Licensor or Licensee's designee or, at Licensor's written request, Licensee
shall destroy said Product without such supervision provided that Licensee
provides Licensor with an affidavit of such fact, sworn to by a principal
officer of Licensee.
15. Notices
All statements and all notices to Licensor shall be addressed to Licensor at the
address set forth above or any other address hereinafter designated by written
notice by Licensor. All notices to Licensee shall be addressed to Licensee at
the address set forth above, or any other address hereinafter designated by
written notice by Licensee. All notices to be given to either party hereto shall
be in writing and shall be delivered either personally to an officer of the
addressee or by certified mail, return receipt requested, postage prepaid, or by
overnight express (charges prepaid) or via facsimile (with a "hard" copy
delivered in any of the manners set forth in this sentence). Any notice which is
mailed, sent via overnight express or sent via facsimile shall be conclusively
deemed to have been given on the date of mailing or on the date of delivery to
the overnight express company or upon transmission by facsimile; provided notice
of change of address shall be deemed given when actually received.
16. Miscellaneous
(a) The covenants hereunder are subject to applicable laws and treaties. This
Agreement , its validity, construction and effect shall be governed and
construed under the laws of the State of New York applicable to contracts
executed therein and wholly to be performed therein. Any disputes arising from
this Agreement shall be subject to the exclusive jurisdiction of the state or
federal courts located in the City, County, and State of New York, U.S.A.
(b) If any part of this Agreement shall be declared invalid or unenforceable by
a court of competent jurisdiction, it shall not effect the validity of the
balance of this Agreement, provided, however, that if any provision of this
Agreement pertaining to the payment of monies to Licensor shall be declared
invalid or unenforceable, Licensor shall have the right, at its option, to
terminate, this Agreement upon giving not less than ten (10) days' written
notice to Licensee.
(c) Except as provided for in this Agreement, all rights of any nature in the
Product licensed hereunder are reserved by Licensor.
(d) This Agreement may not be modified orally; no waiver, amendment or
modification shall be binding effective unless in writing and signed by both
parties.
(e) Paragraph headings used herein are for convenience only and are nor part of
this Agreement and shall not be used in construing it.
(f) This Agreement shall inure to the benefit of and be binding upon Licensor
and its successors and assigns and Licensee and any permitted successors or
assigns.
<PAGE>
Page 8
(g) In the event any payments due Licensor are delayed or prohibited by currency
restrictions or other governmental regulations, Licensor shall be entitle to
designate a local depository in the territory, in which Licensee, at the
direction of Licensor, shall deposit such monies to the credit of Licensor
subject to the laws of the Territory.
(h) In the event of any action, suit or proceeding hereunder the prevailing
party shall be entitled to recover reasonable attorneys' fees in addition to the
costs of said actions, suit or proceeding.
(i) Licensee agrees to comply with local law and, if required by Licensor,
register for copyright, trademark and/or patent protection as applicable, on
behalf of Licensor (or as Licensor otherwise directs) in the Territory for the
Product which is subject to this Agreement.
(j) This Agreement does not (and shall not be construed to) create a partnership
or joint venture between the parties.
(k) This Agreement constitutes the entire understanding between the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first et forth above.
PRIME INTERNATIONAL PRODUCTS, INC.
By: /s/ Diego Leiva
Diego Leiva
Title: President & CEO
ACCEPTED & AGREED:
YAKIMOTO LTD.
By: /s/ Yves Uzan
Yves Uzan
Title:
<PAGE>
Prime International Products, Inc.
115 Route 46 West, Suite A2
Mountain Lakes, NJ 07046
Phone: (201) 334-2929
Fax: (201) 335-7676
February 28, 1996
Mr. Yves Victor Uzan
Yakimoto, Ltd.
International Building
Bank Lane
Nassau, Bahamas
Dear Mr. Uzan:
In order to induce Prime International Products, Inc. to grant Yakimoto, Ltd.
the license to market, sell and distribute Prime's prepaid cellular telephone
system in Asia, Australia, Africa and Europe (except France, Great Britain,
Italy, Spain, Germany, Switzerland, Belgium and Luxembourg), Yakimoto, Ltd.
hereby agrees to provide Prime International Products, Inc. with 500,000
restricted shares of the common stock of Ultimistics, Inc.
If the foregoing is in accordance with your understanding, please return one
signed copy of this letter to my attention.
Sincerely,
/s/ Diego Leiva
Diego Leiva
President & CEO
ACCEPTED and AGREED:
YAKIMOTO, LTD.
By: /s/ Yves-Victor Uzan
Yves Victor Uzan
Title: Authorized Signatory
<PAGE>
Exhibit 10.16
AGREEMENT made as of this 25h. day of January 1996 between PRIME INTERNATIONAL
PRODUCTS, INC. 115 Route 46 West, Suite A2, Mountain Lakes, New Jersey, 07046
(hereinafter referred to as "Licensor") and YAKIMOTO INVESTMENT LTD.,
International Building, Bank Lane, Nassau, Bahamas (hereinafter referred to as
"Licensee").
W I T N E S S E T H:
WHEREAS, Licensor has certain rights in and to a prepaid telephone, inclusive of
the microchip contained therein and software package to be furnished therewith
(individually and/or collectively referred to in this Agreement as the
"Product"); and
WHEREAS, License is in a position to provide marketing, distribution and sales
for the Product throughout the countries in South America (hereinafter
individually and/or collectively referred to as the "Territory");
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and promises hereinafter set forth, it is agreed:
1. License of Product
Licensor hereby licenses to License, and Licensee hereby accepts from Licensor
the exclusive right to market, distribute and sell the Product only in the
Territory during the "Term" and the "Sell-off Period" (as those terms are
defined below). Except as provided for in this Agreement, all rights of any
nature whatsoever in the Product are reserved by Licensor. Licensee undertakes
to use all reasonable efforts, skill and ability in its marketing, distribution
and sale of the Product hereunder. Licensor represents and warrants that at the
time of delivery to Licensee of the Product hereunder, Licensor will own or
control all rights herein granted to Licensee hereunder.
2. Rights Granted
Licensor hereby grants to Licensee the following rights:
(a) The right to market, distribute, sell and advertise the Product made
available hereunder in the Territory, it being understood that such right to
market, distribute, sell and advertise shall be exclusive during the Term and
non-exclusive during the Sell-off Period.
(b) Licensee's right to release the Product at less than full "top-line" retail
prices (e.g., as any so-called "budget" products, as any so-called "premium"
products, as any so-called "mid-line" or any other discounted Product) in
connection with any merchandising schemes or commercial tie-up arrangements, or
through any direct mail or mail order method of distribution or other similar
merchandising methods, shall not be exercised without the prior written consent
of Licensor. Further, Licensee shall not be permitted to assign or sub-license
the Product, this Agreement of any of its rights hereunder in whole or in part,
without Licensor's prior written consent. If Licensee wishes to assign any of
this Agreement, prior to seeking Licensor's consent to such assignment Licensee
must obtain a written commitment that the Sublicensee will sign an agreement
with Licensor on the same terms and conditions as set forth herein.
Licensor warrants and represents that it has not granted to any third parties
any rights in the Territory during the Term which are inconsistent with the
rights granted to Licensee hereunder.
<PAGE>
Page 2
3. Term
The "Term" of this Agreement shall commence as of the date hereof and shall
continue until December 31, 2000 providing Licensee is selling the Product in
each country in the Territory by June 1, 1997. If Licensee is not selling the
Product in any country in the Territory by June 1, 1997, Licensor shall have the
right to revoke the license granted hereunder to that particular country of the
Territory. Licensor hereby irrevocably grants Licensee five (5) consecutive
options to extend the Term for additional periods of five (5) years for the
Territory each under the terms and conditions of this Agreement. Each such
option shall be exercised by Licensee, if at all, by Licensee giving Licensor
written notice thereof no later than one hundred eighty (180) days prior to the
date that the then-current option would otherwise expire; provided, however, if
Licensee has failed to give such notice to Licensor within such period, Licensor
shall notify Licensee of such failure and Licensee shall have a period of thirty
(30) days from Licensee's receipt of such notice within which to exercise such
option(s).
4. Delivery of Product
Since delivery times for the Product are based on suppliers deliveries to
Licensor, Licensee shall supply quarterly projections to Licensor of its
estimated purchases of Product hereunder.
Licensor shall deliver the Product (as ordered by Licensee no less than fourteen
(14) days prior to the delivery date) at Licensor's cost price plus ten percent
(10%), F.O.B. Licensor's plant. Title to all Product passes to Licensee at
F.O.B. point of shipment. Licensee shall pay Licensor for the cost of such
Product plus ten percent (10%) as well as packaging, shipping, insurance,
customs fees and duties (if any), and any other expenses actually incurred by
Licensor relating to the shipment to Licensee of all Products ordered. It is
expected that Licensor shall deliver such Product to Licensee's export locations
as specified by Licensee. All amounts due Licensor under this paragraph shall be
paid promptly by wire transfer ten (10) days prior to shipment and/or by
Licensee supplying an irrevocable letter of credit which Licensor shall exercise
at time of shipment. Licensee shall have the right, upon reasonable notice to
Licensor during normal business hours at Licensor's offices and not more than
once a year, to audit Licensor's financial books and records solely as the same
pertain to Licensor's aforesaid costs and expenses in connection with the
Product.
5. Consideration
In consideration for this Agreement and the rights licensed hereunder:
(a) Licensee shall pay Licensor a royalty equal to five (5%) percent of the
retail selling price of all "Gross Sales" (as defined below) in the country of
sale of one hundred (100%) percent of the Product. As used herein "Gross Sales"
shall mean all Product manufactured and sold hereunder as well as all air time
sold in connection with the sales of all such Product. Licensee agrees that the
retail selling price of Products manufactured and sold hereunder (and the price
of the air time sold in connection therewith) shall not be less than the
suggested retail list price established by Licensor with Licensee with regard to
each country of the Territory of the Product sold hereunder, and the parties
shall agree to the basis which shall be used to calculate royalties hereunder
promptly, but prior to the first delivery of the Product to Licensee hereunder.
Licensee shall thereafter expeditiously notify Licensor of its desire to make
any change in pricing for the Products in any country of the Territory for
Licensor's approval.
<PAGE>
Page 3
(b) Licensee shall make arrangements to provide and pay for a $475,000 declining
balance Irrevocable Letter of Credit on behalf of Licensor which shall be used
by Licensor to secure the payment of a transaction with a third party over the
period of April 1, 1996 through December 31, 2000.
(c) Licensee shall provide Licensor with one million (1,000,000) shares of
restricted common stock of ULTIMISTICS INC. promptly (but not later than thirty
[30] days) after the full execution of this Agreement. Licensee respectively
warrants that the respective shares of such stock shall be free and clear of any
encumbrances whatsoever and that Licensee will execute and deliver to Licensor
simultaneously with such stock all other documents or instruments which may be
reasonably necessary or reasonably required to effectuate such transfer.
6. Accounting and Payment of Royalties
Within fourteen (14) days following the end of each calendar month of each year,
Licensee shall send to Licensor a statement setting forth in detail the
computation of royalties for the prior monthly period, setting forth for each
country in the Territory the Gross Sales of the Product (including the number of
Product distributed and sold, the retail price of each Product and the price of
all such air time), the royalties earned for each Product, and the aggregate
payable to Licensor hereunder. Each such statement shall be accompanied by
payment in United States Dollars of all royalty amounts payable to Licensor. All
payments hereunder shall be by bank wire transfer in United States funds to
Licensor as follows:
Bank: Chemical Bank New Jersey NA
Address: 57 Diamond Spring Road
Denville, NJ 07834
Account #: 6002 004149
Routing #: 021 202 337
7. Books and Records
Licensee shall keep true and correct accounts of the sale and other distribution
of Licensor's Product for each country in the Territory. Licensor or its
representative shall have the right from time to time to appoint an independent
duly qualified accountant or auditor to inspect and make extracts of the books
and records of Licensee, whenever same may be, insofar as said books and records
pertain to the exercise by Licensee of any rights granted to Licensee hereunder.
Such inspections shall be made on reasonable prior written notice, by such
accountants or auditors as are chosen by Licensor, during normal business hours
or normal business days, and shall be at Licensor's expense unless it is found
that the amount of the total payments made to Licensor prior to the date of such
inspection is less than ninety (90%) percent of the total payments which ought
to have been made, in which event Licensee shall pay Licensor an amount equal to
all costs and expenses incurred by Licensor in connection with such inspection
and audit.
8. Licensor's Intellectual Property Rights
(a) Licensee agrees and acknowledges that it shall not acquire any rights of
ownership in the copyright(s), the renewal of copyright(s), the trademark(s)
and/or patent(s) (hereinafter individually and/or collectively referred to as
"Intellectual Property Rights") in and to the Product (or any component thereof)
as a result of Licensee's use of Licensor's Intellectual Property Rights in and
to the Product and that all such uses of any and all Intellectual Property
Rights in and to the Product by Licensee shall, as between Licensee and
Licensor, insure to the benefit of Licensor and be limited solely to the
marketing, distribution, sales and advertising of the Product. Licensee shall
not, directly or indirectly, during the term of this Agreement or thereafter, do
anything to interfere with Licensor's ownership of the Product or attack the
ownership by or control of Licensor in and to any and all of Licensor's
Intellectual Property Rights with respect to the Product or attack the validity
of the license
<PAGE>
Page 4
herein granted to it. Licensee will perform all acts necessary to vest and
maintain Licensor's Intellectual Property Rights in all jurisdictions in which
the Licensee is doing business, including providing Licensor with any
documentation Licensor may need and the signing of any papers Licensor may need.
Without limiting the generality of the provisions of this paragraph, except as
set forth in this Agreement, Licensee shall at no time use or authorize the use
of any trademark, "logo", trade name or other designation identical with or
confusingly similar to any of the trademarks, "logo", trade name or other
designation (individually and/or collectively referred to as "Trademarks") used
by Licensor. Licensee shall notify Licensor of any adverse use of a trademark or
other designation similar to any of the Trademarks of which Licensee is or
becomes aware. Licensee shall not at any time apply for any registration of any
copyright, trademark or "logo" or other designation which includes any of the
Trademarks used by Licensor, in whole or in part, and shall not file any
document with any government authority or take any other action which would
affect Licensor's ownership or control of any of Licensor's Intellectual
Property Rights in and to the Product including, without limitation, any of the
Trademarks.
(b) The Licensor hereby authorizes, empowers and vests in the Licensee the
right, subject to Licensor's prior written approval, to enforce and protect all
rights to the Product and the Licensor's Intellectual Property Rights therein in
the Territory, whether standing in the name of the Licensor or otherwise and
subject to Licensor's prior written approval and in the reasonable judgment of
the Licensor, to join Licensor and such others as Licensor may deem advisable as
parties in any suits or proceedings in the name of the Licensor or in the name
of any other parties as Licensor may deem advisable and, subject to Licensor's
prior written approval, to proceed with or dispose of the same in the same
manner and to the same extent as could Licensor acting alone. In the event of
any recovery, fifty percent (50%) of the net proceeds therefrom (i.e., resulting
after deducting from the gross proceeds therefrom any expenses of litigation or
other applicable costs which have been pre-approved in writing by Licensor,
including reasonable attorney's fees and court costs) shall be paid by Licensee
to Licensor and fifty percent (50%) of such net proceeds may be retained by
Licensee. Notwithstanding the foregoing, Licensor shall have the right,
exercisable at any time, to institute any action, suit or proceeding in its own
name and at its own expense, in which case one hundred percent (100%) of the
recovery shall be retained by Licensor. In this regard, Licensee shall
immediately notify Licensor of : (1) any situation(s) or circumstance(s) which
might reasonable warrant the commencement by Licensor or Licensee hereunder of
any such action, suite or proceeding against any third parties; and/or (2) the
institution by any third party(ies) of any action, suit or proceeding against
Licensee or otherwise pertaining to the Product and/or Licensor's Intellectual
Property Rights therein.
(c) Notwithstanding anything to the contrary in this Agreement, Licensee shall
reimburse Licensor for its patent costs (including legal costs for preparing and
for patent filings and registration fees) incurred by Licensor in each country
in the Territory; and, in addition, Licensee shall give Licensor every
assistance in filing the patent and registering same in each country in the
Territory.
9. Export Control
Licensee acknowledges that any products software and technical information
(including, but not limited to the Product, and, if applicable, any services and
training) provided under this Agreement are subject to United States export laws
and regulations and any use or transfer of such products, software and technical
information must be authorized under those regulations. Licensee agrees that it
will not use, distribute, transfer or transmit the products, software or
technical information (even if incorporated into the Product or other products)
except in compliance with United State export regulations. Licensee also agrees
to give notice to Licensor and sign those export-related documents which may be
required for Licensor to comply with United States export regulations and to
indemnify and hold Licensor harmless from any losses, costs, expenses, fines or
penalties assessed against Licensor for failure to comply with such laws and
regulations. Notwithstanding anything expressed in or implied by this Agreement,
Licensee agrees that it shall be Licensee's sole responsibility at its sole cost
and expense to comply with any and all such Export Regulations or other
applicable laws or regulations.
<PAGE>
Page 5
10. Tax Provisions
As between Licensor and Licensee, Licensee is obligated to pay all taxes, duties
and other similar charges in connection with the sale of the Product hereunder.
In the event Licensee shall be obligated by the laws of any country of the
territory to deduct and withhold income or other similar tax from royalties
payable to Licensor hereunder, Licensee shall promptly supply Licensor, if
required, a certificate setting forth the amount of tax which shall have been
withheld, the rate of tax and any other necessary information which shall assist
Licensor, upon presentation of such certificate, to obtain income tax credit
from the United States Internal Revenue Service for the tax so withheld.
11. Warranties and Indemnities
(a) Licensee warrants and represents that (1) it has the right to enter into
this Agreement and to fully perform all of its obligations hereunder; (2) it
shall not at any time use or disclose or permit the use or disclosure of,
directly or indirectly, any trade secrets, confidential or proprietary
information and/or all other knowledge, information, documents or other
materials, owned, developed or possessed by Licensor, whether in tangible or
intangible form, and which pertain to the subject matter of this Agreement.
Licensee agrees to defend, indemnify and hold Licensor harmless against any and
all liability, loss, damage, cost or expense including court costs and
reasonable attorney's fees, paid or incurred by reason of any breach of any of
Licensee's covenants, warranties or representations hereunder which are reduced
to final judgment or settled with Licensee's prior written consent (not to be
reasonable withhold) and not due to any violation or breach by Licensor of
Licensor's covenants, warranties or representations hereunder. Licensee shall
reimburse Licensor, on demand, for any payment made by Licensor at any time with
respect to any damage, liability, cost, loss or expense to which the foregoing
indemnity applies.
(b) Licensor represents and warrants that it possesses the full right, power and
authority to enter into and to perform the is Agreement. Licensor agrees to
defend, indemnify and hold Licensee harmless against any and all liability,
loss, damage, cost or expense including court costs and reasonable attorneys'
fees, paid or incurred by reason of any breach or claim of breach of any of
Licensor's covenants, warranties or representations hereunder which re reduced
to final judgment or settled with Licensor's prior written consent (not to be
unreasonable withheld) and not due to any violation or breach by Licensee of
Licensee's covenants, warranties or representations hereunder. Licensor shall
reimburse Licensee, on demand, for any payment made by Licensee at any time with
respect to any damage, liability, cost, loss or expense to which the foregoing
indemnity applies.
NOTWITHSTANDING ANYTHING TO THE CONTRARY EXPRESSED IN OR IMPLIED BY THIS
AGREEMENT, LICENSEE ACKNOWLEDGES AND AGREES THAT THERE ARE NO WARRANTIES,
GUARANTEES, CONDITIONS, COVENANTS OR REPRESENTATIONS BY LICENSOR WITH RESPECT TO
THE PRODUCT AS TO MARKETABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHER
ATTRIBUTES, WHETHER EXPRESS OR IMPLIED (IN LAW OR IN FACT), ORAL OR WRITTEN.
12. Rights of Termination of Licensor
In the event:
(a) Licensee shall fail to perform any of its obligations required to its
hereunder (except as set forth in subparagraphs 12(b) and 12(c) below), and
Licensor shall have notified Licensee in writing of such failure and Licensee
shall not have cured such failure within thirty (30) days after such written
notification; or
(b) Licensee shall fail to account and make purchase and royalty payments to
Licensor in a timely manner hereunder; or
<PAGE>
Page 6
(c) Licensee (by itself or through any third party including without limitation,
known exporters) causes or allows the Product hereunder (or any component
thereof) to be manufactured, distributed, sold, shipped, trans-shipped, exported
or exploited in any manner whatsoever, outside of the Territory or otherwise in
violation of applicable US. Export Administration Regulations or other
applicable laws, treaties or regulations or otherwise;
then and in any such events, Licensor may, in addition to all of its other
rights and remedies at law or otherwise, at its option, terminate this Agreement
immediately upon giving written notice to Licensee without prejudice to any
rights or claims which Licensor may have.
13. Insolvency
In the event Licensee shall make any assignment for the benefit of creditors or
make any compromises with creditors, or any action or proceeding under any
bankruptcy or insolvency law is taken by or against Licensee, which is not
discharged within thirty (30) days after it is commenced, then in any such
events the Licensor may, in addition to al of its other rights and remedies at
law or otherwise, its option, terminate this Agreement upon giving Licensee not
less than ten (10) days' written notice.
14. Effect of Expiration or Termination
(a) Upon the expiration or termination of this Agreement all sales or
distribution of the Product by Licensee (or by any third party previously
authorized in writing by Licensor to sell or otherwise distribute the Product on
behalf of Licensee) shall cease. All Product in Licensee's possession or control
(or in possession or control of any such authorized third party) shall promptly,
at the option of Licensor and upon its written instructions, either:
(i) Be transferred by Licensee or Licensor's designee at Licensee's actual
direct cost, plus shipment charges,; or
(ii) be destroyed by Licensee under the supervision of Licensor or Licensor's
designee, or at Licensor's written request, destroyed by Licensee without such
supervision provided Licensee provides Licensor with an affidavit or such fact,
sworn to by a principal officer of Licensee.
(b) Licensee shall submit to Licensor not later than thirty (30) days after the
expiration of this Agreement a written inventory of all the then remaining
product hereunder. Licensor or its designee shall have the option, upon giving
the Licensee written notice of its election to do so not later than three (3)
months after its receipt of such written inventory, to purchase such Product
which remain unsold at the time Licensor makes such election, for an amount
equal to Licensee's actual direct cost of such Product. If Licensor or its
designee elects to purchase such remaining Product, Licensee shall promptly ship
the same, at Licensee's cost, to Licensor or its designee, or shall make them
available at Licensee's place of business for Licensor or its designee to take
possession thereof.
(c) Subject to subparagraph (b) above, upon the expiration of this Agreement, by
reason of passage of time and not by reason of any termination by Licensor , and
provided further that Licensee submits the aforesaid written inventory to
Licensor within ten (10) days after such expiration, Licensee shall continue to
have the right to sell the then remaining Product, on a non-exclusive basis only
for an additional "Sell-off Period" of six (6)months. Licensee agrees that it
shall not order quantities of Product hereunder in excess of reasonably
anticipated market demand during the last six (6) months of the Term of this
Agreement.
(d) All sales of Product by Licensee subsequent to the expiration of this
Agreement shall, except as otherwise provided herein, be in accordance with the
terms and provisions hereof applicable to the sale of
<PAGE>
Page 7
Product during the term hereof. Without limiting the generality of the
foregoing, such sales shall be in Licensee's normal course of business and at
prices not less than the normal retail prices of such Product during the Term
hereof. Such sales (other than sales pursuant to subparagraph (b) hereof) shall
be subject to the payment of royalties by Licensee under the terms of this
Agreement. Upon the expiration of the six (6) month period referred to in
subparagraph (c) above, and at Licensor's sole direction in writing, Licensee
agrees to either transfer the then remaining Product to Licensor or Licensor's
designee or destroy all the then remaining Product under the supervision of
Licensor or Licensee's designee or, at Licensor's written request, Licensee
shall destroy said Product without such supervision provided that Licensee
provides Licensor with an affidavit of such fact, sworn to by a principal
officer of Licensee.
15. Notices
All statements and all notices to Licensor shall be addressed to Licensor at the
address set forth above or any other address hereinafter designated by written
notice by Licensor. All notices to Licensee shall be addressed to Licensee at
the address set forth above, or any other address hereinafter designated by
written notice by Licensee. All notices to be given to either party hereto shall
be in writing and shall be delivered either personally to an officer of the
addressee or by certified mail, return receipt requested, postage prepaid, or by
overnight express (charges prepaid) or via facsimile (with a "hard" copy
delivered in any of the manners set forth in this sentence). Any notice which is
mailed, sent via overnight express or sent via facsimile shall be conclusively
deemed to have been given on the date of mailing or on the date of delivery to
the overnight express company or upon transmission by facsimile; provided notice
of change of address shall be deemed given when actually received.
16. Miscellaneous
(a) The covenants hereunder are subject to applicable laws and treaties. This
Agreement , its validity, construction and effect shall be governed and
construed under the laws of the State of New York applicable to contracts
executed therein and wholly to be performed therein. Any disputes arising from
this Agreement shall be subject to the exclusive jurisdiction of the state or
federal courts located in the City, County, and State of New York, U.S.A.
(b) If any part of this Agreement shall be declared invalid or unenforceable by
a court of competent jurisdiction, it shall not effect the validity of the
balance of this Agreement, provided, however, that if any provision of this
Agreement pertaining to the payment of monies to Licensor shall be declared
invalid or unenforceable, Licensor shall have the right, at its option, to
terminate, this Agreement upon giving not less than ten (10) days' written
notice to Licensee.
(c) Except as provided for in this Agreement, all rights of any nature in the
Product licensed hereunder are reserved by Licensor.
(d) This Agreement may not be modified orally; no waiver, amendment or
modification shall be binding effective unless in writing and signed by both
parties.
(e) Paragraph headings used herein are for convenience only and are nor part of
this Agreement and shall not be used in construing it.
(f) This Agreement shall inure to the benefit of and be binding upon Licensor
and its successors and assigns and Licensee and any permitted successors or
assigns.
(g) In the event any payments due Licensor are delayed or prohibited by currency
restrictions or other governmental regulations, Licensor shall be entitle to
designate a local depository in the
<PAGE>
Page 8
territory, in which Licensee, at the direction of Licensor, shall deposit such
monies to the credit of Licensor subject to the laws of the Territory..
(h) In the event of any action, suit or proceeding hereunder the prevailing
party shall be entitled to recover reasonable attorneys' fees in addition to the
costs of said actions, suit or proceeding.
(i) Licensee agrees to comply with local law and, if required by Licensor,
register for copyright, trademark and/or patent protection as applicable, on
behalf of Licensor (or as Licensor otherwise directs) in the Territory for the
Product which is subject to this Agreement.
(j) This Agreement does not (and shall not be construed to) create a partnership
or joint venture between the parties.
(k) This Agreement constitutes the entire understanding between the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first set forth above.
PRIME INTERNATIONAL PRODUCTS, INC.
By:/s/ Diego Leiva
Diego Leiva
Title: President & CEO
ACCEPTED & AGREED:
YAKIMOTO INVESTMENT LTD.
By: /s/ Yves Uzan
Yves Uzan
Title: /s/ President
<PAGE>
EXHIBIT 10.17
CARRIER AGREEMENT
NO.
BETWEEN
AT&T CORP.
AND
PICK COMMUNICATIONS
AVAILABLE: 30 Day Period
<PAGE>
THIS CARRIER AGREEMENT ("Agreement) is made and entered into as of the last
signature date below by and between AT&T Corp., a corporation organized and
existing under the laws of the State of New York and having an office at 55
Corporate Drive, Bridgewater, New Jersey, United State of America ("AT&T") and
Pick Communications Corp., having an office at 115 Route 46 W, Mountain Lake,
New Jersey ("Customer"). The terms and conditions herein constitute an offer
that may be accepted by customer by its signature below, but which thereafter
expires and us null and void, and may be accepted only once.
SECTION 1. ACCEPTANCE OF OFFER
AT&T and Customer, acting through their duly authorized representatives, hereby
agree to the terms set forth in Sections 2 through 5 of this Agreement, together
with its Attachments A and B, as of the date first above written.
AT&T CORP
By_S/S Diego Lieva_____________ BY___/s/ Larry Bell______________
Diego Lieva Larry Bell
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Printed or Typed Name Printed or Typed Name
President Global Services Vice President
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Title Title
2/16/96 2/26/96
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Date Date
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TABLE OF CONTENTS
Section 1. Acceptance of Offer
Section 2. Eligibility of Customer
Section 3. Responsibilities of AT&T
Section 4. Responsibilities of Customer
Section 5. General Terms and Conditions
Schedule A Services
Schedule B Service ?Rates, Terms and Conditions
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SECTION 2.
The rates, terms and conditions herein are expressly conditioned upon the
Customer's meeting the following eligibility requirements. Customer is an
interexchange communications common carrier who certifies that:
2.1. has obtained the required operating authority in the states in which it
conducts business, including but not limited to authority for resale of
international telecommunications service pursuant to Section 214 of the
Communications Act of 1934, 47 U.S.C. #214;
2.2. has and uses its own carrier identification code in connection with all
traffic routed by way of Service provided under this Agreement;
2.3. shall originate calls using the Service offered hereunder only from an IXC
switch or switches owned and operated by Customer, each having and using its own
carrier identification code in connection with all traffic routed by way of
Service provided under this Agreement. An IXC Switch is a telecommunications
switch (including all remote switching modules under common control of the same
central switch) with the following characteristics: (a) it is used for the
transmission of calls that are routed by a Local Exchange Carrier to the IXC
Switch using Feature Group D Access, or a functional equivalent; (b) it is
capable of interconnecting circuits or transferring calls between circuits; (C)
is has a maximum capacity of at least 100,000 access lines and (d) it is used by
the Customer to provide Common Carrier service to end users;
2.4. has had a consistent on-time payment record with respect to all
telecommunications service to which it has subscription from AT&T for at least
24 consecutive months prior to the execution of this Agreement. This requirement
includes affiliates, parents, subsidiaries, predecessors, successors and any
entity having an ownership interest of 20% or more also has ownership interest
of 20% of more in Customer;
2.5. has had no customer complaints filed against it with either the FCC, state
commissions, or other authorities charging customer with misrepresenting its
affiliation or relationship to AT&T or to any other carrier whose service it has
resold; and
2.6. agrees to all the terms and conditions set forth herein.
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SECTION 3. RESPONSIBILITIES OF AT&T
3.1. Provision of Service. Subject to its Correspondence Agreements and
regulation by Federal and state authorities, AT&T shall provide Service in
accordance with its standard practices and procedures for the operation of its
network. Service shall be available 24 hours per day, seven days per week. AT&T
is responsible for the provision of Service from station to station, but is not
responsible for the quality of transmission or signaling on the Customer's side
of the interface at a Customer's premises.
3.2. Installation. AT&T shall install no later than the date requested by
Customer in writing (the CISD) shall not be earlier than thirty (30) days from
the date of the execution of this Agreement, unless otherwise agreed by AT&T.
3.3. Maintenance. AT&T shall maintain Service in conformity with its standard
network operating procedures.
3.4. Limitation of Liability. In no event shall either party be liable for
consequential, special or indirect damages or lost profits sustained by reason
of its performance of this Agreement, or for an failure, breakdown, or
interruption of service, whatever shall be the cause, or however long it shall
last, and regardless of whether anyone has been advised of the possibility of
such damages. AT&T's liability, is any, shall not exceed and amount equal to the
initial period charge provided for under this Agreement for the Service call for
the period during which the call was affected. This limitation of liability
shall apply regardless of the form of action, whether in contract, tort,
warranty, strict liability, or negligence (including without limitation active
and passive negligence). AT&T shall have no liability for damages caused (1) by
Customer's failure to perform its responsibilities under this Agreement, or (2)
by the acts of third parties (including without limitation Customer's Users or
end users). This Agreement does not create any claim or right of action, nor is
it intended to confer any benefit on any third party, including but not limited
to any User of Customer. Customer shall indemnify, and hold AT&T harmless for
all claims by any Customer's Users or end-users arising out of any failure,
breakdown, or interruption in service.
3.5. Service, Channels or Equipment of Others. AT&T is not liable for damages
associated with service, channels, or equipment that it does not furnish.
3.6. No Patent or Software License. No license under patents or software
copyrights (other than the limited license to use) is granted by AT&T or shall
be implied or arise by estoppel, with respect to Service offered under this
Agreement.
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SECTION 4. RESPONSIBILITIES OF CUSTOMER.
4.1. Placement of Orders, Payment of Bills, and Compliance with Regulations -
Customer is responsible for placing any necessary orders and for assuring that
it complies with the provisions of this Agreement and all applicable law and
regulations.
4.2. Billing; Responsibility for Payment. Customer is liable for all amounts due
AT&T hereunder, subject to the following. The customer will receive a single
monthly bill for each of the Service provided under this Agreement, regardless
of the number of Customer premises, which will be send to one location
designated by the Customer. Customer shall be solely responsible for rendering
of all bills and collection of charges from its customers and end-users. Failure
of Customer to bill and collect charges from its customers or end-users shall
not excuse in whole or in part Customer's responsibilities under Section 4 of
this Agreement.
4.3. Deposits. AT&T may require the Customer, prior to provision of service, to
make a deposit in an amount to be determined by AT&T in its reasonable
discretion to be held as a guarantee of charges; provided, that such deposit
shall not be fixed by AT&T at an amount exceeding the remaining MARC at the time
the deposit is being requested. A deposit does not relieve Customer of the
responsibility for the prompt payment of bills on presentation. In lieu of a
cash deposit, AT&T will accept Bank Letters of Credit and Surety Bonds which
have been approved by AT&T Treasury and the AT&T Law Division.
4.4. The Customer's Use of Service. Customer may use service for any lawful
purpose consistent with the transmission and switching parameters of the
telecommunications network, and may resell its use (or the use of any part
thereof) to a third party in the normal course of the Customer's business,
subject to the following:
4.4.1. Abuse - The abuse of Service is prohibited. The following activities
constitute abuse:
4.4.1.1. Using Service to make calls that might reasonably be expected to
frighten, abuse, torment, or harass another, or
4.4.1.2. Using Service in such a way that it interferes unreasonably with
the use of Service or AT&T's network by others.
4.4.2. Fraudulent Use. The fraudulent use of, or the intended or attempted
fraudulent use of, Service is prohibited. The following activities constitute
fraudulent use:
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4.4.2.1. Using Service to transmit a message, locate a person, or otherwise give
or obtain information, without payment for Service.
4.4.2.2. Using or attempting to use Service with the intent to avoid the
payment, either in whole or in part, or any charges by any means or device.
4.4.3. Interference, Impairment or Improper Use, Customers may not use Service
in any manner that subjects AT&T personnel to hazardous conditions or results in
immediate herm to AT&T network or other AT&T services.
4.5. Rights of AT&T for Misuse of Service by Customer.
4.5.1. In any instance in which AT&T determines.that Customer is using Service
in violation of Sections 4.4.1. or 4.4.2., AT&T may, immediately and upon
written notice to the Customer, and without liability, restrict, suspend or
disctoninue providing Service.
4.5.2. In any instance in which AT&T determines that Customer is using Service
in violoation of Section 4.4.3., AT&T may temporarily restrict Service
immediately. In such cases, AT&T will make a resonable effort to give the
Customer prior notice.
In addition to the remedies set forth in Sections 4.5.1. and 4.5.2., AT&T may,
on ten days written notice by certified U.S. Mail to the Customer, deny requests
for additional Service. If AT&T does not deny or restrict Service involved as
permitted in this Section 4.5, and the Customer non-compliance continues, AT&T
shall retain the right to deny or restrict Service without further notice.
Provided, that when a written violation of this Section results in a denial of
Service and/or restriction of service, the denial and/or restriction will be
removed when AT&T has verfied that the Customer is in compliance and the
violation is not likely to recur.
4.6. Access to Customer's Premises - The Customer is responsible for arranging
presmises access at any reasonable time so that AT&T personnel may install,
repair, maintain, inspect or remove Service components. Permises access must be
made available at a time mutually agreeable to the Customer and AT&T.
4.7. Indemnification. Cutomer shall indemnify, defend, and hold harmless AT&T
and and its directors, officers, employees, agents, parent, subsidiaries,
successors, and assigns from all claims, damages and expenses (includiong
reasonable attorneys' fees) arising out of or resulting from, in whole or in
part, the acts or ommissions of Customer or its Members, their employees, agents
or contractors affiliated companies and their employees, agents or contracors,
including but not limited to the following:
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4.7.1. Claims for libel, slander, invasion of privacy, or infringement of
copyright arising from any communication; and
4.7.2. Claims for patent infringement arising from combining or using furnished
by AT&T in connection with facilities or equipment furnished by others.
4.8. Rights of AT&T Upon Breach by Customer of Section 5.11. If it is determined
that, in connection with its resale of Service provided hereunder, Customer or
any of its Members ("Infringing Member") is using AT&T's corporate or trade
names, logos, trademarks, service marks, trade dress or other symbols that serve
to identify and distinguish AT&T shall have the right, upon written notice to
Customer and the Infringing Member(s) to immediately suspend Service to Customer
or any Infringing Member(s) until such time as such infringing use is corrected
and its correction substantiated to AT&T. If the infringing use continues for 45
days past the date on which AT&T provides notice of such suspension, AT&T shall
have the right to disconnect service to Customer.
Section 5. General Terms and Conditions.
5.1. Assignment. Customer may not assign this Agreement in whole or in part
without prior written consent of AT&T. This provision shall not affect the
Customer's right to resell Service. Furtherm any resale or assignment shall not
release the original Customer from its obligations under this Agreement.
5.2. Independent Parties. The relationship established by this Agreement shall
ion no way consistute AT&T (or its agents or employees) as a partner or agent of
Customer or its Members. The relationship established by this Agreement shall in
no way constitute the Customer or its Members (or their agents or empoloyees) as
a partner or agent of AT&T. The provision of Service described in this Agreement
does not establish any joint undertaking, joint venture, or fiduciary
relationshipo between AT&T and Customer or its Members.
5.3. Force Majeure. Neither party nor its affiliates, subsidiaries,
subcontractors, or parent corporation shall be liable in any way for delay,
failure in performance, loss or damage due to any of the following: fire,
strike, embargo, explosion, power blackout, earthquake, volcanic action, flood,
war, water, the elements, labor disputes, civil or military authority, acts of
God, acts of the public ememy, inability to secure raw materials, inability to
secure products, acts or ommossions of carriers, or other causes beyond its
resonable control, whether or not similar to the foregoing.
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5.4. Severability. If any portion of this Agrement shall be found to be inavlid
or unenforceable, such portion shall be void and no effect, but the remainder of
the Agreement shall continue in full force and effect unless the Agreement fails
of its essential purpose without the voided portion.
5.5. Notices. All noctices, identifications, formal requests or other formal
communications required or desired to be given in connection with this
Agreement, shall be in writing and shall be effective when delivered in person,
mailed by registered or certified post or sent by Telex or facsimilie ("FAX") to
the recipient, unless the parties otherwise agree in writing.
5.6. Modification and Waiver. This Agreement may be modified only be a writing
signed by both parties. The failure of a party to enforce any right under this
Agreement shall not constitute a continuing waiver of any sich right.
5.7. Compliance with Laws. Each party is responsible for its own compliance with
all laws and regulations affectings its business.
5.8. Choice of Law. The domestic law of the State of New York, except its
conflict-of-law rules, shall govern the construction, interpretation, and
performance of this Agreement,
5.9. Confidentiality. The terms, conditions, and rates contained in this
Agreement are confidential, and shall remain so unless and until it shall be
determined by AT&T that the Communications Act of 1934 (or any subsequent
legislation) and that the Communications Commission ("Commission"). In such
event, AT&T shall file the Agreement within thirty days of its execution, or
upon such determination that filing is required (whichever is later); provided,
that AT&T nonetheless shall keep the identity of Customer confidential unless
required to disclose such identity by the Commission. Absent such a filing
requirement, neither party shall disclose the terms or conditions of this
Agremeent to any third party, nor issue any public statements relating to this
Agreement without the written consent of the other party, unless such disclosure
or statement is reasonable believed by the party to be compelled by governmental
authority. A disclosing party shall furnish reasonable prior notice to the other
party before making the statement or disclosure.
5.10. Dispute Resolution. If a dispute arises out of or relates to this
Agreement, or its breach, the parties agree to submit the dispute to a sole
mediator selected by the parties or, at any time at the option of a party, to
mediation by the American Arbitration Association ("AAA"), to be held in
Morristown, New Jersey. If not this resolved it shall be referred to a sole
aribtrator selected by the parties within thirty (30) days of the mediation or,
in the abscence of such selection, to AAA arbitration which shall be governed by
the United Stated Arbitration Act and judgement on the award may be entered in
any court having jurisdiction. The arbitrator may not limit, expand or otherwise
modify the terms of the Agreement. The parties, their representative, other
participants and the mediator and arbitrator shall hold the existence, content
and result of mediation and arbitration in confidence.
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5.11. Trade Names, Trademarks, Service Marks and Registred Marks. Neither
Customer nor AT&T shall use the other's trade names, trademarks or service marks
("Marks") without the prior written approvak of the other party. Absent such
approval, for example, Customer shall not inform their Users that Customer or
any Member is selling service on the AT&T network, nor shall any of them make
any other useof the AT&T name designated to convey a similar interpression.
Neither shall display or use the other's Marks, nor permit the same to be
displayed or used by third parties, Nothing in this Agreement creates in a party
rights in the Marks of the other.
5.12. Business Downturn/Technology Migration. In the event of a business
downturn beyone CUSTOMER'S control, a sorporate divestiture, or a network
optimization using other AT&T services, any of which significant reduces the
volume of network services required by the CUSTOMER, with the result that
CUSTOMER will be unable to meet its revenue and/or volume commitments under this
Contract (notwithstanding CUSTOMER'S best efforts to avoid such a shortfall),
AT&T and Customer will cooperate in efforts to develop a mutually agreeable
alternative proposal that will satisify the concerns of both parties and comply
with all alternative proposal that will satisfy the concerns of both parties and
comply with all aplicable legal and regulatory requirements. By way of example
and not limitation, such alternative proposals may include changes in rates,
nonrecurring charges, revenie and/or volume commitments, discounts, the
multi-year service period and other provisions. Subject to all apl;licable legal
and regulatory requirements, including the requirements of the Federal
Communications Commission and the Communications Act of 1934, AT&T will prepare
any contract revisions necessary to implement such mutually agreeable
alternative proposal. This provision shall not apply to a change resulting from
a decision by CUSTOMER to transfer portions of traffice or propjected growth to
carriers ither than AT&T. The CUSTOMER must give AT&T written notice of the
conditions it believes will require the application of this provision. This
provision does not consistute a waiver of any charges, including shortfall
charges, incurred by the CUSTOMER prior to the time the parties mutually agree
to amend or replace this Contract.
5.13. Entire Agreement. Together with its Schedules, this Agreement constitutes
the entire Agreement of the parties with respect to the subject matter hereof
and supercedes all prior written or oral agreements, proposals or
understandings.
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EXHIBIT 10.18
RECIPROCAL TELECOMMUNICATIONS AGREEMENT
AGREEMENT made this 12th day of April , 1996 by and between CHERRY
COMMUNICATIONS INC., ( hereinafter "CUSTOMER"), located at,
2205 Enterprise Drive, Suite 501 Westchester, Illinois 60154 and PICK INC.,
located at 115 Route 46 West, Suite A2, Mountain Lakes, New Jersey 07046
(hereinafter "PICK").
WITNESSETH:
WHEREAS, PICK and Customer are in the business of providing telecommunications
services; and
WHEREAS, Customer desires to purchase telecommunications services from PICK and
PICK desires to purchase telecommunications services from Customer;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, and for other good and valuable consideration, the parties agree as
follows:
1. Services.
(A) PICK agrees to furnish to Customer, and Customer agrees to purchase
from PICK, the telecommunications services set forth in Exhibit A attached
hereto.
(B) Customer agrees to furnish to PICK and PICK agrees to purchase from
Customer, the telecommunications services as set forth in Exhibit B attached
hereto.
(C) Interconnection between Customer and PICK, for purposes of
performance hereunder, shall occur as set forth in Exhibit C attached hereto.
(D) It is understood that all Services provided by the parties
hereunder are provided for resale by the other party to end users, customers or
subscribers.
2. Terms. This Agreement shall commence on the 1st day of May , 1996 (the
"Commencement Date") and continue for a period of one (1) year. This Agreement
shall thereafter continue, on the same terms and conditions, on a month-to-month
basis unless either party notifies the other party in writing not less than
thirty (30) days prior to the termination date of its desire to terminate this
Agreement.
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3. Rates.
PICK and Customer agree that each is granting the other the most favorable price
per minute rate in the Exhibits attached during the first 90 days (ramp up
period) of this Agreement. However, after the initial ramp up period, all
pricing shall be based on actual traffic usage and will be adjusted and invoiced
in accordance with the appropriate level of traffic per the rates attached as
follows:
(A) During the term of this Agreement, PICK shall charge for the
telecommunications services, and Customer shall pay for such telecommunication
services, that amount as determined by using the appropriate rates set out in
Exhibit A.
(B) During the term of this Agreement, Customer shall charge for the
telecommunication services, and PICK shall pay for such telecommunication
services, that amount as determined by using the appropriate rates set out in
Exhibit B.
(C) PICK and Customer shall have the right to modify the rates and conditions
set forth in Exhibits "A" and "B" at any time during this Agreement, but shall
give the other party at least seven (7) days prior notice.
(D)Billing shall include raw CDR (unrated) and completely rated summaries by
country showing number of calls, number of minutes and corresponding charges.
4. Charges and Payment Terms.
(A) PICK and Customer hereby acknowledge the charges for the provision of
Service will be billed as provided herein and that payment for such Service
shall be payable in U.S. dollars. For each week during the term of this
Agreement, PICK and Customer will provide the other party with an invoice for
Service provided during the previous week. The invoice amounts due and payable
by PICK and Customer shall be offset, and the party which has a balance payable
after such netting shall make payment to the other party on or before the second
(2nd) day of the following week. Late payments will be assessed a late charge of
1.5% per month or the maximum amount permitted by law, whichever is less.
Payments shall be made by wire transfer or such other methods as may be agreed
by the parties.
(B) Should either PICK or Customer dispute any of the monthly charges on the
monthly invoice, it shall notify the other party of the disputed charges not
later than thirty (30) days from the date of invoice. Said dispute shall set
forth all details concerning the disputed charges in writing. In the event of a
dispute, the entire invoice shall nevertheless be paid in
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accordance with the payment terms set forth herein. After resolution of the
disputed portion of the invoice, the adjustments, if any, shall be immediately
credited to the other party's account.
(C) Customer and PICK shall at all times comply with the other party's
continuing credit approval procedure and policies. Upon request by either party
at any time, the other party agrees to provide financial statements or other
indications of financial circumstances. As may be determined by either party in
its sole discretion at any time, if the financial circumstances or payment
history of the other party is or becomes unacceptable, or one party is
purchasing much more Services than the other party and the differential is more
than $25,000 a week, the party furnishing Service may require a deposit,
guarantee or irrevocable letter of credit, at such party's option, to secure the
other party's payments for the term of the Agreement. Failure of a party to
provide requested security shall permit the other party to immediately suspend
Service, without further notice or demand, until such time as the requested
security is provided.
5. Warranty. PICK and Customer will use reasonable efforts under the
circumstances to maintain overall network quality. The quality of Service
provided hereunder shall be consistent with other common carrier industry
standards, government regulations and sound business practices. PICK AND
CUSTOMER MAKE NO OTHER WARRANTIES ABOUT THE SERVICE PROVIDED HEREUNDER, EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE.
6. Continuing Relationship and Termination. This Agreement and the relationship
of the parties may be terminated by the non-defaulting party in accordance with
applicable provision hereof and/or the occurrence of any of the following events
which shall constitute a default:
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(A) Material breach of this Agreement after notice thereof and failure of the
breaching party to cure such breach: (i) within three (3) days of receipt of
such notice where such breach involves a failure to make payments when due and
(ii) within twenty (20) days of receipt of such notice for all other breaches;
(B) The adjudication of bankruptcy of either party under any Federal, state or
municipal bankruptcy or insolvency act, or the appointment of a receiver or any
act or action constituting a general assignment by a party of its properties and
interest for the benefit of creditors.
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(C) The determination by any governmental entity having jurisdiction over the
Service provided under this Agreement that the relationship of the parties
and/or Services provided hereunder are contrary to then existing laws.
7. Taxes. The parties acknowledge and understand that all charges stated in
attached Exhibits are computed exclusive of any applicable use, excise, gross
receipts, sales and privilege taxes, duties, fees or other similar liabilities
(other than general income or property taxes). Such Additional Charges shall be
paid by the party receiving services in addition to all other charges provided
for herein. All applicable taxes, duties, fees or other liabilities shall be
billed to the appropriate party by the other party unless such party provides
the other party with applicable tax exemption documentation.. Each party is
solely liable for and hereby indemnifies and holds the other party harmless from
filing all applications, forms, reports, returns, statements, and other
documents and information with any payment of all taxes and/or assessments to
all local, county, state, federal, and other taxing authorities having
jurisdiction with respect to any and all charges to each party's end users or
customers for the services, including without limitation, any governmental
agency or authority in any foreign country.
8. Suspension of Services. In the event payment in full is not received from
either party when due, the other party shall have the right, after giving the
defaulting party two (2) days prior notice after the due date to suspend all or
any portion of the Service to the defaulting party until such time as such party
has paid in full all charges then due, including any late fees.
9. Liability; General Indemnity.
(A) Limited Liability IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES,
INCLUDING WITHOUT LIMITATION, LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS,
LOSS OF GOODWILL OR LOSS OF PROFITS ARISING IN ANY
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MANNER FROM THIS AGREEMENT AND THE PERFORMANCE OR NON-PERFORMANCE OF OBLIGATIONS
HEREUNDER.
THE LIABILITY OF PICK AND CUSTOMER WITH RESPECT TO THE INSTALLATION (INCLUDING
DELAYS THEREOF), PROVISION, TERMINATION, MAINTENANCE, REPAIR, INTERRUPTION, OR
RESTORATION OF ANY SERVICE OR FACILITIES OFFERED UNDER THIS AGREEMENT SHALL NOT
EXCEED AN AMOUNT EQUAL TO THE CHARGE APPLICABLE UNDER THIS AGREEMENT TO THE
PERIOD DURING WHICH SERVICES WERE AFFECTED. FOR THOSE SERVICES WITH MONTHLY
RECURRING CHARGES, THE LIABILITY OF EITHER PARTY IS LIMITED TO AN AMOUNT EQUAL
TO THE PROPORTIONATE MONTHLY RECURRING CHARGES FOR THE PERIOD DURING WHICH
SERVICE WAS AFFECTED.
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(B) General Indemnity. In the event parties other then PICK and
Customer shall have use of the Service, then PICK and Customer agree to forever
indemnify and hold each other harmless from and against any and all claims,
demands, suits, actions, losses, damages assessments or payments which may be
asserted by said parties arising out of or relating to any defect in the
Service.
10. Force Majeure. If either party's performance of this Agreement or any
obligation hereunder is prevented, restricted or interfered with by causes
beyond its reasonable control including, but not limited to, acts of God, fire,
explosion, vandalism, cable cut, storm or other similar occurrence, any law,
order, regulation, direction, action or request of the United States government
or state or local governments, or of any department, agency, commission, court,
bureau, corporation or other instrumentality of any one or more said
governments, or of any civil or military authority, or by national emergency,
insurrection, riot, war, strike, lockout or work stoppage or other labor
difficulties, supplier failure, shortage, breach or delay, then such party shall
be excused from such performance on a day-to-day basis to the extent of such
restriction or interference. Such party shall notify the other and use
reasonable efforts under the circumstances to avoid or remove such causes of
nonperformance and shall proceed to perform with reasonable dispatch whenever
such causes are removed or cease. This provision shall not, however, relieve
either party from making any payment when due.
11. Notices. All notices pursuant to this Agreement shall be deemed given when
delivered personally or sent by registered mail or facsimile or overnight
carrier (such as Federal Express), charges prepaid, as follows:
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PICK INC. CHERRY COMMUNICATIONS INC.
115 Route 46 West, Suite A2 2205 Enterprise Drive, Suite 501
Mountain Lakes, NJ 07046 Westchester, IL 60154
FAX (201) 335-7676 FAX: (708) 449-7047
Attn: Diego Leiva, President Attn: Michael P. Dyer , President
Network Services
Notice of change of address shall also be governed by this Paragraph.
12. No-Waiver. No term or provision of this Agreement shall be deemed waived and
no breach or default shall be deemed excused unless such waiver or consent shall
be in writing and signed by the party claimed to have waived or consented. No
consent by any party to, or waiver of, a breach or
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default by the other, whether express or implied, shall constitute a consent to,
waiver of, or excuse for any different or subsequent breach or default.
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13. Partial Invalidity. If any term or provision of this Agreement shall be
found to be illegal or unenforceable, then notwithstanding such illegality or
unenforceability, this Agreement shall remain in full force and effect and such
terms or provision shall be deemed to be deleted.
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14. Exclusive Remedies. Except as otherwise specifically provided for herein,
the remedies set forth in this Agreement comprise the exclusive remedies
available to either party at law or in equity.
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15. Use of Service. PICK and Customer agree to provide the Service specified
hereunder upon condition that the Service shall not be used for any unlawful
purpose. The provision of Service will not create a partnership or joint venture
between the parties or result in a joint communication service offering to any
third party.
16. Choice of Law. This Agreement shall be construed in accordance with the laws
of the State of New Jersey. However, any controversy or claim arising our of the
parties, or breach which has not been cured, shall be settled by binding
arbitration in accordance with Commercial Arbitration Rules of the American
Arbitration Association and judgment upon the award of the Arbitrators may be
entered in any court having jurisdiction.
17. Proprietary Information.
(A) Confidential Information The parties understand and agree that the
terms and conditions of this Agreement, and documents referred (including
invoices to Customer for Service provided hereunder) herein, communications
between the parties regarding this Agreement or the Service to be provided
hereunder (including price quotes to Customer or PICK for any Service proposed
to be provided or actually provided hereunder) and all information regarding the
customers of Customer or PICK, as well as such information relevant to any other
agreements between the parties (collectively " Confidential Information"), are
confidential as between Customer and PICK.
(B) Limited Disclosure A party shall not disclose Confidential
Information unless subject to discovery or disclosure pursuant to legal process,
or to any other party other than the directors, officers, and employees of a
party or agent's of a party including their respective brokers, lenders,
insurance carriers or prospective purchasers of the party's business who have
specifically agreed in writing to nondisclosure of the terms and conditions
hereof. Any disclosure hereof required by legal process shall only be made after
providing the non-disclosing party with notice thereof in order to permit the
non-disclosing party to seek an appropriate protective order or exemption.
Violation by a party or its agents of the foregoing provision shall
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entitle the non-disclosing party, at its option, to obtain injunctive relief
without a showing of irreparable harm or injury and without bond.
(C) Press Releases. The partied further agree that any press release,
advertisement or publication generated by a party regarding this Agreement, the
Service provided hereunder or in which a party desires to mention the name of
the other party's parent or affiliated company(ies), will be submitted to the
nonpublishing party for its written approval prior to publication.
(D) Survival and Confidentiality. The provisions of this Paragraph will
be effective as of the date of this Agreement and remain in full force and
effect for a period equal to the longer of: (I) five (5) years following the
effective date of this Agreement; or (ii) five (5) years following the
termination of all Service hereunder.
18. Successors and Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors or assigns,
provided, however, that neither party shall assign or transfer its rights or
obligations under this Agreement without the prior written consent of the other
party, which shall not unreasonably be withheld and further provided that any
assignment or transfer without such consent shall be void.
19. General.
(A) Survival of Terms. The terms and provisions contained in this
Agreement that by their sense and context are intended to survive the
performance thereof by the parties hereto shall so survive the completion of
performance and termination of this Agreement, including, without limitation,
provision for indemnification and the making of any and all payments due
hereunder.
(B) Headings. Descriptive headings in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
(C) Industry Terms. Words having well-known technical or trade
meanings shall be so construed, and all listings of items shall not be taken
to be exclusive, but shall include other items, whether similar or dissimilar
to those listed, as the context reasonably requires.
---------------
(D) Rule of Construction. No rule of construction requiring
interpretation against the draftsman hereof shall apply in the interpretation of
this Agreement.
20. Entire Agreement. This Agreement consists of all of the terms and
conditions contained herein; in executed Service Schedules that are identified
herewith; and in documents incorporated herein specifically by reference. This
Agreement constitutes the complete and exclusive statement
-----------------
<PAGE>
Page 8
of the understandings between the parties and supersedes all proposals and prior
agreements (oral or written) between the parties relating to Service provided
hereunder. No subsequent agreement between the parties concerning the Service
shall be effective or binding unless it is made in writing and subscribed to by
authorized representatives of Customer and PICK.
ACCEPTED and AGREED:
PICK INC. CHERRY COMMUNICATIONS INC.
/s/Raymond M. Brennan /s/Michael Dyer
By: By:
Raymond M. Brennan Michael Dyer, President
Vice President Network Services
<PAGE>
EXHIBIT 10.19
CARRIER SERVICE AGREEMENT
THIS CARRIER SERVICE AGREEMENT ("AGREEMENT") IS ENTERED INTO ON MARCH 18, 1996,
between STAR VENDING INC., a Nevada Corporation ("Provider"), with offices at
740 State Street, Suite 202, Santa Barbara, California, 93101, and PICK, INC., a
New Jersey Corporation ("Purchaser"), with its principal office located at 115
Route 46 W, Mountain Lakes, New Jersey 07046.
Background:
A. Provider provides telephone communications services between its location and
the outbound termination points identified on Exhibit A attached hereto and
incorporated herein by this reference; and
B. Purchaser desires to purchase and Provider desires to provide, upon the terms
and conditions set forth in this Agreement, telephone communication services to
Purchaser.
Agreement:
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
Business Provisions:
1. Service Commencement Date. Beginning on or about April 1, 1996, Provider
shall provide telephone communication services to Purchaser at the rates, terms
and conditions described in Exhibit A, and to the termination points set forth
in Exhibit A. Purchaser acknowledges that the per-minute rate set forth on
Exhibit A (the "Discount Rate") is a preferential rate based on prompt payment
on or before the Due Date. Such rate is subject to adjustment as provided in
Section 4. The services to be provided are limited to those set forth in Exhibit
A.
2. Period of Service. This Agreement shall be effective and the parties'
obligations shall commence upon the above date of execution by the parties and
this Agreement shall continue (subject to Provider's right to terminate this
Agreement sooner, as provided in Sections 4 and 6) for a period of six (6)
months from such date. This Agreement will be automatically renewed on a
month-to-month basis after expiration of the initial term or any subsequent
term. If either party desires to cancel this Agreement upon the expiration of
the initial term or any subsequent term, it shall give the other party notice of
its intent to cancel at least thirty (30) days prior to the expiration of the
current term. This Agreement shall continue and remain in full force and effect
until canceled by either party upon notice as provided herein.
3. Security. AS a condition of the Provider's obligations hereunder, to ensure
prompt payment of sums due hereunder, Purchaser shall furnish to Provider the
execution of this Agreement $ DEPOSIT WAIVED in the form of cash, irrevocable
and unconditional letter of credit, or such other security as may be acceptable
to provider. In the event that payment is received late for two (2) consecutive
months, Purchase shall furnish to Provider and additional deposit equal to one
<PAGE>
month's usage. Purchase shall provide deposit for late payment(s) within two (2)
days after receipt of a default notice and request for such deposit by Provider.
General Provisions:
4. Invoice. Provider shall submit an invoice to Purchaser each month, covering
charges for the previous month. Purchaser shall make payment to Provider within
twenty (20) days after the invoice date (the "Due Date"), which shall be the
last date of the previous month's billing cycle. The delinquent balance, i.e.,
any amounts not paid by the Due Date, shall bear interest at the rate of one and
one-half percent (1 1/2%) per month, computed with reference to the Adjusted
Rate. Nothing herein shall be construed to constitute a waiver of Provider's
right to declare a default by Purchaser under this Agreement on account of such
delinquency, to terminate this Agreement and to exercise any other rights under
this Agreement or at law or in equity.
5. Taxes. Purchaser upon the execution of this Agreement shall provide Provider
with a properly executed Certificate of Exemption for all foreign, federal,
state, county and local taxes and fees (if any) and shall be responsible for the
collection of all applicable end-user taxes and fees and the remittance of such
taxes and fees to the relevant governmental authority.
6. Termination. If payment has not been received by the Due Date described
above, or any extension thereof permitted in writing at Provider's option, for
all charges (including transmission charges, service charges and monthly fixed
charges, if any) billed to Purchaser, then Provider may at its sole discretion,
and with five (5) days prior written notice to Purchaser, terminate transmission
services in part or in whole. Provider reserves the right to collect
attorney's's fees and any and all costs incurred by Provider in the collection
of any unpaid amounts whether or not suit instituted.
8. No Warranties. PROVIDER MAKES NO WARRANTY, EXPRESS OF IMPLIED, WITH
RESPECT TO THE TRANSMISSION SERVICES PROVIDED HEREUNDER AND
EXPRESSLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY, DESCRIPTION
OR FITNESS FOR ANY PARTICULAR PURPOSE OR FUNCTION.
9. Waiver of Liability. As a material inducement for Provider to Provide the
services hereunder at the prices stated, Purchaser agrees that Provider shall in
no event be liable for any loss, expense or damage for (I) loss of revenue,
profits savings, business or goodwill, and (ii) exemplary, proximate,
consequential, or incidental damages, and expenses of any type or nature on
account of the use or nonuse or the services.
10. Indemnity. Purchaser shall indemnify and hold harmless the Provider, its
stockholders, officers, directors, employees and agents from any and all loss,
cost, damage, expense or liability,
<PAGE>
including without limitation, court costs and reasonable attorney's fee, arising
out of, in whole or in part, directly, the installation, hook-up, maintenance,
service or trouble-shooting of the transmission services described in this
Agreement including any interruption of transmission service to Purchaser, its
employees, agents and customers, except when caused by the negligence or breach
of this Agreement by the Provider or the intentional violations of any
applicable law or governmental regulation by Provider.
11. Regulations. This Agreement is made expressly subject to all present and
future valid orders and regulations of any regulatory body having jurisdiction
over the subject matter hereof and to the laws of the United States of America,
any of its states, or any foreign governmental agency having jurisdiction. In
the event this Agreement, or any of its provisions, shall be found contrary to
or in conflict with any such order, rule, regulation or law, this Agreement
shall be deemed modified to the extent necessary to comply with any such order,
rule, regulation or law and shall be modified in such a way as is consistent
with the form, intent and purpose of this Agreement,
12. No Agency. Neither party is authorized to act as an agent for, or legal
representative of, the other party and neither party shall have the authority to
assume or create any obligation on behalf of, in the name of, or binding upon
the other party.
13. Force Majeure. The parties' obligations under this Agreement are subject to,
and neither party shall be liable for, delays, failures to perform (except the
payment of money by Purchaser), damages, losses or destruction, or malfunction
of any equipment or any consequence thereof, caused or occasioned by, or due to
fire, flood, water, the elements, labor disputes or shortages, utility
curtailments, power failures, explosions, civil disturbances, governmental
actions, shortages of equipment for supplies, unavailability of transportation,
acts or omissions of third parties, or any other cause beyond the party's
reasonable control. Purchaser shall not represent that Provider is responsible
for the type of quality of Purchaser's services to its customers.
14. No Waiver. The failure of either party to enforce or insist upon compliance
with any of the provisions of this Agreement of the waiver, thereof, in any
instance, shall not be construed as a general waiver or relinquishment of any
other provision of this Agreement.
15. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns. Neither party shall voluntarily or by operation of low assign,
transfer, license, or otherwise transfer all or any part of its right, duties or
other interests in this Agreement or the proceeds thereof (collectively,
"Assignment"), without the other party's prior written consent, which consent
shall not be unreasonably withheld or delayed. Any attempt to make an assignment
in violation of this provision shall be null and void. Purchaser shall provide
written notice to Provider of any material change in ownership of Purchaser.
Purchaser's failure to comply with the assignment provisions, as contained in
this paragraph, shall give Provider, at is sole discretion, the option to either
accept Purchaser's assignee or terminate this Agreement. No assignment shall
release Purchaser of its obligations hereunder.
<PAGE>
acknowledgment or acceptance by either party of any purchase order, sales
acknowledgment or other similar form from the other party.
17. Merger. This Agreement (including its exhibits) supersedes and merges all
prior agreements, promises, understandings, statements, representations,
warranties, indemnities and covenants and all inducements to the making of this
Agreement relied upon by either party herein, whether written or oral, and
embodies the parties' complete and entire agreement with respect to the subject
matter hereof. No statement or agreement, oral or written, made before the
execution of this Agreement shall vary or modify the written terms hereof in any
way whatsoever.
18. Interpretation. The words and phrases used herein shall have the meaning
generally understood in the telecommunications industry. This Agreement shall be
construed in accordance with its fair meaning and not for or against either
party on the account of which party drafted this Agreement.
19. Third Party Beneficiaries/Parties in Interest. This Agreement has been made
and is made solely for the benefit of the Provider and Purchaser, and their
respective successors and permitted assigns. Nothing in this Agreement is
intended to confer any rights/remedies under or by reason of this Agreement on
any third party.
20. Severability. If any term or provision of this Agreement is determined to be
illegal, unenforceable, or invalid in whole or in part for any reason, such
illegal, unenforceable, or invalid provisions or part(s) thereof shall be
stricken from this Agreement and such provision shall not affect the legality,
enforceability, or validity of the remainder of this Agreement. If any provision
or part thereof this Agreement is stricken in accordance with the provisions of
this section, then the stricken provision shall be replaced, to the extent
possible, with a legal enforceable, and valid provision that is as similar in
tenor to the stricken provision as is legally possible.
21. Representation of Authority. Each party represents and warrants to the other
that the execution and delivery of this Agreement and the performance of such
party's obligations hereunder have been duly authorized and that the Agreement
is a valid and legal agreement binding on such parties and enforceable in
accordance with its terms.
22. Further Assurances. The parties shall at their on cost and expense execute
and deliver such further documents and instruments and shall take such other
actions as may be reasonably required or appropriate to carry out the intent and
purposes of this Agreement.
23. Governing Law. This Agreement shall be in all respects, governed by and
construed and enforced in accordance with the laws of the State of California,
including all matters of construction, validity and performance. However, any
controversy or claim arising out of this Agreement, or breach which has not been
cured, shall be settled by binding arbitration in accordance with the Commercial
Arbitration rules of the American Arbitration Association and judgement upon the
award of the arbitrators may be entered in any court having jurisdiction.
<PAGE>
constitute an original, but all of which shall constitute one and the same
instrument.
25. Notices. All notices, demands, requests and other communications required or
permitted hereunder shall be in writing and sent by facsimile, followed by a
mailing of same, and shall be deemed to be delivered when actually received, ir,
if earlier and regardless of whether actually received on the day following the
date of mailing, first class mail, duly addresses and with proper postage to the
last known place of business of either party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
PROVIDER: STAR VENDING, INC. PURCHASER: PICK, INC.
By:____/S/MARY CASEY________________ By:_____/S/DIEGO LEIVA__________
Printed Name: __MARY CASEY____________ Printed Name:__DIEGO LIEVA
Title:________PRESIDENT_______________ Title:__PRESIDENT__________________
<PAGE>
EXHIBIT 10.20
TELECOMMUNICATION SERVICE AGREEMENT
This Agreement is made this 2nd day of April , 1996 by and between Worldstar
Communications Corporation, ("WCC") with offices located at 399 Park Avenue, New
York, New York, 10022, and Pick, Inc, ("Reseller"), with offices located at 115
Route 46 West, Suite A2, Mountain Lakes, New Jersey 07046.
WHEREAS, WCC is a telecommunications company, which among other things, is a
wholesale provider of long distance communications services and other related
telecommunications services ("Telecommunication Services" of "Services"); and
WHEREAS, Reseller is desirous of purchasing said Telecommunications Services;
NOW, THEREFORE, in consideration of the promises made herein, the parties agree
as follows:
1. APPOINTMENT
Subject to the terms and conditions of this Agreement, WCC hereby appoints
Reseller ordering wholesale Telecommunications Services herein as a
non-exclusive Reseller of such Services, and Reseller upon ordering or receiving
or accepting WCC Services hereby unconditionally and exclusively accepts such
appointments and agrees to be bound by all the terms and conditions outlines
herein, for the term of this Agreement.
2. DURATION
Unless otherwise terminated pursuant to the terms of this Agreement, the parties
agree that this Agreement shall be for a period of one (1) year, commencing as
of the due date of execution.
3. PURCHASE RATE(S) & PAYMENT TERMS
A. BILLING CYCLE
(I). The Reseller shall be invoiced weekly and shall be subject to payments of
all outstanding invoices and or amounts in full, without deduction or offset of
any kind, on a weekly basis ("Billing Cycle").
(ii). The billing cycle shall be specified more thoroughly in Schedules A, B, C,
D, E, E, F, G, H, I, J, K, and L, attached hereto and made a part hereof.
B. Reseller agrees to pay WCC at the rate(s) charges defined in Schedules A, B,
C, D, E, F, G, H, I, J, K, and L ("Rate(s)"), attached hereto and made a part
hereof, for all Services utilized and/or contracted for. Rates charges are from
WCC point-of-presence, as designated in Schedules A, B, C, D, E, F, G, H, I, J,
K, and L.
<PAGE>
C. Amounts due WCC for the Telecommunication Services contracted for, are
payable by wire transfer, direct deposit or other means acceptable to WCC within
________ days of receipt of invoice by Reseller. Any late payment(s) received by
WCC shall be subject to a late charge on delinquent amounts at a rate of 1.5%
per month of the past due balances, not to exceed the maximum lawful rate
allowed. Payment of all WCC invoices shall be made by Reseller on or before all
payment due dates, time being of the essence,
D. If Reseller, in good faith, disputes any invoiced amount, Reseller must
notify WCC, in writing, by fax and registered mail, of such dispute within
thirty (30) days of the receipt of such invoice and the parties will resolve
same within sixty (60) days. Reseller shall pay a late fee of 1.5% per month on
any previously disputed amount deemed to be due and owing by WCC. All undisputed
amounts must be paid in a timely manner. Late charges in the amount of 1.5% of
the outstanding amount of the Reseller's account shall be payable on the next
billing cycle on any past due amounts and shall continue to remain due and
payable until all amounts due have been paid in full. The late charges set forth
herein shall be automatically reduced to the maximum lawful rate in the event
the forgoing percentage charges shall be deemed unlawful.
E. Reseller shall maintain a minimum usage volume of minutes per Billing Cycle
or other designated period as set forth in Schedules, A, B, C, D, E, F, G, H, I,
J, K. And L. Should usage volume of minutes fall below the specified minimum in
Schedules A, B, C, D, E, F, G, H, I, J, K, and L, then Reseller will be
surcharged in accordance with Schedules A, B, C, D, E, F, G, H, I, J, K, and L.
Notwithstanding the specified minimum usage volume in Schedules A, B, C, D, E,
F, G, H, I, J, K, and L, the Reseller shall have a maximum number of days, from
the date hereof, to attain the minimum usage volume as set forth in Schedules A,
B, C, D, E, F, G, H, I, J, K, and L, respectively.
F. Reseller shall furnish to WCC, upon execution of this Agreement, and initial
deposit ("Security Deposit") of a minimum US $50,000.00 in the form of cash, or
an irrevocable and unconditional letter of credit, or other security that may be
acceptable to WCC, to insure the proper payment of amounts due hereunder.
Deposit shall be equal to at least two (2) week traffic usage volume of minutes.
Reseller shall increase its Security Deposit upon WCC's written demand for
increase of amount of said Security Deposit as necessary based on anticipated
and/or changing amount of traffic usage and billing and/or if the financial
circumstances and payment history of the Reseller becomes unacceptable to WCC.
Provided Reseller fully performs its obligations hereunder, the Security Deposit
shall be returned on termination of this Agreement, reduced by any amounts which
may be owing and outstanding to WCC.
<PAGE>
G. WCC reserves the right to charge its wholesale per minutes Rates charges,
including Rates charged for inbound and/or outbound long distance call(s)
charged to Reseller, upon 30 days written notice. Reseller, thereupon, has the
right to terminate this Agreement should those Rates be deemed unacceptable to
Reseller.
H. Any tax, levy, or other tax liability arising out of the sale of any product
or services by the Reseller shall be paid and or collected for any governmental
authority by Reseller direct, and or its customers and or dealers.
I. Resellers shall retain sole responsibility for obtaining all orders,
processing all receivables, and bad debts and fraud associated with its product.
Reseller shall be responsible for all monetary collections, including sales tax,
if applicable, from all its customers. Payment of WCC invoices, as per Section
3, A, B any C above, are not contingent upon Reseller's customers.
4. CONDUCT OF BUSINESS
A. WCC shall use its best efforts to provide Reseller with all the
Telecommunication Services described herein and to maintain its overall network
quality. The quality of Service provided hereunder shall be consistent with
other common carrier industry standards, governmental regulations and sound
business practices. WCC makes no other warranties about the service provided
hereunder, express or implied, including but not limited to, any warranty or
merchantability or fitness for a particular purpose or use. WCC shall not be
liable for any damages, no matter how proximate or remote, as a result of any
delay or failure to deliver the Telecommunication Services.
B. Upon WCC's request, Reseller shall promptly furnish any technical
information or specifications relating to its system as may be reasonable
required by WCC.
C. Reseller shall obtain, at its own expense, all necessary licenses and permits
and governmental or regulatory consents or approvals to permit Reseller to
conduct business as contemplated herein. Reseller represents and warrants that
Reseller shall conduct business in strict conformity with all international,
domestic, local, state and federal laws, rules and regulations.
D. Reseller shall not create any obligations of any kind whatsoever or nature
on behalf of WCC.
E. Reseller shall not permit or suffer the use of WCC's systems or facilities
for any use or purpose not permitted by law.
<PAGE>
5. INDEMNIFICATION AND INSURANCE
WCC agrees to indemnify and hold harmless from any and all claims, suits,
actions, demands, costs, settlements, liens, losses, expenses and other
liabilities including all reasonable legal costs on account thereof, arising out
of or resulting from any product defects or any negligent or intentional acts or
omissions on the part of WCC. Notwithstanding the propr sentence, such
indemnification shall be limited to actual damages incurred.
Reseller agrees to indemnify and hold WCC harmless from any and all claims,
suits, actions, demands, costs, settlements, liens, losses, expense and other
liabilities including all reasonable legal costs on account thereof, arising out
of or resulting from the negligent or international misrepresentations by
Reseller in the marketing, promotion and distribution of the WCC product.
6. TERMINATION
A. Except as set forth in Section 6(b) hereof, if either parties considers the
other to be in breach of this Agreement, the party asserting such breach shall
provide written notice thereof. Thereafter, the party receiving such notice
shall cure the breach within five (5) business days. Upon receipt of a notice of
objection to the matter shall be submitted to arbitration. Any controversy or
claim arising out of this Agreement or breach which has not been cured, shall be
settled by arbitration in New York City in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and judgement upon the
award of the Arbitrators may be entered in any court having jurisdiction. In the
event that the alleged breaching party neither cures the breach nor provides
written notice of objection within five (5) business days following its receipt
of a written notice of breach, this Agreement shall be terminated as of the
close of business on such fifth business day.
B. If the breach relates to Reseller's failure to make full payment for all
completed long distance calls and or other Services provided within five (5)
business days following presentation of an invoice detailing such calls and or
Services, WCC shall have the right to immediately suspend the availability of
its long distance Service, time being of the essence.
7. WARRANTY
WCC warrants to Reseller only that it will provide the same quality of service
that it provides its own retail and other wholesale customers, which services
shall meet minimum standards required by applicable low or regulation.
<PAGE>
8. FORCE MAJEURE
WCC shall not be liable for any failure, interruption, diminution of service in
the event that such failure, interruption or diminution is the result of an act
of God, natural disaster, fire, civil or military authority, insurrection, riot,
war, national emergency, strike or other labor dispute, power failure of other
carriers of exchanges, flood, explosion or other cause out of WCC's reasonable
control.
9. LIMITATION OF LIABILITY
IN NO EVENT WILL EITHER PARTY HERETO BE LIABLE TO THE OTHER PARTY FOR ANY
INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING
WITHOUT LIMITATION, LOSS OF GOODWILL OR LOSS OF PROFITS ARISING IN ANY MANNER
FROM THIS AGREEMENT AND THE PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS
HEREUNDER.
THE LIABILITY OF RESELLER WITH RESPECT TO THE INSTALLATION (INCLUDING DELAYS
THEREOF), PROVISION, TERMINATION, MAINTENANCE, REPAIR, INTERRUPTION OR
RESTORATION OF ANY SERVICE OR FACILITIES OFFERED UNDER THIS AGREEMENT SHALL NOT
EXCEED AN AMOUNT EQUAL TO THE CHARGE APPLICABLE UNDER THIS AGREEMENT TO THE
PERIOD DURING WHICH SERVICES WERE AFFECTED. FOR THOSE SERVICES WITH MONTHLY
RECURRING CHARGES, THE LIABILITY OF RESELLER IS LIMITED TO AN AMOUNT EQUAL TO
THE PROPORTIONATE MONTHLY RECURRING CHARGES FOR THE PERIOD DURING WHICH SERVICE
WAS AFFECTED.
10. CONFIDENTIALITY
The terms of this Agreement and any confidential information relating to WCC,
Reseller, or their respective customers or vendors which are furnished or
revealed pursuant to this Agreement are deemed to be confidential information
("Confidential Information"). Confidential Information to any third party except
to the professional advisors of either party or as may be required by applicable
law.
11. MISCELLANEOUS
A. Each party hereby represents its full power any authority to execute and
deliver this Agreement and to perform the duties and obligations hereunder.
B. This Agreement shall be considered to be severable with respect to any term
or provision which shall be found to be invalid, void or unenforceable and the
remaining terms and provisions shall continue to be binding upon the parties
hereto.
<PAGE>
C. This Agreement constitutes the entire understanding between the parties with
respect to the subject matter of this Agreement and there are no
representations, warranties, covenants, agreements or collateral understanding
oral or otherwise, expressed or implied affecting this instrument which are not
expressly set forth herein. This Agreement may only be amended by the parties
hereto in writing.
D. A waiver by either party of a breach of any provision if the Agreement
shall not operate as, nor be construed as , a waiver of any subsequent breach.
E. The invalidity or enforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
F. This Agreement shall be interpreted and enforced pursuant to the laws of
the State of New York.
G. Any notice to be given under this Agreement shall be given in writing
delivered both by fax and certified mail and shall be deemed given on the first
business day following delivery of such notice by fax.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be executed by
their duly authorized representatives effective as of the date first written
above.
Worldstar Communications Corporation Pick, Inc.
By:____D. OMAR VALDEZ____________ By:__DIEGO LEIVA_________________
By:__/S/D. OMAR VALDEZ___________ By:___/S/ DIEGO LEIVA___________
Title:___PRESIDENT_________________ Title:_____PRESIDENT________________
Date:_____4/2/96__________________ Date:______4/2/96__________________
<PAGE>
EXHIBIT 10.21
Cellular Telephone Company
AGREEMENT
RELATING TO THE RESALE
OF CELLULAR SERVICE
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS..........................................................1
AGREEMENTS........................................................1
I. DEFINITIONS...................................................1
1.1 Activation...............................................1
1.2 Affiliate................................................1
1.3 Area(s)..................................................2
1.4 Assignment...............................................2
1.5 Customer.................................................2
1.6 End User.................................................2
1.7 Events of Default........................................2
1.8 Home Area................................................3
1.9 Normal Business Hours....................................3
1.10 Rate Sheet...............................................3
1.11 Number...................................................3
1.12 Roaming User or Roamer...................................3
1.13 Service..................................................3
1.14 Service Plan.............................................3
1.15 Unauthorized Access......................................3
<TABLE>
<S> <C> <C>
II. ELIGIBILITY, PROVISION OR SERVICE AND CUSTOMER RELATIONSHIP 3
2.1 Provision of Service....................................................................3...........
2.2 Failure to Maintain Eligibility Criteria................................................4.....
III. TERM OF AGREEMENT..........................................................................4
IV. ASSIGNMENT OF NUMBERS, CONNECTIONS.................................... 4
4.1 Provision of Numbers to Customer........................................................4
4.2 Restrictions on Numbers.................................................................5.......
4.3 Activation of Service...................................................................5...........
4.4 Remote Access...........................................................................5............
4.5 Modification or Termination of Service..................................................5.
4.6 Authorized Representatives..............................................................5....
4.7 Limitations on Service..................................................................5..........
4.7.1 Limitations on Service Within the Home Area......................................... 5
4.7.2 Limitations on Roaming Service..........................................................6...
4.8 Reassignment of Numbers.................................................................6.....
<PAGE>
4.9 Privacy.................................................................................6..................
4.10 Notices.................................................................................7.................
V. PRICES AND TERMS OF PAYMENT........................................................ 7
5.1 Payment of Charges......................................................................7.........
5.2 Minimum Charges.........................................................................7.........
5.3 Aggregate Volume Reward.................................................................7...
5.4 Taxes...................................................................................7..................
5.5 Tariffs.................................................................................7...................
5.6 Monthly Billing.........................................................................7.............
5.7 Provision of Magnetic Tapes.............................................................8.....
5.7.1 Provisions of Data by Other Means.......................................................8.
5.8 Invoices................................................................................8.................
5.8.1 Itemized Invoices.......................................................................8..........
5.8.2 Payment of Invoices.....................................................................8..........
5.8.3 Disputed Charges........................................................................9...........
5.8.4 Proration of Charges....................................................................9..........
5.9 Modification to Schedule 2..............................................................10......
5.10 Customer Right to Select Other Service Plans......................................... 10
5.11 Loss of Telephones......................................................................10.........
5.12 Billing Adjustments.....................................................................11..........
5.13 Company's Right to Offset...............................................................11.....
VI. LIMITATIONS OF WARRANTIES AND LIABILITIES........................... 12
7.1 Customer's Charges......................................................................12........
7.2 Equipment...............................................................................12.............
7.3 Obligations to End Users................................................................12.......
7.4 Ethical Responsibilities................................................................13..........
7.5 Responsibility for Actions or Omissions.................................................13
7.6 Responsibility for Agents...............................................................13........
7.7 No Rights to Company's Facilities.......................................................13..
7.8 Contracts With End Users................................................................13.....
7.8.1 Contract Required.......................................................................13..........
7.8.2 Rental Exception........................................................................14...........
7.9 Insurance...............................................................................15...............
7.10 Security................................................................................15.................
VIII. COMPANY'S OBLIGATIONS................................................................ 16
8.1 Company's Service.......................................................................16.........
8.2 Informational Material..................................................................16.........
8.3 Notice of Material Change in Service....................................................16.
<PAGE>
IX. TRADE NAME AND TRADEMARK........................................................ 16
9.1 Company's Marks.........................................................................16........
9.2 Customer's Marks........................................................................17.........
X. PROPRIETARY INFORMATION; CONFIDENTIALITY.......................... 17
10.1 Confidential Information................................................................17.......
10.2 Additional Protection of Confidential Information................................... 17
XI. RESTRICTIONS ON USE.........................................................................17
11.1 Abuse or Fraudulent Use.................................................................17........
11.2 Cancellation of Service to End User.....................................................18.
11.3 Interference............................................................................18...............
XII. INDEMNIFICATION............................................................................18..
XIII. DEFAULT AND TERMINATION.......................................................... 19
13.1 Default.................................................................................19.................
13.2 Right to Pursue Remedies................................................................19.....
13.3 Survival of Obligations.................................................................20........
13.4 Continuing Obligations..................................................................20.......
13.5 No Company Obligations for Continuing Service to End Users............... 20
13.6 Notice of Customer's Intended Sale of Its Business or Customer Lists.... 20
XIV. ASSIGNMENT.................................................................................21.....
XV. ARBITRATION, JURISDICTION, GOVERNING LAW........................ 21
15.1 State Law...............................................................................21...............
15.2 Arbitration Required....................................................................21.........
15.3 Court Proceedings/Venue.................................................................21....
15.4 Attorney's Fees.........................................................................21............
XVI. MISCELLANEOUS..............................................................................22.
16.1 Headings................................................................................22...............
16.2 Waiver..................................................................................22................
16.3 No Agency...............................................................................22.............
16.4 Notices.................................................................................22................
16.5 Forms...................................................................................23................
16.6 Severability............................................................................23...............
16.7 Force Majeure...........................................................................23............
<PAGE>
16.8 Merger/Entire Agreement.................................................................23.....
16.9 Counterparts............................................................................23.............
16.10 Compliance With Laws....................................................................24.....
16.11 Amendments..............................................................................24...........
16.12 The Company.............................................................................24...........
16.13 Successors and Assigns..................................................................25.......
16.14 Preparation of Agreement................................................................25.....
XVII. INDEPENDENT INVESTIGATION...................................................... 25
Schedule 1.......................................................................................27.................
Schedule 2.......................................................................................28-39..............
Schedule 3.......................................................................................40.................
Schedule 4.......................................................................................41.................
Schedule 5.......................................................................................42.................
Schedule 6.......................................................................................43.................
</TABLE>
<PAGE>
AGREEMENT
THIS AGREEMENT, containing terms and conditions pertinent to reselling service,
effective as of the _______ day of __________________, 199__, is by and between
CELLULAR TELEPHONE COMPANY, a New York general partnership, with its principal
place of business at 15 E. Midland Avenue, Paramus, New Jersey, on behalf of
itself and its current and future affiliates holding licences to provide
non-wireline cellular radio telecommunications service ("Service") within the
United States (collectively, the "Company"), and CUSTOMER NAME, a corporation
organized under the laws of the State of Nevada with its principal place of
business at 115 Route 46 W, Suite A-2, Mountain Lakes, New Jersey 07046 (the
"Customer").
RECITALS
A. Company provides or is authorized to provide "Service" as defined below in
certain geographic areas in the United States to "Customer" as defined below.
The areas in which the company is authorized may change from time to time. A
list of the areas where the Company is currently licenced to provide Service is
set forth in the attached Schedule a, which Schedule may be revised by Company
from time to time.
B. Customer desires to purchase and resell access to and usage of Company's
Service within the areas listed in Schedule 1 designated by Customer.
AGREEMENTS
In consideration of the mutual covenants and the promised contained herein, the
Parties hereto agree as follows:
I. DEFINITIONS
The following terms when used herein shall have the following meanings:
1.1 Activation shall mean the initiation of the Service for the account of
Customer.
1.2 Affiliate shall means any person, partnership, corporation, or other
business association (hereinafter "person") that directly or indirectly
controls, is controlled by, or is under common control with another person.
Control shall be defined as (I) ownership of a majority of the voting power of
all classes of voting stock, or (ii) ownership of a majority of the beneficial
interests income or capital of an entity other than a corporation.
<PAGE>
1.3 Area shall mean the areas within the United States, where the Company
currently provides Service pursuant to licences granted by the Federal
Communications Commission ("FCC").
1.4 Assignment shall mean the assignment of a Number or block of Numbers to
Customer.
1.5 Customer shall mean any individual or entity purchasing Service, from
Company, pursuant to this Agreement.
1.6 End User shall mean any person or entity purchasing Service, directly or
indirectly, from or through customer.
1.7 Events of Default shall mean the following:
(a) the execution of any assignment for the benefit of creditors of the filing
for relief by either party under any applicable bankruptcy, reorganization,
moratorium, or similar debtor relief laws;
(b) the appointment of a receiver Customer or Company or for substantially all
of their respective
assets or properties;
(c) the failure of either party to pay any sum owed to the other hereunder at
the time such amount comes due;
(d) the failure of either party to perform or observe any other material term,
condition, or covenant to be performed by it under this Agreement;
(e) the commission of any illegal act (excluding misdemeanor traffic offences
and other minor misdemeanors not involving dishonesty or moral turpitude) by or
the filing of any criminal indictment or information against Customer, its
proprietors, partners, officers, or directors or shareholders controlling in the
aggregate or individual 10% or more of the voting rights or equity interests of
Customer;
(f) the furnishing, within a 12-month period, by Customer to Company of two or
more checks that are not paid when presented due to insufficient funds; and
(g) an unauthorized assignment of this Agreement.
<PAGE>
Upon the occurrence of any of these Events of Default, a party shall be deemed
to be in default of this Agreement, until such Event of Default is cured.
1.8 Home Area shall mean the area served by the Affiliate of the Company holding
the FCC license for the MSA or RSA with which the number is normally associated.
1.9 Normal Business Hours shall mean 9:00 a.m. to 5:00 p.m., Monday through
Friday, excluding Company observed holidays, except as specifically stated
otherwise on Schedule 2, at the office responsible for handling the pertinent
interaction between Company and Customer.
1.10 Rate Sheet shall mean the list of services published from time to time by
Company which reflects the rates, terms, and conditions at which it makes
Service available to Customers under different Service Plans.
1.11 Number shall mean the ten-digit (NPA NXX XXXX) number assigned to a
cellular telephone unit used to provide access to Service.
1.12 Roaming User or Roamer shall mean a customer using cellular service outside
the Home Area.
1.13 Service shall mean Domestic Common Carrier Public Cellular Radio
Telecommunications Service provided pursuant to Part 22, subpart K of the Rules
of the Federal Communications Commission ("FCC"), as amended, whether provided
solely or principally on those frequencies designated in 47 C.F.R. #22.902, and
such other services as may be offered by Company from time to time under this
Agreement.
1.14 Service Plan shall mean the rates, terms and conditions under which
Customer purchases Service from Company as set forth in the attached Schedule 2.
1.15 Unauthorized Access shall mean any unauthorized use of service through the
modification of the Electronic Serial Number ("ESN") originally installed by the
manufacturer in a cellular phone (which shall include the practices generally
referred to as "counterfeiting,: "cloning fraud," or "tumbling fraud").
II. ELIGIBILITY, PROVISION OF SERVICE AND CUSTOMER RELATIONSHIP
2.1 Provision of Service; Company shall provide and Customer agrees to purchase
Service from Company within the area as designated by Customer, which Service
Customer may resell to End Users. Company shall have the continuing right to
market and sell Service to Customers and potential Customers in competition with
Customer.
<PAGE>
2.2 Failure to Maintain Eligibility Criteria. If a customer shall at any time
fail to meet the eligibility criteria set forth in Schedule 2, Company may
provide Customer with ninety (90) days written notice that customer is no longer
eligible to receive service under this agreement. If, Customer is unable, during
the ninety (90) day period after Company's notice is sent, to satisfy the
eligibility criteria, Company may terminate this Agreement without further
notice. Customer may continue to receive service by entering into one or more
separate agreements with each Affiliate of Company providing service in each
portion of the Area which Customer wishes to continue to receive cellular
service.
III. TERM OF AGREEMENT
Subject to the provisions of Article XIII, the term of this Agreement shall
commence on the date set forth above, and shall continue until terminated in
accordance with the terms hereof. This Agreement may be canceled at any time by
either party without cause upon ninety days prior written notice; provided,
however, that neither party may terminate the Agreement without cause prior to
the expiration of any term commitment under any Service Plan applicable to any
Number. If, however, Customer does terminate the Agreement or any service
without cause prior to the expiration of any such term commitment. Customer
shall be obligated to pay any cancellation fee specified in Schedule 2. A
termination shall be deemed to be without cause if it occurs in the absence of
an Event of Default. If either party wished to terminate this Agreement, it
shall deliver written notice to the other party, specifying the effective date
of termination. Company's obligation to provide additional Numbers to Customer
shall cease; (a) upon receipt by Company of Customer's written notice of
termination; or (b) upon issuance by Company of written notice of termination to
Customer.
IV. ASSIGNMENT OF NUMBERS, CONNECTIONS
4.1 Provision of Numbers to Customer. Within thirty (30) days of execution of
this Agreement, Company shall assign to Customer, and Customer shall accept from
Company, an initial order for each Area. Customer may, at any time that it is
not in default under this Agreement, and according to the procedures (including
credit requirements) established by Company, order additional Numbers in such
amounts as are set forth in Schedule 3. Subject to the availability of Numbers
and the capacity of the Facilities such additional Numbers will be supplied to
Customer within three business days of Company's receipt of the order. Company
shall process orders for Numbers from all Customers, including Customers who are
owned or controlled by Company or and Affiliate of Company, in the sequence in
which orders for additional Numbers are received. Customer and Company shall
follow reasonable number conservation policies generally accepted by
telecommunications industry and Company may, from time to time change number
assignments. If Numbers are unavailable, Company shall follow generally accepted
industry standards and/or regulatory requirements, if any, in responding to the
shortage of numbers, and shall, by doing so, incur no liability to Customer.
<PAGE>
4.2 Restrictions on Numbers. A Number may not be associated with more than one
telephone unit at the same time.
4.3 Activation of Service. Service shall only be initiated on normal business
days, during normal business hours. A Number shall be activated within Eight
normal business Hours following receipt by Company's designated representative
for such purpose from an authorized representative of Customer of written notice
and of any deposit required pursuant to Section 7.10. Notwithstanding the
foregoing, Company shall use reasonable efforts to activate Numbers as soon as
practicable upon its receipt of the notice and the deposit. However, Company
shall not be obligated to initiate Service if Customer is in default.
4.4 Remote Access. Where Company makes a remote access procedure available to
Customer and, Customer elects the remote access option, Customer will be
responsible for ordering and activating Numbers. Customer agrees that it will
comply with any procedures developed by Company with respect to this program.
4.5 Modification or Termination of Service. When Customer desires to modify or
terminate Service with respect to one or more Number(s), Customer shall provide
notice to Company. Except as set forth below in Section 11.2 with respect to
fraud, such notice shall be provided by an authorized representative of Customer
and shall be given during Company's normal business hours; it shall specify
Number and such additional information as Company may reasonably require.
Company shall modify or terminate Service to such Number(s) within four business
hours following receipt of such notice from Customer.
4.6 Authorized Representatives. Immediately upon execution of this Agreement,
Company and Customer shall each notify the other of their representative
authorized representatives for purposes of giving and receiving the notices
provided for under this Article IV and any other Service orders, including those
which involve the activation, change, or discontinuance of Service. Each party
may appoint no more than three representative at any time, unless the other
party consents to a greater number. The notice of appointment, and the authority
of the representative, shall remain effective until the notice is canceled or
amended by the party for which such representative is acting. Company will not
accept any notice or orders from any End User or other agent of Customer.
4.7 Limitations on Service.
4.7.1 Limitations on Service within the Home Area. CUSTOMER ACKNOWLEDGES THAT
SERVICE IS MADE AVAILABLE TO CELLULAR TELEPHONE UNITS EQUIPPED FOR
SERVICE ONLY WHEN WITHIN OPERATING RANGE OF THE FACILITIES WITHIN
THE HOME AREA. SERVICE MAY BE TEMPORARILY REFUSED, INTERRUPTED, OR
LIMITED BECAUSE OF: (a) TRANSMISSION LIMITATIONS CAUSED BY
ATMOSPHERIC, TERRAIN, OTHER NATURAL OR ARTIFICIAL CONDITION
ADVERSELY AFFECTING TRANSMISSION, AND OTHER CAUSES REASONABLY
<PAGE>
OUTSIDE OF COMPANY'S CONTROL; OR (c) EQUIPMENT MODIFICATIONS, UPGRADES,
RELOCATIONS, REPAIRS, AND OTHER SIMILAR ACTIVITIES NECESSARY FOR THE PROPER
IMPROVED OPERATION OF SERVICE, INDIVIDUAL CALLED MAY BE "DROPPED" (i.e.,
INVOLUNTARILY DISCONNECTED) FOR A VARIETY OF REASONS, INCLUDING WITHOUT
LIMITATION TO ATMOSPHERIC CONDITIONS, TOPOGRAPHY, WEAK BATTERIES, SYSTEM
OVERCAPACITY, MOVEMENT OUTSIDE A SERVICE AREA, AND GAPS IN COVERAGE WITHIN A
SERVICE AREA. COMPANY SHALL INCUR NO LIABILITY TO PROVIDE ADEQUATE SERVICES
HEREUNDER OF SUCH LIABILITY IS DUE TO A LACK OF NETWORK CAPACITY OR TO CAUSES
BEYOND THE REASONABLE CONTROL OF COMPANY. NOR SHALL COMPANY BE RESPONSIBLE FOR
ANY ACT OR OMISSION RELATED TO NON-COMPANY EQUIPMENT OR SYSTEMS USED IN
CONNECTION WITH THE SERVICE. CUSTOMER AGREES TO INFORM ITS END USERS OF THE
SERVICE LIMITATIONS CONTAINED IN THIS SECTION,
4.7.2 Limitations on Roaming Service. COMPANY WILL PROVIDE, AS TO EACH NUMBER
ACTIVATED FOR CUSTOMER, THE SAME ROAMING SERVICE THAT IS AVAILABLE TO COMPANY'S
OTHER CUSTOMERS WITH NUMBERS ASSOCIATED WITH THE SAME HONE AREA. IF COMPANY, OR
ANOTHER ENTITY WITH WHOM COMPANY HAS A ROAMING AGREEMENT, DISCOVERS OR SUSPECTS
FRAUD WITH RESPECT TO CERTAIN NUMBERS, THEN ROAMING PRIVILEGES MAY BE SUSPENDED
WITH RESPECT TO SUCH NUMBERS. IT SHALL BE COMPANY'S POLICY TO USE COMMERCIALLY
REASONABLE EFFORTS TO PROVIDE CUSTOMER WITH PRIOR, OR PROMPT SUBSEQUENT,
NOTIFICATION OF THE SUSPENSION OF THE ROAMING SERVICE; HOWEVER, COMPANY SHALL
HAVE NO LIABILITY ARISING OUT OF ANY FAILURE TO NOTIFY UNLESS SUCH FAILURE
RESULTED FROM A DELIBERATE DECISION MADE IN BAD FAITH.
4.8 Reassignment of Numbers. CUSTOMER ACKNOWLEDGES THAT COMPANY MAY BE REQUIRED
TO CHANGE OR REASSIGN NUMBERS PREVIOUSLY PROVIDED TO CUSTOMER FROM TIME TO TIME.
COMPANY WILL PROVIDE CUSTOMER WITH NOTICE OF THE INTENDED CHANGE REASONABLY IN
ADVANCE OF MAKING SUCH CHANGE. CUSTOMER AGREES TO INFORM ITS END USERS OF THE
PROVISIONS OF THIS SECTION, AND FURTHER ACKNOWLEDGES AND AGREES THAT NEITHER IT
NOR ANY END USER SHALL HAVE OR ACQUIRE ANY PROPRIETARY RIGHT IN ANY SPECIFIC
NUMBER OR BLOCK OF NUMBERS PROVIDED BY COMPANY.
4.9 Privacy. Cellular telephone systems use radio channels to transmit voice and
data communications over a complex network and privacy cannot be guaranteed.
Customer agrees that Company shall not be liable to End Users for any such lack
of privacy.
<PAGE>
4.10 Notices. Any order, notice, or other communication placed or given pursuant
to this Article IV may be delivered by such means as may be permitted from time
to time by the general practices of Company.
V. PRICES AND TERMS OF PAYMENT
5.1 Payment of Charges. Customer shall pay to Company charges computed as set
forth in Schedule 2. All such charges may be modified from time to time in
accordance with the provisions of this Article V, Section 5.9.
5.2 Minimum Charges. Customer shall pay Company any minimum charges as set forth
in Schedule 2 for each Number assigned to Customer for any minimum Number block
required by such Service Plan selected by Customer, regardless whether service
has been initiated for such Number or block of Numbers.
5.3 Aggregate Volume Reward. Customer may participate in any Aggregate Volume
Reward program offered by Company for which Customer is eligible, as set forth
in the attached Schedule 2.
5.4 Taxes. Except where Customer provides to Company a valid certificate of
resale or such documentation as would release Company from any liability, levy,
or duty, there shall be added to any charges due from Customer an amount equal
to any duty, fee, surcharge, levy or tax, including but not limited to sales,
gross receipts, excise, utility, and use taxes, fees or surcharges, imposed by
any local, State of Federal government or governmental agency with respect to
Customer, the Service, or transactions contemplated by this Agreement, excepting
only taxes on the income of the Company.
5.5 Tariffs. In the event that Service provided or changes made therefor are
currently subject, or at any time become subject, to any Federal, state, or
local regulation or tariff, then the agreed charges as set forth in Schedule 2
(as amended from time to time) shall be deemed amended to conform to the rates
or any changes in rates or terms and conditions that may occur or be required
under such regulation or tariff. Nothing in this Agreement shall be seemed (I)
to require or preclude the use of tariff-equivalent or tariff-related charges,
(ii) to provide or imply that such charges are or are not appropriate in the
provision of Service provided for in this Agreement and in Schedule 2.
5.6 Monthly Billing. Company shall bill Customer for charges incurred for each
Number once per calendar month, with the billing date to be the same for that
Number each successive month. Company will use reasonable efforts to have all
Numbers of Customer assigned to a single cycle, but any Number may be assigned
to any cycle and the cycle to which a Number is assigned may be changed from
time to time; provided, however, that Company shall not unreasonable require
multiple billing cycles for Customer. When practicable, Company will provide
Customer with 90-days prior written notice of any change in billing cycles to be
used with respect to Numbers assigned to Customer.
<PAGE>
5.7 Provision of Magnetic Tapes. Company shall use reasonable efforts to provide
Customer's billing agent accurate magnetic billing tapes for Service provided
pursuant to this agreement and the associated charges therefor within seven
working days of the cut-off date for each billing cycle. Customer agrees to
notify Company immediately if it does not receive a magnetic tape within this
time frame. The magnetic tapes provided by Company will include reasonable
billing information compiled using standard industry protocols. Customer agrees
to notify company within five business days of its receipt of a magnetic tape
containing defects. Customer must provide Company with written notice of the
name, address and phone number of its billing agent at least 30 days prior to
the expected mailing date of the billing tape. Each container within which the
magnetic billing tapes are shipped to Customer's billing agent shall be labeled
with Customers name, the appropriate Company's name, the applicable Home Area,
the name of the Customer's billing agent, the billing period to which the tape
pertains, Company shall provide one magnetic billing tape per billing cycle for
the charge indicated in Schedule 2, with any additional or lost copies at
Customer's expense.
5.7.1 Provision of Data by Other Means. It is understood and agreed that the
data related to billing may be transmitted, with Customer's consent, by means
other than magnetic tape, such as by optical disk or by way of wired networks
from one computer to another. The substitution of another form of transmission
shall not affect the transmission, compliance, with standard protocols,
timeliness of notice regarding defects, identification of the data by reasonable
"labeling", and responsibility for costs of replacing data, nearly as
practicable as if magnetic tapes had been used.
5.8 Invoices.
5.8.1 Itemized Invoices. Customer shall receive one paper invoice per billing
cycle (there may be multiple monthly cycles) setting forth the details listed in
Schedule 2. Customer shall be billed in advance (or arrears, at Company's
option) for applicable access, feature and non-usage related charges, and shall
be billed for air time, tool and other usage related charges at the end of each
billing cycle. Customer agrees to pay all charges, including, but not limited
to, toll calls, directory listings, custom calling charges, network service,
network usage, directory assistance, roamer service charges, and 900 and other
Service Access Code service charges (to the extent that Company provides, or is
authorized to bill for, these services).
5.8.2 Payment of Invoices. Payment in full for such invoices shall be due in
U.S. currency upon the due date set forth in the invoice without any right of
offset by Customer for disputed charges or otherwise -- unless the invoice is
adjusted by Company in writing prior to the due date, or as otherwise provided
in schedule 2. Company may at its sole discretion require payment by certified
check or money order. Payments are past due is not received by the due date
shown on the invoice, or within 30 days after the magnetic tape was mailed,
which ever is later. In the event the payment is not received within this time
period, Customer agrees to pay a late fee as set forth in Schedule 2. Customer
further agrees that time is of the essence with respect to its payment of
invoices. Customer agrees not to place any condition or restrictive legend, such
as "Paid in Full", on any check or instrument used to make a payment. The
parties agree that the negotiation of any such check or instrument so inscribed
shall not constitute an accord and
<PAGE>
satisfaction or novation. The resolution of payment disputes, rather, shall be
made in accordance with the provisions of Section 5.8.3 and Article XV.
5.8.3 Disputed Charges.
(a) Customer shall provide Company with written notice of any disputed charges
within 90 days after the mailing date of the first invoice containing such
charges. Sending of such notice by Customer shall not excuse or defer Customer's
obligation to make full payment of the invoice under Section 5.8.2, unless
otherwise specifically provided in Schedule 2. Customer may not thereafter
dispute charges. Company shall provide Customer with its determination with
respect to disputed charges within thirty (30) days after receipt of Customer's
notice of dispute and, if appropriate, will credit Customer's account.
(b) Customer's failure to provide notice of disputed charges pursuant to Section
5.8.3.a. above shall constitute a waiver by Customer of the underlying claim,
and Customer shall not, thereafter, make any claim with respect to such disputed
charges. This provision shall not shorten the period within which suit must be
filed as established by the applicable statute of limitation, but shall
constitute a condition precedent to any right of the aggrieved party to contest
prior charges. This condition is designated to allow each party the opportunity
to preserve important evidence in defense of a claim.
(c) If Customer claims that certain charges are not payable in full because they
are a result of Unauthorized Access by a person with whom Customer has not
dealt, then it is Customer's obligation to supply Company with clear and
convincing evidence of the Unauthorized Access. Company considers the following
to be evidence of Unauthorized Access: (I) an affidavit from the appropriate End
User stating that s/he or it did not make the call(s) in question; (ii) call
detail information for End User's account; and (iii) a statement by Customer
that it has thoroughly investigated the alleged Unauthorized Access. Such
investigation by customer should included contacting or attempting to contact a
sufficient number of the recipients of calls at issue of each End User so as to
establish a reasonable basis for inferring that the remainder of such calls were
the result of Unauthorized Access. If Customer complies with this section within
180 days of the mailing date of the first invoice containing such charges at
issue (or such other time period as set forth in Schedule 2), charges may be
reduced to the extend set forth in Schedule 2.
5.8.4 Proration of Charges. Access fees with respect to assigned Numbers for
billing periods of less than one month will be prorated based on the actual
number of days in such periods. For purposes of such prorations, each monthly
billing cycle may be deemed, at Company's discretion, to have 30 days. Company
may, at its option, prorate other monthly charges, such as for calling features.
<PAGE>
5.9 Modification to Schedule 2. The charges set forth in Schedule 2 may be
increase or decrease at any time upon 90 days written notice to Customer, unless
Schedule 2 provides otherwise. To the extent that the charges set forth in
Schedule 2 are subject to any federal, state, or local regulation or tariff. If
any modification proposed by Company to Schedule 2 is unacceptable to Customer,
Customer shall have the right to terminate this Agreement by providing Company
with written notice of termination within 30 days of the notice of modification;
provided, however, that if Company in turn provides Customer with written notice
rescinding the modification within 15 days thereafter, the Agreement will not
terminate but shall continue in full force and effect.
5.10 Customer Right to Select Other Service Plans.
(a) Customer may, from time to time, change its selection of Service Plan under
which Service shall be provided to Customer's Numbers by providing Company with
written notice of the change, provided that Customer complies with all of the
terms and conditions of the new Service Plan. In such event, Schedule 2 shall be
deemed to include the Rate Sheet for and Service Plan selected by Customer and
Customer may be required to sign an addendum to this agreement to reflect
changed terms and conditions applicable for such Service Plan. In such case,
except as otherwise provided in the relevant rate sheet, Customer will not
receive a magnetic billing tape, unless Customer agrees to bear any additional
costs arising from the providing of such tape. The rates any terms for various
Service Plans are available from Company. Any such modification to Schedule 3
pursuant to this Section shall not be deemed a modification for purposes of
Section 5.9 above.
(b) In the event Customer changes Service Plans, except as otherwise provided in
the relevant rate sheet, Customer will not receive a magnetic billing tape,
unless Customer agrees to bear any additional costs arising from providing of
such tape. Numbers on the Customer rate plan and Numbers on other rate plans are
on different billing cycles. If Customer selects an annual rate plan, there may
be a cancellation fee if Customer cancels service within the first year.
5.11 Loss of Telephone. In the event an End User's cellular telephone is lost,
stolen, or otherwise absent from the End User's possession or control in an
unauthorized manner, Customer shall nevertheless be liable for all charges
attributable to the access Number assigned to such cellular telephone until he
notifies Company during Normal Business Hours of such loss, theft, or
unauthorized absence, in which case Customer's liability therefore shall
terminate at the end of four business hours after such notification is received
by Company. Company shall use reasonable efforts, taking into account all
circumstances which shall include other operational demands placed upon its
employees, to deactivate Service to the Number affected as soon as practicable.
<PAGE>
5.12 Billing Adjustments. In the event of a total service outage ("Outage")
within the Home Area or any portion of the Home Area associated with any number
which is not caused by Customer or End User and which lasts for a period of 24
hours or more, a credit allowance will be made, at the Customer's request, in
the form of a pro rata adjustment of the fixed charges billed by Company to
Customer with respect to such number. Periods of non-continuous Outage may not
be accumulated in determining if an Outage has continued for at least 24 hours.
In order to receive such credit, Customer must submit a written request to
Company, stating the nature and duration of the Outage, the numbers affected,
and such other information as Company may reasonable require. Such notice must
be received by the Company within ten business days following the last day of
the period of Outage. Except as provided herein, Company shall incur no
liability for outages.
5.13 Company's Right to Offset. Company may offset against any deposit, monies,
or compensation owed to Customer by Company any amounts owed bu Customer to
Company or its Affiliates pursuant to this Agreement, or otherwise, including
without limitation, any expenses and damages that are incurred by Company and
are subject to indemnification by Customer under Section 18.
VI. LIMITATIONS OF WARRANTIES AND LIABILITIES
Company supply a service and not "good(s)" at that term is defined in the
Uniform Commercial Code. Notwithstanding and without limitation of the
foregoing, to the extend that any portion of Service offered by Company might be
construed as good(s), COMPANY EXPRESSLY DISCLAIM ANY AND ALL IMPLIED WARRANTIES
OF WHATSOEVER NATURE INCLUDING, BUT NOT LIMITED TO, THE WARRANT OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE.
THE LIABILITY OF COMPANY FOR DAMAGES OR COSTS ARISING FROM ERRORS, OUTAGES, OR
FAILURES OF SERVICE, OR DEFECTS OR MALFUNCTIONS OF THE FACILITIES. OCCURRING IN
THE COURSE OF PERFORMING UNDER THIS AGREEMENT (INCLUDING THE OBTAINING AND
FURNISHING OF INFORMATION WITH RESPECT TO CUSTOMER, END USERS, OR OTHER USERS OF
SERVICE OR FACILITIES). REGARDLESS OF THE LEGAL BASIS FOR SUCH CLAIM SHALL IN
ANY EVENT BE LIMITED TO AN AMOUNT EQUAL TO THE PROPORTIONATE CHARGE TO CUSTOMER
FOR THE PERIOD OF SERVICE DURING WHICH SUCH ERRORS, OUTAGES, FAILURES, DEFECT,
OR MALFUNCTIONS OR EQUIPMENT OCCUR.
<PAGE>
IN NO EVENT SHALL COMPANY BE LIABLE FOR ANY SPECIAL OR
CONSEQUENTIAL DAMAGES.
VII. CUSTOMER'S OBLIGATIONS
7.1 Customer's Charges. Customer is solely responsible for all charges billed
under Article V above, regardless of when billed, with respect to any Number
assigned to it.
7.1 Equipment
(a) Customer is responsible for ensuring that any equipment utilized by it, its
agents, or its end Users in connection with Service and each Agent's and End
User's use thereof shall at all times meet industry standards for compatibility
with Service including any Company's requirements for compatibility with
upgraded Facilities, and all FCC and other applicable regulatory authorities'
requirements. In the event that any of the equipments utilized by an agent or
End User does not meet such standards, Customer shall use its best efforts to
ensure that such equipment is no longer used in the reception or transmission of
Service and shall, of necessary, terminate Service to such agent or End User.
(b) Company shall not be responsible to Customer or any End User for the
installation, operation, quality of transmission, or testing and maintenance of
any cellular telephone unit or cellular terminal equipment, unless Customer
contracts with Company for Company to provide maintenance, warranty, or
installation of End User equipment at Company between Company and Customer as to
such matters shall be governed by a separate agreement. Company shall have no
obligation to see or otherwise provide Equipment to Customer or to its End
Users.
7.3 Obligations to End Users.
(a) With respect to the matters covered by this Agreement, Company shall be
obligated only to Customer, with which it is in privity of contract, and not
with End Users with whom Company is not in privity. End Users are not to be
deemed to be third-party beneficiaries of this Agreement.
(b) Unless otherwise provided in Schedule 2, Customer shall provide an adequate
and properly trained staff to receive and investigate any complaints from its
End Users relating to Service, and will report any trouble with Service to
Company only upon reasonable verification that such trouble is due to reasons
other than the misuse or malfunctioning of the End User's equipment or the
failure of such equipment to meet the technical standards for compatibility with
Service.
<PAGE>
(c) Unless otherwise provided in Schedule 2, Company is not responsible for
sending bills to Customer's End Users.
7.4 Ethical Responsibilities. Customer shall refrain from doing anything that
would tend to discredit, dishonor, reflect adversely upon, or injure, in any
manner, the reputation of the Company, Customer, or any Customers or dealers of
Company. Each party shall be governed in all its dealings with respect to this
Agreement by the highest standards of honesty, integrity, and fair dealing.
7.5 Responsibility for Actions or Omissions. Customer shall be solely
responsible for all risks and expenses incurred in connection with its actions
or omissions in the sale of Service or otherwise relating to this Agreement.
Customer shall act in all respects on it own account, and shall be solely
responsible for such things as credit verification, deposits, billing,
collection, consolidation, rebilling, customer complaints, charges for usage,
bad debts, and, except as provided in Schedule 2, fraudulent use of any Number
assigned to Customer, whether by Customer. An End User or any third party,
provided Company has followed Customer's instructions under this Agreement with
respect to any relevant Number.
7.6 Responsibility for Agents. Customer is responsible for the performance of
its agents, if any, and shall ensure that its agents are in compliance with any
applicable terms of this Agreement, and controlling tariffs, and any other
applicable industry standards.
7.7 No Rights to Company's Facilities. No provision of this Agreement shall be
construed as vesting in the Customer any control or ownership interest
whatsoever in any Facilities or operations of Company.
7.8 Contract With End Users.
7.8.1 Contract Required. Customer agrees that each End User will sign a contract
containing the information referenced in Sections 4.7 and 4.8 above, together
with language similar in all material aspects to the Sections set forth below:
(a) [END USER] HAS NO PROPERTY RIGHT IN THE TELEPHONE ACCESS NUMBER.
(b) [END USER] EXPRESSLY UNDERSTANDS AND AGREES THAT IT HAS NO CONTRACTUAL
RELATIONSHIP WHATSOEVER WITH UNDERLYING CELLULAR SERVICE CARRIER AND THAT [END
USER] IS NOT A THIRD PARTY BENEFICIARY OF ANY AGREEMENT BETWEEN [CUSTOMER] AND
UNDERLYING CARRIER. IN ADDITION, [END USER] EXPRESSLY UNDERSTANDS AND AGREES
THAT UNDERLYING CARRIER SHALL HAVE NO LEGAL, EQUITABLE, OR OTHER LIABILITY OF
ANY KIND TO [END USER]. IN ANY EVENT, REGARDLESS OF THE FORM OF THE ACTION,
WHETHER FOR BREACH OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY IN TORT
OR OTHERWISE [END USER] EXCLUSIVE
<PAGE>
REMEDY AND THE TOTAL LIABILITY OF THE UNDERLYING CARRIER ARISING IN ANY WAY IN
CONNECTION WITH THIS AGREEMENT, FOR ANY CAUSE WHATSOEVER, INCLUDING BUT NOT
LIMITED TO ANY FAILURE OR DISRUPTION OF SERVICE PROVIDED HEREUNDER, IS LIMITED
TO PAYMENT OF DAMAGES IN AN AMOUNT EQUAL TO THE PRORATION OF THE FIXED MONTHLY
CHARGE TO [END USER] FOR THE SERVICES RELATING TO THE PERIOD OF SERVICE DURING
WHICH SAID DAMAGES OCCUR.
(c) UNLESS CAUSED BY THE NEGLIGENCE OF [CUSTOMER], [END USER] SHALL INDEMNIFY
AND HOLD HARMLESS THE UNDERLYING CELLULAR SERVICE CARRIER SUPPLYING SERVICES TO
[CUSTOMER] AND ITS OFFICERS, EMPLOYEES, AND AGENTS AGAINST ANY AND ALL CLAIMS,
INCLUDING WITHOUT LIMITATION CLAIM FOR LIBEL, SLANDER, INFRINGEMENT OR
COPYRIGHT, OR ANY PERSONAL INJURY OR DEATH, ARISING IN ANY WAY DIRECTLY OR
INDIRECTLY IN CONNECTION WITH THIS AGREEMENT OR THE USE, FAILURE TO USE, OR
INABILITY TO USE THE ACCESS TELEPHONE NUMBER. THIS INDEMNITY SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT.
(d) [END USER] HEREBY ACKNOWLEDGES THAT THIS AGREEMENT IS ASSIGNABLE BY CUSTOMER
TO THE UNDERLYING CELLULAR SERVICE CARRIER SUPPLYING SERVICES TO [CUSTOMER] TO
SECURE PERFORMANCE OF [CUSTOMER] UNDER THE TERMS OF [CUSTOMER'S] AGREEMENT WITH
SUCH CARRIER.
Customer may, at its option, include such other provisions or modify the
foregoing provision to apply to Customer as well as to Company, so long as such
additions or modifications do not migate the effect of the foregoing.
7.8.2 Rental Exception. The contract requirement of Section 7.8.1 does not apply
in any case: (I) where Customer provided Service to an End User for a period of
less than fourteen (14) days in conjunction with a cellular telephone unit not
owed by End User; and (ii) where it would be impractical for Customer to enter
into contracts with each End User obtaining such a short-term rental Service,
provided, however, that if Customer does not obtain contracts with such End
Users, it must, and does hereby, indemnify Company and hold Company harmless for
and from any claims brought by such End Users, and any other damages that may
occur and would not have occurred had the End User contacts been in place.
Further, if Customer intends to invoke the exception set forth in this Section,
it must notify Company at lease four days before doing so, so that Company may
determine whether to increase the amount of the security required of Customer
under Section 7.10.
<PAGE>
7.9 Insurance
Customer shall keep in force liability, personal injury, property damage, and
contractual liability insurance with respect to the business operated by
Customer, which insurance shall cover each occurrence in an amount not to exceed
less than $1 million and shall cover property damage in an amount not less than
$500,000. Such policy or policies shall name Company as an additional insured
and shall be procured from an insurance carrier reasonably acceptable to
Company. Within ten days of execution of this Agreement, Customer shall furnish
Company with certificate evidencing such insurance. Such insurance shall provide
insurer will not cancel, alter, or allow such insurance to expire without first
giving Company 30 days prior written notice.
7.10 Security.
(a) Prior to processing any Order for Numbers submitted by Customer, or at any
time during the term of this Agreement, Company may require that Customer
deposit cash with Company or provide it with an irrevocable letter of credit,
issued by a financial institution and having terms and conditions satisfactory
to Company, in such amount as set forth in Schedule 3 hereto or as otherwise
required by Company in its sole discretion. A financial institution will
generally be satisfactory to Company if it is a bank chartered under the laws of
the State of one of the areas which the Customer purchases Service or the United
States with deposits insured by the Federal deposit Insurance Corporation
("FDIC") and with an office located within the Area. This security may be
required by Company to secure performance of Customer's obligations under this
Agreement, and may be based on its assessment of Customer's creditworthiness,
including Customer's payment history with Company, and Company may waive the
requirement of a deposit or letter of credit, or may increase or decrease the
amount thereof required from Customer at any time based on Company's
reassessment of Customer's creditworthiness or and Event of Default under this
Agreement by Customer. All decisions with respect to the necessity for an amount
of a deposit or letter of credit shall be made in Company's sole discretion.
(b) In the even Customer provides Company with a cash deposit, Customer hereby
grants to Company a security interest in such deposit.
(c) If Customer has fully performed all terms and conditions of this Agreement,
any cash deposit without interest (unless payment of interest is required by
law) shall be returned to Customer within 30 days following payment of all sums
owed by Customer under this agreement or within 90 days after termination of
this Agreement, whichever is later. If the Postal Service is not able to deliver
the funds to Customer and returns them to Company, and Company is not able upon
reasonable inquiry to locate Customer within 30 days after such return, Company
will keep the funds and Customer shall have no further right hereto.
(d) If Customer fails to pay all sums owed to Company, then upon termination of
the Agreement, any deposit from Customer may be applied, without notice, to pay
such sums owed under this Agreement. This right of offset is in addition to all
other rights and remedies available to Company under this Agreement or at law or
in equity credit to sums due hereunder, or to cure
<PAGE>
other breaches by Customer. Customer shall restore the deposit or letter of
credit to an amount acceptable to Company within ten days of Company's written
notice to do so.
(e) Company may apply all or part of the deposit or letter of credit to sums due
hereunder, or to cure other breaches by Customer. Customer shall restore the
deposit or letter of credit to an amount acceptable to Company within ten days
of Company's written notice to do so.
VIII. COMPANY'S OBLIGATIONS
8.1 Company's Service. Company will provide Service to Customer subject to the
terms and conditions specified in this Agreement. Company's obligation to
provide Service is conditioned upon Company's ability to obtain, retain, and
maintain, without reasonable expense, suitable facilities, equipment, licenses,
and rights to provide Service. Company's obligation to provide Service is
further conditioned upon Customer's compliance with the terms and conditions of
this Agreement.
8.2 Informational Material. Company will provide to Customer, when available, a
coverage map of geographical areas where Company's Service is in effect, and a
copy of such other pertinent informational material and other assistance
reasonably necessary to enable customer to acquaint itself and End User's with
Company's Service.
8.3 Notice of Material Change in Service. Company agrees to provide reasonable
notice to Customer of any material changes in Service of either a permanent or
temporary nature.
XI. TRADE NAME AND TRADEMARK
9.1 Company's Marks. Customer recognizes the right, title, and/or interest of
Company and its Affiliates through ownership or license in and to all service
marks, trademarks, and trade names owned by or used in connection with Service
by Company (the "Marks"). Company Marks are set forth in Schedule 4. Customer
agrees not to engage in any activities or commit any acts, directly or
indirectly, which may contest, dispute, or otherwise impair such right, title,
and interest of Company and its Affiliated therein. Customer has no rights to
the Marks, shall not use any Marks, and shall not mention "AT&T" in connection
with the Service. Customer shall not acquire or claim any right, title or
interest in or to the Marks through sale of service or otherwise. Customer is
specifically prohibited from incorporating any of the Marks into Customer Marks
or from using any service mark, trademark or trade name which is confusingly
similar to any of the Marks.
<PAGE>
9.2 Customer's Marks. Company recognizes the right, title, and interest of
Customer and its Affiliates in and to all service marks, trademarks, and trade
names owned byCustomer or used in connection with Service by Customer or its
Affiliates (collectively, "Customer Marks"). The Customer Marks are set forth in
Schedule 5. Company agrees not to engage in any activities or commit any acts,
directly or indirectly, which may contest, dispute, or otherwise impair such
right, title, and interest of Customer and its Affiliates therein. Company has
not rights to the Customer Marks and shall not use any Customer Marks in
connection with the Service. Company shall not acquire or claim any right,
title, or interest in or to the Customer Marks through sale of Service or
otherwise. Company is specifically prohibited from incorporating any Customer
Marks into the Marks or from using any service makr, trademark, tade name
confusingly similar to the Customer Marks.
X. PROPRIETARY INFORMATION; CONFIDENTIALITY
10.1 Confidential Information. During the term of this Agreement either party
may (but shall not be obligated to) disclose the other information which is
considered proprietary or confidential by the disclosing party. Without the
disclosing party's specific prior written consent, disclosure shall not be made
to a third party (including but not limited to End Users) of any information
which is designated confidential or proprietary and which is supplied by one
party to the other party, abd which information is not otherwise generally
available to the public or is not already known to the other party; provided,
however, either party may disclose such information in compliance with court
processes or similary agency requirements if the other party has been given ten
days prior written notice of the proposed disclosure or as much notice as is
reasonably possible if the situation does not permit such ten-day notice.
10.2 Additional Protection of Confidential Information. In addition, as a
measure to protect each party's confidential business information, each party
agrees to notify the other at lease five business days prior to employing any
person who, during the preceding year, was employed by the other or any of its
Affiliates, agents, or dealers, so that such party may take reasonable steps to
protect its rights with respect to such information. In addition, each party
agrees not to employ any person if such employment would cause such person to be
in breach of a non-competition agreement between such person and the other
party. Nor may either party otherwise obtain any confidential or proprietary
information from the other, its Affiliates, agents, or dealers, or their current
or former employees without the other's specific prior written consent.
XI. RESTRICTIONS ON USE
11.1 Abuse or Fradulent Use. Service is furnished subject to the condition that
there will be no abuse or fradulent use thereof. Abuse and fradualent use of
Service include, but are not limited to:
<PAGE>
(a) Attempting or assistning another to access, alter, or interfere with the
communications of and/or information about another cellular customer;
(b) Tampering with or making an unauthorized connection with and Facilities of
Company;
(c) Using or assiting another to use any scheme, false representation, or false
credit device, or other fraduaulent means or devices in connection with the
Service;
(d) Using Service in such a manner so as to interfere unreasonably with the use
of Service by one or more other Customers or End Users or to interfere
unreasonably with Company's ability to provide Service; and
(e) Using service to convey information which is obscene, salacious, prurient,
or unlawful.
11.2 Cancellation of Service to End User. Company may require Customer to cancel
the right to market or use Service. Oral notice may be given by Company in this
circumstance, provided that such oral notice is to be confirmed in writting
within 24 hours. Customer shall, within four hours of receipt of notice from
Company as to the abuse or fraud, give notice to Company to cancel such Service
in accordance with Article IV. If Customer does not provide this notice in a
timely fashion, Company is authorized by Customer to execute such a notice on
behalf of Customer and to terminate Service to such End User's Number
immediately thereafter. For so long as company act in good faith under this
Section, Customer shall indemnify and hold Company harless against any claim or
liability, including attorneys fees and costs (through any appeals) arising
therefrom.
11.3 Interference. The parties understand that from time to time one or more End
Users may interfere with the System in such a way as to impair the quality of
Service provided by Company to their Customers; accordingly, upon discovery of
any such abuse by an End User by either of the parties hereot, the party having
such knowledge shall promptly notify the other party, and the Customer shall
immediately order the end User to cease from angaging in such act(s) of
interference. Company shall have the right to discontinue Service as to that End
User should such acts continue. Customer shall assist Company in taking all
actions reasonably necessary to prevent further interference.
XII. INDEMNIFICATION.
Customer and Company each hereby agree to defend, indemnify, and hold harmless
each other and each other's Affilates, and their former, current, and future
officers, directors, employees, agents, successors, and assigns, from and
against any claims, costs, and expenses, including
<PAGE>
punitive damages, court costs, and reasonable attorney's and expert witness fees
before and at trial and on appeal (collectively, "Claims"), arising from a
breach of this Agreement by, or any conduct in connection with this Agreement
of, the indemnifying party (including such party's Affiliates, and this
officers, directors, employees, agents, and contractors). Customer further
agrees to defend, indemnify, and hold harmless Company, thier Affiliates, and
former, current, and future officers, directors, employees, agents, successors
and assigns, from and against any Claims of End Users; provided, however, that
the obligations (of both Customer and Company) to defend indemnify, and hold
harmless shall not apply to the extent such Claims result from the other party's
negligence or willfull misconduct.
Within ten days after being notified of any Claim to which these indemnification
obligations may apply, the party receiving such notice shall notify the party
from whom the indemnification is sought (the "Indemnifying Party"), and shall
give reasonable opportunity to the Indemnifying Party to defend the claim at its
own expense with counsel of its own selection; provided, however, that the party
seeking indemnification shall at all times have the right to participate fully
(at its own expense) in the defense of and to approve any settlement of the
Claim.
If the Indemnifying Party shall, within 30 days after notice, fail to accept
defense of the Claim, then the party seeking indemnification shall have the
right, but not the obligation, to undertake the defense of, and to compromise or
settle (exercising reasonable business judgement), the Clkaim of behalf, for the
account, and at the risk of Indemnifying Party. If the Claims cannot by their
own nature be defended solely by one party, the other party shall make available
all information and assistance that may reasonably be requested, regardless of
any obligations to indemnify hereunder.
XIII. DEFAULT AND TERMINATION
13.1 Deafult. This Agreement may be terminated upon an Event of Default by
either party if such event of Default is not cured by the defaulting party
within 30 days of receipt of writtent notice of the event of Default; provided,
however, that in the case of (I) Customer's Default for failure to pay Company
any sums due (including providing any required deposits), or (ii) a violation of
Article IX, this Agreement may be terminated if such Event of Default is not
cured within ten days of receipt of written notice of the Default. If such Event
of Default remains uncured, termination shall be effective on the expiration of
the cure period without the requirement of additional notice.
13.2 Right to Pursue Remedies. If this Agreement is terminated as a result of an
Event of Default attributable to Customer, Company shall have the immediate
right, without further notice or proceedings, to deduct any amounts due from
security references in Section 7.10 above3 and to pursue other actions as
Company may deem approriate.
<PAGE>
13.3 Survival of Obligations. The obligations undertaken by the parties pursuant
to Articles V, except Section 5.10, IX, X, XI, XII, XIII, and XV shall survive
termination of this Agreement.
13.4 Continuing Obligations. Termination pursuant to the terms of this
Agreement, regardless of cause or nature, shall be without prejudice to any
other rights of remedies of the Parties, and Customer shall remain solely
responsible for its obligations to its agents and End Users. Termination of this
Agreement with or without cause shall not release either party hereto from any
liability which at the time of termination has already accrued to the other
party or which thereafte may accrue in respect to any act or omission prior to
termination, that Company may, without liability, cancel any previously accepted
orders for Numbers which have not been assigned to End Users on or before the
date of termination.
13.5 No Company Obligation for Continuing Service to End Users. Upon
termination, Company shall have no further obligation to provide Service to
Customer. However, in order to avoid disruption of Service to End Users, upon
request of Customer or End Users, Company may continue Service directly to any
End User who meets Company's credit requirements, and enters into a contract for
Service with the Company. Upon termination, Company may re-route calls using any
Numbers previously assigned to Customer so that any attempts to access Service
will result in connection to Company's personnel, who will advise callers of the
termination and describe how they may obtain service directly from applicable
Company or Companies.
13.6 Notice of Customer's Intended Sale of Its Business or Customer Lists. In
addition, in order to reduce the risk of service disruption to End Users and
without reducing the value of Customer's business, during the term of this
Agreement, and any extension thereof, and for 90 days following termination,
Customer shall be obligated to provided Company with reasonable notice of its
interest in selling all or part of its cellular resale business, cellular resale
customer lists, or cellular resale End Users' service accounts arising out of
this Agreement. Company shall be given a fair opportunity by Customer to bid for
the right to purchase such resale business or assets.
XIV. ASSIGNMENT
No rights or obligations hereunder shall be assigned or delegated, in whole or
in part, by Customer to any other person, firm, corporation, or other entity,
except a parent corporation which own 100% of the equity securities of Customer
at the time this Agreement is made, without Company's prior written consent,
which consent will not be unreasonably withheld. For purposes of this provision,
any change in the ultimate control of Customer, by stock sale, merger,
consolidation, or any other means, shall constitute an assignment subject to the
consent requirements hereof.
<PAGE>
XV. ARBITRATION; JURISDICTION; GOVERNING LAW
15.1 State Law Law. The validity, construction, and performance of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New York.
15.2 Arbitration Required. Except as stated in Section 15.3, all claims and
disputes relating in any way to the performance, interpretation, validity, or
breach of this Agreement shall be referred to final and binding arbitration
under the commercial arbitration rules of the American Arbitration Association.
A single neutral arbitrator shall decide claims of less than $100,000. All
documents, materials, and information in the possession of each party and in any
way relevant to the claims or disputes shall be made available to the other
party for review and copying not later than 60 days after the notice of
arbitration is served. To the extent that either party would be required to make
confidential information available to the other, an agreement or an order shall
be entered in the proceeding protecting the confidentiality of and limiting
access to such information before either party is required to produce such
information. Information produced by either party shall be used exclusively in
the arbitration or litigation that may arise, and shall not otherwise be
disclosed. In no event shall either party by entitled to punitive damages in any
arbitration or judicial proceeding and each party hereby waives its rights to
any punitive damages. In the even an arbitration panel or a court concludes that
the punitive damages waiver contained in the pervious sentence is unenforceable,
then the parties agree that the court with subject matter jurisdiction over the
confirmation of the award shall have sole and exclusive jurisdiction to
determine issues of entitlement and amount of punitive damages. The arbitrators
shall NOT have subject matter jurisdiction to decide any issues relating to the
statute of limitations or amounts in excess of $100,000, exclusive of interests
and costs, and the parties hereby stipulate to stay the arbitration proceeding
(without the need of bond) until any such issues in dispute are resolved.
15.3 Court Proceedings/Venue. The parties hereby consent to the sole and
exclusive jurisdiction and venue of the State and federal courts located in or
covering Bergen County, New Jersey, for the following matters: (a) disputes
relating to the statute of limitations; (b) contractual claims where the amount
in dispute (excluding interests and costs) exceeds $100,000.00, (C) disputes
relating to any "non-contractual" claims (i.e., those not governed by Section
15.2); and (d) the entry of a judgement confirming an arbitrators award.
15.4 Attorneys' Fees. In the event and action (including an arbitration) is
commenced by either party to enforce the terms of this Agreement, the
substantially prevailing party in such action shall be entitled to its
reasonable costs and attorneys' and expert witness' fees incurred therein
through appeal. For purposes of this Section, the efforts of in-house attorneys
and their staff shall be valued at rates prevailing in the market for private
practitioners.
<PAGE>
XVI. MISCELLANEOUS
16.1 Headings. Headings to articles and Sections of this agreement are to
facilitate reference only, do not form any part of this agreement, and shall not
in any way affect the interpretation hereof.
16.2 Waiver. Except as set forth in Article V above, the waiver, express or
implied, by either party of any rights hereunder or of any failure to perform or
breach hereof by the other party shall not constitute or be deemed a waiver of
any other right hereunder or any other failure to perform or breach hereof by
the other party, whether of a similar or dissimilar nature.
16.3 No Agency. Neither party is authorized to act as an agent for, or legal
representative of, the other party, nor shall either party have authority to
assume or create any obligation on behalf of, in the name of, or that shall be
binding upon, the other party. Customer shall not represent itself as a Customer
or agent of Company in any manner not specifically provided for herein. All
sales by Customer shall be in its own names and for its own account.
16.4 Notices. Except as otherwise provided in this Agreement, all notice
required or permitted to be given hereunder shall be in writing and shall be
delivered; (I) personally; (ii) by certified mail, return receipt requested,
(iii) by an overnight courier service having a record of receipt; or (iv) by
facsimile, with a confirming copy sent by one of the other three methods
described in this sentence. Notices shall be addressed as follows:
(a) If to Customer:
Corporate Name: Pick Communications Corp.
Attention: Diego Leiva, President
Street Address: 115 Route 46 West, Suite A-2
City: Mountain Lakes, N. J. 07046
Phone: (201) 334-2929
Fax: (201) 335-7676
(b) If to Company:
Cellular Telephone Company
Attention: Reseller Manager
15 E. Midland Avenue
Paramus, N. J. 070652
with a copy to:
Cellular Telephone Company
<PAGE>
Attention: Director, Legal Department
15 E. Midland Avenue
Paramus, N. J. 07652
Either party hereto may changes its address by a notice given to the other party
hereto in the manner set forth above. All notices shall be effective on receipt.
16.5 Forms. All notices and communications given by Customer to Company under
this Agreement -- including orders, assignment requests, deactivation requests,
suspension requests, feature modifications, fraud notices, etc. -- shall be
submitted by Customer on forms prescribed by Company. This section does not
apply to any notice of termination of the Agreement. Company may, at its option,
approve the use on non-standard forms and may condition any such approval on
payment of a reasonable charge for the handling of non-standard forms.
16.6 Severability. Should any part of this Agreement for any reason be declares
invalid by court order or by any regulatory agency, such order shall not affect
the validity of any remaining portion, and the remaining portion of the
Agreement shall continue in full force and effect, unless such order materially
alters the nature of the obligations of either party hereto. In such event, the
Agreement shall immediately terminate.
16.7 Force Majeure. Each party's performance under this Agreement shall be
excused if such non-performance is due to labor difficulties,, governmental
orders, equipment failure, inability or delay in securing equipment, civil
commotion, acts of nature, weather disturbances or adverse weather conditions,
and other circumstances beyond the party's reasonable control.
16.8 Merger/Entire Agreement. With respect to the subject matter hereof, this
agreement represents the entire Agreement between the parties hereto and, except
as expressly provided, shall not be affected by reference to any other
documents. The attached Schedules are a material and integral part of this
Agreement. The terms and conditions of this Agreement supersede any other
agreements or understandings, including prior or contemporaneous representations
of sales representatives or other Company personnel, whether oral or written.
Notwithstanding the foregoing, if the parties have previously entered into a
written agreement pursuant to which Customer acquired Service from Company prior
to the effectiveness of this Agreement, the provisions of such earlier agreement
shall survive to the extent specified herein, except as otherwise provided in a
written Termination Agreement executed in conjunction with the making of this
Agreement.
16.9 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall constitute an original agreement, but all of which together
shall constitute one and the same instrument.
<PAGE>
16.10 Compliance With Laws. Company and Customer shall at all times comply in
all material respects with all laws, rules, and regulations applicable to the
performance of this Agreement. If Company, at any time and in its sole
discretion, determines that continues performance by Company of one or more
provisions under this Agreement would violate applicable law, including any
judicial or regulatory decree binding on Company, then, Company may provide
Customer with twenty-four (24) hours notice and, provided that continued
performance of the Agreement without such provision(s) is practicable and
economically beneficial to Company, terminate performance of such provision(s)
is not practicable or economically beneficial to Company, then Company may
terminate this Agreement on twenty-four (24) hours notice and, provided that
continued performance of the Agreement without such provision(s) is practicable
and economically beneficial to Company, terminate performance of such
provision(s). If continued performance of the Agreement without such
provision(s) is not practicable or economically beneficial to Company, then
Company may terminate this agreement on twenty- four (24) hours notice.
16.11 Amendments. Customer acknowledges that, from time to time, Company may
find it necessary to change or update certain procedures set forth in this
Agreement in order to more effectively conduct its business and provide Service
to Customer. Such changes or updates may be accomplished by Company providing
30-days written notice to Customer. Except as otherwise provided herein, the
Agreement may be amended by Company alone upon 90 days written notice to
Customer. If Company notified Customer of an amendment to this Agreement and
such Amendment is unacceptable to customer, then Customer has the right to
terminate this Agreement upon 30-days prior notice given not more than 60-days
after the Customer received notice of the amendment; provided, however, that if
Company rescinds the amendment within 20 days after receiving Customer's notice,
this Agreement will not terminate, but shall continue in full force and effect.
This Agreement shall be deemed automatically amended to the extent it is
inconsistent with any tariff required to be filed by Company.
16.12 The Company. This Agreement shall be construed as a separate contract with
the entity listed in Schedule 1 and any additional entity which provided Service
pursuant to this Agreement in the future. Notwithstanding the foregoing, for so
long as any of such entities if affiliated with McCaw Cellular Communications,
Inc. ("McCaw"), or its successors interest, the obligations of Customer with
respect to insurance or minimum purchase requirements shall be determined as if
all entities were one entity, and McCaw Cellular communications, Inc., may act
on behalf of any such Affiliates for any purpose arising under this Agreement.
If any of such entities shall cease to be affiliated with McCaw or its
successors in interest, this Agreement may be terminated by such entity at such
time as the affiliation shall cease, or at any time thereafter, upon 30-days
written notice (which notice may be given prior to or after the disaffiliation).
In addition, if any of such entities shall cease to be affiliated with McCaw,
the minimum blocks of Numbers, if any, as may be required by Schedule 2 from
time to time, shall be computed only with respect to the markets operated by
Affiliates of McCaw within the Areas in which Customer continues to
<PAGE>
receive Service pursuant to the Agreement. If the disaffiliation of any entity
shall result in Customer's failure to comply with such provisions, Customer
shall be given 30 days within which to attain compliance and Customer shall have
the right to elect during such period to terminate this Agreement by given 30
days advance notice without being in breach hereof.
16.13 Successors and Assigns. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and permitted
assigns.
16.14 Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its preparation
or drafting.
XVII. INDEPENDENT INVESTIGATION
COMPANY AND CUSTOMER ACKNOWLEDGE THEY HAVE READ THIS AGREEMENT AND UNDERSTAND
AND ACCEPT THE TERMS, CONDITIONS AND COVENANTS CONTAINED HEREIN AS BEING
REASONABLY NECESSARY TO MAINTAIN COMPANY'S HIGH STANDARDS FOR SERVICE. CUSTOMER
ACKNOWLEDGES AND UNDERSTANDS THAT COMPANY MAY AT ANY TIME ALSO BE ENGAGED
DIRECTLY OR INDIRECTLY THROUGH OTHER DEALERS, OR OUTLETS OF ANY KIND, IN
SOLICITING POTENTIAL CUSTOMERS FOR THE SERVICE OR OTHER SERVICES OR PRODUCTS OR
FOR THE SALE, LEASE, INSTALLATION, REPAIR, OR SERVICING OF EQUIPMENT IN THE
AREA. CUSTOMER ALSO ACKNOWLEDGES AND UNDERSTANDS THAT COMPANY MAY SELL THE
SERVICE TO OTHERS WHO MAY RESELL IT. CUSTOMER HAS INDEPENDENTLY INVESTIGATED THE
CELLULAR SERVICE OR EQUIPMENT SALE/LEASING BUSINESS AND THE PROFITABILITY (IF
ANY) AND RISKS THEREOF AND IS NOT RELYING ON ANY REPRESENTATION, GUARANTEE, OR
STATEMENT OF COMPANY OTHER THAN AS SET FORTH IN THIS AGREEMENT.
IN PARTICULAR, CUSTOMER ACKNOWLEDGES THAT COMPANY HAS NOT REPRESENTED: (A)
CUSTOMER'S PROSPECTS OR CHANCES FOR SUCCESS SELLING SERVICES UNDER THIS
AGREEMENT; (B) THE TOTAL INVESTMENT THAT CUSTOMER MAY NEED TO MAKE TO OPERATE
UNDER THIS AGREEMENT (COMPANY DOES NOT KNOW THE AMOUNT OF THE TOTAL INVESTMENT
THAT MAY BE REQUIRED FOR THIS PURPOSE); OR (C) THAT IT WILL LIMIT ITS EFFORTS TO
SELL SERVICE OR ESTABLISH OTHER RESELLING CUSTOMERS IN THE AREA.
CUSTOMER ALSO ACKNOWLEDGES THAT COMPANY HAS NOT REPRESENTED TO IT THAT : (A)
COMPANY WILL PROVIDE LOCATIONS OR ASSIST CUSTOMER TO FIND LOCATIONS TO PROMOTE
THE SALE OF SERVICE UNDER THIS AGREEMENT; (B) COMPANY WILL PURCHASE ANY PRODUCTS
MADE BY CUSTOMER THAT ARE IN ANY WAY ASSOCIATED WITH THE SERVICE SOLD BY
CUSTOMER UNDER THIS AGREEMENT; (C) CUSTOMER WILL DERIVE INCOME FROM THE SALE OF
COMPANY'S SERVICES UNDER THIS AGREEMENT, OR COMPANY WILL REFUND ANY PAYMENTS
MADE BY CUSTOMER TO COMPANY UNDER THIS AGREEMENT;
<PAGE>
OR (D) COMPANY WILL PROVIDE A SALES OR MARKETING PROGRAM THAT WILL ENABLE
CUSTOMER TO DERIVE INCOME UNDER THIS AGREEMENT.
CUSTOMER FURTHER ACKNOWLEDGES THAT COMPANY HAS NOT MADE ANY REPRESENTATIONS
REGARDING: (A) THE QUANTITY OR QUALITY OF SERVICE TO BE SOLD BY CUSTOMER; (B)
THE PROVISION BY COMPANY TO CUSTOMER OF TRAINING AND MANAGEMENT ASSISTANCE; (C)
THE AMOUNT OF PROFITS, NET OR GROSS, THAT CUSTOMER CAN EXPECT FROM ITS
OPERATIONS UNDER THIS AGREEMENT; (D) THE SIZE (OTHER THAN THE GEOGRAPHIC AREA),
CHOICE, POTENTIAL, OR DEMOGRAPHIC NATURE OF THE AREA IN WHICH COMPANY'S SERVICE
IS AVAILABLE OR THE NUMBER OF OTHER DEALER OR RESELLING CUSTOMERS THAT ARE OR
MAY BE IN THE FUTURE OPERATE IN THAT AREA; (E) THE TEMINATION, TRANSFER OR
RENEWAL PROVISIONS OF THIS AGREEMENT OTHER THAN AS SET FORTH IN THE AGREEMENT;
OR (F) THE SPONSORSHIP OR PARTICIPATION OF A PRIMARY MARKETER OF TRADEMARK
PRODUCTS OR SERVICES IN CUSTOMER'S OPERATIONS UNDER THIS AGREEMENT OTHER THAN AS
MAY BE SET FORTH IN THIS AGREEMENT. CUSTOMER ACKNOWLEDGES THAT IT UNDERSTANDS
THAT IT WILL NOT OBTAIN ANY EXCLUSIVE RIGHTS UNDER THIS AGREEMENT, EITHER WITH
RESPECT TO A TERRITORY OR OTHERWISE, AND UNDERSTANDS THAT COMPANY MAY APPOINT
OTHER DEALERS OR CUSTOMERS IN THE AREA AFFECTED BY THIS AGREEMENT. CUSTOMER ALSO
ACKNOWLEDGES THAT COMPANY CANNOT CALCULATE IN ADVANCE THE TOTAL AMOUNT THAT
CUSTOMER MUST PAY TO COMPANY UNDER THIS AGREEMENT AS THAT AMOUNT DEPENDS ON THE
QUANTITY OF SERVICE THAT CUSTOMER'S END USERS PURCHASE.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the day and year first above written.
Company:
By: /s/ Robert Hearn
CUSTOMER:
PICK Communications Corp.
By: /s/Raymond M. Brennan
Name: Raymond M. Brennan
Title: Vice President
<PAGE>
EXHIBIT 16
JONES, JENSEN & COMPANY
A PARTNERSHIP OF
PROFESSIONAL CORPORATIONS
MEMBERS
American Institute of CPAs
Certified Public Accountants SEC Practice Section
Utah Association of CPAs
Private Companies Practice Section
Independent Accountants International
R. Gordon Jones, CPA, PC
Mark F. Jensen, CPA, PC May 23, 1996
Securities and Exchange Commission
Washington, D.C.
Gentlemen:
We have reviewed item 14 of the registration statement of Prime International
Products. We concur with the statements made therein so far as they refer to our
firm.
Sincerely,
/s/ Jones, Jensen & Company
Jones, Jensen & Company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS OF PICK COMMUNICATIONS CORP. FOR DECEMBER 31, 1993, 1994
AND 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001006282
<NAME> PICK Communications Corp.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C> <C> <C>
<PERIOD-TYPE> Year Year Year
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1994 DEC-31-1995
<PERIOD-START> JAN-01-1993 JAN-01-1994 JAN-01-1995
<PERIOD-END> DEC-31-1993 DEC-31-1994 DEC-31-1995
<EXCHANGE-RATE> 1 1 1
<CASH> 6,453 17,659 110,715
<SECURITIES> 0 0 16,625
<RECEIVABLES> 6,016 148,374 824,463
<ALLOWANCES> 0 15,028 42,650
<INVENTORY> 0 47,898 167,091
<CURRENT-ASSETS> 12,469 213,931 1,605,764
<PP&E> 16,692 119,540 158,246
<DEPRECIATION> 1,669 13,636 44,111
<TOTAL-ASSETS> 27,492 319,835 2,661,524
<CURRENT-LIABILITIES> 59,598 1,341,521 2,679,923
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 126,000 53,545 80,260
<OTHER-SE> (158,106) (1,075,231) (714,167)
<TOTAL-LIABILITY-AND-EQUITY> 27,492 319,835 2,661,524
<SALES> 23,301 529,913 1,565,039
<TOTAL-REVENUES> 23,301 529,913 1,565,039
<CGS> 10,067 753,346 1,387,459
<TOTAL-COSTS> 14,970 1,327,070 1,644,946
<OTHER-EXPENSES> 164,768 426,428 872,726
<LOSS-PROVISION> 0 15,028 42,650
<INTEREST-EXPENSE> 0 0 45,033
<INCOME-PRETAX> (158,106) (1,250,580) (1,070,828)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (158,106) (1,250,580) (1,070,791)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (158,106) (1,250,580) (1,070,791)
<EPS-PRIMARY> 0 0 (0.03)
<EPS-DILUTED> 0 0 (0.03)
</TABLE>
