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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1998, or
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from ______________ to ______________.
Commission File Number: 000-22251
BOBBY ALLISON WIRELESS CORPORATION f/k/a 2CONNECT EXPRESS, INC.
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(Name of Small Business Issuer in Its Charter)
FLORIDA 65-0674664
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(State of Incorporation (I.R.S. Employer Identification No.)
or organization)
2055 LAKE AVENUE, S.E., SUITE A, LARGO, FLORIDA 33771
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(Address of Principal Executive Offices) (Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the Company was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for the most recent fiscal year. $8,146,369
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked prices of such common
equity, as of a specified date within the past 60 days. $0 as of May 14, 1999.
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
after the distribution of securities under a plan confirmed by a court.
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 480,000 shares of Common
Stock, par value $.01 per share, as of May 14, 1999.
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In accordance with Rule 12b-32 of the Securities Exchange Act of 1934, exhibits
from the following documents are incorporated by reference into the Index to
Exhibits of this Form 10-KSB:
(i) The Registration Statement on Form SB-2 with respect to the
units of Bobby Allison Wireless Corporation f/k/a/ 2Connect
Express, Inc.(Commission File No. 333-15567) is incorporated
by in reference into Part III of this report.
(ii) The Bobby Allison Wireless Corporation f/k/a 2Connect Express,
Inc. Current Report on Form 8-K for the event occurring on
August 27, 1998 (Commission File No. 000-22251), is
incorporated by reference into Part III of this report.
(iii) The Bobby Allison Wireless Corporation f/k/a 2Connect Express,
Inc. Quarterly Report on Form 10- QSB for the quarter ended
August 1, 1998 (Commission File No. 000-22251), is
incorporated by reference into Part III of this report.
(iv) The Bobby Allison Wireless Corporation f/k/a 2Connect Express,
Inc. Quarterly Report on Form 10- QSB for the quarter ended
October 31, 1998 (Commission File No. 000-22251), is
incorporated by reference into Part III of this report.
(v) The Bobby Allison Wireless Corporation f/k/a 2Connect Express,
Inc. Current Report on Form 8-K for the event occurring on
December 31, 1998 (Commission File No. 000-22251), is
incorporated by reference into Part III of this report.
(vi) The Bobby Allison Wireless Corporation f/k/a 2Connect Express,
Inc. current report on Form 8-K for the event occurring on
January 7, 1999 (Commission File No. 000-22251), is
incorporated in reference to Part III of this report.
(vii) The Bobby Allison Wireless Corporation f/k/a 2Connect Express,
Inc. current report on Form 8-K for the event occurring on
March 1, 1999 (Commission File No. 000-22251), is incorporated
in reference to Part III of this report.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), Bobby Allison Wireless
Corporation (together with its subsidiary, the "Company") is hereby providing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements made by or on behalf of the Company herein or which
are made orally, whether in presentations, in response to questions or
otherwise. Any statements that express, or involve discussions as to
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always through the use of words or phrases such as
"will result," "are expected to," "will continue," "is anticipated," "plans,"
"intends," "expects," "estimated," "projection," and "outlook") including
certain provisions of the Year 2000 Readiness Disclosure contained in Item 6
herein are not historical facts and accordingly, such statements involve
estimates, assumptions and uncertainties which could cause actual results to
differ materially from those expressed in the forward-looking statements. Such
uncertainties include, among other, the following factors: risks associated with
rapid growth, the Company's ability to successfully compete, dependence on
carriers, technological change and inventory obsolescence, dependence on key
personnel and other risk factors that may emerge from time to time. It is not
possible for management to predict all of such factors or to assess the effect
of each such factor on the Company's business or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE COMPANY
GENERAL
Bobby Allison Wireless Corporation is a Florida corporation formerly
known as 2Connect Express, Inc. (the "Company") and operates through its wholly
owned subsidiary, Bobby Allison Wireless, Inc., a Florida corporation ("BAW").
Hereinafter, where appropriate, the "Company" shall also refer to the Company
and BAW collectively. The Company, headquartered in Largo, Florida, is an
enclosed regional mall-based specialty retailer of wireless communications
products and services for the individual and small business customer. The
Company currently operates thirty (30) sales locations consisting of twenty-four
(24) in-line stores, five (5) kiosks and one (1) direct sales location under the
name "Bobby Allison Cellular & Pager" and "Bobby Allison Wireless." All of the
in-line stores and kiosks are located in regional malls throughout Central and
South Florida. The Company is the largest independent specialty retailer of AT&T
Wireless Services in Florida accounting for approximately fifteen percent (15%)
of AT&T cellular activations in Florida.
The Company's revenues are generated principally from three sources:
retail sales, activation income and residual payments. Retail sales involve the
sale through the Company's sales locations of cellular and pager wireless
products such as phones and pagers and related accessories such as batteries,
chargers, carrying cases and hands-free kits. Activation income consists of
payments to the Company by applicable wireless carriers when a customer
initially subscribes for the carrier's services. The amount of the activation
commission paid by carriers is based upon various service plans offered by the
carriers. The Company's exclusive carrier for wireless telephone services is
AT&T Wireless Services. Activation Commissions from AT&T Wireless Services
represented approximately 51% of the Company's revenue and approximately 75% of
the Company's accounts receivables in the year ended December 31, 1998. The
Company sells pager services for several carriers. The Company receives residual
payments on pager services only. Pager residual payments are received for the
pager airtime that the Company buys wholesale from paging carriers and then
resells to individuals and small businesses.
The Company does not currently offer any personal communication systems
("PCS") services due to its exclusive carrier agreement with AT&T Wireless
Services in the State of Florida. The Company is, however, currently negotiating
with malls to expand its operations into the State of Georgia and expects to
open its first store outside of the State of Florida in Atlanta, Georgia in June
of 1999. At such time, the Company will be able to and plans to offer PCS as
well as cellular service in the State of Georgia.
The Company was incorporated as "2Connect Express, Inc." and operated
as a one-stop specialty retailer of communication-related products and services
under the name "2Connect, America's Total Communication Store"and was an
authorized dealer for, among others, BellSouth Mobility. In January of 1998, the
Company filed a voluntary petition for bankruptcy under Chapter 11 in the U.S.
Bankruptcy Court, Southern District of Florida and closed nine (9) of its ten
(10) stores leaving in operation only its Coral Square Mall location. The
Company emerged from bankruptcy on October 27, 1998 after confirmation of its
Plan of Reorganization and entering into an agreement to merge with Bobby
Allison Cellular Systems of Florida, Inc. a/k/a Bobby Allison Cellular and
Pager, a Florida corporation and specialty retailer of wireless communications
products and services ("BAC"). Effective December 31, 1998, BAC merged with and
into BAW which was then known as 2Connect Acquisition Corp. and formed as a
subsidiary of the Company for the sole purpose of the merger. As of the time of
the merger, BAC had approximately twenty-three (23) regional mall-based in-line
stores and kiosks and operated the Company's location at Coral Square Mall
pursuant to a Management Agreement. Consequently, immediately after the merger,
the Company (as combined with BAC) grew from one (1) to twenty-four (24)
regional mall-based in-line stores and kiosks making the Company
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again operational. As a result of the merger, the two shareholders of BAC (i)
received approximately seventy-three percent (73%) of the outstanding common
stock of the Company, par value $.01 per share ("Common Stock"), but which,
assuming conversion of all of the Company's outstanding convertible preferred
stock and the exercise of all outstanding stock options, would be diluted to
just slightly below fifty percent (50%), (ii) became two of the three members of
the Board of Directors and (iii) became the executive officers of the Company.
For a detailed description of the Company's history and the bankruptcy, please
see "History of the Company", "History of Bobby Allison" and "The Merger" below.
BUSINESS STRATEGY AND CONCEPT
BAC developed a business strategy which has been adopted by the Company
which focuses upon opening its sales locations in highly trafficked regional
malls which are simply designed & operated as well as developing partnerships
with top quality, well-established and well-known hardware and service
providers. To effect this strategy, BAC, and now the Company, have done the
following:
o REGIONAL MALL LOCATIONS. The Company's sales locations are
conveniently located in high traffic regional malls. The
Company uses in-line stores and kiosks for maximum flexibility
to place stores in the best enclosed regional malls and the
best possible locations within those malls.
o ONE-STOP WIRELESS SHOPPING. The Company provides its customers
with cellular and pager service plans from leading
manufacturers along with a wide array of related products and
accessories.
o AT&T WIRELESS SERVICES AFFILIATION. The Company believes that
its wireless partnership with AT&T Wireless Services provides
customers with the best quality service in the industry at
attractive values, including its single rate plans without
long distance and roaming charges. AT&T Wireless Services also
currently offers one of the best geographic coverages in the
U.S. AT&T Wireless Services is the Company's exclusive carrier
in the State of Florida. However, upon expansion outside of
Florida into states such as Georgia, the Company will be able
to and plans to offer more than one service plan including
PCS service.
o QUALITY STORE SERVICE. The Company seeks to attract and retain
customers through its high quality service and product
knowledge about its services and products.
o EFFECTIVE STORE DESIGN AND LAYOUT. The Company's stores are
designed for visual appeal and functionality in terms of
product presentation and customer service. The presentations
allow customers to sample products and services and to be
instructed by sales personnel in the use and application of
the Company's products and services.
o QUALITY PERSONNEL. The Company attracts, develops and
motivates its associates through competitive compensation,
incentives, training, career path management and advancement
opportunity.
o SALES LOCATION EXPANSION. The Company plans to continue to
expand in the State of Florida and to expand into the State of
Georgia. The Company is currently negotiating with malls in
Atlanta, Augusta, Macon, Albany and Savannah, Georgia. The
Company expects to open its first store outside of the State
of Florida in Atlanta, Georgia in June of 1999. The Company
has no immediate plans to expand in other states at this time
but is currently investigating opportunities in North Carolina
and South Carolina. The Company's expansion plans are depended
upon, among other things, obtaining additional financing in
the form of either debt or equity. The Company has not
currently obtained or identified any such financing.
Consequently, there is no assurance that the Company will be
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able to obtain any additional financing or, if available, that
such financing will be available on terms acceptable to the
Company. Consequently, the Company may be unable to complete
its expansion plans or such plans may be substantially
delayed.
INDUSTRY OVERVIEW
The wireless communications industry has grown substantially in recent
years. Cellular telephone service has been one of the fastest growing markets
within the industry. From the inception of the cellular phone industry in 1983
until the end of 1997, the number of U.S. cellular subscribers has grown to
approximately 55 million. However, although having grown at an annual compound
rate of 41%, the national cellular subscriber base only reflects an average
market penetration of 20.4% based on the U.S. population. In 1996, PCS wireless
services were introduced in selected regions of the U.S., which resulted in
approximately 300,000 subscribers by year end. Paul Kagan Associates, Inc.
projects that by the year 2000 the number of cellular and PCS subscribers in the
U.S. will reach approximately 89 million. The Company currently only offers
cellular service due to its exclusive relationship with AT&T Wireless Services
in Florida but will be able to and plans to offer PCS service at such time as
the Company expands into other states such as the State of Georgia. See
"-Carrier Agreements" and "-Business Strategy and Concept."
The industry has seen a shift in the distribution of cellular and
wireless services, products and accessories in the United States. For many
years, cellular and wireless products and services were distributed to consumers
directly through telemarketing, direct mail, direct sales forces and, to a
lesser extent, carrier-owned retail outlets. As wireless services and products
have become more affordable, the market has expanded significantly and shifted
to a broader consumer base, which purchases for, among other reasons,
convenience and security purposes.
TYPICAL RETAIL TRANSACTIONS
o CELLULAR. In a typical cellular retail transaction, a customer
subscribes for service with AT&T Wireless Services and purchases a telephone for
which there is a gross profit of approximately 30-40% to the Company. The
Company supplements its cellular phone sales with wireless accessories, such as
batteries, chargers, carrying cases and hands-free kits, which generate an
average gross margin of approximately 75% for the Company. Prior to October of
1998, the Company paid AT&T Wireless Services a high price for a wireless
telephone which was then sold at a loss by the Company. However, such loss was
converted into a profit by a substantial activation commission. Since October
1998, however, AT&T Wireless Services has changed its policy and now sells the
Company wireless telephones at a lower price resulting in a gross profit on
wireless telephone sales of, as stated above, approximately 30-40% but then has
correspondingly reduced activation commissions. The resulting effect is a
decrease in revenue and an offsetting decrease in cost of goods sold resulting
in no material effect to gross profit or net income. See "Management's
Discussions and Analysis or Plan of Operation-Sources of Revenue."
o PAGING. In a typical paging retail transaction, the customer buys a
pager and three months of service for one price. Alternatively, a customer can
simply purchase a pager at full retail price. In each case, the customer's
initial payment exceeds the cost of the pager.
ADVERTISING AND MARKETING
The Company's enclosed regional mall-based real estate strategy
generally generates sufficient walk-by traffic to support satisfactory sales
levels without significant advertising campaigns. However, the Company engages
in some advertisement in its market areas through television, radio and print
advertisements featuring Bobby Allison, the reknown NASCAR driver. Pursuant to
the Company's license agreement with Bobby Allison, Bobby Allison is obligated
during each year to make eight (8) personal appearances such as a store grand
opening and devote forty-eight (48) hours of his time to advertising for the
Company such as the production of a television, radio or print advertisement.
See "Proprietary Information". Also, the Company earns co-operative advertising
credits for the
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sales of cellular phone service plans from its primary carriers and utilizes
these allowances for pre-opening advertising to promote new stores. In addition,
the Company's marketing department develops attractive and informative in-store
signage programs, which invites mall traffic into the stores.
CARRIER AGREEMENTS
Generally, the Company's stores offer cellular telephone services and
paging services pursuant to carrier agreements. There are only two licensed
cellular (excluding PCS carriers) carriers in a geographic market. The Company
currently sells AT&T Wireless Services' cellular telephone service in Central
and Southern Florida pursuant to an exclusive carrier agreement with AT&T
Wireless Services expiring December 1, 2000. The Company receives activation
commissions based on the number of subscribers enlisted and the volume of
activations. While management believes that a canceled carrier agreement could
likely be replaced with an agreement with one of the carrier's competitors
including PCS carriers, due to the fact that the Company receives substantial
activation commissions from AT&T Wireless Services, the cancellation or
non-renewal of the AT&T Wireless Services carrier contract could have a
significant effect on the Company's financial condition and results of
operations. The Company is also a reseller of paging services, buying blocks of
paging time from paging carriers at a substantial discount and reselling paging
services to its customers. The Company's paging carrier agreements are generally
for a term of one year which automatically renews for successive one year terms
unless terminated by either party before such renewal. Paging customers are
charged a monthly fee for local service and additional fees for service in other
markets.
SUPPLIERS
The Company purchases its inventory from a variety of sources, such as
suppliers, carriers and other large wholesale distributors. The Company
purchases all of its inventory through a centralized purchasing department that
tracks the inventory needs of each of its stores. The Company deals with its
suppliers on an order-by-order basis and seeks to find the lowest price with
quantity discounts. The purchasing department negotiates payment terms, vendor
financing of inventory and merchandise discounts with suppliers. The Company
currently purchases inventory from approximately 20 suppliers, the largest of
which is AT&T Wireless Services which sells the Company wireless telephones as
well as the service.
HISTORY OF THE COMPANY
PRE-BANKRUPTCY
The Company was incorporated in April 1996 as "2Connect Express, Inc."
and operated as a one-stop specialty retailer of internet, cellular, PCS,
paging, telephone, satellite and other communication-related services and
products under the name "2Connect, America's Total Communication Store". The
Company opened its first store in December 1996 at Coral Square Mall, an
enclosed regional mall in Coral Springs, Florida. The next nine (9) stores were
opened in strip shopping centers during the period from April 1997 through
November 1997 for a total of ten (10) stores. The stores ranged in size from
1,300 to 3,000 square feet. To finance its operations, the Company completed
three private placements and a public offering. In the first two private
placements completed in May of 1996, the Company sold 1,010,000 shares of Common
Stock for approximately $388,000. In the third private placement completed in
August of 1996, the Company sold 750,000 shares of Common Stock for
approximately $2.85 million after issuance costs. The Company had also initially
issued its founders 950,000 shares for nominal consideration. In May 1997, the
Company completed an initial public offering of 520,000 units (priced at $12.50
per unit) which (after underwriters discount and offering expenses) raised $5.3
million in net proceeds to the Company. Each unit was comprised of two shares of
Common Stock and one Common Stock Purchase Warrant to purchase one share of
Common Stock for $6.00 during an exercise period commencing one year from the
initial public offering date and ending 60 days thereafter. The proceeds of the
initial public offering were used for store expansion, advertising, creation of
systems and infrastructure and corporate overhead.
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The Company sustained significant losses in 1997 due to (1)
unprofitable store locations; (2) inability to cost effectively drive traffic to
those locations with advertising; (3) unsustainable corporate overhead which was
incurred in anticipation of rapid store growth; (4) excessive inventory which
turned slowly due to weak sales; (5) low margins due to competitive pressures in
the Company's South Florida markets and weak sales of higher margin internet,
long distance and other service business components. During the last four months
of 1997, the Company realized that store sales and profits were not meeting the
Company's expectations. On November 25, 1997, the Company entered into a
revolving credit agreement with Bay Tech Investments, Inc. ("Bay Tech"), a
company owned and operated by the father of the Company's then President and
CEO, Marc D. Fisherman. This credit facility provided for borrowings of up to $1
million at an annual interest rate of prime plus 2%. Notwithstanding this credit
facility, the Company continued to experience financial difficulty and declared
bankruptcy.
BANKRUPTCY
On January 12, 1998, in order to restructure its financial obligations
and implement a strategy to improve the Company's unprofitable operating
results, the Company filed a voluntary petition for relief under Chapter 11
("Chapter 11 Filing") of Title II of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of Florida (the "Court"). Consequently, the Company became a debtor-in-
possession under Chapter 11 and could not engage in transactions outside of the
ordinary course of business without the approval of the Court.
Immediately following the Chapter 11 Filing, the Company began to close
its retail stores and liquidate its assets which consisted primarily of selling
off inventory and collecting accounts receivables. The Company eventually sold
all of its inventory and other assets except for certain store fixtures and
closed its headquarters and nine (9) of its ten (10) retail stores leaving in
operation only the store located at the Coral Square Mall. Also immediately
following the Chapter 11 Filing, the Company reached an agreement with Bay Tech,
to convert the then existing credit facility into a secured debtor-in-possession
credit facility. The debtor-in-possession credit facility provided for
borrowings dependent upon the Company's level of inventory and accounts
receivable with maximum borrowings of $500,000. The agreement granted Bay Tech a
security interest in substantially all of the Company's assets. Advances under
the facility bore interest at 11%. At the time of the Chapter 11 Filing, the
Company had borrowed $275,000 under the original credit facility, which balance
rolled over to the debtor-in-possession credit facility. The
debtor-in-possession credit facility was originally scheduled to terminate on
February 29, 1998; however, the Company requested and received a thirty-day
extension of the debtor-in-possession credit facility until March 28, 1998. The
interest rate on advances under the debtor-in-possession credit facility during
the extension period was increased from 11% to 12%. On March 28, 1998, the
Company paid off the balance owed on the debtor-in-possession credit facility
plus accrued interest.
On March 3, 1998, the Company announced that it had executed a Letter
of Intent with BAC whereby BAC would merge with and into a subsidiary of the
Company. The transaction was contingent upon completion of a definitive merger
agreement which would be incorporated into a Plan of Reorganization to be filed
with the Bankruptcy Court. The surviving entity of the merger was expected to be
financed principally by Sterne Agee & Leach, Inc. ("Sterne Agee"), an investment
banking firm that was the managing underwriter of the Company's initial public
offering in May 1997. The merger and related financing were anticipated to take
place following the Company's emergence from the bankruptcy proceeding. Also,
the surviving entity would retain the Coral Square Mall location in Coral
Springs, Florida which was the Company's one profitable retail location and
certain other assets including certain store fixtures and a computer system. In
order to induce the creditors of the Company to agree not to force the
liquidation of the Coral Square Mall location, the certain store fixtures and
the computer system which the Company wished to retain, Sterne Agee agreed to
make, subject to and upon the occurrence of certain events, a new value
contribution to the Company of $185,000 which monies were to be paid the to the
Company's creditors upon completion of the bankruptcy.
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On April 14, 1998, the Company filed the Plan of Reorganization and the
accompanying Disclosure Statement to be distributed to shareholders and
creditors. On May 1, 1998, the Company and BAC executed the definitive Merger
Agreement. Then, on May 6, 1998, the Company and BAC executed the Management
Agreement with BAC whereby BAC would assume the operation of the Company's one
remaining store at the Coral Square Mall location and be responsible for all
expenses related thereto. The Court approved the Management Agreement on June
16, 1998, which became effective June 18, 1998.
After certain disagreements between the Company and Sterne Agee
regarding the triggering events for the new value contribution, on August 27,
1998, the Company and Sterne Agee entered into a settlement agreement
("Settlement Agreement") approved by the Court on the same day whereby Sterne
Agee would, as of the effective date of the Plan of Reorganization of the
Company filed with the Court, acquire out of bankruptcy 100% of the equity
interests of the Company and the Company would retain the Coral Square Mall
store lease and certain store fixtures. In consideration for such acquisition,
Sterne Agee agreed to make a new value contribution to the bankruptcy estate for
the benefit of the Company's creditors in the amount of $175,000 ($10,000 of the
original $185,000 had already been paid for the retention of one of the
Company's computer systems) which monies were placed in escrow subject only to
the Plan of Reorganization by the Court. Also, pursuant to the terms of the
Settlement Agreement and effective August 27, 1998, all of the members of the
Board of Directors, except for Marc D. Fishman, resigned from the Board of
Directors and Mr. Fishman, as the sole remaining director, and in accordance
with the Bylaws of the Company, appointed James S. Holbrook, Jr., Craig R.
Heyward and F. Eugene Woodham, each of whom are employees of Sterne Agee, to
fill three of the vacancies. The Board of Directors further resolved to appoint
James S. Holbrook, Jr. as the Chairman of the Board and, in accordance with the
Bylaws of the Company, to designate that the Chairman of the Board is the chief
executive officer of the Company. Mr. Fishman later resigned from the Board of
Directors on October 26, 1998, the day before the effective date of the Plan of
Reorganization.
To effect the Settlement Agreement, the Plan of Reorganization, as
amended, provided that, upon the effective date of the Plan of Reorganization,
all of the existing Common Stock of the Company was forever extinguished and
canceled and the Company issued 30,000 new shares of Common Stock to Sterne Agee
which constituted 100% of the issued and outstanding shares at such time making
the Company a wholly-owned subsidiary of Sterne Agee. Simultaneously, the
$175,000 held in escrow was released for payment to the creditors. The existing
shareholders of the Common Stock of the Company did not retain any interest in
the Company post-bankruptcy and their interests were extinguished and canceled.
The Company's Plan of Reorganization became effective on October 27, 1998. A
copy of the Company's Plan of Reorganization and amendments thereto was filed
with the Company's Form 10-QSB for the quarter ended October 31, 1998.
HISTORY OF BOBBY ALLISON
BAC was founded in 1993 by Robert L. McGinnis and James L. Ralph as a
regional mall-based specialty retailer of wireless communications products and
services for the individual and small business customer and was an authorized
dealer of AT&T Wireless Services. As of December 31, 1998, BAC operated one
direct marketing location and 24 enclosed mall-based specialty retail locations
including the Company's one location at Coral Square Mall which BAC operated
pursuant to a Management Agreement by and between the Company and BAC from June
18, 1998 (the effective date of the Management Agreement) through December 31,
1998 (the date of the merger of BAC with the Company). A copy of the Management
Agreement was filed with the Company's Form 10-QSB for the quarter ended July
31, 1998.
Until 1998, BAC financed its growth through internally generated cash,
loans to BAC by Messrs. McGinnis and Ralph of $125,000 each ($250,000 in the
aggregate), an asset based line of credit from Southern Commerce Bank and the
issuance of subordinated debentures in the aggregate amount of $500,000. In
1998, BAC was in need of additional funds for continued operation and expansion.
At such time, BAC had ten (10) stores. Sterne Agee agreed to loan BAC $200,000
upon the execution by BAC of the Letter of Intent with the Company dated March
3, 1998 which provided for the merger of BAC with the Company upon completion of
the bankruptcy. See "History of the
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Company." The loan was collateralized by a pledge of 10% of BAC's common stock
owned by Messrs. McGinnis and Ralph. The purpose of the loan, as discussed in
the Letter of Intent, was to finance BAC until the bankruptcy and hence the
merger of BAC with the Company could be completed which, at the time, was
expected to occur in June of 1998. It was then anticipated that Sterne Agee
would assist the combined Company to raise capital, the proceeds of which would
be used in part to pay off such $200,000 loan. Due to various problems including
disagreements among the Company, Sterne Agee and a group of the Company's
creditor's and the failure of the Company to have its financial statements
audited or complete and file its Form 10-K for the year ended January 31, 1998,
the bankruptcy proceedings were not completed until October 27, 1998.
Consequently, Sterne Agee and its affiliates continued to finance the operations
of BAC from late May until August of 1998 through the purchase of Series A 7.5%
Convertible Subordinated Debentures of BAC in the aggregate amount of $900,000.
The Series A Convertible Subordinated Debentures had a five (5) year term and
bore interest at 7.5% per annum.
In November of 1998, BAC amended and restated its Articles of
Incorporation to create three series of convertible preferred stock and
completed the following transactions: (i) agreed to repay $125,000 of BAC's
original subordinated debentures in January 1999; (ii) converted the remaining
$375,000 of the original non-convertible subordinated debentures into 15 shares
($25,000 per share) of BAC's Series A Convertible Preferred Stock; (iii)
converted Sterne Agee's $200,000 loan into 8 shares ($25,000 per share) of BAC's
Series B Convertible Preferred Stock, (iii) converted the $900,000 of Series A
Convertible Subordinated Debentures into 36 ($25,000 per share) Series B
Convertible Preferred Stock and (iv) converted the $150,000 of shareholder loans
from Messrs. McGinnis and Ralph into 6 shares ($25,000 per share) of Series B
Convertible Preferred Stock. Each series of preferred stock bore a cumulative
dividend of 7.5% and was non-voting except for major corporate events and upon
the breach of the terms of the preferred stock by BAC. All of the preferred
stock of BAC was converted into preferred stock of the Company pursuant to the
merger. See "History of the Company" and "The Merger."
In December of 1998, BAC reexecuted its exclusive provider agreement
with AT&T Wireless Services pursuant to which BAC continued as an exclusive
provider of AT&T Wireless Services' cellular service in Florida and pursuant to
which AT&T Wireless Services approved the merger of BAC into the Company's
subsidiary, BAW. Also, on December 30, 1998, BAC refinanced the Southern
Commerce Bank loan which had a balance of $346,000 with a term loan from
SouthTrust Bank in the amount of $350,000. Since December 30, 1998, the Company
has entered into a line of credit over and above the term loan with SouthTrust
Bank whereby the Company may borrow as needed up to $500,000. Finally, BAC,
effective December 31, 1998, renegotiated its license agreement with Robert A.
Allison a/k/a/ Bobby Allison, the reknown NASCAR driver whereby Bobby Allison
agreed to license to BAC his name and provide to BAC a specific amount of his
time for promotional events and advertisement. The license agreement recognized
the merger and that the Company would become the beneficiary of the license
agreement after the merger. See "Proprietary Information"
THE MERGER
Effective at 11:59 p.m. December 31, 1998, the Company completed its
merger ("Merger") with BAC whereby BAC was merged with and into BAW, with BAW
surviving the Merger. The Merger was effected pursuant to that certain Merger
Agreement by and among the Company, BAW, BAC and all of the Shareholders of BAC
(Robert L. McGinnis and James L. Ralph) dated May 1, 1998 ("Merger Agreement"),
as amended October 26, 1998 ("Amendment"). Pursuant to the terms of the Merger
Agreement, the following occurred: (i) BAW survived the Merger, remained a
wholly owned subsidiary of the Company and changed its name from "2Connect
Acquisition Corp." to "Bobby Allison Wireless, Inc."; (ii) the holders of the
common stock of BAC, Messrs. McGinnis and Ralph, each received for such shares
(A) 175,000 shares (350,000 in the aggregate) of the Common Stock and (B) a
$125,000 debenture ($250,000 in the aggregate) bearing interest at 7.5% per
annum amortized over three (3) years; (iii) each share of the 15 outstanding
shares of 7.5% Series A Convertible Preferred Stock of BAC was converted into a
share of 7.5% Series A Convertible Preferred Stock of the Company, par value
$1.00 per share ("Series A Preferred Stock"),
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<PAGE> 10
and each of which has a face value of $25,000, is non-voting except for
significant corporate action or upon default and is convertible into 4,166
shares of Common Stock or, in the aggregate, 62,490 shares of Common Stock; (iv)
each share of the 50 outstanding shares of 7.5% Series B Convertible Preferred
Stock of BAC was converted into a share of 7.5% Series B Convertible Preferred
Stock of the Company, par value $1.00 per share ("Series B Preferred Stock"),
and each of which has a face value of $25,000, is non-voting except for
significant corporate action or upon default and is convertible into 4,166
shares of Common Stock or, in the aggregate, 208,300 shares of Common Stock; (v)
Craig R. Heyward and F. Eugene Woodham resigned from the Board of Directors of
the Company and Messrs. McGinnis and Ralph were elected to fill such vacancies
and (vi) James S. Holbrook, Jr., former Chairman and CEO of the Company, and F.
Eugene Woodham, former Secretary and Treasurer of the Company, resigned as
officers of the Company and Robert L. McGinnis was appointed to serve as
Chairman, CEO and Treasurer and James L. Ralph was appointed to serve as
President and Secretary. Messrs. McGinnis and Ralph have also entered into
employment contracts with the Company effective December 31, 1998. See Item 10
Executive Compensation below for a description of the employment contracts.
As a result of the Merger, the sole shareholders of BAC, Robert L.
McGinnis and James L. Ralph, acquired control of the Company and the
headquarters of the Company has been moved from 3500 Gateway Drive, Suite 101,
Pompano Beach, Florida 33069 to space occupied by BAC at 2055 Lake Avenue, S.E.,
Suite A, Largo, Florida 33771. Prior to the Merger, there were 130,000 shares of
Common Stock outstanding. Pursuant to the Merger, Messrs. McGinnis and Ralph,
the sole shareholders of BAC, were each issued 175,000 shares (350,000 in the
aggregate) of Common Stock and a $125,000 debenture ($250,000 in the aggregate)
of the Company bearing interest at 7.5% per annum amortized over three (3)
years. Also, Messrs. McGinnis and Ralph were issued 3 shares (6 in the
aggregate) of the Series B Preferred Stock convertible into 24,996 shares of
Common Stock. Consequently, as a result of the Merger, Messrs. McGinnis and
Ralph own approximately 73% of the outstanding Common Stock, no Series A
Preferred Stock and 12% of the Series B Preferred Stock. Also, as a consequence
of the Merger, Messrs. McGinnis and Ralph represent two-thirds of the directors
and serve as the sole executive officers of the Company Their percentage
ownership of the outstanding Common Stock would be diluted to just under 50% if
all of the Company's outstanding Series A Preferred Stock and outstanding Series
B Preferred Stock (including the shares owned by Messrs. McGinnis and Ralph) are
converted into Common Stock.
Although BAC merged into a subsidiary of the Company, BAW, the
transaction was accounted for as a purchase of the Company by BAC (a reverse
acquisition in which BAC is considered the acquirer for accounting purposes)
since the stockholders of BAC obtained a majority of the voting rights of the
Company as a result of this transaction. Accordingly, the historical financial
statements of the Company for the periods prior to the time of the Merger are
those of BAC. The balance sheet, as of December 31, 1998, is that of BAC's after
giving effect to the Merger.
The Company has recently adopted the Bobby Allison Wireless Corporation
1999 Stock Option Plan and has granted each of Messrs. McGinnis and Ralph an
option to purchase 10,000 shares of Common Stock at $6.00 per share. Therefore,
if all options granted to date (44,500) are exercised, Messrs. McGinnis and
Ralph's ownership will remain just under 50% on a fully-diluted basis. Depending
upon future dilution resulting from the sale of additional securities of the
Company, Messrs. McGinnis and Ralph could cause the Board of Directors to issue
such number of stock options to themselves as officers and directors of the
Company necessary to provide Messrs. McGinnis and Ralph the opportunity to
maintain control of a majority of the outstanding Common Stock even if all of
the currently outstanding Series A Preferred Stock and Series B Preferred Stock
is converted. The Company has also authorized 7.5% Series C Convertible
Preferred Stock ("Series C Preferred Stock") none of which are issued and
outstanding, but each share of which is also convertible into 4,166 shares of
Common Stock. See the Company's First Amendment to its Form 10- QSB for the
quarter ended October 31, 1998 for a description of the Series A Preferred
Stock, the Series B Preferred Stock and Series C Preferred Stock (hereinafter,
the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock is collectively referred to as the "Preferred Stock").
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<PAGE> 11
The Merger Agreement and Amendment were negotiated at arm's length.
However, from the execution of the Agreement until the Merger, including the
execution of the Amendment, certain officers of Sterne Agee served as the Board
of Directors and the officers of the Company. Sterne Agee and certain of its
affiliates ("Sterne Agee Group") owned 44 shares of the 7.5% Series B
Convertible Preferred Stock of BAC during such time which was converted pursuant
to the Merger into 44 shares of Series B Preferred Stock. Consequently, the
Sterne Agee Group had the right to convert into 2068 shares of BAC common stock
or approximately 29% assuming conversion of all of BAC' preferred stock, and,
after the Merger, 183,304 shares of Common Stock or approximately 24% of the
Company's Common Stock assuming conversion of all of the Company's outstanding
Preferred Stock. The Sterne Agee Group also owns 130,000 shares of Common Stock
or approximately 17% of the Common Stock assuming conversion of all of the
preferred stock of the Company.
A copy of the Merger Agreement and Amendment were filed as Exhibit 2.1
and 2.2 to the Company's Form 8-K filed January 8, 1998.
EMPLOYEES
As of May 14, 1999 the Company had 120 full-time and 12 part-time
employees. None of the Company's employees are covered by collective bargaining
agreements. The Company believes that employee morale and company culture are
important to its retailing success, and that its relations with its employees
are good.
COMPETITION
The Company is subject to intense competition from existing channels of
distribution, such as service providers, dealers, and retailers. There can be no
assurance that the Company will be able to compete effectively. Existing
retailers could alter their business strategies to be more closely aligned with
the Company's retailing concept to compete more effectively in the
communications and information services category. Moreover, these retailers may
have one or more of the following competitive advantages, among others: brand
name recognition, a more established store system, superior buying power, a more
established customer base, greater financial resources and a history of
financial performance, better real estate locations, more experienced sales and
management staff and greater knowledge of local customer shopping habits. The
Company also recognizes that, even if the Company's competitors are unable or
choose not to replicate certain aspects of the Company's retailing strategies,
these competitors, including ABC Cellular Corp. and Let's Talk Cellular, Inc.,
might develop a retailing concept that the Company will not be able to
successfully compete against. Additionally, other start-up operations could open
in the Company's targeted markets, thus hindering the Company's growth plans.
The Company believes that ultimately its most formidable competitor may be its
suppliers, namely the service providers of cellular, paging, PCS and long
distance telephone. For Example, Sprint Corp. announced that it will provide
one-stop shopping for phone services, paging services, prepaid phone cards,
Internet access, long-distance service and eventually local phone service in
about 300 square feet of each of the 6,800 Radio Shack stores.
SEASONALITY
The Company historically has experienced and expects to continue to
experience significant seasonal fluctuations in its net sales and net income.
The Company generally experiences its strongest sales during the Spring business
expenditure and early vacation season and the Christmas holiday season. The
Company generally experiences its weakest sales during February and early Fall.
PROPRIETARY INFORMATION
The Company uses "Bobby Allison Cellular and Pager" and "Bobby Allison
Wireless" as trade names and service marks in connection with its retail stores.
The Company still has registered with the United States Patent and
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<PAGE> 12
Trademark Office as trademarks the names "2Connect, America's Total
Communication Store" and"2Connect, Freedom of Choice in Communications";
however, the Company does not intend to use these marks any more.
The Company has a License Agreement effective December 31, 1998 with
Robert A. Allison a/k/a/ Bobby Allison, the reknown NASCAR driver, whereby the
Company may utilize Mr. Allison's name in connection with its operations. Also,
Mr. Allison is required to make 8 personal promotional appearances and spend up
to 48 hours on advertising campaigns such as television, radio or print
advertisement. The initial term of the License Agreement is ten (10) years which
commenced on December 31, 1998. The Company has options to renew the License
Agreement for five (5) successive five (5) year terms for a total term
(including the initial term) of 35 years. In consideration of this license and
these services, the Company pays Bobby Allison a fixed annual fee of $36,000 per
year during the first year and $48,000 per year for the following nine (9)
years, $52,800 per year during the first five year renewal period, $58,080 per
year for the second five year renewal period, $63,888 during the third five year
renewal period, $70,277 per year during the fourth five year renewal period and
$77,305 per year during the fifth five year renewal period ("Fixed Fees"). In
addition to the Fixed Fees, the Company will pay Bobby Allison a contingent fee
equal to the difference between that amount which is equal to one-tenth of one
percent of the Company's annual net sales, and the Fixed Fee for such year with
respect to the Company's first $100 million of annual net sales plus that amount
equal to three-hundredths of one percent of annual net sales over $100 million.
The Company also granted Bobby Allison an option to purchase 7,500 shares of
Common Stock at $6.00 per share. This option terminates at the option of the
Company if Bobby Allison breaches the License Agreement.
The Company is not a party to any franchise agreements and does not
intend to enter into franchise relationships in the future.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that a high level of technology and automation are
essential to its business and therefore has invested considerable resources in
computer hardware and systems applications. These systems integrate all major
aspects of the Company's business including monitoring of sales, inventory and
financial reporting. All of the Company's stores are equipped with point-of-sale
terminals which are linked to the Company's central computer at its headquarters
in Largo, Florida. These point of sale terminals are polled nightly and provide
sales, cost, gross margin and commission information from each location.
REGULATION
Compliance by the Company with federal, state and local laws and
regulations, including, without limitation, environmental protection laws, has
not had, and is not expected to have, a material effect on capital expenditures,
earnings or the competitive position of the Company.
EXECUTIVE OFFICES
The Company's principal executive offices are located at 2055 Lake
Avenue, S.E., Suite A, Largo, Florida, 33771, and its telephone number is (727)
584-7902
ITEM 2. DESCRIPTION OF PROPERTY.
As of May 14, 1999, the Company had 30 sales locations consisting of
twenty-four (24) in-line stores, five (5) kiosks and one (1) direct sales
location under the name "Bobby Allison Cellular & Pager" and "Bobby Allison
Wireless" in regional malls throughout Central and South Florida. All of the
Company's sales locations are leased. The Company currently expects that its
policy of leasing rather than owning will continue. The Company's leases
generally provide for original lease terms of five to ten years and contain
provisions for increasing rents. The
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<PAGE> 13
Company's kiosks range in size from 100 to 200 square feet and the Company's
in-line stores are, on average, from 700 to 1,000 square feet.
The Company's corporate headquarters, which are also leased, are
located at 2055 Lake Avenue, S.E., Suite A, Largo, Florida and occupy
approximately 4300 square feet, of which 1500 square feet serves as a central
warehouse and 2800 square feet serves as office space. The central warehouse is
used to temporarily store merchandise for distribution and used to initially
stock new stores upon their opening.
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<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS.
On January 12, 1998, the Company filed a voluntary petition for relief
under the provisions of Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of Florida. The Company's Plan of
Reorganization was confirmed by the Court on October 27, 1998. See Item 1
"Bankruptcy."
The Company is not involved in any other legal proceedings which are
expected to have a material effect on the Company's results of operations or
financial condition, nor is it aware of any threatened litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the Company's fiscal year ended December
31, 1998, the Company submitted to its shareholders for approval the following
matter: (i) the First Amended and Restated Articles of Incorporation which
created three series of convertible preferred stock mirroring the BAC preferred
stock other than conversion ratio to accommodate the merger and (ii) election of
directors. Each of the matters was voted upon by unanimous consent action in
lieu of a meeting.
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<PAGE> 15
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's units were previously traded on the OTC Bulletin Board
under the symbol "CNTCU" during 1997 and 1998 to date. After the units
terminated on May 9, 1998 the Common Stock, a component of the unit, on the OTC
Bulletin Board under the symbol "CNTC" and then after the bankruptcy filing, the
symbol "CNTCQ". Upon the effective date of the Company's Plan of Reorganization
on October 27, 1998, the outstanding Common Stock was forever extinguished and
the Common Stock ceased to trade any further.
The Company has not paid dividends since its initial public offering,
and does not anticipate paying dividends in the foreseeable future.
As of May 14, 1999, the Company had a total of fourteen (14)
shareholders, four (4) holders of record of the Company's Common Stock and
fourteen (14) holders of record of the Company's Preferred Stock (each of the
holders of the Company's Common Stock are also holders of the Company's
Preferred Stock). The following table sets forth the high, low and closing bid
prices of the Company's Common Stock during each quarter in the two year period
ended December 31, 1998:
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
1997:
High Bid - $12.000 $11.250 $9.625
Low Bid - $10.125 $8.125 $2.895
Closing Bid - $10.250 $9.750 $2.895
1998:
High Bid $3.250 $1.125 $0.375 $0.218
Low Bid $0.125 $0.370 $0.062 $0.031
Closing Bid $0.500 $0.625 $0.062 -*
</TABLE>
- ----------
* On October 27, 1998, upon order of the U.S. Bankruptcy Court confirming the
Company's Plan of Reorganization, all of the then outstanding Common Stock of
the Company was forever canceled and extinguished and new shares were issued to
Sterne Agee & Leach, Inc. Consequently, the Common Stock ceased to trade any
further. The last sale on October 27, 1998 was at $.15 per share.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
The Company, headquartered in Largo, Florida, is an enclosed regional
mall-based specialty retailer of wireless communications products and services
for the individual and small business customer which, as of May 14, 1999, had 30
sales locations including twenty-four (24) in-line stores, five (5) kiosks and
one (1) direct sales location all of which are located in Central and South
Florida. The Company's products, which range in price up to approximately $699,
cover a broad assortment of over two hundred fifty (250) stock-keeping units and
a wide range of service plans offered by six (6) service providers, AT&T
Wireless Services and paging carriers. The Company's average sales transaction
was approximately $151 for the year ended December 31, 1998.
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The Company plans to expand its operations beyond the State of Florida
and is currently negotiating with malls to expand its operations into the State
of Geogia, particularly Atlanta, Augusta, Macon, Albany and Savannah. The
Company expects to open its first store outside of the State of Florida in
Atlanta, Georgia in June of 1999. The Company has no immediate plans to expand
in other states at this time but is currently investigating opportunities in
North Carolina and South Carolina. The Company's expansion plans are dependent
upon, among other things, obtaining additional capital whether in the form of
debt or equity. The Company has not currently obtained the necessary financing
or identified any such financing. Consequently, there is not assurance that the
Company will be able to obtain the necessary financing, or if available, that
such financing will be on terms acceptable to the Company. As a result, the
Company may be unable to complete its expansion plans or such plans may be
substantially delayed.
During 1998, the Company planned and implemented a re-structuring which
included:
o the January 12, 1998 filing of a voluntary petition for protection
under Chapter 11 of the U.S. Bankruptcy Code to restructure the
business
o significantly reducing corporate overhead
o pursuant to the Chapter 11 proceedings, rejecting the leases and
closing all of its stores except for its one profitable location Coral
Square mall
o settling all claims of creditors and emerging from bankruptcy on
October 27, 1998
o entering into a merger agreement on May 14, 1998 and consummating a
merger with Bobby Allison Cellular Systems of Florida, Inc. on December
31, 1998
SOURCES OF REVENUE
The Company's revenues are generated principally from three sources:
(i) RETAIL SALES. The Company sells cellular and wireless products,
such as phones, pagers and related accessories in the Company's retail outlets.
(ii) ACTIVATION COMMISSIONS. The Company receives an activation
commission from the applicable cellular carrier when a customer initially
subscribes for the cellular carrier's service. The amount of the activation
commission paid by cellular carriers is based upon the service plan offered by
the carrier and is recognized by the Company at the time of sale. New
subscription activation commissions are fully refundable if the subscriber
cancels its subscription prior to completion of a minimum period of continuous
active service (generally 90 days). Customers generally sign a service agreement
with the Company that the customer reimburse the Company for lost activation
commissions in the event of the early cancellation of service. The Company
accrues for estimated deactivation losses, net of cancellation fees, by creating
a reserve against carrier accounts receivable. The reserve is reflective of the
historical cancellation experience.
Due to the fact that the Company only has sales locations in the state
of Florida and entered into an exclusive carrier agreement with AT&T Wireless
Services in the State of Florida, the Company does not currently offer any PCS
or alternate cellular services. As stated above, the Company plans to expand
into the State of Georgia and expects to open its first store in Atlanta,
Georgia in June of 1999. At such time, the Company expects to begin offering
wireless services from a number of cellular and PCS carriers in Atlanta and,
when applicable, other cities in the state of Georgia on a non-exclusive basis.
AT&T Wireless Services' activation commissions accounted for approximately 51%
of net revenues and approximately 75% of the Company's net accounts receivables
in 1998.
(iii) RESIDUAL PAYMENTS. The Company receives monthly payments directly
from customers for the pager airtime that the Company buys wholesale from paging
carriers and then resells to individuals and small businesses.
A change in sales and commissions policies at AT&T Wireless Services
effective in October of 1998 has had a negative effect on the Company's gross
revenues and will continue to have a negative effect on the Company's gross
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<PAGE> 17
revenues in 1999 and beyond but has not and is not expected to have any material
effect on the Company's gross profit or net income. Prior to October of 1998,
the Company would pay AT&T Wireless Services a high price for a telephone and
sell the same telephone to the consumer for a substantial loss. A substantial
activation commission paid to the Company by AT&T Wireless Services would
convert this loss into a profit. Effective October 1998, AT&T Wireless Services
changed its policy. It has substantially reduced the activation commission
previously payable to the Company but, at the same time, has substantially
reduced the price of the wireless telephones it sells to the Company by an
amount approximately equal to the reduction of the activation commission. As a
result, the Company makes a profit rather than incurring a loss on the sale of
the wireless telephones but at the same time receives a lower activation
commission. In summary, AT&T Wireless Services has simply shifted its subsidy
for the cost of the wireless telephones from the activation commission to the
actual sales price of the wireless telephone. As a result, this payment shift
materially decreases both gross revenues and cost of goods sold but has no
material affect on the Company's gross profit or its net income.
The reduction in revenues negatively affects the Company's same store
sales growth which grew approximately 36.2% from the year ended December 31,
1997 to the year ended December 31, 1998 but would have grown over 40% if not
for this payment shift. Due to the fact that such payment shift did not occur
until the Fall of 1998, the payment shift will have a more drastic negative
effect on same store sales comparisons for the year ended December 31, 1999
versus the year ended December 31, 1998 since it will have been in place for a
full twelve months at such time.
In contrast, because gross profit is not materially effected by the
revenues decrease, then gross profit represents a greater percentage of revenues
and consequently, the Company's gross profit margin increased from approximately
44.2% in the year ended December 31, 1997 to approximately 51.7% in the year
ended December 31, 1998 (which only reflected this change for a short period of
time in 1998). The gross profit margin is expected to be approximately 64%
(absent unexpected changes in market conditions and Company operations)
throughout 1999.
Comparable store sales include only stores owned and operated by the
Company for at least 12 full months and are comprised of retail sales and
activation commissions.
To date, the cost of wireless products has gradually decreased over
time. With such lower cost, the Company typically has offered lower prices to
attract more subscribers, which has increased its total activation commissions
and contributed to gross profit improvements. Consequently, the Company believes
that, as prices of wireless products decrease, they become more affordable to
consumers thereby expanding the wireless communications market and creating an
opportunity to attract new subscribers and increase activation commissions.
RESULTS OF OPERATIONS
The following table sets forth certain selected income statement data
of the Company expressed as a percentage of net sales:
<TABLE>
<CAPTION>
FOR THE TWELVE FOR THE TWELVE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Net Sales............................................... 100.0% 100.0%
Cost of Sales........................................... 48.3% 55.8%
Gross Profit............................................ 51.7% 44.2%
Selling, General and Administrative Expenses 44.4% 52.7%
(Excluding Depreciation)................................
Depreciation and Amortization........................... 2.2% 2.6%
</TABLE>
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<PAGE> 18
<TABLE>
<CAPTION>
FOR THE TWELVE FOR THE TWELVE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Operating Income........................................ 5.2% (11.1%)
Interest Expense........................................ 3.7% 3.2%
Provision (Benefit) For Income Taxes.................... 5.5% (3.7%)
Net Income (loss)....................................... 0.7% (10.5%)
</TABLE>
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED
DECEMBER 31, 1997
NET SALES. Net sales were $8,146,369 for the year ended December 31,
1998 as compared to $4,800,396 for the year ended December 31, 1997 or an
increase of $3,345,973 or approximately 69.7%. This increase reflects the
increase in store count from ten (10) to twenty-two (22) stores. Comparable
store sales for the year ended December 31, 1998 increased by $1,507,903 or
approximately 36.2% as compared to the year ended December 31, 1997. The Company
operated twenty-four (24) stores at December 31, 1998, ten (10) of which had
then been owned and operated for at least 12 months. As stated above, comparable
stores sales include only stores owned and operated by the Company for at least
12 full months and are effected by the AT&T Wireless Services payment shift. See
"-Sources of Revenue."
GROSS PROFIT. Gross profit was $4,211,434 for the year ended December
31, 1998 as compared to $2,120,368 for the year ended December 31, 1997 or an
increase of $2,091,066 or approximately 98.6%, largely reflecting the increase
in stores operated during the year ended December 31, 1998. Gross profit as a
percentage of sales increased from approximately 44.2% in the year ended
December 31, 1997 to approximately 51.7% in the year ended December 31, 1998.
This increase was due primarily to the decrease in revenue and costs of goods
sold resulting from the shift by AT&T Wireless Services of payments for
activation commissions to a reduction in the price that it sells wireless
telephones to the Company. See "-Sources of Revenue."
OPERATING EXPENSES. Selling, general and administrative expense was
$3,613,255 for the year end December 31, 1998 as compared to $2,529,953 for the
year ended December 31, 1997 or an increase of $1,083,302 or approximately
42.8%, largely as a result of the Company's store expansion in 1998. Corporate
headquarter's expenses, included therein, increased due primarily to increased
costs necessitated by the Company's growth and anticipated future growth
including, but not limited to, support and training, advertising and marketing
and merchandising and allocation/distribution.
NET INTEREST EXPENSE. Net interest expense was $296,469 for the year
ended December 31, 1998 as compared to $142,602 for the year ended December 31,
1997 or an increase of $153,867 or approximately 108% due to increased short
term borrowings associated with expenses of the Merger.
NET INCOME/LOSS. The Company had net income of $67,622 for the year
ended December 31, 1998 as compared to a net loss of $501,444 for the year ended
December 31, 1997.
EXTRAORDINARY ITEMS FOR 1999 AND 2000
In December 1998, a major vendor forgave debt owed to such vendor by
the Company in the amount of $262,062. As a result, the Company recorded this
debt forgiveness as deferred income because the Company must repay all
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<PAGE> 19
$262,062 if the Company terminates its relationship with such vendor before
December of 1999 and one-half or $131,031 if the Company terminates its
relationship with such vendor before December of 2000. Consequently, the Company
will recognize $131,031 as income in December of 1999 and $131,031 as income in
December of 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $82,381 of net working capital at December 31, 1998
compared to negative net working capital $1,015,708 at December 31, 1997. The
increase in net working capital was due primarily to the issuance of securities,
the proceeds of which were used to increase inventory levels, reduce current
liabilities and build cash reserves. Also, on February 24, 1999, the Company
consummated a line of credit with SouthTrust Bank by which the Company may
borrow up to $500,000 for working capital. As of May 14, 1999, the Company has
drawn down $350,000 of the line of credit.
The Company's net cash used by operating activities for the year ended
December 31, 1998 was $466,833 as compared to $292,292 for the year ended
December 31, 1997 or an increase of $174,541. The increase was primarily due to
increases in accounts receivables and inventories associated with new stores.
The net cash used in investing activities for the year ended December 31, 1998
increased $248,819 as compared to the year ended December 31, 1997 related
primarily to the purchase of leasehold improvements and equipment required to
support new store growth. The net cash provided by financing activities for the
year ended December 31, 1998 increased by $551,284 as compared to the year ended
December 31, 1997 related primarily to the issuance of convertible debt offset
by the repayment of long-term debt.
The Company expects to satisfy its anticipated demands and commitments
for cash in the next 12 months from internally generated cash, borrowings
through its line of credit and the issuance of additional securities. However,
there is no assurance that the Company will be able to find a purchaser for its
securities or, if a purchaser is found, that an adequate price for the Company's
securities can be obtained or that the Company's shareholders will not be
diluted by any such issuance.
NET OPERATING LOSS CARRY-FORWARDS AND DEFERRED TAX ASSETS
At December 31, 1998, the Company had approximately $425,000 of net
operating loss carry forward for Federal income tax purposes ("NOL") which NOL
expires in 2012 and which are limited by Section 382 of the Internal Revenue
Code of 1986. As of December 31, 1998, the Company has a total deferred tax
asset of $180,000 consisting of $137,000 from NOL, $19,000 from leasehold
improvements and $24,000 from accounts receivables. See Notes to Consolidated
Financial Statements - Note 9.
IMPACT OF INFLATION
General inflation has had only a minor effect on the operations of the
Company and its internal and external sources for liquidity and working capital.
SEASONALITY
The Company's stores have historically experienced, and the Company
expects its stores to continue to experience, seasonal fluctuations in revenues
with a larger percentage of revenues typically being realized in the second
quarter and during the holiday season. In addition, the Company's quarterly
results can be significantly affected by the timing of store openings and
acquisitions and the integration of new and acquired stores into the Company's
operations.
19
<PAGE> 20
YEAR 2000 READINESS DISCLOSURE
The Company has conducted a review of its computer systems to identify
the systems that could be affected by the "Year 2000" issue and has developed an
implementation plan to resolve the issue. The Year 2000 issue is the result of
the computer programs being written using two digits rather than four to define
the applicable year. Any of the Company's computer programs that have
time/date-sensitive software and hardware may recognize a date using "00" has
the year 1900 rather than the year 2000. This could result in major system
failure or miscalculation. The Company has updated its computer systems,
particularly its point-of-sale systems for a total cost of approximately $40,000
and, based upon assurances from its software vendors, believes that it is
presently Year 2000 compliant. Consequently, the Company believes that the Year
2000 issue will not pose significant operations problems for the Company's
computer systems and the Company does not expect to incur any significant
additional costs regarding the Year 2000 issue. The Company has not and does not
plan to develop a contingency plan for the failure of the equipment or systems.
The Company will resort to manual operations in the event of a failure.
The Year 2000 issue not only creates risk for the Company of unforeseen
problems in its own computer systems but also from third parties on which the
Company relies. In addition, the Company is querying its suppliers as to their
progress in identifying and addressing problems that their computer systems will
face in correctly processing date information as the year 2000 approaches and is
reached. The Company has received such assurances from its vendors, particularly
from AT&T Wireless Services, its sole cellular carrier. However, there are no
assurances that the Company will identify all date-handling problems in its
business systems or that the Company or its vendors will be able to successfully
remedy Year 2000 compliance issues that are discovered. To the extent that the
Company is unable to resolve its Year 2000 issues prior to January 1, 2000,
operating results could be adversely affected. In addition, the Company could be
adversely affected if other entities (e.g., vendors) not affiliated with the
Company do not appropriately address their own year 2000 compliance issues in
advance of their occurrence.
ITEM 7. FINANCIAL STATEMENTS.
INDEX TO FINANCIAL STATEMENTS: the financial statements of the Company
listed below have been included on the succeeding pages of this Item 7.
Page
----
Report of Independent Auditors
BDO Seidman, LLP 21
Carter, Belcourt & Atkinson, P. A. 22
Financial Statements
Consolidated balance sheets at December 31, 1998 and 1997. 23-24
Consolidated statements of operations for the years ended
December 31, 1998 and 1997. 25
Consolidated statements of capital deficit year ended
December 31, 1998 and 1997. 26
Consolidated statements of cash flows for the year ended
December 31, 1998 and 1997. 27
Notes to consolidated financial statements 28-49
20
<PAGE> 21
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Bobby Allison Wireless Corporation and Subsidiary
We have audited the accompanying consolidated balance sheet of Bobby Allison
Wireless Corporation (formerly 2Connect Express, Inc.) and Subsidiary as of
December 31, 1998 and the related consolidated statements of operations,
shareholders' equity (deficit), and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Bobby Allison Wireless
Corporation and Subsidiary at December 31, 1998, and the results of their
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.
BDO Seidman, LLP
Orlando, Florida
March 15, 1999, except for Note 7,
which is as of March 31, 1999
21
<PAGE> 22
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Bobby Allison Cellular Systems of Florida, Inc.
We have audited the balance sheet of Bobby Allison Cellular Systems of Florida,
Inc. (see Notes 1 and 2) as of December 31, 1997 and the related statements of
operations, capital deficit and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Bobby Allison Cellular Systems
of Florida, Inc. as of December 31, 1997, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Carter, Belcourt & Atkinson P.A.
Lakeland, Florida
June 15, 1998, except for Notes 3 and
4, as to which the date
is January 5, 1999
22
<PAGE> 23
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- ------------ ---------- ----------
<S> <C> <C>
ASSETS
CURRENT:
Cash $ 125,155 $ 2,050
Accounts receivable, less allowance for doubtful accounts of
$76,144 and $54,237 684,344 408,977
Prepaid expenses 29,091 --
Inventories 645,976 452,018
Deferred tax asset (Note 9) 24,000 20,000
---------- ----------
TOTAL CURRENT ASSETS 1,508,566 883,045
---------- ----------
LEASEHOLD IMPROVEMENTS AND EQUIPMENT, at cost:
Office equipment and furniture 628,182 291,795
Leasehold improvements 310,671 254,009
Automotive equipment 11,215 11,215
---------- ----------
950,068 557,019
Less accumulated depreciation 265,491 156,644
---------- ----------
NET LEASEHOLD IMPROVEMENTS AND EQUIPMENT 684,577 400,375
---------- ----------
OTHER ASSETS:
Goodwill and other intangible assets, net of accumulated amortization of
$135,442 and $109,340 (Note 2) 350,397 40,873
Deferred tax asset (Note 9) 156,000 205,000
Deposits 25,038 14,381
---------- ----------
TOTAL OTHER ASSETS 531,435 260,254
---------- ----------
$2,724,578 $1,543,674
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
23
<PAGE> 24
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
- ------------ ----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 550,156 $ 830,610
Accrued expenses 266,624 121,007
Deferred income (Note 5) 315,528 45,911
Current maturities of long-term debt (Note 3) 168,877 776,225
Convertible debenture (Note 4) 125,000 125,000
----------- -----------
TOTAL CURRENT LIABILITIES 1,426,185 1,898,753
LONG-TERM LIABILITIES:
Long-term debt, less current maturities (Note 3) 441,961 201,750
Convertible debentures (Note 4) -- 375,000
----------- -----------
TOTAL LIABILITIES 1,868,146 2,475,503
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
PREFERRED STOCK (Note 6):
Series A convertible preferred stock, $1.00 par, shares authorized 20;
outstanding 15 375,000 --
Series B convertible preferred stock, $1.00 par, shares authorized 50;
outstanding 50 1,250,000 --
----------- -----------
TOTAL PREFERRED STOCK 1,625,000 --
----------- -----------
CAPITAL DEFICIT:
Common stock, $.01 par; shares authorized 25 million; outstanding
480,000 and 4,330 4,800 43
Additional paid-in capital 100,405 2,287
Deficit (873,773) (927,659)
Treasury stock, 330 shares, at cost -- (6,500)
----------- -----------
TOTAL CAPITAL DEFICIT (768,568) (931,829)
----------- -----------
$ 2,724,578 $ 1,543,674
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
24
<PAGE> 25
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
----------- -----------
<S> <C> <C>
REVENUES:
Product sales $ 3,361,413 $ 1,875,105
Activation commissions 4,153,156 2,187,772
Pager services 631,800 737,519
----------- -----------
Total revenues 8,146,369 4,800,396
COST OF SALES 3,934,935 2,680,028
----------- -----------
Gross profit 4,211,434 2,120,368
----------- -----------
OPERATING EXPENSES:
Selling, general and administrative expenses 3,613,255 2,529,953
Depreciation and amortization 176,116 125,591
----------- -----------
Total operating expenses 3,789,371 2,655,544
----------- -----------
Operating income (loss) 422,063 (535,176)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (301,411) (153,651)
Interest income 4,942 11,049
Other (12,972) 334
----------- -----------
Total other expense (309,441) (142,268)
----------- -----------
INCOME (LOSS) BEFORE TAXES ON INCOME 112,622 (677,444)
INCOME TAX (EXPENSE) BENEFIT (Note 8) (45,000) 176,000
----------- -----------
NET INCOME (LOSS) 67,622 (501,444)
PREFERRED STOCK DIVIDENDS 13,736 --
----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ 53,886 $ (501,444)
=========== ===========
PRO FORMA EARNINGS (LOSS) PER COMMON SHARE:
Basic and diluted $ .11 $ (1.05)
=========== ===========
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted 480,000 480,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
25
<PAGE> 26
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITAL DEFICIT
================================================================================
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN TREASURY
SHARES AMOUNT CAPITAL DEFICIT STOCK TOTAL
-------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 4,330 $ 43 $ 2,287 $(426,215) $ (6,500) $(430,385)
Net loss -- -- -- (501,444) -- (501,444)
-------- --------- --------- --------- --------- ---------
BALANCE, December 31, 1997 4,330 43 2,287 (927,659) (6,500) (931,829)
Cancellation of treasury stock (330) (3) (6,497) -- 6,500 --
Record reverse merger (Notes 1[C] and 2[A]) 476,000 4,760 104,615 -- -- 109,375
Preferred stock dividend -- -- -- (13,736) -- (13,736)
Net income -- -- -- 67,622 -- 67,622
-------- --------- --------- --------- --------- ---------
BALANCE, December 31, 1998 480,000 $ 4,800 $ 100,405 $(873,773) $ -- $(768,568)
======== ========= ========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
26
<PAGE> 27
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
- ----------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 67,622 $ (501,444)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization 176,116 125,591
Loss on disposal of equipment 14,236 714
Accrued interest converted to preferred stock 10,000 --
Cash provided by (used for):
Accounts receivable (275,367) 11,652
Prepaid expenses (27,302) --
Inventories (193,958) 14,281
Deferred tax assets 45,000 (176,000)
Accounts payable (280,454) 217,559
Accrued expenses (10,321) 15,161
Deferred income 7,595 194
----------- -----------
Net cash used for operating activities (466,833) (292,292)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of leasehold improvements and equipment (274,452) (70,072)
Repayment from affiliated company -- 60,774
Increase in deposits (10,657) (3,605)
Proceeds from sale of equipment 1,000 --
Purchase of goodwill and other intangibles -- (22,387)
----------- -----------
Net cash used for investing activities (284,109) (35,290)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (575,953) (103,554)
Proceeds from issuance of long-term debt 350,000 426,317
Proceeds from issuance of convertible debentures 1,100,000 --
----------- -----------
Net cash provided by financing activities 874,047 322,763
----------- -----------
NET INCREASE (DECREASE) IN CASH 123,105 (4,819)
CASH, beginning of year 2,050 6,869
----------- -----------
CASH, end of year $ 125,155 $ 2,050
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
27
<PAGE> 28
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. ORGANIZATION, Bobby Allison Wireless Corporation, formerly
RECAPITALIZATION AND "2Connect Express, Inc."("2Connect") through
MERGER its wholly-owned subsidiary Bobby Allison
Wireless, Inc., formerly "2Connect Acquisition
Corp." ("Acquisition") (collectively the
"Company") through a merger (see Note 1[C])
with Bobby Allison Cellular Systems of
Florida, Inc. ("Bobby Allison") owns and
operates 24 mall-based specialty retail
locations and one direct marketing location in
the state of Florida offering cellular and
pager service under the names "Bobby Allison
Wireless" and "Bobby Allison Cellular." The
Company operates in a single business segment.
The historical financial statements included
herein are those of Bobby Allison up to 11:59
p.m. on December 31, 1998, the merger date as
further described in Note 1(C). Immediately
after the merger, the Company's balance sheet
included the accounts of 2Connect and
Acquisition (which includes those of Bobby
Allison).
(A) PLAN OF REORGANIZATION
2Connect filed a voluntary petition for
relief under Chapter 11 of the U.S.
Bankruptcy Code (the "Filing") on January
12, 1998, and subsequently closed all of
its stores except the store at Coral
Square Mall in Coral Springs, Florida.
Subsequent to the Filing, 2Connect
liquidated most of its assets. The Coral
Square store operated from June 16, 1998
until December 31, 1998 under a management
agreement (the "Management Agreement")
with Bobby Allison whereby Bobby Allison
was responsible for all expenses related
to that store and is entitled to any
profits or losses that it generated.
On March 3, 1998, 2Connect executed a
Letter of Intent, then a merger agreement
on May 1, 1998 that was amended on October
26, 1998 (collectively the "Merger
Agreement") with Bobby Allison (see Note
1[C]) under which Bobby Allison would
merge with and into Acquisition, a Florida
corporation formed on April 22, 1998.
28
<PAGE> 29
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
On August 27, 1998, 2Connect entered into
an agreement with Sterne, Agee & Leach,
Inc. ("Sterne Agee") whereby Sterne Agee
would acquire out of bankruptcy 100% of
the equity interests of 2Connect and
2Connect would retain the Coral Square
store lease and certain store fixtures. In
consideration for such acquisition, Sterne
Agee would make a new value contribution
to the bankruptcy estate for the benefit
of 2Connect's creditors in the amount of
$175,000. To effect this transaction, the
Plan of Reorganization, as amended,
provided that, upon the effective date of
the Plan of Reorganization, all of the
existing common stock of 2Connect was
forever extinguished and canceled and
2Connect issued 30,000 new shares of
Common Stock to Sterne Agee which
constituted 100% of the issued and
outstanding shares at such time. The
existing shareholders of the common stock
of 2Connect did not retain any interest in
the post-bankruptcy estate and their
interests were extinguished and canceled.
On October 27, 1998, the U.S. Bankruptcy
Court confirmed 2Connect's Plan of
Reorganization and 2Connect emerged from
bankruptcy as a wholly owned subsidiary of
Sterne Agee. A related entity of Sterne
Agee acquired an additional 100,000 shares
of common stock prior to the merger.
(B) RESTATED ARTICLES OF INCORPORATION
On December 1, 1998, the Company filed its
Amended and Restated Articles of
Incorporation ("Restated Articles") in
anticipation of the merger with Bobby
Allison (see Note 1[C]). At that date,
Bobby Allison's capital structure included
three series of preferred stock and one
class of common stock. The Merger
Agreement required that, prior to the
Merger, the Company file Restated Articles
to authorize three classes of preferred
stock substantially similar to the
preferred stock authorized and issued by
Bobby Allison for issuance pursuant to the
Merger.
29
<PAGE> 30
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The Company filed the Restated Articles on
December 1, 1998 authorizing 20 shares of
7.5% Series A Convertible Preferred Stock,
$1.00 par value, 50 shares of 7.5% Series
B Convertible Preferred Stock, par value
$1.00, 250 shares of 7.5% Series C
Convertible Preferred Stock, par value
$1.00 and 25 million shares of common
stock, par value $.01.
(C) MERGER
On December 31, 1998, pursuant to the
Merger Agreement, Bobby Allison merged
with and into Acquisition, and the
following occurred:
(i) Acquisition survived the merger,
remained a wholly owned subsidiary of
2Connect and changed its name to "Bobby
Allison Wireless, Inc.";
(ii) the two holders of all of the common
stock of Bobby Allison each received
175,000 shares of the common stock of
2Connect (in the aggregate, 350,000
shares representing approximately 73%
of the 480,000 shares of Common Stock
of 2Connect after the merger) and a
$125,000 debenture (or $250,000 in the
aggregate) bearing interest at 7.5% per
annum, with principle and interest
payable quarterly at $11,729 over three
years;
(iii) holders of preferred stock in Bobby
Allison received equivalent
preferred stock in 2Connect that is
convertible into 270,790 shares of
common stock, of which the two former
shareholders of Bobby Allison own
preferred stock convertible into 24,996
shares of common stock;
(iv) the officers of 2Connect resigned
and the two former stockholders of
Bobby Allison were appointed
officers of 2Connect;
30
<PAGE> 31
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(v) on March 1, 1999, 2Connect changed
its name to Bobby Allison Wireless
Corporation.
(D) UNAUDITED PRO FORMA INFORMATION
The following unaudited pro forma
information has been prepared assuming the
Merger had taken place at the beginning of
the respective periods. The unaudited pro
forma information includes adjustments for
interest expense that would have been
incurred to finance the purchases,
additional preferred stock dividends based
on preferred stock being outstanding the
entire period and the amortization of
intangibles arising from the transaction.
The unaudited pro forma financial
information is not necessarily indicative
of the results of operations as they would
have been had the transactions been
effected on the assumed dates.
<TABLE>
<CAPTION>
UNAUDITED
-----------------------------
YEAR ENDED DECEMBER 31, 1998 1997
-------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 10,386,548 $ 7,378,301
Net loss to common stockholders (6,363,143) (3,902,906)
Loss per common share (13.26) (8.13)
-------------------------------------------------------------------------
</TABLE>
2. SUMMARY OF (A) BASIS OF PRESENTATION
SIGNIFICANT
ACCOUNTING Upon the consummation of the Merger, the
POLICIES former stockholders of Bobby Allison
obtained approximately 73% of the
voting rights of the Company.
Although Bobby Allison merged into
Acquisition, the transaction was accounted
for as a purchase of 2Connect by Bobby
Allison (a reverse acquisition in which
Bobby Allison is considered the acquirer
for accounting purposes), since the
stockholders of Bobby Allison obtained a
majority of the voting rights of 2Connect
as a result of this transaction.
Accordingly, the historical financial
31
<PAGE> 32
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
statements of the Company for the periods
prior to the time of the merger are those
of Bobby Allison. The balance sheet as of
December 31, 1998 is that of Bobby Allison
after giving effect to the Merger.
The purchase price for 2Connect was
computed by valuing the common stock of
2Connect issued ($109,375) and adding the
acquisition costs of $142,203 and the
$250,000 of debentures issued to the
former stockholders of Bobby Allison for a
total purchase price of $501,578. The
purchase price has been allocated to the
assets purchased and liabilities assumed
based upon the fair values at the date of
transaction. The excess of the purchase
price over the fair value of the net
assets acquired was $335,627 and has been
recorded as goodwill, which is being
amortized on a straight line basis over 10
years.
(B) CASH EQUIVALENTS
The Company considers all highly liquid
investments with a maturity of three
months or less when purchased to be cash
equivalents.
(C) INVENTORIES
Inventories, consisting of cellular and
wireless products and related accessories,
are valued at the lower of average cost or
market.
(D) PROPERTY AND EQUIPMENT
Depreciation on equipment is computed over
the estimated useful lives (three to seven
years) of the assets by the declining
balance method. Leasehold improvements are
depreciated over the shorter of the
estimated life of the assets or the lease
term.
32
<PAGE> 33
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(E) IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates impairment of
long-lived assets in accordance with
Statement of Financial Accounting
Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (FAS
121). FAS 121 requires impairment losses
to be recorded on long-lived assets used
in operations and intangible assets when
indications of impairment are present and
the undiscounted cash flows estimated to
be generated by those assets are less than
the assets' carrying amount.
(F) GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets, substantially goodwill,
are carried at cost and amortized under
the straight-line method generally over
ten years, the estimated useful life.
Goodwill represents the excess cost of the
acquired businesses over the fair value of
net assets acquired. At December 31, 1998,
unamortized goodwill and other intangible
assets of $350,397 was not considered to
be impaired.
(G) REVENUE RECOGNITION
The Company's revenue recognition policies
are:
PRODUCT SALES - Revenue from retail
product sales is recorded upon customer
purchase.
ACTIVATION COMMISSIONS - The Company
receives an activation commission from the
applicable cellular carrier when a
customer initially subscribes for the
cellular carrier's service. The amount of
the activation commission paid by cellular
carriers is based upon the service plan
offered by the carrier and is recognized
by the Company at the time of sale. New
subscription activation commissions are
fully refundable
33
<PAGE> 34
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
if the subscriber cancels its subscription
prior to completion of a minimum period of
continuous active service (generally 90
days). Customers generally sign a service
agreement with the Company that the
customer reimburse the Company for lost
activation commissions in the event of the
early cancellation of service. The Company
accrues for estimated deactivation losses,
net of cancellation fees, by creating a
reserve against carrier accounts
receivable. The reserve is reflective of
the historical cancellation experience.
AT&T activation commissions accounted for
approximately 51% and 45% of the Company's
net revenues for the year ended December
31, 1998 and 1997, respectively. Accounts
receivable from AT&T accounted for
approximately 75% and 92% of the total net
accounts receivable at December 31, 1998
and 1997, respectively.
PAGER SERVICES - The Company is a reseller
of pager services. The Company's policy is
to bill in advance for pager services.
Revenue on pager services is recognized
over the period of such service, typically
three months.
(H) INCOME TAXES
The Company accounts for income taxes in
accordance with Statement of Financial
Accounting Standards No. 109, "Accounting
for Income Taxes," which requires
recognition of estimated income taxes
payable or refundable on income tax
returns for the current year and for the
estimated future tax effect attributable
to temporary differences and
carryforwards. Measurement of deferred
income tax is based on enacted tax laws
including tax rates, with the measurement
of deferred income tax assets being
reduced by available tax benefits not
expected to be realized.
34
<PAGE> 35
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(I) NET INCOME (LOSS) PER COMMON SHARE ("EPS")
Basic EPS is calculated by dividing the
income (loss) available to common
shareholders by the weighted average
number of common shares outstanding for
the period without consideration for
common stock equivalents. Diluted EPS
includes the effect of potentially
dilutive securities. The Company has
presented earnings per share on a pro
forma basis as if the merger, which
occurred December 31, 1998, had occurred
on January 1, 1997.
(J) ADVERTISING COSTS
The Company expenses advertising costs as
incurred. The total advertising costs
charged to expense was $33,302 and $42,383
for the years ended December 31, 1998 and
1997, respectively.
(K) USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted
accounting principles requires management
to make estimates and assumptions that
affect the reported amounts of assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from
those estimates.
35
<PAGE> 36
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
(L) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting
Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133). SFAS 133
requires companies to recognize all
derivatives contracts as either assets or
liabilities in the balance sheet and to
measure them at fair value. If certain
conditions are met, a derivative may be
specifically designated as a hedge, the
objective of which is to match the timing
of gain or loss recognition on the hedging
derivative with the recognition of (i) the
changes in the fair value of the hedged
asset or liability that are attributable
to the hedged risk or (ii) the earnings
effect of the hedged forecasted
transaction. For a derivative not
designated as a hedging instrument, the
gain or loss is recognized in income in
the period of change. SFAS 133 is
effective for all fiscal quarters of
fiscal years beginning after June 15,
1999.
Historically, the Company has not entered
into derivatives contracts either to hedge
existing risks or for speculative
purposes. Accordingly, the Company does
not expect adoption of the new standard on
January 1, 2000 to affect its financial
statements.
In June 1997, the Financial Accounting
Standards Board issued Statement of
Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS 130 establishes standards
for reporting and displaying comprehensive
income, its components and accumulated
balances. SFAS 130 is effective for
periods beginning after December 15, 1997.
The Company adopted this new accounting
standard in 1998, and its adoption had no
effect on the Company's financial
statements and disclosures.
36
<PAGE> 37
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
3. LONG-TERM DEBT Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
-------- --------
<S> <C> <C>
8.5% bank notes refinanced February 1999, payable
$11,066 monthly beginning March 1999 through
February 2002, including interest; collateralized
by receivables, inventories, equipment, furniture, $350,000 $ --
fixtures, intangibles and personal guaranty of two
stockholders
7.5% debenture note payable to stockholder, payable
$11,729 quarterly through December 2001, including 125,000 --
interest; unsecured
7.5% debenture note payable to stockholder, payable
$11,729 quarterly through December 2001, including 125,000 --
interest; unsecured
10.625% bank notes, payable $13,994 monthly
through February 1999, including interest;
collateralized by receivables, inventories,
equipment, furniture, fixtures, and
intangibles; and debt subordination
agreements with stockholders, personal guaranty of -- 476,041
stockholders and right to first offer of assignment
of certain leases
9% demand note to supplier, payable $11,130 monthly
through December 2000, including interest;
collateralized by receivables, inventories,
intangibles and debt subordination agreement with -- 350,000
stockholders (Note 5)
8%subordinated note payable to stockholder,
principal and interest payable December 31,
1998; unsecured; principal and accrued interest converted -- 70,000
to preferred stock December 1998
8%subordinated note payable to stockholder,
principal and interest payable December 31,
1998; unsecured; principal and accrued interest converted -- 70,000
to preferred stock December 1998
Noninterest bearing note (discounted at 7.51%),
payable $2,000 monthly through June 1998;
collateralized by specific acquired assets and -- 11,934
personal guaranty of stockholders
Other note payable 10,838 --
-------- --------
610,838 977,975
Less current maturities 168,877 776,225
-------- --------
Total long-term debt $441,961 $201,750
======== ========
</TABLE>
37
<PAGE> 38
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Future maturities of long-term debt are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------------------
<S> <C> <C>
1999 $ 168,877
2001 205,919
2002 214,715
2003 21,327
Thereafter --
-----------------------------------------------------------------------------
$ 610,838
=============================================================================
</TABLE>
On February 24, 1999, the Company executed a
line of credit agreement with a local bank.
The line of credit is for a maximum amount of
$500,000, has revolving payment terms, bears
interest at prime plus 1% (8.75% at February
24, 1999), is collateralized by substantially
all the Company's assets and is personally
guaranteed by two stockholders.
4. CONVERTIBLE At December 31, 1997, the Company had four
DEBENTURE $125,000 convertible debenture notes
NOTES outstanding. Three of the notes totaling
$375,000 were converted into preferred stock
in November 1998 pursuant to the Merger
Agreement; the remaining debenture note was
repaid in January 1999.
5. DEFERRED During 1998, the Company negotiated an
INCOME agreement with a supplier whereby the supplier
agreed to forgive a note payable with an
outstanding balance of $262,022. Under the
terms of the agreement, the forgiveness is
cancelable if certain events occur, including
the termination of a related agreement with
cause. The Company has deferred the
recognition of debt forgiveness income until
the risk of repayment no longer exists and is
expected to recognize 50% of the deferred
income on November 30, 1999 and the balance on
November 30, 2000, provided the agreement is
still in effect on those dates. The agreement
also provides for certain supplier marketing
development funds received in January 1999 to
be deferred over the same period and
recognized using the same percentages.
38
<PAGE> 39
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Deferred income also includes billed but
unearned beeper service revenue as of December
31, 1998 and 1997 of $53,505 and $45,911,
respectively.
6. PREFERRED STOCK At December 31, 1998, the Company has
outstanding 15 shares of Series A Preferred
Stock, $1.00 par, and 50 shares of Series B
Preferred Stock, $1.00 par, each with a face
value of $25,000 per share. The holders of
this preferred stock are entitled to receive,
out of funds legally available therefor,
cumulative dividends that begin accruing at
the date of issuance at the annual rate of
7.5% based upon the initial purchase price of
each share of Preferred Stock. No dividends
shall be paid to holders of common stock
unless all accrued dividends on the preferred
stock have been paid. In the event that there
is insufficient legally available funds to pay
all dividends on the preferred stock, then the
Company shall first pay all accrued dividends
pro rata on the Series A Preferred Stock and
Series B Preferred Stock. If there are
sufficient funds to pay all of the dividends
on the Series A Preferred Stock and Series B
Preferred Stock, then and remaining funds
shall be paid pro rata to the holders of
Series C Preferred Stock. The Company has
authorized but not issued any Series C
Preferred Stock.
CALL FEATURE
The Series A and Series B Preferred Stock are
callable by the Company at any time. The
Preferred Stock also carries a mandatory
redemption feature whereby all outstanding
Series A and Series B Preferred Stock is
redeemable at par value five years after the
issuance date. As a result of this provision,
the Preferred Stock had been recorded outside
of the stockholders' equity section of the
Company's consolidated balance sheet at
December 31, 1998.
39
<PAGE> 40
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
CONVERSION RATE
Each share of Series A and Series B Preferred
Stock has a face value of $25,000 per share
and is convertible into 4,166 shares of common
stock, or $6.00 per common share ("Conversion
Ratio"). The Restated Articles provide that
the Conversion Ratio shall be adjusted for
various corporate actions of the Company to
protect the holders of the preferred stock
against dilution, including, but not limited
to, stock splits, stock dividends, mergers,
reorganization and recapitalizations. The
Conversion Ratio shall also be adjusted for
the sale of any shares of common stock at a
price of less than the conversion price,
excluding stock options granted before the
filing of the Restated Articles, of which
there were none, or granted pursuant to a duly
adopted stock option plan for which no more
than 10% of the outstanding common stock shall
be reserved for issuance.
REDEMPTION
To the extent the Company has funds legally
available therefor, the Company shall redeem
each share of Series A and Series B Preferred
Stock on that date exactly five years after
the issuance of such share of preferred stock.
To the extent the Company has funds legally
available therefor, the Board of Directors of
the Company may at any time, in its sole and
absolute discretion, redeem by lot any series
or portion of any series of the preferred
stock. Redeemed shares of preferred stock
shall revert to the status of authorized but
unissued and may be redesignated and reissued.
VOTING RIGHTS
The Series A and Series B Preferred Stock
shall be generally non-voting except as
specifically provided for in the Restated
Articles
40
<PAGE> 41
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
and summarized below:
The vote of the majority of the Series A
Preferred Stock shall be required for
authorization of the following: (i) the
issuance of any securities ranking senior to
or in parity with the Series A Preferred Stock
except for commercial debt incurred in the
ordinary course of business; (ii) any
amendments, alterations or repeals of any
provision of the Restated Articles affecting
the rights or preferences of the Preferred
Stock; (iii) any consolidation or merger
(unless the Company survives and the capital
is not changed); (iv) any transaction or
series of transactions in which an excess of
50% of the Company's voting power is
transferred; (v) any reclassification or
recapitalization; (vi) any dissolution,
liquidation, or winding up of the Company;
(vii) any sale of all or more than 50% of the
assets of the Company or (viii) any agreement
to do any of the foregoing.
The vote of the majority of the Series B
Preferred Stock shall be required for
authorization of the following: (i) the
issuance of any securities ranking senior to
or in parity with the Series B Preferred Stock
except for commercial debt incurred in the
ordinary course of business; (ii) any
amendments, alterations or repeals of any
provision of the Restated Articles affecting
the rights or preferences of the Preferred
Stock; (iii) any consolidation or merger
(unless the Company survives and the capital
is not changed); (iv) any transaction or
series of transactions in which an excess of
50% of the Company's voting power is
transferred; (v) any reclassification or
recapitalization; (vi) any dissolution,
liquidation, or winding up of the Company;
(vii) any sale of all or more than 50% of the
assets of the Company or (viii) any agreement
to do any of the foregoing. Also, the Series B
Preferred Stock shall have the right to elect
1/3 of the directors of the Board of
Directors.
The vote of the majority of the Series C
Preferred Stock shall be
41
<PAGE> 42
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
required for authorization of any securities
ranking senior to or in parity with the Series
C Preferred Stock except for commercial debt
incurred in the ordinary course of business.
In the event that the Company defaults on the
payment of any dividend on or redemption of
any series of preferred stock, then that
series of preferred stock shall become fully
voting on all matters submitted to a vote of
the shareholders as if fully converted into
common stock.
LIQUIDATION
Upon any liquidation, dissolution or
winding-up of the Company, distribution of the
assets of the Company shall be made in the
following order: (i) to the holders of Series
A Preferred Stock, an amount equal to the
initial purchase price plus accrued but unpaid
dividends; (ii) to the holders of Series B
Preferred Stock, an amount equal to the
initial purchase price plus accrued but unpaid
dividends; (iii) to the holders of the Series
C Preferred Stock, an amount equal to the
initial purchase price plus accrued but unpaid
dividends; and (iv) pro rata to the holders of
the preferred stock and common stock.
7. STOCK OPTIONS PLAN OPTIONS
Pursuant to 2Connect's Plan of Reorganization
confirmed by the Bankruptcy Court on October
27, 1998, all outstanding stock options and
stock option plans were terminated. Pursuant
to the terms of the employment agreements with
Messrs. McGinnis and Ralph, the Company
adopted the Bobby Allison Wireless Corporation
1999 Stock Option Plan ("Option Plan")
effective January 1, 1999. The Option Plan
provides that the Company may grant options to
purchase up to 10% of its outstanding common
stock but in no event greater than 100,000
shares. On March 31, 1999, the Company granted
stock options pursuant to the Option Plan to
purchase 42,000 shares of common stock at
$6.00 per share.
42
<PAGE> 43
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NON-PLAN OPTIONS
The Company issued non-plan options to
purchase 7,500 shares of common stock on
December 31, 1998 pursuant to the execution of
a license agreement (see Note 12). The value
of these options as determined by the
Black-Scholes valuation model was not material
to the financial statements.
8. RELATED PARTY TRANSACTIONS The Company had transactions with its
stockholders and an affiliated company in
which a stockholder has an ownership interest.
These transactions included in the
accompanying financial statements are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------------
<S> <C> <C>
STOCKHOLDERS:
Notes payable (Note 3) $ 250,000 $ 140,000
Accounts receivable -- 1,200
AFFILIATED COMPANY:
Consulting fees paid 37,500 180,000
Accounts receivable -- 1,546
--------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 44
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
9. INCOME TAXES Deferred income taxes at December 31, 1998
and 1997 consist of the following:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------------
<S> <C> <C>
CURRENT DEFERRED TAX ASSET:
Accounts receivable allowance $ 24,000 $ 20,000
--------------------------------------------------------------------------------
Total current deferred tax asset 24,000 20,000
Less valuation allowance - -
--------------------------------------------------------------------------------
Net current deferred tax asset 24,000 20,000
--------------------------------------------------------------------------------
NONCURRENT DEFERRED TAX ASSETS:
Net operating loss carryforwards 137,000 205,000
Leasehold improvements 19,000 -
--------------------------------------------------------------------------------
Total noncurrent deferred tax assets 156,000 205,000
Less valuation allowance - -
--------------------------------------------------------------------------------
NET NONCURRENT DEFERRED TAX ASSET $ 156,000 $ 205,000
================================================================================
</TABLE>
At December 31, 1998, the Company had a net
operating loss for income tax purposes of
approximately $425,000, which expires in
2012, and its use to offset the Company's
future taxable income will be limited each
year under the provisions of Section 382 of
the Internal Revenue Code of 1986, as
amended, based on the change in ownership
that occurred upon the Effective date of the
Plan of Reorganization.
Significant components of income tax expense
(benefit) are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------------
<S> <C> <C>
Deferred:
Federal $ 39,000 $ (140,000)
State 6,000 (36,000)
--------------------------------------------------------------------------------
$ 45,000 $ (176,000)
================================================================================
</TABLE>
44
<PAGE> 45
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The following summary reconciles differences
from taxes at federal statutory rates with
the effective rate:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------------
<S> <C> <C>
Federal income taxes at statutory rates 34% (34%)
State taxes 5% (5%)
Graduated rates - 13%
--------------------------------------------------------------------------------
Taxes on income (benefit) at effective rates 39% (26%)
=================================================================================
</TABLE>
10. LEASES The Company has entered into various
leases for equipment, office and retail
facilities. Future minimum lease payments
under noncancelable operating leases at
December 31, 1998 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------
<S> <C> <C>
1999 $ 739,642
2000 695,250
2001 447,955
2002 340,411
2003 300,823
Thereafter 743,377
-----------------------------------------------------------------
Total minimum payments required $ 3,267,458
=================================================================
</TABLE>
Several retail facility lease agreements
provide for additional lease payments based
upon various operating expenses of the
lessor. These amounts have been estimated for
future periods utilizing amounts charged in
1998. Rent expense for the years ended
December 31, 1998 and 1997 was $757,236 and
$518,093, respectively.
45
<PAGE> 46
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
11. PROFIT-SHARING The Company adopted a 401(k) profit sharing
PLAN plan during 1997 covering substantially all
employees. Participants may contribute up to
the lesser of 10% of their annual compensation
or the maximum amount allowable under
provisions of the Internal Revenue Code. The
Plan requires Company contributions equal to
25% of each participant's contribution up to
5% of compensation. Company contributions to
the plan were $6,398 and $4,820 for 1998 and
1997, respectively.
12. COMMITMENTS LICENSE AGREEMENT
AND
CONTINGENCY The Company has a license agreement effective
December 31, 1998 with Robert A. Allison
a/k/a/ Bobby Allison ("Mr. Allison"), the
renown NASCAR driver, whereby the Company may
utilize Mr. Allison's name in connection with
its operations. Also, Mr. Allison is required
to make eight personal promotional appearances
and spend up to 48 hours on advertising
campaigns such as television, radio or print
advertisement.
The initial term of the license agreement is
ten years, which commenced on December 31,
1998. The Company has options to renew the
license agreement for five successive
five-year terms for a total term (including
the initial term) of 35 years. In
consideration of this license and these
services, the Company pays Mr. Allison a fixed
annual fee of $36,000 per year during the
first year and $48,000 per year for the
following 9 years, $52,800 per year during the
first five-year renewal period, $58,080 per
year for the second five-year renewal period,
$63,888 during the third five-year renewal
period, $70,277 per year during the fourth
five-year renewal period and $77,305 per year
during the fifth five-year renewal period
("Fixed Fees").
In addition to the Fixed Fees, the Company
will pay Mr. Allison a contingent fee equal to
the difference between that amount which is
equal to one-tenth of one percent of the
Company's annual net
46
<PAGE> 47
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
sales, and the Fixed Fee for such year with
respect to the Company's first $100 million of
annual net sales plus that amount equal to
three-hundredths of one percent of annual net
sales over $100 million.
As part of the agreement, the Company also
issued options (see Note 7) to the licensor to
purchase 7,500 shares of the Company's common
stock with an exercise price of $6.00 per
share. The option is exercisable May 31, 1999
and expires 15 days after the termination of
this agreement. The license agreement imposes
certain restrictions on the options or, if
exercised, the underlying common stock in the
event of a breach in the license agreement by
the licensor.
EMPLOYMENT AGREEMENTS
On December 31, 1998, the Company entered into
employment agreements with the Company's Chief
Executive Officer and President (collectively
"the Officers"). The employment agreements
have an initial term of three years. Upon the
expiration of the initial term, the employment
agreements automatically renew for successive
one-year terms unless sooner terminated by the
Company or either Officer giving written
notice 120 days prior to the commencement of
such renewal term. During the first 12 months
of the employment agreements, the Officers
shall each receive a minimum annual base
compensation of $135,000. At the end of such
initial 12-month period and each 12-month
period thereafter, the Company's Board of
Directors shall review the Officers' annual
salary to determine the next 12 months' annual
compensation provided, however, that the
Officers' annual salary shall be increased a
minimum of 6% each year.
In the event that either Officer terminates
their employment agreement for the Company's
breach of its terms, then the Company shall
pay the officer severance compensation equal
to
47
<PAGE> 48
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
two-thirds (2/3) of the Officer's annual
compensation at the time of the termination if
during the initial three-year term and
one-fourth (1/4) of the Officer's annual
compensation at the time of the termination if
during a renewal term.
The employment agreements require that the
Board of Directors approve an incentive
compensation plan which provides additional
compensation to the Officers based upon the
Company's net income and which, at a minimum,
shall be equal to 2% of the Company's net
income for any applicable employment year. In
the event that either Officer terminates the
employment agreement for the Company breach of
its terms, then the Company shall pay the
Officer severance compensation equal to
two-thirds of the Officer's annual
compensation at the time of the termination if
during the initial three-year term and
one-fourth of the Officer's annual
compensation at the time of the termination if
during a renewal term.
MEDICAL INSURANCE PLAN
The Company self insures a portion of its
employee medical insurance plan. Expense is
based on payments made plus estimates of
unpaid claims. Any claims exceeding
approximately $5,000 are covered by insurance.
48
<PAGE> 49
BOBBY ALLISON WIRELESS CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
13. SUPPLEMENTAL CASH FLOW Supplemental cash flow information is as
INFORMATION follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
--------------------------------------------------------------------------------
Cash paid for interest $ 128,838 $ 143,708
--------------------------------------------------------------------------------
<S> <C> <C>
Noncash financing and investing activities:
Conversion of debentures into Series A preferred
stock $ (375,000) $ --
Conversion of debentures into Series B preferred
stock (140,000) --
Forgiveness of note payable classified as
deferred revenue (262,022) --
Accrued preferred stock dividends 13,736 --
Record acquisition:
Prepaid expenses (1,789) --
Fixed assets (175,000) --
Goodwill (335,626) --
Accrued expenses 142,202 --
Debenture notes payable 250,000 --
Other notes payable 10,838 --
================================================================================
</TABLE>
49
<PAGE> 50
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
At the time of the Company's initial public offering, the Company's
balance sheet for the fiscal year ended December 31, 1996 and the related
statements of operations and deficit accumulated during the development stage,
shareholders equity and cash flows for the period from April 19, 1996 (date of
inception) to December 31, 1996 were audited by the independent accounting firm
of KPMG LLP, formerly known as KPMG Peat Marwick LLP ("KPMG"). KPMG expressed
its unqualified opinion as to such financial statements of the Company in its
report dated February 20, 1997, except as to the last paragraph of Note 9, which
is as of May 5, 1997.
On November 21,1997, the Company changed its fiscal year end to the
Saturday nearest January 31, in conformity with the National Retail Federation
fiscal calendar. The Company filed a Form 8-K on December 3, 1997 giving notice
of this change and the Company's intent to reflect the fiscal year transition on
Form 10-KSB for the year ended January 31, 1998.
The Company filed for bankruptcy on January 12, 1998. Subsequently, the
U.S. Bankruptcy Court, Southern District of Florida, did not authorize the
expenditure of the Company's funds for an audit. Therefore, the Company was
unable to engage KPMG to complete an audit of the Company's financial statements
for the one month ended January 31, 1997 and the year ended January 31, 1998. As
a result of the Company's failure to have an audit completed, the Company did
not file a Form 10-KSB for such fiscal year.
There were no disagreements during 1996 or 1997 between the Company and
KPMG on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreement, if not resolved
to the satisfaction of KPMG would have caused it to make reference to the
subject matter of the disagreement in its report. Since its emergence from
bankruptcy, the Company contacted KPMG regarding its audit. However, KPMG has
declined to stand for reelection which was confirmed by its letter to the
Company dated January 8, 1999.
On January 7, 1999, in anticipation of KPMG's declination to stand for
reelection, the Company engaged BDO Seidman, LLP ("BDO Seidman") as the
successor independent auditor, which engagement was approved by the Board of
Directors of the Company on the same date. BDO Seidman is an international
accounting and consulting organization with three offices in Florida. BDO
Seidman was engaged on January 7, 1999 to audit the Company's financial
statements for the one-month ended January 31, 1997 and the fiscal year ended
January 31, 1998.
The Merger described in Item 1 of the Company's Form 8-K for the event
dated December 31, 1998 filed on January 8, 1999 results in a change of control
of ownership of the Company. BDO Seidman has advised the Company that the
financial statements of the Company for the years prior to 1999 would include
only the results of operations of Bobby Allison as a result of the change in
control. Consequently, BDO Seidman has been engaged to audit the Company's
financial statements for the year ended December 31, 1998 which will be the
historical financial statements of Bobby Allison. As reflected in Item 7 above,
the historical financials of BAC for the year ended December 31, 1997 was
audited by the independent accounting firm of Carter, Belcourt & Atkinson, P. A.
The Company's historical financial statements for the year ended
January 31, 1998 and the one month period ended January 31, 1997 existing prior
to the Merger, which were audited by BDO Seidman, have been filed with the
Company's Form 8-K/A amending the Company's Form 8-K reporting the Merger.
50
<PAGE> 51
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
DIRECTORS, EXECUTIVE OFFICERS AND PROMOTERS
The following table sets forth certain information regarding the
current executive officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert L. McGinnis 58 Chairman of the Board, Chief Executive Officer and
Treasurer
James L. Ralph 35 President, Secretary and Director
James S. Holbrook, Jr. 55 Director
</TABLE>
ROBERT L. MCGINNIS has served as Chairman of the Board, Chief Executive
Officer and Treasurer of the Company since December 31, 1998. Mr. McGinnis
previously served as Chief Executive Officer of Bobby Allison Cellular Systems
of Florida, Inc. which merged with the Company on December 31, 1998.
JAMES L. RALPH has served as President, Secretary and Director since
December 31, 1998. Mr. Ralph previously served as the President and Chief
Operating Officer of Bobby Allison Cellular Systems of Florida, Inc. which
merged with the Company on December 31, 1998.
JAMES S. HOLBROOK, JR. has served as Director since December 31, 1998
and served as Chairman of Board and Chief Executive Officer from August 27, 1998
until December 31, 1998. Mr. Holbrook is, and has for the past five (5) years
been, the chief executive officer of Sterne Agee and its affiliated companies.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who beneficially own more than 10%
of the Common Stock ("Section 16 Insiders"), to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Section 16 Insiders are required by the SEC regulations to furnish the Company
with copies of all SEC forms required under Section 16(a) of the Securities
Exchange Act of 1934 ("Section 16(a) Forms"). Based solely on review of the
Section 16(a) Forms as furnished to the Company, the Company believes that for
the period from January 1, 1998 through December 31, 1998, all Section 16
Insiders filed their Section 16(a) Forms in a timely manner, except that Sterne,
Agee & Leach, Inc. was late filing its Form 3. Also, since December 31, 1998,
Robert L. McGinnis, James L. Ralph, Sterne Agee & Leach Group Inc., and The
Trust Company of Sterne, Agee & Leach, Inc. were late filing their Form 3s and
James S. Holbrook, Jr. was late filing his Form 4.
51
<PAGE> 52
ITEM 10. EXECUTIVE COMPENSATION.
COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company for services rendered during, 1998, 1997 and
1996, as applicable, to the Company's three (3) chief executive officers serving
during the fiscal year ending December 31, 1998 (the "Named Executive
Officers").
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
SALARY BONUS OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION (1) YEAR ($) ($) COMPENSATION COMPENSATION
------------------------------- ----- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Marc D. Fishman, CEO 1998 $ 0 0 0 0
(Incorporation-January 7, 1998) 1997 150,000 0 0 0
1996 112,500 0 0 0
Thomas H. Hicks, CEO 1998 $145,988 0 0 $16,406.26 (2)
(January 7, 1998-August 27, 1998) 1997 43,299 0 0 0
1996 0 0
James S. Holbrook, Jr., Chairman and CEO 1998 0 0 0 0
(August 27, 1998-December 31, 1998) 1997 0 0 0 0
1996 0 0 0 0
</TABLE>
(1) As of December 31, 1998, Robert L. McGinnis became the Chairman of the Board
and CEO and James L. Ralph became the President and COO pursuant to the Merger
and subject to employment agreements. See "Employment Agreements."
(2) Received as consulting fees after terminating employment with the Company.
EMPLOYMENT AGREEMENTS
Pursuant to the Merger, Robert L. McGinnis and James L. Ralph became
the Named Executive Officers of the Company. They have each entered into
employment agreements with the Company effective December 31, 1998, a summary of
which are discussed below.
MCGINNIS AGREEMENT. Pursuant to the employment agreements entered into
between the Company and Robert L. McGinnis ("McGinnis Agreement") on December
31, 1998, Mr. McGinnis became the Company's Chief Executive Officer. The
McGinnis Agreement shall have an initial term of three (3) years. Upon the
expiration of the initial term, the McGinnis Agreement shall automatically renew
for successive one (1) year terms unless sooner terminated by either party
giving written notice one hundred twenty (120) days prior to the commencement of
such renewal term. During the first twelve (12) months of the McGinnis
Agreement, Mr. McGinnis shall receive a minimum annual base compensation of One
Hundred Thirty-Five Thousand Dollars ($135,000). At the end of such initial
twelve (12) month period and each twelve (12) month period thereafter, the
Company's Board of Directors shall review Mr. McGinnis' annual salary to
determine the next twelve (12) months annual compensation; provided, however,
that Mr. McGinnis' annual salary shall be increased a minimum of six percent
(6%) each year. The McGinnis Agreement requires that the Board of Directors
approve an incentive compensation plan which provides additional compensation to
52
<PAGE> 53
Mr. McGinnis based upon the Company's net income and which at a minimum shall be
equal to two percent (2%) of the Company's net income for any applicable
employment year. The Board of Directors may also reward Mr. McGinnis additional
discretionary compensation in the form of bonuses or other rewards. In the event
that Mr. McGinnis terminates the McGinnis Agreement for the Company's breach of
its terms, then the Company shall pay Mr. McGinnis severance compensation equal
to two-thirds (2/3) of Mr. McGinnis' annual compensation at the time of the
termination if during the initial three (3) year term and one-fourth (1/4) of
Mr. McGinnis' annual compensation at the time of the termination if during a
renewal term.
Pursuant to the McGinnis Agreement, Mr. McGinnis will be entitled to
receive other benefits such as an automobile, health insurance, disability
insurance, reimbursement of business expenses and the right to participate in
other employee benefit plans, retirement plans, deferred compensation plans and
other fringe benefits generally made available to executive and management
employees of the Company. The McGinnis Agreement further provides that Mr.
McGinnis will be eligible to participate in a stock option plan of the Company
which has reserved for issuance at least ten percent (10%) of the issued and
outstanding capital stock of the Company. As previously stated, no stock option
plan has yet been adopted.
Finally, the McGinnis Agreement provides that the Company shall fund
the premium of a life insurance policy on Mr. McGinnis' life which will provide
a split-dollar benefit, i.e, death benefit to the Company and cash surrender
value to Mr. McGinnis' designated beneficiaries or estate in the event of his
death. The life insurance policy shall be a permanent life policy with a face
amount that will cause the annual premium to exceed the annual cost of term life
insurance by $15,000. If Mr. McGinnis is terminated, then Mr. McGinnis shall
become the sole owner of the policy. Mr. McGinnis and the Company entered into a
Split-Dollar Agreement on February 10, 1999, effective December 31, 1998.
RALPH AGREEMENT. Pursuant to the employment agreements entered into
between the Company and James L. Ralph ("Ralph Agreement") on December 31, 1998,
Mr. Ralph became the Company's President. The Ralph Agreement shall have an
initial term of three (3) years. Upon the expiration of the initial term, the
Ralph Agreement shall automatically renew for successive one (1) year terms
unless sooner terminated by either party giving written notice one hundred
twenty (120) days prior to the commencement of such renewal term. During the
first twelve (12) months of the Ralph Agreement, Mr. Ralph shall receive a
minimum annual base compensation of One Hundred Thirty-Five Thousand Dollars
($135,000). At the end of such initial twelve (12) month period and each twelve
(12) month period thereafter, the Company's Board of Directors shall review Mr.
Ralph's annual salary to determine the next twelve (12) months annual
compensation; provided, however, that Mr. Ralph' annual salary shall be
increased a minimum of six percent (6%) each year. The Ralph Agreement requires
that the Board of Directors approve an incentive compensation plan which
provides additional compensation to Mr. Ralph based upon the Company's net
income and which at a minimum shall be equal to two percent (2%) of the
Company's net income for any applicable employment year. The Board of Directors
may also reward Mr. Ralph additional discretionary compensation in the form of
bonuses or other rewards. In the event that Mr. Ralph terminates the Ralph
Agreement for the Company's breach of its terms, then the Company shall pay Mr.
Ralph severance compensation equal to two-thirds (2/3) of Mr. Ralph's annual
compensation at the time of the termination if during the initial three (3) year
term and one-fourth (1/4) of Mr. Ralph's annual compensation at the time of the
termination if during a renewal term.
Pursuant to the Ralph Agreement, Mr. Ralph will be entitled to receive
other benefits such as an automobile, health insurance, disability insurance,
reimbursement of business expenses and the right to participate in other
employee benefit plans, retirement plans, deferred compensation plans and other
fringe benefits generally made available to executive and management employees
of the Company. The Ralph Agreement further provides that Mr. Ralph will be
eligible to participate in a stock option plan of the Company which has reserved
for issuance at least ten percent (10%) of the issued and outstanding capital
stock of the Company. As previously stated, no stock option plan has yet been
adopted.
Finally, the Ralph Agreement provides that the Company shall fund the
premium of a life insurance policy on Mr. Ralph's life which will provide a
split-dollar benefit, i.e., death benefit to the Company and Mr. Ralph's
designated
53
<PAGE> 54
beneficiaries or estate in the event of his death. The life insurance policy
shall be a permanent life policy with a face amount that will cause the annual
premium to exceed the annual cost of term life insurance by $10,000. If Mr.
Ralph is terminated, then Mr. Ralph shall become the sole owner of the policy.
Mr. Ralph and the Company entered into a Split-Dollar Agreement on February 10,
1999, effective December 31, 1998.
Copies of the Employment Agreements are attached as exhibits to the
Company's Form 8-K filed on January 8, 1999 and copies of the Split-Dollar
Agreements are attached hereto.
STOCK OPTIONS
Pursuant to the Company's Plan of Reorganization confirmed by the
Bankruptcy Court on October 27, 1998, all outstanding stock options and stock
option plans were terminated. Pursuant to the terms of the employment agreements
with Messrs. McGinnis and Ralph, the Company adopted the Bobby Allison Wireless
Corporation 1999 Stock Option Plan ("Option Plan") effective January 1, 1999.
The Option Plan provides that the Company may grant options to purchase up to
ten (10%) of the outstanding Common Stock but in no event greater than 100,000
shares. On March 31, 1999, the Company granted incentive stock options to
certain employees of the Company for the right to purchase up to 42,000 shares
at $6.00 per share exercisable immediately, including options to purchase up to
10,000 shares of Common Stock granted to each of Messrs. McGinnis and Ralph. The
Company granted a new employee options to purchase 2,500 shares of Common Stock
on May 1, 1999.
COMPENSATION OF DIRECTORS
Directors do not currently receive any compensation for serving as a
director of the Company. The Company does, however, reimburse directors for
their travel and other expenses incurred in connection with attending meetings
of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee. However, Mr.
McGinnis, the Chairman of the Board and CEO and Mr. Ralph, the President and
COO, are two of the three members of the full Board of Directors of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of outstanding
shares of Common Stock beneficially owned as of March 15, 1999 by (i) each
person or entity known by the Company to own more than 5% of the outstanding
Common Stock; (ii) each Named Executive Officer of the Company; (iii) each
director of the Company, and (iv) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES(1) PERCENTAGE(2)
------------------------ --------- -------------
<S> <C> <C>
Robert L. McGinnis (3) 197,498 25.9%
2055 Lake Avenue, S.E., Suite A
Largo, Florida 33771
James L. Ralph(3) 197,498 25.9%
2055 Lake Avenue, S.E., Suite A
Largo, Florida 33771
James S. Holbrook, Jr.(4)(5) 279,976 37.29%
1901 Sixth Avenue North, Suite 2100
Birmingham, Alabama 35203
Sterne, Agee & Leach Group, Inc.(5) 246,648 32.85%
1901 Sixth Avenue North
Birmingham, Alabama 35203
</TABLE>
54
<PAGE> 55
<TABLE>
<CAPTION>
<S> <C> <C>
Sterne, Agee & Leach, Inc.(5) 246,648 32.85%
1901 Sixth Avenue North
Birmingham, Alabama 35203
The Trust Company of Sterne, Agee & Leach, Inc.(5) 246,648 32.85%
800 Shades Creek Parkway, Suite 125
Birmingham, Alabama 35209
All directors and executive officers as a group (3 persons) 674,972 85.57%
</TABLE>
- ----------
(*) Indicates beneficial ownership of less than 1% of the outstanding
shares of the Company's Common Stock.
(1) Includes shares of Common Stock owned and shares of Common Stock into which
shares of convertible preferred stock of the Company owned by such person is
convertible. The only direct owners of the Common Stock at this time are Robert
L. McGinnis, James L. Ralph, Sterne, Agee & Leach, Inc. and The Trust Company of
Sterne, Agee & Leach, Inc.
(2) Calculated pursuant to Rule 13d-3(d) under the Securities Exchange Act of
1934 ("Exchange Act"). Under Rule 13d-3(d), shares not outstanding which are
subject to options exercisable within 60 days are deemed outstanding for the
purpose of calculating the number and percentage owned by such person, but not
deemed outstanding for the purpose of calculating the percentage owned by any
other person listed. As of December 31, 1998, the Company had 750,790 shares of
Common Stock outstanding which is adjusted for such options.
(3) Messrs, McGinnis and Ralph are Named Executive Officers, directors and five
(5) percent shareholders. Each of Messrs, McGinnis and Ralph hold an option to
purchase up to 10,000 shares of Common Stock at $6.00 per share which are
currently exercisable.
(4) Mr. Holbrook is a director, 5% beneficial owner and served as Chairman and
CEO from August 27 through December 31, 1998.
(5) Mr. Holbrook (33,328 shares ), Sterne, Agee & Leach Group, Inc. (99,948
shares) Sterne, Agee and Leach, Inc.,(30,000 shares) and The Trust Company of
Sterne, Agee & Leach, Inc. (116,664 shares) constitute a voting group under Rule
13d-1 as defined in the Exchange Act. Mr. Holbrook disclaims beneficial
ownership of all securities held by Sterne, Agee & Leach Group, Inc., Sterne,
Agee & Leach, Inc. and The Trust Company of Sterne, Agee & Leach, Inc. Sterne,
Agee & Leach Group, Inc., Sterne, Agee & Leach, Inc. and The Trust Company of
Sterne, Agee & Leach, Inc. as trustees disclaim beneficial ownership of all
securities held by The Trust Company of Sterne, Agee & Leach, Inc. for the
benefit of third parties.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to the Merger, each of Messrs. McGinnis and Ralph were issued
debentures of the Company in the principal amount $125,000 payable in
installment over three (3) years at an interest rate of 7.5% per annum. See Item
1. "The Merger."
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: The exhibits required to be filed by this Item 13(a) are listed
herein on the Index to Exhibits on page 58 and are hereby incorporated herein by
reference.
55
<PAGE> 56
(b) Reports on Form 8-K: The Company filed the following Form 8-K's during the
quarter ended December 31, 1998 which includes a listing of the items reported,
whether any financial statements were attached and the dates of such reports
(1) Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc. (the
"Company") Current Report on Form 8-K filed September 1, 1998 reporting a change
of control under Item 2 of Form 8-K, the execution of the Agreement between the
Company and Sterne, Agee & Leach, Inc. dated August 27, 1998 under Item 5 of
Form 8-K and the resignation of certain directors under Item 6 of Form 8-K. No
financial statements are attached to this Form 8-K.
(2) Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc. (the
"Company") Current Report on Form 8-K filed September 25, 1998 reporting the
filing of the Monthly Financial Report with the Bankruptcy Court under Item 5 of
Form 8-K which included as an exhibit the Monthly Financial Report for the
period from August 2, 1998 to August 29, 1998.
(3) Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc. (the
"Company") Current Report on Form 8-K filed October 26, 1998 reporting the
filing of the Monthly Financial Report with the Bankruptcy Court under Item 5 of
Form 8-K which included as an exhibit the Monthly Financial Report for the
period from August 30, 1998 to October 3, 1998.
(4) Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc. (the
"Company") Current Report on Form 8-K filed November 18, 1998 reporting the
filing of the Monthly Financial Report with the Bankruptcy Court under Item 5 of
Form 8-K which included as an exhibit the Monthly Financial Report for the
period from October 4, 1998 to October 31, 1998.
56
<PAGE> 57
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Company caused this report to be signed on its
behalf by the undersigned, there unto duly authorized.
BOBBY ALLISON WIRELESS CORPORATION f/k/a
2CONNECT EXPRESS, INC.
By: /s/ Robert L. McGinnis
--------------------------------
Name: Robert L. McGinnis
Title: Chairman of the Board and Chief
Executive Officer
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ ROBERT L. MCGINNIS Chairman of the Board, Chief Executive Officer June 1, 1999
- ------------------------------- (Principal Executive Officer) and Treasurer
Robert L. McGinnis (Principal Financial and Accounting Officer)
/s/ JAMES L. RALPH President and Secretary June 1, 1999
- -------------------------------
James L. Ralph
/s/ JAMES S. HOLBROOK, JR. Director June 1, 1999
- -------------------------------
James S. Holbrook, Jr.
</TABLE>
57
<PAGE> 58
FORM 10-KSB
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
3.1 First Amended and Restated Articles of Incorporation of the Company, as
amended (4)(5)(7)
3.2 Bylaws of Company (1)
3.3 Amendment to Bylaws dated June 1, 1999
4.1 Specimen Stock Certificate of Company (1)
9.9 Voting Trust Agreement with Mark D. Fisherman (1)(8)
10.1 2Connect Express, Inc. 1996 Stock Option Plan (1)(8)
10.2 2Connect Express, Inc. Director's Option Plan (1)(8)
10.3 Amended and Restated Employment Agreement with Marc. D. Fisherman
dated as of April 1, 1997 (1)(8)
10.4 Employment Agreement between the Company and Kevin Killoran dated
June 17, 1997 (1)(8)
10.5 Employment Agreement between the Company and Michael Wichelns dated
June 17, 1996 (1)(8)
10.6 Employment Agreement between the Company and Jeff Manly dated June 17,
1996 (1)(8)
10.7 Form of Indemnification Agreement between Company and Marc D. Fisherman
(1)(8)
10.8 Form of Indemnification Agreement between Company and Steven Stedman
(1)(8)
10.9 Form of Indemnification Agreement between Company and Jeff Manly (1)(8)
10.10 Form of Indemnification Agreement between Company and Kevin Killoran
(1)(8)
10.11 Form of Indemnification Agreement between Company and Ira Neimark (1)(8)
10.12 Form of Indemnification Agreement between Company and David Colby (1)(8)
10.13 Form of Indemnification Agreement between Company and Lynn Tilton (1)(8)
10.14 Form of Indemnification Agreement between Company and Arnold Jaffee (1)(8)
10.15 Management Agreement between the Company and Bobby Allison Cellular
Systems of Florida, Inc. (2)
</TABLE>
58
<PAGE> 59
<TABLE>
<S> <C> <C>
10.16 Agreement by an between the Company and Sterne, Agee & Leach, Inc. dated
August 27, 1998 (3)
10.17 Debtor's Amended Plan of Reorganization file June 24, 1998 (4)
10.18 Second Amended Disclosure Statements for Amended Plan of Reorganization
filed June 24, 1998 (4)
10.19 First Modification to Amended Plan of Reorganization dated August 7, 1998 (4)
10.20 First Modification to Second Amended Disclosure Statement dated August 7,
1998 (4)
10.21 Second Modification to Amended Plan of Reorganization filed August 28, 1998
(4)
10.22 Merger Agreement by and among the Company, 2Connect Acquisition Corp.,
Bobby Allison Cellular Systems of Florida, Inc. and the shareholders of Bobby
Allison Cellular Systems of Florida, Inc. dated May 1, 1998, as amended
October 26, 1998. (5)
10.23 Employment Agreement of Robert L. McGinnis (5)
10.24 Employment Agreement of James L. Ralph (5)
10.25 License Agreement with Robert A. Allison a/k/a Bobby Allison
10.26* Exclusive Regional Retail Dealer Agreement, effective December 1,
1998, by and between Bobby Allison Cellular Systems of Florida,
Inc. and AT&T Wireless Services of Florida, Inc. d/b/a AT&T
Wireless Services.
10.27 Bobby Allison Wireless Corporation 1999 Stock Option Plan
16.1 Letter of KPMG LLP on change of accountants (6)
21.1 Subsidiaries of Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc.
27.1 Financial Data Schedule
</TABLE>
59
<PAGE> 60
* To be filed by amendment. Upon filing such amendment, certain
provisions of this exhibit will be subject to a request for
confidential treatment filed with the Securities and Exchange
Commission.
(1) Registration Statement on Form SB-2 with respect to the units of Bobby
Allison Wireless Corporation f/k/a/ 2Connect Express, Inc.(Commission
File No. 333-15567) is incorporated by in reference into Part III of
this report.
(2) The Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc.
Quarterly Report on Form 10-QSB for the quarter ended August 1, 1998
(Commission File No. 000-22251), is incorporated by reference into Part
III of this report.
(3) The Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc.
Current Report on Form 8-K for the event occurring on August 27, 1998
(Commission File No. 000-22251), is incorporated by reference into Part
III of this report.
(4) The Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc.
Quarterly Report on Form-10SB for the quarter ended October 31, 1998
(Commission File No. 000-22251), is incorporated by reference into Part
III of this report.
(5) The Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc.
Current Report on Form 8-K for the event occurring on December 31, 1998
(Commission File No. 000-22251), is incorporated by reference into Part
III of this report.
(6) The Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc.
current report on Form 8-K for the event occurring on January 7, 1999
(Commission File No. 000-22251), is incorporated in reference to Part
III of this report.
(7) The Bobby Allison Wireless Corporation f/k/a 2Connect Express, Inc.
current report on Form 8-K for the event occurring on March 1, 1999
(Commission File No. 000-22251), is incorporated in reference to Part
III of this report.
(8) Each of these documents have either expired or were terminated upon the
confirmation of the Company's Plan of Reorganization confirmed by the
U.S. Bankruptcy Court, Southern District of Florida on October 27,
1998.
60
<PAGE> 1
AMENDMENT TO THE
BYLAWS
OF
BOBBY ALLISON WIRELESS CORPORATION
DATED JUNE 1, 1999
Pursuant to the provisions of ARTICLE IX of the Bylaws of Bobby Allison
Wireless Corporation (the "Corporation") and the Florida Statutes, the
Corporation hereby makes the following amendment to its Bylaws:
Section 2 of Article II of the Bylaws of the Corporation shall be deleted
in its entirety and the following language shall be inserted in lieu thereof.
SECTION 2. Annual Meetings of the Shareholders of shall be held on
the second Tuesday in June if not a legal holiday in the state in which
the meeting shall be held, and if a legal holiday, then on the next
secular day following, and at such time as determined by the board of
directors, or at such other date and time as shall be designated from time
to time by the board of directors and stated in the notice of the meeting.
At the annual meeting, the shareholders shall elect a board of directors
and transact such other business as may properly be brought before the
meeting. If the annual meeting is not held on the date designated
therefor, the board of directors shall cause the meeting to be held as
soon thereafter as convenient.
The effective date of this amendment to the Bylaws of the Corporation is
June 1, 1999 and is hereby certified by the Secretary of the Corporation as a
true and correct copy of the amendment to the Bylaws.
/s/ James L. Ralph
---------------------------------
James L. Ralph,. Secretary
1
<PAGE> 1
Exhibit 10.25
LICENSE AGREEMENT
This License Agreement ("this Agreement") is made and entered into as
of the latest date upon which either party hereto executes this Agreement, to be
effective for all purposes as of December 31, 1998 ("the Effective Date"), by
and between BOBBY ALLISON CELLULAR SYSTEMS OF FLORIDA, INC. d/b/a BOBBY ALLISON
CELLULAR & PAGERS ("BAC"), a Florida corporation, and ROBERT A. ALLISON a/k/a
BOBBY ALLISON ("Allison"), an Alabama resident. For the purposes of this
Agreement, BAC and Allison are hereinafter referred to as "party", in the
singular, and as "parties", in the plural.
WHEREAS, BAC, BOBBY ALLISON SYSTEMS, INC. ("BASI), an Alabama
corporation, ROBERT L. McGINNIS ("McGinnis"), and JAMES L. RALPH ("Ralph")
executed that certain Agreement dated March 1, 1995 ("the Prior Agreement"); and
WHEREAS, the Prior Agreement granted to BAC, McGinnis, and Ralph a
non-exclusive license to use the Bobby Allison service marks, trademarks, and
system in a prescribed area of the State of Florida;
WHEREAS, the parties desire to cause the Prior Agreement to be
terminated by the mutual agreement of BAC, BASI, McGinnis, and Ralph as of the
Effective Date; and
WHEREAS, the parties desire to replace the Prior Agreement with this
Agreement.
-1-
<PAGE> 2
NOW, THEREFORE, in consideration of the premises, and of the terms
hereinafter contained, the adequacy of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
1. FOREGOING STATEMENTS. The parties hereby acknowledge and agree
that all of the foregoing statements are true and accurate.
The parties further acknowledge and agree that such statements
are integral parts of this Agreement.
2. TERMINATION OF PRIOR AGREEMENT. BAC shall terminate, and shall
cause McGinnis and Ralph to terminate, the Prior Agreement.
Allison shall cause BASI to terminate the Prior Agreement.
Such terminations shall be structured as a mutual termination
by all those concerned. Such mutual termination shall be a
condition precedent to the validity of this Agreement. Allison
represents and warrants that this Agreement will not conflict
with, or cause a default with respect to, any other agreement
by which he is bound.
3. LICENSES GRANTED.
(a) Allison hereby grants to BAC an exclusive license
("the Exclusive License") to use the name "Bobby
Allison", the name "Bobby Allison Racing", and any
other prefix, suffix, and derivation of the name
"Bobby Allison", and any and all service marks and
trademarks directly or indirectly related to the
foregoing. BAC shall be
-2-
<PAGE> 3
entitled to use the Exclusive License in connection
with the sale and distribution, both wholesale and
retail, of wireless and wired communication products,
consumer electronic products not contained in
packaging with Allison's name or likeness,
residential security products, personal security
products, and both accessories and services directly
or indirectly related to the foregoing products.
(b) Subject to BAC obtaining Allison's prior written
consent with respect to each product line (which
consent shall not be unreasonably withheld), Allison
hereby grants to BAC a non-exclusive license ("the
Non-exclusive License") to sell "Bobby Allison racing
memorabilia", including souvenirs, clothing, and the
like, separately licensed by Allison to others and
all other retail products directly or indirectly
related to such memorabilia, provided that the
Non-exclusive License does not conflict with such
licenses held by others for such memorabilia.
(c) BAC shall be entitled to use the Exclusive License
and the Non-exclusive License within the United
States, including Alaska and Hawaii, and within all
possessions and territories of the United States.
-3-
<PAGE> 4
4. TERM AND TERMINATION. The initial term of this Agreement shall
commence on the Effective Date and shall expire ten (10) years
thereafter ("the Initial Term"). Upon the expiration of the
Initial Term, BAC, in its sole discretion, shall be entitled
to renew this Agreement for an additional term of five (5)
years ("the First Renewal Term"). Upon the expiration of the
First Renewal Term, BAC, in its sole discretion, shall be
entitled to renew this Agreement for an additional term of
five (5) years ("the Second Renewal Term"). Upon the
expiration of the Second Renewal Term, BAC, in its sole
discretion, shall be entitled to renew this Agreement for an
additional term of five (5) years ("the Third Renewal Term").
Upon the expiration of the Third Renewal Term, BAC, in its
sole discretion, shall be entitled to renew this Agreement for
an additional term of five (5) years ("the Fourth Renewal
Term"). Upon the expiration of the Fourth Renewal Term, BAC,
in its sole discretion, shall be entitled to renew this
Agreement for an additional term of five (5) years ("the Fifth
Renewal Term"). With respect to each aforesaid renewal term,
BAC shall be deemed to have exercised its renewal right unless
BAC notifies Allison, at least thirty (30) days prior to the
expiration of the immediately preceding term, that it desires
to terminate this Agreement. In the event BAC provides such
notice to
-4-
<PAGE> 5
Allison within the aforesaid time period, this Agreement shall
expire on the last day of such immediately preceding term.
Notwithstanding any contrary provision of this Section 4,
either party may immediately terminate this Agreement upon the
material breach of this Agreement by the other party;
provided, however, in the event BAC defaults in the
performance of its financial obligations under this Agreement,
Allison shall give written notice of such default to BAC, and
Allison shall not be entitled to terminate this Agreement
unless such default is not cured within thirty (30) days after
BAC's receipt of such notice. Upon the expiration or
termination of this Agreement, BAC shall cease and desist from
all use of the subject matter of the Exclusive License.
5. LICENSE FEES.
(a) BAC shall pay to Allison, in monthly installments on
the fifteenth (15th) day of each calendar month
comprising the term of this Agreement, the following
annual fixed license fees ("Fixed Fees", in the
plural, and "Fixed Fee", in the singular).
(i) With respect to the first twelve (12) month
period of the Initial Term, the annual Fixed
Fee shall be $36,000. With respect to each
succeeding twelve (12)
-5-
<PAGE> 6
month period of the Initial Term, the annual
Fixed Fee shall be $48,000.
(ii) With respect to each twelve (12) month
period of the First Renewal Term, if any,
the annual Fixed Fee shall be $52,800.
(iii) With respect to each twelve (12) month
period of the Second Renewal Term, if any,
the annual Fixed Fee shall be $58,080.
(iv) With respect to each twelve (12) month
period of the Third Renewal Term, if any,
the annual Fixed Fee shall be $63,888.
(v) With respect to each twelve (12) month
period of the Fourth Renewal Term, if any,
the annual Fixed Fee shall be $70,277.
(vi) With respect to each twelve (12) month
period of the Fifth Renewal Term, if any,
the annual Fixed Fee shall be $77,305.
(b) In addition to the Fixed Fees referred to in Section
5(a) hereinabove, BAC shall pay to Allison, within
sixty (60) days after the conclusion of each
accounting year of BAC comprising part of the term of
this Agreement, the annual contingent license fees
("Contingent Fees", in the plural, and "Contingent
Fee", in the singular), as provided for in, and
-6-
<PAGE> 7
strictly in accordance with, the succeeding
provisions of this Section 5(b).
(i) If, with respect to any accounting year of
BAC comprising part of the term of this
Agreement, BAC's annual net sales during
such year do not exceed $100,000,000,
Allison shall be entitled to receive a
Contingent Fee with respect to such year in
an amount equal to the excess of the First
Tier Net Sales Base over the aggregate
monthly Fixed Fees to which Allison is
entitled with respect to such year. For the
purposes of this Section 5(b)(i), the First
Tier Net Sales Base shall be the product
obtained by multiplying the annual net sales
during such year by .001 (i.e., one-tenths
percent).
(ii) If, with respect to any accounting year of
BAC comprising part of the term of this
Agreement, BAC's annual net sales during
such year exceed $100,000,000, Allison shall
be entitled to receive a Contingent Fee with
respect to such year in an amount equal to
the excess of the sum of the Second Tier Net
Sales Base and the Third Tier Net Sales Base
over the aggregate monthly Fixed Fees to
which Allison is entitled with respect to
such
-7-
<PAGE> 8
year. For the purposes of this Section
5(b)(ii), the Second Tier Net Sales Base
shall be the product obtained by multiplying
the first $100,000,000 of annual net sales
during such year by .001 (i.e., one-tenths
percent). For the purposes of this Section
5(b)(ii), the Third Tier Net Sales Base
shall be the product obtained by multiplying
annual net sales during such year in excess
of $100,000,000 by .0003 (i.e.,
three-hundredths percent). With respect to
the succeeding provisions of this Section
5(b), the Second Tier Net Sales Base and the
Third Net Sales Base are referred to
collectively as "the Combined Net Sales
Base".
(iii) Sections 5(b)(i) and Section 5(b)(ii)
hereinabove shall constitute mutually
exclusive provisions of this Agreement. The
First Tier Net Sales Base and the Combined
Net Sales Base shall not both be applicable
during any accounting year of BAC. If BAC's
annual net sales during a particular
accounting
-8-
<PAGE> 9
year of BAC do not exceed $100,000,000, only
the First Tier Net Sales Base shall be
applicable with respect to such year. If
BAC's annual net sales during a particular
accounting year of BAC exceed $100,000,000,
only the Combined Net Sales Base shall be
applicable with respect to such year.
(iv) For the purpose of this Section 5(b), the
term "accounting year of BAC" means the
twelve (12) month period adopted by BAC for
financial accounting purposes.
(v) Notwithstanding any contrary provision of or
interpretation of this Section 5(b), in the
event any accounting year of BAC comprising
part of the term of this Agreement does not
constitute twelve (12) months, the
Contingent Fee shall be determined solely
with reference to BAC's actual net sales
during such partial accounting year of BAC.
Furthermore, notwithstanding any contrary
provision of or interpretation of this
Section 5(b), Allison shall be entitled to
receive a Contingent Fee with respect to
such partial accounting year of BAC in an
amount equal to the excess of the First Tier
Net Sales Base or the Combined Net Sales
Base, as the case may be, over the aggregate
monthly Fixed Fees to which Allison is
entitled with respect to such partial
accounting year of BAC. For the purpose of
the
-9-
<PAGE> 10
immediately preceding sentence, the First
Tier Net Sales Base or the Combined Net
Sales Base, as the case may be, shall be
determined solely with reference to BAC's
actual net sales during such partial
accounting year. If BAC's actual net sales
during a particular partial accounting year
of BAC do not exceed $100,000,000, only the
First Tier Net Sales Base (as described in
this Section 5(b)(v)) shall be applicable
with respect to such partial year. If BAC's
actual net sales during a particular partial
accounting year of BAC exceed $100,000,000,
only the Combined Net Sales Base (as
described in this Section 5(b)(v)) shall be
applicable with respect to such partial
year.
(vi) The parties acknowledge and agree that the
First Tier Net Sales Base and the Combined
Net Sales Base used in determining the
Contingent Fees provided for herein shall be
determined with reference to the accounting
years of BAC (full or partial, as the case
may be), not with reference to the twelve
(12) month periods described in Section 5(a)
hereinabove.
(vii) If, with respect to any full or partial
accounting year of BAC, the applicable First
Tier Net Sales
-10-
<PAGE> 11
Base or the applicable Combined Net Sales
Base, as the case may be, does not exceed
the aggregate monthly Fixed Fees to which
Allison is entitled with respect to such
year, Allison shall not receive any
Contingent Fee with respect to such year.
6. STOCK PURCHASE OPTION.
(a) Commencing one hundred eighty (180) days after the
Effective Date, and continuing until fifteen (15)
days after the expiration or termination of this
Agreement, Allison shall be entitled to purchase from
BAC 75 shares of BAC's common stock at a price of
$600 per share ("the Option"). In the event Allison
does not exercise the Option within the aforesaid
period, the Option shall lapse and shall become
invalid. If at the time Allison exercises the Option
he is in breach of this Agreement, his rights with
respect to the Option shall be suspended until such
time as such breach is cured to the satisfaction of
BAC. If, after Allison purchases BAC common stock
pursuant to the Option ("the Option Stock"), Allison
commits a material breach of this Agreement (whether
such breach is an act or an omission), and BAC
terminates this Agreement as a direct result of such
breach, Allison shall, at BAC's
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<PAGE> 12
election and in BAC's sole discretion, be obligated
to sell the Option Stock to BAC for an amount equal
to the price paid by Allison to BAC therefor. The
Option shall not be transferred by Allison to any
individual or entity, without the prior written
consent of BAC.
(b) The parties acknowledge that BAC contemplates merging
into 2Connect Acquisition Corp. ("Acquisition"), a
Florida corporation, pursuant to a forward triangular
merger under the Internal Revenue Code, in which
capital stock of Acquisition's parent company,
2Connect Express, Inc. ("2Connect"), a Florida
corporation, will be exchanged for the capital stock
of BAC. In connection with such merger ("the
Merger"), Acquisition will be the surviving entity,
and BAC's corporate existence shall cease. In the
event the Merger is consummated, BAC shall use its
best efforts to cause the Option to be converted into
an option permitting Allison to purchase 7,500 shares
of 2Connect's common stock at a price of $6 per share
("the 2Connect Option"). The 2Connect Option shall be
subject to the same provisions set forth in Section
6(a) hereinabove, with respect to exercise rights,
lapse events, suspension events, and transfer
restrictions; moreover, any common stock of 2Connect
acquired by Allison
-12-
<PAGE> 13
pursuant to the 2Connect Option ("the 2Connect
Stock") shall be subject to the same provisions set
forth in Section 6(a) hereinabove with respect to
resale and repurchase upon Allison's commission of a
material breach of this Agreement. For the purpose of
the immediately preceding sentences, 2Connect shall
be substituted for BAC in applying the provisions of
Section 6(a) hereinabove to the 2Connect Option and
the 2Connect Stock.
7. ADVERTISING AND PERSONAL APPEARANCES.
(a) Allison shall perform promotional and advertising
activities for BAC, as requested by BAC, including,
but not limited to, radio advertisements, television
advertisements, other mass media advertising, and
promotional activities. However, such activities
shall not exceed forty-eight (48) hours with respect
to any twelve (12) month period of this Agreement.
(b) During each twelve (12) month period of this
Agreement, Allison shall personally appear on behalf
of BAC at eight (8) separate promotional events or
other events scheduled by BAC. BAC may, in its sole
discretion, cause Allison to personally appear on
behalf of BAC at more than eight (8) promotional or
other events scheduled by BAC, in which case Allison
shall be
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<PAGE> 14
entitled to receive the sum of $1,500 for each
personal appearance in excess of eight (8) personal
appearances during any twelve (12) month period of
this Agreement.
(c) Allison shall not be entitled to receive any
compensation for performance of the activities
described in Section 7(a) or the eight (8) personal
appearances for the events described in Section 7(b).
However, with respect to the personal appearances
described in Sections 7(a) and 7(b), BAC shall pay
directly, or reimburse Allison for, the personal
travel expenses paid or incurred by Allison with
respect to such personal appearances, provided that
such expenses are approved in advance, in writing, by
BAC.
8. AUTHORITY AND TITLE. Allison represents and warrants that he
owns, or has full authority to license to BAC, the subject
matter of the Exclusive License and the subject matter of the
Non-exclusive License, as described in Section 3. During the
term of this Agreement, Allison shall not at any time do or
cause to be done, or fail to do, any act or thing that will in
any way impair his ownership, or authority to license to BAC,
such subject matter. Allison further represents and warrants
that he has full authority to enter into this Agreement and
that this Agreement does not infringe upon any proprietary,
patent, copyright,
-14-
<PAGE> 15
trademark, or servicemark rights of any third party. Allison
shall indemnify and hold harmless BAC from and against any
claims or damages asserted against BAC by any third party in
connection with any untrue representation or warranty
described in this Section 8; moreover, Allison shall reimburse
BAC for all expenses incurred or paid by BAC that are directly
or indirectly related to such claims or damages, including but
not limited to, reasonable attorney fees, court costs,
incidental damages, and consequential damages. For the
purposes of this Agreement, a third party is any individual or
entity other than the parties.
9. LACK OF ECONOMIC FEASIBILITY. Notwithstanding any contrary
provision of this Agreement, in the event BAC shall determine
that its use of the Exclusive License or the Non-exclusive
License is not economically feasible or not profitable with
respect to its business, BAC shall be entitled to terminate
this Agreement upon thirty (30) days prior written notice.
10. TRANSFER OR ASSIGNMENT. BAC shall be entitled to transfer or
assign its rights or obligations (or both) under this
Agreement to a successor, transferee, or assignee upon
providing to Allison evidence of such succession, transfer, or
assignment in advance, provided that BAC's successor,
transferee, or assignee agrees, in writing, to be bound by
-15-
<PAGE> 16
the terms of this Agreement to the extent such terms relate to
the rights and obligations succeeded to, transferred, or
assigned. Allison shall not be entitled to transfer or assign
his obligations under this Agreement that relate to personal
appearances or personal services; however, Allison shall be
entitled to transfer or assign his rights or other obligations
(or both) under this Agreement to a successor, transferee, or
assignee upon providing to BAC evidence of such succession,
transfer, or assignment in advance, provided that Allison's
successor, transferee, or assignee agrees, in writing, to be
bound by the terms of this Agreement to the extent such terms
relate to the rights and obligations succeeded to,
transferred, or assigned.
11. BUSINESS RELATIONSHIP BETWEEN THE PARTIES. Each party agrees
that the other party is an independent contractor, not an
employee of such party. Each party shall be solely responsible
for any income tax, social security tax, self-employment tax,
or other tax applicable to remuneration paid to such party by
the other party pursuant to this Agreement. Each party agrees
to indemnify and hold harmless the other party for any
liability resulting from such party's nonpayment of such
taxes.
-16-
<PAGE> 17
12. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement represents the
entire agreement of the parties hereto with respect
to the subject matter hereof. Correspondence,
memoranda, notes, discussions, or agreements, whether
written or oral, originating before the date of this
Agreement are replaced in total by this Agreement.
(b) BINDING EFFECT. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties and
their respective legal representatives, successors,
and permitted assigns.
(c) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the
State of Florida. The state courts of Pinellas
County, Florida shall have exclusive jurisdiction
over any judicial proceeding relating to any dispute
out of the interpretation, performance, or breach of
this Agreement.
(d) INTERPRETATION. The language used in this Agreement
shall not be construed in favor of or against either
party, but shall be construed as if both parties
prepared this Agreement. The language used in this
Agreement shall be deemed to be the language chosen
by the parties to express their mutual intent, and no
rule
-17-
<PAGE> 18
of strict construction shall be applied against
either party.
(e) NOTICE. Any notice or other communication which is
required, or which may be given, under this Agreement
shall be in writing and shall be effective upon
actual receipt, except as otherwise provided
hereinbelow. Any such notice or communication shall
be personally delivered or sent by certified mail,
return receipt requested, first class postage
prepaid. In each case, notice shall be given to the
parties at the following addresses:
If to BAC: BOBBY ALLISON CELLULAR SYSTEMS OF
FLORIDA, INC.
2055 Lake Avenue S.E.
Suite A
Largo, Florida 33771
If to Allison: Robert A. Allison
140 Church Avenue
Hueytown, Alabama 35023
With a copy to: Edward L. Hardin, Jr.
2201 Arlington Avenue
Birmingham, Alabama 35205
Either party may change such party's address for the
purposes of this Agreement by giving written notice
of the new address to the other party in accordance
with one of the mediums described hereinabove.
Rejection of, or any other refusal to accept,
delivery of any notice required or permitted to be
given under this
-18-
<PAGE> 19
Agreement shall cause such notice to be effective
when sent. The inability to deliver any notice
required or permitted to be given under this
Agreement because of a changed address for which no
notice was given shall cause such notice to be
effective when sent.
(f) HEADINGS. The titles and headings of the various
sections of this Agreement are intended solely for
convenience of reference and are not intended to
explain, modify or place any interpretation upon any
of the provisions of this Agreement.
(g) AMENDMENT. This Agreement may be amended only by a
writing signed by both of the parties.
(h) SEVERABILITY. If any part of this Agreement is
determined to be illegal or unenforceable, all other
parts shall be given effect separately and shall not
be affected.
(i) NONWAIVER. No waiver of any provision of this
Agreement, express or implied, shall be valid unless
the same is in writing and signed by the party
against whom it is sought to be enforced. No assent
or waiver, express or implied, of any breach of any
one or more of the covenants, conditions or
provisions of this Agreement shall be deemed a waiver
of any subsequent
-19-
<PAGE> 20
breach, or a waiver of any other covenant, condition
or provision of this Agreement.
(j) ATTORNEY'S FEES. The prevailing party to a dispute
between, or litigation between, the parties, if said
dispute or litigation relates to this Agreement,
shall be entitled to reimbursement from the
non-prevailing party for such prevailing party's
reasonable costs and expenses, including reasonable
attorneys' fees. For purposes of this Agreement, the
"prevailing party" shall be deemed to be that party
who obtains substantially the result sought, whether
by settlement, mediated or otherwise, dismissal, or
judgment. For purposes of this Agreement, the term
"reasonable attorneys' fees" shall include, without
limitation, the actual attorneys' fees incurred in
retaining counsel for advice, negotiations, suit,
appeal, or any other legal proceeding, including
mediation and arbitration.
(k) ADDITIONAL DOCUMENTS. Each party agrees to execute
and acknowledge, if required, any and all other
documents and writings which may be necessary to
carry out the purposes and provisions of this
Agreement.
(l) COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed
an
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<PAGE> 21
original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date or dates set forth hereinbelow, to be effective for all purposes as of the
Effective Date.
/s/ Nancy H. Waldron /s/ Robert A. Allison
- -------------------------- ------------------------------
Signature of Witness Robert A. Allison a/k/a
Bobby Allison
Nancy H. Waldron Date: 12/31/98
- -------------------------- --------------------
Printed Name of Witness
/s/ Edward C. Hardin, Jr.
- --------------------------
Signature of Witness
Edward C. Hardin, Jr.
- --------------------------
Printed Name of Witness
BOBBY ALLISON CELLULAR SYSTEMS
OF FLORIDA, INC.
/s/ Paul E. Farmer II By: /s/ Robert L. McGinnis
- -------------------------- --------------------------
Signature of Witness Robert L. McGinnis
Title: Its Chief Executive Officer
Paul E. Farmer II Date: 12/31/98
- -------------------------- -------------------------
Printed Name of Witness
/s/ Dulci Seaver
- --------------------------
Signature of Witness
Dulci Seaver
- --------------------------
Printed Name of Witness
/s/ Paul E. Farmer II By: /s/ James L. Ralph
- -------------------------- --------------------------
Signature of Witness James L. Ralph
Title: Its President
Paul E. Farmer II Date: 12/31/98
- -------------------------- -------------------------
Printed Name of Witness
/s/ Dulci Seaver
- --------------------------
Signature of Witness
Dulci Seaver
- --------------------------
Printed Name of Witness
-21-
<PAGE> 1
Exhibit 10.27
BOBBY ALLISON WIRELESS CORPORATION
1999 STOCK OPTION PLAN
<PAGE> 2
BOBBY ALLISON WIRELESS CORPORATION
1999 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS..............................................................................................1
1.1 "Board".........................................................................................1
1.2 "Change in Control" shall.......................................................................1
1.3 "Code"..........................................................................................1
1.4 "Company".......................................................................................1
1.5 "Director"......................................................................................1
1.6 "Disability"....................................................................................1
1.7 "Disinterested Person"..........................................................................2
1.8 "Eligible Participants" and "Eligible Participant"..............................................2
1.9 "Employee"......................................................................................2
1.10 "Employer"......................................................................................2
1.11 "Exchange Act"..................................................................................2
1.12 "Exercise Price"................................................................................2
1.13 "Fair Market Value".............................................................................2
1.14 "Grantee".......................................................................................2
1.15 "Incentive Stock Options".......................................................................2
1.16 "Non-Qualified Stock Options"...................................................................2
1.17 "Officer".......................................................................................2
1.18 "Option"........................................................................................2
1.19 "Optionee"......................................................................................2
1.20 "Permitted Transferee"..........................................................................3
1.21 "Plan"..........................................................................................3
1.22 "Purchasable"...................................................................................3
1.23 "Qualified Domestic Relations Order"............................................................3
1.24 "Reload Option".................................................................................3
1.25 "Section 16 Insider"............................................................................3
1.26 "Stock".........................................................................................3
1.27 "Stock Option Agreement"........................................................................3
1.28 "Stock Purchase Agreement"......................................................................3
1.29 "Subsidiary"....................................................................................3
ARTICLE II
THIS PLAN................................................................................................3
2.1 PURPOSE.........................................................................................3
2.2 EFFECTIVE DATE..................................................................................4
ARTICLE III
PARTICIPANTS.............................................................................................4
ARTICLE IV
ADMINISTRATION...........................................................................................4
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.1 DUTIES AND POWERS OF THE BOARD...................................................................4
4.2 INTERPRETATION; RULES............................................................................4
4.3 NO LIABILITY.....................................................................................4
4.4 MAJORITY RULE....................................................................................4
4.5 COMPANY ASSISTANCE...............................................................................4
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN...........................................................................5
5.1 LIMITATIONS......................................................................................5
5.2 ANTIDILUTION.....................................................................................5
ARTICLE VI
OPTIONS...................................................................................................6
6.1 TYPES OF OPTIONS GRANTED.........................................................................6
6.2 OPTION GRANT AND AGREEMENT.......................................................................6
6.3 OPTIONEE LIMITATIONS.............................................................................6
6.4 $100,000 LIMITATION..............................................................................7
6.5 EXERCISE PRICE...................................................................................7
6.6 EXERCISE PERIOD..................................................................................7
6.7 OPTION EXERCISE..................................................................................7
6.8 RELOAD OPTIONS...................................................................................8
6.9 NONTRANSFERABILITY OF OPTION.....................................................................9
6.10 TERMINATION OF EMPLOYMENT OR SERVICE.............................................................9
6.11 EMPLOYMENT RIGHTS................................................................................9
6.12 CERTAIN SUCCESSOR OPTIONS.......................................................................10
6.13 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS................................10
ARTICLE VII
STOCK CERTIFICATES.......................................................................................10
ARTICLE VIII
TERMINATION AND AMENDMENT OF PLAN........................................................................11
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS.................................................................11
ARTICLE X
MISCELLANEOUS............................................................................................11
10.1 FORFEITURE FOR COMPETITION......................................................................11
10.2 PLAN BINDING ON SUCCESSORS......................................................................11
10.3 SINGULAR, PLURAL; GENDER........................................................................11
10.4 HEADINGS, ETC...................................................................................11
Exhibit A........................................................................................................A-1
</TABLE>
ii
<PAGE> 4
BOBBY ALLISON WIRELESS CORPORATION
1999 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless
the context clearly indicates to the contrary:
1.1 "Board" means the Board of Directors of the Company.
1.2 "Change in Control" shall mean the occurrence of either of the
following events:
(a) a change in the composition of the Board as a result of
which fewer than one-half (1/2) of the incumbent Directors are Directors who
either:
(i) Had been directors of the Company twelve (12)
months prior to such change; or
(ii) Were elected, or nominated for election, to the
Board with the affirmative votes of at least the majority of
the directors who have been directors of the Company twelve
(12) months prior to such change and who were still in office
at the time of the election or nomination; or
(b) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), other than any person who is a
shareholder of the Company on or before the effective date of this Plan, by the
acquisition or the aggregation of securities of the Company is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities ordinarily (and a part from rights
accruing under special circumstances) having the right to vote at elections of
Directors (the "Base Voting Securities"); except that any change in the relative
beneficial ownership of the Company's securities by any person resulting solely
from a reduction in the aggregate number of outstanding shares of Base Voting
Securities, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any securities of
the Company.
1.3 "Code" means the Internal Revenue Code of 1986, as amended,
including effective date and transition rules (whether or not codified). Any
reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of future law.
1.4 "Company" means Bobby Allison Wireless Corporation, a Florida
corporation.
1.5 "Director" shall mean a member of the Board and any person who is
an advisory, honorary or emeritus director of the Company if such person is
considered a director for the purposes of Section 16 of the Exchange Act, as
determined by reference to such Section 16 and to the rules, regulations,
judicial decisions, and interpretative or "no-action" positions with respect
thereto of the Securities and Exchange Commission, as the same may be in effect
or set forth from time to time.
1.6 "Disability" shall have the meaning set forth in Section 22(e)(3)
of the Code.
1
<PAGE> 5
1.7 "Disinterested Person" shall have the meaning set forth in Rule
16b-3 under the Exchange Act, as the same may be in effect from time to time, or
in any successor rule thereto, and shall be determined for all purposes under
this Plan according to interpretative or "no-action" positions with respect
thereto issued by the Securities and Exchange Commission.
1.8 "Eligible Participants" and "Eligible Participant" means those
persons within the classes of persons identified in Article III of this Plan.
1.9 "Employee" means an employee of the Company or a Subsidiary of the
Company.
1.10 "Employer" shall mean the corporation that employs a Grantee.
1.11 "Exchange Act" shall mean the Securities Exchange Act of 1934. Any
reference herein to a specific section of the Exchange Act shall be deemed to
include a reference to any corresponding provision of future law.
1.12 "Exercise Price" means the price at which an Optionee may purchase
a share of Stock under a Stock Option Agreement.
1.13 "Fair Market Value" on any date shall mean (i) the closing sales
price of the Stock on such date on the national securities exchange having the
greatest volume of trading in the Stock during the thirty-day period preceding
the day the value is to be determined or, if such exchange was not open for
trading on such date, the next preceding date on which it was open; (ii) if the
Stock is not traded on any national securities exchange, the average of the
closing high bid and low asked prices of the Stock on the over-the-counter
market on the day such value is to be determined, or in the absence of closing
bids on such day, the closing bids on the next preceding day on which there were
bids; or (iii) if the Stock also is not traded on the over-the-counter market,
the fair market value as determined in good faith by the Board or the Board
based on such relevant facts as may be available to the Board, which may include
opinions of independent experts, the price at which recent sales have been made,
the book value of the Stock, and the Company's current and future earnings.
1.14 "Grantee" shall mean a person who is an Optionee.
1.15 "Incentive Stock Options" means Options which comply with and are
subject to the terms, limitations and conditions of Section 422 of the Code and
any regulations promulgated with respect thereto.
1.16 "Non-Qualified Stock Options" means Options which do not comply
with the provisions of Section 422 of the Code.
1.17 "Officer" shall mean a person who constitutes an officer of the
Company or a Subsidiary of the Company or for the purposes of Section 16 of the
Exchange Act, as determined by reference to such Section 16 and in the rules,
regulations, judicial decisions, and interpretative or "no-action" positions
with respect thereto of the Securities and Exchange Commission, as the same may
be in effect or set forth from time to time.
1.18 "Option" means an option, whether or not an Incentive Stock
Option, to purchase Stock granted pursuant to the provisions of Article VI
hereof.
1.19 "Optionee" means a person to whom an Option has been granted
hereunder.
2
<PAGE> 6
1.20 "Permitted Transferee" shall mean, with respect to an Optionee,
any member of such Optionee's immediate family and any charitable, religious,
scientific, or educational organization, contributions to which are deductible
for federal or state income tax purposes, and any trust or other vehicle for the
benefit of such a family member or organization.
1.21 "Plan" means the Bobby Allison Wireless Corporation 1999 Stock
Option Plan, the terms of which are set forth herein.
1.22 "Purchasable" refers to Stock which may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
1.23 "Qualified Domestic Relations Order" means an order with the
meaning set forth in the Code or in the Employee Retirement Income Security Act
of 1974, or the rules and regulations promulgated under the Code or such Act, as
the same may be in effect from time to time.
1.24 "Reload Option" shall have the meaning set forth in Section 6.8
hereof.
1.25 "Section 16 Insider" shall mean any person who is subject to the
provisions of Section 16 of the Exchange Act, as provided in Rule 16a-2
promulgated pursuant to the Exchange Act.
1.26 "Stock" means the common stock, par value $.01 per share, of the
Company, as adjusted pursuant to Section 5.2 hereof.
1.27 "Stock Option Agreement" means an agreement between the Company
and an Optionee under which the Optionee may purchase Stock hereunder, a sample
form of which is attached hereto as EXHIBIT "A" (which form, subject to the
provisions of this Plan, may be varied by the Board in granting an Option).
1.28 "Stock Purchase Agreement" means any agreement which the Board, in
its own discretion, may require the Optionee to execute and deliver to the
Company before such Optionee exercises an Option.
1.29 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
grant of the Option, each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
ARTICLE II
THIS PLAN
2.1 PURPOSE. The purpose of this Plan is to advance the interests of
the Company, its Subsidiaries, and the Company's shareholders by affording
certain employees of the Company and its Subsidiaries an opportunity to acquire
or increase their proprietary interests in the Company. The objective of the
issuance of the Options is to promote the growth and profitability of the
Company and its Subsidiaries because the Optionee will be provided with an
additional incentive to achieve the Company's objectives through participation
in its success and growth and by encouraging their continued association with or
service to the Company or its Subsidiaries.
2.2 EFFECTIVE DATE. The Plan shall become effective on the date
adopted; provided, however, this Plan shall terminate and all Options granted
theretofore shall become void and may not be exercised on such
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date which is twelve (12) months from the effective date if the stockholders of
the Company shall not by that date have approved this Plan.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in this Plan shall consist
of all Directors, Officers or Employees of the Company and its Subsidiaries
whose participation in this Plan the Board determines to be in the best
interests of the Company.
ARTICLE IV
ADMINISTRATION
4.1 DUTIES AND POWERS OF THE BOARD. This Plan shall be administered by
the Board. The Board shall have the power to act by unanimous written consent in
lieu of a meeting and to meet telephonically. In administering this Plan, the
Board's actions and determinations shall be binding on all interested parties.
The Board shall have the power to grant Options in accordance with the
provisions of this Plan and may grant Options singly, in combination, or in
tandem. Subject to the provisions of this Plan, the Board shall have the
discretion and authority to determine those individuals to whom Options will be
granted, the number of shares of Stock subject to each Option, such other
matters as are specified herein, and any other terms and conditions of a Stock
Option Agreement. To the extent not inconsistent with the provisions of this
Plan, the Board may give an Optionee an election to surrender an Option in
exchange for the grant of a new Option, and shall have the authority to amend or
modify an outstanding Stock Option Agreement, or to waive any provision thereof,
provided that the Optionee consents to such action.
4.2 INTERPRETATION; RULES. Subject to the express provisions of this
Plan, the Board also shall have authority to interpret this Plan, to prescribe,
amend, and rescind rules and regulations relating to it, to determine the
details and provisions of each Stock Option Agreement and to make all other
determinations necessary or advisable for the administration of this Plan,
including, without limitation, amending or altering this Plan and any Options
granted hereunder as may be required to comply with or to conform to any
federal, state, or local laws or regulations.
4.3 NO LIABILITY. No member of the Board shall be liable to any person
for any act or determination made in good faith with respect to this Plan or any
Option granted hereunder.
4.4 MAJORITY RULE. Action may only be taken by the affirmative vote of
a majority of the Board.
4.5 COMPANY ASSISTANCE. The Company shall supply full and timely
information to the Board on all matters relating to Eligible Participants, their
employment, death, retirement, disability, or other termination of employment,
and such other pertinent facts as the Board may require. The Company shall
furnish the Board with such clerical and other assistance as is necessary in the
performance of its duties under this Plan.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 LIMITATIONS. Subject to any antidilution adjustment pursuant to the
provisions of Section 5.2 hereof, the maximum number of shares of Stock that may
be issued in the aggregate pursuant to this Plan shall be such number as is
equal at any time to ten (10) percent of the outstanding shares of Stock on a
fully diluted
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basis, taking into account the number of shares of stock which may be issued
pursuant to outstanding convertible securities, but which number shall, in no
event, be greater than One Hundred Thousand (100,000). Shares of Stock subject
to an Option must be authorized and unissued shares. The shares covered by any
unexercised portion of an Option that has terminated for any reason (except as
set forth in the paragraph immediately below), may again be optioned under this
Plan, and such shares shall not be considered as having been optioned or issued
in computing the number of shares of Stock remaining available for option
hereunder.
In the event of the issuance of Options in respect of options to
acquire stock of any entity acquired, by merger or otherwise, by the Company (or
any Subsidiary of the Company), to the extent that such issuance shall not be
inconsistent with the terms, limitations and conditions of Code section 422 or
Rule 16b-3 under the Exchange Act, the aggregate number of shares of stock for
which Options may be granted hereunder shall automatically be increased by the
number of shares subject to the Options so issued; PROVIDED, HOWEVER, that the
aggregate number of shares of Stock for which Options may be granted hereunder
shall automatically be decreased by the number of shares covered by any
unexercised portion of an Option so issued that has terminated for any reason,
and the shares subject to any such unexercised portion may not be optioned to
any other person.
5.2 ANTIDILUTION.
(a) In the event that the outstanding shares of Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination or exchange of shares, stock
split or stock dividend, or in the event that any spin-off, split-up, split-off,
or other distribution of assets which materially affects the Fair Market Value
of the Stock:
(i) The aggregate number and kind of shares of Stock
for which Options may be granted hereunder shall be adjusted
proportionately by the Board; and
(ii) The rights of Optionee (concerning the number of
shares subject to Options and the Exercise Price) under
outstanding Options shall be adjusted proportionately by the
Board.
(b) If the Company shall be a party to any reorganization in
which it does not survive, involving merger, consolidation, or acquisition of
the stock or substantially all the assets of the Company, the Board, in its
discretion, may:
(i) notwithstanding other provisions hereof, declare
that all Options granted under this Plan shall become
exercisable immediately notwithstanding the provisions of the
respective Stock Option Agreements regarding exercisability
and that all such Options shall terminate 30 days after the
Board gives written notice of the immediate right to exercise
all such Options and of the decision to terminate all Options
not exercised within such 30-day period; and/or
(ii) notify all Optionees that all Options granted
under this Plan shall be assumed by the successor corporation
or substituted on an equitable basis with options issued by
such successor corporation.
(c) If the Company is to be liquidated or dissolved or
otherwise ceases to exist in connection with a reorganization described in
Section 5.2(b), the provisions of such section shall apply. In
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all other instances, the adoption of a plan of dissolution or liquidation of the
Company shall, notwithstanding other provisions hereof, cause every Option
outstanding under this Plan to terminate to the extent not exercised prior to
the adoption of the plan of dissolution or liquidation by the shareholders;
PROVIDED that, notwithstanding other provisions hereof, the Board may declare
all Options granted under this Plan to be exercisable at any time on or before
the fifth business day following such adoption notwithstanding the provisions of
the respective Stock Option Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of
this Section 5.2, and the manner of their application, shall be determined by
the Board, and any such adjustment may provide for the elimination of fractional
share interests; PROVIDED, HOWEVER, that any adjustment made by the Board shall
be made in a manner that will not cause an Incentive Stock Option to be other
than an incentive stock option under applicable statutory and regulatory
provisions. The adjustments required under this Article V shall apply to any
successors of the Company and shall be made regardless of the number or type of
successive events requiring such adjustments.
ARTICLE VI
OPTIONS
6.1 TYPES OF OPTIONS GRANTED. The Board may, under this Plan, grant
either Incentive Stock Options or Non-Qualified Stock Options. Within the
limitations provided in this Plan, both types of Options may be granted to the
same person at different times, under different terms and conditions, as long as
the terms and conditions of each Option are consistent with the provisions of
this Plan. Without limitation of the foregoing, Options may be granted subject
to conditions based on the financial performance of the Company or any other
factor the Board deems relevant.
6.2 OPTION GRANT AND AGREEMENT. Each Option granted hereunder shall be
evidenced by minutes of a meeting or the written consent of the Board and by a
written Stock Option Agreement executed by the Company and the Optionee. The
terms of the Option, including the Option's duration, time or times of exercise,
exercise price, and whether the Option is intended to be an Incentive Stock
Option, shall be stated in the Stock Option Agreement. No Incentive Stock Option
may be granted more than ten years after the earlier to occur of the effective
date of this Plan or the date this Plan is approved by the Company's
shareholders. Separate Stock Option Agreements may be used for Incentive Stock
Options and NonQualified Stock Options, but any failure to use such separate
agreements shall not invalidate, or otherwise adversely affect the Optionee's
interest in, the Options evidenced thereby.
6.3 OPTIONEE LIMITATIONS. The Board shall not grant an Incentive Stock
Option to any person who, at the time the Incentive Stock Option is granted:
(a) is not an Officer or Employee; or
(b) owns or is considered to own stock possessing at least 10%
of the total combined voting power of all classes of stock of the Company or its
Subsidiaries; PROVIDED, HOWEVER, that this limitation shall not apply if at the
time an Incentive Stock Option is granted the Exercise Price is at least
110% of the Fair Market Value of the Stock subject to such Option and such
Option by its terms would not be exercisable after five years from the date on
which the Option is granted. For the purpose of this subsection (b), a person
shall be considered to own (i) the stock owned, directly or indirectly, by or
for his or her brothers and sisters (whether by whole or half blood), spouse,
ancestors and lineal descendants; (ii) the stock owned, directly or indirectly,
by or for a corporation, partnership, estate, or trust in proportion to such
person's stock interest,
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partnership interest or beneficial interest therein; and (iii) the stock which
such person may purchase under any outstanding Options of the Company or of any
Subsidiary of the Company.
6.4 $100,000 LIMITATION. Except as provided below, the Board shall not
grant an Incentive Stock Option to, or modify the exercise provisions of
outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Company and any Subsidiary of the Company
such that the aggregate Fair Market Value (determined as of the respective dates
of grant or modification of each option) of the Stock with respect to which such
Incentive Stock Options are exercisable for the first time during any calendar
year is in excess of $100,000 (or such other limit as may be prescribed by the
Code from time to time); PROVIDED that the foregoing restriction on modification
of outstanding Incentive Stock Options shall not preclude the Board from
modifying an outstanding Incentive Stock Option if, as a result of such
modification and with the consent of the Optionee, such Option no longer
constitutes an Incentive Stock Option; and PROVIDED that, if the $100,000
limitation (or such other limitation prescribed by the Code) described in this
Section is exceeded, the Incentive Stock Option the granting or modification of
which resulted in the exceeding of such limit shall be treated as an Incentive
Stock Option up to the limitation and the excess shall be treated as a
Non-Qualified Stock Option.
6.5 EXERCISE PRICE. The Exercise Price of the Stock subject to each
Option shall be determined by the Board. Subject to the provisions of Section
6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall not be less
than the Fair Market Value of the Stock as of the date the Option is granted (or
in the case of an Incentive Stock Option that is subsequently modified, on the
date of such modification), as adjusted pursuant to Section 5.2 hereof. The
exercise price of a Non-Qualified Stock Option shall not be less than 85% of the
Fair Market Value of the Stock as of the date the Option is granted (or in the
case of a NonQualified Stock Option that is subsequently modified, on the date
of such modification), as adjusted pursuant to Section 5.2 hereof.
6.6 EXERCISE PERIOD. The period for the exercise of each Option granted
hereunder shall be determined by the Board, but the Stock Option Agreement with
respect to each Option intended to be an Incentive Stock Option shall provide
that such Option shall not be exercisable after the expiration of ten years from
the date of grant (or modification) of the Option. In addition, no Option
granted to a Section 16 Insider shall be exercisable prior to the expiration of
six months from the date such Option is granted, other than in the case of the
death or disability of the Optionee.
6.7 OPTION EXERCISE.
(a) Unless otherwise provided in the Stock Option Agreement or
Section 6.6 hereof, an Option may be exercised at any time or from time to time
during the term of the Option as to any or all full shares which have become
Purchasable under the provisions of the Option, but not at any time as to less
than 10 shares unless the remaining shares that have become so Purchasable are
less than 10 shares. The Board shall have the authority to prescribe in any
Stock Option Agreement that the Option may be exercised only in accordance with
an accrual schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the
Company at its principal office of a written notice of exercise with respect to
a specified number of shares of Stock (the "Notice"), (ii) payment to the
Company at that office of the full amount of the Exercise Price for such number
of shares in accordance with Section 6.7(c) and (iii) execution and delivery to
the Company of a Stock Purchase Agreement and, if required by the Board, an
escrow agreement and any other documents which the Board may require as a
condition to the issuance of such shares.
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(c) The aggregate amount of the Exercise Price (such aggregate
Exercise Price being the Exercise Price times the number of shares of the Stock
specified in the Notice) is to be paid in full in U.S. Dollars in cash upon the
exercise of the Option and the Company shall not be required to deliver
certificates for the shares purchased until such payment has been made;
PROVIDED, HOWEVER, that in lieu of cash and in the sole discretion of the Board,
all or any portion of such aggregate Exercise Price may be paid by tendering to
the Company shares of Stock duly endorsed for transfer and owned by the Optionee
to be credited against such aggregate Exercise Price at the aggregate Fair
Market Value of such shares on the date of exercise (however, no fractional
shares may be so transferred, and the Company shall not be obligated to make any
cash payments in consideration of any excess of the aggregate Fair Market Value
of Stock transferred over the aggregate Exercise Price); PROVIDED FURTHER, that
the Board may provide in a Stock Option Agreement or may otherwise determine in
its sole discretion at the time of exercise that, in lieu of cash or Stock, all
or a portion of the aggregate Exercise Price may be paid by delivery to the
Company of such other consideration consisting of money or property actually
received by the Company as may be deemed in the sole opinion of the Board to
have a value equal to the aggregate Exercise Price, all subject to compliance
with applicable state and federal laws, rules and regulations.
(d) In addition to and at the time of payment of the aggregate
Exercise Price, the Optionee shall pay to the Company in U.S. Dollars in cash
the full amount of any federal, state, and local income, employment, or other
withholding taxes applicable to the taxable income of such Optionee resulting
from such exercise; PROVIDED, HOWEVER, that in the discretion of the Board, any
Stock Option Agreement may provide that all or any portion of such tax
obligations, together with additional taxes not exceeding the actual additional
taxes to be owed by the Optionee as a result of such exercise, may, upon the
irrevocable election of the Optionee, be paid by tendering to the Company whole
shares of Stock duly endorsed for transfer and owned by the Optionee, or by
authorization to the Company to withhold shares of Stock otherwise issuable upon
exercise of the Option, in either case in that number of shares having an
aggregate Fair Market Value on the date of exercise equal to the amount of such
taxes thereby being paid, and subject to such restrictions as to the approval
and timing of any such election as the Board may from time to time determine to
be necessary or appropriate to satisfy the conditions of the exemption set forth
in Rule 16b-3 under the Exchange Act, if such rule is applicable.
(e) The holder of an Option shall not have any of the rights
of a shareholder with respect to the shares of Stock subject to the Option until
such shares have been issued in the name of and transferred to the Optionee upon
the exercise of the Option.
6.8 RELOAD OPTIONS.
(a) The Board may specify in a Stock Option Agreement (or may
otherwise determine in its sole discretion) that a Reload Option shall be
granted, without further action of the Board, (i) to an Optionee who exercises
an Option (including a Reload Option) by surrendering shares of Stock in payment
of amounts specified in Sections 6.7(c) or 6.7(d) hereof, (ii) for the same
number of shares as are surrendered to pay such amounts, (iii) as of the date of
such payment and at an Exercise Price equal to the Fair Market Value of the
Stock on such date, and (iv) otherwise on the same terms and conditions as the
Option whose exercise has occasioned such payment, except as provided below and
subject to such other contingencies, conditions or other terms as the Board
shall specify at the time such exercised Option is granted; PROVIDED, that, the
shares surrendered by a Section 16 Insider in payment as provided above must
have been held by the Optionee for at least six (6) months prior to such
surrender.
(b) Unless provided otherwise in the Stock Option Agreement, a
Reload Option may not be exercised by an Optionee (i) prior to the end of a
one-year period from the date that the Reload Option is
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granted, and (ii) unless the Optionee retains beneficial ownership of the shares
of Stock issued to such Optionee upon exercise of the Option referred to above
in Section 6.8(a) for a period of one year from the date of such exercise.
6.9 NONTRANSFERABILITY OF OPTION.
(a) No Incentive Stock Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution, and no
Non-Qualified Stock Option shall be transferable by an Optionee other than by
will or the laws of descent and distribution or pursuant to a Qualified Domestic
Relations Order. During the lifetime of an Optionee, Options shall be
exercisable only to the extent specifically permitted under the terms of the
Stock Option Agreement. An Option may be exercised during the Optionee's
lifetime only by the Optionee (or by such Optionee's guardian or legal
representative, should one be appointed).
(b) Except as provided above and unless provided otherwise in
the Stock Option Agreement, Optionees and Permitted Transferees of Optionees may
transfer Options to any person, including a broker-dealer, but the Option shall
not be transferable by any person other than an Optionee or Permitted Transferee
except by will or the laws of descent and distribution or pursuant to a
Qualified Domestic Relations Order. Except as provided above and unless provided
otherwise in the Stock Option Agreement, Options shall be exercisable by any
person to whom such Option has been validly transferred.
6.10 TERMINATION OF EMPLOYMENT OR SERVICE. The Board shall have the
power to specify, with respect to the Options granted to a particular Optionee,
the effect upon such Optionee's right to exercise an Option upon termination of
such Optionee's employment or service under various circumstances, which effect
may include, without limitation, immediate or deferred termination of such
Optionee's rights under an Option, or acceleration of the date at which an
Option may be exercised in full; or, at the option of the Company, purchase of
the Option by the Company or its Subsidiaries upon payment to the Optionee
(against surrender by the Optionee of the Option) of the aggregate Fair Market
Value of the shares of Stock that would have been Purchasable by the Optionee at
the date of such termination of employment or service (with such Fair Market
Value to be determined as of the effective date at any such termination of
employment or service as near to that date as is reasonably possible under the
circumstances), less the aggregate Exercise Price of said shares; PROVIDED,
HOWEVER, that in no event may an Incentive Stock Option be exercised after the
expiration of ten (10) years from the date of grant thereof; nor more than three
(3) months after termination of employment for any reason other than Disability;
nor more than one (1) year after termination of employment by reason of
Disability.
6.11 EMPLOYMENT RIGHTS. Nothing in this Plan or in any Stock Option
Agreement shall confer on any person any right to continue in the employ or
other service of the Company or its Subsidiaries or shall interfere in any way
with the right of the Company or its Subsidiaries to terminate such person's
employment or service therewith.
6.12 CERTAIN SUCCESSOR OPTIONS. To the extent not inconsistent with the
terms, limitations and conditions of Code section 422 and any regulations
promulgated with respect thereto, an Option issued in respect of an option held
by an employee or officer to acquire stock of any entity acquired, by merger,
consolidation, acquisition of property or stock, separation, reorganization, or
liquidation, by the Company (or its Subsidiaries) may contain terms that differ
from those stated in this Article VI, but solely to the extent necessary to
preserve for any such employee the rights and benefits contained in such
predecessor option, or to satisfy the requirements of Code section 424(a).
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6.13 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS.
Subject to the general limitations on Options contained elsewhere in this Plan,
the Board, at its discretion, from time to time may authorize, generally or in
specific cases only, any adjustment in the Exercise Price, the number of shares
subject to, the restrictions upon or the term of, an Option granted under this
Plan by cancellation of an outstanding Option and a subsequent regranting of an
Option, by amendment, by substitution of an outstanding Option, by waiver or by
other legally valid means. Such amendment or other action may result among other
changes in an Exercise Price which is higher or lower than the Exercise Price of
the original or prior Option, provide for a greater or lesser number of shares
subject to the Option, or provide for a longer or shorter vesting or exercise
period. Notwithstanding the foregoing, no Option shall be modified so as to
adversely affect an Optionee's rights under a Stock Option Agreement without the
consent of the Optionee or his or her legal representative.
6.14 CHANGE OF CONTROL. The Board may determine, at the time of
granting an Option or thereafter, that such Option shall become exercisable on
an accelerated basis in the event that a Change in Control occurs with respect
to the Company. If the Board finds there is a reasonable possibility that within
the next succeeding six (6) months, a Change in Control will occur with respect
to the Company, then the Board may determine that all outstanding Options shall
be exercisable on an accelerated basis.
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate
for shares of Stock purchased upon the exercise of any Option granted hereunder
or any portion thereof, prior to fulfillment of all of the following conditions:
(a) The completion of any registration or other qualification
of such shares which the Board shall deem necessary or advisable under any
federal or state law or under the rulings or regulations of the Securities and
Exchange Commission of the United States or any other governmental regulatory
body;
(b) The obtaining of any approval or other clearance from any
federal or state governmental agency or body which the Board shall determine to
be necessary or advisable; and
(c) The lapse of such reasonable period of time following the
exercise of the Option as the Board from time to time may establish for reasons
of administrative convenience.
Stock certificates issued and delivered to Optionee shall bear such restrictive
legends as the Company shall deem necessary or advisable pursuant to applicable
federal and state securities and corporate laws.
ARTICLE VIII
TERMINATION AND AMENDMENT OF PLAN
The Board may at any time terminate this Plan, and may at any time and
from time to time and in any respect amend this Plan; PROVIDED, HOWEVER, that
the Board (unless its actions are approved or ratified by the requisite number
of shareholders of the Company) may not amend this Plan to:
(a) Increase the total number of shares of Stock issuable
pursuant to Incentive Stock Options under this Plan or materially increase the
number of shares of Stock subject to this Plan, in each case except as
contemplated in Section 5.2 hereof;
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(b) Change the class of employees eligible to receive
Incentive Stock Options or materially change the class of persons that may
participate in this Plan; or
(c) Otherwise materially increase the benefits accruing to
Eligible Participants under this Plan.
Except as provided herein, no termination, or amendment, or modification of this
Plan shall affect adversely an Optionee's rights under a Stock Option Agreement
without the consent of the Optionee or his or her legal representative.
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of this Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or its
Subsidiaries; nor shall the adoption of this Plan preclude the Company or its
Subsidiaries from establishing any other form of incentive or other compensation
plan for employees or officers of the Company or employees and officers of the
Company's Subsidiaries.
ARTICLE X
MISCELLANEOUS
10.1 FORFEITURE FOR COMPETITION. If an Optionee provides services to a
competitor of the Company, or its Subsidiaries, whether as an employee, officer,
director, independent contractor, consultant, agent, or otherwise, such services
being of a nature that can reasonably be expected to involve the knowledge,
skills, and experience used or developed by the Optionee while an employee or a
director of the Company, then that Optionee's rights under any Options
outstanding hereunder shall be forfeited and terminated, subject to a
determination to the contrary by the Board.
10.2 PLAN BINDING ON SUCCESSORS. This Plan shall be binding upon the
successors and assigns of the Company.
10.3 SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender and the neuter pronoun shall include the masculine and feminine
genders.
10.4 HEADINGS, ETC. Headings of Articles and Sections hereof are
inserted for convenience and reference; they do not constitute part of this
Plan.
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Exhibit A to Bobby Allison
Wireless Corporation 1999 Stock
Option Plan - Form of Stock
Option Agreement
BOBBY ALLISON WIRELESS CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into as of
this ______ day of __________________________, _______, by and between Bobby
Allison Wireless Corporation, a Florida corporation (the "Company"), and
_____________________ (the "Optionee").
WHEREAS, on March 26, 1999, the Board of Directors of the Company
adopted a stock option plan known as the "Bobby Allison Wireless Corporation
1999 Stock Option Plan" (the "Plan"); and
WHEREAS, the Board (as defined in the Plan) has granted the Optionee a
stock option to purchase the number of shares of the Company's common stock as
set forth below, and in consideration of the granting of that stock option the
Optionee intends to remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan;
NOW, THEREFORE, as a performance incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. INCORPORATION OF PLAN. The option is granted pursuant to the
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the Plan has
been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. GRANT OF OPTION. Subject to the terms, restrictions, limitations and
conditions stated herein, the Company hereby evidences its grant to the
Optionee, not in lieu of salary or other compensation, of the right and option
(the "Option") to purchase all or any part of the number of shares of the
Company's common stock, par value $.01 per share (the "Stock"), set forth on
Schedule A attached hereto and incorporated herein by reference. The Option
shall be exercisable in the amounts and at the times specified on Schedule A.
The Option shall expire and shall not be exercisable on the date specified on
Schedule A or on such earlier date as determined pursuant to Section 8, 9 or 10
hereof. Schedule A states whether the Option is intended to be an Incentive
Stock Option or Non-Qualified Stock Option.
3. PURCHASE PRICE. The price per share to be paid by the Optionee for
the shares subject to the Option (the "Exercise Price") shall be as specified on
Schedule A, which price shall be an amount not less than the Fair Market Value
of a share of Stock as of the Date of Grant (as defined in Section 11 below) if
the Option is an Incentive Stock Option, or not less than 85% of the Fair Market
Value of a share of Stock as of the Date of Grant (as defined in Section 11
below) if the Option is a Non-Qualified Stock Option.
4. EXERCISE TERMS. The Optionee must exercise the Option for at least
the lesser of 10 shares or the number of shares of Purchasable Stock as to which
the Option remains unexercised. In the event the Option is not exercised with
respect to all or any part of the shares subject to the Option prior to its
expiration,
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the Option shall be null and void and the shares with respect to which the
Option was not exercised shall no longer be subject to the Option.
5. RESTRICTIONS ON TRANSFERABILITY. No Incentive Stock Option shall be
transferable by an Optionee other than by will or the laws of descent and
distribution, and no Non-Qualified Stock Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or pursuant
to a Qualified Domestic Relations Order.
6. NOTICE OF EXERCISE OF OPTION. The Option may be exercised by the
Optionee, or by the Optionee's administrators, executors, legal representative
or personal representatives, by a written notice (in substantially the form of
the Notice of Exercise attached hereto as Schedule B) signed by the Optionee, or
by such administrators, executors or personal representatives, and delivered or
mailed to the Company as specified in Section 14 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) a
certified or cashier's check and shares of Stock owned by the Optionee and duly
endorsed or accompanied by stock transfer powers, or authorization to the
Company to withhold a number of shares of Stock otherwise issuable upon the
exercise of the Option, whose Fair Market Value when added to the amount of the
check equals the total Exercise Price applicable to such shares purchased
hereunder, or (iii) such other consideration as may from time to time be
specified by the Board (subject to the requirements of the Plan and applicable
law) as constituting valid and adequate consideration for Purchasable Stock and
having a fair market value equal to the total Exercise Price applicable to such
shares purchased hereunder. Upon receipt of any such notice and accompanying
payment, and upon execution and delivery by Optionee and the Company of a Stock
Purchase Agreement, as shall be specified by the Board, and if required by the
Board, an escrow agreement and any other documents which the Board may require
as a condition to the issuance of shares of the Stock to Optionee, and subject
to the terms hereof, the Company agrees to issue to the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, stock certificates for the number of shares specified in such notice
registered in the name of the person exercising the Option.
7. ADJUSTMENT IN OPTION. The number of Shares subject to the Option,
the Exercise Price and other matters are subject to adjustment during the term
of the Option in accordance with Section 5.2 of the Plan.
8. TERMINATION OF EMPLOYMENT.
(a) Except as otherwise specified in Schedule A hereto, in the
event that the Optionee shall cease to be employed by, or otherwise associated
or affiliated with, the Company in any capacity involving the rendition of
services to the Company either directly, as an employee or member of the Board
of the Company, or indirectly, as an employee of its Subsidiaries, other than a
termination that is either (i) for cause, or (ii) voluntary on the part of the
Optionee and without written consent of the Company or its Subsidiaries, or
(iii) for reasons of disability as contemplated under Section 9 below, the
Optionee may exercise the Option at any time within ninety (90) days after such
termination to the extent of the number of shares which were Purchasable
hereunder at the date of such termination.
(b) Except as otherwise specified in Schedule A attached
hereto, in the event Optionee (i) terminates his or her employment voluntarily
without the written consent of the Company, or (ii) is
A-2
<PAGE> 17
terminated for cause, the Option, to the extent not previously exercised, shall
terminate immediately and shall not thereafter be or become exercisable.
(c) The Option does not confer upon the Optionee any right
with respect to continuance of employment by the Company or its Subsidiaries.
9. DISABLED OPTIONEE. In the event of termination of employment because
of the Optionee's Disability, the Optionee (or his or her legal representative)
may exercise the Option at any time within one year after such termination to
the extent of the number of shares which were Purchasable hereunder at the date
of such termination.
10. DEATH OF OPTIONEE. Except as otherwise set forth in Schedule A with
respect to the rights of the Optionee upon termination of employment or
association or affiliation with the Company under Section 8(a) hereof, in the
event of the Optionee's death while employed by or associated or affiliated with
the Company or its Subsidiaries the appropriate persons described in Section 6
hereof may exercise the Option at any time within a period ending on the earlier
of (a) the last day of the three (3) month period following the Optionee's death
or (b) the expiration date of the Option. The Option may be so exercised to the
extent of the number of shares that were Purchasable hereunder at the date of
death. If the Optionee's employment, association or affiliation terminated prior
to his or her death, the Option may be exercised only to the extent of the
number of shares covered by the Option which were Purchasable hereunder at the
date of such termination.
11. DATE OF GRANT. The Option was granted by the Board on the date set
forth in Schedule A (the "Date of Grant").
12. COMPLIANCE WITH REGULATORY MATTERS. The Optionee acknowledges that
the issuance of capital stock of the Company is subject to limitations imposed
by federal and state law, and the Optionee hereby agrees that the Company shall
not be obligated to issue any shares of Stock upon exercise of the Option that
would cause the Company to violate law or any rule, regulation, order or consent
decree of any regulatory authority (including without limitation the Securities
and Exchange Commission) having jurisdiction over the affairs of the Company.
The Optionee agrees that he or she will provide the Company with such
information and representation as is reasonably requested by the Company or its
counsel to determine whether the issuance of Stock complies with the provisions
described by this Section, including, without limitation, a representation that
the Optionee shall not sell or otherwise dispose of the Stock in the absence of
registration of such shares under applicable federal and state securities laws
or an opinion of counsel, satisfactory to the Company, that such registration is
not required.
13. RESTRICTION ON DISPOSITION OF SHARES. Unless further restrictions
are placed upon disposition by the provisions of the Stock Purchase Agreement,
the shares of Stock purchased pursuant to the exercise of an Incentive Stock
Option shall not be transferred by the Optionee except pursuant to the
Optionee's will or the laws of descent and distribution until such date which is
the later of two years after the grant of such Incentive Option or one year
after the transfer of the shares to the Optionee pursuant to the exercise of
such Incentive Stock Option. The shares of stock purchased pursuant to the
exercise of a Non-Qualified Stock Option shall not be transferred by the
Optionee except pursuant to the Optionee's will or the laws of descent and
distribution or pursuant to a Qualified Domestic Relations Order. The transfer
restrictions imposed by this Section 13 will expire and be of no force and
effect upon the completion by the Company of a public offering of the Stock
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended.
A-3
<PAGE> 18
14. MISCELLANEOUS.
(a) This Agreement shall be binding upon the parties hereto
and their representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and shall be
governed by the laws of, the State of Florida.
(c) Any requests or notices to be given hereunder shall be
deemed given, and any elections or exercises to be made or accomplished shall be
deemed made or accomplished, upon actual delivery thereof to the designated
recipient, or three days after deposit thereof in the United States mail,
certified or registered, return receipt requested and postage prepaid,
addressed, if to the Optionee, at the address set forth below and, if to the
Company, to the executive offices of the Company at 2055 Lake Avenue, S.E.,
Suite A, Largo, Florida 33771.
(d) This Agreement may not be modified except in writing
executed by each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused
this Stock Option Agreement to be executed on behalf of the Company and the
Company's seal to be affixed hereto and attested by the Secretary of the
Company, and the Optionee has executed this Stock Option Agreement under seal,
all as of the day and year first above written.
COMPANY:
BOBBY ALLISON WIRELESS CORPORATION
Attest:
By:
- -------------------------------- --------------------------------
Secretary Name:
Title: Chairman, Board of Directors
[SEAL]
OPTIONEE:
-----------------------------------
Name:
Address:
---------------------------
---------------------------
---------------------------
A-4
<PAGE> 19
SCHEDULE A
TO STOCK OPTION AGREEMENT BETWEEN
BOBBY ALLISON WIRELESS CORPORATION AND
[NAME]
Dated _________________
1. NUMBER OF SHARES SUBJECT TO OPTION: ______________ Shares.
2. THIS OPTION (Fill in Number) is for ___________________ Incentive Stock
Options and ________________ Non-Qualified Stock Options.
3. OPTION EXERCISE PRICE: $______ per Share for Incentive Stock Options
and $_______ per Share for Non-Qualified Stock Options.
4. DATE OF GRANT: ______________________________
5. OPTION VESTING SCHEDULE: Options are exercisable with respect to the
number of shares indicated below on or after the date indicated next to
the number of shares:
NO. OF SHARES VESTING DATE
------------- ------------
6. OPTION EXERCISE PERIOD:
Check One: ( ) All options expire and are void unless
exercised on or before __________________.
( ) Options expire and are void unless exercised
on or before the date indicated next to the
number of shares:
NO. OF SHARES EXPIRATION DATE
------------- ---------------
7. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER ASSOCIATION OR AFFILIATION
WITH THE COMPANY OF OPTIONEE (if different from that set forth in
Sections 8 and 10 of the Stock Option Agreement):
<PAGE> 20
SCHEDULE B
TO STOCK OPTION AGREEMENT BETWEEN
BOBBY ALLISON WIRELESS CORPORATION AND
[NAME]
Dated ________________
NOTICE OF EXERCISE
The undersigned hereby notifies Bobby Allison Wireless
Corporation (the "Company") of this election to exercise the undersigned's stock
option to purchase ________________ shares of the Company's common stock, par
value $.01 per share (the "Stock"), pursuant to the Stock Option Agreement (the
"Agreement") between the undersigned and the Company dated ________________.
Accompanying this Notice is (1) a certified or a cashier's check in the amount
of $________________ payable to the Company, and/or (2) _______________ shares
of Stock presently owned by the undersigned and duly endorsed or accompanied by
stock transfer powers, or an authorization to the Company to withhold the number
of shares of Stock otherwise issuable pursuant to the exercise of the Option, in
each case having an aggregate Fair Market Value (as defined in the Bobby Allison
Wireless Corporation 1999 Stock Option Plan) as of the date hereof of
$__________________, such amounts being equal, in the aggregate, to the purchase
price per share set forth in Section 3 of the Agreement multiplied by the number
of shares being purchased hereby (in each instance subject to appropriate
adjustment pursuant to Section 7 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and
seal, this ________ day of ________________,_______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
___________________________________
Name:
Capacity (if other than Optionee):
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF BOBBY ALLISON WIRELESS CORPORATION
Bobby Allison Wireless, Inc. (Florida)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-KSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERECE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 125,155
<SECURITIES> 0
<RECEIVABLES> 684,344
<ALLOWANCES> 76,144
<INVENTORY> 645,976
<CURRENT-ASSETS> 1,508,566
<PP&E> 950,068
<DEPRECIATION> 265,491
<TOTAL-ASSETS> 2,724,578
<CURRENT-LIABILITIES> 1,426,185
<BONDS> 0
1,625,000
0
<COMMON> 4,800
<OTHER-SE> (773,368)
<TOTAL-LIABILITY-AND-EQUITY> 2,724,578
<SALES> 8,146,369
<TOTAL-REVENUES> 8,146,369
<CGS> 3,934,935
<TOTAL-COSTS> 3,789,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 301,411
<INCOME-PRETAX> 112,622
<INCOME-TAX> 45,000
<INCOME-CONTINUING> 67,622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,622
<EPS-BASIC> .11
<EPS-DILUTED> .11
</TABLE>
