<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1997
REGISTRATION NO. 333-34595
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
LET'S TALK CELLULAR & WIRELESS, INC.
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
FLORIDA 5999,5065 650292891
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------
5200 N. W. 77TH COURT
MIAMI, FLORIDA 33166
(305) 477-8255
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
NICOLAS MOLINA
BRETT BEVERIDGE
LET'S TALK CELLULAR & WIRELESS, INC.
800 BRICKELL AVENUE
SUITE 400
MIAMI, FLORIDA 33131
(305) 358-8255
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
---------------------
WITH COPIES TO:
<TABLE>
<C> <C>
JORGE L. FREELAND, ESQ. MICHAEL L. FITZGERALD, ESQ.
GREENBERG TRAURIG HOFFMAN BROWN & WOOD LLP
LIPOFF ROSEN & QUENTEL, P.A. ONE WORLD TRADE CENTER
1221 BRICKELL AVENUE NEW YORK, NEW YORK 10048
MIAMI, FLORIDA 33131 (212) 839-5300
(305) 579-0500 TELECOPY (212) 839-5599
TELECOPY (305) 579-0717
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01 per share.......... $55,200,000 $16,728
================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended, and
includes 450,000 shares of Common Stock that may be purchased by the
Underwriters pursuant to an overallotment option.
(2) The total amount of the registration fee is $16,728, of which $15,152 has
already been paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 9, 1997
PROSPECTUS
3,000,000 SHARES
[LET'S TALK CELLULAR LOGO]
COMMON STOCK
------------------------
Of the 3,000,000 shares of Common Stock offered hereby, 2,000,000 shares
are being offered by Let's Talk Cellular & Wireless, Inc. (the "Company") and
1,000,000 shares are being offered by certain shareholders of the Company (the
"Selling Shareholders"). The Company will not receive any of the proceeds from
the sale of shares by the Selling Shareholders. See "Principal and Selling
Shareholders."
Prior to the offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for a discussion of factors to
be considered in determining the initial public offering price.
Application has been made for quotation of the Common Stock on The Nasdaq
National Market under the symbol "LTCW."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $ $
=======================================================================================================================
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $1,200,000.
(3) The Selling Shareholders have granted the Underwriters an option to purchase
up to an additional 450,000 shares of Common Stock, exercisable within 30
days after the date hereof, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discount, Proceeds to the Company and Proceeds to Selling Shareholders will
be $ , $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about , 1997.
------------------------
MERRILL LYNCH & CO.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 3
[PHOTOS/MAP OF U.S.]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that the underwriters' over-allotment
option has not been exercised, and gives effect to a 3.289-for-one stock split
to be effected immediately prior to the offering. Fiscal year references are to
the respective fiscal year ended July 31. References to Pro Forma Financial
Information are to the information set forth herein under "Unaudited Pro Forma
Financial Data," giving effect to the acquisition by the Company of Telephone
Warehouse, Inc. and National Cellular, Incorporated (collectively, "Telephone
Warehouse") as if such acquisition (the "Telephone Warehouse Acquisition") took
place as of the beginning of the periods presented. Unless otherwise indicated,
cellular and PCS industry statistics are obtained from the Cellular
Telecommunications Industry Association ("CTIA") and Paul Kagan Associates, Inc.
and paging industry statistics are obtained from The Strategis Group.
THE COMPANY
Let's Talk Cellular & Wireless, Inc. (together with its subsidiaries, the
"Company") is the largest independent specialty retailer of cellular and
wireless products, services and accessories in the United States, with 102
stores located in 12 states, the District of Columbia and Puerto Rico as of
September 30, 1997. The Company's stores, located predominantly in regional
shopping malls, seek to offer one-stop shopping for consumers to purchase
cellular, personal communication system ("PCS"), paging, internet, satellite,
and other wireless products and services and related accessories. The Company is
also a leading wholesaler of cellular and wireless products and accessories to
more than 1,000 accounts, consisting primarily of distributors, carriers and
smaller independent retailers.
The Company's business strategy is to offer the most extensive assortment
of wireless products and services at everyday low prices supported by
knowledgeable customer service, through conveniently located and attractively
designed stores. The Company believes that this strategy provides it with a
competitive advantage by combining the extensive product selection, competitive
prices and operating efficiencies typical of a "big box" retailer with the
superior customer service and upscale shopping experience characteristic of a
specialty retailer. The Company offers wireless products from well-known,
name-brand suppliers such as AT&T, Ericsson, Motorola, Nokia and Sony. The
Company's stores typically sell up to 40 different makes and models of cellular
and PCS phones and pagers and over 1,000 stock keeping units ("SKUs") of
wireless products and accessories, such as batteries, home and car chargers,
vehicle adapter kits and cases. The Company supports its broad product offering
with knowledgeable and personalized customer service focused on educating the
consumer and identifying the most appropriate products and services for each
consumer's individual needs. The Company offers everyday low prices that are
competitive with other retailers and supports this policy with price guarantee,
upgrade and trade-in programs.
The Company believes that its store level economics compare favorably to
other retailing sectors. The Company has developed both kiosk and in-line mall
stores, which average approximately 150 and 800 square feet in size,
respectively. In fiscal 1997, comparable stores (stores owned and operated by
the Company for at least 12 full months) generated average annual sales of
approximately $500,000 (excluding two stores that generate substantially higher
sales than other stores). In fiscal 1997, per store capital expenditures and
initial inventory for new kiosks and in-line stores averaged approximately
$66,000 and $141,000, respectively. Although sales per square foot vary by
format, the Company's stores had average sales per square foot of approximately
$1,000 in fiscal 1997.
The Company's revenues are generated principally from four sources: retail
sales, activation commissions paid by cellular carriers, residual payments and
wholesale sales. Retail sales involve the sale of cellular, PCS and wireless
products, such as phones, pagers and related accessories in the Company's retail
outlets. Activation commissions are payments the Company receives from the
applicable cellular carrier when a customer initially subscribes for the
cellular carrier's services. The amount of the activation commission paid by
cellular carriers is based upon various service plans offered by the carriers.
Residual payments are monthly payments ("residual income") made by certain
cellular carriers and pager customers. Cellular residual
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<PAGE> 5
payments are based upon a percentage (usually 4-6%) of the customers' monthly
service charges. 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. Wholesale sales involve the sale of wholesale cellular and
wireless products. Management believes the wholesale business, which was
acquired as part of the Telephone Warehouse Acquisition, provides the Company
with greater purchasing power and additional distribution capabilities that
complement the Company's retail operations.
The Company earns a profit on the cellular and PCS phones it retails as the
purchase price and/or activation commission exceeds the cost of the products
sold. The Company has recently made a strategic decision to accept increased
activation commissions from carriers in certain markets, in lieu of monthly
residual payments, to optimize cash flow and to facilitate the Company's growth
strategy.
INDUSTRY DYNAMICS
The wireless communications industry has grown substantially in recent
years. Cellular telephone service has been one of the fastest growing markets
within the industry. Since the inception of the cellular phone industry in 1983,
the number of U.S. cellular subscribers has grown to approximately 44 million by
year end 1996, having grown at an annual compound rate of 41% during the
previous five years. It is estimated that as of December 1996, this subscriber
base reflected an average market penetration of only 16.6%, 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.
According to CTIA, approximately $24 billion was spent on cellular service in
1996.
The paging market has also grown significantly. The number of U.S. pagers
in service has grown to approximately 42 million by year end 1996, having grown
at an annual compound rate of approximately 29% during the previous five years.
It is estimated that as of December 1996, this subscriber base reflected an
average market penetration of only 16%, based on the U.S. population. The
Strategis Group projects that by the year 2000 the number of U.S. pagers in
service will reach over 60 million. The Company believes that the U.S. market
for wireless communications products and services will continue to expand due to
advances in system technology and equipment, the emergence of new wireless
technologies, such as PCS, lower equipment prices and service charges and
increased consumer acceptance.
The Company believes that a shift is occurring 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. In order to better access such a broad
consumer base, management believes carriers will seek multiple points of retail
distribution including established independent specialty retailers such as the
Company, their own retail outlets and "big box" electronics retailers.
COMPETITIVE POSITIONING
The Company believes that it has certain competitive advantages over other
retailers in satisfying consumers' changing needs and preferences. Compared to
"big box" retailers, the Company believes that its stores are more conveniently
located in regional shopping malls and typically have more selling space devoted
to wireless products. In addition, the Company believes that because it
exclusively focuses on wireless products, it is able to provide more specialized
and faster customer service than "big box" retailers. With the technological
advancements and continuous introductions of new products and service options in
the wireless industry, consumers demand increasingly higher levels of service
and support, access to a more extensive product selection and greater education
regarding all wireless products, including cellular, PCS, paging and internet
products.
Compared to carrier-owned stores, the Company has the advantage of
typically being able to offer wireless services from multiple carriers in any
given area whereas carrier-owned stores almost always offer only
4
<PAGE> 6
their own wireless service. As a result, the Company is able to offer a larger
number of service options, including PCS from up to five carriers as well as
paging services. Other advantages include the Company's expertise in retailing
communications products and services to consumers and its ability to serve as a
one-source retail distribution system for a wide variety of cellular and
wireless services.
GROWTH STRATEGY
The Company believes that the combination of its broad product offering,
highly visible and convenient store locations, excellent customer service and
everyday low pricing strategy positions it well for future growth. Key elements
of the Company's growth strategy are outlined below:
- New Store Expansion. The Company plans to open 65 to 75 new stores in
fiscal 1998 and 80 to 100 new stores in fiscal 1999, in both new and
existing markets, of which approximately 40% are expected to be kiosks and
60% are expected to be in-line stores. The Company believes that this
expansion rate, which is dependent upon a number of factors, is achievable
given the Company's existing infrastructure, the ease with which it can
replicate its store model and its successful opening of 45 new stores in
fiscal 1997. As of September 30, 1997, the Company had 4 store locations
under construction and had signed leases or reached an agreement in
principle for an additional 24 store locations. The Company's stores are
located in only 76 of the more than 1,000 regional malls in the
continental U.S. The Company intends to focus initially on the largest and
fastest growing wireless markets in the U.S., based on industry
statistics, by targeting additional mall locations and supplementing its
penetration in existing markets with power strip locations. Management
believes that the flexibility of the Company's kiosk and in-line store
formats permits the Company to take advantage of the best available
locations across a broad range of market areas.
- Pursue Selective Acquisitions. The Company intends to continue to
increase the number of its stores through selective acquisitions of other
specialty retailers of cellular and wireless products in addition to those
stores opened by the Company. The Company believes that the independent
retail market for cellular and wireless products is highly fragmented and
consists of numerous independent specialty retailers in each major
metropolitan area. Through selective acquisitions, the Company seeks to
obtain immediate access to desirable markets and locations, qualified
sales personnel and, in some cases, an existing subscriber base. The
Company believes it can successfully apply its operating strategy and
leverage its existing infrastructure and financial controls with such
acquisitions. Recent acquisitions completed by the Company include (i)
Peachtree Mobility, one of AirTouch Cellular's largest agents in Atlanta,
acquired in August 1996 and (ii) Telephone Warehouse, one of the largest
AT&T agents in the southwestern U.S., acquired in June 1997. In addition,
the Company has executed letters of intent for the acquisition of (i)
Cellular USA, Inc. ("Cellular USA"), one of AT&T's largest agents in Las
Vegas, which operates six retail stores (the "Cellular USA Acquisition"),
and (ii) Cellular Unlimited, Inc. ("Cellular Unlimited"), one of Cellular
One's largest agents in upstate New York, which operates 15 retail stores
(the "Cellular Unlimited Acquisition"). See "Recent Acquisitions." As part
of the Company's growth strategy, management regularly reviews acquisition
prospects that would augment or complement the Company's existing
operations.
- Increase Comparable Store Sales. The Company seeks to increase
comparable store sales by capitalizing on the changing industry dynamics
that are driving the growth in cellular and wireless usage and pursuing
repeat business from its existing customers for new products, product
upgrades and additional accessories. As the Company's stores increase
penetration into new and existing markets, the Company expects to obtain
greater brand name recognition through broader advertising, increased
repeat and referral business and corporate sales.
- Capitalize on Operating Leverage. The Company continues to invest in
infrastructure, including a management team and information systems, to
manage its rapidly growing chain of stores. These infrastructure
investments could result in a material reduction in income from operations
in the first half of fiscal 1998 compared with pro forma income from
operations for the corresponding period in fiscal 1997. As the Company
continues to expand internally and through acquisitions, it expects to
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<PAGE> 7
leverage these investments and improve margins through economies of scale.
In addition, the Company believes its acquisition of Telephone Warehouse
will provide additional purchasing power as the wholesale operations of
Telephone Warehouse have historically been able to source inventory at
lower prices because of volume discounts.
HISTORY
Let's Talk Cellular & Wireless was founded by the Company's Chief Executive
Officer, Nick Molina, and Chairman, Brett Beveridge. Originally, the founders
sold cellular products and services at major public events until opening their
first store in 1989. During the first three years of operations the Company
opened three stores. By early 1995, the Company had grown to 14 stores primarily
in the southeastern United States. In June 1996, the Company, then operating 25
stores (one of which subsequently closed), received growth capital from HIG
Investment Group, L.P. and its affiliates ("HIG") and accelerated its store
expansion. See "Certain Transactions." Since that time, the Company has opened
54 stores and acquired 24 stores and operated 102 stores as of September 30,
1997. The Company had total net revenues of $74.4 million on a pro forma basis
for the fiscal year ended July 31, 1997.
RECENT ACQUISITIONS
Cellular Unlimited Acquisition. On September 26, 1997, the Company
executed a letter of intent for the acquisition of substantially all of the
assets of Cellular Unlimited, one of Cellular One's largest agents in upstate
New York, which operates 15 retail stores. The Company expects to close the
acquisition concurrently with the consummation of the offering. For the twelve
months ended July 31, 1997, Cellular Unlimited had total net revenues of
approximately $6.4 million. The letter of intent provides for a cash purchase
price of $2.0 million and up to $225,000 in certain contingent payments in each
of the six-month periods ending July 31, 1998, January 31, 1999 and July 31,
1999. The Company intends to change the store names to "Let's Talk Cellular &
Wireless," increase in-stock merchandise availability and integrate the
accounting, sales and administrative functions into the Company's corporate
offices.
Cellular USA Acquisition. On September 15, 1997, the Company executed a
letter of intent for the acquisition of all of the outstanding capital stock of
Cellular USA, one of AT&T's largest agents in Las Vegas, which operates six
retail stores. The Company expects to close the acquisition concurrently with
the consummation of the offering. For the twelve months ended July 31, 1997,
Cellular USA had total net revenues of approximately $3.0 million. The letter of
intent provides for a cash purchase price of $1,625,000 and certain contingent
payments of up to an aggregate of $175,000 in 1998 and 1999. The Company intends
to change the store names to "Let's Talk Cellular & Wireless," increase in-stock
merchandise availability and integrate the accounting, sales and administrative
functions into the Company's corporate offices.
Telephone Warehouse Acquisition. In June 1997, the Company acquired
Telephone Warehouse in exchange for 1,817,468 shares of the Company's Common
Stock and the assumption of $13.1 million of indebtedness. Telephone Warehouse
is one of the largest AT&T agents in the southwestern United States and operates
19 specialty cellular and wireless retail stores in Texas, Missouri and Kansas.
It also wholesales cellular and wireless products to over 1,000 regional and
local retailers, distributors and carriers. See "Certain Transactions." For the
twelve months ended December 31, 1996 and for the four months ended April 30,
1997, Telephone Warehouse had total net revenues of approximately $49.6 million
and $14.5 million, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for additional information
regarding the historical results of operations of Telephone Warehouse.
The Company's principal purpose in acquiring Telephone Warehouse was to
obtain immediate access to desirable markets, such as Dallas, San Antonio and
Kansas City, and locations and to qualified sales personnel and an existing
subscriber base. The Company intends to apply its operating strategy to
Telephone Warehouse, leverage Telephone Warehouse's existing infrastructure and
grow Telephone Warehouse's retail operations. In addition, the Company has the
opportunity to leverage the expertise of and benefit from Telephone Warehouse's
significant pager business. Management believes that the wholesale business,
which
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<PAGE> 8
was acquired as part of the Telephone Warehouse Acquisition, provides the
Company with greater purchasing power and additional distribution capabilities.
Peachtree Mobility. In August 1996, the Company acquired Peachtree
Mobility, one of AirTouch Cellular's largest agents in Atlanta, which operates
five retail stores (the "Peachtree Acquisition"). Since the date of the
acquisition, the Company has changed the store names to "Let's Talk Cellular &
Wireless," increased in-stock merchandise availability and integrated the
accounting, sales and administrative functions into the Company's corporate
offices. The Company has also added three additional stores in the Atlanta
market.
The Company's executive offices are located at 800 Brickell Avenue, Suite
400, Miami, Florida 33131, and its telephone number is (305) 358-8255.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.................. 2,000,000 shares
Common Stock offered by the Selling Shareholders..... 1,000,000 shares
Common Stock to be outstanding after the offering.... 8,199,762 shares(1)
Use of proceeds...................................... To repay the Company's outstanding bank
indebtedness and certain shareholder loans,
and, with the remaining net proceeds, to
finance the Company's expansion, including the
Cellular USA Acquisition and the Cellular
Unlimited Acquisition, the opening of new
stores and other possible acquisitions and for
other general corporate purposes.
Proposed Nasdaq National Market symbol............... "LTCW"
</TABLE>
- ---------------
(1) Does not include 447,606 shares of Common Stock issuable upon the exercise
of outstanding stock options, at a weighted average exercise price of $17.05
per share.
7
<PAGE> 9
SUMMARY FINANCIAL DATA
The following table presents (i) summary historical consolidated financial
data of the Company as of the dates and for the periods indicated and (ii)
summary unaudited pro forma financial data of the Company as of the dates and
for the periods indicated giving effect to the events described in the
"Unaudited Pro Forma Financial Data" included elsewhere herein as though they
had occurred on the dates indicated therein. The summary unaudited pro forma
financial data are not necessarily indicative of operating results or the
financial condition that would have been achieved had these events been
consummated on the date indicated and should not be construed as representative
of future operating results or financial condition. The summary historical
consolidated and unaudited pro forma financial data should be read in
conjunction with the financial statements and related notes thereto of the
Company and Telephone Warehouse and with the "Unaudited Pro Forma Financial
Data" and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
--------------------------------------------------------------
PRO
FORMA(1)
1994 1995 1996 1997 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Retail sales and activation
income.................. $ 4,033 $ 7,771 $ 12,518 $ 25,805 $ 38,433
Residual income............ 228 533 1,075 1,948 10,496
Wholesale sales............ -- -- -- 2,309 25,477
--------- --------- --------- --------- ---------
Total net revenues...... $ 4,261 $ 8,304 $ 13,593 $ 30,062 $ 74,406
Gross profit................. $ 2,133 $ 4,044 $ 7,084 $ 15,239 $ 29,993
Selling, general and
administrative expenses.... 1,918 3,896 6,601 13,993 23,395
Former shareholder
compensation expense....... -- -- -- 80 100
Depreciation and
amortization............... 43 100 225 451 640
Amortization of
intangibles................ -- -- -- 418 2,176
--------- --------- --------- --------- ---------
Income from operations....... $ 172 $ 48 $ 258 $ 297 $ 3,682
Income (loss) before
provision for income
taxes...................... $ 159 $ 8 $ 105 $ (43) $ 3,580
Income tax provision......... 70 -- 39 3 1,530
--------- --------- --------- --------- ---------
Net income (loss)............ $ 89 $ 8 $ 66 $ (46) $ 2,050
========= ========= ========= ========= =========
Net income (loss) per share
applicable to common
shareholders............... $ .01 $ -- $ .01 $ (.07)(2)(3) $ .24(3)
========= ========= ========= ========= =========
Weighted average shares
outstanding................ 6,199,762 6,199,762 6,199,762 6,199,762 8,199,762
========= ========= ========= ========= =========
SELECTED OPERATING DATA:
EBITDA(4).................... $ 215 $ 148 $ 492 $ 1,203 $ 6,556
========= ========= ========= ========= =========
Stores open at end of
period(5):
Kiosk...................... 5 13 14 35 35
In-line.................... 3 9 11 58 58
--------- --------- --------- --------- ---------
Total................... 8 22 25 93 93
Percentage change in
comparable store
sales(6)................... (2.2)% 10.5% 11.5% 5.4%
Average comparable store
sales(7)................... $ 442,000 $ 450,000 $ 462,000 $ 500,000
Number of activations during
period..................... 1,661 5,205 14,803 43,360
Total gross square feet at
end of period.............. 2,447 7,006 9,529 96,093
</TABLE>
Footnotes on following page
8
<PAGE> 10
<TABLE>
<CAPTION>
AS OF JULY 31, 1997
-------------------------
ACTUAL AS ADJUSTED(8)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 1,613 $15,390
Total assets................................................ 34,538 45,328
Long-term debt.............................................. 14,383 2,033
Shareholders' equity........................................ 6,610 31,732
</TABLE>
- ---------------
(1) In June 1997 the Company acquired Telephone Warehouse in exchange for
1,817,468 shares of Common Stock and the assumption of Telephone Warehouse's
outstanding indebtedness. The unaudited pro forma financial data set forth
herein reflect (i) the combined operations of the Company and Telephone
Warehouse and (ii) the sale of the shares of Common Stock offered by the
Company hereby and the application of the estimated net proceeds therefrom
as set forth in "Use of Proceeds," as if such transactions had taken place
as of the beginning of the periods presented. For information regarding the
pro forma adjustments made to the Company's historical financial data, see
"Unaudited Pro Forma Financial Data."
(2) The fair value of the Common Stock distributed to the holder of the
Company's Series A Preferred Stock in order to induce the conversion of the
Series A Preferred Stock to Common Stock of $320,000 is deducted from net
loss for purposes of calculating net loss per share applicable to common
shareholders for fiscal 1997.
(3) Accretion to redemption value of the Series A Preferred Stock of $62,640,
has been deducted from net income (loss) for purposes of calculating net
income (loss) per share applicable to common shareholders. See "Unaudited
Pro Forma Financial Data."
(4) EBITDA is defined as net income (loss) plus (i) provision for income taxes,
(ii) gross interest expense and (iii) depreciation and amortization. EBITDA
is presented not as an alternative measure of operating results or cash flow
from operations (as determined in accordance with generally accepted
accounting principles), but because it is a widely accepted supplemental
financial measure.
(5) Pro forma information does not include six stores to be acquired pursuant to
the Cellular USA Acquisition and 15 stores to be acquired pursuant to the
Cellular Unlimited Acquisition.
(6) A store becomes comparable after it has been owned and operated by the
Company for at least 12 full months. Comparable store sales are comprised of
retail sales and activation income at the Company's retail stores, but do
not include residual income.
(7) Represents the average retail sales and activation income on a store by
store basis only for stores owned and operated by the Company for at least
12 full months as of period end (excluding two stores that generate
substantially higher sales than other stores). Therefore, period to period
figures may not be comparable.
(8) Adjusted to give effect to (i) the sale of the shares of Common Stock
offered by the Company and the application of the estimated net proceeds
therefrom as set forth in "Use of Proceeds" as if such transactions had
occurred at July 31, 1997, and (ii) a non-recurring charge of approximately
$738,000, net of tax, related to the write-off of deferred financing costs
in connection with the repayment of bank indebtedness with a portion of the
proceeds of this offering. See "Capitalization" and "Pro Forma Condensed
Consolidated Balance Sheet."
9
<PAGE> 11
RISK FACTORS
Prospective investors should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the following risks
in connection with an investment in shares of Common Stock offered hereby.
RISKS ASSOCIATED WITH RAPID GROWTH
The Company's total net revenues have grown significantly in the past
several years, with sales increasing from $3.3 million in fiscal 1993 to $74.4
million on a pro forma basis for fiscal 1997. In connection with the recent
Telephone Warehouse Acquisition, the Company more than doubled the amount of its
assets and previous twelve months' total net revenues. The Company intends to
continue to pursue an aggressive growth strategy. The continued growth of the
Company is dependent, in large part, upon the Company's ability to construct and
operate new stores on a timely and profitable basis and upon the Company's
ability to acquire and profitably integrate the operations of new and acquired
stores. The Company plans to open approximately 65 to 75 new stores in fiscal
1998 and 80 to 100 new stores in fiscal 1999. However, the rate of new store
openings is subject to various contingencies, many of which are beyond the
Company's control. These contingencies include, among others, the Company's
ability to secure suitable store sites on a timely basis and on satisfactory
terms, the Company's ability to hire, train and retain qualified personnel, the
availability of adequate capital resources and the successful integration of new
stores into existing operations. There can be no assurance that the Company's
new stores will be profitable or achieve sales and profitability comparable to
the Company's existing stores. In addition, the Company expects that, as a
result of further infrastructure investments it plans to make during fiscal
1998, principally in order to integrate the operations of its new and acquired
stores, it may experience reduced operating margins in the near term.
The Company's growth will also depend on its ability to acquire additional
retailers, manage expansion, control costs of its operations and consolidate
acquisitions into existing operations. In connection with such acquisitions, the
Company will be required to review the operations of the acquired company,
including its management infrastructure and systems and financial controls, and
make operating adjustments or complete reorganizations as appropriate.
Unforeseen capital and operating expenses, or other difficulties and delays
frequently encountered in connection with the expansion and integration of
acquired operations, could have an adverse effect upon the Company's financial
results. Significant acquisitions, such as the Telephone Warehouse Acquisition,
require the integration of administrative, finance, sales, purchasing and
marketing organizations, as well as the coordination of common sales and
marketing efforts and the implementation of appropriate operational, financial
and management systems and controls. This will require substantial attention
from the Company's senior management team, who have limited acquisition
experience to date. The diversion of management attention required by the
acquisition and integration of acquired companies, as well as any other
difficulties that may be encountered in the transition and integration process,
could have an adverse effect on the results of operations of the Company. There
can be no assurance that the Company will identify suitable acquisition
candidates, that acquisitions will be consummated on acceptable terms or that
the Company will be able to successfully integrate the operations of any
acquired company. The Company's ability to continue to grow through the
acquisition of additional stores will also be dependent upon the availability of
suitable candidates, the Company's ability to attract and retain competent
management and the availability of capital to complete the acquisitions. See
"Business -- Growth Strategy." The Company currently intends to finance
acquisitions through a combination of cash resources, borrowings and, in
appropriate circumstances, the issuance of equity and/or debt securities. The
acquisition of additional stores has in the past and is expected in the future
to have a significant effect on the Company's results of operations and
financial position and could cause substantial fluctuations in the Company's
quarterly and yearly operating results. The accelerated amortization applied to
the value of the residual income acquired in connection with the Telephone
Warehouse Acquisition is expected to have a significantly negative effect on net
income in the fourth quarter of fiscal 1997 and for the next two fiscal years.
Future acquisitions by the Company involving residual income could result in
significant charges to net income from accelerated amortization. See Note 2 to
the "Pro Forma Condensed Consolidated Statements of Income."
10
<PAGE> 12
COMPETITION
The retail market for cellular and wireless products and service is
characterized by intense price competition and significant price erosion over
the life of a product. The Company competes with numerous well-established
retailers, carriers, wholesale distributors and suppliers of cellular and
wireless products and equipment, including the Company's carriers and suppliers,
many of which possess greater financial, marketing and other resources than the
Company. Substantially all of these competitors market the same or similar
products directly to the Company's customers and most have the financial
resources to withstand substantial price competition and implement extensive
advertising and promotional programs. Certain carriers are principal competitors
of the Company, and two carriers in particular provide the Company with
significant revenue (approximately 24% of total net revenue in fiscal 1997) from
activation and residual payments. Potential conflicts of interest could arise,
therefore, between the Company and its principal customers. In recent years, the
price of products and subscription rates for services that the Company and its
competitors have been able to charge their customers have decreased, primarily
as a result of lower costs and greater competition in the industry. The Company
believes that significant price-based competition will continue to exist in each
of the Company's markets for the foreseeable future. The cellular and wireless
retail industry is highly fragmented and characterized by low barriers to entry
and frequent introduction of new products. The Company's ability to continue to
compete successfully will be largely dependent on its ability to maintain its
current carrier and supplier relationships and to anticipate various competitive
factors affecting the industry, such as new or improved products, changes in
technology and consumer preferences, demographic trends, regional and local
economic conditions and discount pricing and promotion strategies by
competitors. The Company expects that there will be increasing competition in
the acquisition of other cellular and wireless retailers as industry
participants become larger. There can be no assurance that the Company will be
able to maintain or increase its size relative to its competitors or to maintain
its historical profit margins in the face of increased competition. See
"Business -- Competition."
DEPENDENCE ON CELLULAR AND PCS CARRIERS
Generally, a Company store operates pursuant to a carrier agreement between
one of the cellular and one or more of the PCS carriers operating in the
geographic area in which the store is located and the Company or its subsidiary
that owns the store. Payments from two of the Company's carriers constituted
approximately 24% of its total net revenues for fiscal 1997. The Company is
therefore highly dependent on its relationship with its carriers. Each cellular
and PCS carrier is responsible for maintaining the quality and consistency of
its signal, the capacity of the system to add new customers and the
competitiveness of the retail prices it charges for service. In addition, the
carriers create national and regional advertising as well as customer incentive
programs. The Company has no ability to control its carriers' funding for system
maintenance, capacity increases, marketing or the prices it charges for coverage
below regulatory ceilings. Consequently, the Company's ability to attract and
retain cellular and PCS customers is dependent upon the quality and pricing of
services provided by the Company's carriers. In addition, there are typically
only two licensed cellular carriers and up to five licensed PCS carriers in a
geographic area. The wireless communications industry is relatively new and
dynamic. While the Company currently believes that carriers have an incentive to
achieve broad distribution of wireless phone services and that the current
program of activation and residual payments will continue as a method of
subsidizing the cost of such distribution, no assurance can be given that such
payment programs will continue or will continue at the current rate of payments.
For instance, the Company does not receive activation commissions or residual
payments in connection with its recent sales of PCS phones but instead acquires
PCS phones from carriers at a significantly reduced cost than that paid by the
PCS carrier. The Company, in turn, resells such phones at a profit that may be
less than the total profit it would earn in connection with the sale and related
activation and residual payments associated with a cellular phone. The
activation commissions the Company receives from its cellular and paging
carriers are negotiated at the time the carrier agreements are executed and
remain constant over the life of the contract, unless renegotiated. There can be
no assurance that the Company will be able to maintain the size of the
activation commissions and residual payments it receives from carriers upon the
expiration or renegotiation of existing carrier agreements or in connection with
entering into new agreements with its existing or new carriers. Two of the
Company's cellular carrier agreements contain non-competition provisions that
prevent the Company from
11
<PAGE> 13
selling wireless services (including cellular and PCS) of a competing carrier
during the term of the agreement and for one year thereafter. In addition, most
of the carrier agreements provide for the carrier's termination of its residual
payments to the Company in the event the agreement is terminated by the Company
without cause. Accordingly, the Company has limited ability to change carriers
in a geographic area in the event its current carrier fails to provide cellular
or PCS services at competitive prices and terms. There can be no assurance that
the Company's carriers will continue to provide cellular and PCS services at
competitive prices and terms or that the Company will be able to change carriers
without a significant loss of revenues. In the event one or more of the
Company's carriers experiences financial difficulties or fails to maintain
competitive prices and services the Company's results of operations and
financial condition could be adversely affected. See "Business -- Carrier
Agreements."
CUSTOMER TURNOVER
The Company's results of operations can be significantly affected by
customer cancellations of cellular phone service and pagers. In the event that a
customer cancels service within a stipulated period (generally 180 days) of
activation, the cellular carrier assesses a charge-back to the Company relating
to the applicable customer. The sales and marketing costs associated with
attracting new cellular and paging customers are substantial relative to the
costs of providing cellular and paging service to existing customers. Although
the Company accrues for estimated deactivation losses, there can be no assurance
that any increase in the Company's cellular or pager customer disconnection rate
would not adversely affect the Company's results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General."
TECHNOLOGICAL CHANGE AND INVENTORY OBSOLESCENCE
The retail market for cellular and wireless communications products and
services is characterized by rapidly changing technology and evolving industry
standards, often resulting in short product life cycles, product obsolescence or
inventory price reductions. Future technological advances in the industry could
lead to the introduction of new products and services that compete with the
products and services offered by the Company or could lower the cost of
competitive products and services to the extent that the Company is required to
further reduce the price of its products and services. As the number of stores
the Company operates increases and as the Company enters into product wholesale
activities in connection with the Telephone Warehouse Acquisition, it will be
required to raise its inventory levels, thereby increasing its risk of loss from
inventory obsolescence or price reductions. Accordingly, the Company's success
is dependent upon its ability to anticipate technological changes in the
industry and to continually identify, obtain and successfully market new
products that satisfy evolving industry and consumer requirements. In the event
the Company is unable to obtain new products and services representing improved
technology, the Company's stores will be at a competitive disadvantage to
retailers offering technologically advanced products and services.
VARIABILITY OF RESULTS OF OPERATIONS
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 fiscal
quarter during the holiday season. In addition, the Company's results during any
fiscal period 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. Comparable store sales can also fluctuate significantly from period
to period as a result of a variety of factors, including the timing of periodic
promotions sponsored by carriers, the introduction of new wireless equipment and
the acquisition of large corporate accounts.
EFFECT OF CONSUMER SPENDING
The success of the Company's operations depends to a significant extent
upon a number of factors relating to discretionary consumer spending, including
economic conditions affecting disposable consumer income (such as employment,
business conditions, taxation and interest rates) and the ability of mall anchor
12
<PAGE> 14
tenants and other attractions to generate customer traffic in the vicinity of
the Company's stores. There can be no assurance that consumer spending will not
be affected by adverse economic conditions, thereby affecting the Company's
results of operations and financial condition.
POSSIBLE HEALTH RISKS ASSOCIATED WITH WIRELESS TELEPHONES
Lawsuits have been filed against suppliers and sellers of wireless
telephones alleging possible health risks, including brain cancer, associated
with electromagnetic fields emitted by portable hand-held wireless telephones.
To date, there has been only limited research in this area, and such research
has not been conclusive as to what effects, if any, exposure to electromagnetic
fields emitted by portable wireless telephones has on human cells. However, the
perception that health risks may exist could adversely affect the Company's
ability to market portable wireless telephone products. Inasmuch as most of the
Company's revenues are derived from sales of portable wireless telephones,
future studies confirming possible health risks associated with the use of such
products could have a material adverse effect on the wireless communications
industry and the Company. As a distributor of wireless telephones, the Company
may be subject to product liability and other lawsuits alleging health risks.
The costs associated with the defense of such lawsuits or a successful claim
against the Company could have a material adverse effect on the Company's
results of operations and financial condition.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is substantially dependent upon its senior
management team, in particular the Company's Chief Executive Officer and
Chairman, Messrs. Molina and Beveridge, respectively. The loss of the services
of one or more of these persons could have a material adverse effect on the
Company. The Company has entered into five year employment agreements with
Messrs. Molina and Beveridge that limit the ability of the executives to compete
with the Company after their departure. See "Management -- Employment
Agreements." The Company's business will also be dependent upon its ability to
attract and retain additional qualified personnel. The loss of Mr. Molina, Mr.
Beveridge or other key personnel could have a material adverse effect on the
Company's results of operations and financial condition. See "Management."
CONTROLLING SHAREHOLDER
Upon completion of this offering, HIG will beneficially own approximately
38.0% of the outstanding Common Stock (approximately 33.3% if the Underwriters'
over-allotment option is exercised in full). Accordingly, HIG will have
sufficient voting power to control all matters requiring shareholder approval,
including the election of directors and the approval of fundamental corporate
transactions. See "Principal and Selling Shareholders."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BYLAW AND OTHER PROVISIONS
Certain provisions of the Company's Amended and Restated Articles of
Incorporation (the "Articles") and Amended and Restated Bylaws (the "Bylaws")
may be deemed to have anti-takeover effects and may discourage, delay, defer or
prevent a change in control of the Company. Certain of these provisions (i)
divide the Company's Board of Directors into three classes, each of which will
serve for different three-year periods, (ii) provide that the shareholders may
remove directors from office only for cause and by a supermajority vote, (iii)
provide that special meetings of the shareholders may be called only by the
Board of Directors, the Chairman of the Board of Directors or upon the written
demand of the holders of not less than fifty percent of the votes entitled to be
cast at a special meeting, (iv) establish certain advance notice procedures for
nomination of candidates for election as directors and for shareholder proposals
to be considered at annual shareholders' meetings, and (v) authorize the
issuance of 1,000,000 shares of "blank check" preferred stock with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could materially adversely
affect the voting power or other rights of the holders of the Company's Common
Stock. In addition, certain provisions of the Florida Business Corporation Act
may be deemed to have certain anti-takeover effects. Certain anti-
13
<PAGE> 15
takeover provisions of the Company's Articles concerning the number, term and
removal of directors may only be amended by a supermajority vote of
shareholders. See "Description of Capital Stock -- Anti-takeover Effects of
Certain Provisions of the Company's Articles of Incorporation and Bylaws and
Other Provisions."
DILUTION
Investors purchasing shares of Common Stock in this offering will
experience immediate and substantial dilution in net tangible book value of
$12.84 per share. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding an
aggregate of 8,199,762 shares of Common Stock. All of the shares sold in this
offering (plus an additional 450,000 shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradeable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares purchased by an affiliate of the
Company that will be subject to the resale limitations of Rule 144 under the
Securities Act. Upon the expiration of lock-up agreements between each of the
executive officers, directors and existing shareholders and the Underwriters,
180 days after the date of this Prospectus (or earlier upon the written consent
of Merrill Lynch & Co., Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch")), 3,741,845 shares of Common Stock (including options to acquire 182,348
shares of Common Stock) outstanding prior to this offering may be sold in the
public market by affiliates of the Company, subject to the limitations and
restrictions contained in Rule 144 under the Securities Act. Holders of
1,640,265 shares of Common Stock will not be able to sell their shares in
reliance on Rule 144 under the Securities Act prior to June 1998. In addition,
310,000 shares of Common Stock have been reserved for issuance under the
Company's 1997 Executive Incentive Compensation Plan (the "Incentive Plan").
Options to acquire an aggregate of 265,258 of such shares will be granted to
certain key employees and directors of the Company under the Incentive Plan on
the date of this Prospectus, a third of which will vest in October of each of
1998, 1999 and 2000. 118,404 of such options are held by two executive officers
and will vest immediately upon the termination of their employment for any
reason other than cause. Upon completion of this offering any shares of Common
Stock issuable upon the exercise of such options (subject to certain vesting
terms and other limitations on exercise with respect to such options) will be
eligible for sale in the future pursuant to registration on Form S-8. Sales of
substantial amounts of Common Stock, or the perception that substantial amounts
of Common Stock are available for future sale, could adversely affect the
prevailing market price of the Common Stock. Following the closing of the
offering, one of the Company's existing shareholders will have the right to
require the Company to register the sale of its 1,475,095 shares of Common Stock
under the Securities Act. Following the closing of the offering, all of the
existing shareholders, who will hold an aggregate of 5,382,110 shares (including
options to acquire 182,348 shares), will have the right to include such shares
of Common Stock in registrations proposed to be effected by the Company. Such
shareholders have agreed not to exercise their registration rights prior to 180
days from the date of this Prospectus without the prior written consent of
Merrill Lynch. See "Shares Eligible for Future Sale," "Management -- Executive
Incentive Compensation Plan," "Principal and Selling Shareholders" and
"Underwriting."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop or, if
developed, that such market will be sustained following the offering or that the
market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price of the Common Stock will be
determined by negotiations between the Company, the Selling Shareholders and the
representatives of the Underwriters based on the factors described under
"Underwriting." The trading price of the Common Stock could be subject to
fluctuations in response to variations in the Company's results of operations,
as well as developments that affect the industry, the overall economy and the
financial markets. Upon commencement of this offering, the Common Stock will be
quoted on the Nasdaq National Market, which stock market has experienced and is
likely to experience in the future significant price and volume fluctuations
which could adversely affect the market price of the Common Stock without regard
to the operating performance of the Company.
14
<PAGE> 16
USE OF PROCEEDS
The net proceeds from the sale of the 2,000,000 shares of Common Stock
offered by the Company hereby (at an assumed initial public offering price of
$15.00 per share and not including fees payable as described under "Certain
Transactions") are estimated to be approximately $26.7 million. The Company will
not receive any proceeds from the sale of Common Stock offered by the Selling
Shareholders. The Company intends to use approximately $14.4 million of the net
proceeds of the offering to repay its outstanding bank indebtedness and certain
shareholder loans and to apply the remaining net proceeds to finance the
Company's expansion, including the Cellular USA Acquisition and the Cellular
Unlimited Acquisition, the opening of new stores and other possible
acquisitions, and for other general corporate purposes, including the payment of
certain fees set forth under "Certain Transactions." Of the net proceeds to the
Company, (i) approximately $14.1 million will be used to repay the Company's
outstanding bank indebtedness incurred primarily to fund the Telephone Warehouse
Acquisition, (ii) approximately $258,100 will be used to repay loans from
Messrs. Molina and Beveridge bearing interest at 8.0% and maturing upon the
closing of this offering, (iii) approximately $1.6 million will be used to fund
the Cellular USA Acquisition and (iv) approximately $2.0 million will be used to
fund the Cellular Unlimited Acquisition. See "Certain Transactions." Bank loans
to be repaid by the Company consist of $13.1 million of term loans and $1.0
million of revolving loans, bearing interest at 4.5% and 3.75%, respectively,
over the commercial paper rate, and in each case payable May 2004. The bank
loans are secured by all of the assets of the Company and a first priority lien
on the Common Stock owned by HIG. Pending the application of the remaining net
proceeds, the Company will invest such proceeds in money market funds or other
short-term, investment-grade, interest bearing securities.
DIVIDEND POLICY
The Company does not intend to pay cash dividends to holders of its Common
Stock for the foreseeable future. Instead, the Company intends to apply
earnings, if any, to finance its growth. Any future determination to pay cash
dividends will be at the discretion of the Board of Directors and will be
dependent upon the Company's financial condition, restrictions contained in
financing agreements, results of operations, capital requirements and such other
factors as the Board of Directors may consider relevant.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the current portion of long-term debt and
capitalization of the Company as of July 31, 1997 on a historical basis and as
adjusted to reflect the sale of the 2,000,000 shares of Common Stock offered by
the Company hereby (at an assumed initial public offering price of $15 per share
and after payment of the fees described under "Certain Transactions") and the
application of the net proceeds thereof as set forth in "Use of Proceeds." The
table should be read in conjunction with the Consolidated Financial Statements
and related notes and "Unaudited Pro Forma Financial Data" appearing elsewhere
in this Prospectus. See also "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
AS OF JULY 31, 1997
------------------------
ACTUAL AS ADJUSTED
------- --------------
(IN THOUSANDS)
<S> <C> <C>
Bank line of credit, current portion of long-term debt and
capital lease obligations................................. $ 2,013 $ 32
======= =======
Long-term debt, less current maturities:
Bank term loans........................................... $12,350 $ --
8.0% subordinated note.................................... 2,000 2,000
Capital lease obligations................................. 33 33
------- -------
Total long-term debt................................... 14,383 2,033
------- -------
Shareholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares
authorized; none issued and outstanding................ -- --
Common Stock, $.01 par value; 50,000,000 shares
authorized; 6,093,166 shares issued and outstanding(1);
8,199,762 shares issued and outstanding, as
adjusted(2)............................................ 61 82
Additional paid-in capital................................ 6,166 32,005
Retained earnings (deficit)............................... 383 (355)
------- -------
Total shareholders' equity............................. 6,610 31,732
------- -------
Total capitalization.............................. $20,993 $33,765
======= =======
</TABLE>
- ---------------
(1) Does not include 106,596 shares of Common Stock that will be issued
immediately prior to the sale of the Common Stock offered hereby, for a per
share price of $.0001, upon exercise of warrants that are held by the bank
lender to the Company. See "Certain Transactions."
(2) Does not include 447,606 shares of Common Stock issuable upon the exercise
of outstanding stock options, at a weighted average exercise price of $17.05
per share.
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<PAGE> 18
DILUTION
At July 31, 1997, the Company had a net tangible book value (deficiency) of
$(8.1) million, or $(1.31) per share of Common Stock. Net tangible book value
(deficiency) per share is determined by dividing the net tangible book value
(tangible assets less total liabilities) of the Company by the total number of
shares of Common Stock outstanding. Without taking into account any changes in
net tangible book value after July 31, 1997, other than to give effect to the
issuance and sale of the 2,000,000 shares of Common Stock offered by the Company
hereby (at an assumed initial public offering price of $15.00 per share), after
deduction of the underwriting discount and estimated offering expenses to be
paid by the Company, the application of the net proceeds to pay indebtedness as
set forth in "Use of Proceeds" and the non-recurring charges that will result
from the repayment of the Company's bank indebtedness, the net tangible book
value of the Company at July 31, 1997 would have been $17.7 million, or $2.16
per share. This represents an immediate increase in net tangible book value of
$3.47 per share to existing shareholders and an immediate dilution of $12.84 per
share to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
Net tangible book value (deficiency) per share as of July
31, 1997............................................... (1.31)
Increase in net tangible book value per share attributable
to new investors....................................... 3.47
------
Pro forma net tangible book value per share after the
offering.................................................. 2.16
------
Dilution per share to new investors......................... $12.84
======
</TABLE>
The following table summarizes as of July 31, 1997, the difference between
the number of shares of Common Stock purchased from the Company, the aggregate
consideration paid and the average price per share paid by existing shareholders
and new investors purchasing shares in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)(2)....... 6,199,762 75.6% $ 6,227,400 17.2% $ 1.00
New investors(1).................. 2,000,000 24.4 $30,000,000 82.8% $ 15.00
--------- ----- ----------- -----
Total................... 8,199,762 100.0% $36,227,400 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Sales by the Selling Shareholders in this offering will reduce the number of
shares held by the existing shareholders to 5,199,762, or 63.4% of the total
number of shares of Common Stock to be outstanding after this offering, and
the number of shares to be purchased by new investors will increase to
3,000,000, or 36.6 % of the total shares of Common Stock to be outstanding.
If the Underwriters' over-allotment option is exercised in full, the number
of shares held by existing shareholders will decrease to 4,749,762 or 57.9%
of the total number of shares of Common Stock to be outstanding after this
offering, and the number of shares to be purchased by new investors will
increase to 3,450,000, or 42.1% of the total shares of Common Stock to be
outstanding. See "Principal and Selling Shareholders."
(2) Includes 106,596 shares of Common Stock that will be issued immediately
prior to the sale of the Common Stock offered hereby, for a per share price
of $.0001, upon exercise of warrants that are held by the bank lender to the
Company. See "Certain Transactions" and "Principal and Selling
Shareholders."
The foregoing table assumes no exercise of outstanding stock options after
the date hereof. As of the date of this Prospectus, there were options
outstanding to purchase a total 447,606 of shares of Common Stock, at a weighted
average exercise price of $17.05 per share. See "Management -- Executive
Incentive Compensation Plan" and Note 13 of Notes to Consolidated Financial
Statements.
17
<PAGE> 19
UNAUDITED PRO FORMA FINANCIAL DATA
The accompanying unaudited pro forma condensed consolidated statement of
income for the year ended July 31, 1997, reflects the historical statement of
operations of the Company, adjusted to reflect the effects of the Telephone
Warehouse Acquisition and related transactions, the sale of the Common Stock
offered hereby and the application of a portion of the net proceeds therefrom to
the repayment of outstanding bank indebtedness and certain shareholder notes as
if such transactions had occurred as of the beginning of the period presented.
Share and per share amounts included herein, give effect to a 3.289-for-one
stock split to be effected immediately prior to this offering. The pro forma
financial information does not give effect to the Cellular USA Acquisition or
the Cellular Unlimited Acquisition.
On June 27, 1997 (effective June 30, 1997), the Company purchased all of
the outstanding shares of common stock of Telephone Warehouse from Texas
Cellular Partners, L.P. ("TCP"), an affiliate of HIG, in exchange for 1,817,468
shares of the Company's Common Stock and assumption of $13.1 million of
indebtedness. The fair value of the shares issued, as determined by management,
was approximately $2.8 million. The fair value of net assets acquired, including
approximately $1.6 million (net of deferred tax liability of $942,000) allocated
to acquired residual income, was approximately $4.9 million. The purchase price
exceeded the fair value of the net assets acquired by approximately $11.0
million, which amount will be amortized on a straight line basis over 30 years.
The allocated cost of residual income is being amortized on an accelerated
basis, which amortization is expected to have a significant negative effect on
net income for the next two fiscal years. See Note 2 to the Pro Forma Condensed
Consolidated Statements of Income. The acquisition was accounted for using the
purchase method of accounting. In connection with the acquisition of Telephone
Warehouse, the Company refinanced its debt and issued warrants to NationsCredit
Commercial Corporation, the Company's bank lender ("NationsCredit"), to purchase
a total of 106,596 shares of the Company's Common Stock at an exercise price of
$.0001 per share.
In a previous transaction, on January 1, 1997, TCP had purchased from the
President and sole shareholder of Telephone Warehouse, Ronald Koonsman, all of
the outstanding stock of Telephone Warehouse for a purchase price of $15.1
million including acquisition costs of approximately $200,000.
Simultaneous with the acquisition of Telephone Warehouse, the Company
induced the holder of the Company's outstanding Series A Preferred Stock to
convert all outstanding shares of the Series A Preferred Stock to Common Stock
by increasing the conversion ratio of the Series A Preferred Stock from 17.50 to
1 to 21.38 to 1. As a result of such conversion, the holder of the Company's
outstanding Series A Preferred Stock surrendered certain rights to enforce
various restrictive covenants regarding the Company's operations. Upon such
conversion, the holder of the Series A Preferred Stock received 2,137,850 shares
of Common Stock (388,701 shares in addition to the original conversion ratio).
Management determined that the fair value of the 388,701 shares at the date of
issuance was approximately $320,000.
The unaudited pro forma consolidated financial data and accompanying notes
should be read in conjunction with the Consolidated Financial Statements and the
related notes of the Company and the Combined Financial Statements and related
notes of Telephone Warehouse, all of which are included elsewhere in this
Prospectus. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the pro forma
financial data. The purchase price allocation is based on preliminary data. The
unaudited pro forma financial data is provided for informational purposes only
and should not be construed to be indicative of the Company's financial
condition or results of operations had the transactions and events above been
consummated on the dates assumed and are not intended to constitute projections
with regards to the Company's financial condition as of any future date or
results of operations for any future period.
18
<PAGE> 20
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JULY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
TELEPHONE
WAREHOUSE
ELEVEN
MONTHS
THE ENDED PRO FORMA
COMPANY JUNE 30, 1997 ADJUSTMENTS PRO FORMA
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues:
Retail sales and activation income..... $25,804,718 $12,627,738 $38,432,456
Residual income........................ 1,948,169 8,186,855 10,135,024
Wholesale sales........................ 2,309,082 23,529,042 25,838,124
----------- ----------- ----------- -----------
Total net revenues.................. 30,061,969 44,343,635 -- 74,405,604
Cost of sales............................ 14,822,617 29,589,564 44,412,181
----------- ----------- ----------- -----------
Gross profit............................. 15,239,352 14,754,071 -- 29,993,423
Operating expenses:
Selling, general and administrative.... 13,993,392 9,588,511 $ (35,000)(1) 23,395,016
(151,887)(2)
Former shareholder compensation
expense............................. 80,000 1,080,000 (1,060,000)(1) 100,000
Depreciation and amortization.......... 451,108 189,004 640,112
Amortization of intangibles............ 417,739 1,120,997 637,642(3) 2,176,378
----------- ----------- ----------- -----------
Total operating expenses............ 14,942,239 11,978,512 (609,245) 26,311,506
----------- ----------- ----------- -----------
Income from operations................... 297,113 2,775,559 609,245 3,681,917
Interest expense, net.................... (340,102) (714,997) (846,477)(4) (109,550)
1,792,026(5)
Other.................................... -- 7,598 7,598
----------- ----------- ----------- -----------
Income (loss) before provision for income
taxes.................................. (42,989) 2,068,160 1,554,794 3,579,965
Income tax provision..................... 2,842 680,402 847,069(6) 1,530,313
----------- ----------- ----------- -----------
Net income (loss)................... (45,831) 1,387,758 707,725 2,049,652
Fair value of Common Stock distributed to
preferred shareholder to induce
conversion of Series A Preferred
Stock.................................. (320,000) -- 320,000(7) --
----------- ----------- ----------- -----------
Net income (loss) applicable to
common shareholders............... $ (365,831) $ 1,387,758 $ 1,027,725(9) $ 2,049,652
=========== =========== =========== ===========
Net income (loss) per share
applicable to common
shareholders...................... $ (0.07) $ 0.24(8)(9)
=========== ===========
Weighted average shares outstanding...... 6,199,762 8,199,762(8)
=========== ===========
</TABLE>
19
<PAGE> 21
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(1) Reflects reduction of compensation expense to $100,000 per year based on a
new employment agreement signed at the time of the Telephone Warehouse
Acquisition by Ronald Koonsman providing for the following: (i) for the six
month period beginning on July 1, 1997, a salary of $50,000 and (ii) for the
12 month period beginning on January 1, 1998, a salary of $100,000. The
agreement also provides for a non-recurring bonus of $950,000 payable on or
before December 31, 1997, provided that certain financial performance levels
are met for the twelve months ended December 31, 1997. As a non-recurring
charge, such bonus is not included herein. Also reflects a new employment
arrangement entered into at the time of the Telephone Warehouse Acquisition
with a Vice President of Telephone Warehouse that provided for a reduction
in compensation expense from 10% to 5% of annual income before interest,
taxes, depreciation and amortization and management fees.
(2) Reflects the elimination of management and consulting fees of $151,887
provided by HIG Capital Management, Inc., which will be discontinued upon
consummation of the offering.
(3) Reflects increase to amortization of intangible assets. Goodwill totaling
approximately $11.0 million is being amortized over 30 years and the
allocated cost of acquired residual income of approximately $2.5 million is
being amortized on an accelerated basis according to the anticipated timing
of acquired cash flows, resulting in incremental amortization as follows:
<TABLE>
<S> <C>
Incremental amortization of goodwill........................ $163,791
Incremental amortization of acquired residual income........ 473,851
--------
Pro forma adjustment.............................. $637,642
</TABLE>
The amortization of the allocated cost of acquired residual income
subsequent to July 31, 1997 is expected to be approximately as follows:
<TABLE>
<S> <C>
Fiscal 1998................................................. $1,507,000
Fiscal 1999................................................. 676,000
Fiscal 2000................................................. 189,000
Fiscal 2001................................................. 5,000
----------
$2,377,000
</TABLE>
(4) Reflects incremental interest expense and incremental amortization of
deferred financing costs on assumed debt of Telephone Warehouse, comprised
of $11.1 million in bank indebtedness and $2 million in note payable to
former shareholder, and new borrowings to fund the Telephone Warehouse
Acquisition of $2 million as if such debt was outstanding as of the
beginning of the period presented, as follows:
<TABLE>
<S> <C>
Incremental interest expense on assumed debt................ $583,706
Incremental interest expense on new borrowings.............. 51,125
Incremental amortization of deferred financing costs on
assumed debt.............................................. 137,590
Incremental amortization of deferred financing costs on new
debt...................................................... 74,056
--------
Pro forma adjustment.............................. $846,477
</TABLE>
(5) Reflects a reduction in interest expense assuming the repayment of bank
indebtedness of $14.1 million and certain shareholder notes of $258,100 with
a portion of the proceeds from the offering.
(6) Reflects recognition of income tax expense associated with the following:
<TABLE>
<S> <C>
Income tax provision as if all Telephone Warehouse entities
were C-Corporations as of August 1, 1996.................. $ 145,420
Tax effect of the pro forma adjustments at statutory
rates..................................................... 876,974
Tax benefit associated with the incremental amortization of
the acquired residual income.............................. (175,325)
---------
Pro forma adjustment.............................. $ 847,069
</TABLE>
20
<PAGE> 22
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME -- (CONTINUED)
(7) Reflects the reversal of a non-recurring distribution resulting from the
issuance of 388,701 shares of Common Stock distributed to induce the
conversion of the Series A Preferred Stock into a total of 2,137,850 shares
of Common Stock simultaneous with the acquisition of Telephone Warehouse.
(8) Net income per share applicable to common shareholders is calculated by
using the weighted average number of shares of Common Stock outstanding
during the period, assuming the conversion of the Series A Preferred Stock
into 2,137,850 shares of Common Stock, the issuance of 1,817,468 shares of
Common Stock to purchase Telephone Warehouse, the issuance of 106,596
warrants in connection with the Company's debt refinancing and the issuance
of 2,000,000 shares of Common Stock in connection with the offering had all
occurred as of August 1, 1996 resulting in 8,199,762 weighted average shares
outstanding. Accretion to redemption value of the Series A Preferred Stock
of $62,640, has been deducted from net income for purposes of calculating
net income per share applicable to common shareholders.
(9) Does not include a non-recurring charge of approximately $738,000, net of
tax, relating to the write-off of deferred financing costs in connection
with the repayment of the bank indebtedness of $14.1 million with a portion
of the net proceeds of this offering.
21
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company for the five years ended July 31, 1997 and has been derived from the
financial statements of the Company. The consolidated financial statements as of
and for the years ended July 31, 1996 and 1997 have been audited by Ernst &
Young LLP, independent auditors. The consolidated financial statements as of and
for the years ended July 31, 1994 and 1995 have been audited by Deloitte &
Touche, LLP, independent auditors. The consolidated financial statements as of
and for the year ended July 31, 1993 are unaudited. The financial data set forth
below should be read in conjunction with the financial statements and related
notes, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Retail sales and activation
income................... $ 3,205 $ 4,033 $ 7,771 $ 12,518 $ 25,805
Residual income............. 75 228 533 1,075 1,948
Wholesale sales............. -- -- -- -- 2,309
--------- --------- --------- --------- ---------
Total net revenues....... 3,280 4,261 8,304 13,593 30,062
Cost of sales................. 1,596 2,128 4,260 6,509 14,823
--------- --------- --------- --------- ---------
Gross profit.................. 1,684 2,133 4,044 7,084 15,239
Selling, general and
administrative expenses..... 1,202 1,918 3,896 6,601 13,993
Former shareholder
compensation................ -- -- -- -- 80
Depreciation and
amortization................ 29 43 100 225 451
Amortization of intangibles... -- -- -- -- 418
--------- --------- --------- --------- ---------
Income from operations........ 453 172 48 258 297
Interest income (expense),
net......................... 27 (13) (40) (153) (340)
--------- --------- --------- --------- ---------
Income (loss) before provision
for income taxes............ 480 159 8 105 (43)
Income tax provision.......... 194 70 -- 39 3
--------- --------- --------- --------- ---------
Net income (loss)............. $ 286 $ 89 $ 8 $ 66 $ (46)
========= ========= ========= ========= =========
Net income (loss) applicable
to common shareholders...... $ 286 $ 89 $ 8 $ 66 $ (366)
========= ========= ========= ========= =========
Net income (loss) per share
applicable to common
shareholders................ $ .05 $ .01 $ -- $ .01 $ (.07)(1)(2)
========= ========= ========= ========= =========
Weighted average shares
outstanding................. 6,199,762 6,199,762 6,199,762 6,199,762 6,199,762
========= ========= ========= ========= =========
SELECTED OPERATING DATA:
EBITDA(3)..................... $ 536 $ 215 $ 148 $ 492 $ 1,203
========= ========= ========= ========= =========
Stores open at end of period:
Kiosk....................... 3 5 13 14 35
In-Line..................... 1 3 9 11 58
--------- --------- --------- --------- ---------
Total.................... 4 8 22 25 93
Percentage change in
comparable store sales(4)... (2.2)% 10.5% 11.5% 5.4%
Average comparable store
sales(6).................... $ 442,000 $ 450,000 $ 462,000 $ 500,000
Number of activations during
period...................... 1,661 5,205 14,803 43,360
Total gross square feet at end
of period................... 821(5) 2,447 7,006 9,529 96,093
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
AS OF JULY 31,
---------------------------------------
1993 1994 1995 1996 1997
---- ---- ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............................ $165 $144 $ (110) $ 779 $ 1,613
Total assets............................................ 561 947 3,324 6,646 34,538
Long-term debt.......................................... -- 26 328 474 14,383
Preferred stock......................................... -- -- -- 2,937 --
Shareholders' equity.................................... 276 362 621 693 6,610
</TABLE>
- ---------------
(1) The fair value of the Common Stock distributed to the holder of the
Company's Series A Preferred Stock in order to induce the conversion of the
Series A Preferred Stock to Common Stock of $320,000 is deducted from net
loss for purposes of calculating net loss per share applicable to common
shareholders for fiscal 1997. See "Unaudited Pro Forma Financial Data."
(2) Accretion to redemption value of the Series A Preferred Stock of $62,640,
has been deducted from net income (loss) for purposes of calculating net
income (loss) per share applicable to common shareholders.
(3) EBITDA is defined as net income (loss) plus (i) provision for income taxes,
(ii) gross interest expense and (iii) depreciation and amortization. EBITDA
is presented not as an alternative measure of operating results or cash flow
from operations (as determined in accordance with generally accepted
accounting principles), but because it is a widely accepted supplemental
financial measure.
(4) A store becomes comparable after it has been owned and operated by the
Company for at least 12 full months. Comparable store sales are comprised of
retail sales and activation income at the Company's retail stores, but do
not include residual income.
(5) Information not available.
(6) Represents the average retail sales and activation income on a store by
store basis only for stores owned and operated by the Company for at least
12 full months as of period end (excluding two stores that generate
substantially higher sales than other stores). Therefore, period to period
figures may not be comparable.
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the Results of Operations and Financial
Condition of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and the Related Notes thereto included
elsewhere in this Prospectus.
GENERAL
The Company is the largest independent specialty retailer of cellular and
wireless products, services and accessories in the United States, with 102
stores located in 12 states, the District of Columbia and Puerto Rico. Since its
inception in 1989 through June 30, 1996, the Company opened 25 stores. During
that period, the Company had limited capital and opened stores with funds
derived primarily from cash generated from operations. In June 1996, the Company
issued $3.3 million of Series A Preferred Stock to HIG (which has been converted
into Common Stock) and accelerated its store expansion. During fiscal 1997, the
Company added a net total of 68 stores, including five stores acquired from
Peachtree Mobility in the Atlanta metropolitan area and 19 stores acquired from
Telephone Warehouse, and has executed letters of intent to acquire six stores
from Cellular USA and 15 stores from Cellular Unlimited.
The Company opened 45 stores in fiscal 1997 and presently plans to open 65
to 75 new stores in fiscal 1998 and 80 to 100 new stores in fiscal 1999. To
prepare for this expansion, during the past year management has been building
the infrastructure necessary to support a rapidly growing chain of stores. The
Company hired senior management, established a field structure of district
managers, developed employee training programs, enhanced its financial controls
and procedures and finalized standards of store design and visual presentation.
The Company plans to continue its infrastructure investments, which could result
in a material reduction in income from operations in the first half of fiscal
1998 compared with pro forma income from operations for the corresponding period
in fiscal 1997. As the Company continues to expand through new store openings
and acquisitions, it expects to leverage these investments and improve margins
through economies of scale.
The Company's revenues are generated principally from four 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 Income. 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 various service plans offered by
the carriers 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 180 days). Customers generally sign a
service agreement with the Company that requires a customer deposit that is
forfeited in the event of early cancellation. The Company then applies the
customer's deposit to reduce or offset its resulting deactivation loss owed
to the carrier. The Company accrues for estimated deactivation losses, net
of cancellation fees, by creating a reserve against carrier accounts
receivable.
(iii) Residual Income. The Company receives monthly payments made by
certain cellular carriers and pager customers. Cellular residual payments
are based upon a percentage (usually 4-6%) of the customers' monthly
service charges and are recognized as income when received. Pager residual
payments are received on a monthly basis directly from pager customers for
the pager airtime that the Company buys wholesale from paging carriers and
then resells to individuals and small businesses.
(iv) Wholesale Sales. The Company began to wholesale cellular and
wireless products when it acquired Telephone Warehouse in June 1997. The
wholesale business typically has higher volumes and lower margins than the
retail business, but provides the Company with greater purchasing power and
additional distribution capabilities.
24
<PAGE> 26
Comparable stores sales include only stores owned and operated by the
Company for at least 12 full months and are comprised of retail sales and
activation income, as residual income is not allocated among stores.
Historically, retail sales have accounted for most of the Company's net
revenues. As sales of discounted and "free" cellular phones designed to attract
new subscribers have increased significantly, the number of activations has
increased and activation income has become increasingly significant to the
Company's net revenues. Activation income for the Company was $1.6 million, $4.4
million and $12.6 million in fiscal 1995, 1996 and 1997, respectively. The
Company has recently made a strategic decision to accept increased activation
income in connection with certain new carrier agreements in lieu of monthly
residual payments to optimize cash flow and to facilitate the Company's growth
strategy. As a result, management believes that activation income may account
for an increased share of the Company's future net revenues relative to residual
income.
To date, the cost of wireless products has gradually decreased over time.
With such lower costs, the Company typically has offered lower prices to attract
more subscribers, which has increased its total activation income and
contributed to gross profit improvements. Consequently, the Company believes
that as prices of wireless products decrease they become more affordable to
consumers, expanding the wireless communications market and creating an
opportunity to attract new subscribers and increase activation income.
The Company has developed two distinct mall-based store formats,
free-standing kiosks and traditional "in-line" stores. The average capital
expenditures for new kiosk and in-line locations approximate $34,000 and
$94,000, respectively. The initial inventory for a new store approximates
$32,000 for a kiosk and $47,000 for an in-line store. Management believes that
the flexibility of the Company's kiosk and in-line store formats permits the
Company to take advantage of the best available locations across a broad range
of market areas. Pre-opening costs for new stores such as travel and the hiring
and training of new employees are expensed as incurred and typically average
$3,000 per store. In fiscal 1997, comparable stores generated average annual
sales of approximately $500,000 (excluding two stores that generate
substantially higher sales than other stores). Generally, the Company's new
store sales reach normal operating levels after three months of operations.
In connection with the offering, the Company expects to incur a write-off
of deferred financing costs of approximately $738,000, net of tax, in connection
with the repayment of bank indebtedness with a portion of the proceeds of this
offering.
ACQUISITION OF TELEPHONE WAREHOUSE
In June 1997, the Company more than doubled the amount of its assets and
previous twelve months' total net revenues by acquiring Telephone Warehouse, one
of the largest AT&T cellular agents in the Southwest. Telephone Warehouse
operates 19 wireless specialty retail stores in Texas, Missouri and Kansas and
wholesales cellular and wireless products to over 1,000 regional and local
retailers, distributors and carriers. On a pro forma basis, the Company had
$74.4 million in total net revenues, $30.0 million in gross profit and $3.7
million in income from operations for the fiscal year ended July 31, 1997. See
"Unaudited Pro Forma Financial Data."
Telephone Warehouse had total net revenues of $49.6 million ($22.4 million
of which were from retail sales and activation and residual income and the
remaining were from wholesale operations) and income from operations of $4.0
million for its fiscal year ended December 31, 1996. Activation income for
Telephone Warehouse was $9.3 million, $7.3 million and $1.9 million in 1995,
1996 and the four months ended April 31, 1997, respectively.
The accelerated amortization applied to the value of the residual income
acquired in connection with the Telephone Warehouse Acquisition is expected to
have a significantly negative effect on net income in the fourth quarter of
fiscal 1997 and for the next two fiscal years. See Note 2 to the "Pro Forma
Condensed Consolidated Statements of Income."
25
<PAGE> 27
Prior to its acquisition by the Company, Telephone Warehouse was operated
with different strategic and financial objectives. Former management sought to
maximize cash flow and shareholder distributions, rather than reinvest earnings
in new store growth. As a result, Telephone Warehouse's net revenues and number
of stores did not grow significantly in recent years.
The Company's principal purpose in acquiring Telephone Warehouse was to
obtain immediate access to desirable markets, such as Dallas, San Antonio and
Kansas City, and locations and to qualified sales personnel and an existing
subscriber base. The Company intends to apply its operating strategy to
Telephone Warehouse, leverage Telephone Warehouse's existing infrastructure and
grow Telephone Warehouse's retail operations. In addition, the Company has the
opportunity to leverage the expertise of and benefit from Telephone Warehouse's
significant pager business. Management believes that the wholesale business,
which was acquired as part of the Telephone Warehouse Acquisition, provides the
Company with greater purchasing power and additional distribution capabilities.
In connection with the Telephone Warehouse Acquisition, the Company issued
1,817,468 shares of Common Stock and assumed $13.1 million of indebtedness. The
Company recorded intangibles of approximately $13.5 million, of which $11.0
million was allocated to goodwill, to be amortized over a 30-year period, and
$2.5 million was allocated to acquired residual income, substantially all of
which is to be amortized through the year 2000 on an accelerated basis according
to the anticipated timing of acquired cash flows. The Company has accounted for
the Telephone Warehouse Acquisition using the purchase method of accounting and,
as a result, does not include in its financial statements the results of
operations of Telephone Warehouse prior to the date it was acquired by the
Company.
RESULTS OF OPERATIONS
The following table summarizes for the periods presented certain selected
income statement data of the Company expressed as a percentage of total net
revenues:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED JULY 31,
---------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Total net revenues.......................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 51.3 47.9 49.3
----- ----- -----
Gross profit................................................ 48.7 52.1 50.7
Selling, general and administrative expenses................ 46.9 48.6 46.8
Depreciation and amortization............................... 1.2 1.7 1.5
Amortization of intangibles................................. -- -- 1.4
----- ----- -----
Income from operations...................................... 0.6 1.8 1.0
Interest expense, net....................................... 0.5 1.1 1.1
Income tax provision........................................ -- 0.3 --
----- ----- -----
Net income (loss)........................................... 0.1% 0.4% (0.1)%
===== ===== =====
Number of stores at end of period........................... 22 25 93
</TABLE>
26
<PAGE> 28
THE COMPANY
YEAR ENDED JULY 31, 1997 COMPARED TO YEAR ENDED JULY 31, 1996
Total net revenues increased $16.5 million, or 121.1%, to $30.1 million in
fiscal 1997 from $13.6 million in fiscal 1996 due to increases in retail sales,
activation income and residual income, and to the acquisition of Telephone
Warehouse on June 30, 1997 and the resulting inclusion of Telephone Warehouse's
operations in the Company's consolidated revenues for the month of July 1997.
Retail sales and activation income increased 106.1% to $25.8 million from $12.5
million and residual income increased $800,000, or 81.2%, to $1.9 from $1.1
million. Comparable store sales increased 5.4% and accounted for $634,000, or
3.8%, of the increase in total net revenues. Sales relating to 45 new stores
opened, 24 stores acquired since July 31, 1996 and the four stores that were not
yet open for 12 full months accounted for $12.6 million, or 76.3%, of the
increase in total net revenues. The comparable stores sales growth was primarily
attributable to increased advertising during the holiday season in the second
fiscal quarter and the growth of cellular subscriptions in the wireless
communication industry overall. Wholesale sales increased to $2.3 million as a
result of the acquisition of Telephone Warehouse on June 30, 1997. The increase
in residual income was due to the inclusion of Telephone Warehouse's residual
income ($720,000 for the month of July 1997), the increase in the number of
cellular activations (43,360 in fiscal 1997 as compared to 14,803 in fiscal
1996) and the addition of cellular subscribers resulting from the Peachtree
Acquisition and the Company's store expansion. The Company had 93 stores open at
July 31, 1997 as compared to 25 at July 31, 1996.
Gross profit increased $8.1 million, or 115.1%, to $15.2 million in fiscal
1997 from $7.1 million in fiscal 1996. As a percentage of total net revenues,
gross profit decreased to 50.7%, from 52.1%, primarily due to the inclusion of
Telephone Warehouse's wholesale operations, which have lower margins than the
Company's retail sales. Management expects that in fiscal 1998 gross profit as a
percentage of revenues will decrease due to the inclusion of Telephone
Warehouse's wholesale sales in the Company's operations for a full fiscal year.
Selling, general and administrative expenses increased $7.5 million, or
113.2%, to $14.1 million in fiscal 1997 from $6.6 million in fiscal 1996,
primarily as a result of higher personnel, rent and related costs associated
with the opening of 45 stores, the acquisition of five Peachtree Mobility stores
and the inclusion of Telephone Warehouse's operations for the month of July
1997. Higher advertising costs were incurred in connection with entering new
markets and additional expenses related to infrastructure investments were
incurred to support this expansion. Management believes that more advertising is
required to support sales in new markets than is required to support the same
level of sales in existing markets and, as a result, expects advertising to
increase in future periods as the Company expands into new markets with new
store openings. A charge of $264,000 was recorded in fiscal 1997 in connection
with the write-off of assets associated with underperforming stores and one
store closing. As a percentage of total net revenues, selling, general and
administrative expenses decreased to 46.8% during fiscal 1997 from 48.6% in
fiscal 1996.
Amortization of intangibles consisted of (i) $220,000 associated with the
thirty month noncompete agreement entered into in August 1996 in connection with
the Peachtree Acquisition, and (ii) $198,000 associated with the amortization of
goodwill and acquired residual income resulting from the acquisition of
Telephone Warehouse on June 30, 1997.
Income from operations increased $39,000 to $297,000 in fiscal 1997 from
$258,000 in fiscal 1996 and decreased as a percentage of total net revenues to
1.0% from 1.9%.
Interest expense, net increased $187,000 to $340,000 in fiscal 1997 from
$153,000 in fiscal 1996 primarily due to increased bank borrowings.
Income tax provision was $3,000 in fiscal 1997 as compared to $39,000 in
fiscal 1996 primarily as a result of a $148,000 decrease in income before
provision for income taxes.
Net loss was $46,000 in fiscal 1997 compared to net income of $66,000 in
fiscal 1996.
27
<PAGE> 29
Net loss applicable to common shareholders was $366,000 in fiscal 1997 as
compared to $66,000 in fiscal 1996 primarily due to the fair value of the Common
Stock, $320,000, distributed to the preferred shareholder to induce conversion
of the Series A Preferred Stock. This amount is reflected as a deduction from
net loss.
YEAR ENDED JULY 31, 1996 COMPARED TO YEAR ENDED JULY 31, 1995
Total net revenues increased $5.3 million, or 63.7%, to $13.6 million in
fiscal 1996 from $8.3 million in fiscal 1995. Retail sales and activation income
increased 61.1% to $12.5 million from $7.8 million, and residual income
increased 101.6% to $1.1 million from $533,000. Comparable store sales increased
11.5% and accounted for $855,000, or 16.2%, of the increase in total net
revenues. Net revenues from the three stores opened during fiscal 1996 and the
14 stores that were not yet open for 12 full months accounted for $4.4 million,
or 83.2%, of the increase in total net revenues. The comparable store sales
increase was primarily attributable to the introduction of a new model of
cellular phone to the market during the fourth quarter of fiscal 1996, increased
number of activations relating to corporate accounts, increased carrier
promotions conducted in certain of the Company's significant cellular markets
and the growth of cellular subscribers in the wireless industry overall. The
increase in residual income was due to the growth in the number of the Company's
cellular subscribers corresponding to the increase in cellular activations (to
14,803 in fiscal 1996 from 5,205 in fiscal 1995). The Company had 25 stores open
at July 31, 1996 as compared to 22 at July 31, 1995.
Gross profit increased $3.0 million, or 75.2%, to $7.0 million in fiscal
1996 from $4.0 million in fiscal 1995. As a percentage of total net revenues,
gross profit increased to 52.1% in fiscal 1996 from 48.7% in fiscal 1995,
primarily due to activation income increasing at a faster rate than the cost of
merchandise sold.
Selling general and administrative expense increased $2.7 million, or
69.4%, to $6.6 million in fiscal 1996 from $3.9 million in fiscal 1995 primarily
as a result of higher personnel, rent and related costs associated with the
opening of new stores. As a percentage of total net revenues, selling, general
and administrative expense increased to 48.6% in fiscal 1996 from 46.9% in
fiscal 1995. This increase resulted from higher expenses associated with new
stores with lower initial sales volumes compared to established stores and
increased general and administrative expenses related to adding field management
and increasing advertising to support expansion into new markets.
Income from operations increased $210,000 to $258,000 in fiscal 1996 from
$48,000 in fiscal 1995 and increased as a percentage of total net revenues to
1.9% from 0.6%.
Interest expense, net increased $113,000 to $153,000 in fiscal 1996 from
$40,000 in fiscal 1995 primarily as a result of higher bank borrowings to
finance the increase in the Company's working capital requirements and
additional store openings.
Income tax provision was $39,000 in fiscal 1996 as a result of $97,000
increase in income before provision for income taxes.
Net income was $66,000 in fiscal 1996 from $8,000 in fiscal 1995.
YEAR ENDED JULY 31, 1995 COMPARED TO YEAR ENDED JULY 31, 1994
Total net revenues increased $4.0 million, or 94.9%, to $8.3 million in
fiscal 1995 from $4.3 million in fiscal 1994. Retail sales and activation income
increased 92.7% to $7.8 million in fiscal 1995 from $4.0 million in fiscal 1994
and residual income increased 133.5% to $533,000 in fiscal 1995 from $228,000 in
fiscal 1994. Comparable store sales increased 10.5% and accounted for $424,000,
or 10.5%, of total net revenues. Net revenues from the 14 stores opened during
fiscal 1995 and the four stores that were not yet open for 12 full months
accounted for $3.6 million, or 89.1%, of the increase in total net revenues. The
comparable store sales growth was primarily attributed to improved merchandise
assortments, higher focus on activations and retention of more qualified sales
associates through an improved store payroll structure. The increase in residual
income was due to the growth in the number of the Company's cellular subscribers
corresponding to the increase in cellular activations (to 5,205 in fiscal 1995
from 1,661 in fiscal 1994). The Company had 22 stores open at July 31, 1995 as
compared to 8 stores open at July 31, 1994.
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<PAGE> 30
Gross profit increased $1.9 million, or 89.5%, to $4.0 million in fiscal
1995 from $2.1 million in 1994. As a percentage of total net revenues, gross
profit decreased to 48.7% in fiscal 1995 from 50.1% in fiscal 1994, primarily
due to the introduction of discounts on the retail price of phones.
Selling, general and administrative expense increased $2.0 million, or
103.1%, to $3.9 million in fiscal 1995 from $1.9 million in fiscal 1994
primarily due to increases in payroll, rent and other costs associated with the
opening of 14 stores in fiscal 1995. Higher payroll costs were incurred due to
modifications to the store payroll structure designed to attract and retain
quality sales associates. As a percentage of total net revenues, selling general
and administrative expense increased to 46.9% in fiscal 1995 from 45.0% in
fiscal 1994. This increase resulted from higher expenses associated with new
stores with lower initial sales volume compared to established stores.
Income from operations decreased $124,000 to $48,000 in fiscal 1995 from
$172,000 in fiscal 1994 and decreased as a percentage of total net revenues to
0.6% from 4.0%.
Interest expense, net increased $27,000 to $40,000 in fiscal 1995 from
$13,000 in fiscal 1994 primarily as a result of higher bank borrowings.
Net income was $8,000 in fiscal 1995 compared to $89,000 in fiscal 1994.
TELEPHONE WAREHOUSE
FOUR MONTHS ENDED APRIL 30, 1997 COMPARED TO FOUR MONTHS ENDED APRIL 30, 1996
Total net revenues decreased $565,000, or 3.8%, to $14.5 million for the
four months ended April 30, 1997 from $15.0 million for the four months ended
April 30, 1996. Retail sales and activation income decreased 4.3% to $4.2
million and wholesale sales decreased 8.5% to $7.4 million. These decreases were
partially offset by an increase in residual income of 11.5% to $2.9 million from
$2.6 million. Comparable store sales, based on retail sales and activation
income, were flat. The decrease in retail sales, activation income and wholesale
sales was primarily due to the diversion of management's attention during the
period preceding the acquisition of Telephone Warehouse. In addition, Telephone
Warehouse closed two stores during the four months ended April 30, 1997. The
decrease in wholesale sales resulted from high levels of Ericsson digital phone
sales during the four months ended April 30, 1996. Due to lower cost sourcing,
special discounted prices on the Ericsson phones were offered during the four
months ended April 30, 1996, which were not repeated in the comparable period in
1997. The increase in residual income is primarily attributable to the increase
in the number of pager activations.
Gross profit decreased $284,000, or 5.5%, to $4.9 million during the four
months ended April 30, 1997 from $5.2 million during the four months ended April
30, 1996. As a percentage of total net revenues, gross profit decreased to 33.8%
in the four months ended April 30, 1997 from 34.4% in the four months ended
April 30, 1996 primarily due to increased promotions offering free accessories
to promote cellular activations in the retail stores. In addition, the four
month period ended April 30, 1996 had higher wholesale margins due to lower cost
sourcing associated with the high levels of Ericsson digital phone sales, and
such higher wholesale margins were not repeated in the comparable period in
1997.
Selling, general and administrative expenses remained constant at $3.2
million for the four months ended April 30, 1997 and, as a percentage of total
net revenues, increased to 22.3% from 21.6% for the comparable period in 1996
due to the decrease in total net revenues.
Amortization of intangibles consisted of $773,000 for the four months ended
April 30, 1997 associated with the amortization of goodwill and acquired
residual income resulting from the acquisition of Telephone Warehouse by TCP, an
affiliate of HIG.
Income from operations decreased $805,000 to $495,000 for the four months
ended April 30, 1997 from $1.3 million for the four months ended April 30, 1996
and decreased as a percentage of total net revenues to 3.4% from 8.6%.
29
<PAGE> 31
Interest expense, net was $437,000 for the four months ended April 30, 1997
compared to a net interest income of $26,000 for the four months ended April 30,
1996, primarily due to the indebtedness incurred in connection with the
acquisition of Telephone Warehouse.
Net income. As a result of the foregoing, Telephone Warehouse incurred a
net loss of $3,000 during the four months ended April 30, 1997 compared to a net
income of $1,102,000 during the four months ended April 30, 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Total net revenues increased $4.8 million, or 10.7%, to $49.6 million in
1996 from $44.8 million in 1995. Wholesale sales increased $7.0 million, or
34.4%, to $27.3 million in 1996 from $20.3 million in 1995 primarily due to high
levels of Ericsson digital phones sales. Due to lower cost sourcing, special
discounted prices on Ericsson digital phones were offered during the first half
of the year. Residual income increased $1.1 million, or 14.6%, to $8.3 million
in 1996 from $7.3 million in 1995 due to an increase in cellular and pager
subscribers. Retail sales and activation income decreased $3.2 million, or
18.8%, to $14.0 million in 1996 from $17.3 million in 1995 due to a decline in
carrier promotions, which resulted in fewer activations and equipment sales. In
addition, the Company increased promotions of free pagers, which resulted in a
corresponding decline in retail product sales.
Gross profit increased $1.8 million, or 12.4%, to $16.2 million in 1996
from $14.4 million in 1995. Gross profit as a percentage of total net revenues
increased to 32.7% in 1996 from 32.3% in 1995 primarily due to an increase in
residual income and higher wholesale margins associated with the Ericsson
digital phone sales.
Selling, general and administrative expense increased $178,000, or 1.7%, to
$10.4 million in 1996 from $10.2 million in 1995. As a percentage of total net
revenues, selling, general and administrative expense decreased to 20.9% in 1996
from 22.7% in 1995 because sales increased more rapidly than selling, general
and administrative expense.
Income from operations increased $2.1 million to $4.0 million in 1996 from
$1.9 million in 1995 and increased as a percentage of total net revenues to 8.1%
from 4.1%.
Interest income, net increased $19,000 to $30,000 in 1996 from $11,000 in
1995.
Net income increased to $3.4 million in 1996 from $1.7 million in 1995 for
the above reasons and due to the decrease in former shareholder compensation
expense of $529,000.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Total net revenues increased $2.4 million, or 5.5%, to $44.8 million in
1995 from $42.4 million in 1994. Wholesale sales increased 8.0% to $20.3 million
in 1995 from $18.8 million in 1994 primarily due to the addition of sales
personnel in the wholesale operations. Residual income increased 30.2% to $7.3
million in 1995 from $5.6 million in 1994 due to the increase in cellular and
pager subscribers. Retail sales and activation income decreased 4.7% to $17.3
million in 1995 from $18.1 million in 1994, due to increased product
discounting.
Gross profit increased $2.3 million, or 19.1%, to $14.4 million in 1995
from $12.1 million in 1994. Gross profit as a percentage of total net revenues
increased to 32.2% in 1995 from 28.6% in 1994 primarily due to a decrease in the
cost of wireless products.
Selling, general and administrative expense increased $1.4 million, or
15.8%, to $10.2 million in 1995 from $8.8 million in 1994 primarily due to
increases in payroll, rent, advertising resulting from the opening of new
stores. As a percentage of total net revenues, selling, general and
administrative expense increased to 22.7% in 1995 from 20.7% in 1994. This
increase resulted from higher expenses associated with new stores with lower
initial sales volumes compared to established stores.
Income from operations increased by $1.9 million to $1.9 million in 1995
from a loss from operations of $85,000 in 1994 and increased as a percentage of
total net revenues to 4.1% from a loss of 0.2%
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<PAGE> 32
Interest income, net decreased $9,000 to $11,000 in 1995 from $20,000 in
1994.
Net income increased to $1.7 million from a loss of $86,000 in 1994 for the
above reasons and due to a decrease in former shareholder compensation expense
of $1.1 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements have been primarily to support its
increased inventory requirements and build-out costs for new store expansion and
to fund acquisitions. The Company has historically financed its liquidity needs
through a combination of bank borrowings, capital contributions, loans from
shareholders and cash provided by operations. Telephone Warehouse's liquidity
requirements have been primarily to finance its working capital requirements.
Telephone Warehouse has historically financed its liquidity needs primarily
through loans from its former shareholder.
The Company's working capital increased $843,843 to $1.6 million at July
31, 1997 from $778,830 at July 31, 1996. The Company's cash requirements during
fiscal 1997 were affected by the need for increased working capital to fund the
Company's growth. Accounts receivable and inventory increased $9.6 million to
$11.4 million at July 31, 1997 from $1.8 million at July 31, 1996. This increase
was partially offset by an increase in accounts payable of $5.7 million to $6.6
million at July 31, 1997 from $841,490 at July 31, 1996.
The Company's net cash used in operating activities increased to $471,768
for fiscal 1997 compared to net cash provided by operating activities of
$252,184 for fiscal 1996. The decrease in net cash provided by operating
activities resulted primarily from an increase in inventories and accounts
receivable partially offset by an increase in current liabilities and net income
reflecting the growth in the Company's operations. Net cash provided by
operating activities in fiscal 1996 was primarily attributable to net income
before a non-cash charge of $225,159 for depreciation and amortization.
The Company's net cash used in investing activities decreased to $1.7
million for fiscal 1997 from $2.5 million for fiscal 1996. Net cash used by
investing activities in fiscal 1997 primarily consisted of capital expenditures
of $3.6 million and the Company's acquisition of Northpoint Cellular (more
commonly known as Peachtree Mobility) for $850,000, largely offset by the
release of $2.0 million of escrowed cash relating to HIG's preferred stock
investment in the Company and the $823,846 of cash acquired in connection with
the Telephone Warehouse Acquisition. Net cash used in investing activities in
fiscal 1996 primarily consisted of $594,185 in capital expenditures and $2.0
million in escrowed cash from HIG, both of which were used principally to fund
new store openings.
The Company's net cash provided by financing activities decreased to $1.9
million in fiscal 1997 from $3.4 million in fiscal 1996. During fiscal 1996, net
cash provided by financing activities primarily reflected $2.9 million of
proceeds from the Company's sale of Series A Preferred Stock to HIG in June
1996.
At July 31, 1997, the Company's projected short-term capital expenditures
(through fiscal 1998) were approximately $6.0 million. Of this amount,
approximately $4.6 is budgeted for new store openings, $650,000 is budgeted for
enhancements to the Company's management information system and, $765,000 is
budgeted for renovation of existing stores and new corporate offices. The
average capital expenditures for new kiosk and in-line locations approximate
$34,000 and $94,000, respectively. Initial inventory for a new store
approximates $32,000 for a kiosk and $47,000 for an in-line store. Start-up
costs for new stores such as travel and the hiring and training of new employees
are expensed as incurred and typically average $3,000 per store. At July 31,
1997, the Company's projected long-term capital expenditures (fiscal 1999) were
approximately $6.2 million. Of this amount, approximately $5.9 million is
budgeted for new store openings, and $300,000 is budgeted for renovation of
existing stores. No assurance can be given that the amount of capital
expenditures anticipated to be made by the Company during fiscal 1998 or
thereafter will, in fact, be made. The timing and amount of capital expenditures
is dependent upon a variety of factors, including the availability of suitable
sites for the construction of new stores, the size of the store and the extent
of build-out required at the selected site and possible store acquisitions.
The Company's existing credit facility provides for borrowings of up to
$22.1 million, of which $14.1 million was outstanding as of July 31, 1997. The
credit facility, which expires in January 2004, is secured by
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<PAGE> 33
substantially all of the Company's assets, including the capital stock of
Telephone Warehouse owned by the Company, and by the capital stock of the
Company owned by HIG. The credit facility is comprised of a $9.0 million
revolving loan and an aggregate of $13.1 million in term loans. The revolving
credit facility's availability is based on a formula of eligible receivables and
inventories, and at July 31, 1997 the Company had an additional $5.9 million
available for borrowing. Advances under the revolving credit line bear interest
at 3.75% above the commercial paper rate. The term loans are payable in
increasing quarterly payments over seven years and bear interest at 4.5% over
the commercial paper rate.
The Company intends to use a portion of the net proceeds of this offering
to repay all amounts outstanding under its existing bank term loans and credit
facility. The Company expects that it will thereupon terminate its existing
credit facility and secure other credit facilities with a commercial bank. The
Company anticipates that net proceeds from the offering of Common Stock, cash
provided by operations and borrowings under credit facilities, will be
sufficient to meet currently foreseeable liquidity requirements.
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 fiscal
quarter 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.
32
<PAGE> 34
BUSINESS
GENERAL
The Company is the largest independent specialty retailer of cellular and
wireless products, services and accessories in the United States, with 102
stores located in 12 states, the District of Columbia and Puerto Rico as of
September 30, 1997. The Company's stores, located predominantly in regional
shopping malls, seek to offer one-stop shopping for consumers to purchase
cellular, PCS, paging, internet, satellite, and other wireless products and
services and related accessories. The Company is also a leading wholesaler of
cellular and wireless products and accessories to more than 1,000 accounts,
consisting primarily of distributors, carriers and smaller independent
retailers.
The Company's business strategy is to offer the most extensive assortment
of wireless products and services at everyday low prices supported by
knowledgeable customer service, through conveniently located and attractively
designed stores. The Company believes that this strategy provides it with a
competitive advantage by combining the extensive product selection, competitive
prices and operating efficiencies typical of a "big box" retailer with the
superior customer service and upscale shopping experience characteristic of a
specialty retailer. The Company offers wireless products from well-known,
name-brand suppliers such as AT&T, Ericsson, Motorola, Nokia and Sony. The
Company's stores typically sell up to 40 different makes and models of cellular
and PCS phones and pagers and over 1,000 SKUs of wireless products and
accessories, such as batteries, home and car chargers, vehicle adapter kits and
cases. The Company supports its broad product offering with knowledgeable and
personalized customer service focused on educating the consumer and identifying
the most appropriate products and services for each consumer's individual needs.
The Company offers everyday low prices that are competitive with other retailers
and supports this policy with price guarantee, upgrade and trade-in programs.
INDUSTRY DYNAMICS
The wireless communications industry provides voice and data communications
services through cellular telephone, personal communications services,
satellite, enhanced specialized mobile radio and paging services. Advances in
system technology and equipment, combined with lower equipment prices and
service charges, have increased consumer acceptance and have caused significant
increases in worldwide demand for wireless communications products and services.
Cellular/PCS Market
Cellular telephone service has been one of the fastest growing markets
within the industry. Since the inception of the cellular phone industry in 1983,
the number of U.S. cellular subscribers has grown to approximately 44 million by
year end 1996, having grown at an annual compound rate of 41% during the
previous five years. It is estimated that as of December 1996, this subscriber
base reflected an average market penetration of only 16.6%, 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.
According to CTIA, approximately $24 billion was spent on cellular service in
1996.
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<PAGE> 35
The following table sets forth certain information with respect to the
cellular telephone market for the last five years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------- 1992-96
1992 1993 1994 1995 1996 CAGR(1)
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Cellular subscribers
(millions).................... 11.0 16.0 24.1 33.8 44.0 41.4%
% Growth...................... 46.0% 45.1% 50.8% 40.0% 30.4% --
Cellular penetration............ 4.3% 6.2% 9.1% 12.9% 16.6% --
Cellular service revenue ($
billions)..................... $ 7.8 $10.9 $14.2 $19.1 $23.6 31.8%
% Growth...................... 37.0% 39.2% 30.6% 34.0% 23.9% --
</TABLE>
- ---------------
(1) Compound annual growth rate measured from 1992 through 1996.
In recent years the number of systems and services has expanded within the
cellular industry. Until 1993, cellular systems in the U.S. were based upon
analog radio frequency technology. Primarily in response to the growth in the
number of cellular subscribers, many cellular carriers are upgrading their
existing cellular systems from analog to digital radio frequency technology to
increase capacity. Digital technology offers advantages over analog systems for
consumers, such as better quality, improved call security, lower service charges
and the ability to provide data transmission services. The Company believes it
will benefit from the increased availability of digital systems as demand
increases for cellular service and new cellular products. In 1996, PCS wireless
services were introduced as an alternative to cellular technology. PCS utilizes
digital technology similar to digital cellular service, but operates on
different transmission frequencies. As a result, PCS telephones offer many of
the same benefits as digital cellular telephones but currently have more limited
coverage areas and service plans.
The Company believes that it will benefit from the increase in the number
of wireless service providers. Prior to 1995, the Federal Communications
Commission (the "FCC") allowed two carriers to provide cellular service to each
metropolitan service area. In 1995 and 1996, the FCC completed auctions of major
area PCS licenses. As a result, up to five PCS carriers have been granted
licenses to operate in each metropolitan service area, increasing the total
number of potential PCS and cellular carriers to as many as seven per market.
The Company sells PCS in most of its markets where PCS service is available. The
Company believes that an increase in the number of wireless service providers
will increase competition among carriers. Such competition could result in
increased demand for wireless communications products, lower prices, increased
advertising and improved service quality. As such competition increases between
cellular and PCS carriers, management believes that agents with multiple points
of distribution, such as the Company, will become more important to the growth
of carrier sales.
Paging Market
The paging market has also grown significantly in recent years. The number
of U.S. pagers in service has grown to approximately 42 million by year end
1996, having grown at an annual compound rate of approximately 29% during the
previous five years. It is estimated that as of December 1996, this subscriber
base reflected an average market penetration of only 16%, based on the U.S.
population. The Strategis Group projects that by the year 2000, the number of
U.S. pagers in service will reach over 60 million.
The Company believes that the growth in the paging industry has been and
will continue to be driven by higher speed services, new features and growth in
the wireless communications industry. Paging continues to be a lower-cost,
wireless alternative to cellular and PCS service. In addition, paging is also
complementary to cellular, offering users the ability to screen incoming calls
and to minimize usage-based charges.
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<PAGE> 36
The following table sets forth certain information with respect to the
paging market for the last five years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------ CAGR(1)
1992 1993 1994 1995 1996 1992-96
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Pagers in service (millions)......... 15.3 19.3 26.3 34.5 42.3 28.9%
% Growth........................... 29.7% 26.1% 36.3% 31.2% 22.6% --
Paging penetration................... 6% 8% 10% 13% 16% --
</TABLE>
- ---------------
(1) Compound annual growth rate measured from 1992 through 1996.
Emerging Wireless Technologies
The Company anticipates that the emergence of new wireless communications
technologies and services such as enhanced specialized mobile radio ("ESMR") and
satellite communications systems, will increase the variety of wireless services
and expand the potential retail market for wireless products. The Company
intends to sell other products and services incorporating new technologies as
they become available. The Company believes that certain of its existing
carriers will be participants in developing new communications technologies and
its current suppliers will be suppliers of products incorporating these new
technologies. The Company anticipates that its relationships with these carriers
and suppliers will enable the Company to take advantage of opportunities to sell
new products and services. Management also believes that carriers of advanced
technologies will have a financial incentive to utilize the Company's retail
distribution capabilities to increase consumer acceptance and use of their new
systems.
Distribution Channels
The Company believes that a shift is occurring 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, 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. In order to better access such a broad consumer base,
management believes carriers will seek multiple points of retail distribution
including established independent specialty retailers such as the Company, their
own retail outlets and "big box" electronics retailers.
OPERATING STRATEGY
The Company's operating strategy is to enhance its position as the largest
independent specialty retailer of cellular and wireless products and services in
the United States by emphasizing the following competitive strengths:
- Prime Store Locations. The Company seeks to locate its retail stores in
prime locations in regional shopping malls or other high traffic locations
in selected geographic markets having desirable demographic statistics.
Management believes that the Company's market presence, established
relationships with national mall developers, attractive store design and
relatively high average sales volume per square foot give the Company a
competitive advantage in securing desirable mall locations on attractive
terms. The Company utilizes either kiosk or in-line store formats to have
greater flexibility to place stores in the best available locations.
- Strong Store-Level Economics. The Company believes that its store level
economics compare favorably to other retailing sectors. The Company has
developed both kiosk and in-line mall stores, which average approximately
150 and 800 square feet in size, respectively. In fiscal 1997, comparable
stores (stores owned and operated by the Company for at least 12 full
months) generated average annual sales of approximately $500,000
(excluding two stores that generate substantially higher sales than other
stores) and, although sales per square foot vary by format, overall the
Company's stores had average sales per square foot of approximately
$1,000. In fiscal 1997, per store capital expenditures and
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<PAGE> 37
initial inventory for new kiosks and in-line stores averaged approximately
$66,000 and $141,000, respectively.
- Attractive Store Design. Let's Talk Cellular & Wireless stores are
designed to create a warm and inviting atmosphere that emphasizes the
Company's distinctive, upscale image and encourages impulse purchases. The
typical store utilizes a combination of light wood, glass and bright
colors to attract walk-in traffic and encourage browsing. Merchandise is
displayed in large glass cases with prominent signage containing simple
explanations of product and service features and benefits, as well as
pricing and subscription information. The Company believes its attractive
store design, merchandise presentations and signage are a significant
factor in establishing, differentiating and reinforcing the "Let's Talk
Cellular & Wireless" brand.
- Extensive Merchandise Selection. The Company seeks to offer the most
extensive selection of cellular and wireless products, services and
accessories in the industry from leading suppliers such as Motorola,
Nokia, Ericsson, Sony and AT&T for cellular phones, Ericsson and Sony for
PCS phones and Motorola, NEC, Panasonic and Sony for numeric, alpha
numeric and two-way pagers. A typical store offers up to 40 different
makes and models of cellular and PCS phones and pagers and over 1,000 SKUs
of other wireless products and accessories, such as batteries, home and
car chargers, vehicle adapter kits and cases. The Company believes that
its stores offer a significantly greater breadth of products than the
typical carrier-owned store. The Company attempts to emphasize in-stock
availability of products that reflect the latest technology and industry
trends. As an independent retailer, the Company has the advantage of being
able to objectively select from among the available carriers and suppliers
in choosing services and products to offer its customers. The Company
believes it provides individuals and small businesses with one-stop
shopping for all of their wireless communications needs.
- Exceptional Customer Service. The Company believes that providing high
quality, knowledgeable and personalized customer service differentiates
the Company from its competitors. The Company has implemented extensive
employee training programs on an ongoing basis designed to ensure that its
sales associates are thoroughly familiar with the latest technical and
functional elements of its products and services as they are introduced.
With the technological advancements and introductions of new products and
service options in the wireless industry, customers are more likely to
require the advice of increasingly qualified salespeople to assist in
product and service selections. Management believes that its emphasis on
training and customer service distinguishes the Company within the
industry and is an important part of its business strategy. The Company
emphasizes a consultative selling process, in which sales personnel
inquire about the needs and desires of each customer, in an attempt to
recommend the most appropriate products and services.
- Competitive Everyday Low Pricing. The Company maintains everyday low
prices that are competitive with prices charged by other retailers within
each local market. The Company supports this policy with a lowest-price
guarantee, a 7-day return policy and a 30-day satisfaction guarantee to
provide customer assurance and satisfaction. In addition, customers are
eligible to receive 100% credit for their product purchases if they
upgrade within 12 months of the original purchase.
- Sophisticated Financial Controls. Each Let's Talk Cellular & Wireless
store is equipped with a modern point-of-sale computer terminal. The
point-of-sale terminals are linked to a central computer at the Miami
headquarters, allowing the Company's finance staff to continuously monitor
sales and inventory levels. The system is capable of generating financial
statements at the store level, providing management with key operating and
financial data in a timely manner, thereby allowing the Company to respond
quickly to changes in consumer preferences and emerging industry trends.
The Company anticipates spending approximately $650,000 during fiscal 1998
in connection with the upgrading of its entire corporate MIS system, which
will allow the Company to efficiently monitor up to 300 retail locations.
This new system is expected to be fully tested and on-line by April 1998.
- Wholesale Strategy. Management believes the wholesale business provides
the Company greater purchasing power and additional distribution
capabilities which complement the Company's retail operations. The Company
intends to continue to expand its wholesale business by aggressively
seeking
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<PAGE> 38
to obtain more accounts with distributors, carriers and independent
retailers. In addition, the Company intends to utilize its Miami
distribution facility to support its wholesale operations and offer faster
delivery and lower-cost shipping to its east coast accounts. The Company
also intends to purchase substantially all of its cellular and wireless
product inventory through its wholesale operations and, as a result of the
increased volume of wholesale purchases, obtain such products at lower
cost.
GROWTH STRATEGY
Since opening its first store in 1989, the Company has grown through
internal expansion and acquisitions, and operated 102 stores as of September 30,
1997. The following table shows the development of the Company's stores during
the past five years.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
---------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Open at beginning of year................................... 2 3 4 8 22 25
Opened during year.......................................... 1 1 4 14 5 45
Acquired during year........................................ -- -- -- -- -- 24
Closed during year.......................................... -- -- -- -- 2 1
--- --- --- ---- ---- ----
Open at end of year......................................... 3 4 8 22 25 93
=== === === ==== ==== ====
Weighted average open during year......................... 2.1 3.7 6.3 14.5 25.5 69.8
</TABLE>
- New Store Expansion. The Company plans to open 65 to 75 new stores in
fiscal 1998 and 80 to 100 stores in fiscal 1999 in both new and existing
markets, of which approximately 40% are expected to be kiosks and 60% are
expected to be in-lines. The Company believes that this expansion rate is
achievable given the Company's existing infrastructure, the ease with
which it can replicate the Company's store model and its successful
opening of 45 new stores in fiscal 1997. The Company's new store expansion
rate is subject to a number of factors. See "Risk Factors -- Risks
Associated with Rapid Growth." As of September 30, 1997, the Company had 4
store locations under construction and has signed leases or reached an
agreement in principle for an additional 24 store locations. The Company's
store expansion strategy is to target initially the largest and fastest
growing wireless markets in the U.S., based on industry statistics.
Management believes that the flexibility of the Company's kiosk and
in-line store formats permits the Company to take advantage of the best
available locations across a broad range of market areas. Within each
selected market, the Company intends to open a cluster of 5-15 stores in
order to achieve scale economies and to obtain greater marketing benefits.
Specific components of the Company's store expansion program include the
following:
- Target Additional Mall Locations. The Company intends to continue
opening both kiosks and in-line stores in shopping malls where it can
obtain desirable locations with high traffic flow. Currently, the
Company owns stores in only 76 of the more than 1,000 regional malls
located in the continental U.S., many of which are managed by
companies with which the Company has established strong relationships.
The Company believes that the combination of its market presence,
established relationships with national mall developers, attractive
store design and high average sales volume per square foot give the
Company a competitive advantage in securing desirable mall locations
on attractive terms. The Company's kiosk and in-line mall stores
average approximately 150 and 800 square feet, respectively.
- Penetrate Power Strip Locations in Existing Markets. The Company
intends to open power-strip locations to further penetrate existing
markets and supplement its geographic expansion in selected markets.
Power strips are generally anchored by one or more large retailers,
and typically contain a variety of smaller specialty stores. The
Company's power-strip stores typically range in size from 2,000 to
4,000 square feet.
- Pursue Selective Acquisitions. The Company intends to continue to
increase the number of its stores through selective acquisitions of other
specialty retailers of cellular and wireless products in addition to those
stores opened by the Company. The Company believes that the independent
retail market for
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<PAGE> 39
cellular and wireless products is highly fragmented and consists of
numerous independent specialty retailers in each major metropolitan area.
Through selective acquisitions, the Company seeks to obtain immediate
access to desirable markets and locations, qualified sales personnel and,
in some cases, an existing subscriber base. The Company believes it can
successfully apply its operating strategy and leverage its existing
infrastructure and financial controls with such acquisitions. Potential
acquisition candidates include other independent wireless retailers that
the Company believes have excellent market demographics and management. In
assessing acquisition candidates, the Company reviews numerous factors,
including purchase price, store locations, number of potential customers,
market penetration and growth, availability of capital and local
competition. The Company believes that, following the offering, it will
have a competitive advantage over non-public specialty retailers in making
acquisitions as a result of its improved access to the capital markets and
its ability to use its common stock as acquisition currency.
Management has had successful experiences in acquiring other specialty
retailers of cellular and wireless products. In August 1996, the Company
acquired Peachtree Mobility, an Atlanta based retailer with five stores.
Since the acquisition, the Company has changed the store names to "Let's
Talk Cellular & Wireless," increased the number of product offerings in
the stores, improved in-stock availability, integrated the accounting and
sales and administrative functions into the Company's corporate offices.
The Company has also added three additional stores in the Atlanta market.
In June 1997, the Company acquired 19 stores located in Texas, Kansas and
Missouri through the Telephone Warehouse Acquisition. In September 1997,
the Company executed letters of intent for the acquisition of (i) Cellular
USA, one of AT&T's largest agents in Las Vegas, which operates six retail
stores and (ii) Cellular Unlimited, one of Cellular One's largest agents
in upstate New York, which operates 15 retail stores. The Company expects
to close these acquisitions concurrently with the consummation of the
offering. The Company intends to change the store names to "Let's Talk
Cellular & Wireless," increase in-stock merchandise availability and
integrate the accounting, sales and administrative functions into the
Company's corporate offices, as it has done with the Peachtree Mobility
stores. The Company reviews acquisitions on a continuing basis as
opportunities arise, however, there can be no assurance that any of the
Company's expansion plans will be consummated or prove successful.
- Increase Comparable Store Sales. The Company seeks to increase
comparable store sales by capitalizing on the changing industry dynamics
that are driving the growth in cellular and wireless usage, and pursuing
repeat business from its existing customers for new products, product
upgrades and additional accessories. As the Company's stores increase
penetration into new and existing markets, the Company expects to obtain
greater brand name recognition through broader advertising, increased
repeat and referral business and corporate sales.
- Capitalize on Operating Leverage. The Company continues to invest in an
infrastructure, including a management team and information systems, to
manage a rapidly growing chain of stores. These infrastructure investments
could result in a material reduction in income from operations in the
first half of fiscal 1998 compared with pro forma income from operations
for the corresponding period in fiscal 1997. As the Company continues to
expand internally and through acquisitions, it expects to leverage these
investments and improve margins through economies of scale. For example,
Telephone Warehouse has historically been able to acquire inventory at
lower prices than the Company. The Company recently has combined its
purchasing department with that of Telephone Warehouse and expects to
attain further cost reductions based on greater volume purchases and other
economies of scale as the Company grows.
38
<PAGE> 40
PRODUCTS AND SERVICES
The Company offers an extensive selection of cellular and wireless
communications products and services as described below:
- Cellular Phones, Services and Accessories. The Company offers up to 25
different makes and models of cellular phones, with an emphasis on having
in-stock availability of phones that reflects the latest technology and
industry trends. The Company displays the phones by four price categories
and rates them for excellence in quality, design and performance. With
such prominent displays of product information, the Company believes that
it encourages browsing, better educates customers and increases impulse
purchases. The Company offers cellular telephone service from leading
carriers such as AirTouch Cellular, AT&T, Bell Atlantic/NyNex, BellSouth,
Cellular One and L.A. Cellular and markets all of their various service
plans and available options, such as night and weekend programs and call
waiting. In addition, the Company offers pre-paid cellular service, when
available from the carrier, to customers who would not otherwise
financially qualify for cellular service. Let's Talk Cellular & Wireless
stores also display a wide assortment of cellular phone hardware and
accessories such as batteries, home and car chargers, vehicle adapter
kits, cases and starter kits from leading name-brand suppliers.
- PCS Phones, Services and Accessories. The Company offers up to 5
different makes and models of PCS phones in its markets where PCS service
is available. PCS telephones operate in a manner similar to cellular
telephones, but utilize different transmission frequencies. Differences
exist in the service features available, the service coverage areas, and
the service plan pricing options and structure. The Company offers PCS
service from leading PCS carriers such as PCS Sprint, Omnipoint, PrimeCo
and PCS phones from Ericsson and Sony. The Company also rates PCS phones
to help customers differentiate quality, design and performance and offers
a complete line of PCS accessories from various suppliers.
- Pagers, Services and Accessories. The Company offers up to 10 different
makes and models of wireless pagers, including numeric (standard pagers
that can only display numbers), alphanumeric (pagers that can display
numbers and/or text) and 2-way (alphanumeric pagers that give users the
ability to respond to messages with the touch of a button) from leading
name-brand suppliers including Motorola, NEC, Panasonic and Sony. The
Company offers paging services from leading national carriers such as CTI,
McCaw, Metrocall, PageMart, PageNet, and offers local, regional or
nationwide paging coverage. The Company also offers additional services
such as voice mail and custom greeting as well as a broad selection of
pager hardware and accessories to complement its sales of pagers and pager
services.
- Other Products. The Company's stores seek to continuously offer the
latest in wireless products and services as they become available for
consumer use. The Company merchandises internet products such as
Mindspring, WebTV and WebPhones and intends to offer other internet
products and services that become available in the future. The Company
intends to sell Sprint long distance services and prepaid calling cards
for long distance telephone service. The Company offers the Carcop
hand-held automobile security system which utilizes global positioning
system ("GPS") technology to identify the location of automobiles.
Additionally, the Company intends to offer other after-market automobile
navigation devices which utilize GPS technology when such devices become
more widely used and affordable in price. The Company sells several
electronic products and services to business customers, such as an
automated electronic phone answering service and call routing system that
utilizes voice recognition technology to route calls. Additionally, the
Company sells hand-held voice organizers that utilize voice recognition
technology, digitally store names, calendars, address books and messages,
and transfer data between laptop computers and other portable electronic
devices. The Company intends to carry satellite phones and other devices
that take advantage of new wireless technologies as they become available
in the future. The Company carries Personal Digital Assistants ("PDA"),
electronic devices that contain the functions and capabilities of a palm
top computer, a cellular phone, a beeper, an internet browser and an
e-mail retriever and are capable of sending and receiving facsimile
39
<PAGE> 41
transmissions. The Company's strategy is to provide one-stop shopping for
its customers and to maintain its reputation as a retailer of the latest
technological advances in the communications industry. Management believes
that the flexibility of its merchandising positions the Company as an
attractive distribution network for new products and services.
TYPICAL RETAIL TRANSACTIONS
Cellular. In a typical cellular retail transaction, a customer subscribes
for service with one carrier and receives a phone for free or at a substantial
discount to its retail value. The Company's cost for the "free" phone,
approximately $100-$140, is more than offset by an activation commission paid by
the carrier, and by volume bonuses and co-op advertising payments. In some
cases, the carrier pays the Company 4-6% of the customer's ongoing monthly
service bills as residual payments for as long as the subscription remains in
effect. The Company seeks to supplement its sales with wireless accessories,
such as batteries, chargers and carrying cases, which generate an average gross
margin of approximately 65% for the Company.
PCS. In a typical PCS retail transaction, the customer buys the phone from
the Company at a price in excess of the Company's cost and subscribes for
service with a selected PCS carrier. The Company does not receive activation
commissions or residual payments in connection with its recent sales of PCS
phones but instead acquires PCS phones from carriers at a significantly reduced
cost than that paid by the PCS carrier. The Company, in turn, resells such
phones at a profit.
Paging. In a typical paging retail transaction, the customer buys a pager
and 12 months of service at one low price. Alternatively, a customer can
purchase a pager at full retail price and subscribe for three months of service.
In each case, the customer's initial payment exceeds the cost of the pager.
STORE DESIGN
The Company believes its attractive store design, merchandise presentations
and signage are a significant factor in establishing, differentiating and
reinforcing the Let's Talk Cellular & Wireless brand. The Company seeks to
create an inviting and enjoyable shopping environment that emphasizes the
Company's distinctive, upscale image, attracts walk-in traffic and encourages
impulse purchases. The typical Let's Talk Cellular & Wireless store utilizes a
combination of light wood, glass and bright colors to attract walk-in traffic.
Kiosks are typically oval or rectangular in shape, with glass merchandise
display cases forming the outside perimeter. The Company pays careful attention
to detail in the layout of each of its stores, particularly lighting, colors,
choice of material and placement of display cases. Each store features
merchandise displays and other materials that are designed to provide easy
customer access and information to encourage browsing. The Company seeks to
present customers with simple explanations of product and service features and
benefits, as well as pricing and sign-up information.
To facilitate the opening of multiple stores, the Company utilizes two
basic designs for kiosk and three basic designs for in-line stores. The designs
incorporate modular fixtures and can be easily adjusted to reflect different
sized and shaped locations, permitting faster and more cost effective
construction. The Company believes that a number of its key store design
elements can be used in a wide variety of retail settings.
SALES AND MARKETING
The Company's marketing strategy is to attract new customers, create name
awareness and promote repeat business through its use of local radio, direct
mail and print media as well as in-store promotional programs and special price
and product offerings. The Company seeks to place its stores in highly visible
locations where its distinctive store design will attract the attention of
prospective customers. The Company believes that its stores benefit from
increased traffic flow created by the advertising, marketing and promotional
efforts of the mall itself as well as other mall tenants. The Company clusters
stores in target markets in order to provide it with a sufficient base to
undertake management, marketing and advertising efforts.
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<PAGE> 42
The Company's marketing programs are supplemented by carriers and suppliers
in the form of cooperative advertising allowances, market development funds, and
new store allowances. For fiscal 1997, the Company received an aggregate of $1.5
million of such funds. Cooperative advertising allowances are provided for store
advertising that features their services or products. Market development funds
are additional funds provided for marketing and advertising in new markets. New
store allowances are funds provided to offset the costs of developing new
stores.
CUSTOMER SERVICE
With the technological advancements and introductions of new products and
service options in the wireless industry, customers are more likely to require
the advice of increasingly qualified salespeople to assist in product and
service selections. Management believes that its emphasis on training and
customer service distinguishes the Company within the industry and is an
important part of its business strategy. The Company seeks to maximize customer
satisfaction as well as repeat and referral business by providing high quality,
knowledgeable and personalized customer service. The Company has implemented
extensive employee training programs on an ongoing basis designed to ensure that
its sales associates are thoroughly familiar with the latest technical and
functional elements of its products and services as they are introduced. Each
sales professional receives two weeks of classroom training and two additional
weeks of in-store training prior to his permanent assignment. New products and
services are introduced to the Company's sales staff by supplier and carrier
representatives prior to the public. The Company emphasizes a consultative
selling process in which sales personnel inquire about the needs and desires of
each customer, in an attempt to recommend the most appropriate products and
services. The Company's sales representatives' compensation is comprised of a
base salary and a sales commission on product sales. In addition to in-store
promotions, the Company's sales force generate repeat and referral business by
contacting existing and prospective customers via telephone. The Company offers
everyday low prices that are competitive with other retailers and supports this
policy with a lowest-price guarantee, a 7-day return policy and a 30-day
satisfaction guarantee to provide customer assurance and satisfaction. In
addition, customers are eligible to receive 100% credit for their product
purchases if they upgrade within 12 months of the original purchase.
CARRIER AGREEMENTS
Generally, the Company's stores offer cellular and PCS telephone services
and paging service pursuant to carrier agreements between one or more of the
carriers operating in the geographic area where the store is located and the
Company. There are only two licensed cellular carriers in a geographic market.
In each market the Company has an exclusive agreement with one such cellular
carrier. The Company's cellular carrier agreements range in duration from one to
five years. In most of the Company's cellular carrier agreements, the Company
receives activation commissions and monthly residual fees based on the number of
subscribers enlisted and the volume of their usage. The Company can receive
bonus commissions when the volume of activations exceeds certain levels. There
are up to five PCS carriers in a geographic market, depending on the size of the
market, and therefore, the Company's PCS carrier agreements are nonexclusive.
The Company typically offers multiple PCS services to its customers, although
two of Telephone Warehouse's carrier agreements covering the Texas markets have
provisions prohibiting the Company from offering competing cellular or PCS
telephone service during the term of the agreements and for a period of one year
after termination. The Company's PCS carrier agreements are typically for a term
of one year. In fiscal 1995, 1996 and 1997 sales to the following carriers
represented more than 10% of the Company's net revenues: (i) BellSouth Mobility
represented 11%, 23% and 12%, respectively; and (ii) AirTouch Cellular
represented 0%, 0% and 12%, respectively. In fiscal 1994, 1995 and 1996 and for
the four months ended April 30, 1997, Telephone Warehouse had sales to AT&T
Wireless of 26%, 20%, 13% and 18% of total net revenues, respectively. For
fiscal 1997, on a pro forma basis, AT&T Wireless was the only carrier to whom
sales exceeded 10% of total net revenues. Management believes that in most
instances, the cancellation or non-renewal of any of its carrier agreements
would not have a material adverse effect on the Company's financial condition or
results of operations, as it believes that a canceled agreement could likely be
replaced with an agreement with one of the carrier's competitors. However, in
certain markets where the Company receives substantial residual payments from
the carrier, the cancellation or non-renewal could have a significant effect
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<PAGE> 43
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 range in duration from one to
10 years. Paging customers are charged a monthly fee for local service and
additional fees for service in other markets. The Company offers cellular and
paging coverage throughout the continental United States and PCS coverage in the
five U.S. markets where it is available to the Company's stores. Set forth below
is a list of the Company's cellular, PCS and paging carriers, the geographic
territory where the services are sold and the expiration dates of their
agreements:
<TABLE>
<CAPTION>
TYPE OF
CARRIER SERVICE GEOGRAPHIC AREA EXPIRES
- ------- ------- --------------- -------
<S> <C> <C> <C>
AirTouch Cellular........... Cellular Atlanta December 1998
AT&T Wireless............... Cellular Dallas/Fort Worth December 2001
AT&T Wireless............... Cellular Denver(1) September 2001
AT&T Wireless............... Cellular New York City metropolitan December 1998
area
AT&T Wireless............... Cellular San Antonio December 2001
Bell Atlantic/NyNex......... Cellular District of Columbia, February 1998
Maryland, Philadelphia, New
Jersey
BellSouth Mobility.......... Cellular South and Central Florida(2) March 1998
Cellular One................ Cellular Puerto Rico January 1998
Cellular One................ Cellular Kansas City December 1999
L.A. Cellular............... Cellular Los Angeles January 1998
Cellular One................ Paging Puerto Rico May 31, 2002
CTI......................... Paging Nationwide December 1997
McCaw....................... Paging San Antonio March 1998
Metrocall................... Paging Dallas/Fort Worth August 2004
PageMart.................... Paging Nationwide October 1997
PageNet..................... Paging Texas, Louisiana, Oklahoma, February 2006(3)
Arkansas, Kansas, Missouri
Omnipoint................... PCS New York City metropolitan
area
PrimeCo..................... PCS South Florida, Tampa, October 2001
Orlando
Sprint...................... PCS Nationwide April 1998
</TABLE>
- ---------------
(1) In September 1996, the Company entered into a Kiosk Staffing Agreement with
AT&T Wireless. Pursuant to the agreement the Company provides personnel and
management expertise to operate AT&T Wireless kiosks and in-line stores in
the greater Denver metropolitan area through September 2001 in exchange for
receiving commissions and fees for services and products sold at such
stores. The Company currently operates 3 such AT&T Wireless stores. The
agreement provides incremental operating income with no requirements for
capital expenditures.
(2) The Company currently offers BellSouth Mobility cellular service in South
and Central Florida, although its carrier agreement with Bell South Mobility
permits the Company to offer such services wherever BellSouth Mobility
offers cellular service, which is currently throughout the Southeastern
United States.
(3) Pursuant to a non-binding memorandum of understanding.
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 over 40 suppliers. Because cellular and
wireless products can be sourced from numerous suppliers, the Company does not
believe it is dependent on any particular source of supply for its inventory
needs.
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<PAGE> 44
Historically, Telephone Warehouse has purchased inventory at lower prices
than the Company because of its large volume discounts, which are primarily
associated with its wholesale business. The wholesale business maintains
competitive pricing by purchasing products from multiple sources such as
suppliers, carriers and large distributors, often on a "spot" basis to take
advantage of discounts. Management believes that the acquisition of Telephone
Warehouse, combined with continued new store expansion and an improved capital
structure resulting from the offering, will give the Company increased
purchasing capabilities and enable the Company to qualify for better quantity
discounts.
SITE SELECTION
The Company's strategy for opening stores is to seek prime locations in
regional shopping malls or other high traffic locations in selected geographic
markets having attractive demographic statistics. Markets for new stores are
selected on the basis of factors such as attractive demographics, household
income levels, growth potential and real estate availability. Within a specific
market, management carefully selects each site by evaluating store location,
visibility, accessibility and walk-by traffic volume, among other factors.
Management believes that the Company's market presence, established
relationships with national mall developers, attractive store design and high
average sales volume per square foot give the Company a competitive advantage in
securing desirable mall locations on attractive terms. The Company utilizes
either kiosk or in-line store formats to have greater flexibility to place
stores in the best available locations.
WHOLESALE OPERATIONS
The Company wholesales cellular phones and accessories to over 1,000
accounts, consisting primarily of distributors, carriers and smaller independent
retailers. The Company seeks to provide superior customer service as compared to
larger distributors in the industry by locating "hard to find" items, responding
quickly to customer inquiries and credit decisions, quickly turning around
repairs and providing same day shipping service. The wholesale business
maintains competitive pricing by purchasing products from multiple sources such
as suppliers, carriers and large distributors, often on a "spot" basis to take
advantage of discounts. The Company believes its wholesale business serves a
niche market in which customers are willing to pay higher prices for better
customer service. Management plans to continue to grow the wholesale business
because it believes the business will continue to complement the Company's
retail operations by providing economies of scale for purchasing and
distributing products and enabling the Company to purchase its cellular and
wireless product inventory through its wholesale operations at lower cost.
MANAGEMENT INFORMATION SYSTEMS
Each Company store is equipped with a modern computer terminal. The
point-of-sale terminals are linked to a central computer at the Miami
headquarters, allowing the Company's finance staff to continuously monitor sales
and inventory levels. The Company's MIS system provides sales, cost, gross
margin and commission information from store point-of-sale terminals that are
polled nightly. Customer, product and control information is also updated
nightly. The MIS system is also linked to the accounting system for general
ledger and accounts payable functions. The MIS system is capable of generating
financial statements at the store level and providing management with key
operating and financial data in a timely manner, thereby allowing the Company to
respond quickly to changes in customer preferences and emerging industry trends.
The Company is in the process of upgrading its corporate MIS system, which will
allow the Company to monitor up to 300 retail locations. This new system is
expected to be fully tested and on-line by April 1998.
COMPETITION
The Company is the largest independent specialty retailer of cellular and
wireless products and services. However, the industry is characterized by
intense competition, is highly fragmented and is composed of national chains of
"big box" electronic and consumer goods retailers, carrier-owned retail stores,
and regional and local chains of other specialty cellular retailers, among
others. Certain of the Company's competitors have significantly greater
resources than the Company. Competition is based in part on local market
conditions and varies from one location or geographic area to another. The
Company believes that the primary elements of
43
<PAGE> 45
competition in the industry are price, breadth of product, in-stock availability
of products and services that meet the latest industry trends, level of customer
service and convenience of store location. The Company believes it competes
favorably with national and regional retailers. See "Business -- Competitive
Strengths" and "Risk Factors -- Competition."
PROPERTIES
The Company currently leases all of its existing store locations other than
the AT&T Wireless stores in Denver and one store owned by Telephone Warehouse.
The Company expects that its policy of leasing rather than owning will continue
as it expands. The Company's leases generally provide for initial lease terms
ranging from three to five years for kiosks and up to 10 years for in-line and
power strip stores. Rent is generally computed as a percentage of the store's
gross sales in excess of a fixed minimum base rent plus a portion of the mall
common area maintenance expenses, taxes, insurance and electrical service for
the premises and mall common areas. Lease rental payments are also subject to
annual increases for taxes, common area maintenance and insurance.
As current leases expire, the Company believes that it will generally be
able either to obtain lease renewals if desired for present store locations, or
to obtain leases for equivalent or better locations in the same general area.
Certain of the Company's store leases contain provisions requiring the
landlord's written consent for, or permitting the landlord to terminate the
lease upon, a change in control of the ownership of the lessee. The foregoing
provisions may be applicable in certain cases as a result of the Telephone
Warehouse Acquisition (see "Certain Transactions -- the Telephone Warehouse
Acquisition"). Based primarily on the absence of lease terminations following
the Telephone Warehouse Acquisition, the Company's historic ability to secure
leases for suitable locations and the significant number of Company stores,
management believes that such provisions will not have a material adverse effect
on the business or financial position of the Company.
In addition to its stores, the Company currently leases an approximately
9,220 square foot building in Miami, Florida, for its distribution facility. The
Company leases approximately 11,000 square feet of office space in Miami,
Florida, for its corporate headquarters, which management believes will be
adequate for the Company's anticipated growth. The Company also owns an
approximately 4,600 square foot building in Irving, Texas, which it uses as a
retail store.
EMPLOYEES
As of September 30, 1997, the Company had approximately 524 employees, of
whom approximately 398 are involved in retail operations, 5 are involved in
wholesale operations and 121 are corporate office personnel. None of the
Company's employees is covered by a collective bargaining agreement and
management believes that the Company's relations with its employees are good.
SERVICEMARKS
The Company has filed an application to register the name "Let's Talk
Cellular & Wireless" and the Company's logo as a servicemark in the United
States Patent and Trademark Office. The Company is actively engaged in a program
to consolidate its store operations under the "Let's Talk Cellular & Wireless"
tradename and achieve a consistent and distinctive store appearance. As of
September 30, 1997, 76% of the Company's 102 stores were operated under the
"Let's Talk Cellular & Wireless" tradename. In the Texas, Kansas and Missouri
markets, the Company conducts its retail operations under the name Telephone
Warehouse, pending an orderly transition to the "Let's Talk Cellular & Wireless"
tradename. Following the Cellular USA Acquisition and the Cellular Unlimited
Acquisition, the Company intends to operate the stores under the Cellular USA
and Cellular Unlimited names, pending an orderly transition to the "Let's Talk
Cellular & Wireless" tradename.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings other than routine
litigation incidental to its business, none of which is material.
44
<PAGE> 46
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and key employees of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Nicolas Molina............................ 29 Chief Executive Officer and Director
Brett Beveridge........................... 32 President and Chairman of the Board
Anne Gozlan............................... 35 Chief Financial Officer
Ronald Koonsman........................... 54 President -- Telephone Warehouse
Anthony Tamer............................. 39 Director
Sami Mnaymneh............................. 36 Director
John Bolduc............................... 33 Director
Douglas Berman............................ 31 Director
Allan Sorensen............................ 59 Director
KEY EMPLOYEES
Richard Berglund.......................... 50 Vice President -- Sales
Fernando Perez............................ 37 Director of Information Systems
Chris Howard.............................. 31 Director of Construction and Design
Nelson Roberts............................ 43 Vice President and General Manager --
Telephone Warehouse, Inc.
Sheril Miller............................. 41 Director of Real Estate
Lazarus Rothstein......................... 39 General Counsel and Secretary
</TABLE>
Nicolas Molina is a co-founder of the Company and serves as Chief Executive
Officer and a director of the Company. Since the inception of the Company in
1989, Mr. Molina has been a director and Chief Executive Officer of the Company
and has been primarily responsible for the Company's finance, administration,
human resources, MIS, expansion of the Company's retail operations, including
real estate site selection, leasing and construction, as well as other general
corporate matters. Prior to the formation of the Company, Mr. Molina was a
corporate account executive for McCaw Communications.
Brett Beveridge is a co-founder of the Company and serves as Chairman of
the Board of Directors and President of the Company. Since the inception of the
Company in 1989, Mr. Beveridge has been a director and President of the Company
and has been primarily responsible for the Company's retail operations,
marketing, merchandising, distribution, carrier and vendor relationships and
other general operational matters. Prior to the formation of the Company, Mr.
Beveridge was a Divisional Sales Manager for Bally Corporation's health club
division in Miami, Florida from 1984 to 1988.
Anne Gozlan has served as Chief Financial Officer of the Company since May
1995. From 1992 to 1995, Ms. Gozlan served as controller of Perfumania, Inc., a
publicly traded specialty retailer of perfumes and related products. Prior to
joining Perfumania, Ms. Gozlan was an audit manager at Price Waterhouse, where
she was employed from 1984 to 1992.
Ronald Koonsman was the founder and has served as President and Chief
Executive Officer of Telephone Warehouse and its affiliates since January 1984.
Mr. Koonsman joined the Company upon the consummation of the Telephone Warehouse
Acquisition in June 1997 and has over 27 years of experience in the
telecommunications industry, having been employed by Southwestern Bell and AT&T
in a variety of management positions from 1970 to 1983.
Anthony Tamer has been a director of the Company since June 1996 and a
Managing Director of HIG Capital Management, Inc., an affiliate of HIG
Investment Group, L.P. since 1993. Mr. Tamer was previously a Partner at Bain &
Company ("Bain") from 1986 to 1993. Mr. Tamer attended Harvard Business School
where he was awarded a Master in Business Administration degree. He also holds a
Master degree in Electrical Engineering from Stanford University, and a Bachelor
of Science degree in Electrical Engineering from Rutgers University.
45
<PAGE> 47
Sami Mnaymneh has been a director of the Company since June 1997 and a
Managing Director of HIG Capital Management, Inc. since 1993. Mr. Mnaymneh was
previously a Managing Director at The Blackstone Group from 1990 to 1993 and
prior to such time was a Vice President in the Mergers and Acquisitions Group at
Morgan Stanley & Co. Mr. Mnaymneh attended Columbia University in New York,
where he was elected to Phi Beta Kappa. He subsequently attended Harvard
Business School and Harvard Law School where he was awarded a Master in Business
Administration degree and a Juris Doctor degree, respectively, with honors.
John Bolduc has been a director of the Company since June 1997 and a
Managing Director of HIG Capital Management, Inc. since 1993. Prior to joining
HIG, Mr. Bolduc was with Bain from 1990 to 1993. Mr. Bolduc holds a Master in
Business Administration from the Darden Graduate School of Business at the
University of Virginia and a Bachelor of Science degree in Computer Engineering
from Lehigh University.
Douglas Berman has been a director of the Company since June 1997 and a
Vice President of HIG Capital Management, Inc. since 1996. Prior to joining HIG,
Mr. Berman was with Bain from 1992 to 1996. Mr. Berman is a graduate of the
Wharton School of the University of Pennsylvania, where he received a Master in
Business Administration. He also holds a Bachelor of Arts degree in Economics
from the University of Virginia, where he was elected to Phi Beta Kappa.
Allan Sorensen has served as Vice Chairman of the Board and a Director of
the Company since 1994. Mr. Sorensen is also Chairman of the Board of Interim
Services, Inc., a New York Stock Exchange company, where he has served on the
Board of Directors since 1967. He has also served as Temporary Chairman of The
Appletree Companies since August 1996 and Director since February 1996. He was a
member of the Board of Directors of H&R Block, Inc. from 1979 until September
1993 when Interim Services was spun off in an initial public offering. He is the
past five-term Chairman of the Board and a director of the Home Health Services
and Staffing Association (HHSSA). He is a past president and member of the Board
of Directors of the National Association of Temporary & Staffing Services
(NATSS) and recipient of their 1992 Leadership Award.
Richard Berglund has served as Vice President -- Sales of the Company since
October 1996. From 1992 to 1996, Mr. Berglund served as Director of Stores at
Herman's World of Sporting Good's, Inc.
Fernando Perez has served as the Director of Information Systems for the
Company since August 1996. Prior to such time, Mr. Perez was employed by
Sunglass Hut International, Inc., where he served as Manager of Systems and
Programming for over 5 years. Before joining Sunglass Hut, he served as the
Manager of Operations for Savin Florida, a retailer of office products, from
1988 to 1991 after serving as its Manager of Information Systems from 1984 to
1987.
Chris Howard has served as the Company's Director of Construction and
Design since July 1996. From 1992 to 1996, Mr. Howard served as a Director of
Construction for Spec's Music Co. Prior to joining Spec's Music Co., Mr. Howard
served as a senior project manager for Scherer Construction & Engineering from
1989 to 1992.
Nelson Roberts has served as Vice President and General Manager of
Telephone Warehouse, Inc. since January 1992. Mr. Roberts has over 27 years of
retail experience in the consumer electronics industry, including 12 years in
sales and marketing in the wireless communications industry. Mr. Roberts served
as the president of a Dallas-based chain of mobile electronics retail stores
from 1981 to 1992.
Sheril Miller has served as Director of Real Estate of the Company since
August 1997. From July 1994 until August 1997, Ms. Miller was employed by Lord
Associates, a leasing, marketing and real estate development firm, as a leasing
executive. From February 1993, Ms. Miller was employed by General Growth, a real
estate development firm, and prior to February 1993 was employed for eight years
by Kravco, a real estate development firm.
Lazarus Rothstein has served as General Counsel and Secretary of the
Company since May 1997. Prior to joining the Company, Mr. Rothstein engaged in
the private practice of law for 13 years, primarily in the areas of real estate,
securities and business transactions and commercial litigation.
46
<PAGE> 48
The Company's Board of Directors intends to appoint at least one additional
director who is not affiliated with the Company within 90 days of the
consummation of this offering. This additional director has not yet been
identified.
The Company also intends to establish an Audit Committee and a Compensation
Committee in connection with the appointment of such additional directors. The
Compensation Committee will be responsible for setting and administering
policies that govern annual compensation for the Company's executive officers
and administering the Company's Incentive Plan. See "-- Executive Incentive
Compensation Plan." The duties and responsibilities of the Audit Committee will
include (i) recommending to the full Board the appointment of the Company's
auditors and any termination or engagement, (ii) reviewing the plan and scope of
audits, (iii) reviewing the Company's significant accounting policies and
internal controls, (iv) administering the Company's compliance programs, (v)
having general responsibility for all related auditing matters and (vi)
approving all material transactions with affiliates.
The Company's Articles provide that the Board of Directors be divided into
three classes, with regular three year staggered terms and initial terms of one,
two and three years for each of the classes of directors. Accordingly, Messrs.
Bolduc, Berman and Sorensen will hold office until the annual meeting of
shareholders to be held in 1998. Messrs. Mnaymneh and Tamer and one of the
contemplated independent directors will hold office until the 1999 annual
meeting and Messrs. Molina and Beveridge and another contemplated independent
director will hold office until the 2000 annual meeting.
DIRECTOR COMPENSATION
The Company does not currently intend to pay any fees to directors. The
Company will reimburse all directors for out-of-pocket expenses incurred in
connection with the rendering of services as a director.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company, for
services rendered during the past year to the Company's Chief Executive Officer
and certain other officers whose total 1997 salary and bonus exceeded $100,000
(the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
------------------------------------------ ------------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
--------------------------- ------ -------- ------- ------------ ------------
($) ($) ($) (#)
<S> <C> <C> <C> <C> <C>
Nicolas Molina............................ 1997 $198,000 $25,000 $33,960(2) 91,174(3)
Chief Executive Officer
Brett Beveridge........................... 1997 $198,000 $25,000 $34,800(2) 91,174(3)
President and Chairman of the Board
Anne Gozlan............................... 1997 $100,000 -- -- --
Chief Financial Officer
</TABLE>
- ---------------
(1) The column for "All Other Compensation" has been omitted because there is no
compensation required to be reported in such column.
(2) Represents the value of perquisites and other personal benefits, including
premium payments and related expense for life insurance, disability
insurance and group health insurance totaling $19,927 and $20,199 for
Messrs. Molina and Beveridge, respectively.
(3) See "Option Grants Table" below for additional information about these
options.
OPTION GRANTS, EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to grants of
options to purchase shares of Common Stock during the fiscal year ended July 31,
1997 to the Named Officers. The amounts shown as potential
47
<PAGE> 49
realizable values on the options are based on assumed annualized rates of
appreciation in the price of the Common Stock of 0%, 5% and 10% over the term of
the options, as set forth in rules of the Securities and Exchange Commission.
Actual gains, if any, on stock option exercises are dependent on future
performance of the Common Stock. There can be no assurance that the potential
realizable values reflected in this table will be achieved.
STOCK OPTION GRANTS IN THE FISCAL YEAR ENDED JULY 31, 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(1)
---------------------------------------------------------------- ------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ---- ------------------ ---------------- ----------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Nicolas Molina............ 91,174 50% $20.04 7/27/07 -- -- --
Brett Beveridge........... 91,174 50% $20.04 7/27/07 -- -- --
</TABLE>
- ---------------
(1) The Company determined that the Common Stock had a fair market value of
$1.55 on the date of grant.
The following table sets forth information concerning the value of
unexercised options as of July 31, 1997 held by the Company's Named Officers. No
options were exercised during fiscal 1997.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
YEAR-END YEAR-END
------------------------- ----------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ------------------------- ----------------------------
<S> <C> <C>
Nicolas Molina................................. 91,174 --/--
Brett Beveridge................................ 91,174 --/--
</TABLE>
- ---------------
(1) The Company determined that the Common Stock had a fair market value of
$1.55 per share on July 31, 1997.
EXECUTIVE INCENTIVE COMPENSATION PLAN
The Company has adopted a 1997 Executive Incentive Compensation Plan (the
"Incentive Plan") which is designed to assist the Company in attracting,
motivating, retaining and rewarding high-quality executives and other employees,
officers, directors and independent contractors (collectively, the
"Participants") by enabling the Participants to acquire or increase a
proprietary interest in the Company, as well as providing the Participants with
annual and long-term performance incentives to expend their maximum efforts in
the creation of shareholder value. Pursuant to the terms of the Incentive Plan
the Company may grant Participants stock options, stock appreciation rights,
restricted stock, deferred stock, other stock-related awards and performance or
annual incentive awards that may be settled in cash, stock or other property
(collectively, the "Awards"). A committee comprised of at least two non-employee
directors (the "Committee"), or in the absence thereof the Board of Directors,
will administer and interpret the Incentive Plan and is authorized to grant
Awards thereunder to all eligible Participants. The Incentive Plan has a term of
10 years.
Under the Incentive Plan, the total number of shares of Common Stock that
may be subject to the granting of Awards during the term of the Incentive Plan
shall be equal to 310,000 shares, plus the number of shares with respect to
Awards previously granted under the Incentive Plan that terminate without being
exercised and the number of shares of Common Stock that are surrendered in
payment of any Awards or any tax withholding requirements. The following is a
description of the Awards that may be granted under the Incentive Plan:
Stock Options and Stock Appreciation Rights -- The Committee is
authorized to grant stock options, including both incentive and
non-qualified stock options, and stock appreciation rights ("SAR")
entitling a Participant to receive the amount by which the fair market
value of a share of Common Stock
48
<PAGE> 50
on the date of exercise exceeds the grant price of the SAR. The exercise
price per share subject to an option and the grant price of an SAR are
determined by the Committee, but must not be less than the fair market
value of a share of Common Stock on the date of grant. Each option is
exercisable after the period or periods specified in the related option
agreement, but no option may be exercisable after the expiration of ten
years from the date of grant. Options granted to an individual who owns (or
is deemed to own) at least 10% of the total combined voting power of all
classes of stock of the Company must have an exercise price of at least
110% of the fair market value of the Common Stock on the date of grant and
a term of no more than five years. Options may be exercised by payment of
the exercise price in cash, shares of Common Stock, outstanding Awards or
other property having a fair market value equal to the exercise price, as
the Committee may determine from time to time.
Restricted and Deferred Stock -- The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares
of Common Stock which may not be sold or disposed of, and which may be
forfeited in the event of termination of employment, prior to the end of a
restricted period specified by the Committee. A Participant granted
restricted stock generally has all the rights of a shareholder of the
Company, unless otherwise determined by the Committee. An Award of deferred
stock confers upon the Participant the right to receive shares of Common
Stock at the end of a specified deferral period, subject to possible
forfeiture of the Award in the event of termination of employment prior to
the end of a specified restricted period. Prior to the issuance of shares
of Common Stock, an Award of deferred stock carries no voting or dividend
rights.
Bonus Stock and Awards in Lieu of Cash Obligations -- The Committee is
authorized to grant shares of Common Stock as a bonus, free of
restrictions, or to grant shares of Common Stock or other Awards in lieu of
cash under the Incentive Plan, subject to such terms as the Committee may
specify.
Other Stock-based Awards -- The Committee is authorized to grant
Awards that are denominated or payable in, valued by reference to, or
otherwise based on or related to, shares of Common Stock. Such Awards might
include convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Common Stock, purchase rights
for shares of Common Stock, Awards with value and payment contingent upon
performance by the Company or any other factors designated by the
Committee, and Awards valued by reference to the book value of shares of
Common Stock or the value of securities of or the performance of specified
subsidiaries or business units. The Committee determines the terms and
conditions of such Awards.
The right of a Participant to exercise or receive a grant or settlement of
an Award, and the timing thereof, may be subject to such performance conditions
(including subjective individual goals) as may be specified by the Committee. In
addition, the Incentive Plan authorizes specific annual incentive Awards, which
represent a conditional right to receive cash, shares of Common Stock or other
Awards upon achievement of certain preestablished performance goals and
subjective individual goals during a specified fiscal year.
Awards may be settled in the form of cash, shares of Common Stock, other
Awards or other property at the discretion of the Committee. The Committee may
condition any payment relating to an Award on the withholding of taxes and may
provide that a portion of any shares of Common Stock or other property to be
distributed will be withheld (or previously acquired shares of Common Stock or
other property surrendered by the Participant) to satisfy withholding and other
tax obligations. Awards granted under the Incentive Plan generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
Participant's death, except that the Committee may, in its discretion, permit
transfers for estate planning or other purposes subject to any applicable
restrictions.
The Company had no Awards outstanding prior to fiscal 1997. The Company
will grant on the date of this Prospectus options to purchase an aggregate of
265,258 shares of Common Stock under the Incentive Plan, all at an exercise
price equal to the initial public offering price of the Common Stock.
49
<PAGE> 51
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In June 1996, the Company's Board of Directors established a Compensation
Committee, consisting of Messrs. Tamer and Molina, to set executive compensation
levels. All compensation decisions affecting Mr. Molina were approved by the
Company's directors, exclusive of Mr. Molina. Upon consummation of this
offering, the Compensation Committee will consist of Mr. Sorensen.
EMPLOYMENT AGREEMENTS
Effective June 27, 1997, the Company amended and restated employment
agreements with each of Messrs. Molina and Beveridge. Mr. Molina's agreement
provides for his employment as the Chief Executive Officer of the Company, and
Mr. Beveridge's agreement provides for his employment as the President of the
Company. Both agreements provide for five year terms with base salaries of
$210,000 per year, to be increased annually by the greater of the annual
increase in the consumer price index or 5%, as well as annual bonuses of not
less than $50,000, subject to the achievement of reasonable performance targets
set by the Board. Upon termination of his employment by the Company for reasons
other than death, disability or cause, the executive shall be entitled to
receive the greater of (i) his salary and bonus for the remainder of the
employment period or (ii) two years' salary and bonus, except that these amounts
shall be reduced by any amounts of earned income the executive may be receiving
from any new employer.
In May 1995, the Company entered into an employment agreement with Ms.
Gozlan, which was subsequently amended in June 1996. The agreement provides for
a three-year term with a base salary of $100,000 to be increased annually by the
greater of the annual increase in the consumer price index or 5%. Upon
termination of her employment by the Company for reasons other than death,
disability or cause, Ms. Gozlan shall be entitled to receive her salary for the
following 12 months. In August 1997, the term of Ms. Gozlan's employment
agreement was extended through December 1998.
In June 1997, Telephone Warehouse amended and restated its employment
agreement with Mr. Koonsman, its former owner in connection with the Telephone
Warehouse Acquisition. The agreement provides for a two-year term expiring in
December 1998 and compensation in the form of (i) a $50,000 salary through
December 1997, (ii) a $100,000 salary from January 1998 through December 1998
and (iii) a $950,000 bonus paid in December 1997 provided that Telephone
Warehouse's earnings exceed certain targets. Upon termination of his employment
by the Company for reasons other than death, cause or resignation, Mr. Koonsman
shall be entitled to receive all payments of his compensation. See "Certain
Transactions."
50
<PAGE> 52
CERTAIN TRANSACTIONS
GENERAL
The Company from time to time has entered into transactions with certain of
its officers, directors and principal shareholders and entities in which such
parties have an interest. The Company believes that each such transaction has
been on terms no less favorable to the Company than could be obtained in a
transaction with an independent third party.
SERIES A PREFERRED STOCK
In June 1996 the Company issued 100,000 shares of Series A Preferred Stock
to HIG Fund V, Inc., a subsidiary of HIG ("Fund V"), in exchange for an
aggregate of $3.3 million pursuant to the Series A Preferred Stock Purchase
Agreement, dated June 25, 1996, among the Company, Messrs. Molina and Beveridge
and Fund V (the "Purchase Agreement"). HIG and Messrs. Tamer, Mnaymneh, Bolduc
and Berman own shares in Fund V.
Simultaneously with the Telephone Warehouse Acquisition, the Company
induced Fund V to convert the Series A Preferred Stock to Common Stock by
increasing the conversion ratio of the Series A Preferred Stock from 17.50 to 1
to 21.38 to 1. As a result of such conversion, Fund V surrendered certain rights
to enforce restrictive covenants regarding the Company's operations. Upon such
conversion, the Company issued to Fund V 2,137,850 shares of Common Stock, of
which 388,701 were in addition to the original conversion feature. In connection
with such conversion, Fund V agreed to terminate the provisions of the Purchase
Agreement other than provisions relating to registration rights pertaining to
shares of Common Stock issued in connection with such conversion.
TELEPHONE WAREHOUSE ACQUISITION
TCP, a subsidiary of HIG, acquired all of the outstanding capital stock of
Telephone Warehouse, Inc. and National Cellular, Incorporated from Mr. Ronald
Koonsman on December 31, 1996 for $15.1 million, consisting primarily of $12.9
million in cash and a $2.0 million 8% subordinated note (the "Seller Note"). The
acquisition was financed by $13.1 million in senior indebtedness provided by
NationsCredit, a limited partner of TCP, and the Seller Note. In addition, Mr.
Koonsman's employment agreement provided that he would receive an additional
$1.0 million in 1997 and up to $2.0 million in 1998 upon the two companies
reaching certain financial performance targets. The Seller Note was secured by a
second priority lien on TCP's stock in Telephone Warehouse, Inc. and National
Cellular, Incorporated and was guaranteed by the two companies. HIG,
NationsCredit and Messrs. Tamer, Mnaymneh, Bolduc and Berman own beneficial
interests in TCP.
In June 1997 the Company issued 1,817,468 shares of common stock to TCP in
exchange for all of the outstanding capital stock of Telephone Warehouse, Inc.
and National Cellular, Incorporated and assumed all of TCP's indebtedness,
approximately $13.1 million at such date. Mr. Koonsman's employment agreement
was amended to provide as follows: (i) for the six month period beginning on
July 1, 1997, a salary of $50,000, (ii) for the 12 month period beginning on
January 1, 1998, a salary of $100,000 and (iii) a bonus of $950,000 payable on
or before December 31, 1997, provided that Telephone Warehouse, Inc. and
National Cellular, Incorporated reach certain financial targets for the 12
months ended December 31, 1997. The Seller Note was modified to increase the
principal amount by up to $1,585,000 (subject to Telephone Warehouse, Inc. and
National Cellular, Incorporated reaching certain financial performance targets,
whether or not Mr. Koonsman is employed by the Company), to add the Company as a
guarantor, to add a second lien on Fund V's stock in the Company as additional
collateral for the loan and to provide for the release of the pledge of TCP's
and Fund V's stock in the Company upon the Company's initial public offering.
In connection with the Telephone Warehouse Acquisition, the Company
refinanced its debt and issued stock purchase warrants to NationsCredit. Such
warrants permit NationsCredit to purchase an aggregate of 106,596 shares of
Common Stock at an exercise price of $.0001 per share. NationsCredit has
informed the Company that it intends to exercise such warrants in full prior to
the issuance of the shares of Common Stock offered hereby and sell the 106,596
underlying shares to the Underwriters as part of this offering. See
51
<PAGE> 53
"Principal and Selling Shareholders." A portion of the proceeds of this offering
will be used to repay all of the Company's indebtedness to NationsCredit,
thereby releasing the guarantees and collateral for the loans.
Pursuant to Ms. Gozlan's employment agreement with the Company, 21,378
shares of the Common Stock restricted stock bonus granted to her vested in May
1997, and 21,378 shares vested upon the consummation of the Telephone Warehouse
Acquisition.
Concurrently with the Telephone Warehouse Acquisition, the Company issued
stock options to purchase 91,174 shares of Common Stock, with an exercise price
of $20.04 per share, to each of Nicolas Molina and Brett Beveridge. See
"Management -- Option Grants, Exercises and Fiscal Year-end Values."
MANAGEMENT
During fiscal 1995 Messrs. Molina and Beveridge together loaned the Company
an aggregate of $258,100 to fund the opening of new stores and for other working
capital purposes. These loans bear interest at 8.0% per annum, are unsecured and
mature upon the earlier of June 1, 1998 or the consummation of the offering. The
Company intends to repay these loans from the proceeds of the offering. During
fiscal 1997 the Company paid Messrs. Molina and Beveridge approximately $18,100
in interest on the loans.
HIG Capital Management, Inc., an affiliate of HIG, provided to the Company
certain (i) investment banking services in connection with this offering, for an
aggregate fee of $840,000, and (ii) management and consulting services from July
1997 through the date hereof, for a fee of $29,167 per month. The fee described
in clause (i) will be paid by the Company from the proceeds of the offering. The
fees described in clause (ii) have already been paid.
In addition, HIG Capital Management, Inc. has identified and presented to
the Board of Directors certain potential acquisition targets for the Company.
The Company has agreed to pay HIG Capital Management, Inc. an investment banking
fee equal to 2.0% of the purchase price paid with respect to the acquisition by
the Company of each such acquisition target.
52
<PAGE> 54
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information concerning the beneficial
ownership of the Common Stock immediately prior to this offering and as adjusted
to reflect the sale of the shares offered by this Prospectus by (i) each of the
Company's executive officers and directors, (ii) each person who is the
beneficial owner of more than 5% of the Common Stock and (iii) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE NUMBER OF OWNED AFTER THE
OFFERING(2) SHARES TO OFFERING(2)
---------------------- BE SOLD IN ----------------------
NAME AND ADDRESS(1) NUMBER PERCENTAGE THE OFFERING NUMBER PERCENTAGE
- ------------------- --------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
HIG Investment Group, L.P.(3)(4)......... 3,955,318 63.8% 839,958 3,115,360 38.0%
Nicolas Molina(4)(5)..................... 1,021,138 16.0 -- 1,021,138 12.5
Brett Beveridge(4)(5).................... 1,021,138 16.0 -- 1,021,138 12.5
NationsCredit Commercial
Corporation(6)......................... 283,799 4.6 283,799 -- --
Anne Gozlan(7)........................... 64,135 1.0 -- 64,135 1.0
Ronald Koonsman.......................... -- -- -- -- --
Anthony Tamer(4)(8)...................... 3,955,318 63.8 839,958 3,115,360 38.0
Sami Mnaymneh(4)(8)...................... 3,955,318 63.8 839,958 3,115,360 38.0
John Bolduc(4)(8)........................ 3,955,318 63.8 839,958 3,115,360 38.0
Douglas Berman(4)(8)(9).................. 3,955,318 63.8 839,958 3,115,360 38.0
Allan Sorensen(10)....................... 213,785 3.4 53,446 160,339 3.0
All directors and executive officers of
the Company as a group (9
persons)(11)........................... 6,275,514 98.3% 1,000,000(4) 5,382,110 65.6
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the address of each of the beneficial owners is
c/o the Company, 800 Brickell Avenue, Suite 400, Miami, Florida 33131.
(2) Based on 6,093,166 shares outstanding at September 30, 1997 and 8,199,762
as adjusted after the offering. Pursuant to the rules of the Commission,
certain shares which a person has the right to acquire within 60 days of
the date hereof pursuant to the exercise of stock options are deemed to be
outstanding for the purpose of computing the percentage ownership of such
person but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person.
(3) Includes 2,137,850 shares held of record by Fund V and 1,817,468 shares
held of record by TCP prior to the offering. Fund V will sell 662,755
shares in the offering, and TCP will sell 177,203 shares in the offering,
resulting in Fund V owning 1,475,095 shares (18.0%) and TCP owning
1,640,265 (20.0%). NationsCredit is a limited partner of TCP and
beneficially owns 177,203 of the shares owned of record by TCP. TCP is
selling 177,203 shares in the offering on behalf of NationsCredit. HIG
Investment Group, L.P. disclaims beneficial ownership of such shares. HIG
Investment Group, L.P. is the controlling shareholder of Fund V and the
controlling shareholder of TCP's general partner. Mr. Tamer and Mr.
Mnaymneh are directors of the Company, Managing Directors of HIG Capital
Management, Inc., directors of Fund V and TCP, and are controlling
shareholders of the general partner of HIG Investment Group, L.P. Mr.
Bolduc is a director of the Company, Managing Director of HIG Capital
Management, Inc., director of Fund V and director of TCP. Mr. Berman is a
director of the Company, Vice President of HIG Capital Management, Inc.,
Vice President of Fund V and Vice President of TCP. Messrs. Tamer,
Mnaymneh, Bolduc and Berman may, by virtue of their relationship with Fund
V, TCP and HIG Investment Group, L.P., be deemed to beneficially own the
securities held by Fund V, TCP or HIG Investment Group, L.P., and to share
voting and investment power with respect to such securities. Messrs. Tamer,
Mnaymneh, Bolduc and Berman each disclaims beneficial ownership of the
securities, except to the extent of his respective investment interests in
Fund V, TCP or HIG Investment Group, L.P. The address of Fund V, TCP and
HIG Investment Group, L.P. and Messrs. Tamer, Mnaymneh, Bolduc and Berman
is c/o HIG Capital Management, Inc., 1001 South Bayshore Drive, Suite 2708,
Miami, Florida 33131.
(4) Does not reflect the possible sale of shares upon exercise of the
Underwriters' over-allotment option. Fund V and Messrs. Molina and
Beveridge have granted an option to the Underwriters, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
450,000 additional shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. If the Underwriters exercise the option in full, Fund V will sell
1,046,089 shares and Messrs. Molina and Beveridge will each sell 33,333
shares, resulting in Fund V owning 1,091,761 shares (13.3%) and Messrs.
Molina and Beveridge each owning 987,805 shares (12.1%) after the closing
of the offering. See "Underwriting."
(5) Includes (i) 929,964 shares directly owned, and (ii) 91,174 shares subject
to presently exercisable options. Excludes 59,202 shares subject to
unexercisable options.
(6) Includes (i) 106,596 shares issuable upon the exercise of outstanding
warrants issued to NationsCredit as the Company's lender and (ii) 177,203
shares owned by TCP, which represent NationsCredit's proportionate interest
in the 1,817,468 shares owned by TCP based upon NationsCredit's limited
partnership interest in TCP. The address of NationsCredit is One Canterbury
Green, Stamford, Connecticut 06912. See "Certain Transactions."
(7) Includes 64,135 shares directly owned. Excludes 16,445 shares subject to
unexercisable options.
(8) Reflects shares held of record by Fund V and TCP. See footnote (3).
(9) Excludes 13,156 shares subject to unexercisable options.
(10) The address of Mr. Sorensen is c/o Interim Services, 2050 Spectrum
Boulevard, Ft. Lauderdale, Florida 33309.
(11) Includes 91,174 shares subject to presently exercisable options held by
each of Messrs. Molina and Beveridge. Excludes (i) 3,955,318 shares owned
of record by Fund V and TCP and (ii) an aggregate of 148,005 shares subject
to unexercisable options held by Messrs. Molina, Beveridge and Berman and
Ms. Gozlan.
53
<PAGE> 55
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, par value $.01 per share, 8,199,762 shares of which will
be outstanding upon the consummation of the offering and (ii) 1,000,000 shares
of preferred stock, par value $.01 per share, none of which will outstanding.
The following summary description of the capital stock of the Company is
qualified in its entirety by reference to the Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws of the Company, copies of which
are filed as exhibits to the Registration Statement of which this Prospectus is
a part. See "Additional Information."
COMMON STOCK
Subject to the rights of the holders of any preferred stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and, in the event of liquidation, to
share pro rata in any distribution of the Company's assets after payment or
providing for the payment of liabilities and the liquidation preference of any
outstanding preferred stock. Each holder of Common Stock is entitled to one vote
for each share held of record on the applicable record date on all matters
presented to a vote of shareholders, including the election of directors.
Holders of Common Stock have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities and there are no
conversion rights or redemption or sinking fund provisions with respect to such
stock. All outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby will be when issued, fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
PREFERRED STOCK
The Company's Board of Directors may, without further action by the
Company's shareholders, from time to time, direct the issuance of shares of
preferred stock in series and may, at the time of issuance, determine the
rights, preferences and limitations of each series. Satisfaction of any dividend
preferences of outstanding shares of preferred stock would reduce the amount of
funds available for the payment of dividends on shares of Common Stock. Holders
of shares of preferred stock may be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of shares of Common Stock. Under certain
circumstances, the issuance of shares of preferred stock may render more
difficult or tend to discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of the Company's securities
or the removal of incumbent management. The Board of Directors of the Company,
without shareholder approval, may issue shares of preferred stock with voting
and conversion rights which would adversely affect the holders of shares of
Common Stock. Upon consummation of the offering, there will be no shares of
preferred stock outstanding, and the Company has no present intention to issue
any shares of preferred stock.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S
ARTICLES OF INCORPORATION AND BYLAWS AND OTHER PROVISIONS
Certain provisions of the Articles and Bylaws of the Company and Florida
law summarized in the following paragraphs may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a shareholder might consider in its best interest, including those
attempts that might result in a premium over the market price for the shares
held by shareholders.
Classified Board of Directors. The Articles provide for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. The Articles also provide that shareholders may
remove a director upon the affirmative vote of two-thirds of all votes entitled
to be cast for the election of directors. This provision, when coupled with the
provision of the Bylaws authorizing only the Board of Directors to fill vacant
directorships, will preclude a shareholder from removing incumbent directors
without cause and simultane-
54
<PAGE> 56
ously gaining control of the Board of Directors by filling the vacancies created
by such removal with its own nominees. The Company's Articles provide that the
provisions described in this paragraph may only be amended by an affirmative
vote of two-thirds of all votes entitled to be cast for the election of
directors.
Special Meeting of Shareholders. The Articles provide that special
meetings of shareholders of the Company may be called only by the Board of
Directors, the Company's Chairman of the Board of Directors or the holders of
not less than 50% of all votes entitled to be cast on any issue proposed to be
considered at such special meeting. This provision will make it more difficult
for shareholders to take actions opposed by the Board of Directors.
Advance Notice for Shareholder Proposals and Director Nominations. The
Articles provide that shareholders seeking to bring business before an annual
meeting of shareholders, or to nominate candidates for election as directors at
an annual or special meeting of shareholders, must provide timely notice thereof
in writing. To be timely with respect to an annual meeting, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 120 days nor more than 180 days prior to
the first anniversary of the date of the Company's notice of annual meeting
provided with respect to the previous year's meeting. The Articles also specify
certain requirements for a shareholder's notice to be in proper written form.
These provisions may preclude shareholders from bringing matters before or from
making nominations for directors at an annual or special meeting.
Authorized But Unissued Shares. Subject to the applicable requirements of
the Nasdaq National Market, the authorized but unissued shares of Common Stock
and preferred stock are available for future issuance without shareholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved Common Stock and preferred stock may enable the
Board of Directors to issue shares to persons friendly to current management
which could render more difficult or discourage an attempt to obtain control of
the Company by means of a proxy contest, tender offer, merger or otherwise, and
thereby protect the continuity of the Company's management.
Certain Florida Legislation. The State of Florida has enacted legislation
that may deter or frustrate takeovers of Florida corporations. The Florida
Control Share Act generally provides that shares acquired in excess of certain
specified thresholds will not possess any voting rights unless such voting
rights are approved by a majority of a corporation's disinterested shareholders.
The Florida Affiliated Transactions Act generally requires supermajority
approval by disinterested shareholders of certain specified transactions between
a public corporation and holders of more than 10% of the outstanding voting
shares of the corporation (or their affiliates). Florida law and the Company's
Articles also authorize the Company to indemnify the Company's directors,
officers, employees and agents under certain circumstances and presently limit
the personal liability of corporate directors for monetary damages, except where
the directors (i) breach their fiduciary duties and (ii) such breach constitutes
or includes certain violations of criminal law, a transaction from which the
directors derived an improper personal benefit, certain unlawful distributions
or certain other reckless, wanton or willful acts or misconduct. The Company may
also indemnify any person who was or is a party to any proceeding by reason of
the fact that he is or was a director, officer, employee or agent of such
corporation (or is or was serving at the request of such corporation in such a
position for another entity) against liability to be in the best interests of
such corporation and, with respect to criminal proceedings, had no reasonable
cause to believe his conduct was unlawful.
55
<PAGE> 57
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, the Company will have 8,199,762 shares
of Common Stock issued and outstanding. Of the Common Stock outstanding upon
completion of this offering, the 3,000,000 shares of Common Stock sold in this
offering (3,450,000 if the Underwriters' over-allotment option is exercised in
full) will be freely tradable by the holders thereof without restriction or
further registration under the Securities Act except for any shares held by
"affiliates" of the Company, as that term is defined under the Securities Act
and the regulations promulgated thereunder (an "affiliate"), or persons who have
been affiliates within the preceding three months. Upon the expiration of
lock-up agreements between each of the executive officers, directors and
existing shareholders and the Underwriters, 180 days after the date of this
Prospectus (or earlier upon the written consent of Merrill Lynch), 3,741,845
shares of Common Stock (including options to acquire 182,348 shares of Common
Stock) outstanding prior to this offering may be sold in the public market by
affiliates of the Company, subject to the limitations and restrictions contained
in Rule 144 under the Securities Act. Holders of 1,640,265 shares of Common
Stock will not be able to sell their shares in reliance on Rule 144 under the
Securities Act prior to June 1998.
In general, under Rule 144 as currently in effect, a holder (or holders
whose shares are aggregated) of "restricted securities," including persons who
may be deemed affiliated with the Company, whose shares meet a one-year holding
period requirement are entitled to sell, within any three-month period, a number
of these shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock (approximately 8,199,762 shares immediately after this
offering) or the average weekly reported trading volume in the Common Stock
during the four calendar weeks preceding the date on which notice of the sale is
given, provided certain manner of sale and notice requirements and requirements
as to the availability of current public information about the Company are
satisfied. Under Rule 144(k), a holder of "restricted securities" who is deemed
not to have been an affiliate of the Company during the three months preceding a
sale by him, and whose shares meet a two-year holding period requirement, is
entitled to sell those shares, without regard to these restrictions and
requirements. In addition, affiliates of the Company must comply with the
restrictions and requirements of Rule 144, other than the one-year holding
period requirement, in order to sell shares of Common Stock which are not
"restricted securities" (such as shares acquired by affiliates in the offering).
The Company has reserved an aggregate of 310,000 shares of Common Stock for
issuance under the Incentive Plan. On the date of this Prospectus, options to
purchase an aggregate of 265,258 shares of Common Stock will be granted under
the Incentive Plan, a third of which will vest in October of each of 1998, 1999
and 2000. 118,404 of such options are held by two executive officers and will
vest immediately upon the termination of their employment for any reason other
than cause. See "Management -- Executive Incentive Compensation Plan." After the
offering, the Company may file a registration statement under the Securities Act
to register the Common Stock to be issued under this plan. After the effective
date of such registration statement, shares issued under the Incentive Plan will
be freely tradable without restriction or further registration under the
Securities Act, unless acquired by affiliates of the Company.
Prior to this offering, there has been no trading market for the Common
Stock. No prediction can be made as to the effect, if any, that future sales of
shares pursuant to Rule 144 or otherwise will have on the market price
prevailing from time to time. Sales of substantial amounts of the Common Stock
in the public market following this offering or the perception that such sales
might occur could adversely affect the then prevailing market price. The
Company's existing shareholders have agreed that they will not sell or otherwise
transfer any shares of Common Stock to the public for 180 days after this
offering. See "Underwriting."
REGISTRATION RIGHTS
Following the closing of this offering, Fund V will be entitled, subject to
the lock-up agreements, to require the Company to register the sale of its
1,475,095 shares of outstanding Common Stock under the Securities Act, and the
Company must use all commercially reasonable efforts to effect such
registration. Pursuant to agreements entered into between the Company and each
of Fund V, TCP, Mr. Molina, Mr. Beveridge, Mr. Sorensen and Ms. Gozlan, under
certain circumstances and subject to certain limitations and the lock-up
agreements, following the closing of this offering, such shareholders may
require the Company
56
<PAGE> 58
to include an aggregate of 5,382,110 shares of Common Stock held by them
(including options to acquire 182,348 shares of Common Stock) in the event the
Company proposes to register any of its securities, either for its own account
or for the account of a security holder, subject to certain limitations on the
number of shares to be included in the registration by the underwriter of such
offering.
57
<PAGE> 59
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement
(the "Purchase Agreement"), the Company and the Selling Shareholders have agreed
to sell to each of the underwriters named below (the "Underwriters") and each of
the Underwriters, for whom Merrill Lynch is acting as representative (the
"Representative"), severally has agreed to purchase, the number of shares of
Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
---------
Total............................................. 3,000,000
=========
</TABLE>
The Representative has advised the Company and the Selling Shareholders
that the Underwriters propose to offer the Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $
per share and that the Underwriters may allow, and such dealers may reallow,
discounts not in excess of $ per share to certain other dealers. After
the initial public offering, the offering price, concession and discount may be
changed.
NationsCredit has informed the Company that it intends to exercise its
warrants to purchase shares of Common Stock in full prior to this offering and
sell the aggregate of such underlying shares to the Underwriters. See "Principal
and Selling Shareholders."
Fund V and Messrs. Molina and Beveridge have granted an option to the
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of 450,000 additional shares of Common Stock at the
initial public offering price set forth on the cover page of this Prospectus,
less the underwriting discount. Messrs. Molina and Beveridge have each granted
such option with respect to 33,333 of their shares of Common Stock, and Fund V
has granted such option with respect to 383,334 of its shares. The Underwriters
may exercise this option only to cover over-allotments, if any, made on the sale
of the Common Stock offered hereby. To the extent that the Underwriters exercise
this option, each Underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of Common Stock proportionate to such
Underwriter's initial amount reflected in the foregoing table.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to shares to be sold and offered
hereby by the Company to certain employees of the Company and other persons. The
number of shares of Common Stock available for sale to the general public will
be reduced to the extent such persons purchase such reserved shares. Any
reserved shares which are not orally confirmed for purchase within one day of
the pricing of the offering will be offered by the Underwriters to the general
public on the same terms as the other shares offered hereby. Certain individuals
purchasing reserved shares may be required to agree not to sell, offer or
otherwise dispose of any shares of Common Stock for a period of three months
after the date of this Prospectus.
The Company, its executive officers, directors and all existing
shareholders have agreed, subject to certain exceptions, not to directly or
indirectly (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of or otherwise dispose of or transfer any shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or thereafter acquired by the person
executing the
58
<PAGE> 60
agreement or with respect to which the person executing the agreement thereafter
acquires the power of disposition, or file a registration statement under the
Securities Act with respect to the foregoing or (ii) enter into any swap or
other agreement that transfers, in whole or in part, the economic consequence of
ownership of the Common Stock whether any such swap or transaction is to be
settled by delivery of Common Stock or other securities, in cash or otherwise,
without the prior written consent of Merrill Lynch for a period of 180 days
after the date of this Prospectus. See "Shares Eligible for Future Sale."
Prior to the offering, there has been no public market for the Common Stock
of the Company. The initial public offering price has been determined through
negotiations among the Company, the Selling Shareholders and the Representative.
The factors considered in determining the initial public offering price, in
addition to prevailing market conditions, are price-earnings ratios of publicly
traded companies that the Representative believes to be comparable to the
Company, certain financial information of the Company, the history of, and the
prospects for, the Company and the industry in which it competes, and the
Company's past and present operations, the prospects for, and timing of, future
revenues of the Company, the present state of the Company's development, and the
above factors in relation to market values and various valuation measures of
other companies engaged in activities similar to those of the Company. There can
be no assurance that an active trading market will develop for the Common Stock
or that the Common Stock will trade at or above the initial public offering
price. The initial public offering price set forth on the cover page of this
Prospectus should not be considered an indication of the actual value of the
Common Stock. Such price is subject to change as a result of market conditions
and other factors. Application has been made for quotation of the Common Stock
on the Nasdaq National Market under the symbol "LTCW."
The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act or to contribute to payments Underwriters may be required to
make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception in these rules, Merrill Lynch is permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the offering, (i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus) Merrill Lynch may
reduce that short position by purchasing Common Stock in the open market.
Merrill Lynch may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
Merrill Lynch may also impose a penalty bid on certain Underwriters and
selling group members. This means that if Merrill Lynch purchases shares of
Common Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, Merrill Lynch may reclaim the amount of
the selling concession from the Underwriters and selling group members who sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that Merrill
Lynch will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
59
<PAGE> 61
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.,
Miami, Florida. Certain legal matters will be passed upon for the Underwriters
by Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company at July 31, 1996 and
1997 and for each of the two years in the period ended July 31, 1997 and the
combined financial statements of Telephone Warehouse at December 31, 1995 and
1996, and for each of the three years in the period ended December 31, 1996
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, and the consolidated financial
statements of the Company at July 31, 1995 and for each of the two years in the
period then ended have been audited by Deloitte & Touche LLP, independent
auditors, as set forth in their respective reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firms as experts in accounting and auditing.
The Company's Board of Directors appointed Ernst & Young LLP as the
independent accountants for the Company in July 1996 to replace Deloitte &
Touche LLP, who were the independent accountants from July 1994 until such time.
During the period of Deloitte & Touche LLP's retention by the Company, there
were no disagreements between Deloitte & Touche LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Deloitte
& Touche LLP, would have caused them to make reference to the disagreement in
any of their reports on the Company's financial statements. In addition, the
reports of Deloitte & Touche LLP on the financial statements of the Company at
and for the years ended July 31, 1994 and 1995 contained no adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty, the
scope of the audit performed or accounting principles. During the two years
ended July 31, 1995, there have been no reportable events described in Item
304(a)(1)(v) of Regulation S-K promulgated by the Commission. The Company has
requested Deloitte & Touche LLP furnish it with a letter addressed to the
Commission stating whether or not it agrees with the above statements. A copy of
such letter has been filed as an exhibit to the registration statement of which
this Prospectus forms a part. The Company engaged Ernst & Young LLP as its new
independent accountants as of July 12, 1996 to perform audit services commencing
with the year ended July 31, 1996. During the year ended July 31, 1995, the
Company had not consulted Ernst & Young LLP on items which (i) were or should
have been subject to Statement on Accounting Standards No. 50 or (ii) concerned
the subject matter of a disagreement or reportable event (as described in Item
304(a)(1)(iv) of Regulation S-K).
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits and schedules thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Act"), with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to
such Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. Copies of the Registration Statement may be
obtained from the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the fees prescribed by the Commission,
or may be examined without charge at the offices of the Commission. The
Commission also maintains a World Wide Web site on Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information filed electronically with the Commission. Information
concerning the Company will also be available for inspection at the offices of
the Nasdaq National Market, Reports Section, 1735 K Street, N.W., Washington,
D.C. 20006.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements which have been certified by its
independent public accountants, and quarterly reports containing unaudited
summary financial information for each of the first three quarters of each
fiscal year.
60
<PAGE> 62
INDEX TO FINANCIAL STATEMENTS
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES:
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Report of Independent Certified Public Accountants.......... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Operations....................... F-5
Consolidated Statements of Changes in Redeemable,
Convertible Preferred Stock and Common Shareholders'
Equity.................................................... F-6
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
TELEPHONE WAREHOUSE:
Report of Independent Auditors.............................. F-21
Combined Balance Sheets..................................... F-22
Combined Statements of Operations........................... F-23
Combined Statements of Changes in Shareholders' Equity...... F-24
Combined Statements of Cash Flows........................... F-25
Notes to Combined Financial Statements...................... F-26
</TABLE>
F-1
<PAGE> 63
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Let's Talk
Cellular & Wireless, Inc. and subsidiaries as of July 31, 1996 and 1997, and the
related consolidated statements of operations, changes in redeemable,
convertible preferred stock and common shareholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Let's Talk
Cellular & Wireless, Inc. and subsidiaries at July 31, 1996 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Miami, Florida
September 19, 1997, except for Note 18,
as to which the date is October , 1997
The foregoing report is in the form that will be signed upon the completion
of the stock split described in Note 18 to the financial statements.
/s/ ERNST & YOUNG LLP
Miami, Florida
October 3, 1997
F-2
<PAGE> 64
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
We have audited the accompanying statements of operations, shareholders'
equity and cash flows of Let's Talk Cellular & Wireless, Inc. (formerly Let's
Talk Cellular of America, Inc.) for the year ended July 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Let's Talk
Cellular & Wireless, Inc. and subsidiaries for the year ended July 31, 1995 in
conformity with generally accepted accounting principles.
Miami, Florida
October 31, 1995
(October , 1997 as to the effects
of the stock split discussed in Note 18)
The accompanying consolidated financial statements reflect the 3,289 for
one split of the Company's outstanding common stock which is to be effected
immediately prior to the effective date of the offering contemplated by this
Prospectus. The above report is in the form which will be furnished by Deloitte
& Touche LLP upon completion of such stock split, which is described in Note 18
to the consolidated financial statements and assuming that from October 31, 1995
to the date of such stock split, no other events shall have occurred that would
affect the accompanying consolidated financial statements and notes thereto.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
October 3, 1997
F-3
<PAGE> 65
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
------------------------
1996 1997
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $1,357,172 $ 1,080,014
Accounts receivable, net.................................. 620,521 5,706,983
Inventories............................................... 1,210,159 5,712,420
Prepaid expenses.......................................... 31,224 265,859
Income taxes receivable (Note 11)......................... -- 291,099
Other current assets...................................... 42,511 600,385
Deferred tax asset (Note 11).............................. 17,174 475,245
---------- -----------
Total current assets.............................. 3,278,761 14,132,005
Cash held in escrow (Note 12)............................... 2,009,194 --
Property and equipment, net (Note 4)........................ 1,324,852 5,296,743
Other assets, net........................................... 32,780 1,353,097
Intangible assets, net (Notes 3, 5 and 14).................. -- 13,755,696
---------- -----------
Total assets...................................... $6,645,587 $34,537,541
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................... $ 841,490 $ 6,583,542
Bank lines of credit (Note 6)............................. 827,000 1,023,285
Accrued expenses.......................................... 512,486 3,120,493
Loans payable to shareholders and officers (Note 7)....... -- 258,100
Current portion of bank term loans and obligations under
capital leases (Notes 6 and 8)......................... 115,236 732,195
Income taxes payable (Note 11)............................ 59,217 --
Deferred revenues......................................... 79,886 693,038
Customer deposits......................................... 64,616 108,673
---------- -----------
Total current liabilities......................... 2,499,931 12,519,326
Bank term loans, less current portion (Note 6).............. 190,000 12,350,000
Loans payable to shareholders and officers (Note 7)......... 258,100 2,000,000
Obligations under capital leases, less current portion (Note
8)........................................................ 26,226 32,859
Other liabilities........................................... 35,565 72,808
Deferred tax liability (Note 11)............................ 5,572 952,596
Commitments and contingencies (Note 9)
Series A preferred stock, $30 par value, 150,000 shares
authorized, 100,000 and none issued and outstanding,
respectively (Note 12).................................... 2,937,360 --
Shareholders' equity (Notes 13 and 18):
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding (Note 13)...... -- --
Common stock, $.01 par value, 50,000,000 shares
authorized, 2,137,848 and 6,093,166 shares issued and
outstanding, respectively.............................. 21,379 60,932
Additional paid-in capital.................................. 243,077 6,166,474
Retained earnings........................................... 428,377 382,546
---------- -----------
Total common shareholders' equity................. 692,833 6,609,952
---------- -----------
Total liabilities and shareholders' equity........ $6,645,587 $34,537,541
========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 66
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Net revenues:
Retail sales and activation income................. $7,770,308 $12,518,247 $25,804,718
Residual income.................................... 533,273 1,075,035 1,948,169
Wholesale sales.................................... -- -- 2,309,082
---------- ----------- -----------
Total net revenues......................... 8,303,581 13,593,282 30,061,969
Cost of sales........................................ 4,259,814 6,509,282 14,822,617
---------- ----------- -----------
Gross profit......................................... 4,043,767 7,084,000 15,239,352
Operating expenses:
Selling, general and administrative................ 3,896,453 6,601,077 13,993,392
Former shareholder compensation expense............ -- -- 80,000
Depreciation and amortization...................... 99,732 225,159 451,108
Amortization of intangible assets.................. -- -- 417,739
---------- ----------- -----------
Total operating expenses................... 3,996,185 6,826,236 14,942,239
---------- ----------- -----------
Income from operations............................... 47,582 257,764 297,113
Interest expense, net................................ (39,898) (152,827) (340,102)
---------- ----------- -----------
Income (loss) before provision (benefit) for income
taxes.............................................. 7,684 104,937 (42,989)
Provision (benefit) for income taxes................. (455) 38,939 2,842
---------- ----------- -----------
Net income (loss).......................... 8,139 65,998 (45,831)
Fair value of Common Stock distributed to preferred
shareholder to induce conversion of Series A
Preferred Stock.................................... -- -- (320,000)
---------- ----------- -----------
Net income (loss) applicable to common
shareholders............................. $ 8,139 $ 65,998 $ (365,831)
========== =========== ===========
Net income (loss) per share applicable to
common shareholders...................... $ -- $ .01 $ (.07)
========== =========== ===========
Weighted average shares outstanding.................. 6,199,762 6,199,762 6,199,762
========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 67
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE,
CONVERTIBLE PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
REDEEMABLE COMMON SHAREHOLDERS' EQUITY
CONVERTIBLE ---------------------------------------------------
PREFERRED STOCK COMMON STOCK PAID-IN
---------------------- --------------------- CAPITAL RETAINED
SHARES AMOUNT SHARES(1) AMOUNT(1) (DEFICIENCY)(1) EARNINGS
--------- ---------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31,
1994.................... -- $ -- 2,137,848 $21,379 $ (13,129) $354,240
Capital contributions..... -- -- -- -- 250,000 --
Net income................ -- -- -- -- -- 8,139
--------- ---------- --------- ------- ---------- --------
Balance at July 31,
1995.................... -- -- 2,137,848 21,379 236,871 362,379
Issuance of Series A
Preferred Stock for
cash.................... 100,000 3,295,000 -- -- -- --
Issuance costs associated
with Series A Preferred
Stock................... -- (358,702) -- -- -- --
Accretion of Series A
Preferred Stock to
redemption value........ -- 1,062 -- -- (1,062) --
Issuance of stock under
stock bonus plan........ -- -- -- -- 7,268 --
Net income................ -- -- -- -- -- 65,998
--------- ---------- --------- ------- ---------- --------
Balance at July 31,
1996.................... 100,000 2,937,360 2,137,848 21,379 243,077 428,377
Accretion of Series A
Preferred Stock to
redemption value........ -- 62,640 -- -- (62,640) --
Issuance of stock under
stock bonus plan........ -- -- -- -- 29,651 --
Redemption of Series A
Preferred Stock in
exchange for common
stock................... (100,000) (3,000,000) 2,137,850 21,379 2,978,621 --
Issuance of common stock
to purchase Telephone
Warehouse............... -- -- 1,817,468 18,174 2,811,826 --
Warrants issued in
connection with debt
refinancing............. -- -- -- -- 165,939 --
Net loss.................. -- -- -- -- -- (45,831)
--------- ---------- --------- ------- ---------- --------
Balance at July 31,
1997.................... -- $ -- 6,093,166 $60,932 $6,166,474 $382,546
========= ========== ========= ======= ========== ========
</TABLE>
- ---------------
(1) Number of shares and related amounts have been restated to reflect a 3.289
for 1 stock split immediately prior to the offering. (See Note 18)
See accompanying notes.
F-6
<PAGE> 68
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------------
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 8,139 $ 65,998 $ (45,831)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 99,732 225,159 451,108
Amortization of intangible assets......................... -- -- 417,739
Amortization of deferred financing costs.................. -- -- 40,998
Provision for activation adjustments and cancellation
losses.................................................. -- 65,638 151,041
Deferred income taxes..................................... 19,999 (31,601) (137,739)
Loss on disposal of property and equipment................ -- 50,476 128,184
Loss on impairment of leasehold improvements.............. -- -- 135,167
Issuance of stock under stock bonus plan.................. -- 7,268 29,651
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable..................................... (387,717) (175,516) (1,945,325)
Inventories............................................. (719,560) (18,807) (2,389,231)
Prepaid expenses........................................ (133,886) 139,230 (58,233)
Other current assets.................................... (120,748) 85,740 (357,874)
Income tax receivable................................... -- -- (291,099)
Other assets............................................ (10,663) (9,718) (267,408)
Trade accounts payable.................................. 1,014,614 (390,116) 2,886,454
Accrued expenses........................................ 216,619 146,641 791,505
Other liabilities....................................... 2,711 32,854 37,243
Income taxes payable.................................... -- 59,217 (63,348)
Customer deposits....................................... 4,659 17,738 (27,528)
Deferred revenues....................................... 97,903 (18,017) 42,758
---------- ----------- -----------
Net cash provided by (used in) operating activities......... 91,802 252,184 (471,768)
INVESTING ACTIVITIES
Cash acquired in connection with the acquisition of
Telephone Warehouse....................................... 823,846
Acquisition of Northpoint Cellular.......................... -- -- (850,000)
Proceeds from disposals of property and equipment........... -- 73,680 --
Purchases of property and equipment......................... (809,182) (594,185) (3,648,761)
Decrease (increase) in cash held in escrow.................. -- (2,009,194) 2,009,194
---------- ----------- -----------
Net cash used in investing activities....................... (809,182) (2,529,699) (1,665,721)
FINANCING ACTIVITIES
Net borrowings under bank lines of credit................... 312,493 364,507 196,286
Increase (decrease) in loans from shareholders.............. 332,792 (100,897) --
Proceeds from capital contributions......................... 250,000 -- --
Proceeds from bank term loan................................ -- 300,000 2,600,000
Payments on bank term loan and capital leases............... -- (107,041) (935,955)
Proceeds from sale of preferred stock, net of issuance
costs..................................................... -- 2,936,298 --
---------- ----------- -----------
Net cash provided by financing activities................... 895,285 3,392,867 1,860,331
---------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 177,905 1,115,352 (277,158)
Cash and cash equivalents at beginning of year.............. 63,915 241,820 1,357,172
---------- ----------- -----------
Cash and cash equivalents at end of year.................... $ 241,820 $ 1,357,172 $ 1,080,014
========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 31,269 $ 152,358 $ 373,079
========== =========== ===========
Cash paid for income taxes.................................. $ 9,812 $ -- $ 502,700
========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Common stock issued to acquire Telephone Warehouse.......... $ -- $ -- $ 2,830,000
========== =========== ===========
Common stock issued to convert Redeemable Preferred Stock... $ -- $ -- $ 3,000,000
========== =========== ===========
Warrants issued in connection with debt refinancing......... $ -- $ -- $ 165,939
========== =========== ===========
Acquisition of property and equipment under capital
leases.................................................... $ 135,683 $ 21,552 $ 36,412
========== =========== ===========
</TABLE>
See accompanying notes.
F-7
<PAGE> 69
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Let's Talk Cellular & Wireless, Inc. (LTC) and its wholly-owned
subsidiaries (collectively, the Company) ( known as Let's Talk Cellular of
America, Inc. prior to June 27, 1997) is an independent specialty retailer and
wholesale distributor of cellular and wireless products, services and
accessories.
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 fiscal
quarter during the holiday season. In addition, the Company's results during any
fiscal period 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. As of July 31, 1995, 1996 and 1997, the Company operated 22, 25 and
93 stores, respectively, located throughout the United States and Puerto Rico.
On June 27, 1997 (effective June 30, 1997), the Company purchased 100% of
the outstanding shares of common stock of National Cellular, Incorporated, and
Telephone Warehouse, Inc. (collectively Telephone Warehouse), from Texas
Cellular Partners, L.P. (TCP), an affiliate of HIG Fund V, Inc. (HIG Fund V).
The Series A Preferred Stock of the Company, owned by HIG Fund V, was converted
into Common Stock simultaneously with this acquisition (see Note 12). This
acquisition has been accounted for as a purchase and, accordingly, the
consolidated financial statements include the net assets and results of
operations of Telephone Warehouse beginning July 1, 1997 (see Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Let's Talk
Cellular and Wireless, Inc. and its wholly-owned subsidiaries LTC Kiosk
Management Corporation, Let's Talk Cellular of Bayside, Inc., Telephone
Warehouse, Inc. (since July 1, 1997) and National Cellular, Incorporated (since
July 1, 1997). All intercompany balances and transactions have been eliminated
in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE
A substantial portion of the Company's accounts receivable are due from
carriers of wireless communication services. Wholesale accounts receivable are
primarily due from distributors and small retailers. Credit is extended to
wholesale customers based on the evaluation of the customers financial
condition. Collateral is not required and terms are generally between 30 and 60
days. Accounts receivable are net of allowances of $65,638 and $686,804 as of
July 31, 1996 and 1997, respectively (of which $0 and $132,721 relates to the
Company's wholesale operations, respectively), which are primarily reserves for
deactivations. The reserve for deactivations is calculated based on a historical
percentage of deactivations over a one year period.
INVENTORIES
Inventories, consisting of cellular and wireless products and related
accessories, are valued at the lower of cost, based on the average cost method,
or market.
F-8
<PAGE> 70
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of their useful life or
the remainder of the noncancelable lease period (including renewal options) (see
Note 4).
OTHER ASSETS
At July 31, 1996 and 1997, other assets includes unamortized deferred
financing costs totaling $16,667 and $1,004,956, net of accumulated amortization
of $5,812 and $16,479, respectively. Deferred financing costs are being
amortized on the interest method over the terms of the related debt, which is
seven years.
INTANGIBLE ASSETS
Intangible assets includes cost in excess of identifiable assets acquired
(goodwill) and cost allocable to the estimated fair value of acquired residual
income and the noncompete arrangement entered into in connection with the
Northpoint Cellular, Inc. acquisition (see Note 14).
The Company reviews the carrying value of intangible assets on an ongoing
basis. When factors indicate that an intangible asset may be impaired, the
Company uses an estimate of the undiscounted future cash flows over the
remaining life of the asset in measuring whether the intangible asset is
recoverable. If such an analysis indicates that impairment has in fact occurred,
the book value of the intangible asset is written down to its estimated fair
value. Goodwill is being amortized over 30 years, acquired residual income is
being amortized on an accelerated basis based on the timing of acquired cash
flows through the year 2000 and the noncompete arrangement is amortized over the
life of the arrangement, which is thirty months.
PREOPENING EXPENSES
The Company expenses store preopening costs as incurred.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In fiscal 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets. SFAS No. 121 requires impairment losses to be recorded on
long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The adoption of SFAS No. 121 did not have a material impact on
the results of operations of the Company.
REVENUE RECOGNITION
Product Sales
Revenue from retail product sales is recorded upon customer purchase.
Revenue from wholesale product sale is recognized upon shipment of goods.
Activation Income
The Company receives activation commission income from cellular carriers
for each new cellular phone subscription sold by the Company. Revenue from such
commissions is recorded upon customer subscription. New subscription activation
commissions are fully refundable if the subscriber cancels service within a
certain minimum period of continuous active service (generally 180 days).
Customers generally sign a service agreement that requires a customer deposit
which is forfeited in case of early cancellation. The allowance for accounts
receivable includes an amount for estimated cancellation losses, net of deposit
forfeitures.
F-9
<PAGE> 71
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Residual Income
The Company generally receives monthly residual income from the cellular
service providers based on a percentage of actual phone usage by subscribers.
Revenue from residual income is generally recorded as the cellular service is
provided. Revenue from prepaid pager service is deferred and recognized over the
period service is provided, usually three to twelve months. Revenue from monthly
installment pager service contracts is recorded as received.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expense
which is included in selling, general and administrative is recorded net of
cooperative advertising payments received. Net advertising expense amounted to
$130,277, $77,168 and $590,513 for the years ended July 31, 1995, 1996 and 1997,
respectively. These amounts are net of $181,550, $654,687 and $1,804,867 of
cooperative advertising payments received for the years ended July 31, 1995,
1996 and 1997, respectively.
INCOME TAXES
Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates that will be in effect when the
differences are expected to reverse.
NET INCOME (LOSS) PER SHARE APPLICABLE TO COMMON SHAREHOLDERS
Net income (loss) per share applicable to common shareholders is calculated
using the weighted average number of common and common equivalent shares
outstanding during the respective periods. Common shares and common equivalent
shares issued at prices below the Company's estimated public offering price
during the 12 months immediately preceding the date of the initial filing of the
registration statement are included in the calculation of common equivalent
shares, as if they were outstanding for all periods presented. As such,
2,137,850 shares of Common Stock issued upon conversion of the redeemable
convertible preferred stock (see Note 12), 1,817,468 shares issued to acquire
Telephone Warehouse (see Note 3) and the issuance of 106,596 stock purchase
warrants issued in connection with the Company's debt refinancing (see Note 6)
are included in the calculation of the weighted average number of common and
common equivalent shares for all periods presented. For the years ended July 31,
1996 and 1997, accretion to redemption value of the redeemable convertible
preferred stock of $1,062 and $62,640, respectively, has been deducted from net
income (loss) for purposes of calculating net income (loss) per share applicable
to common shareholders.
Net income (loss) per share applicable to common shareholders without
including common equivalent shares prior to their issuance date, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Net income (loss) applicable to common
shareholders............................... $ 8,139 $ 65,998 $ (365,831)
Net income (loss) per share applicable to
common shareholders(1)..................... $ .00 $ .03 $ (.10)
Weighted average shares outstanding(1)....... 2,137,848 2,310,367 4,083,424
</TABLE>
- ---------------
(1) Excluding common equivalent shares prior to their issuance.
F-10
<PAGE> 72
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING FOR STOCK-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation," became effective
January 1, 1996. The new standard defines a fair value method of accounting for
issuance of stock options and other equity instruments. Under the fair value
method, compensation cost is measured at the grant date based on the fair value
of the award and is recognized over the service period, which is usually the
vesting period. Pursuant to SFAS No. 123, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees," (APB Opinion 25) but are required to disclose in a
note to the consolidated financial statements pro forma net income and per share
amounts as if the Company had applied the new method of accounting.
The Company applies APB Opinion 25 and Related Interpretations in
Accounting for its employee stock-based transactions and has complied with the
disclosure requirements of SFAS No. 123.
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued a new
accounting pronouncement, SFAS No. 128, Earnings per Share, which will change
the current method of computing earnings per share. The new standard requires
presentation of "basic earnings per share" and "diluted earnings per share"
amounts, as defined. SFAS No. 128 will be effective for the Company's quarter
ending January 1, 1998, and upon adoption, all prior-period earnings per share
presented shall be restated to conform with the provisions of the new
pronouncement.
Application earlier than the Company's quarter ending January 31, 1998 is
not permitted. The restated basic and diluted earnings or loss per share to be
reported upon adoption of SFAS No. 128 will not differ from amounts reported
under the existing accounting rules for all periods reported by the Company
through July 31, 1997.
3. ACQUISITION
On June 27, 1997 (effective June 30, 1997), the Company purchased Telephone
Warehouse in exchange for 1,817,468 shares of the Company's common stock and
assumption of approximately $13,075,000 of indebtedness. The fair value of the
shares issued to TCP were determined by management to be approximately
$2,830,000. The fair value of net assets acquired, including approximately
$2,545,000 allocated to acquired residual income was approximately $4,877,000. A
deferred tax liability of $942,000 was provided related to the acquired residual
income. The purchase price exceeded the fair value of the net assets acquired by
approximately $11,028,000. The purchase price allocation is based on preliminary
data.
In connection with the acquisition, the Company assumed an employment
agreement with the former shareholder of Telephone Warehouse (the Former
Shareholder) providing for the following: (i) for the six month period beginning
on July 1, 1997, a salary of $50,000, (ii) for the 12 month period beginning on
January 1, 1998, a salary of $100,000 and (iii) a bonus of $950,000 payable on
or before December 31, 1997, provided that certain financial performance levels
are met for the twelve months ended December 31, 1997. Payments to be made
beginning July 1, 1997 through December 31, 1997 under the employment agreement
F-11
<PAGE> 73
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
totaling $1,000,000, will be treated as compensation expense for such period, of
which $560,000 has been included in accrued expenses at July 31, 1997.
In addition, a note payable to the Former Shareholder of $2 million,
included in assumed indebtedness of $13,075,000, provides for additional
payments to be made in March 1999 for up to $1,585,000 contingent upon the
results of Telephone Warehouse for the year ended December 31, 1998, whether or
not the Former Shareholder remains employed by the Company (see Note 7).
In a previous transaction, on January 1, 1997, TCP had purchased from the
president and sole shareholder of Telephone Warehouse (the Former Shareholder),
all of the outstanding stock of Telephone Warehouse for a purchase price of
approximately $15,100,000, including acquisition costs of approximately
$200,000. The purchase price included a $2 million subordinated promissory note
issued to the Former Shareholder, which was assumed by the Company on June 27,
1997. (see Note 7)
The following table summarizes, on an unaudited pro forma basis, the
results of operations for the years ended July 31, 1997 and 1996 as though the
acquisition of Telephone Warehouse had occurred as of the beginning of the
respective periods:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Net revenues................................................ $60,669,000 $74,406,000
Income before taxes......................................... $ 588,000 $ 736,000
Net income.................................................. $ 246,000 $ 344,000
Accretion of Series A Preferred Stock....................... (1,000) (63,000)
Fair value of common stock distributed to preferred
shareholder to induce conversion of Series A Preferred
Stock..................................................... -- (320,000)
----------- -----------
Net income (loss) applicable to common shareholders......... $ 245,000 $ (39,000)
Net income (loss) per share applicable to common
shareholders.............................................. $ 0.04 $ (.01)
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JULY 31,
USEFUL LIVES -----------------------
(YEARS) 1996 1997
------------ ---------- ----------
<S> <C> <C> <C>
Computer equipment................................. 5 $ 239,185 $ 778,628
Furniture, vehicles and equipment.................. 5-7 716,724 1,826,484
Office equipment................................... 5-7 33,216 78,032
Building........................................... 30 -- 254,998
Leasehold improvements............................. 2-10 734,012 3,174,432
Construction in progress........................... 3,850 2,750
---------- ----------
1,726,987 6,115,324
Less accumulated depreciation and amortization..... (402,135) (818,581)
---------- ----------
$1,324,852 $5,296,743
========== ==========
</TABLE>
Office equipment under capital leases totaled $157,235 and $179,482 at July
31, 1996 and 1997, respectively. Accumulated amortization for assets under
capital leases was $44,121 and $70,292 at July 31, 1996 and 1997, respectively.
During 1997, the Company recorded a loss on impairment of leasehold
improvements of approximately $135,000. Additionally, the Company wrote-off
approximately $0, $50,500 and $128,000 of property and equipment related to
store closings for the years ended July 31, 1995, 1996 and 1997, respectively.
F-12
<PAGE> 74
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INTANGIBLE ASSETS
Intangible assets consist of the following at July 31, 1997:
<TABLE>
<S> <C>
Goodwill.................................................... $11,028,312
Acquired residual income.................................... 2,545,123
Non compete agreement....................................... 600,000
-----------
14,173,435
Accumulated amortization.................................... (417,739)
-----------
$13,755,696
===========
</TABLE>
6. BANK LINES OF CREDIT AND BANK TERM LOAN
On June 27, 1997, in connection with the purchase of Telephone Warehouse
from TCP, the Company assumed the debt of Telephone Warehouse owed to Nations
Credit Commercial Corporation (NCCC), a limited partner of TCP, which consisted
of the then outstanding balance of $13,075,000 under a term loan agreement, and
simultaneously refinanced the Company's debt with NCCC. The Company's new credit
facility provides for borrowings of up to $9 million under a revolving credit
facility ($1,023,285 is outstanding at July 31, 1997) and a $13,075,000 term
loan (see below). The revolving credit facility is secured by substantially all
of the Company's assets and availability is based on a formula of eligible
receivables and inventories. Borrowings under this facility bear interest at
3.75% above the commercial paper rate. At July 31, 1997, $5,927,000 was
available under the revolving credit facility based on eligible collateral at
that date.
On September 5, 1995, the Company entered into a line of credit agreement
with a bank. Under the line of credit, the Company could borrow up to $1,300,000
(as amended on December 4, 1995) based on a formula of eligible receivables and
inventories ($827,000 was outstanding at July 31, 1996). Advances under the line
of credit were payable on demand and bore interest at 2% above the bank's prime
rate (10.25% at July 31, 1996). The line of credit was secured by a pledge of
substantially all of the Company's assets and was personally guaranteed by the
Company's majority shareholders. The line of credit was repaid and terminated on
June 27, 1997 in connection with the Company's acquisition of Telephone
Warehouse.
F-13
<PAGE> 75
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amounts outstanding under bank term loans are as follows:
<TABLE>
<CAPTION>
JULY 31,
-----------------------
1996 1997
-------- -----------
<S> <C> <C>
NCCC term loan of $13,075,000 payable in quarterly principal
payments over 7 years through May 2004 bearing interest at
4.5% over the commercial paper rate (10.157% at July 31,
1997), secured by substantially all of the Company's
assets.(a)................................................ -- 13,050,000
Bank term loan of $300,000 payable in 35 monthly principal
installments of $5,000 with the remaining principal
balance due in September 1998 bearing interest 2.5% above
the bank's prime rate (10.75% at July 31, 1996), secured
by substantially all of the Company's assets and
personally guaranteed by two of the Company's
shareholders(b)........................................... 250,000 --
-------- -----------
250,000 13,050,000
Less current portion........................................ (60,000) (700,000)
-------- -----------
Long-term portion........................................... $190,000 $12,350,000
======== ===========
</TABLE>
- ---------------
(a)In connection with the Company's debt refinancing, the Company issued stock
purchase warrants to NCCC to purchase a total of 106,596 shares of the
Company's common stock at an exercise price of $.0001 per share. Deferred
interest expense of $165,939 was recorded at June 27, 1997, representing the
estimated value of the warrants, which is being recognized as interest
expense over the term of the credit facilities of 7 years. The warrants
expire on December 31, 2006.
(b)This term loan was repaid on June 27, 1997 in connection with the Company's
acquisition of Telephone Warehouse.
The NCCC credit facility contains certain restrictive covenants that, among
other things, restrict the payment of dividends, restrict additional
indebtedness and obligations, limit capital expenditures and require maintenance
of certain financial ratios.
Maturities of the bank term loan as of July 31, 1997, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 700,000
1999........................................................ 1,225,000
2000........................................................ 1,775,000
2001........................................................ 2,175,000
2002........................................................ 1,400,000
Thereafter.................................................. 5,775,000
-----------
Total............................................. $13,050,000
===========
</TABLE>
7. LOANS PAYABLE TO SHAREHOLDERS AND OFFICERS
Loans payable to shareholders and officers are as follows:
<TABLE>
<CAPTION>
JULY 31,
----------------------
1996 1997
-------- ----------
<S> <C> <C>
Loans payable to shareholders............................... $258,100 $ 258,100
8% subordinated note payable to officer (Former
Shareholder).............................................. -- 2,000,000
-------- ----------
258,100 2,258,100
Less current portion........................................ -- (258,100)
-------- ----------
Long term portion........................................... $258,100 $2,000,000
======== ==========
</TABLE>
F-14
<PAGE> 76
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of July 31, 1996, loans from shareholders, amounting to $258,100,
consisted of unsecured notes payable to two shareholders bearing interest at 8%,
due monthly, and payable on October 2001.
On June 27, 1997, the Company entered into amended and restated promissory
notes (Amended Shareholder Notes) with these shareholders. The Amended
Shareholder Notes call for the principal to be payable in full on the earlier to
occur of (a) a Qualified Public Offering, as defined, or (b) June 1, 1998. All
accrued and unpaid interest under the Amended Shareholder Notes is due and
payable monthly and bears interest at 8%.
In connection with the acquisition of Telephone Warehouse, the Company
assumed a $2 million subordinated term note due to the Former Shareholder of
Telephone Warehouse. Interest on the note is payable quarterly at an interest
rate of 8%. The note is due on March 15, 2002. The note is subordinated to
borrowings under the Company's line of credit and term loan agreements.
8. CAPITAL LEASE OBLIGATIONS
The Company leases certain office equipment under capital leases. These
lease obligations are payable in monthly installments. During 1996, total
payments under such leases aggregated $52,820. The future minimum lease payments
at July 31, 1997 relating to these capital leases are as follows:
<TABLE>
<S> <C>
Year Ending July 31,:
1998................................................. $39,858
1999................................................. 8,575
2000................................................. 8,575
2001................................................. 8,575
2002................................................. 6,431
-------
Total payments remaining under capital leases........ 72,014
Less amount representing interest at 9%.............. (6,960)
-------
Present value of capital lease obligations........... (65,054)
Less current portion................................. (32,195)
-------
Capital lease obligations, net of current portion.... $32,859
=======
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company leases retail, office and warehouse space and certain equipment
under operating leases which expire at various dates through 2007 with options
to renew certain of such leases for additional periods. The lease agreements
covering retail space provide for minimum rentals and/or rentals based on a
percentage of sales.
Future minimum payments under operating leases at July 31, 1997 are
approximately as follows:
<TABLE>
<S> <C>
Year Ending July 31:
1998................................................... $ 3,539,400
1999................................................... 2,994,500
2000................................................... 2,363,500
2001................................................... 1,353,400
Thereafter............................................. 3,214,900
-----------
Total............................................. $13,465,700
===========
</TABLE>
F-15
<PAGE> 77
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total rent expense for the years ended July 31, 1995, 1996 and 1997 was
approximately, $874,500, $1,566,600 and $2,985,000, respectively, of which
approximately $21,100, $10,600 and $8,000, respectively, was paid for rentals
based on a percentage of sales.
On June 27, 1997, the Company entered into amended and restated employment
agreements with two officers, who are also shareholders of the Company which
provide for five year terms and base salaries subject to annual increases and
annual bonuses subject to achievement of defined performance targets.
The Company is the defendant in certain legal proceedings that have arisen
in the ordinary course of business. In the opinion of management, the ultimate
resolution of such pending legal proceedings will not have a material adverse
effect on the Company's results of operations or financial position.
10. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
amounts due under the lines of credit, trade accounts payable and accrued
expenses approximate fair value because of their short duration to maturity. The
carrying amounts of the bank term loans approximates fair value because the
interest rate is tied to a quoted variable index. The carrying value of the
loans from shareholders approximate fair value because the interest rate
approximates the Applicable Federal Rate (AFR).
11. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Current........................................... $(20,454) $ 70,540 $ 140,581
Deferred.......................................... 19,999 (31,601) (137,739)
-------- -------- ---------
Total................................... $ (455) $ 38,939 $ 2,842
======== ======== =========
</TABLE>
The differences between the effect of applying the federal statutory income
tax rate and the effective income tax rate are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Tax provision (benefit) at federal statutory rate.... $ 2,613 $35,679 $(14,616)
State income taxes, net of federal benefit........... 279 3,809 274
Permanent differences................................ 3,950 6,023 17,184
Other................................................ (7,297) (6,572) --
------- ------- --------
$ (455) $38,939 $ 2,842
======= ======= ========
</TABLE>
F-16
<PAGE> 78
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's net deferred income taxes are as
follows:
<TABLE>
<CAPTION>
JULY 31,
--------------------
1996 1997
------- ---------
<S> <C> <C>
Deferred tax assets:
Inventory................................................. $ -- $ 88,654
Vacation accrual.......................................... -- 79,328
Long-lived assets......................................... -- 50,863
Allowances................................................ 5,885 216,591
Miscellaneous accruals.................................... 11,289 39,809
------- ---------
Total current deferred tax asset............................ 17,174 475,245
Deferred tax liabilities:
Depreciation.............................................. (5,572) (48,933)
Amortization of residual income........................... -- (903,663)
------- ---------
Total deferred tax liability................................ (5,572) (952,596)
------- ---------
Net deferred tax asset (liability).......................... $11,602 $(477,351)
======= =========
</TABLE>
At July 31, 1997 income taxes receivable represents an overpayment of
federal income taxes. The Company expects to apply this overpayment to future
tax liabilities.
12. CASH HELD IN ESCROW AND REDEEMABLE, CONVERTIBLE PREFERRED STOCK
On June 25, 1996, the Company entered into a Series A Preferred Stock
Purchase Agreement (the Agreement) with HIG Fund V and issued 100,000 shares of
the Company's Series A Redeemable, Convertible Preferred Stock (the Series A
Preferred Stock), par value $30 per share at a price of $32.95 per share for an
aggregate purchase price of $3,295,000 of which $1,000,000, net of $358,702 in
certain issuance costs, was paid at closing. The balance of $2,000,000 was
released from escrow to the Company in September and December of 1996.
Under the escrow agreement, the release of funds occurred upon management
providing certain representations, including: (a) that the Company had
substantially used all of the previous amounts funded as set forth in the
Agreement, which provided in general that funds were to be used for capital
expenditures and not to repay shareholder notes or to pay down the Company's
line of credit to less than a specified amount; and (b) that there had been no
material adverse change (as defined by management) in the Company's condition or
prospects.
Each holder of the Series A Preferred Stock was entitled to vote on all
matters and was entitled to that number of votes equal to the largest number of
whole shares of Common Stock into which such holders shares of Series A
Preferred Stock could be converted. Any share of Series A Preferred Stock was,
at the option of the holder, to be converted at any time into 11.51 shares of
Common Stock, subject to certain adjustments to prevent dilution. As of June 27,
1997, the conversion rate increased to 17.50 shares of Common Stock since
certain performance thresholds were not met, as defined in the agreement.
In connection with the original issuance of the Series A Preferred Stock
and until the Company's first Qualified Public Offering, as defined, the Company
agreed with the preferred stockholders to comply with certain restrictive
covenants, including covenants concerning limitations on: investments,
distributions, dealings with affiliates, mergers, the issuance of options,
rights or warrants, indebtedness, compensation, and consulting agreements and
capital expenditures. As a condition precedent to the acquisition of Telephone
Warehouse, on June 27, 1997, the Company issued 2,137,850 shares of Common Stock
to HIG Fund V in exchange for the conversion of all the outstanding Series A
Preferred Stock. Of the 2,137,850 shares issued, 388,701 shares were issued in
addition to the original conversion feature of the Series A Preferred Stock in
F-17
<PAGE> 79
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
order to induce HIG Fund V to convert the Series A Preferred Stock and in
exchange for relief from the limitations placed on the Company by the HIG Fund
V. Management determined that the fair value of the 388,701 shares at the date
of issuance was approximately $320,000.
13. PREFERRED AND COMMON STOCK
On September 16, 1997, the Company amended and restated its Articles of
Incorporation such that the par value of the Common Stock was increased to $.01
per share and the number of shares of authorized capital stock was increased to
51,000,000 shares, consisting of 50,000,000 shares of common stock and 1,000,000
shares of preferred stock -- par value $.01 per share (preferred stock). The
1996 financial statements have been restated to reflect the change in par value.
During 1995 and 1996, the Company issued an aggregate of 64,135 shares of
the Company's Common Stock under a stock bonus agreement, as amended, and
recognized $0, $7,268, and $29,651 in compensation expense, in 1995, 1996, and
1997, respectively, associated with the vesting provisions of the agreement,
which provided for all of the shares to be fully vested as of June 27, 1997, due
to a change in control of the Company. Upon termination of the employee, the
Company may, at its option and in its sole discretion, redeem all or a portion
of these shares, at a price equal to the higher of a per share value based on
earnings or book value. This redemption provision expires upon a successful
initial public offering.
On June 27, 1997, the Company issued stock options to purchase 182,348
shares of Common Stock, with an exercise price of $20.04 per share, to two
officers of the Company. These options vested immediately.
As required by SFAS No. 123, pro forma information regarding net income and
earnings per share has been determined as if the Company had accounted for its
employee stock options under the fair value provision of that statement. The
fair value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted average assumptions for
1997: risk-free rate of 6.0%; no dividend yield; zero to minimal volatility
factors as the Company's stock does not have a market history; and a weighted
average expected life of the option of 5 years. The weighted average fair value
of the stock options for the year ended 1997 approximated the fair value of the
options at the date of grant, thus not requiring the recognition of compensation
expense under the fair value provisions of SFAS No. 123.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimates, the
existing models, in management's opinion, do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
In August 1997, the Company established the 1997 Executive Incentive
Compensation Plan (the Incentive Plan). Pursuant to the terms of the Incentive
Plan the Company may grant participants stock options, stock appreciation
rights, restricted stock, deferred stock, other stock-related awards and
performance or annual incentive awards that may be settled in cash, stock or
other property (collectively, the Awards). Under the Incentive Plan, the total
number of shares of Common Stock that may be subject to the granting of Awards
during the term of the Incentive Plan shall be equal to 310,000 shares, plus the
number of shares with respect to Awards previously granted under the Incentive
Plan that terminate without being exercised and the number of shares of Common
Stock that are surrendered in the payment of any Awards.
The Company intends to grant, in accordance with the provisions of the
Incentive Plan, stock options to purchase an aggregate of 265,258 shares of
Common Stock to certain key employees and directors of the Company immediately
prior to a successful initial public offering. Such stock options will have an
exercise price equal to the initial public offering price and will vest over a
three year period.
F-18
<PAGE> 80
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. ACQUISITION OF NORTHPOINT CELLULAR, INC.
On August 31, 1996, the Company entered into an asset purchase agreement
with a third party (Northpoint Cellular, Inc., a company also known as Peachtree
Mobility) to purchase the assets of five stores located in the Georgia area for
a total purchase price of $850,000. The assets purchased amounted to $250,000
and consisted mostly of leasehold improvements. In conjunction with the
purchase, Northpoint Cellular, Inc. entered into a noncompete arrangement for
aggregate consideration of $600,000 which was paid on August 31, 1996. The
noncompete arrangement expires August 31, 1999.
15. RELATED PARTY TRANSACTIONS
On June 27, 1997, the Company entered into a consulting agreement with HIG
Capital Management, Inc., an affiliate of the general partner of TCP, to provide
management, consulting and financial services. The agreement, as amended and
restated on October 8, 1997, requires that the Company pay $350,000 per year,
payable in monthly installments. This agreement will remain in effect until the
earlier to occur of (i) a liquidation, reorganization or public offering or (ii)
June 25, 2001. For the year ended July 31, 1997, the Company paid $29,167 under
this agreement.
This consulting agreement also provides for the Company to pay HIG Capital
Management, Inc. an investment banking fee of $840,000 upon the occurrence of a
successful initial public offering.
16. SIGNIFICANT CUSTOMERS
One customer accounted for 11%, 23% and 12%, of the Company's net revenues
for the years ended July 31, 1995, 1996 and 1997, respectively. Accounts
receivable from this customer accounted for 51% and 6% of the total net accounts
receivable at July 31, 1996 and 1997, respectively.
A second customer accounted for 12% of net revenues for the year ended July
31, 1997 and 7.5% of the net accounts receivable at July 31, 1997.
A third customer accounted for 11% and 7% of net revenues for the years
ended July 31, 1996 and 1997, respectively. This customer accounted for 25% and
3% of the net accounts receivable at July 31, 1996 and 1997, respectively.
17. EMPLOYEE BENEFIT PLAN
In August 1996, the Company adopted a defined contribution plan (401K Plan)
for all eligible employees based on years of service. The basis for determining
contributions is a percentage of the employees' compensation not to exceed 15%.
Contributions made by the Company are at the discretion of the Board of
Directors. The Company did not make any contributions during the year ended July
31, 1997.
18. STOCK SPLIT
On October , 1997, the Company's Board of Directors authorized a stock
split of 3.289 for 1. The financial statements have been restated to give
retroactive recognition to the stock split in the prior periods including all
references in the financial statements to number of shares and per share amounts
have been restated.
19. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF CERTIFIED PUBLIC
ACCOUNTANTS
On September 15, 1997, the Company executed a letter of intent for the
acquisition of all of the outstanding capital stock of Cellular USA, Inc. The
Company expects to close the acquisition concurrently with the consummation of
an anticipated initial public offering. The letter of intent provides for a cash
F-19
<PAGE> 81
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase price of $1,625,000 and certain contingent payments of up to an
aggregate of $175,000 in 1998 and 1999.
Additionally, on September 26, 1997, the Company executed a letter of
intent for the acquisition of substantially all of the assets of Cellular
Unlimited, Inc. The Company expects to close the acquisition concurrently with
the consummation of an anticipated initial public offering. The letter of intent
provides for a cash purchase price of $2,000,000 and up to $225,000 in certain
contingent payments in each of the six-month periods ending July 31, 1998,
January 31, 1999 and July 31, 1999.
F-20
<PAGE> 82
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholder
National Cellular, Inc.
Telephone Warehouse, Inc.
Telephone Warehouse -- San Antonio, Inc.
Telephone Warehouse -- KC, Inc.
We have audited the accompanying combined balance sheets of National
Cellular, Inc., Telephone Warehouse, Inc., Telephone Warehouse -- San Antonio,
Inc. and Telephone Warehouse -- KC, Inc. (collectively referred to as Telephone
Warehouse or Predecessor) as of December 31, 1995 and 1996, and the related
combined statements of operations, changes in shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of National
Cellular, Inc., Telephone Warehouse, Inc., Telephone Warehouse -- San Antonio,
Inc. and Telephone Warehouse -- KC, Inc. at December 31, 1995 and 1996, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
--------------------------------------
Dallas, Texas
July 25, 1997
F-21
<PAGE> 83
TELEPHONE WAREHOUSE
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ APRIL 30,
1995 1996 1997
----------- ---------- -----------
(PREDECESSOR) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,114,591 $1,265,919 $ 573,872
Accounts receivable, net.................................. 4,803,664 4,390,030 2,483,069
Inventory, net............................................ 2,070,164 3,267,965 3,201,119
Prepaid expenses.......................................... 110,395 90,834 287,702
Deferred tax asset (Note 9)............................... 118,318 119,479 353,176
----------- ---------- -----------
Total current assets............................... 9,217,132 9,134,227 6,898,938
Property and equipment, net (Note 3)........................ 877,843 757,184 694,015
Other assets, net........................................... 86,302 80,169 951,565
Intangible assets, net (Note 4)............................. -- -- 12,684,181
Total assets....................................... $10,181,277 $9,971,580 $21,228,699
=========== ========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Trade accounts payable.................................... $ 3,494,156 $4,658,232 $ 2,755,370
Accrued expenses.......................................... 1,125,892 834,376 1,304,836
Current portion of term note (Note 5)..................... -- -- 500,000
Income taxes payable...................................... 32,259 434,953 157,573
Deferred revenues......................................... 631,672 562,788 716,237
Customer deposits......................................... 100,849 96,679 89,039
----------- ---------- -----------
Total current liabilities.......................... 5,384,828 6,587,028 5,523,055
Deferred tax liability (Note 9)............................. 2,272 2,272 708,938
Loans from former shareholder (Note 5)...................... 1,065,000 1,065,000 --
Bank line of credit (Note 5)................................ -- -- 300,000
Note payable to former shareholder (Note 5)................. -- -- 2,000,000
Term note, less current portion (Note 5).................... -- -- 10,700,000
Commitments and contingencies (Note 7)
Shareholder's equity:
National Cellular, Inc.:
Common stock $1 par value, 10,000,000 shares authorized;
20,000 shares issued and outstanding at December 31,
1995 and 1996 and $0.01 par value, 3,000 shares
authorized; 1,000 shares issued and outstanding at
April 30, 1997........................................ 20,000 20,000 10
Additional paid in capital.............................. -- -- 999,990
Telephone Warehouse, Inc.:
Common stock no par value, 1,000,000 shares authorized;
2,000 shares issued and outstanding at December 31,
1995 and 1996 and $0.01 par value, 3,000 shares
authorized; 1,000 shares issued and outstanding at
April 30, 1997........................................ -- -- 10
Additional paid in capital.............................. 1,000 1,000 999,990
Telephone Warehouse -- San Antonio, Inc.:
Common stock no par value, 1,000,000 shares authorized;
1,000 shares issued and outstanding at December 31,
1995 and 1996......................................... -- -- --
Additional paid in capital.............................. 1,000 1,000 --
Telephone Warehouse -- KC, Inc.:
Common stock $1 par value, 1,000,000 shares authorized;
1,000 shares issued and outstanding at December 31,
1995 and 1996......................................... -- -- --
Additional paid in capital.............................. 1,000 1,000 --
Retained earnings (accumulated deficit)................... 3,706,177 2,294,280 (3,294)
----------- ---------- -----------
Total shareholder's equity......................... 3,729,177 2,317,280 1,996,706
----------- ---------- -----------
Total liabilities and shareholder's equity......... $10,181,277 $9,971,580 $21,228,699
=========== ========== ===========
</TABLE>
See accompanying notes.
F-22
<PAGE> 84
TELEPHONE WAREHOUSE
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOUR MONTHS ENDED APRIL 30,
--------------------------------------- ---------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ------------ ------------
(PREDECESSOR) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
Retail sales and activation
income..................... $18,103,704 $17,261,537 $14,023,500 $ 4,339,690 $ 4,153,753
Residual income............... 5,586,406 7,275,971 8,337,688 2,643,661 2,947,009
Wholesale sales............... 18,768,104 20,273,747 27,253,550 8,055,859 7,373,530
----------- ----------- ----------- ----------- -----------
Total net revenues.... 42,458,214 44,811,255 49,614,738 15,039,210 14,474,292
Cost of sales................... 30,321,312 30,360,447 33,368,653 9,868,826 9,587,580
----------- ----------- ----------- ----------- -----------
Gross profit.................... 12,136,902 14,450,808 16,246,085 5,170,384 4,886,712
Operating expenses:
Selling, general and
administrative............. 8,802,304 10,193,631 10,371,732 3,251,874 3,234,527
Former shareholder
compensation expense....... 3,256,000 2,169,000 1,640,000 553,075 320,000
Depreciation and
amortization............... 164,026 231,966 225,109 65,934 64,163
Amortization of intangible
assets..................... -- -- -- -- 773,356
----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 12,222,330 12,594,597 12,236,841 3,870,883 4,392,046
----------- ----------- ----------- ----------- -----------
Income (loss) from operations... (85,428) 1,856,211 4,009,244 1,299,501 494,666
Other income (expense):
Interest income (expense),
net........................ 19,651 10,754 29,542 26,004 (436,758)
Other......................... 12,928 12,203 2,639 55 --
----------- ----------- ----------- ----------- -----------
Total other income
(expense)........... 32,579 22,957 32,181 26,059 (436,758)
----------- ----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes.............. (52,849) 1,879,168 4,041,425 1,325,560 57,908
Provision for income taxes...... 33,042 174,702 678,322 223,370 61,202
----------- ----------- ----------- ----------- -----------
Net (loss) income............... $ (85,891) $ 1,704,466 $ 3,363,103 $ 1,102,190 $ (3,294)
=========== =========== =========== =========== ===========
Unaudited pro forma information
Historical (loss) income before
provision for income taxes.... $ (52,849) $ 1,879,168 $ 4,041,425 $ 1,325,560
Pro forma provision (benefit)
for income taxes.............. (7,368) 712,240 1,462,710 491,306
----------- ----------- ----------- -----------
Pro forma net (loss) income..... $ (45,481) $ 1,166,928 $ 2,578,715 $ 834,254
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-23
<PAGE> 85
TELEPHONE WAREHOUSE
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
NATIONAL CELLULAR INC. TELEPHONE WAREHOUSE, INC.
------------------------------- ----------------------------
ADDITIONAL ADDITIONAL
COMMON PAID-IN COMMON PAID-IN
SHARES STOCK CAPITAL SHARES STOCK CAPITAL
------- -------- ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
Balance at December 31, 1993................................ 20,000 $ 20,000 $ -- 2,000 $-- $ 1,000
Formation of Telephone Warehouse -- San Antonio, Inc. on
February 19, 1994......................................... -- -- -- -- -- --
Net income.......................................... -- -- -- -- -- --
------- -------- -------- ------ --- --------
Balance at December 31, 1994................................ 20,000 20,000 -- 2,000 -- 1,000
Formation of Telephone Warehouse -- KC, Inc. on January 19,
1995...................................................... -- -- -- -- -- --
Net income.......................................... -- -- -- -- -- --
Dividends........................................... -- -- -- -- -- --
------- -------- -------- ------ --- --------
Balance at December 31, 1995................................ 20,000 20,000 -- 2,000 -- 1,000
Net income.......................................... -- -- -- -- -- --
Dividends........................................... -- -- -- -- -- --
------- -------- -------- ------ --- --------
Balance at December 31, 1996................................ 20,000 20,000 -- 2,000 -- 1,000
SUCCESSOR:
Capital contribution by TCP................................. 1,000 10 999,990 1,000 10 999,990
Acquisition of National Cellular, Inc., Telephone Warehouse,
Inc., Telephone Warehouse -- KC, Inc., and Telephone
Warehouse -- San Antonio, Inc. by TCP and amendments to
par value, and the number of authorized, issued and
outstanding shares (Unaudited)............................ (20,000) (20,000) (2,000) -- (1,000)
Net loss (Unaudited)................................ -- -- -- -- -- --
------- -------- -------- ------ --- --------
Balance at April 30, 1997 (Unaudited)....................... 1,000 $ 10 $999,990 1,000 $10 $999,990
======= ======== ======== ====== === ========
</TABLE>
<TABLE>
<CAPTION>
TELEPHONE WAREHOUSE -- TELEPHONE WAREHOUSE --
SAN ANTONIO, INC. KC, INC.
----------------------------- ---------------------------- RETAINED
ADDITIONAL ADDITIONAL EARNINGS TOTAL
COMMON PAID-IN COMMON PAID-IN (ACCUMULATED SHAREHOLDER'S
SHARES STOCK CAPITAL SHARES STOCK CAPITAL DEFICIT) EQUITY
------ ------- ---------- ------ ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
Balance at December 31, 1993........ $ -- $ -- $ -- -- $ -- $ -- $ 3,987,602 $ 4,008,602
Formation of Telephone
Warehouse -- San Antonio, Inc. on
February 19, 1994................. 1,000 -- 1,000 -- -- -- -- 1,000
Net income.................. -- -- -- -- -- -- (85,891) (85,891)
------ ------- ------- ------ ------ ------- ----------- -----------
Balance at December 31, 1994........ 1,000 -- 1,000 -- -- -- 3,901,711 3,923,711
Formation of Telephone
Warehouse -- KC, Inc. on January
19, 1995.......................... -- -- -- 1,000 -- 1,000 -- 1,000
Net income.................. -- -- -- -- -- -- 1,704,466 1,704,466
Dividends................... -- -- -- -- -- -- (1,900,000) (1,900,000)
------ ------- ------- ------ ------ ------- ----------- -----------
Balance at December 31, 1995........ 1,000 -- 1,000 1,000 -- 1,000 3,706,177 3,729,177
Net income.................. -- -- -- -- -- -- 3,363,103 3,363,103
Dividends................... -- -- -- -- -- -- (4,775,000) (4,775,000)
------ ------- ------- ------ ------ ------- ----------- -----------
Balance at December 31, 1996........ 1,000 -- 1,000 1,000 -- 1,000 2,294,280 2,317,280
SUCCESSOR:
Capital contribution by TCP......... -- -- -- -- -- -- -- 2,000,000
Acquisition of National Cellular,
Inc., Telephone Warehouse, Inc.,
Telephone Warehouse -- KC, Inc.,
and Telephone Warehouse -- San
Antonio, Inc. by TCP and
amendments to par value, and the
number of authorized, issued and
outstanding shares (Unaudited).... (1,000) -- (1,000) (1,000) -- (1,000) (2,294,280) (2,317,280)
Net loss (Unaudited)........ -- -- -- -- (3,294) (3,294)
------ ------- ------- ------ ------ ------- ----------- -----------
Balance at April 30, 1997
(Unaudited)....................... -- $ -- $ -- -- $ -- $ -- $ (3,294) $ 1,996,706
====== ======= ======= ====== ====== ======= =========== ===========
</TABLE>
See accompanying notes.
F-24
<PAGE> 86
TELEPHONE WAREHOUSE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOUR MONTHS ENDED
YEAR ENDED DECEMBER 31, APRIL 30,
--------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ------------
(PREDECESSOR) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income...................... $ (85,891) $ 1,704,466 $ 3,363,103 $ 1,102,190 $ (3,294)
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
Depreciation and amortization........ 164,026 231,966 225,109 65,934 64,163
Amortization of intangibles.......... -- -- -- -- 773,356
Amortization of deferred financing
costs.............................. -- -- -- -- 51,539
Bad debt expense..................... 142,688 57,650 30,281 15,550 12,050
Deferred income taxes................ (22,892) 5,412 (1,161) (53,569) (208,925)
Changes in operating assets and
liabilities:
Accounts receivable................ (1,720,296) 427,238 383,353 1,663,804 1,894,911
Inventory.......................... (1,292,344) 376,685 (1,197,801) (187,907) 66,846
Prepaid expenses and other
assets........................... (54,849) (62,019) 25,694 (2,797) (193,060)
Trade accounts payable............. 1,451,571 429,303 1,164,076 (1,864,336) (1,902,862)
Accrued expenses and customer
deposits......................... 674,631 43,799 (295,686) (25,469) 462,820
Income taxes payable............... 37,130 (19,267) 402,694 150,589 (277,380)
Deferred revenues.................. 118,792 113,120 (68,884) 121,034 153,449
----------- ----------- ----------- ----------- ------------
Net cash (used in) provided by
operating activities................. (587,434) 3,308,353 4,030,778 985,023 893,613
INVESTING ACTIVITIES
Acquisition of business, net of cash
acquired............................. -- -- -- -- (11,827,004)
Proceeds from disposals of property and
equipment............................ 14,489 22,987 20,099 13,100 20,912
Purchases of property and equipment.... (265,496) (390,806) (124,549) (15,459) (21,906)
----------- ----------- ----------- ----------- ------------
Net cash used in investing
activities........................... (251,007) (367,819) (104,450) (2,359) (11,827,998)
FINANCING ACTIVITIES
Increase in loans from former
shareholder.......................... 275,000 790,000 -- -- --
Borrowings on bank term loan........... -- -- -- -- 11,200,000
Proceeds from bank line of credit...... -- -- -- -- 2,200,000
Payment on loans from former
shareholder.......................... -- -- -- -- (1,065,000)
Payment on bank line of credit......... -- -- -- -- (1,900,000)
Debt acquisition costs................. (926,743)
Capital contributions.................. 1,000 1,000 -- -- 2,000,000
Dividends.............................. -- (1,900,000) (4,775,000) (1,275,000) --
----------- ----------- ----------- ----------- ------------
Net cash provided by (used in)
financing activities................. 276,000 (1,109,000) (4,775,000) (1,275,000) 11,508,257
----------- ----------- ----------- ----------- ------------
Net (decrease) increase in cash and
cash equivalents..................... (562,441) 1,831,534 (848,672) (292,336) 573,872
Cash and cash equivalents at beginning
of period............................ 845,498 283,057 2,114,591 2,114,591 --
----------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end of
period............................... $ 283,057 $ 2,114,591 $ 1,265,919 $ 1,822,255 $ 573,872
=========== =========== =========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest................. $ -- $ 20,750 $ 68,300 $ 30,300 $ 340,330
=========== =========== =========== =========== ============
Cash paid for income taxes............. $ 31,627 $ 109,333 $ 460,127 $ 29,083 $ 435,000
=========== =========== =========== =========== ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITY
Issuance of note payable to Former
Shareholder.......................... $ -- $ -- $ -- $ -- $ 2,000,000
=========== =========== =========== =========== ============
</TABLE>
See accompanying notes.
F-25
<PAGE> 87
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS
BASIS OF PRESENTATION
The accompanying combined financial statements as of December 31, 1996 and
for each of the three years then ended are the combined financial statements of
Telephone Warehouse (or Predecessor) which was comprised of four entities:
National Cellular, Inc. (NCI), Telephone Warehouse, Inc., Telephone
Warehouse -- San Antonio, Inc. and Telephone Warehouse -- KC, Inc. Each such
entity was owned 100% by a sole shareholder (the Former Shareholder). All
transactions among the combined companies have been eliminated.
Effective January 1, 1997, Texas Cellular Partners, L.P. (TCP) acquired all
of the capital stock of Telephone Warehouse from the Former Shareholder for
approximately $12,896,000 of cash and a subordinated promissory note of
$2,000,000. At the time of such acquisition, Telephone Warehouse entered into a
two year employment agreement with the Former Shareholder that provided for
payment of up to $3,000,000 upon Telephone Warehouse reaching certain financial
performance levels in 1997 and 1998. TCP, in connection with the acquisition:
(i) merged Telephone Warehouse -- San Antonio, Inc. and Telephone Warehouse --
KC, Inc. with and into Telephone Warehouse, Inc. (ii) amended the par value, and
the number of authorized, issued and outstanding shares of NCI and Telephone
Warehouse, Inc., and (iii) contributed $1,000,000 to NCI. and $1,000,000 to
Telephone Warehouse, Inc.
The accompanying combined financial statements as of April 30,1997 and for
the four months then ended are the combined financial statements of Telephone
Warehouse (or Successor). In connection with the acquisition described above and
effective as of January 1, 1997, Telephone Warehouse is comprised of two
entities: NCI and Telephone Warehouse, Inc. All transactions between the
combined companies have been eliminated.
The purchase price exceeded the fair value of tangible net assets acquired
by approximately $13,458,000 of such amount $2,672,000 was allocated to the
estimated fair value of acquired residual income at December 31, 1996 and
$10,786,000 was allocated to the costs in excess of identifiable assets
(goodwill). A deferred tax liability of $989,000 was provided related to the
acquired residual income. The fair value of assets acquired, not including
intangibles, was approximately $10,278,000 (including $307,000 of deferred taxes
not recorded at Telephone Warehouse due to its Subchapter S status) and the fair
value of liabilities assumed, including the deferred tax liability of $989,000
described above, totaled approximately $8,643,000. The purchase price allocation
is based on preliminary data.
In accordance with pushdown basis of accounting in financial statements of
subsidiaries, this purchase transaction has been reflected in the combined
financial statements of the Company as of January 1, 1997.
In connection with the acquisition and the repayment of amounts due to the
former shareholder, the Company obtained $12.7 million and $2.0 million of bank
debt and seller financing, respectively (see Note 5). In connection with the
acquisition, the Company incurred $927,000 and $197,000 related to deferred
financing costs and acquisition costs, respectively.
NATURE OF OPERATIONS
Telephone Warehouse (the Company) is an independent specialty retailer and
wholesale distributor of cellular and wireless products and services. As of
December 31, 1995 and 1996 and April 30, 1997, the Company's retail business
operated 19, 20 and 18 stores, respectively, located in Dallas and San Antonio,
Texas and Kansas City, Kansas and Missouri. The Company's wholesale business
distributes wireless
F-26
<PAGE> 88
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
communications products to numerous retail and wholesale outlets throughout the
United States from its warehouse located in Arlington, Texas.
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 fourth quarter
during the holiday season. In addition, the Company's results during any fiscal
period 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE
The Company's retail accounts receivable are due primarily from carriers of
wireless communications services. Wholesale accounts receivable are primarily
due from distributors and small retailers. Credit is extended to wholesale
customers based on the evaluation of the customers financial condition.
Collateral is not required and terms are generally between 30 and 60 days.
Accounts receivable are net of allowances of approximately $625,000, $572,000
and $472,000 as of December 31, 1995, 1996 and April 30, 1997, of which
$139,000, $123,000 and $133,000 relates to the Company's wholesale operations,
respectively. The remaining balances are comprised primarily of reserves for
early cellular deactivations.
INVENTORIES
Inventories, consisting of cellular and wireless products and related
accessories, are valued at the lower of cost or market, cost being determined by
the average cost method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of their useful life or
the remainder of the noncancelable lease period (see Note 3).
OTHER ASSETS
At April 30, 1997, unamortized deferred financing costs totaling $875,000
are included in other assets and are being amortized on the interest method over
the terms of the related debt, which is seven years.
INTANGIBLE ASSETS
Intangible assets includes cost in excess of identifiable assets acquired
(goodwill) and cost allocable to the estimated fair value of acquired residual
income.
The Company reviews the carrying value of intangible assets on an ongoing
basis. When factors indicate that an intangible assets may be impaired, the
Company uses an estimate of the undiscounted future cash flows over the
remaining life of the asset in measuring whether the intangible asset is
recoverable. If such an analysis indicates that impairment has in fact occurred,
the book value of the intangible asset is written down to its estimated fair
value. Goodwill is being amortized over 30 years and acquired residual income is
being amortized on an accelerated basis based on the timing of acquired cash
flows through the year 2000.
F-27
<PAGE> 89
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS. SFAS No. 121 which requires impairment losses to be recorded on
long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The adoption of SFAS No. 121 had no effect on the Company's
combined financial statements.
REVENUE RECOGNITION
Product Sales
Revenue from retail product sales is recorded upon customer purchase.
Revenue from wholesale product sales is recognized upon shipment of goods.
Activation Income
The Company receives activation income from cellular service providers for
each new cellular phone subscription sold by the Company. Revenue from such
activations is recorded upon customer subscription. New subscription activation
commissions are fully refundable if the subscriber cancels service within a
certain minimum period of continuous active service (generally 180 days).
Customers generally sign a service agreement that requires a customer deposit
which is forfeited in case of early cancellation. The allowance for doubtful
accounts includes an amount for estimated cancellation losses, net of deposit
forfeitures.
Residual Income
The Company generally receives monthly residual income from the cellular
service providers based on a percentage of actual phone usage by subscribers.
Revenue from residual income is generally recorded as the cellular service is
provided. Revenue from prepaid pager service ($2,790,402, $3,924,746,
$4,859,113, $1,520,339, $1,841,281 for the years ended December 31, 1994, 1995,
1996 and the four months ended April 30, 1996 and 1997, respectively) is
deferred and recognized over the period service is provided, usually three to
twelve months. Revenue from monthly installment pager service contracts is
recorded as received.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expense
which is included in selling, general and administrative is recorded net of
cooperative advertising payments received. Net advertising expense amounted to
approximately $846,000, $977,000, $933,000, $162,000 and $209,000 for the years
ended December 31, 1994, 1995, 1996 and the four months ended April 30, 1996 and
1997, respectively. These amounts are net of approximately $1,874,000,
$1,842,000, $1,364,000, $346,000 and $311,000 of cooperative advertising
payments received for the years ended December 31, 1994, 1995, 1996 and the four
months ended April 30, 1996 and 1997, respectively.
INCOME TAXES
NCI, a C corporation for all periods presented, adopted the provisions of
Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES
(SFAS 109) in its separate financial statements. Under SFAS 109, deferred tax
assets and liabilities are recognized based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
F-28
<PAGE> 90
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Prior to January 1, 1997, the Former Shareholder elected S Corporation
treatment for Telephone Warehouse, Inc., Telephone Warehouse -- San Antonio,
Inc. and Telephone Warehouse -- KC, Inc. As a result, the net income for those
entities is reflected in the Former Shareholder's personal tax return.
Therefore, no provision or credit for federal income tax amounts for those
entities has been included in these combined financial statements for the three
year period ended December 31, 1996. Concurrent with the acquisition of the
Company by TCP on January 1, 1997, such three entities were merged into
Telephone Warehouse, Inc. which became a C Corporation. Subsequent to January 1,
1997, Telephone Warehouse, Inc. began accounting for income taxes under SFAS
109.
PRO FORMA STATEMENTS OF INCOME INFORMATION
Pro forma net income reflects adjustments for income taxes which would have
been recorded if Telephone Warehouse, Inc., Telephone Warehouse -- San Antonio,
Inc. and Telephone Warehouse -- KC, Inc. had been C-corporations for the three
years ended December 31, 1996.
INTERIM FINANCIAL DATA
In the opinion of the management of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of April 30, 1997, the results of operations and cash flows for the
four months ended April 30, 1996 and 1997 and the changes in shareholder's
equity for the four months ended April 30, 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES ----------------------- APRIL 30,
(YEARS) 1995 1996 1997
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Computer equipment..................... 5 $ 47,634 $ 78,600 $ 90,796
Furniture, vehicles and equipment...... 5 - 7 623,690 575,909 554,997
Office equipment....................... 7 18,535 18,535 18,535
Building............................... 30 324,000 324,000 324,000
Leasehold improvements................. 2 - 6 603,981 676,074 685,784
---------- ---------- ----------
1,617,840 1,673,118 1,674,112
Less accumulated depreciation and
amortization......................... (739,997) (915,934) (980,097)
========== ========== ==========
$ 877,843 $ 757,184 $ 694,015
========== ========== ==========
</TABLE>
F-29
<PAGE> 91
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. INTANGIBLE ASSETS
Intangible assets consist of the following at April 30, 1997:
<TABLE>
<S> <C>
Goodwill.................................................... $10,785,888
Acquired residual income.................................... 2,671,649
-----------
13,457,537
Accumulated amortization.................................... (773,356)
-----------
$12,684,181
===========
</TABLE>
5. REVOLVING LINE OF CREDIT, LOANS FROM FORMER SHAREHOLDER AND TERM NOTE
The Company had a $2 million revolving line of credit with a bank for which
the maximum borrowings were limited to the sum of (a) 80% of the outstanding
eligible accounts receivable and (b) the lesser of (i) 50% of the eligible
inventory (as defined in the loan agreement) or (ii) $750,000, less any amounts
advanced to the Company. Interest was due and payable quarterly based on the
bank's prime rate. The line was secured by accounts receivable, contract rights,
inventory and general intangibles of the Company. At December 31, 1995 and 1996,
no amounts were outstanding under the line. This revolving line of credit was
terminated on January 1, 1997.
Amounts due to the Former Shareholder at December 31, 1995 and 1996 totaled
$1,065,000. The interest rates on amounts due the Former Shareholder varied
between 7% and 9.5% with maturities between March 1999 and October 2000.
Interest was paid annually and the notes were unsecured. These loans and accrued
interest amounting to $1,103,577 were repaid on January 1, 1997 in connection
with the acquisition of the Company by TCP (see Note 11).
In connection with the January 1, 1997 acquisition, the Company entered
into a $11.2 million term note (Term Note) with NationsCredit Commercial
Corporation (NCCC), a limited partner of TCP. The Term Note requires quarterly
principal payments beginning in May 1997 and continuing through February 2004.
The Company may also be required to make additional incremental principal
payments beginning in January 1998 if the Company's cash flow exceeds certain
levels agreed to in the Term Note. Interest is payable monthly at the 30 day
commercial paper rate plus 4.5% (10.2% at April 30, 1997). The Term Note is
collateralized by substantially all of the assets of the Company.
Additionally, the Company entered into a $5 million credit facility (Line
of Credit) with NCCC. The Line of Credit requires monthly interest payments at
an interest rate based on the 30 day commercial paper rate plus 3.75% on all
outstanding amounts, and monthly commitment fees of 0.25% on any unused amounts.
The Line of Credit expires on January 1, 2004 with any borrowings outstanding
payable on that date. The Line of Credit is collateralized by substantially all
of the assets of the Company. The Company borrowed $1,500,000 in conjunction
with the January 1, 1997 acquisition of the Company by TCP. As of April 30,
1997, $300,000 is outstanding under the Line of Credit and based upon the
borrowing base, as defined, the available borrowings are $2,456,000.
The Term Note and Line of Credit agreement contain certain restrictive
covenants that, among other things, restrict the payment of dividends, restrict
additional indebtedness and obligations, limits capital expenditures, and
require maintenance of certain financial ratios.
The Company incurred deferred financing costs totaling approximately
$927,000 (see Note 6) in association with obtaining the Term Note and Line of
Credit.
A $2 million subordinated term note due to the Former Shareholder (Seller
Note) was issued to the Former Shareholder in connection with the January 1,
1997 acquisition of the Company by TCP. Interest is
F-30
<PAGE> 92
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
payable quarterly at an interest rate of 8%. The Seller Note is due on March 15,
2002. The Seller Note is subordinated to borrowings under the Term Note and the
Line of Credit (see Note 11).
Maturities of the outstanding borrowings at April 30, 1997, are as follows:
<TABLE>
<S> <C>
Twelve months ending April 30:
1998...................................................... $ 500,000
1999...................................................... 1,000,000
2000...................................................... 1,500,000
2001...................................................... 2,200,000
2002...................................................... 2,500,000
Thereafter................................................ 5,800,000
-----------
Total............................................. $13,500,000
===========
</TABLE>
6. RELATED PARTY TRANSACTIONS
The Former Shareholder (an officer of the Company) received compensation of
$3,256,000, $2,169,000, $1,640,000, and $553,000 for the years ended December
31, 1994, 1995, 1996 and the four months ended April 30, 1996, respectively.
Dividends paid to the Former Shareholder were $1,900,000, $4,775,000 and
$1,275,000 for the years ended December 31, 1995, 1996 and the four months ended
April 30, 1996, respectively. No compensation or dividends were paid to the
Former Shareholder during the four months ended April 30, 1997. Accrued expenses
at April 30, 1997 includes $320,000 related to estimated amounts due under the
employment agreement. No dividends were paid to the Former Shareholder for the
year ended December 31, 1994.
On January 1, 1997, the Company entered into a management agreement with
HIG Capital Management, Inc., an affiliate of the general partner of TCP,
requiring a $20,800 monthly payment in exchange for consulting services to be
rendered. Included in selling, general and administrative expenses is $83,200 in
fees paid in connection with this agreement for the period ended April 30, 1997.
HIG Capital Management Inc. was paid $500,000 for acquisition and financing
services rendered in connection with the acquisition of the Company by TCP and
the attainment of the Term Note and Line of Credit described in Note 5.
The Company has entered into various debt agreements with NCCC (see Note
5). Total debt outstanding at April 30, 1997 to NCCC was $11,500,000. Interest
payments to NCCC for the period ended April 30, 1997 amounted to approximately
$392,000 and $4,000 of unused line of credit fee. Deferred financing costs
include $243,000 paid to NCCC for services rendered in connection with the
attainment of the Term Note and Line of Credit described in Note 5.
The Company issued the Seller Note (see Note 5) to the Former Shareholder
(an officer of the Company). Interest payments for the period ended April 30,
1997 amounted to approximately $53,000 (see Note 11).
7. COMMITMENTS AND CONTINGENCIES
The Company leases retail, offices and warehouse space and certain
equipment under operating leases which expire at various dates through 2000 with
options to renew certain of such leases for additional periods. Certain of the
Company's leases include rent escalation provisions over the life of the lease.
F-31
<PAGE> 93
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum payments under operating leases at December 31, 1996 are
approximately as follows:
<TABLE>
<S> <C>
1997........................................................ $ 645,421
1998........................................................ 384,588
1999........................................................ 160,516
2000........................................................ 22,960
----------
Total............................................. $1,213,485
==========
</TABLE>
Total rent expense for the years ended December 31, 1994, 1995, 1996 and
the four months ended April 30, 1996 and 1997 was approximately $536,000,
$796,000, $964,000, $314,000 and $323,000, respectively.
The Company is the defendant in certain legal proceedings that have arisen
in the ordinary course of business. In the opinion of management, the ultimate
resolution of such pending legal proceedings will not have a material adverse
effect on the Company's results of operations or financial position.
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
trade accounts payable and accrued expenses approximate fair value because of
their short duration to maturity. The carrying amounts of the bank line of
credit and term note approximate fair value because the interest rate is tied to
a quoted variable index.
9. INCOME TAXES
HISTORICAL
The historical income tax information for the period prior to January 1,
1997 reflects disclosures for NCI only.
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
FOUR MONTHS ENDED
YEARS ENDED DECEMBER 31, APRIL 30,
-------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Current...................... $ 56,000 $170,000 $679,000 $277,000 $ 270,000
Deferred..................... (23,000) 5,000 (1,000) (54,000) (209,000)
-------- -------- -------- -------- ---------
Total.............. $ 33,000 $175,000 $678,000 $223,000 $ 61,000
======== ======== ======== ======== =========
</TABLE>
The difference between the federal statutory income tax rate and the
effective income tax rate are summarized below:
<TABLE>
<CAPTION>
FOUR MONTHS ENDED
YEARS ENDED DECEMBER 31, APRIL 30,
----------------------------------- --------------------
1994 1995 1996 1996 1997
-------- --------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Tax at federal statutory
rate...................... $(18,000) $ 639,000 $1,374,000 $ 451,000 $19,000
State income taxes, net of
federal benefit........... 11,000 73,000 89,000 40,000 1,000
Amortization of goodwill.... -- -- -- -- 41,000
Income earned in non-tax
paying entities........... 40,000 (537,000) (785,000) (268,000) --
-------- --------- ---------- --------- -------
Total............. $ 33,000 $ 175,000 $ 678,000 $ 223,000 $61,000
======== ========= ========== ========= =======
</TABLE>
F-32
<PAGE> 94
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's net deferred income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- APRIL 30,
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Depreciation...................................... $ -- $ -- $ 24,000
Allowance for doubtful accounts................... 49,000 53,000 161,000
Inventory......................................... 50,000 56,000 90,000
Deferred revenue.................................. -- -- 17,000
Deferred rent..................................... -- -- 12,000
Other............................................. 19,000 10,000 87,000
-------- -------- ---------
Total deferred tax asset.................. 118,000 119,000 391,000
Deferred tax liabilities:
Depreciation...................................... (2,000) (2,000) --
Amortization of residual income................... -- -- (747,000)
-------- -------- ---------
Total deferred tax liabilities............ (2,000) (2,000) (747,000)
-------- -------- ---------
Net deferred tax asset (liability).................. $116,000 $117,000 $(356,000)
======== ======== =========
</TABLE>
PRO FORMA
The pro forma provision for income taxes for the three years ended December
31, 1996 reflects income tax expense as if Telephone Warehouse, Inc., Telephone
Warehouse -- San Antonio, Inc. and Telephone Warehouse -- KC, Inc. had been
taxed as C corporations.
The components of the pro forma provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOUR MONTHS
---------------------------------- ENDED
1994 1995 1996 APRIL 30, 1996
--------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Current................................. $ 129,000 $ 816,000 $1,393,000 $526,000
Deferred................................ (136,000) (104,000) 70,000 (35,000)
--------- --------- ---------- --------
Total......................... $ (7,000) $ 712,000 $1,463,000 $491,000
========= ========= ========== ========
</TABLE>
The differences between the federal statutory income tax rate and the pro
forma effective income tax rate are summarized below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOUR MONTHS
---------------------------------- ENDED
1994 1995 1996 APRIL 30, 1996
--------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Tax at federal statutory rate........... $ (18,000) $ 639,000 $1,374,000 $451,000
State income taxes, net of federal
benefit............................... 11,000 73,000 89,000 40,000
--------- --------- ---------- --------
Total......................... $ (7,000) $ 712,000 $1,463,000 $491,000
========= ========= ========== ========
</TABLE>
10. SIGNIFICANT CUSTOMERS
During the year ended December 31, 1994, 1995, 1996 and the four months
ended April 30, 1996 and 1997, the Company recognized activation income and
residual income from two cellular service providers of approximately
$12,304,000, $12,574,000, $10,797,000, $3,056,000 and $2,996,000, respectively.
At December 31, 1995, 1996 and April 30, 1997, accounts receivable included
approximately $2,627,000, $1,627,000 and $838,000, respectively, due from these
two cellular service providers.
F-33
<PAGE> 95
TELEPHONE WAREHOUSE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
11. SUBSEQUENT EVENTS
On June 27, 1997 (effective June 30, 1997), TCP sold 100% of the
outstanding shares of NCI and Telephone Warehouse, Inc. to Let's Talk Cellular &
Wireless, Inc. (LTC), an entity partially owned by an affiliate of the general
partners of TCP.
On June 27, 1997, in connection with the sale of the Company, TCP and the
Former Shareholder negotiated certain amendments to the terms of the Seller Note
and the Former Shareholder's employment agreement to provide for the following:
(i) for the six month period beginning on July 1, 1997, a salary of $50,000,
(ii) for the 12 month period beginning on January 1, 1998, a salary of $100,000
and (iii) a bonus of $950,000 payable on or before December 31, 1997, provided
that certain financial performance levels are met for the twelve months ended
December 31, 1997. Accrued expenses at April 30, 1997 includes $320,000 related
to estimated amounts due under the employment agreement. The Seller Note of $2.0
million was renegotiated to provide for additional payments to be made in March
1999 for up to $1.585 million contingent upon the results of the Company for the
year ended December 31, 1998, whether or not the Former Shareholder remains
employed by the Company.
Based on the terms of the amended employment agreement and the $2 million
Seller Note, any bonus paid to the Former Shareholder during the year ended
December 31, 1997 will be treated as compensation, any amounts paid in 1998 (in
excess of the original $2 million Seller Note), will be accounted for as
additional purchase price related to the acquisition by TCP.
F-34
<PAGE> 96
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 10
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Unaudited Pro Forma Financial Data.... 18
Selected Consolidated Financial
Data................................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 33
Management............................ 45
Certain Transactions.................. 51
Principal and Selling Shareholders.... 53
Description of Capital Stock.......... 54
Shares Eligible for Future Sale....... 56
Underwriting.......................... 58
Legal Matters......................... 60
Experts............................... 60
Additional Information................ 60
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
3,000,000 SHARES
LET'S TALK CELLULAR [LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
, 1997
======================================================
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 16,728
NASD filing fee............................................. 6,020
Nasdaq National Market listing fee.......................... 38,000
Printing and engraving expenses............................. 153,000
Accounting fees and expenses................................ 600,000
Legal fees and expenses..................................... 325,000
Registrar and Transfer Agent's fees and expenses............ 10,000
Miscellaneous............................................... 51,252
----------
Total............................................. $1,200,000
==========
</TABLE>
- ---------------
* To be provided by amendment.
All amounts except the Securities and Exchange Commission registration fee,
the NASD filing fee and the Nasdaq listing fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the Florida Business Corporation Act to
indemnify its directors and officers to the extent provided in such statute. The
Registrant's Articles of Incorporation provide that the Registrant shall
indemnify its executive officers and directors to the fullest extent permitted
by law either now or hereafter. The Registrant is also entering into an
agreement with each of its directors and certain of its officers wherein it is
agreeing to indemnify each of them to the fullest extent permitted by law. In
general, Florida law permits a Florida corporation to indemnify its directors,
officers, employees and agents, and persons serving at the corporation's request
in such capacities for another enterprise against liabilities arising from
conduct that such persons reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of criminal
law, unless the director had reasonable cause to believe his conduct was lawful
or had no reasonable cause to believe his conduct was unlawful, (b) deriving an
improper personal benefit from a transaction, (c) voting for or assenting to an
unlawful distribution, and (d) willful misconduct or a conscious disregard for
the best interests of the Registrant in a proceeding by or in the right of the
Registrant to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the Federal securities laws or
state or Federal environmental laws.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought from the Registrant, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification from the Registrant by
any officer or director. Upon the closing of the offering the Registrant will
have directors and officers insurance in place, which will insure claims up to
$5 million per occurrence.
II-1
<PAGE> 98
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In October 1994, the Registrant issued to Allan Sorensen, an aggregate of
213,785 shares of Common Stock. The aggregate consideration paid for such
securities was $250,000. Such securities were issued pursuant to the exemption
set forth in Section 4(2) of the Securities Act.
In June 1996, the Registrant issued to its current shareholders for no
additional consideration 2,137,850 shares of Common Stock in connection with a
2137.85-for-one stock split. Such shares were issued pursuant to the exemption
set forth in Section 3(a)(9) of the Securities Act.
In June 1996, the Registrant issued to Fund V an aggregate of 100,000
shares of Series A Preferred Stock. The aggregate consideration paid for such
securities was $3.3 million. See "Certain Transactions -- Series A Preferred
Stock." Such securities were issued pursuant to the exemption set forth in
Section 4(2) of the Securities Act.
In June 1997, the Registrant issued to Fund V, the current holder of Series
A Preferred Stock, for no additional cash consideration, an aggregate of
2,137,850 shares of Common Stock in connection with the conversion of the Series
A Preferred Stock. See "Certain Transactions -- Series A Preferred Stock." Such
shares were issued pursuant to the exemption set forth in Section 3(a)(9) of the
Securities Act.
In June 1997, the Registrant issued to TCP an aggregate of 1,817,468 shares
of Common Stock in exchange for all of the outstanding capital stock of
Telephone Warehouse, Inc. and National Cellular, Incorporated and the assumption
of all of the indebtedness of TCP, in connection with the Telephone Warehouse
Acquisition. The Registrant valued Telephone Warehouse at $2.8 million at the
time of the acquisition. See "Certain Transactions -- Telephone Warehouse
Acquisition." Such shares were issued pursuant to the exemption set forth in
Section 4(2) of the Securities Act.
In June 1997, the Registrant issued to NationsCredit warrants to purchase
an aggregate of 106,596 shares of Common Stock in connection with the financing
of the Telephone Warehouse Acquisition. See "Certain Transactions -- Telephone
Warehouse Acquisition." Such warrants were issued in consideration for providing
the acquisition financing for the Telephone Warehouse Acquisition and were
pursuant to the exemption set forth in Section 4(2) of the Securities Act.
Immediately prior to this offering, the Company will issue to NationsCredit
an aggregate of 106,596 shares of Common Stock upon exercise of outstanding
warrants. See "Certain Transactions -- Telephone Warehouse Acquisition." Such
shares will be issued pursuant to the exemption set forth in Section 4(2) of the
Securities Act.
Immediately prior to this offering, the Registrant expects to issue to its
current shareholders for no additional consideration 6,199,762 shares of Common
Stock in connection with a 3.289-for-one stock split. Such shares will be issued
pursuant to the exemption set forth in Section 3(a)(9) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
1.1 -- Proposed form of Underwriting Agreement.**
3.1 -- Registrant's form of Amended and Restated Articles of
Incorporation.**
3.2 -- Registrant's form of Amended and Restated Bylaws.**
4.1 -- Registrant's form of Common Stock Certificate.***
5.1 -- Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P.A. as to the validity of the Common Stock being
registered.***
10.1 -- Registrant's 1997 Executive Incentive Compensation Plan.**
</TABLE>
II-2
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
10.2 -- Form of Indemnification Agreement between the Registrant and
each of its directors and certain executive officers.**
10.3 -- Shareholders Agreement, dated as of June 27, 1997, by and
among the Registrant, Nicolas Molina, Brett Beveridge, Allan
Sorensen, HIG Fund V, Inc. and Texas Cellular Partners,
L.P.**
10.4 -- Registration Rights Agreement, dated as of June 27, 1997, by
and among the Registrant, Nicolas Molina, Brett Beveridge
and Allan Sorensen.**
10.5 -- Amended and Restated Renewal Promissory Note of the
Registrant to Nicolas Molina in the principal amount of
$129,050, accruing interest at the rate of 8.0% per annum
and due and payable upon the consummation of this
offering.**
10.6 -- Amended and Restated Renewal Promissory Note of the
Registrant to Brett Beveridge in the principal amount of
$129,050, accruing interest at the rate of 8.0% per annum
and due and payable upon the consummation of this
offering.**
10.7 -- The Registrant's Stock Option Agreement for Nicolas Molina,
dated as of June 27, 1997, by and between the Registrant and
Nicolas Molina.**
10.8 -- The Registrant's Stock Option Agreement for Brett Beveridge,
dated as of June 27, 1997, by and between the Registrant and
Brett Beveridge.**
10.9 -- Amended and Restated Employment Agreement, dated as of June
27, 1997, by and between the Registrant and Nicolas
Molina.**
10.10 -- Amended and Restated Employment Agreement, dated as of June
27, 1997, by and between the Registrant and Brett
Beveridge.**
10.11 -- Employment Agreement, dated as of May 22, 1995, by and
between the Registrant and Anne Gozlan, as amended to
date.**
10.12 -- Amended and Restated Employment Agreement, dated as of June
27, 1997, by and between the Registrant and Ronald
Koonsman.**
10.13 -- Intercompany Note of the Registrant to Texas Cellular
Partners, L.P. in the principal amount of up to $3,585,000,
accruing interest at the rate of 8.0% per annum and maturing
on the second anniversary of this offering.**
10.14 -- Warrantholders Rights Agreement, dated as of June 27, 1997,
among the Registrant, HIG Fund V, Inc. and NationsCredit
Commercial Corporation and the related Warrant to purchase
32,410 shares of Common Stock of the Registrant.**
10.15 -- Credit Agreement, dated as of December 31, 1996 and amended
as of June 27, 1997, by and among the Registrant,
NationsCredit Commercial Corporation, the Lenders referred
to therein, Texas Cellular Partners, L.P., Telephone
Warehouse, Inc. and National Cellular, Incorporated.***
10.16 -- Amended and Restated Consulting Agreement, dated as of
October 8, 1997, among the Registrant, Telephone Warehouse,
Inc. and HIG Capital Management, Inc.***
10.17 -- Series A Preferred Stock Purchase Agreement, dated as of
July 25, 1996, by and among the Registrant, HIG Fund V,
Inc., Nicolas Molina and Brett Beveridge, as amended by (i)
that Conversion Agreement, dated as of June 27, 1997, by and
among the Registrant, HIG Fund V, Inc. and Texas Cellular
Partners, L.P. and (ii) that Side Letter, dated April 11,
1997, from HIG Capital Management, Inc. to Nicolas Molina
and Brett Beveridge relating to indebtedness and capital
expenditure limits.***
10.18 -- Stock Purchase Agreement, dated as of October 5, 1994, by
and between the Registrant and Allan Sorensen, as amended.**
10.19 -- Amended and Restated Agreement and Plan of Merger, dated as
of June 27, 1997, by and among the Registrant, Merger Sub 1,
Inc., Merger Sub 2, Inc., Telephone Warehouse, Inc.,
National Cellular, Incorporated and Texas Cellular Partners,
L.P.***
</TABLE>
II-3
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
10.20 -- Asset Purchase Agreement, dated as of August 31, 1996, by
and among the Registrant, North Point Cellular, Inc.,
Michael Weinstock and Marc Greene.***
10.21+ -- Dealer Agreement, dated December 20, 1996, by and between
Telephone Warehouse, Inc. and Metroplex Telephone Company
d/b/a AT&T Wireless Services.**
10.22+ -- Dealer Agreement, dated December 20, 1996, by and between
Telephone Warehouse -- San Antonio, Inc. and AT&T Wireless
Services of San Antonio, Inc. d/b/a AT&T Wireless
Services.**
11.1 -- Statement regarding computation of per share earnings.***
16.1 -- Deloitte & Touche LLP letter.**
21.1 -- Subsidiaries of the Registrant.**
23.1 -- Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P.A. (included in its opinion to be filed as Exhibit
5.1).***
23.2 -- Consent of Ernst & Young LLP.***
23.3 -- Consent of Ernst & Young LLP.***
23.4 -- Consent of Deloitte & Touche LLP.***
24.1 -- Reference is made to the signature pages of this
Registration Statement for the Power of Attorney contained
therein.
27.1 -- Financial Data Schedule (for SEC use only).***
</TABLE>
- ---------------
** Previously filed.
*** Filed herewith.
+ Certain provisions of this exhibit are subject to a request for confidential
treatment filed with the Securities and Exchange Commission.
(b) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts.............S-1
All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions or are not applicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registration of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 101
(c) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 102
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida,
on October 9, 1997.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ NICOLAS MOLINA
------------------------------------
Nicolas Molina,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ NICOLAS MOLINA Chief Executive Officer October 9, 1997
- ----------------------------------------------------- and Director (principal
Nicolas Molina executive officer)
ANNE GOZLAN* Chief Financial Officer October 9, 1997
- ----------------------------------------------------- (principal accounting
Anne Gozlan officer)
BRETT BEVERIDGE* President and Chairman of the October 9, 1997
- ----------------------------------------------------- Board
Brett Beveridge
ANTHONY TAMER* Director October 9, 1997
- -----------------------------------------------------
Anthony Tamer
DOUGLAS BERMAN* Director October 9, 1997
- -----------------------------------------------------
Douglas Berman
SAMI MNAYMNEH* Director October 9, 1997
- -----------------------------------------------------
Sami Mnaymneh
JOHN BOLDUC* Director October 9, 1997
- -----------------------------------------------------
John Bolduc
ALLAN SORENSEN* Director October 9, 1997
- -----------------------------------------------------
Allan Sorensen
*By: /s/ NICOLAS MOLINA
-----------------------------------------------
Nicolas Molina
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 103
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Let's Talk Cellular & Wireless, Inc.
We have audited the financial statements of Let's Talk Cellular & Wireless,
Inc. as of July 31, 1996 and 1997, and for the two years then ended, and have
issued our report thereon dated September 19, 1997, except for Note 18 as to
which the date is October , 1997 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed in
item 16(b) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audit.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Miami, Florida
September 19, 1997, except for Note 18,
as to which the date is October , 1997
The foregoing report is in the form that will be signed upon the completion
of the stock split described in Note 18 to the financial statements.
/s/ ERNST & YOUNG LLP
Miami, Florida
October 3, 1997
S-1
<PAGE> 104
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
LET'S TALK CELLULAR & WIRELESS, INC.
JULY 31, 1997
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS(1) DEDUCTIONS YEAR
- ----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1996
Deducted from asset accounts:
Allowances................................ $ -- $ 65,638 $ -- $65,638
======= ======== ======== ======= ========
YEAR ENDED JULY 31, 1997
Deducted from asset accounts:
Allowances................................ $65,638 $151,041 $525,125 $55,000 $686,804
Inventory................................. -- 20,000 188,594 -- 208,594
------- -------- -------- ------- --------
$65,638 $171,041 $713,719 $55,000 $895,398
======= ======== ======== ======= ========
</TABLE>
- ---------------
(1) Acquired in connection with the Telephone Warehouse acquisition.
Note: At July 31, 1995 and 1994 and for the years then ended, there were no
allowance deductions from asset accounts.
S-2
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Proposed form of Underwriting Agreement.**
3.1 -- Registrant's form of Amended and Restated Articles of
Incorporation.**
3.2 -- Registrant's form of Amended and Restated Bylaws.**
4.1 -- Registrant's form of Common Stock Certificate.***
5.1 -- Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P.A. as to the validity of the Common Stock being
registered.***
10.1 -- Registrant's 1997 Executive Incentive Compensation Plan.**
10.2 -- Form of Indemnification Agreement between the Registrant and
each of its directors and certain executive officers.**
10.3 -- Shareholders Agreement, dated as of June 27, 1997, by and
among the Registrant, Nicolas Molina, Brett Beveridge, Allan
Sorensen, HIG Fund V, Inc. and Texas Cellular Partners,
L.P.**
10.4 -- Registration Rights Agreement, dated as of June 27, 1997, by
and among the Registrant, Nicolas Molina, Brett Beveridge
and Allan Sorensen.**
10.5 -- Amended and Restated Renewal Promissory Note of the
Registrant to Nicolas Molina in the principal amount of
$129,050, accruing interest at the rate of 8.0% per annum
and due and payable upon the consummation of this
offering.**
10.6 -- Amended and Restated Renewal Promissory Note of the
Registrant to Brett Beveridge in the principal amount of
$129,050, accruing interest at the rate of 8.0% per annum
and due and payable upon the consummation of this
offering.**
10.7 -- The Registrant's Stock Option Agreement for Nicolas Molina,
dated as of June 27, 1997, by and between the Registrant and
Nicolas Molina.**
10.8 -- The Registrant's Stock Option Agreement for Brett Beveridge,
dated as of June 27, 1997, by and between the Registrant and
Brett Beveridge.**
10.9 -- Amended and Restated Employment Agreement, dated as of June
27, 1997, by and between the Registrant and Nicolas
Molina.**
10.10 -- Amended and Restated Employment Agreement, dated as of June
27, 1997, by and between the Registrant and Brett
Beveridge.**
10.11 -- Employment Agreement, dated as of May 22, 1995, by and
between the Registrant and Anne Gozlan, as amended to
date.**
10.12 -- Amended and Restated Employment Agreement, dated as of June
27, 1997, by and between the Registrant and Ronald
Koonsman.**
10.13 -- Intercompany Note of the Registrant to Texas Cellular
Partners, L.P. in the principal amount of up to $3,585,000,
accruing interest at the rate of 8.0% per annum and maturing
on the second anniversary of this offering.**
10.14 -- Warrantholders Rights Agreement, dated as of June 27, 1997,
among the Registrant, HIG Fund V, Inc. and NationsCredit
Commercial Corporation and the related Warrant to purchase
32,410 shares of Common Stock of the Registrant.**
10.15 -- Credit Agreement, dated as of December 31, 1996 and amended
as of June 27, 1997, by and among the Registrant,
NationsCredit Commercial Corporation, the Lenders referred
to therein, Texas Cellular Partners, L.P., Telephone
Warehouse, Inc. and National Cellular, Incorporated.***
10.16 -- Amended and Restated Consulting Agreement, dated as of
October 8, 1997, among the Registrant, Telephone Warehouse,
Inc. and HIG Capital Management, Inc.***
10.17 -- Series A Preferred Stock Purchase Agreement, dated as of
July 25, 1996, by and among the Registrant, HIG Fund V,
Inc., Nicolas Molina and Brett Beveridge, as amended by (i)
that Conversion Agreement, dated as of June 27, 1997, by and
among the Registrant, HIG Fund V, Inc. and Texas Cellular
Partners, L.P. and (ii) that Side Letter, dated April 11,
1997, from HIG Capital Management, Inc. to Nicolas Molina
and Brett Beveridge relating to indebtedness and capital
expenditure limits.***
10.18 -- Stock Purchase Agreement, dated as of October 5, 1994, by
and between the Registrant and Allan Sorensen, as amended.**
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <C> <S>
10.19 -- Amended and Restated Agreement and Plan of Merger, dated as
of June 27, 1997, by and among the Registrant, Merger Sub 1,
Inc., Merger Sub 2, Inc., Telephone Warehouse, Inc.,
National Cellular, Incorporated and Texas Cellular Partners,
L.P.***
10.20 -- Asset Purchase Agreement, dated as of August 31, 1996, by
and among the Registrant, North Point Cellular, Inc.,
Michael Weinstock and Marc Greene.***
10.21+ -- Dealer Agreement, dated December 20, 1996, by and between
Telephone Warehouse, Inc. and Metroplex Telephone Company
d/b/a AT&T Wireless Services.**
10.22+ -- Dealer Agreement, dated December 20, 1996, by and between
Telephone Warehouse -- San Antonio, Inc. and AT&T Wireless
Services of San Antonio, Inc. d/b/a AT&T Wireless
Services.**
11.1 -- Statement regarding computation of per share earnings.***
16.1 -- Deloitte & Touche LLP letter.**
21.1 -- Subsidiaries of the Registrant.**
23.1 -- Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P.A. (included in its opinion to be filed as Exhibit
5.1).***
23.2 -- Consent of Ernst & Young LLP.***
23.3 -- Consent of Ernst & Young LLP.***
23.4 -- Consent of Deloitte & Touche LLP.***
24.1 -- Reference is made to the signature pages of this
Registration Statement for the Power of Attorney contained
therein.
27.1 -- Financial Data Schedule (for SEC use only).***
</TABLE>
- ---------------
** Previously filed.
*** Filed herewith.
+ Certain provisions of this exhibit are subject to a request for confidential
treatment filed with the Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 4.1
[LOGO]
NUMBER SHARES
ES
COMMON STOCK SEE REVERSE FOR
INCORPORATED UNDER THE LAWS CERTAIN DEFINITIONS
OF THE STATE OF FLORIDA
LET'S TALK CELLULAR & WIRELESS, INC.
CUSIP 527260 10 3
This Certifies that
Is the registered holder of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE OF
50.01 PER SHARE, OF
- -------------------- ----------------------
- -------------------- LET'S TALK CELLULAR & WIRELESS, INC. ----------------------
- -------------------- ----------------------
Transferable upon the books of Corporation by the holder hereof in person or by
a duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Articles of Incorporation
and By-laws of the Corporation, each as from time to time amended, copies of
which are on file with the Transfer Agent, to all of which the holder by
acceptance hereof assents. This certificate is not valid until countersigned
and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of the duly authorized officers.
Dated:
[SEAL]
/s/ /s/
--------------------- -------------------------------------
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
Cosignor and Registrar
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, New York) Transfer Agent
and Registrar
Registered Signature
<PAGE> 2
<TABLE>
<S> <C> <C>
LET'S TALK CELLULAR & WIRELESS, INC.
The Corporation will furnish without charge to each shareholder who so requests the designations, relative rights,
preferences and limitations applicable to each class of shares and the variations in rights, preferences and limitations determined
for each series within a class (and the authority of the Board of Directors to determine variations for future series).
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations;
TEN COM -- as tenants in common UNIF GIFT MIN ACT Custodian
------ -----------
TEN ENT -- as tenants by the entireties (Cust) (Minor)
under Uniform Gifts to Minors
JT TEN -- as joint tenants with right of Act
survivorship and not as tenants -------------------------------
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, ____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
/ /
_________________________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
____________________________________________ Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated ___________________
________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
________________________________________________________________
SIGNATURE(S) GUARANTEED: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS, AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE
17AD-15.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
October 9, 1997
Let's Talk Cellular & Wireless, Inc.
800 Brickell Avenue, Suite 400
Miami, Florida 33131
RE: INITIAL PUBLIC OFFERING OF COMMON STOCK
---------------------------------------
Ladies and Gentlemen:
On August 29, 1997, Let's Talk Cellular & Wireless, Inc., a Florida
corporation (the "Company"), filed with the Securities and Exchange Commission a
Registration Statement on Form S-1, Registration No. 333-34595 (the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Act"). The Registration Statement relates to the sale by the Company and
certain selling shareholders (the "Selling Shareholders") of up to 2,000,000,
and 1,000,000 shares, respectively, of the Company's Common Stock, par value
$.01 per share (the "Shares"). We have acted as special counsel to the Company
in connection with the preparation and filing of the Registration Statement.
Defined terms used herein shall have the meanings attributed thereto in the
<PAGE> 2
Let's Talk Cellular Wireless, Inc.
October 9, 1997
Page 2
- ----------
Registration Statement.
In connection therewith, we have examined and relied upon the original
or a copy, certified to our satisfaction, of (i) the Amended and Restated
Articles of Incorporation and the Bylaws of the Company; (ii) actions of the
Board of Directors of the Company authorizing the offering and the issuance of
the Shares and related matters; (iii) the Registration Statement and exhibits
thereto; and (iv) such other documents and instruments as we have deemed
necessary for the expression of opinions herein contained. In making the
foregoing examinations, we have assumed the genuineness of all signatures and
the authenticity of all documents submitted to us as originals, and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies. As to various questions of fact material to this opinion,
we have relied, to the extent we deem reasonably appropriate, upon
representations or certificates of officers or directors of the Company and upon
documents, records and instruments furnished to us by the Company, without
independently checking or verifying the accuracy of such documents, records and
instruments.
Based upon the foregoing examination, we are of the opinion that (i)
the Shares to be sold by the Company pursuant to the Registration Statement have
been duly and validly authorized and, when issued and delivered in accordance
with the Purchase Agreement filed as Exhibit 1.1 to the Registration Statement
will be validly issued, fully paid and nonassessable, and (ii) the Shares to be
sold by the Selling Shareholders pursuant to the Registration Statement have
been duly and validly authorized and issued and are fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
of the Commission thereunder.
Sincerely,
/s/ GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL, P.A.
--------------------------------
GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL, P.A.
<PAGE> 1
EXHIBIT 10.15
CREDIT AGREEMENT
dated as of December 31, 1996
and
amended and restated as of June 27, 1997
among
TELEPHONE WAREHOUSE, INC.,
NATIONAL CELLULAR, INCORPORATED,
LET'S TALK CELLULAR & WIRELESS, INC.,
TEXAS CELLULAR PARTNERS, L.P.,
The LENDERS referred to herein
and
NATIONSCREDIT COMMERCIAL CORPORATION,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
- ---------
DEFINITIONS
-----------
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 1.03. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 2
- ---------
TERM LOANS
----------
SECTION 2.01. Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.02. Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.03. Interest on the Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.04. Repayments and Prepayments of Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 3
- ---------
WORKING CAPITAL LOANS
---------------------
SECTION 3.01. Working Capital Loans and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.02. Working Capital Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.03. Interest on Working Capital Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.04. Advancing Working Capital Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.05. Mandatory Repayments and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.06. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.07. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.08. Obligation to Make Working Capital Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.09. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 4
- ---------
GUARANTY
--------
SECTION 4.01. The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.02. Guaranty Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.03. Discharge Only upon Payment in Full; Reinstatement
In Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.04. Waiver by the Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.05. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.06. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 5
- ---------
CONDITIONS
----------
SECTION 5.01. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.02. Conditions to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 6
- ---------
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 6.01. Legal Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.02. Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.03. Binding Effect; Liens of Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.06. Ownership of Property, Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.07. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.08. No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.09. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.10. Subsidiaries; Other Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.11. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.12. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.14. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.15. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.16. Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.17. Employment, Shareholders and Subscription Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.18. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.19. Representations and Warranties from Other
Operative Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.20. Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.21. Compliance with Environmental Requirements; No
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.22. Initial Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 7
- ---------
AFFIRMATIVE COVENANTS
---------------------
SECTION 7.01. Financial Statements and Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.03. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.04. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.05. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.06. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.07. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.08. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.09. Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.10. Lenders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.11. Consummation of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 7.12. Hazardous Materials; Remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.13. Collateral Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.14. Collections; Right to Notify Account Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.15. Enforcement of Covenants Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.16. Landlord and Warehouseman Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8
- ---------
NEGATIVE COVENANTS
------------------
SECTION 8.01. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.02. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.03. Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.04. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.05. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.06. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.07. Purchase of Assets, Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.08. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.09. Amendments or Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.10. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.11. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.12. Total Debt Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.13. Lease Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.14. Minimum EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.15. Limitations on Activities by Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.16. Investor Affiliate Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.17. Subordinated Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 9
- ---------
EVENTS OF DEFAULT
-----------------
SECTION 9.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.02. Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 10
- ----------
FEES, EXPENSES AND INDEMNITIES; GENERAL PROVISIONS RELATING TO
--------------------------------------------------------------
PAYMENTS
--------
SECTION 10.01. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.02. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.03. General Provisions Regarding Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.04. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.05. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.06. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.07. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 10.08. Maximum Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 11
- ----------
THE AGENT
---------
SECTION 11.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE 12
- ----------
MISCELLANEOUS
-------------
SECTION 12.01. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.02. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.04. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.06. Successors and Assigns; Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 12.08. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 12.09. GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 12.10. Notice of Breach by Agent or Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 12.11. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 12.12. Counterparts; Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
EXHIBIT A-1 - National Cellular Term Note
EXHIBIT A-2 - TWI Term Note
EXHIBIT A-3 - LTC Term Note
EXHIBIT B - Working Capital Note
EXHIBIT C - Company Security Agreement
EXHIBIT D - Holdings Pledge Agreement
EXHIBIT E - HIG Pledge Agreement
EXHIBIT F - LTC Pledge Agreement
EXHIBIT G - Borrowing Base Certificate
EXHIBIT H - Opinion of Greenberg Traurig, Counsel for
the Companies
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT I - Opinion of Davis Polk & Wardwell, Special Counsel for the Agent
EXHIBIT J - Lender Interest Warrants
EXHIBIT K - Warrantholders Rights Agreement
SCHEDULE 1.01 - Existing LTC Loan Agreements
SCHEDULE 6.17 - Employment, Shareholders' and Subscription Agreements
SCHEDULE 6.21 - Environmental Matters
SCHEDULE 6.22 - Initial Capitalization
SCHEDULE 6.23 - Real Property Leases
SCHEDULE 7.04 - Required Insurance
SCHEDULE 8.01 - Outstanding Debt
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of December 31, 1996, as amended and restated as
of June 27, 1997, among TELEPHONE WAREHOUSE, INC., NATIONAL CELLULAR,
INCORPORATED, LET'S TALK CELLULAR & WIRELESS, INC., TEXAS CELLULAR PARTNERS,
L.P., the LENDERS listed on the signature pages hereof and NATIONSCREDIT
COMMERCIAL CORPORATION, as Agent.
W I T N E S S E T H:
WHEREAS, Telephone Warehouse, Inc. (f/k/a HIG Cellular Acquisition
Corporation) , National Cellular, Incorporated (f/k/a HIG Cellular Acquisition
Corporation II), Texas Cellular Partners, L.P. and NationsCredit Commercial
Corporation, as Lender and Agent, are parties to a Credit Agreement dated as of
December 31, 1996 (the "Original Credit Agreement");
WHEREAS, in connection with (i) the proposed merger of Merger Sub 1,
Inc., a wholly-owned subsidiary of Let's Talk Cellular & Wireless, Inc., with
and into Telephone Warehouse, Inc. and (ii) the proposed merger of Merger Sub
2, Inc., a wholly-owned subsidiary of Let's Talk Cellular & Wireless, Inc.,
with and into National Cellular, Incorporated, the parties hereto desire to
amend the Original Credit Agreement to increase the commitments of
NationsCredit Commercial Corporation as Lender, to add Let's Talk Cellular &
Wireless, Inc. as a borrower thereunder, to modify certain financial covenants
and to make numerous other changes thereto, all as hereinafter set forth; and
WHEREAS, in order to set forth in one document, for the convenience
of the parties, the text of the Original Credit Agreement as amended by the
amendments to be made upon the effectiveness hereof, the Original Credit
Agreement will, upon satisfaction of the conditions set forth in Section 5.01
hereof, be amended and restated to read in full as set forth herein;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Certain Defined Terms. The following terms have the
following meanings:
<PAGE> 8
"Affiliate" means, with respect to any Person (the "Subject
Company") (i) any other Person that directly, or indirectly through one or more
intermediaries, controls the Subject Company (a "Controlling Person") or (ii)
any Person (other than the Subject Company or any of its Subsidiaries) which is
controlled by or is under common control with a Controlling Person. As used
herein, the term "control" of a Person means the possession, directly or
indirectly, of the power to vote 10% or more of any class of voting securities
of such Person or to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agent" means NationsCredit in its capacity as agent for the Lenders
hereunder, and its successors in such capacity.
"Applicable Premium Percentage" has the meaning set forth in Section
2.04(c).
"Asset Sale" means any sale, lease or other disposition (including
any such transaction effected by way of merger or consolidation) by Holdings,
any Company or any of their respective Subsidiaries of any asset, but excluding
(i) dispositions of inventory in the ordinary course of business, (ii)
dispositions of Temporary Cash Investments and cash payments otherwise
permitted under this Agreement and (iii) dispositions of equipment no longer
used or useful in the business of any Company to the extent the Net Cash
Proceeds from any such disposition are used to replace such equipment with the
same or similar equipment; provided that a disposition of assets not excluded
by clauses (i), (ii) or (iii) above during any Fiscal Year shall not constitute
an Asset Sale unless and until (and only to the extent that) the aggregate Net
Cash Proceeds from such disposition, when combined with all other such
dispositions previously made during such Fiscal Year, exceeds $100,000.
"Assumption Agreement" means the Assumption Agreement dated December
31, 1996 signed by National Cellular, Incorporated.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrowing Base" means, on any date, a dollar amount equal to the
sum of 85% of Eligible Receivables determined as of such date and 60% of
Eligible Inventory determined as of the last day of the month most recently
ended prior to the tenth day prior to such date.
2
<PAGE> 9
"Borrowing Base Certificate" means a certificate, duly executed by
the chief executive officer, chief financial officer, president, or treasurer
of LTC, appropriately completed and substantially in the form of Exhibit G.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in Chicago or New York City are authorized by law to
close.
"Capital Lease" of any Person means any lease of any property
(whether real, personal or mixed) by such Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of such Person.
"Casualty Insurance Policy" means any insurance policy maintained by
Holdings or any of its Subsidiaries covering losses with respect to tangible
real or personal property or improvements or losses from business interruption.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as
amended from time to time, and regulations promulgated thereunder.
"Class" refers, with respect to Loans, to whether such Loans are
Term Loans or Working Capital Loans and, with respect to Commitments, to
whether such Commitments are Term Commitments or Working Capital Commitments.
"Closing Date" means December 31, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" means all property mortgaged, pledged or otherwise
purported to be subjected to a Lien pursuant to the Security Documents.
"Commitment" means the Term Commitment or a Working Capital
Commitment, or any combination of the foregoing, as the context may require.
"Company" means National Cellular, TWI or LTC, as the context may
require, and "Companies" means National Cellular, TWI and LTC.
"Company Account" means, with respect to each Company, the account
specified on the signature page hereof into which all Loans to such Company
shall be made available, or such other account as such Company shall from time
to time specify by notice to the Lenders.
3
<PAGE> 10
"Company Security Agreement" means the Security Agreement dated as
of December 31, 1996, as amended and restated as of June 27, 1997, between the
Companies and the Agent, substantially in the form of Exhibit C.
"Consolidated Capital Expenditures" with respect to any Company
means, for any period, the aggregate amount of expenditures by such Company and
its Consolidated Subsidiaries for plant, property and equipment during such
period (including any such expenditure by way of acquisition of a Person or by
way of assumption of indebtedness or other obligations of a Person, to the
extent reflected as plant, property and equipment), but excluding any such
expenditures made for the replacement or restoration of assets to the extent
financed by condemnation awards or proceeds of insurance received with respect
to the loss or taking of or damage to the asset or assets being replaced or
restored.
"Consolidated Current Assets" means, at any date, the consolidated
current assets (excluding cash and cash equivalents) of LTC and its
Consolidated Subsidiaries determined as of such date.
"Consolidated Current Liabilities" means, at any date, (i) the
consolidated current liabilities (excluding Debt) of LTC and its Consolidated
Subsidiaries plus (ii) the current liabilities of any Person (other than LTC or
any of its Consolidated Subsidiaries) which are Guaranteed by LTC or any of its
Consolidated Subsidiaries, all determined as of such date.
"Consolidated Free Cash Flow" with respect to any Company means, for
any period, EBITDA of such Company for such period minus (a) all cash payments
of income taxes by such Company and its Consolidated Subsidiaries during such
period; (b) Consolidated Capital Expenditures of such Company for such period,
to the extent that such Consolidated Capital Expenditures are permitted by
Section 8.11 and are not financed during such period (and will not be financed
in any future period) with the proceeds of Debt of any Company permitted by
Section 8.01(c); and (c) any net gain by such Company or any of its
Consolidated Subsidiaries in respect of Asset Sales during such period; plus
(d) any expenditures made by such Company or any of its Consolidated
Subsidiaries during such period for the replacement or restoration of assets to
the extent financed by condemnation awards or proceeds of insurance received
with respect to the loss or taking of or damage to the asset or assets being
replaced or restored.
"Consolidated Subsidiary" means, with respect to any Person at any
date, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date.
4
<PAGE> 11
"Consulting Agreement" means the Amended and Restated Consulting
Agreement dated as of June 27, 1997 by and between LTC, TWI and H.I.G. Capital
Management, Inc.
"Debt" of a Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all Capital Leases of such Person, (v) all obligations
of such Person to purchase securities (or other property) which arise out of or
in connection with the sale of the same or substantially similar securities (or
property), (vi) all non-contingent obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (vii) all equity securities of such Person subject to
repurchase or redemption otherwise than at the sole option of such Person
(other than the Lender Interest), (viii) all Debt secured by a Lien on any
asset of such Person, whether or not such Debt is otherwise an obligation of
such Person, and (ix) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"EBITDA" with respect to any Company means, for any period, the
consolidated net income of such Company and its Consolidated Subsidiaries for
such period plus depreciation, interest, amortization and income and franchise
taxes, determined in accordance with GAAP eliminating (i) all intercompany
items, (ii) all earnings (or losses) attributable to equity interests in
Persons that are not Subsidiaries of such Company unless, in the case of
earnings, actually received by such Company or any of its Consolidated
Subsidiaries, (iii) all income (or loss) arising from the forgiveness,
adjustment, or negotiated settlement of any indebtedness, (iv) any
extraordinary items of income or expense, and (v) any increase or decrease in
income arising from any change in such Company's method of accounting, subject
to Section 1.02(a).
"Eligible Inventories" means, at any date of determination thereof,
the aggregate value (determined at the lower of cost or market on a basis
consistent with that used in the preparation of the financial statements
referred to in Section 6.04(a)) at such date of all Inventories owned by any
Company and located in any jurisdiction in the United States of America as to
which appropriate UCC financing statements have been filed naming such Company
as "debtor" and the Agent as "secured party", all net of any amounts payable by
such Company in respect of
5
<PAGE> 12
commissions, processing fees or other charges, excluding, however, without
duplication (i) any such Inventory which has been shipped to a customer, even
if on a consignment or "sale or return" basis and whether or not such Inventory
has been subsequently returned by such customer; (ii) any Inventory subject to
a Lien, including a landlord's or warehouseman's Lien (other than Liens created
pursuant to the Company Security Agreement), other than (x) Inventory subject
to a Lien in favor of any vendor to such Company but only to the extent that
the aggregate value of such Inventory (determined as set forth above) exceeds
110% of the aggregate amount of all obligations owed by such Company to such
vendor and (y) in the case of LTC, Inventory subject to a landlord's lien in
favor of any landlord of LTC; (iii) any item of Inventory against which such
Company has taken a reserve or that is aged more than 365 days; (iv) any
Inventory not subject to a valid and perfected first-priority Lien in favor of
the Agent under the Company Security Agreement subject to no prior or equal
Lien; (v) any Inventory not produced in compliance with the applicable
requirements of the Fair Labor Standards Act; and (vi) any supply, scrap or
obsolete Inventory (other than scrap metal or supplies that are used in the
manufacturing process that are readily marketable) and any Inventory that is
not reasonably marketable.
"Eligible Receivables" means, at any date of determination thereof,
the aggregate amount of all Receivables at such date due to any Company other
than the following (determined without duplication):
(a) (i) any Receivable due from a Foreign Account Debtor to the
extent that all Receivables due from Foreign Account Debtors exceed $100,000 at
any time, other than any Receivable that is backed by a letter of credit issued
by a bank organized under the laws of the United States of America or a State
thereof having combined capital and surplus in excess of $250,000,000 and
having outstanding senior unsecured long-term debt securities rated A or higher
by Standard & Poor's Corporation or A2 or higher by Moody's Investor Service,
Inc. (so long as such letter of credit has been delivered to the Agent as
additional collateral under the Security Documents), and (ii) any Receivable
that is not denominated and payable in U.S. dollars;
(b) any Receivable that does not comply with all applicable legal
requirements, including, without limitation, all laws, rules, regulations and
orders of any governmental or judicial authority;
(c) any Receivable in respect of which there is any unresolved
dispute with the account debtor, but only to the extent of such dispute;
(d) any Receivable payable by its terms more than 30 days, in the
case of any Receivable owing by any paging or other retail customer, and 60
days, in the
6
<PAGE> 13
case of any other Receivable, after the date of the issuance of the original
invoice therefor;
(e) any Receivable that remains unpaid for more than 45 days, in
the case of any Receivable owing by any paging or other retail customer, and 60
days, in the case of any other Receivable, from the original due date specified
at the time of the original issuance of the invoice therefor;
(f) any unbilled Receivable and any Receivable in respect of
goods not yet shipped;
(g) any Receivable arising outside the ordinary course of
business of such Company.
(h) any Receivable in respect of which there has been established
a contra account, or which is due from an account debtor to whom such Company,
as the case may be, owes a trade payable, but only to the extent of such
account or trade payable;
(i) any Receivable that is not subject to a first priority
perfected Lien under the Company Security Agreement and any Receivable
evidenced by an "instrument" (as defined in the UCC) not in the possession of
the Agent;
(j) any Receivable due from an account debtor (I) as to which on
such date Receivables representing more than 30% of the aggregate amount of all
Receivables of such account debtor have remained unpaid for more than 90 days
from the original due date specified at the time of the original issuance of
the invoice therefor, (II) in respect of which a credit loss has been
recognized or reserved by such Company, (III) in respect of which the Agent
shall have notified such Company that such account debtor does not have a
satisfactory credit standing as determined in good faith by the Agent, (IV)
that is a Subsidiary or Affiliate of such Company, (V) that is the United
States of America or any department, agency or instrumentality thereof, unless
such Company has complied in all respects with the Federal Assignment of Claims
Act of 1940, or (VI) that is the subject of a case or proceeding of the type
described in clauses (g) and (h) of Section 9.01;
(k) any Receivable due from an account debtor that such Company
has not instructed such account debtor in the invoice therefor to make payments
in respect of such Receivable to the applicable Lockbox Account (as defined in
the Company Security Agreement) or from any account debtor that makes payments
in a form that cannot be accepted in the applicable Lockbox Account; and
7
<PAGE> 14
(l) any Receivables due from an account debtor (other than Bell
South Mobility, Bell Atlantic/Nynex, L.A. Cellular, CellularOne, Airtouch
Cellular and AT&T Wireless Services) at any time, to the extent that the
aggregate outstanding amount of Receivables due from such account debtor and
its affiliates at such time exceeds 30% of the aggregate amount of all
Receivables due to such Company at such time, but only to the extent of such
excess.
"Employment Contracts" means the Employment Contract dated as of
December 31, 1996 between TWI and Ron Koonsman, amended and restated as of June
27, 1997, and the employment agreements delivered by Holdings to NationsCredit
on the LTC Closing Date pursuant to Section 5.01(o).
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Materials or wastes into the environment, including ambient air, surface water,
ground water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Materials or wastes or the clean-up or
other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any successor statute.
"ERISA Group" means Holdings, any Company, any Subsidiary of any
Company and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together
with Holdings, any Company or any Subsidiary of any Company are treated as a
single employer under Section 414 of the Code.
"Equity Agreement" means the Equity Agreement dated as of December
31, 1996 among Holdings, the Partners listed on the signature pages thereof and
NationsCredit.
"Event of Default" has the meaning set forth in Section 9.01.
"Excess Cash Flow" means, for any period, an amount equal to (i)
Consolidated Free Cash Flow of LTC for such period plus (or minus) (ii) any net
cash extraordinary gains (or extraordinary cash losses) for such period of LTC
and its Consolidated Subsidiaries (except any such gains or losses in respect
of Asset Sales) plus (or minus) (iii) to the extent reflected in Consolidated
Free Cash Flow
8
<PAGE> 15
of LTC for such period, any non-cash charges (or non-cash gains) for such
period of LTC and its Consolidated Subsidiaries plus (or minus) (iv) any
decrease (or increase) in average of the Net Working Investment at the end of
each fiscal month ended during such period, when compared with average of the
Net Working Investment at the end of each fiscal month ended during the
corresponding period in the prior Fiscal Year, minus (v) the sum for such
period of (A) Total Debt Service of LTC (exclusive of amortization of debt
discount or premium) for such period, (B) all optional payments of the Term
Notes during such period pursuant to Section 2.04(c) and (C) the aggregate
amount of Restricted Payments made during such period in accordance with
clauses (i), (ii), (iii) or (iv) of the proviso to Section 8.04(a).
"Financing Documents" means this Agreement, the Notes and the
Security Documents.
"Fiscal Year" means a fiscal year of each Company and Holdings.
"Foreign Account Debtor" means an account debtor that is not both
domiciled in the United States of America and (if not a natural person)
organized under the laws of the United States of America or any political
subdivision thereof.
"GAAP" has the meaning set forth in Section 1.02.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means each of the Companies and Holdings in their
capacity as a guarantor pursuant to Article 4.
"Hazardous Materials" means (i) any "hazardous substance" as defined
in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) petroleum, its
derivatives, by-products and other hydrocarbons; and (v) any other toxic,
9
<PAGE> 16
radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.
"Hazardous Materials Contamination" means contamination which is
subject to clean-up, remediation, removal, permitting or other regulation under
any Environmental Law (a) of the improvements, buildings, facilities,
personalty, soil, groundwater, air or other elements on or of the relevant
property by Hazardous Materials, or any derivatives thereof, or (b) on or of
any other property as a result of Hazardous Materials, or any derivatives
thereof, generated on, emanating from or disposed of in connection with the
relevant property.
"HIG" means HIG Fund V, Inc., a Cayman Islands corporation, and its
successors.
"HIG Investor" means HIG Texas Cellular Company, a Cayman Islands
corporation.
"HIG Pledge Agreement" means the HIG Pledge Agreement dated as of
the date hereof between HIG and the Agent, substantially in the form of Exhibit
E.
"Holdings" means Texas Cellular Partners, L.P., a Delaware limited
partnership, and its successors.
"Holdings Documents" has the meaning set forth in Section 8.16.
"Holdings Pledge Agreement" means the Holdings Pledge Agreement
dated as of December 31, 1996, as amended and restated as of June 27, 1997,
between Holdings and the Agent, substantially in the form of Exhibit D.
"Indemnitees" has the meaning set forth in Section 10.05.
"Insurance Accounts" has the meaning set forth in the Company
Security Agreement.
"Intercreditor Agreement" means the Intercreditor Agreement dated as
of December 31, 1996 by and between NationsCredit and the Seller.
"Inventory" means inventory (as defined in Article 9 of the UCC) to
the extent comprised of readily marketable materials of a type manufactured,
consumed or held for resale (including raw materials and work-in-process) by
any Company in the ordinary course of its business as presently conducted, or
as modified from time to time in a manner not prohibited by this Agreement.
10
<PAGE> 17
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"IPO" means the initial sale of shares of common stock of LTC by and
for the account of LTC and certain selling shareholders pursuant to an
underwritten public offering registered under the Securities Act.
"LC Collateral Account" has the meaning set forth in the Company
Security Agreement.
"LC Credit Event" has the meaning set forth in Section 3.09(a).
"LC Issuer" means NationsCredit in its capacity as issuer of Letters
of Credit pursuant to Section 3.09(a).
"Lender" means NationsCredit and each other Person that becomes a
holder of a Note pursuant to Section 12.06, and their respective successors,
and "Lenders" means all of the foregoing.
"Lender Interest" has the meaning set forth in Section 2.05.
"Lender Interest Warrants" has the meaning set forth in Section
2.05.
"Letter of Credit" means a letter of credit issued for the account
of any Company by the LC Issuer.
"Letter of Credit Liabilities" means, at any time and in respect of
any Letter of Credit, the sum, without duplication, of (i) the amount available
for drawing under such Letter of Credit (without regard to whether any
conditions to drawing thereunder can then be met) plus (ii) the aggregate
unpaid amount of all Reimbursement Obligations in respect of previous drawings
made under such Letter of Credit.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement and the
other Financing Documents, any Company or any of such Company's Subsidiaries
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
11
<PAGE> 18
"Loans" means the Term Loans and the Working Capital Loans, or any
combination of the foregoing, as the context may require.
"Lockbox Accounts" has the meaning set forth in the Company Security
Agreement.
"Lockbox Agreements" has the meaning set forth in the Company
Security Agreement.
"LTC" means Let's Talk Cellular & Wireless, Inc., a Florida
corporation, together with its successors.
"LTC Merger" means the transactions contemplated by the LTC Merger
Documents to be consummated on or before the LTC Closing Date.
"LTC Merger Documents" means the LTC Merger Agreement, including the
exhibits and schedules thereto, and all agreements, documents and instruments
executed and delivered pursuant thereto or in connection therewith, including
without limitation the LTC Shareholders' Agreement.
"LTC Closing Date" has the meaning set forth in Section 5.01.
"LTC Merger Agreement" means the Agreement and Plan of Merger by and
among LTC, Merger Sub 1, Merger Sub 2, TWI, NCI and Holdings, dated as of April
11, 1997.
"LTC Pledge Agreement" means the LTC Pledge Agreement dated as of
June 27, 1997 between LTC and the Agent, substantially in the form of Exhibit
F.
"LTC Shareholders' Agreement" means the Shareholders' Agreement
dated as of June 27, 1997 by and among LTC and the Current Shareholders and
Investors party thereto.
"LTC Term Loan" has the meaning set forth in Section 2.01.
"LTC Term Note" has the meaning set forth in Section 2.02.
"LTC Working Capital Loan" means any Working Capital Loan of LTC
made pursuant to Section 3.01.
"LTC Working Capital Note" means any Working Capital Note of LTC
issued pursuant to Section 3.02.
12
<PAGE> 19
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received in connection with one or more related events by LTC or any of its
Subsidiaries under any Casualty Insurance Policy or (ii) any award or other
compensation with respect to any condemnation of property (or any transfer or
disposition of property in lieu of condemnation) received by LTC or any of its
Subsidiaries, if the amount of such aggregate insurance proceeds or award or
other compensation exceeds $250,000.
"Margin Stock" has the meaning assigned thereto in Regulation G, U
or X of the Federal Reserve Board, as the same may be amended, supplemented or
modified from time to time.
"Material Debt" means Debt (other than the Notes) of LTC and/or one
or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal or face amount not exceeding $100,000.
"Material Plan" means at any time a Plan having Unfunded
Liabilities.
"Merger Sub 1" means Merger Sub 1, Inc., a Delaware corporation.
"Merger Sub 1 Merger" means the merger of Merger Sub 1 with and into
Telephone Warehouse, Inc. (with Telephone Warehouse, Inc., as the surviving
corporation) pursuant to the LTC Merger Agreement on the LTC Closing Date.
"Merger Sub 2" means Merger Sub 2, Inc., a Texas corporation.
"Merger Sub 2 Merger" means the merger of Merger Sub 2 with and into
National Cellular, Incorporated (with National Cellular, Incorporated, as the
surviving corporation) pursuant to the LTC Merger Agreement on the LTC Closing
Date.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"National Cellular" means National Cellular, Incorporated, a Texas
corporation and the surviving corporation in the Merger Sub 2 Merger, together
with its successors.
13
<PAGE> 20
"National Cellular Merger Agreement" means the Merger Agreement
dated as of December 31, 1996 between HIG Cellular Acquisition Corporation II
and National Cellular.
"National Cellular Term Loan" has the meaning set forth in Section
2.01.
"National Cellular Term Note" has the meaning set forth in Section
2.02.
"National Cellular Working Capital Loan" means any Working Capital
Loan of National Cellular made pursuant to Section 3.01.
"National Cellular Working Capital Note" means any Working Capital
Note of National Cellular issued pursuant to Section 3.02.
"NationsCredit" means NationsCredit Commercial Corporation, a
Delaware corporation, and its successors and assigns.
"Net Cash Proceeds" means, with respect to any transaction, an
amount equal to the cash proceeds received by Holdings, any Company or any of
their respective Subsidiaries from or in respect of such transaction (including
any cash proceeds received as income or other proceeds of any non-cash proceeds
of such transaction), less (x) any expenses (including commissions) reasonably
incurred by such Person in respect of such transaction and (y) in the case of
an Asset Sale, the amount of any Debt secured by a Lien on the related asset
and discharged from the proceeds of such Asset Sale and any taxes paid or
payable by such Person (as estimated by the chief financial officer of
Holdings) in respect of such Asset Sale.
"Net Working Investment" means, at any date, Consolidated Current
Assets minus Consolidated Current Liabilities, all determined at such date.
"New Lease" means, for any Fiscal Year, any operating lease entered
into by any Company or any of such Company's Subsidiaries during such Fiscal
Year, and includes (i) any renewal, renegotiation or material change in any
operating lease existing prior to the first day of such Fiscal Year and (ii)
any operating lease existing prior to the first day of such Fiscal Year that
provides for liability for rental payments in such Fiscal Year in excess of the
liability for rental payments under such lease for the immediately preceding
Fiscal Year.
"Notes" means the Term Notes and the Working Capital Notes, or any
combination of the foregoing, as the context may require.
"Notice of Borrowing" has the meaning set forth in Section 3.04.
14
<PAGE> 21
"Notice of LC Credit Event" has the meaning set forth in Section
3.09(d).
"Officers' Certificate" means a certificate executed on behalf of a
Person by its chairman of the board (if an officer), chief executive officer or
president or one of its vice presidents and by its chief financial officer or
treasurer.
"Operative Documents" means the Financing Documents, the Original
Acquisition Documents, the LTC Merger Documents, the Assumption Agreement, the
Partnership Agreement, the Employment Contracts, the Consulting Agreement, the
Subscription Agreements, the Equity Agreement, the Lender Interest Warrants,
the Warrantholders Rights Agreement, the Seller Note, the Seller Pledge
Agreement, the InterCreditor Agreement, the Subordination Agreements and the
Seller Subsidiary Guaranties.
"Original Acquisition" means the transactions contemplated by the
Original Acquisition Documents consummated on or before the Closing Date.
"Original Acquisition Documents" means the Purchase Agreement,
including the exhibits and schedules thereto, and the Original Merger
Agreements, and all agreements, documents and instruments executed and
delivered pursuant thereto or in connection therewith.
"Partnership Agreement" means the Agreement of Limited Partnership
dated as of December 16, 1996 under which Holdings is organized.
"Original Credit Agreement" has the meaning set forth in the first
recital to this Agreement.
"Original Merger Agreements" means the National Cellular Merger
Agreement and the TWI Merger Agreement.
"Partnership Interests" means partnership interests of Holdings.
"Payment Account" means, with respect to each Lender, the account
specified on the signature pages hereof into which all payments by or on behalf
of any Company to such Lender under the Financing Documents shall be made, or
such other account as such Lender shall from time to time specify by notice to
such Company.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
15
<PAGE> 22
"Permitted Contest" means a contest maintained in good faith by
appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made; provided that
compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge.
"Permitted Liens" means Liens permitted pursuant to Section 8.02.
"Person" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust or other organization,
whether or not a legal entity, and any government agency or political
subdivision thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees
of any member of the ERISA Group or (ii) has at any time within the preceding
five years been maintained, or contributed to, by any Person which was at such
time a member of the ERISA Group for employees of any Person which was at such
time a member of the ERISA Group.
"Purchase Agreement" means the Amended and Restated Stock Purchase
Agreement dated as of December 6, 1996 among HIG Cellular Acquisition
Corporation I, HIG Cellular Acquisition Corporation II and the Seller.
"Quarterly Date" means the first Business Day of each February, May,
August and November occurring after the Closing Date.
"Real Property" means the premises known as 419 W. Airport Freeway,
Irving, Texas, all as more fully described in Exhibit A to the TWI Mortgage.
"Receivable" means, with respect to any Company as at any date of
determination thereof, the unpaid portion of the obligation, as stated in the
respective invoice, of a customer such Company in respect of Inventory sold or
services rendered in the ordinary course of business, which amount has been
earned by performance under the terms of the related contract and recognized as
revenue on the books of such Company net of any credits, rebates or offsets
owed to the customer and also net of any commissions payable to Persons other
than employees of such Company or its respective Subsidiaries.
16
<PAGE> 23
"Reimbursement Obligations" means, at any date, the obligations of
the Companies then outstanding to reimburse the LC Issuer and/or the Lenders
for payments made by the LC Issuer under a Letter of Credit and/or the Lenders
under Section 3.09(a) or Section 3.09(b).
"Reimbursement Refunding Borrowing" means a Working Capital
Borrowing made solely for the purpose of repaying Reimbursement Obligations
coming due not later than the date of such borrowing, and in an aggregate
amount equal to the aggregate amount of such Reimbursement Obligations.
"Required Lenders" means at any time Lenders holding Notes
evidencing at least 51% of the aggregate unpaid principal amount of the Loans
or, if no Loans are outstanding, having at least 51% of the aggregate amount of
the Commitments.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of any Company's capital stock (except dividends payable solely in
shares of its capital stock of the same class) or (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (a) any shares of any
Company's capital stock or (b) any option, warrant or other right to acquire
shares of any Company's capital stock.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Security Documents" means the Company Security Agreement, the
Holdings Pledge Agreement, the HIG Pledge Agreement, the LTC Pledge Agreement,
the TWI Mortgage and any other agreement pursuant to which Holdings, any
Company or any of their respective Subsidiaries or Affiliates provides a Lien
on its assets in favor of the Agent for the benefit of the Lenders, and all
supplementary assignments, security agreements, pledge agreements,
acknowledgments or other documents delivered or to be delivered pursuant to the
terms hereof or of any other Security Document.
"Seller" means Mr. Ron Koonsman.
"Seller Note" means the Subordinated Note in the principal amount of
$3,585,000 issued by Holdings to the Seller on December 31, 1996 and amended
and restated on June 27, 1997.
"Seller Pledge Agreement" means the Stock Pledge Agreement dated
December 31, 1996 between Holdings and the Seller.
17
<PAGE> 24
"Seller Subsidiary Guaranties" means each of the Subsidiary Guaranty
Agreements dated December 31, 1996 by each of National Cellular and TWI in
favor of the Seller.
"Subordination Agreements" means each of the Subordination
Agreements dated as of December 31, 1996 between the Seller, NationsCredit and
each of Holdings, TWI and National Cellular.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Ratings Service and P-1 by Moody's
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of any bank or trust
company which is organized under the laws of the United States or any State
thereof and has capital, surplus and undivided profits aggregating at least
$500,000,000 and which issues (or the parent of which issues) certificates of
deposit or commercial paper with a rating described in clause (ii) above, or
(iv) repurchase agreements with respect to securities described in clause (i)
above entered into with an office of a bank or trust company meeting the
criteria specified in clause (iii) above, provided in each case that such
Investment matures within one year from the date of acquisition thereof by any
Company or any of such Company's Subsidiaries.
"Total Debt Service" with respect to any Company means, for any
period, the sum of (i) the aggregate interest charges incurred by such Company
and its Consolidated Subsidiaries for such period, whether expensed or
capitalized, including the portion of any obligation under Capital Leases
allocable to interest expense in accordance with GAAP and the portion of any
debt discount or premium (but not expenses of issuance) that shall be amortized
in such period and (ii) the aggregate amount during such period of mandatory
principal payments payable by such Company pursuant to Section 2.04(a) and all
other scheduled principal payments on all other Debt payable by such Company or
any of its Consolidated Subsidiaries, including the portion of any payments
under Capital Leases that is allocable to principal.
"Term Commitment" means, for NationsCredit as Lender, an amount
equal to $2,000,000.
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<PAGE> 25
"Term Loan" has the meaning set forth in Section 2.01.
"Term Notes" has the meaning set forth in Section 2.02.
"TWI" means Telephone Warehouse, Inc., a Delaware corporation and
the surviving corporation of the Merger Sub 1 Merger, together with its
successors.
"TWI Merger Agreement" means the Merger Agreement dated as of
December 31, 1996 among HIG Cellular Acquisition Corporation, Telephone
Warehouse - San Antonio, Inc., Telephone Warehouse - KC, Inc. and Telephone
Warehouse Inc.
"TWI Mortgage" means the Mortgage, Assignment, Assignment of Leases
and Rents, Security Agreement and Fixture Filing dated as of December 31, 1996
between TWI and the Agent.
"TWI Term Loan" has the meaning set forth in Section 2.01.
"TWI Term Note" has the meaning set forth in Section 2.02.
"TWI Working Capital Loan" means any Working Capital Loan of TWI
made pursuant to Section 3.01.
"TWI Working Capital Note" means any Working Capital Note of TWI
issued pursuant to Section 3.02.
"UCC" has the meaning set forth in the Security Agreement.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"Warrantholders Rights Agreement" means the Warrantholders Rights
Agreement dated as of June 27, 1997 among LTC, HIG and NationsCredit,
substantially in the form of Exhibit K hereto.
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<PAGE> 26
"Working Capital Borrowing" means the aggregation of Working Capital
Loans of the Lenders to be made to any Company pursuant to Section 3.01 on a
single date.
"Working Capital Commitment" means, (i) for NationsCredit as Lender,
initially $9,000,000, less any amount assigned to another Person that becomes a
Lender after the date hereof (a "Subsequent Lender") and (ii) for any
Subsequent Lender, the amount of Working Capital Commitment assigned to such
Lender.
"Working Capital Loans" has the meaning set forth in Section 3.01.
"Working Capital Note" has the meaning set forth in Section 3.02.
"Working Capital Outstandings" means at any time, as to any Lender,
the sum of the aggregate outstanding principal amount of such Lender's Working
Capital Loans and its pro rata share of the aggregate outstanding Letter of
Credit Liabilities.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time ("GAAP"), applied, with respect to any of any Company or Holdings, on a
basis consistent (except for changes concurred in by such Company's and
Holdings' independent public accountants) with the most recent audited
consolidated and consolidating financial statements of LTC and its Consolidated
Subsidiaries delivered to the Lenders; provided that, if LTC notifies the
Lenders that LTC wishes to amend any covenant in Article 8 or the definition of
"Excess Cash Flow" or any related definition to eliminate the effect of any
change in GAAP on the operation of such covenant or the determination of
"Excess Cash Flow" (or if the Agent notifies LTC that the Required Lenders wish
to amend Article 8 or the definition of "Excess Cash Flow" or any related
definition for such purpose), then LTC's compliance with such covenant or
"Excess Cash Flow", as the case may be, shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to Holdings and the Required Lenders.
SECTION 1.03. Other Definitional Provisions. References in this
Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to
Articles, Sections, Schedules or Exhibits of or to this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.01 may,
unless the
20
<PAGE> 27
context otherwise requires, be used in the singular or plural depending on the
reference. "Include", "includes" and "including" shall be deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import. "Writing", "written" and comparable terms
refer to printing, typing and other means of reproducing words in a visible
form. References to any agreement or contract are to such agreement or
contract as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof. References to any Person include the
successors and assigns of such Person. References "from" or "through" any date
mean, unless otherwise specified, "from and including" or "through and
including", respectively.
ARTICLE 2
TERM LOANS
SECTION 2.01. Term Loans. (a) On the Closing Date, NationsCredit
made one senior floating rate loan in the amount of $5,600,000 to NCI (such
loan, or any portion thereof assigned to any other Lender in accordance with
Section 12.06, a "National Cellular Term Loan") and one senior floating rate
loan in the amount of $5,600,000 to TWI pursuant to this Agreement (such loan,
or any portion thereof assigned to any other Lender in accordance with Section
12.06, a "TWI Term Loan"). As of the LTC Closing Date, $5,537,500 in principal
amount of the NCI Term Loan and $5,537,500 in principal amount of the TWI Term
Loan remain outstanding.
(b) Upon the terms and subject to the conditions set forth
herein, NationsCredit agrees to make an additional senior floating rate loan to
LTC on the LTC Closing Date pursuant to this Section 2.01(b) in a principal
amount equal to its Term Commitment (such loan, or any portion thereof assigned
to any other Lender in accordance with Section 12.06, a "LTC Term Loan", and,
together with the National Cellular Term Loans and the TWI Term Loans, the
"Term Loans"). Term Loans are not revolving in nature and amounts of such
Loans repaid or prepaid may not be reborrowed. The Term Commitment shall
terminate at the close of business on the LTC Closing Date.
SECTION 2.02. Term Notes. Each National Cellular Term Loan
shall be evidenced by a Term Note of National Cellular substantially in the
form of Exhibit A-1 (each such note, a "National Cellular Note"), dated the
Closing Date in a principal amount equal to the initial principal amount of
such National Cellular Term Loan, duly executed and delivered by National
Cellular and payable to the Lender of such Term Loan. Each TWI Term Loan shall
be evidenced by a Term Note of TWI substantially in the form of Exhibit A-2
(each such note, a "TWI
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<PAGE> 28
Term Note"), dated the Closing Date in a principal amount equal to the initial
principal amount of such TWI Term Loan, duly executed and delivered by TWI and
payable to the Lender of such TWI Term Loan. Each LTC Term Loan shall be
evidenced by a Term Note of LTC substantially in the form of Exhibit A-3 (each
such note, a "LTC Term Note" and, together with National Cellular Term Notes
and TWI Term Notes, "Term Notes"), dated the LTC Closing Date in a principal
amount equal to the initial principal amount of such LTC Term Loan, duly
executed and delivered by LTC and payable to the Lender of such LTC Term Loan.
SECTION 2.03. Interest on the Term Loans. Interest on each
Term Loan shall accrue from the date on which such Term Loan was made on the
outstanding principal amount thereof at the rate set forth in the Term Note in
respect thereof, and shall be payable monthly in arrears as set forth therein.
SECTION 2.04. Repayments and Prepayments of Term Notes. (a)
Mandatory Scheduled Repayments. There shall become due and payable and each
Company shall repay an aggregate principal amount of the Term Notes issued by
such Company on each Quarterly Date, commencing with the Quarterly Date
occurring on August 1, 1997, equal to the applicable installment amount set
forth below (or, if less, the aggregate outstanding principal amount of the
Applicable Term Notes), in each case together with accrued and unpaid interest
on the principal amount being repaid to and but excluding the date of payment:
<TABLE>
<CAPTION>
AMORTIZATION SCHEDULE
---------------------
PRINCIPAL AMOUNT OF TERM PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF
NOTES OF OF TERM NOTES OF TERM NOTES OF
INSTALLMENT NATIONAL CELLULAR TWI LTC
----------- ----------------- --- ---
<S> <C> <C> <C>
No. 1 $ 62,500 $ 62,500 25,000
No. 2 62,500 62,500 25,000
No. 3 62,500 62,500 25,000
No. 4 125,000 125,000 25,000
No. 5 125,000 125,000 25,000
No. 6 125,000 125,000 25,000
No. 7 125,000 125,000 25,000
No. 8 187,500 187,500 25,000
No. 9 187,500 187,500 25,000
No. 10 187,500 187,500 25,000
No. 11 187,500 187,500 25,000
No. 12 275,000 275,000 25,000
No. 13 275,000 275,000 100,000
</TABLE>
22
<PAGE> 29
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF TERM PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF
NOTES OF OF TERM NOTES OF TERM NOTES OF
INSTALLMENT NATIONAL CELLULAR TWI LTC
----------- ----------------- --- ---
<S> <C> <C> <C>
No. 14 275,000 275,000 100,000
No. 15 275,000 275,000 100,000
No. 16 62,500 62,500 100,000
No. 17 62,500 62,500 100,000
No. 18 62,500 62,500 100,000
No. 19 62,500 62,500 100,000
No. 20 312,500 312,500 100,000
No. 21 312,500 312,500 100,000
No. 22 312,500 312,500 100,000
No. 23 312,500 312,500 100,000
No. 24 375,000 375,000 100,000
No. 25 375,000 375,000 125,000
No. 26 375,000 375,000 125,000
No. 27 375,000 375,000 125,000
No. 28 -0- -0- 125,000
</TABLE>
(b) Mandatory Incremental Prepayments. (i) There shall become due
and payable, and the Companies shall prepay, an aggregate principal amount of
the Term Notes (or, if less, the aggregate outstanding principal amount of the
Term Notes) in the following amounts at the following times, together with, in
the case of any prepayment of the remaining Term Notes in whole, accrued and
unpaid interest on the principal amount being prepaid to but excluding the date
of such payment:
(A) on the earlier of (x) the date on which the
financial statements required by Section 7.01(b) are delivered to
the Agent and (y) the 120th day following the last day of each
Fiscal Year, beginning with the Fiscal Year ending July 31, 1998,
an amount equal to 50% of the Excess Cash Flow for such Fiscal
Year; and
(B) promptly upon receipt by Holdings or LTC of the
proceeds from the issuance and sale of limited partnership
interests or other equity securities, as the case may be, in a
public offering after the LTC Closing Date, an amount equal to
100% of the Net Cash Proceeds of such issuance and sale.
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(ii) There shall become due and payable, and each Company shall
prepay, an aggregate principal amount of the Term Notes of such Company
(or, if less, the aggregate outstanding principal amount of such Term
Notes) in the following amounts at the following times, together with, in
the case of any payment of the remaining such Term Notes in whole,
accrued and unpaid interest on the principal amount being prepaid to but
excluding the date of such payment:
(A) on the date on which such Company or any of its
Subsidiaries receives any payment which constitutes Major Casualty
Proceeds, an amount equal to the amount of such payment, unless
the Required Lenders shall otherwise direct (in which case the
amount of such payment shall be deposited into the applicable
Insurance Account to be held and applied in accordance with
Section 5 of the Company Security Agreement); and
(B) promptly upon receipt by such Company or any of
its Subsidiaries of the proceeds of any Asset Sale by such Company
(or promptly upon receipt by Holdings or LTC of the proceeds of
any Asset Sale consisting of equity securities or other interests
in such Company) after the LTC Closing Date, other than a sale
pursuant to and in accordance with Section 8.06(c), an amount
equal to 100% of the Net Cash Proceeds of such Asset Sale.
(c) Optional Prepayments. (i) Each Company may prepay the Term
Notes of such Company in whole or in part (in principal amounts of $125,000 or
in any integral multiple of $50,000 in excess thereof) upon at least 10 days'
prior irrevocable written notice to the Lenders (and such amounts specified in
such notice shall become due and payable on the date so specified), by paying
an amount equal to the Applicable Premium Percentage on the date of payment of
the aggregate principal amount being prepaid together with, in the case of any
prepayment of the remaining Term Notes in whole, accrued and unpaid interest on
the principal amount being prepaid to but excluding the date of payment.
"Applicable Premium Percentage" means (i) in the case of any
prepayment made with proceeds of Debt of Holdings or any of its Subsidiaries,
(1) in the case of any prepayment with respect to National Cellular Term Loans
or TWI Term Loans, (x) for any date from December 31, 1996 to but excluding
December 31, 1999, the excess of (A) 101.25% over (B) the product of .0347%
multiplied by the number of times the first day of a month has occurred
subsequent to December 31, 1996 and (y) for any date from and after December
31, 1999, 100%, and (2) in the case of any prepayment with respect to LTC Term
Loans, (x) for any date from June 27, 1997 to but excluding June 27, 2000, the
excess of (A) 101.25% over (B)
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the product of .0347% multiplied by the number of times the first day of a
month has occurred subsequent to June 27, 1997 and (y) for any date from and
after June 27, 2000, 100%, and (ii) in any other case, 100%.
(ii) Notwithstanding the foregoing, no Company may
prepay its Term Notes in whole pursuant to this subsection (c)
with the proceeds of other Debt unless simultaneously with such
prepayment (x) (A) the Companies prepay any outstanding balance
of the Term Notes, together with accrued interest thereon, in
accordance with this subsection (c) and (B) the Companies prepay
all Working Capital Loans, cash collateralize all outstanding
Letter of Credit Liabilities in accordance with Section 3.09(f)
(or provide for the replacement or cancellation thereof on terms
acceptable to each Lender) and terminate the Working Capital
Commitments and (y) Holdings redeems in cash, as provided in
Section 5.3 of the Equity Agreement, the portion of Lender
Interest which any Lender holding such portion of Lender
Interest requests Holdings in writing to redeem.
(d) Application of Payments. Each repayment or prepayment of less
than all the outstanding aggregate principal amount of the Term Notes shall be
applied pro rata to all the Term Notes according to their respective
outstanding principal amounts. Each repayment or prepayment of less than all
the outstanding aggregate principal amount of the Term Notes of any Company
pursuant to Section 2.04(a), 2.04(b)(ii) or 2.04(c) shall be applied pro rata
to their respective outstanding principal amounts. The principal amount of
each payment pursuant to Section 2.04(b) or (c) shall be applied to reduce the
remaining payments required by Section 2.04(a) in pro rata order of the
maturity thereof. No payment pursuant to Section 2.04(a) or (c) shall (except
as reflected in any determination of Excess Cash Flow) reduce the amount of any
payment required by Section 2.04(b).
Section 2.5. Lender Interest. On the Closing Date, NationsCredit
acquired from Holdings, in consideration for making the initial Term Loans,
Partnership Interests (as defined in the Partnership Agreement) equivalent to
5% of the Partnership Interests on a fully diluted basis (taking into account
all of the Partnership Interests of Holdings issued and outstanding as of the
Closing Date (the "Lender Interest"). Holdings and NationsCredit agree that,
for Federal income tax purposes, (i) the initial Term Loans and the Lender
Interest constitute an investment unit and (ii) the aggregate issue price of
the initial Term Loans drawn on the Closing Date is $11,100,000 and the
aggregate purchase price for the Lender Interest on the Closing Date is
$100,000. On the LTC Closing Date, LTC issued to NationsCredit, as an
adjustment to the Lender Interest in connection with the LTC Merger, Warrants
initially exercisable for shares of
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common stock of LTC initially equivalent to 1.72% of the common stock of LTC on
a fully diluted basis (taking into account all of the common stock of LTC
issued and outstanding as of the LTC Closing Date (the "Lender Interest
Warrants"). None of the Companies, Holdings nor any Lender shall voluntarily
take any action inconsistent with the agreement set forth in the immediately
preceding sentence.
ARTICLE 3
WORKING CAPITAL LOANS
SECTION 3.01. Working Capital Loans and Commitments. Upon the
terms and subject to the conditions set forth herein, each Lender severally and
not jointly agrees to make working capital loans ("Working Capital Loans") from
time to time to any Company in an aggregate principal amount at any time
outstanding such that, after giving effect to the application of the proceeds
of any Working Capital Loan made by it on any date, the Working Capital
Outstandings as to such Lender do not exceed such Lender's LTC Working Capital
Commitment. Each Working Capital Borrowing (other than any Reimbursement
Refunding Borrowing) shall be in an aggregate amount of $100,000 or an integral
multiple of $10,000 in excess thereof. No more than three Working Capital
Borrowings (other than any Reimbursement Refunding Borrowing) shall be made
within any week beginning on Monday of such week and ending on the last
Business Day of such week. Within the foregoing limits, each Company may
borrow under this Section 3.01, prepay or repay Working Capital Loans as
required under Section 3.05(b) or to the extent permitted by Section 3.06, and
reborrow pursuant to this Section 3.01.
SECTION 3.02. Working Capital Notes. The Working Capital Loans of
each Lender to each Company shall be evidenced by a single Working Capital
Note, substantially in the form of Exhibit B (each such note, a "Working
Capital Note"), dated the Closing Date or LTC Closing Date, as the case may be,
in an aggregate principal amount equal to (a) in the case of any National
Cellular Working Capital Note or TWI Working Capital Note, the amount of such
Lender's National Cellular's/TWI Working Capital Commitment, and (b) in the
case of any LTC Working Capital Note, the amount of such Lender's LTC Working
Capital Commitment, in each case duly executed and delivered and payable to
such Lender. Each Lender shall record the date and amount of each Working
Capital Loan made by it to such Company and the date and amount of each payment
of principal made by such Company with respect thereto, and prior to any
transfer of its Working Capital Notes shall endorse on Schedule A thereto (or
any continuation thereof) forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Working Capital
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Loan then outstanding; provided that the failure of any Lender to make any such
recordation or endorsement shall not affect the obligations of each Company
hereunder or under the Working Capital Notes. Each Lender is hereby
irrevocably authorized by each Company so to endorse its Working Capital Note
of such Company and to attach to and make a part of its Working Capital Note of
such Company a continuation of any such schedule as and when required.
SECTION 3.03. Interest on Working Capital Loans. Interest on the
Working Capital Loans shall accrue on the aggregate outstanding principal
amount thereof at the rate set forth in the Working Capital Note with respect
thereto, and shall be payable monthly in arrears as set forth therein.
SECTION 3.04. Advancing Working Capital Loans. (a) Each Company
borrowing pursuant to this Article 3 shall give each Lender and NationsCredit
notice (a "Notice of Borrowing") not later than Noon (New York City time) on
the Business Day immediately preceding each Working Capital Borrowing, signed
by the chief financial officer or treasurer of such Company, specifying the
date (which shall be a Business Day) and aggregate principal amount of such
Working Capital Borrowing, and certifying as to the satisfaction of the
conditions set forth in clauses (b), (c) and (d) of Section 5.02.
(b) Not later than 1:00 P.M. (New York City time) on the date of
each borrowing specified in a Notice of Borrowing, each Lender shall make
available its ratable share of such Working Capital Borrowing, in Federal or
other immediately available funds, to the applicable Company Account.
SECTION 3.05. Mandatory Repayments and Prepayments. (a) The
Working Capital Commitment of each Lender shall terminate at the opening of
business on the earlier of (i) May 1, 2004 and (ii) the date on which the Term
Notes shall have been paid in full (the "Termination Date"), and there shall
become due and each Company shall pay on the Termination Date, the entire
outstanding principal amount of each Working Capital Loan made to such Company,
together with accrued and unpaid interest thereon to but excluding the
Termination Date.
(b) If at any time the aggregate Working Capital Outstandings exceed
the lesser of the Borrowing Base and the aggregate Working Capital Commitments
of the Lenders, then, on the next succeeding Business Day, the Companies shall
apply an amount equal to such excess to repay the Working Capital Loans or cash
collateralize Letter of Credit Liabilities, or both, as and to the extent
required by Section 3.07(b), and to the extent the Companies fail to make any
such payment, the Companies shall provide for the replacement or cancellation
of any outstanding Letters of Credit until the aggregate Working Capital
Outstandings do not exceed
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the lesser of the Borrowing Base and the aggregate Working Capital Commitments
of the Lenders.
SECTION 3.06. Optional Prepayments. Each Company may prepay the
Working Capital Loans made to such Company in whole or in part (except with
respect to any Reimbursement Refunding, in minimum principal amounts of
$100,000 or in any larger integral multiple of $50,000) upon at least one
Business Day's prior irrevocable written notice to the Lenders, in an amount
equal to 100% of the principal amount being prepaid. The aggregate principal
amount of the Working Capital Loans designated for prepayment in any notice of
optional prepayment given pursuant to this subsection shall become due and
payable on the date fixed for prepayment as specified above.
SECTION 3.07. Application of Payments (a) Each payment or
prepayment of less than all the outstanding aggregate principal amount of the
Working Capital Loans made to any Company shall be applied pro rata to all the
Working Capital Loans made to such Company according to their respective
outstanding principal amounts.
(b) Amounts to be applied pursuant to Section 3.05(b) shall be
applied first to ratably repay the principal amount of the Working Capital
Loans then outstanding until all such Working Capital Loans shall have been
repaid in full, and if any excess then remains such excess shall be deposited
in the LC Collateral Account to be held, applied or released for application as
provided in Section 5(F) of the Company Security Agreement.
SECTION 3.08. Obligation to Make Working Capital Loans. If any
Lender shall fail to perform its obligation to make a Working Capital loan
hereunder, the amount of the Working Capital Commitments of such Lender shall,
at the time of any such failure, be immediately assumed by NationsCredit so
that the aggregate amount of the Working Capital Commitments to make any
Working Capital Loans provided for herein shall not be reduced. No such
assumption shall relieve any Lender from its Working Capital Commitments, and
each such defaulting Lender agrees to repay on demand NationsCredit any Working
Capital Loans made by NationsCredit in respect of such assumed Working Capital
Commitments, together with interest thereon from the date of such Loan to but
excluding the date of repayment at the rate applicable to such Working Capital
Loans plus 1%.
SECTION 3.09. Letters of Credit. (a) Issuance and Increase of
Letters of Credit; Lender Reimbursement Agreement. (i) Subject to the terms
and conditions hereof and such additional terms and conditions as the LC Issuer
shall from time to time require, each Company may from time to time request
that the
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LC Issuer issue Letters of Credit for the account of such Company or increase
the stated amount of any existing Letter of Credit (each event, an "LC Credit
Event").
(ii) Upon receipt from the beneficiary of any
Letter of Credit of any notice of a drawing under such Letter of
Credit, the LC Issuer shall notify the Agent and the Agent shall
promptly notify the Company for whose account such Letter of
Credit was issued and each other Lender as to the amount to be
paid as a result of such demand or drawing and the payment date.
Each Company shall be irrevocably and unconditionally obligated
forthwith to reimburse the LC Issuer for any amounts paid by the
LC Issuer upon any drawing under any Letter of Credit issued for
the account of such Company, without presentment, demand,
protest or other formalities of any kind. All such amounts paid
by the LC Issuer and remaining unpaid by such Company shall bear
interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate applicable to
Working Capital Loans for such day. In addition, each Lender
agrees for the benefit of the LC Issuer that in the event that
any Company fails to reimburse the LC Issuer for any drawing
under any Letter of Credit issued for the account of such
Company for the full amount of such drawing on the date of such
drawing, each Lender shall be obligated to pay to the LC Issuer,
for value on the second Business Day following such date to the
relevant account notified by the LC Issuer to the Lenders in the
notice referred to in the following sentence, an amount equal to
its pro rata share (determined by reference to the Working
Capital Commitments of each of the Lenders) of such unreimbursed
amount (after giving effect to any reimbursement thereof
theretofore paid by such Company to the LC Issuer in respect of
such drawing). The LC Issuer shall notify each Lender of any
such unreimbursed amount (together with the account to which
such Lender's share in respect thereof is to be paid) not later
than 11:00 A.M. (New York City time) on the Business Day
immediately preceding the date that payment by such Lender is
due.
(iii) In consideration of the foregoing, the
parties hereto agree (and the LC Issuer by accepting the
benefits conferred on it hereby shall be deemed to have agreed)
that upon each LC Credit Event, the LC Issuer shall be deemed,
without further action on the part of the LC Issuer or of any
party hereto, to have sold to each Lender and each Lender shall
be deemed, without further action by the LC Issuer or any party
hereto, to have purchased from the LC Issuer, a participation
(or an increased participation, in the case of any LC Credit
Event that is an increase in the stated amount of an existing
Letter of Credit) in such Letter of Credit and the related
Letter of Credit Liabilities, in the amount required so that the
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participations of the Lenders therein shall be in proportion to
their respective Working Capital Commitments.
(iv) The several obligations of the Lenders to the LC
Issuer under this Section 3.09(a) shall be absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall not
be affected by any circumstance, including, without limitation, (1) any
set-off, counterclaim, recoupment, defense or other right which any
such Lender or any other Person may have against the LC Issuer or any
other Person for any reason whatsoever; (2) the occurrence or
continuance of a Default or an Event of Default or the termination of
the Working Capital Commitments; (3) any adverse change in the
condition (financial or otherwise) of any Company or any other Person;
(4) any breach of any Financing Document by any party thereto; (5) the
fact that any condition precedent to the issuance of, or the making of
any payment under, any Letter of Credit was not in fact met; (6) any
violation or asserted violation of law by any Lender or any affiliate
thereof; or (7) to the extent permitted under applicable law, any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing. Each payment by each Lender to the LC Issuer for
its own account shall be made without any offset, abatement,
withholding or reduction whatsoever.
(v) Each Lender acknowledges and agrees that the
LC Issuer will rely upon the provisions of this Section 3.09(a) in
issuing or increasing the stated amount of Letters of Credit for the
account of any Company; provided that the LC Issuer shall not be
entitled to rely on the provisions of this Section 3.09 with respect to
any Letter of Credit issued or increased by it after a Stop-Issuance
Notice has been received by the LC Issuer and remains in effect and the
Lenders shall not be under any obligation to reimburse the LC Issuer
for any amounts drawn under any Letter of Credit so issued or increased
(if increased, only to the extent of such increase).
"Stop Issuance Notice" means a notice to the LC Issuer from the Agent
to the effect that either (i) the Working Capital Commitments of the Lenders
have terminated or (ii) the conditions to an LC Credit Event specified in
Section 3.09(e) are not satisfied (either generally as to all Letters of Credit
or specifically with respect to any proposed LC Credit Event requested in a
Notice of Issuance delivered hereunder). A Stop-Issuance Notice shall become
effective upon receipt by the LC Issuer and may only be canceled by delivery to
the LC Issuer of a written notice of cancellation signed by the Agent (with the
consent of the Required Lenders).
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(b) Reimbursement Obligations of the Companies. Each Company
agrees, as a separate obligation, independent from any obligation it may have
to reimburse the LC Issuer pursuant to Section 3.09(a), that if at any time any
Lender shall make a payment to the LC Issuer pursuant to Section 3.09(a)(ii) in
respect of a Letter of Credit issued for the account of such Company, such
Company shall be irrevocably and unconditionally obligated forthwith to
reimburse such Lender for the amount of such payment in like currency, without
presentment, demand, protest or other formalities of any kind. All amounts
paid by any Lender to the LC Issuer pursuant to Section 3.09(a)(ii) shall bear
interest, payable on demand, for each day until such Company reimburses such
Lender therefor, at a rate per annum equal to the sum of 2% plus the rate
applicable to Working Capital Loans for such day.
(c) Reimbursement and Other Payments by the Companies. The
obligations of each Company to reimburse the Issuing Bank and each Lender
pursuant to Section 3.09(a) and 3.09(b) shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:
(i) any lack of validity or enforceability of any
Letter of Credit or any related document;
(ii) any amendment or waiver of or any consent to
departure from any Letter of Credit or any related document;
(iii) the existence of any claim, set-off, defense
or other right which such Company may have at any time against
the beneficiary of any Letter of Credit (or any Person or entity
for whom such beneficiary may be acting), the Agent, the LC
Issuer or any Lender or any other Person or entity, whether in
connection with this Agreement, any other Financing Document or
any unrelated transaction, provided that nothing herein shall
prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(iv) any statement or any other document presented
under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever;
(v) payment by the LC Issuer under any Letter of
Credit against presentation of a draft or document which does
not comply with the terms of such Letter of Credit;
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(vi) any affiliation between the LC Issuer and any
Lender; or
(vii) to the extent permitted under applicable law,
any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
(d) Notice of LC Credit Event. Any Company requesting the issuance
or increase of a Letter of Credit hereunder shall give the Agent notice (a
"Notice of LC Credit Event") at least two Business Days before the relevant
issuance or increase, specifying:
(i) the date of issuance or increase of such
Letter of Credit;
(ii) the expiry date of such Letter of Credit
(which shall comply with the requirements of Section
3.09(e)(ii));
(iii) the proposed terms of such Letter of Credit,
including the face amount and currency thereof (which shall
comply with the requirements of Section 3.09(e)(iii)); and
(iv) the transactions or additional transaction or
transactions that are to be supported or financed with such
Letter of Credit or increase thereof.
Upon the receipt of a Notice of LC Credit Event, the Agent shall
promptly notify each Lender of the contents thereof and of the amount of such
Lender's participation in such Letter of Credit.
(e) Conditions to LC Credit Event. No Company shall request or
permit to occur a LC Credit Event unless each of the following conditions shall
have been satisfied:
(i) the Agent shall have received a Notice of LC
Credit Event with respect to such Letter of Credit or increase
thereof in accordance with Section 3.09(d) and a Borrowing Base
Certificate in accordance with Section 7.01(l);
(ii) such Letter of Credit shall by its terms
expire no later than the earlier of (x) one year after its
issuance (but may by its terms be renewable by notice given to
the LC Issuer, subject in any event to clause (y)) and (y) five
Business Days prior to May 1, 2004;
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(iii) such Letter of Credit shall be in a face
amount (including after giving effect to any contemplated
increase thereof) of not more than the amount that would, after
giving effect to the issuance thereof and to the borrowing and
repayment of Working Capital Loans on the date of issuance
thereof, cause (x) the aggregate Letter of Credit Liabilities of
all Letters of Credit to exceed $250,000 or (y) the Working
Capital Outstandings of the Lenders to exceed the lesser of (A)
the Borrowing Base and (B) the aggregate amount of the Working
Capital Commitments;
(iv) the fact that, immediately before and
immediately after such LC Credit Event, no Default shall have
occurred and be continuing; and
(v) the fact that the representations and
warranties of each Company and its Subsidiaries and Holdings
contained in the Financing Documents shall be true on and as of
the date of such LC Credit Event.
Each Notice of LC Credit Event shall be deemed to be a
representation and warranty by the Company delivering such Notice of LC Credit
Event to the Lenders and the Agent as of the date of the issuance or increase
of the relevant Letter of Credit as to the facts specified in clauses (iii),
(iv) and (v) above.
(f) If on any date the Working Capital Commitments are
terminated pursuant to Section 2.04(c)(ii), the Companies on such date shall
deposit in the LC Collateral Account an amount equal to all Letter of Credit
Liabilities then outstanding, to be held, applied or released for application
as provided in Section 5(F) of the Company Security Agreement.
ARTICLE 4
GUARANTY
SECTION 4.01. The Guaranty. Each of the Companies and Holdings
hereby unconditionally guarantees the full and punctual payment (whether at
stated maturity, upon acceleration or otherwise) of the principal of and
interest (including any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Company, whether or not allowed or allowable as a claim
in any such proceeding) on each Note issued by, in the case of such Company,
each other Company and, in the case of Holdings, any Company, pursuant to this
Agreement, and the full and punctual payment of all other amounts payable by,
in the case of such Company, each other Company and, in the case of Holdings,
any Company under this Agreement or any other Financing Document, including any
amounts payable with
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respect to Letter of Credit Liabilities. Upon failure by, in the case of such
Company, each other Company and, in the case of Holdings, any Company, to pay
punctually any such amount, such Company or Holdings, as the case may be, shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in this Agreement or the other Financing Documents.
SECTION 4.02. Guaranty Unconditional. The obligations of
each Guarantor under this Article 4 shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(i) any extension, renewal, settlement,
compromise, waiver or release in respect of any obligation of
the Companies under this Agreement, other than this Article 4,
or any other Financing Document, by operation of law or
otherwise;
(ii) any modification or amendment of or
supplement to this Agreement or any other Financing Document;
(iii) any release, impairment, non-perfection or
invalidity of any direct or indirect security for any obligation
of the Companies under this Agreement or any other Financing
Document;
(iv) any change in the corporate existence,
structure or ownership of the Companies, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
the Companies or their assets or any resulting release or
discharge of any obligation of the Companies contained in this
Agreement or any Financing Document;
(v) the existence of any claim, set-off or other
rights which such Guarantor may have at any time against any
Company, the Agent, any Lender or any other corporation or
person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) any invalidity or unenforceability relating
to or against any Company for any reason of this Agreement or
any Financing Document, or any provision of applicable law or
regulation purporting to prohibit the payment by such Company of
the principal of or interest on any Note or any other amount
payable by such Company under this Agreement or any other
Financing Document; or
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(vii) any other act or omission to act or delay of
any kind by any Company, the Agent, any Lender or any other
corporation or person or any other circumstance whatsoever which
might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of or defense to such Guarantor's
obligations hereunder.
SECTION 4.03. Discharge Only upon Payment in Full; Reinstatement In
Certain Circumstances. Each Guarantor's obligations hereunder shall remain in
full force and effect until the earlier of the date on which the Commitments
shall have terminated and the principal of and interest on the Notes and all
other amounts payable by the Companies under this Agreement or any other
Financing Document shall have been paid in full. If at any time any payment of
the principal of or interest on any Note or any other amount payable by any
Company under this Agreement or any other Financing Document is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of such Company or otherwise, the Guarantor's obligations with
respect to such Company's obligations hereunder with respect to such payment
shall be reinstated as though such payment had been due but not made at such
time.
SECTION 4.04. Waiver by the Guarantors. Each Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against any Company or any other corporation
or person.
SECTION 4.05. Subrogation. Upon making any payment with respect to
any Company hereunder, the Guarantor shall be subrogated to the rights of the
payee against such Company with respect to such payment; provided that such
Guarantor shall not enforce or accept any payment by way of subrogation until
all amounts of principal of and interest on the Notes and all other amounts
payable by such Company under the Loan Documents have been paid in full.
SECTION 4.06. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by any Company under this Agreement, the Notes or
any other Financing Document is stayed upon the insolvency, bankruptcy or
reorganization of such Company, all such amounts otherwise subject to
acceleration under the terms of this Agreement shall nonetheless be payable by
each Guarantor hereunder forthwith on demand by the Agent made at the request
of the requisite proportion of the Lenders specified in Article 9 of this
Agreement.
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ARTICLE 5
Conditions
SECTION 5.01. Conditions to Closing. This Agreement shall become
effective on the date (the "LTC Closing Date", which shall not in any event be
later than June 30, 1997) that each of the following conditions precedent shall
have been satisfied:
(a) receipt by the Agent of counterparts hereof signed by each of
the parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by NationsCredit of a duly executed LTC Term Note and
LTC Working Capital Note for its account, each in the form provided for herein;
(c) receipt by the Agent of duly executed counterparts of each
Security Document required to be effective on the LTC Closing Date, together
with evidence satisfactory to it in its sole good faith discretion of the
effectiveness of the security contemplated thereby;
(d) receipt by NationsCredit of evidence satisfactory to it in its
sole good faith discretion of the satisfaction (without waiver) of all other
conditions to the closing of the LTC Merger on the LTC Closing Date, and that
all transactions contemplated by the Operative Documents to be consummated on
the closing date of the LTC Merger will take place prior to or simultaneously
with the transactions hereunder contemplated to take place on the LTC Closing
Date, and satisfaction of NationsCredit in its sole good faith discretion with
the terms and conditions of the LTC Merger Documents;
(e) receipt by NationsCredit of (i) evidence satisfactory to it in
its sole good faith discretion of the effectiveness of all other Operative
Documents to be executed in connection with the LTC Merger, each of which shall
be in form and substance satisfactory to NationsCredit in its sole good faith
discretion, and (ii) each opinion, report, and other document required to be
delivered pursuant to the LTC Merger Documents in connection with the LTC
Merger, with a letter from each Person delivering any such opinion, report and
other document authorizing reliance thereon by the Agent and the Lenders, all
in form and substance satisfactory to NationsCredit;
(f) receipt by NationsCredit of evidence satisfactory to it that (i)
the shares of common stock of each of National Cellular and TWI shall have been
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converted into shares of common stock of LTC, (ii) the shares of common stock
of Merger Sub 1 shall have been converted into shares of TWI and (iii) the
shares of common stock of Merger Sub 2 shall have been converted into shares of
National Cellular, in each case pursuant to the terms of the LTC Merger
Agreement;
(g) receipt by the Agent of an opinion of Greenberg Traurig,
counsel for the Companies and Holdings substantially in the form of Exhibit H,
covering such additional matters relating to the transactions contemplated
hereby as NationsCredit may reasonably request (by its execution and delivery
of this Agreement, each of the Companies and Holdings authorizes and directs
each such counsel to deliver such opinions to the Agent);
(h) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit I, covering
such additional matters relating to the transactions contemplated hereby as
NationsCredit may reasonably request;
(i) receipt by NationsCredit, including in its capacity as Agent, of
all fees and any other amounts due and payable hereunder (including fees and
expenses payable pursuant to Section 10.04) of which Holdings has received
notice;
(j) [intentionally omitted]
(k) receipt by NationsCredit of any information it may request
concerning the financial condition, results of operations, liabilities
(contingent and otherwise, including with respect to environmental liabilities
and employee and retiree benefits) and prospects of, and the financial
reporting and accounting systems and the management information systems of, the
Companies; and confirmation satisfactory to NationsCredit, after consultation
with management of the Companies, and any independent environmental consultant
or independent accountant retained by NationsCredit, of all such information;
and satisfaction of NationsCredit in its sole good faith discretion with all
such information;
(l) satisfaction of NationsCredit in its sole good faith discretion
as to the absence of any material adverse change in any aspect of the business,
operations, properties, prospects or condition (financial or otherwise) of
Holdings and its Subsidiaries, or any event or condition which is reasonably
likely to result in such a material adverse change;
(m) receipt by NationsCredit of a certificate signed by an officer
of each Company to the effect that, both before and immediately after the
making of the Loans and the consummation of the LTC Merger and the other
transactions contemplated to take place on the LTC Closing Date, (i) no Default
shall have
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occurred and be continuing and (ii) the representations and warranties of the
Companies made in or pursuant to the Operative Documents are true;
(n) receipt by NationsCredit of the certificates referred to in
Section 7.04(c);
(o) receipt by NationsCredit of evidence satisfactory to it in its
sole good faith discretion of the effectiveness of the employment agreements
for Brett Beveridge and Nicholas Molina in the forms attached as Exhibit 7.6 to
the LTC Merger Agreement;
(p) receipt by NationsCredit of (i) the financial statements and
pro forma balance sheet referred to in Sections 6.04(a), (b), (c) and (d), (ii)
a statement of sources and uses of funds covering all payments reasonably
expected to be made by each Company and Holdings in connection with the
transactions contemplated by the Operative Documents to be consummated on the
LTC Closing Date, including an itemized estimate of all fees, expenses and
other closing costs in an aggregate amount not to exceed $50,000 over the
aggregate amount provided for such fees, expenses and closing costs in the
commitment letter dated June 3, 1997 from NationsCredit to H.I.G. Capital
Management, Inc. and (iii) payment instructions with respect to each wire
transfer to be made by the Agent, Holdings or any Company on the LTC Closing
Date setting forth the amount of such transfer, the purpose of such transfer,
the name and number of the account to which such transfer is to be made, the
name and ABA number of the bank or other financial institution where such
account is located and the name and telephone number of an individual that can
be contacted to confirm receipt of such transfer;
(q) receipt by the Agent of an Officer's Certificate of Holdings and
each Company satisfactory to the Agent stating in substance that after giving
effect to the LTC Merger, including the transactions contemplated by this
Agreement, each Company will not (and in the case of each of Holdings and LTC,
each of Holdings and LTC will not on a consolidated basis) be insolvent or be
rendered insolvent thereby, be left with unreasonably small capital with which
to engage in its business or have incurred debts beyond its ability to pay such
debts as they mature, by a margin reasonably satisfactory to the Agent;
(r) receipt by the Agent of evidence satisfactory to it in its sole
good faith discretion that all outstanding obligations of LTC under the loan
agreements specified in Schedule 1.01 have been paid in full, all commitments
thereunder have been terminated and all Liens securing such obligations and all
guarantees thereof have been released; and
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(s) receipt by the Agent of all documents it may reasonably request
relating to the existence of Holdings and the Companies, the corporate
authority for and the validity of the Financing Documents and the other
Operative Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent in its sole good faith discretion.
The documents referred to in this Section shall be delivered to the
Agent no later than the LTC Closing Date. The certificates and opinions
referred to in this Section shall be dated the LTC Closing Date. On the LTC
Closing Date and without further action by any party hereto, the Original
Credit Agreement among the parties hereto shall be amended and restated to read
in full as set forth herein. All references to "this Agreement" shall refer to
this Agreement as amended and restated as set forth herein.
SECTION 5.02. Conditions to Each Loan. The obligation of any
Lender to make a Loan on the occasion of any borrowing thereof (including on
the LTC Closing Date) is subject to the satisfaction of the following
additional conditions:
(a) in the case of a Working Capital Borrowing, receipt by each
Lender of a Notice of Borrowing in accordance with Section 3.04 and a Borrowing
Base Certificate as of the close of business on the Business Day immediately
preceding the date of such borrowing and, in the case of the Borrowing Base
Certificate delivered in connection with the initial borrowing, on a pro forma
basis after giving effect to the LTC Merger;
(b) the fact that, immediately after such borrowing and after
application of the proceeds thereof, the aggregate Working Capital Outstandings
of the Lenders will not exceed the lesser of (i) the Borrowing Base and (ii)
the Working Capital Commitments;
(c) the fact that, immediately before and after such borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of each Company
and Holdings contained in the Financing Documents shall be true on and as of
the date of such borrowing.
Each borrowing hereunder shall be deemed to be a representation and
warranty by each Company and Holdings on the date of such borrowing as to the
facts specified in clauses (b), (c) and (d) of this Section.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Each Company and Holdings, jointly and severally, represent and
warrant (including, in the case of any such representation and warranty made or
deemed made before the consummation of the LTC Merger, at the time such
representation and warranty is made or deemed made and immediately after giving
effect to the consummation of the LTC Merger) that:
SECTION 6.01. Legal Existence and Power. Each of Holdings and the
Companies is duly incorporated or organized, validly existing and in good
standing under the laws of the state of its formation or incorporation, as the
case may be. Each of Holdings, the Companies and their respective Subsidiaries
has all partnership or corporate powers, as the case may be, and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted and as will be conducted after the LTC Merger.
Each of Holdings, the Companies and their respective Subsidiaries is qualified
to do business as a foreign partnership or corporation, as the case may be, in
each jurisdiction in which Holdings or such Subsidiary is required to be so
qualified.
SECTION 6.02. Authorization; No Contravention. The execution,
delivery and performance by each of Holdings, each Company and each Subsidiary
of such Company of the Operative Documents to which it is a party are within
Holdings', such Company's or such Subsidiary's (as the case may be) partnership
or corporate powers, as the case may be, have been duly authorized by all
necessary partnership or corporate action, as the case may be, require no
action by or in respect of, or filing with, any governmental body, agency or
official other than the filing of certificates of merger with the Secretary of
State of the States of Delaware and Texas, the filing of UCC-1 financing
statements, all of which have been made and are in full force and effect) and
do not contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of limited partnership of Holdings, the
Partnership Agreement, the certificate of incorporation or by-laws of any
Company or of any Company's Subsidiaries or of any agreement, judgment,
injunction, order, decree or other instrument binding upon Holdings, any
Company or any of their respective Subsidiaries or result in the creation or
imposition of any Lien (other than the Liens created by the Security Documents)
on any asset of Holdings, any Company or any of their respective Subsidiaries.
SECTION 6.03. Binding Effect; Liens of Security Documents. (a) Each
of the Operative Documents to which any Company is a party (other than the
Notes) constitutes a valid and binding agreement of such Company, and each of
the Notes of such Company, when executed and delivered in accordance with this
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Agreement, will constitute valid and binding obligations of such Company, in
each case enforceable in accordance with its respective terms.
(b) Each of the Operative Documents to which Holdings is a party
constitutes a valid and binding agreement of Holdings, in each case enforceable
in accordance with its respective terms. The issuance of the Lender Interest
has been duly and validly authorized and, when issued and sold in accordance
with this Agreement, the Lender Interest will be duly and validly issued, fully
paid and nonassessable and free of preemptive rights.
(c) The Security Documents create valid security interests in, and
first mortgage Liens on, the Collateral purported to be covered thereby, which
security interests and mortgage Liens are and will remain perfected security
interests and mortgage Liens, prior to all other Liens other than Permitted
Liens. Each of the representations and warranties made by Holdings, any
Company or any of their respective Subsidiaries in the Security Documents is
true and correct.
SECTION 6.04. Financial Information. (a) The combined unaudited
balance sheet of National Cellular and TWI as of April 30, 1997 and the related
combined statement of operations, shareholders' equity and cash flows for the
three months then ended, copies of which have been delivered to each of the
Lenders, fairly present, in conformity with GAAP, the combined financial
position of National Cellular and TWI as of such date and their results of
operations, shareholders' equity and cash flows for the three months then
ended.
(b) The consolidated balance sheet of LTC and its Consolidated
Subsidiaries as of July 31, 1996 and the related statement of operations,
shareholder's equity and cash flows for the Fiscal Year then ended, reported on
by Ernst & Young LLP, copies of which have been delivered to each of the
Lenders, fairly present, in conformity with GAAP, the consolidated financial
position of LTC and its Consolidated Subsidiaries as of such date and its
operations, shareholder's equity and cash flows for such period.
(c) The unaudited consolidated balance sheet of LTC and its
Consolidated Subsidiaries as of April 30, 1997 and the related statements of
operations, shareholders' equity and cash flows for the nine months then ended,
copies of which have been delivered to each of the Lenders, fairly present, in
conformity with GAAP, the consolidated financial position of LTC and its
Consolidated Subsidiaries as of such date and its consolidated operations,
shareholders' equity and cash flows for the nine months then ended.
(d) The pro forma balance sheet of LTC as of April 30, 1997, copies
of which have been delivered to each of the Lenders, fairly presents, in
conformity
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with GAAP, the consolidated and consolidating financial position of LTC and its
Subsidiaries as of such date, adjusted to give effect (as if such events had
occurred on such date) to (i) the transactions contemplated by the LTC Merger
Documents, (ii) the making of the Loans and (iii) the payment of all legal,
accounting and other fees related thereto to the extent known at the time of
the preparation of such balance sheet. As of the date of such balance sheet
and the date hereof, neither any Company nor any of their respective
Subsidiaries had and has any material liabilities, contingent or otherwise,
including liabilities for taxes, long-term leases or forward or long-term
commitments, which are not properly reflected on such balance sheet.
(e) The information contained in the most recently delivered
Borrowing Base Certificate is complete and correct and the amounts shown
therein as "Eligible Receivables" and "Eligible Inventories" have been
determined as provided in the Financing Documents.
(f) Since April 30, 1997, there has been no material adverse change
in the business, operations, properties, prospects or condition (financial or
otherwise) of each Company and its Consolidated Subsidiaries, taken as a whole.
SECTION 6.05. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of any Company or Holdings threatened
against or affecting, Holdings, any Company or any of their respective
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, consolidated financial
position or consolidated results of operations of such Company and its
Consolidated Subsidiaries or which in any manner draws into question the
validity of any of the Operative Documents. There is no action, suit or
proceeding pending against, or to the knowledge of any Company or Holdings
threatened against or affecting, any party to any of the Operative Documents
(other than Holdings, any Company or any of their respective Subsidiaries)
before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity of any of the Operative
Documents.
SECTION 6.06. Ownership of Property, Liens. On and as of the LTC
Closing Date, after giving effect to the LTC Merger, each of Holdings, the
Companies and their respective Subsidiaries is the lawful owner of, has good
and marketable title to and is in lawful possession of, or has valid leasehold
interests in, all properties and other assets (real or personal, tangible,
intangible or mixed) purported to be owned or leased (as the case may be) by
Holdings, such Company or such Subsidiary on the balance sheet referred to in
Section 6.04(a), and none of its properties and assets is subject to any Liens,
except Permitted Liens. Holdings,
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each Company and their respective Subsidiaries conduct their business without
infringement or claim of infringement of any material license, patent,
trademark, trade name, service mark, copyright, trade secret or other
intellectual property right of others and there is no infringement or claim of
infringement by others of any material license, patent, trademark, trade name,
service mark, copyright, trade secret or other intellectual property right of
Holdings, any Company or any of their respective Subsidiaries.
SECTION 6.07. No Default. No Default or Event of Default has
occurred and is continuing and neither Holdings, any Company nor any of their
respective Subsidiaries is in default under or with respect to any material
contract, agreement, lease or other instrument to which it is a party or by
which its property is bound or affected.
SECTION 6.08. No Burdensome Restrictions. No contract, lease,
agreement or other instrument to which Holdings, any Company
or any of their respective Subsidiaries is a party or by which any of its
property is bound or affected, no charge, corporate restriction, judgment,
decree or order and no provision of applicable law or governmental regulation
is reasonably likely to have a material adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of each
Company and its Consolidated Subsidiaries, taken as a whole.
SECTION 6.09. Labor Matters. There are no strikes or other labor
disputes pending or, to the best knowledge of any Company, threatened, against
any Company or any of its Subsidiaries. Hours worked and payments made to the
employees of each Company and its Subsidiaries have not been in violation of
the Fair Labor Standards Act or any other applicable law dealing with such
matters. All payments due from any Company or any of its Subsidiaries, or for
which any claim may be made against any of them, on account of wages and
employee and retiree health and welfare insurance and other benefits have been
paid or accrued as a liability on their books, as the case may be. The
consummation of the transactions contemplated by the Financing Documents and
the other Operative Documents will not give rise to a right of termination or
right of renegotiation on the part of any union under any collective bargaining
agreement to which it is a party or by which it is bound.
SECTION 6.10. Subsidiaries; Other Equity Investments. None of
Holdings or any Company has any Subsidiaries on the date hereof other than, in
the case of Holdings, the Companies and, in the case of LTC, Merger Sub 1,
Merger Sub 2, Let's Talk Cellular of Bayside, Inc. and LTC Kiosk Management,
Inc. In the case of any additional corporate Subsidiaries formed by Holdings
or any Company after the LTC Closing Date, each of such corporate Subsidiaries
will
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be at each time that this representation is made or deemed to be made after the
LTC Closing Date, a wholly-owned Subsidiary of a Company that is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Neither Holdings, any Company nor any of
their respective Subsidiaries is engaged in any joint venture or partnership
with any other Person. The aggregate book value of the assets of all
Subsidiaries of LTC in which the Agent does not have, for the benefit of itself
and the Lenders, a valid and perfected first priority security interest does
not exceed $100,000.
SECTION 6.11. Investment Company Act. Neither Holdings, any Company
nor any of their respective Subsidiaries is an "investment company" as defined
in the Investment Company Act of 1940, as amended. The consummation of the
transactions contemplated by the Operative Documents do not and will not
violate any provision of such Act or any rule, regulation or order issued by
the Securities and Exchange Commission thereunder.
SECTION 6.12. Margin Regulations. None of the proceeds from the
Loans have been or will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any of the loans
under this Agreement to be considered a "purpose credit" within the meaning of
Regulation G, U or X of the Board of Governors of the Federal Reserve Board.
SECTION 6.13. Taxes All Federal, state and local tax returns,
reports and statements required to be filed by Holdings, any Company or any of
their respective Subsidiaries have been filed with the appropriate governmental
agencies in all jurisdictions in which such returns, reports and statements are
required to be filed, and all taxes (including real property taxes) and other
charges shown to be due and payable have been timely paid prior to the date on
which any fine, penalty, interest, late charge or loss may be added thereto for
nonpayment thereof. All state and local sales and use taxes required to be
paid by Holdings, any Company or any of their respective Subsidiaries have been
paid. All Federal and state returns have been filed by Holdings, the Companies
and their respective Subsidiaries for all periods for which returns were due
with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid in full or adequate provisions therefor have been made. National
Cellular's federal tax identification number is 75-1972784, TWI's federal tax
identification number is 65- 0712485, LTC's federal tax identification number
is 65-0292891 and Holdings' federal tax identification number is 65- 0719982.
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SECTION 6.14. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code with
respect to each Plan. No member of the ERISA Group has (i) sought a waiver of
the minimum funding standard under Section 412 of the Code in respect of any
Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Code or (iii) incurred any liability under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA.
SECTION 6.15. Brokers. No broker, finder or other intermediary has
brought about the obtaining, making or closing of the transactions contemplated
by the Operative Documents, and none of Holdings, LTC, National Cellular or TWI
has or will have any obligation to any Person in respect of any finder's or
brokerage fees in connection herewith or therewith.
SECTION 6.16. Related Transactions. The closing of the LTC Merger
will occur simultaneously with the making of the LTC Term Loan and the LTC
Working Capital Loan hereunder and no party has waived, without the consent of
the Required Lenders, any condition precedent to their obligations to close as
set forth in the LTC Merger Documents. True and complete copies of all of the
LTC Merger Documents have been delivered to each of the Lenders, together with
a true and complete copy of each document to be delivered at the closing of the
LTC Merger.
SECTION 6.17. Employment, Shareholders and Subscription Agreements.
Except for the Operative Documents and the other agreements described in
Schedule 6.17, true and complete copies of which have been delivered to the
Lenders, there are no (i) employment agreements covering the management of
Holdings, the Companies and their respective Subsidiaries, (ii) collective
bargaining agreements or other labor agreements covering any employees of
Holdings, any Company or any of their respective Subsidiaries, (iii)
agreements for managerial, consulting or similar services to which Holdings,
any Company or any of their respective Subsidiaries is a party or by which it
is bound or (iv) agreements regarding Holdings, the Companies and their
respective Subsidiaries, its assets or operations or any investment therein to
which any of its stockholders is a party or by which it is bound, including
without limitation any stock option plan or stock appreciation right plan.
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SECTION 6.18. Full Disclosure. None of the information (financial
or otherwise) furnished by or on behalf of Holdings, any Company or any of
their respective Subsidiaries to the Agent or any Lender in connection with the
consummation of the transactions contemplated by any of the Operative Documents
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading in the light of the circumstances under which such statements were
made. All financial projections delivered to the Lenders have been prepared on
the basis of the assumptions stated therein. Such projections represent
Holdings' best estimate of the future financial performance of Holdings, the
Companies and their respective Subsidiaries and such assumptions are believed
by the Companies to be fair in light of current business conditions.
SECTION 6.1. Representations and Warranties from Other Operative
Documents. As of the LTC Closing Date, each of the representations and
warranties made in the Operative Documents by each of the parties thereto is
true and correct in all material respects, and such representations and
warranties are hereby incorporated herein by reference with the same effect as
though set forth in their entirety herein, as qualified therein.
SECTION 6.20. Private Offering. Neither Holdings, any Company nor
any Person acting on its or their behalf has offered the Notes or the Lender
Interest or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any Person other than the Lenders and not more than ten other
institutional investors. Neither Holdings, any Company nor any Person acting
on its or their behalf has taken, or will take, any action which would subject
the issuance or sale of the Notes or the Lender Interest to Section 5 of the
Securities Act, other than as provided in the Equity Agreement.
SECTION 6.21. Compliance with Environmental Requirements; No
Hazardous Materials. After giving effect to the Acquisition and except for
liabilities of any Company and any Subsidiary resulting from the matters
described in Sections 6.21(a)-(e) of this Agreement that would not,
individually or in the aggregate, be reasonably likely to exceed $50,000:
(a) Other than generation in compliance with all applicable
Environmental Laws, no Hazardous Materials are located on any properties now or
previously owned, leased or operated by any Company or any of such Company's
Subsidiaries or have been released into the environment, or deposited,
discharged, placed or disposed of at, on, under or near any of such properties.
No portion of any such property is being used, or has been used at any previous
time, for the disposal, storage, treatment, processing or other handling of
Hazardous
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Materials (other than processing or handling incidental to the generation of
Hazardous Materials in compliance with all applicable Environmental Laws), nor
is any such property affected by any Hazardous Materials Contamination.
(b) No asbestos or asbestos-containing materials that would require
abatement or removal prior to demolition or renovation are present on any of
the properties now or previously owned, leased or operated by any Company or
any of such Company's Subsidiaries.
(c) No polychlorinated biphenyls are located on or in any properties
now or previously owned, leased or operated by any Company or any of such
Company's Subsidiaries, in the form of electrical transformers, fluorescent
light fixtures with ballasts, cooling oils or any other device or form.
(d) No underground storage tanks are located on any properties now
or previously owned, leased or operated by any Company or any of such Company's
Subsidiaries, or were located on any such property and subsequently removed or
filled.
(e) No notice, notification, demand, request for information,
complaint, citation, summons, investigation, administrative order, consent
order and agreement, litigation or settlement with respect to Hazardous
Materials or Hazardous Materials Contamination is in existence or, to any
Company's knowledge, threatened with respect to or in connection with the
operation of any properties now or previously owned, leased or operated by any
Company or any of such Company's Subsidiaries. All uses by any Company or any
of such Company's Subsidiaries of any now or previously owned, leased or
operated property comply and at all times have complied with applicable
Environmental Laws. The prior uses of all now or previously owned, leased or
operated properties have at all times complied with applicable Environmental
Laws. No property now or previously owned, leased or operated by any Company
or any of such Company's Subsidiaries, no property to which any materials
originating at or from any Company or any of such Company's Subsidiaries have
been sent, and no property to which any Company or any of such Company's
Subsidiaries has transported or arranged for the transportation of any material
is listed or, to any Company's knowledge, proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in
CERCLA) or on any similar federal, state or foreign list of sites requiring
investigation or cleanup, nor, to the knowledge of any Company, is any such
property threatened to be placed on any such list.
(f) There has been no environmental investigation, study, audit,
test, review or other analysis conducted of which any Company has knowledge in
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relation to the current or prior business of any Company or any property or
facility now or previously owned, leased or operated by any Company or any of
its Subsidiaries which has not been delivered to the Lenders at least five days
prior to the date hereof.
(g) For purposes of this Section 6.21, the terms "Company" and
"Subsidiary" shall include any business or business entity (including a
corporation) which is, in whole or in part, a predecessor of any Company
(including the Seller) or any Subsidiary of any Company.
SECTION 6.22. Initial Capitalization. Set forth on Schedule 6.22 is
a schedule of the initial capitalization of Holdings, LTC and each of LTC's
Subsidiaries, after giving effect to the transactions contemplated to take
place on the LTC Closing Date, specifying each class of interest held and the
amount and holder thereof.
SECTION 6.23. Real Property Interests. Except for the ownership,
leasehold or other interests set forth on Schedule 6.23, LTC and its
Subsidiaries have, as of the LTC Closing Date, no ownership, leasehold or other
interest in real property.
ARTICLE 7
AFFIRMATIVE COVENANTS
Each Company (and in the cases of Sections 7.01, 7.02, 7.05, 7.08,
7.09, 7.11 and 7.12, Holdings) agrees that, so long as any Lender has any
Commitment hereunder, any amount payable under any Note or any Reimbursement
Obligation remains unpaid or any Letter of Credit remains outstanding:
SECTION 7.01. Financial Statements and Other Reports. Each of the
Companies and Holdings will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with GAAP, and will deliver to each of
the Lenders:
(a) as soon as practicable and in any event within 45 days after the
end of each month, a consolidated and consolidating balance sheet of LTC and
its Consolidated Subsidiaries, as at the end of such month and the related
consolidated and consolidating statements of operations and cash flows for such
month, and for the portion of the Fiscal Year ended at the end of such month
setting forth in each case in comparative form the figures for the
corresponding
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periods of the previous Fiscal Year and the figures for such month and for such
portion of the Fiscal year ended at the end of such month set forth in the
annual operating and capital expenditure budgets and cash flow forecast
delivered pursuant to Section 7.01(k), all in reasonable detail and certified
by the chief financial officer of LTC as fairly presenting the financial
condition and results of operations of LTC and its Consolidated Subsidiaries,
and as having been prepared in accordance with GAAP applied on a basis
consistent with the audited financial statements of Holdings subject to changes
resulting from audit and normal year-end adjustments;
(b) (i) as soon as available and in any event within 120 days after
the end of each Fiscal Year, a consolidated and consolidating balance sheet of
LTC and its Consolidated Subsidiaries, as of the end of such Fiscal Year and
the related consolidated and consolidating statements of operations,
stockholders' equity and cash flows for such Fiscal Year, certified without
qualification by independent public accountants of nationally recognized
standing and setting forth in each case in comparative form the figures for the
previous Fiscal Year (other than for Fiscal Year 1995) and the figures for such
Fiscal Year set forth in the annual operating and capital expenditure budgets
and cash flow forecast delivered pursuant to Section 7.01(k) and (ii) as soon
as available and in any event by no later than September 30, 1997, a combined
balance sheet of NCI and TWI and their respective Consolidated Subsidiaries, as
of the end of the Fiscal Year ended December 31, 1996 and the related
consolidated and consolidating statements of operations, stockholders' equity
and cash flows for such Fiscal Year, certified without qualification by
independent public accountants of nationally recognized standing;
(c) (i) together with each delivery of financial statements pursuant to
(a) and (b) above, an Officers' Certificate of LTC stating that the officers
executing such certificate have reviewed the terms of this Agreement and have
made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of each Company and such Company's
Subsidiaries during the accounting period covered by such financial statements
and that such review has not disclosed the existence during or at the end of
such accounting period, and that such officers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any Default, or, if
any such Default existed or exists, specifying the nature and period of
existence thereof and what action any Company has taken or is taking or
proposes to take with respect thereto; (ii) together with each delivery of
financial statements for each month, fiscal quarter and Fiscal Year, a
compliance certificate of the chief financial officer or treasurer of LTC (x)
providing details of all transactions between each Company or any of its
Subsidiaries and any Person referred to in Section 8.08, (y) demonstrating in
reasonable detail compliance during and at the end of such accounting period
with
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the restrictions contained in Sections 8.11 through 8.17 and (z) if not
specified in the financial statements delivered pursuant to (a) or (b) above,
as the case may be, specifying the aggregate amount of interest paid or accrued
by LTC and its Subsidiaries and the aggregate amount of depreciation and
amortization charged, during such accounting period; and (iii) together with
each delivery of financial statements pursuant to (b) above, a statement
setting forth in reasonable detail the computation of Excess Cash Flow, if any,
for such Fiscal Year, certified by the chief financial officer of Holdings as
having been prepared from such financial statements in accordance with this
Agreement;
(d) together with each delivery of financial statements pursuant to
(b) above, a written statement by the independent public accountants giving the
report thereon (i) stating that their audit examination has included a review
of the terms of this Agreement as it relates to accounting matters, (ii)
stating whether, in connection with their audit examination, any Default has
come to their attention, and if such a condition or event has come to their
attention, specifying the nature and period of existence thereof, and (iii)
stating that based on their annual audit examination nothing has come to their
attention which causes them to believe that the information contained in the
certificates delivered therewith pursuant to (c) above is not correct and that
the matters set forth in the compliance certificate delivered therewith
pursuant to clause (ii) of (c) above for the applicable Fiscal Year are not
stated in accordance with the terms of this Agreement;
(e) promptly upon receipt thereof, copies of all reports submitted
to any Company by independent public accountants in connection with each
annual, interim or special audit of the financial statements of any Company,
made by such accountants, including the comment letter submitted by such
accountants to management in connection with their annual audit;
(f) promptly upon their becoming available, copies of (i) all
financial statements, reports, notices and proxy statements sent or made
available generally by Holdings or any Company to its security holders, (ii)
all regular and periodic reports and all registration statements and
prospectuses filed by Holdings or any Company with any securities exchange or
with the Securities and Exchange Commission or any governmental authority
succeeding to any of its functions and (iii) all press releases and other
statements made available generally by Holdings or any Company to the public
concerning material developments in the business of Holdings or any Company;
(g) promptly upon any officer of Holdings or any Company obtaining
knowledge (i) of the existence of any Default, or becoming aware that the
holder of any Debt of Holdings, any Company or any of their respective
Subsidiaries has given any notice or taken any other action with respect to a
claimed default
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thereunder, (ii) of any change in LTC's certified accountant or any
resignation, or decision not to stand for re-election, by any member of LTC's
board of directors, (iii) that any Person has given any notice to Holdings or
any Company or taken any other action with respect to a claimed default under
any agreement or instrument (other than the Financing Documents) to which
Holdings, any Company or any of their respective Subsidiaries is a party or by
which any of their assets are bound or (iv) of the institution of any
litigation or arbitration involving an alleged liability of Holdings, any
Company or any of their respective Subsidiaries equal to or greater than
$250,000 or any adverse determination in any litigation or arbitration
involving a potential liability of Holdings, any Company or any of their
respective Subsidiaries equal to or greater than $100,000, an Officers'
Certificate of Holdings specifying the nature and period of existence of any
such condition or event, or specifying the notice given or action taken by such
holder or Person and the nature of such claimed default (including any
Default), event or condition, and what action Holdings or any Company has
taken, is taking or proposes to take with respect thereto;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a
copy of such notice; (iv) applies for a waiver of the minimum funding standard
under Section 412 of the Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer of
LTC setting forth details as to such occurrence and action, if any, which LTC
or applicable member of the ERISA Group is required or proposes to take;
(i) simultaneously with the financial statements referred to in (a)
above, operating plans and financial forecasts, including cash flow projections
covering
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proposed fundings, repayments, additional advances, investments and other cash
receipts and disbursements, as prepared from time to time by the management of
Holdings or any Company for internal use;
(j) copies of any reports or notices related to taxes and any other
material reports or notices received by Holdings or any Company from, or filed
by Holdings or any Company with, any Federal, state or local governmental
agency or body regulating the activities of Holdings or any Company, as the
case may be;
(k) within 30 days prior to the conclusion of each Fiscal Year,
LTC's annual operating and capital expenditure budgets and cash flow forecast
for the following Fiscal Year presented on a monthly basis, which shall be in a
format reasonably consistent with projections, budgets and forecasts
theretofore provided to the Lenders;
(l) together with each Notice of Borrowing and on the first Business
Day of each week (unless the Companies have delivered a Borrowing Base
Certificate as of a Business Day during the next preceding week), a Borrowing
Base Certificate as of the close of business of the next preceding Business
Day;
(m) within two Business Days after any request therefor, such
information in such detail concerning the amount, composition and manner of
calculation of the Borrowing Base as any Lender may reasonably request;
(n) within ten days after the end of each calendar month, a report,
in form and substance acceptable to the Required Lenders, as to all accounts
receivable of any Company outstanding as of the last day of such month (a
"Receivables Report"), which shall set forth in summary form an aging of such
receivables and a summary by account debtor of the warranty claims made by such
account debtor and the percentage that such warranty claims represent of all
receivables due from such account debtor, and which shall, if any Lender so
requests, include a detailed aged trial balance of all such receivables
specifying the names, addresses, face amount and dates of all invoices for each
account debtor obligated on a receivable so listed; upon the request of any
Lender and to the extent available, each Receivables Report shall be
accompanied by copies of customer statements, and all documents, including
repayment histories and present status reports, relating to the receivables so
scheduled and such other matters and information relating to the status of any
receivables as any Lender shall reasonably request;
(o) together with the next delivery of a Receivables Report after
any Company becomes aware thereof, notice of any dispute between any account
debtor and such Company with respect to any amounts due and owing in excess of
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$50,000, with an explanation in reasonable detail of the reason for the
dispute, all claims related thereto and the amount in controversy;
(p) within 10 days after the end of each calendar month, a
calculation of the daily average amount during the month then ended of (i) the
aggregate amount available for drawing under all outstanding Letters of Credit
(whether or not any conditions to drawing can then be met) and (ii) the
aggregate unreimbursed amount payable to the LC Issuer (either by any Company
or by the Lenders) in respect of previous drawings under all outstanding
Letters of Credit; and
(q) with reasonable promptness, such other information and data with
respect to Holdings, any Company or any of their respective Subsidiaries as
from time to time may be reasonably requested by any Lender.
SECTION 7.2. Payment of Obligations. Each of Holdings and the
Companies (i) shall pay and discharge, and each Company will cause each of its
Subsidiaries to pay and discharge, at or before maturity, all of its material
obligations and liabilities, including tax liabilities, except where the same
may be the subject of a Permitted Contest, (ii) shall maintain, and any
Company will cause each of its Subsidiaries to maintain, in accordance with
GAAP, appropriate reserves for the accrual of any of the same and (iii) shall
not breach, and each Company shall not permit any of its Subsidiaries to
breach, in any material respect, or permit to exist any material default under,
the terms of any lease, commitment, contract, instrument or obligation to which
it is a party, or by which its properties or assets are bound.
SECTION 7.03. Conduct of Business and Maintenance of Existence.
Each Company will continue, and will cause each of its Subsidiaries to
continue, to engage in business of the same general type as now conducted by
such Company and its Subsidiaries, and will preserve, renew and keep in full
force and effect, and will cause each of its Subsidiaries to preserve, renew
and keep in full force and effect their respective corporate existence and
their respective rights, privileges and franchises necessary or desirable in
the normal conduct of business.
SECTION 7.04. Maintenance of Property; Insurance(a). Each Company
and its Subsidiaries will keep all property useful and necessary in its
business in good working order and condition, ordinary wear and tear excepted.
(b) Each Company will maintain, and such Company will cause each of
its Subsidiaries to maintain, (i) physical damage insurance on all real and
personal property on an all risks basis (not including the perils of flood and
quake), covering the actual cash value of all such property and consequential
loss coverage for business interruption and extra expense, covering such risks,
for amounts not less than those, and with deductible amounts not greater than
those, set forth in Part I of Schedule 7.04, (ii) public liability insurance
(including products/ completed operations liability coverage) covering such
risks, for amounts not less
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than those, and with deductible amounts not greater than those, set forth in
Part II of Schedule 7.04 and (iii) such other insurance coverage in such
amounts and with respect to such risks as the Required Lenders may reasonably
request. All such insurance shall be provided by insurers having an A.M. Best
policyholders rating of not less than B+ or such other insurers as the Required
Lenders may approve in writing.
(c) On or prior to the LTC Closing Date, each Company shall cause
the Agent to be named as an additional insured and loss payee on each insurance
policy required to be maintained pursuant to this Section 7.04. LTC will
deliver to the Lenders on the LTC Closing Date, a certificate from its
insurance broker dated such date showing the amount of coverage as of such
date, and certifying that, in the opinion of such broker, such amounts are
reasonable and customary for companies of established repute engaged in the
same or a similar business, that such policies will include effective waivers
(whether under the terms of any such policy or otherwise) by the insurer of all
claims for insurance premiums against all loss payees and additional insureds
and all rights of subrogation against all loss payees and additional insureds,
and that if all or any part of such policy is canceled, terminated or expires,
the insurer will forthwith give notice thereof to each additional insured and
loss payee and that no cancellation, reduction in amount or material change in
coverage thereof shall be effective until at least 30 days after receipt by
each additional insured and loss payee of written notice thereof. Each Company
will deliver to the Lenders (i) upon the request of any Lender through the
Agent from time to time full information as to the insurance carried, (ii)
within five days of receipt of notice from any insurer, a copy of any notice of
cancellation, nonrenewal or material change in coverage from that existing on
the date of this Agreement and (iii) forthwith, notice of any cancellation or
nonrenewal of coverage by such Company.
(d) Any proceeds in excess of $200,000 from any Casualty Insurance
Policy which are payable to the insured in respect of any claim, or any
condemnation award or other compensation in respect of a condemnation (or any
transfer or disposition of property in lieu of condemnation) for which any
Company or any of its Subsidiaries receives a condemnation award or other
compensation in excess of $50,000, shall be paid to the Agent to be held,
applied or released for application in accordance with Section 5 of the Company
Security Agreement, and each Casualty Insurance Policy shall provide that all
insurance proceeds in excess of $50,000 per claim which are payable to the
insured shall be adjusted with and payable to the Agent or such Company, as the
case may be. Each Company hereby appoints the Agent as its attorney-in-fact to
make proof of loss, claim for insurance and adjustments with insurers, and to
execute or endorse
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all documents, checks or drafts in connection with payments under Casualty
Insurance Policies.
SECTION 7.05. Compliance with Laws. Each of Holdings and the
Companies will comply, and each Company will cause each of its Subsidiaries to
comply, in all material respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including
Environmental Laws and ERISA and the rules and regulations thereunder).
SECTION 7.06. Inspection of Property, Books and Records. Each
Company and Holdings will keep, and each Company will cause each of its
Subsidiaries to keep, proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to its business and activities; and each Company and Holdings will permit, and
each Company will cause each of its Subsidiaries to permit, representatives of
any Lender at such Lender's expense to visit and inspect any of its properties,
to examine and make abstracts or copies from any of its books and records, to
conduct a collateral audit and analysis of its inventories and accounts
receivable and to discuss its affairs, finances and accounts with its officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
SECTION 7.07. Use of Proceeds. LTC will use the proceeds of Loans
borrowed on the LTC Closing Date solely for (i) payment of amounts due under
the LTC Merger Documents and transaction fees incurred in connection with the
Operative Documents and (ii) repayment of outstanding obligations of LTC
pursuant to Section 5.01(r). Working Capital Loans borrowed after the LTC
Closing Date shall be used by each Company solely for (x) working capital needs
of such Company and its Subsidiaries and (y) for capital expenditures in
connection with the opening of new stores. None of such proceeds will be used
in violation of any applicable law or regulation.
SECTION 7.08. Further Assurances. Each of Holdings and the
Companies will, and each Company will cause each of its Subsidiaries to, at its
own cost and expense, cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances (x)
as may from time to time be necessary or as the Required Lenders may from time
to time request in order to carry out the intent and purposes of the Financing
Documents and the transactions contemplated thereby, including all such actions
to establish, preserve, protect and perfect the estate, right, title and
interest of the Lenders to the Collateral (including Collateral acquired after
the date hereof), including first priority Liens thereon, subject only to
Permitted Liens and (y) as the Required Lenders may from time to time request,
to establish, preserve, protect
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and perfect first priority Liens in favor of the Lenders on any and all assets
of Holdings, the Companies and their respective Subsidiaries, now owned or
hereafter acquired, that are not Collateral on the date hereof. Each Company
shall promptly give notice to the Agent of the acquisition after the LTC
Closing Date by such Company or any of its Subsidiaries of any real property
(including leaseholds in respect of real property), trademark, copyright or
patent.
SECTION 7.09. Board Meetings. Each Company will notify the Lenders
of all meetings and actions by written consent of the board of directors of
each of Holdings and such Company and each committee thereof at the same time
and in the same manner as notice of any meetings of such board or committee is
required to be given to its directors who do not waive such notice (or, if such
action requires no notice or notice is waived by the Board, then two days
written notice thereof describing the matters upon which action is to be
taken). All meetings of the board of directors of each Company other than LTC
or each committee thereof shall be held on the same day and in the same
location as the analogous meeting of the board of directors of each of LTC or
relevant committee thereof, as the case may be. The Lenders shall have the
right at their cost to send two representatives selected by them to each such
meeting, who shall be permitted to attend such meeting and any adjournments
thereof (other than any portion of such meeting devoted to discussion of the
Lenders).
SECTION 7.10. Lenders' Meetings. Within 45 days after the end of
each fiscal quarter, each Company will conduct a meeting of the Lenders to
discuss such fiscal quarter's results and the financial condition of such
Company at which shall be present the chief executive officer and the chief
financial officer of each Company and such other officers of such Company as
such Company's chief executive officer shall designate. Such meetings shall be
held at a time and place convenient to the Lenders and such Company. Each of
the Lenders agrees that any Company's chief executive office on the LTC Closing
Date is convenient to the Lenders.
SECTION 7.11. Consummation of the Acquisition. Each of the
Companies and Holdings will cause the closing of the LTC Merger to occur
concurrently with the making of the Loans on the LTC Closing Date, and will not
without the prior written consent of the Required Lenders waive any condition
to its obligations to consummate the LTC Merger.
SECTION 7.12. Hazardous Materials; Remediation. Each Company will
(i) promptly give notice to the Lenders in writing of any complaint, order,
citation, notice or other written communication from any Person with respect
to, or if such Company becomes aware of, (x) the existence or alleged existence
of a violation of any applicable Environmental Law or the incurrence of any
liability, obligation,
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loss, damage, cost, expense, fine, penalty or sanction or the requirement to
commence any remedial action resulting from or in connection with any air
emission, water discharge, noise emission, Hazardous Material or any other
environmental, health or safety matter at, upon, under or within any of the
properties now or previously owned, leased or operated by such Company or any
of its Subsidiaries, or due to the operations or activities of such Company,
any Subsidiary of such Company or any other Person on or in connection with any
such property or any part thereof or (y) any release on any of such properties
of Hazardous Materials in a quantity that is reportable under any applicable
Environmental Law; (ii) promptly comply with any governmental requirements
requiring the removal, treatment or disposal of such Hazardous Materials or
Hazardous Materials Contamination and provide evidence satisfactory to the
Required Lenders of such compliance; and (iii) provide the Lenders, within 30
days after demand therefor by the Required Lenders, with a bond, letter of
credit or similar financial assurance evidencing to the satisfaction of the
Required Lenders that sufficient funds are available to pay the cost of
removing, treating and disposing of such Hazardous Materials or Hazardous
Materials Contamination and discharging any assessment which may be established
on any such property as a result thereof.
SECTION 7.13. Collateral Reports. Each Company shall keep accurate
and complete records of its accounts receivable in at least so much detail as
to enable such Company to provide the Receivables Reports and other information
described in Section 7.01.
SECTION 7.14. Collections; Right to Notify Account Debtors. At any
time following the occurrence of an Event of Default and during the continuance
thereof, in addition to the Lenders' rights under the Security Documents, each
Company hereby authorizes the Agent, at any time, to (i) notify any or all
account debtors that the accounts receivable of such Company and its
Subsidiaries have been assigned to the Agent and that the Agent has a security
interest therein and (ii) direct such account debtors to make all payments due
from them to such Company upon such accounts receivable directly to the Agent
or to a Lockbox designated by the Agent. The Agent shall promptly furnish such
Company with a copy of any such notice sent. Any such notice, in the Agent's
sole discretion, may be sent on such Company's stationery, in which event such
Company shall, if requested by the Agent, co-sign such notice with the Agent.
SECTION 7.15. Enforcement of Covenants Not to Compete. Each Company
shall preserve, protect and defend, to the extent permitted by applicable law
and commercially reasonable, all of its rights, if any, with respect to any
covenant not to compete contained in any of the material contracts of such
Company or contained in any employment agreement with any employee whose
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annual salary and other compensation payable by such Company and its
Subsidiaries is $100,000 or more.
SECTION 7.16. Landlord and Warehouseman Waivers. Each Company shall
use its best efforts to (i) deliver to the Agent waivers of contractual and
statutory landlord's, landlord's mortgagee's and warehouseman's Liens in form
and substance satisfactory to the Agent under each existing lease, warehouse
agreement or similar agreement (other than leases with respect to retail mall
locations) to which such Company or any of its Subsidiaries is a party and (ii)
incorporate such waivers when the existing lease, warehouse agreement or
similar agreement (other than leases with respect to retail mall locations) is
amended, renewed or extended; provided that such Company will obtain waivers of
both contractual and statutory landlord's, landlord's mortgagee's and
warehouseman's Liens in form and substance satisfactory to the Agent in
connection with each new lease, warehouse agreement or similar agreement (other
than leases with respect to retail mall locations) entered into by such Company
or any of its Subsidiaries. Without limiting the obligations of such Company
under this Section 7.17, it is understood and agreed that any Inventory that is
subject to a landlord's, landlord's mortgagee's or warehouseman's Lien or any
other Lien not created by the Security Documents shall not be included in
Eligible Inventories.
ARTICLE 8
NEGATIVE COVENANTS
Each Company (and, in the case of Sections 8.03, 8.05, 8.09, 8.10,
8.11, 8.12, 8.14, 8.15, 8.16 and 8.19, Holdings) agrees that, so long as any
Lender has any Commitment hereunder, any amount payable under any Note or any
Reimbursement Obligation remains unpaid or any Letter of Credit remains
outstanding:
SECTION 8.1. Debt. Each Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee or otherwise become or remain directly or indirectly liable with
respect to, any Debt, except for:
(a) Debt of such Company outstanding on the date of this Agreement
as set forth in Schedule 8.01;
(b) Debt of such Company under the Financing Documents;
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(c) Debt of such Company or any of its Subsidiaries incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
any asset (including through Capital Leases), in an aggregate principal amount
at any time outstanding not greater than $300,000;
(d) Debt of such Company or any of its Subsidiaries to a
wholly-owned Subsidiary of such Company, or of any Subsidiary of such Company
to such Company; and
(e) in the case of LTC, Debt of such Company consisting of Capital
Leases incurred for the purpose of financing the cost of leasing management
information systems, in an aggregate principal amount at any time outstanding
not greater than $650,000; and
(f) Debt of such Company under the Seller Subsidiary Guaranties.
SECTION 8.2. Negative Pledge. Each Company will not, and will not
permit any of its Subsidiaries to, create, assume or suffer to exist any Lien
on any asset now owned or hereafter acquired by it, except:
(a) any Lien on any asset securing Debt permitted under Section
8.01(c) incurred or assumed for the purpose of financing all or any part of the
cost of acquiring such asset, provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition thereof;
(b) Liens existing on the date of this Agreement securing Debt or
other obligations outstanding on such date permitted by Section 8.01(a) in an
aggregate principal amount not exceeding $1,750,000;
(c) Liens in favor of vendors to any Company on Inventory securing
trade payables in an aggregate amount outstanding not to exceed $2,500,000 at
any time; provided that at no time on or after June 30, 1997 shall any such
Lien in favor of any vendor extend to any asset of any Company other than
Inventory supplied by such vendor;
(d) Liens arising in the ordinary course of its business which (i)
do not secure Debt, (ii) do not secure any obligation in an amount exceeding
$50,000 and (iii) do not in the aggregate materially detract from the value of
its assets or materially impair the use thereof in the operation of its
business; and
(e) Liens created by the Security Documents.
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SECTION 8.03. Capital Stock. Each Company will not, and will not
permit any of its Subsidiaries to, issue any shares of capital stock except (i)
shares of capital stock issued by any of its Subsidiaries to such Company and
shares of capital stock of such Company issued to Holdings or (ii) shares of
capital stock of LTC issued pursuant to the IPO; provided that LTC shall prepay
the Term Notes pursuant to Section 2.04(b). Holdings shall not issue any
equity security that under the Partnership Agreement is entitled to a
preference over the Partnership Interests as to payment of dividends or
distributions.
SECTION 8.04. Restricted Payments. Each Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, declare, order,
pay, make or set apart any sum for any Restricted Payment; provided that the
foregoing shall not restrict or prohibit dividends or distributions from such
Company to Holdings at such times and in such amounts as are necessary to
permit:
(i) purchases or redemptions of the Lender
Interest under the terms of the Equity Agreement;
(ii) payment of taxes and de minimis
administrative expenses payable by Holdings in the ordinary
course, so long as before and after giving effect to any such
dividend or distribution for such purpose, no Default shall have
occurred and be continuing;
(iii) distributions to partners of Holdings at the
timed and in the amounts necessary to enable them to pay their
respective federal, state and local tax liabilities in respect
of the taxable income of Holdings (but in no event at a rate
higher than the amounts payable by such partners assuming the
then-highest federal, state and local tax rates applicable to
corporations in the applicable jurisdiction); and
(iv) payments of interest and principal on the
Seller Note and the Employment Agreement to the extent permitted
by Section 8.18.
SECTION 8.05 ERISA. Holdings and each Company will not,
and each Company will not permit any of its Subsidiaries to:
(a) engage in any transaction in connection with which Holdings or
any of its Subsidiaries could be subject to any material liability arising from
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code;
(b) terminate any Plan in a manner, or take any other action, which
could result in any material liability of any member of the ERISA Group to the
PBGC;
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(c) fail to make full payment when due of all amounts which, under
the provisions of any Plan, it is required to pay as contributions thereto, or
permit to exist any accumulated funding deficiency, whether or not waived, with
respect to any Plan;
(d) permit the present value of all benefit liabilities under all
Plans to exceed the fair market value of the assets of such Plans; or
(e) fail to make any payments to any Multiemployer Plan that it may
be required to make under any agreement relating to such Multiemployer Plan or
any law pertaining thereto.
SECTION 8.06. Consolidations, Mergers and Sales of Assets. Each
Company will not, and will not permit any of its Subsidiaries to, (i)
consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, any of its or their assets, other
than (a) sales of inventory in the ordinary course of their respective
businesses, (b) dispositions of Temporary Cash Investments, (c) exchanges of
equipment for replacement equipment in the ordinary course of business, and (d)
dispositions for cash and fair value of assets that the board of directors of
such Company determines in good faith are no longer used or useful in the
business of such Company and its Subsidiaries, provided that immediately after
any such disposition, the aggregate fair market value of all such assets
disposed of pursuant to this clause (d) during the Fiscal Year in which such
disposition is made does not exceed $250,000.
SECTION 8.07. Purchase of Assets, Investments. Each Company will
not, and will not permit any of its Subsidiaries to, acquire any assets other
than in the ordinary course of business. Each Company will not, and will not
permit any of its Subsidiaries to, make, acquire or own any Investment in any
Person other than (a) Temporary Cash Investments and (b) Investments in its
Subsidiaries made after the date hereof in an aggregate amount not exceeding
$100,000. Without limiting the generality of the foregoing, each Company will
not, and will not permit any of its Subsidiaries to, (i) acquire or create any
Subsidiary without (x) the consent of the Required Lenders and (y) arrangements
satisfactory to the Required Lenders for a pledge of the stock of such
Subsidiary to the Agent for the benefit of the Lenders and a guaranty by such
Subsidiary of the obligations of such Company hereunder or (ii) engage in any
joint venture or partnership with any other Person.
SECTION 8.08. Transactions with Affiliates. Each Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
such Company, any
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stockholder of Holdings or such Company or any affiliate of any such
stockholder on terms that are less favorable to such Company or such
Subsidiary, as the case may be, than those which might be obtained at the time
from a Person who is not an Affiliate of such Company, a stockholder of
Holdings or an affiliate of such stockholder, as the case may be; provided that
each Company shall be permitted to (i) to make payments to Holdings to the
extent permitted by Section 8.04 and (ii) pay fees to H.I.G. Capital
Management, Inc. to the extent permitted by Section 8.16.
SECTION 8.09. Amendments or Waivers. Without the prior written
consent of the Required Lenders, none of Holdings and the Companies will, nor
will any of them permit any Subsidiary of any Company to, agree to (i) any
amendment to or waiver of or in respect of any Operative Document or (ii) any
other material amendment to or waiver of any material contract constituting a
part of the Collateral.
SECTION 8.10. Fiscal Year. None of National Cellular, TWI, LTC or
Holdings shall change its fiscal year from a fiscal year ending July 31.
SECTION 8.11. Capital Expenditures. (a) The aggregate amount of
Consolidated Capital Expenditures of LTC for the period commencing on the LTC
Closing Date and ending on July 31, 1997 shall not exceed $1,400,000.
(b) The aggregate amount of Consolidated Capital Expenditures of LTC
for the Fiscal Year ending July 31, 1998 shall not exceed $4,000,000.
(c) The aggregate amount of Consolidated Capital Expenditures of LTC
for the Fiscal Year ending July 31, 1999 shall not exceed the lesser of (i)
$4,000,000 and (ii) an amount equal to the sum of (x) $2,000,000 plus (y) an
amount equal to 70% of the excess (if any) of EBITDA of LTC for the prior
Fiscal Year over the minimum EBITDA of LTC for such prior Fiscal Year as
required pursuant to Section 8.14(b)(iv).
(d) The aggregate amount of Consolidated Capital Expenditures of LTC
for the Fiscal Year ending July 31, 2000 and for each Fiscal Year thereafter
shall not exceed the lesser of (i) $4,000,000 and (ii) an amount equal to the
sum of (x) $1,700,000 plus (y) for any Fiscal Year, an amount equal to 70% of
the excess (if any) of EBITDA of LTC for the prior Fiscal Year over the minimum
EBITDA of LTC for such prior Fiscal Year as required pursuant to Section
8.14(b)(iv).
For purposes of this Section 8.11, (x) to the extent that the amount
of Consolidated Capital Expenditures of LTC in any Fiscal Year are less than
the amount set forth above, the amount of Consolidated Capital Expenditures of
LTC
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otherwise permitted to be made in the immediately succeeding Fiscal Year (the
"Current Amount") (but not for any other subsequent year) will be increased by
the amount of such shortfall (the "Capital Expenditure Carryforward Amount")
and (y) Consolidated Capital Expenditures of LTC expended, incurred or accrued
during any Fiscal Year shall be applied, first, against, the Current Amount and
second, against the Capital Expenditure Carryforward Amount for such Fiscal
Year.
SECTION 8.12. Total Debt Coverage Ratio. (a) The ratio of (x)
Consolidated Free Cash Flow of LTC to (y) Total Debt Service of LTC for each
period commencing on August 1, 1997 and ending on each of October 31, 1997,
January 31, 1998 and April 30, 1998 shall not be less than 1.1 to 1.0.
(b) The ratio of (x) Consolidated Free Cash Flow of LTC to (y) Total
Debt Service of LTC for the four consecutive fiscal quarters ending the last
date of each fiscal quarter of LTC, commencing with July 31, 1998, shall not be
less than 1.1 to 1.0.
SECTION 8.13. Lease Payments. Each Company will not, and will not
permit any of its Subsidiaries to, incur or assume (whether pursuant to a
Guarantee or otherwise) any liability for rental payments under a lease with a
lease term (as defined in Financial Accounting Standards Board Statement No.
13, as in effect on the date hereof) of one year or more if, after giving
effect thereto, the aggregate amount of minimum lease payments that such
Company and its Consolidated Subsidiaries have so incurred or assumed will
exceed, on a consolidated basis, (i) in the case of the Fiscal Year ending July
31, 1997, $7,000,000 for such Fiscal Year under all such leases (excluding
Capital Leases), (ii) in the case of the Fiscal Year ending July 31, 1998,
$3,750,000 for such Fiscal Year under all such leases that are New Leases
(excluding Capital Leases), and (iii) in the case of any Fiscal Year ending
after July 31, 1998, the Permitted Amount for such Fiscal Year under all such
leases that are New Leases (excluding Capital Leases).
For purposes of this Section:
(a) the amount of liability for rental payments under any New Lease
in any Fiscal Year consisting of, or consisting of a renewal of, an operating
lease existing prior to the first day of such Fiscal Year shall be the amount,
if any, by which the amount of liability for rental payments under such New
Lease for such Fiscal Year exceeds 110% of the amount of liability for rental
payments under such New Lease for the Fiscal Year of the Companies most
recently ended prior to the date on which such New Lease became a New Lease;
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(b) "Permitted Amount" means, (i) with respect to the Fiscal Year
ending July 31, 1999, an amount equal to the lesser of (x) $4,000,000 and (y)
the Available Excess Amount for such Fiscal Year, (ii) with respect to the
Fiscal Year ending July 31, 2000, an amount equal to the lesser of (x)
$4,250,000 and (y) the Available Excess Amount for such Fiscal Year, (iii) with
respect to the Fiscal Year ending July 31, 2001, an amount equal to the lesser
of (x) $4,500,000 and (y) the Available Excess Amount for such Fiscal Year,
(iv) with respect to the Fiscal Year ending July 31, 2002, an amount equal to
the lesser of (x) $4,750,000 and (y) the Available Excess Amount for such
Fiscal Year, and (v) with respect to the Fiscal Year ending July 31, 2003, an
amount equal to the lesser of (x) $5,000,000 and (y) the Available Excess
Amount for such Fiscal Year; and
(c) "Available Excess Amount" means, with respect to any Fiscal
Year, an amount equal to the sum of (A) the lesser of (1) $2,000,000 and (2) an
amount equal to the excess (if any) of EBITDA of LTC for the prior Fiscal Year
over the minimum EBITDA of LTC for such prior Fiscal Year required pursuant to
Section 8.14(b)(iv), plus (B) an amount equal to 200% of the excess (if any) of
EBITDA of LTC for the prior Fiscal Year over the sum of $2,000,000 plus the
minimum EBITDA of LTC for such prior Fiscal Year required pursuant to Section
8.14(b)(iv).
SECTION 8.14. Minimum EBITDA. (a) EBITDA for the period commencing
on the LTC Closing Date and ending on October 31, 1997 shall not be less than
$1,100,000.
(b) EBITDA for the period commencing on August 1, 1997 and ending
on January 31, 1998 shall not be less than $2,500,000.
(c) EBITDA for the period commencing on August 1, 1997 and ending
on April 30, 1998 shall not be less than $4,000,000.
(d) EBITDA for the four consecutive fiscal quarters ending on a
date set forth below shall not be less than the corresponding amount set forth
below opposite such date:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
07/31/1998 $5,200,000
10/31/1998 $5,350,000
01/31/1999 $5,500,000
04/30/1999 $5,650,000
</TABLE>
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<TABLE>
<S> <C>
07/31/1999 $5,800,000
10/31/1999 $5,950,000
01/31/2000 $6,100,000
04/30/2000 $6,250,000
07/31/2000 $6,400,000
10/31/2000 $6,550,000
01/31/2001 and the last day of $6,700,000
each fiscal quarter thereafter
</TABLE>
SECTION 8.15. Limitations on Activities by Holdings. Holdings
shall not, directly or indirectly, (i) enter into or permit to exist any
transaction or agreement (including any agreement for incurrence or assumption
of Debt, any purchase, sale, lease or exchange of any property or the rendering
of any service), between itself and any other Person, other than (x) the
Operative Documents to which it is a party (the "Holdings Documents"), or (y)
the incurrence of Debt to any Company to finance the redemption of the Lender
Interest in accordance with the terms of the Equity Agreement, (ii) engage in
any business or conduct any activity (including the making of any Investment or
payment) or transfer any of its assets, other than the making of the
Investments in the Companies and the performance of the Holdings Documents in
accordance with the terms thereof and performance of ministerial activities and
payment of taxes and administrative fees necessary for compliance with the next
succeeding sentence or (iii) consolidate or merge with or into any other
Person. Holdings shall preserve, renew and keep in full force and effect its
partnership existence and any rights, privileges and franchises necessary or
desirable in the conduct of its business, and shall comply in all material
respects with all material applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities, provided that Holdings may terminate
any such right, privilege or franchise (other than its partnership existence)
if the board of directors of its general partner in good faith determines that
such termination is in the best interests of Holdings and not materially
disadvantageous to the Lenders.
SECTION 8.16. Investor Affiliate Fees. Each Company shall not and
shall not permit any of its Subsidiaries to, directly or indirectly, pay or
become obligated to pay any fees or other amounts to or for the account of
H.I.G. Capital Management, Inc. or any of its Affiliates except, so long as no
Default is then continuing or would result therefrom, pursuant to the
Consulting Agreement, which fees or amounts, so long as no Default is then
continuing or would result therefrom, may be increased by an aggregate amount
equal to $100,000 per year.
SECTION 8.17. Subordinated Obligations. Neither Holdings nor any
Company shall permit, nor shall such Company suffer any of its Subsidiaries to,
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purchase, redeem, retire, defease or otherwise acquire for value, deposit any
monies with any Person with respect to, or make any payment or prepayment of
the principal of or interest on, or any other amount owing in respect of, any
Debt outstanding under the Seller Note or any obligation owing to the Seller
pursuant to the Employment Agreement other than scheduled payments of principal
of or interest on such Debt or obligation, as the case may be, required
pursuant to the terms thereof; provided that (i) any such payment shall be
permitted only if no Default, in the case of payment under the Seller Note, and
no Default pursuant to Section 8.14, in the case of payment under the
Employment Agreement, shall have occurred and be continuing at the time of such
payment and (ii) no payment shall be made pursuant to Section 3(b) of the
Employment Agreement unless Adjusted EBIT (as defined in the Seller Note) for
the twelve months ended December 31, 1997 equals or exceeds $4,000,000.
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.1. Events of Default. If any one or more of the
following events (hereinafter called "Events of Default") shall occur and be
continuing for any reason whatsoever (whether voluntary or involuntary, by
operation of law or otherwise):
(a) any Company shall fail to pay any principal on any Note or any
Reimbursement Obligation when due, or shall fail to pay any interest or premium
on any Note, or any fees or any other amount payable hereunder within three
Business Days after the due date thereof;
(b) any Company shall fail to observe or perform any covenant
contained in Section 7.01(a), 7.01(b), 7.01(c) or 7.14, or Article 8 hereof, or
Section 5 or Sections 4(A), (E) or (I) of the Company Security Agreement, or
Holdings shall fail to perform any covenant contained in Article 8 hereof or
Section 3(B) of the Holdings Pledge Agreement, or HIG shall fail to perform any
covenant contained in Section 3(B) of the HIG Pledge Agreement;
(c) any Company or any of such Company's Subsidiaries or Holdings
shall fail to observe or perform any covenant or agreement contained in the
Financing Documents (other than those covered by clause (a) or (b) above) for
10 days after notice thereof has been given to LTC by the Agent;
(d) any representation, warranty, certification or statement made by
any Company or Holdings in any Financing Document or in any certificate,
financial
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statement or other document delivered pursuant to the Financing Documents shall
prove to have been incorrect in any respect (or in any material respect if such
representation, warranty, certification or statement is not by its terms
already qualified as to materiality) when made (or deemed made);
(e) any Company or any of such Company's Subsidiaries or Holdings
shall fail to make any payment in respect of any Material Debt;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt of any Company or any of its
Subsidiaries or Holdings, or enables (or, with the giving of notice or lapse of
time or both, would enable) the holder of such Debt or any Person acting on
such holder's behalf to accelerate the maturity thereof;
(g) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against Holdings, any Company or any of such Company's Subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
Holdings, any Company or any of such Company's Subsidiaries under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $50,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition shall exist
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by reason of which the PBGC would be entitled to obtain a decree adjudicating
that any Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section 4219(c)(5)
of ERISA, with respect to, one or more Multiemployer Plans which could cause
one or more members of the ERISA Group to incur a current payment obligation in
excess of $50,000;
(j) a judgment or order for the payment of money in excess of
$100,000 shall be rendered against Holdings, any Company or any of such
Company's Subsidiaries and such judgment or order shall continue unsatisfied
and unstayed for a period of 10 days;
(k) (i) except as the result of the IPO (provided that LTC shall prepay
the Term Notes pursuant to Section 2.04(b)(i)(B)) or any transfer made pursuant
to the Holdings Pledge Agreement or the HIG Pledge Agreement, Holdings and HIG
shall cease to be the record and beneficial owner of a majority of the issued
and outstanding capital stock of LTC; (ii) except as the result of any transfer
pursuant to the LTC Pledge Agreement, LTC shall cease to be the record and
beneficial owner of 100% of the issued and outstanding stock of each of TWI and
National Cellular; (iii) any person or group of persons (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchanges Commission under the
Securities Exchange Act of 1934, as amended), other than the HIG Investor and
HIG shall have acquired beneficial ownership (within the meaning of such Rule
13d-3) of 50% or more of the issued and outstanding common stock of LTC; (iv)
Ron Koonsman shall cease to be chief executive officer of National Cellular and
TWI and a successor shall not have been appointed by LTC and approved by the
Required Lenders within 90 days thereafter; (v) Nicholas Molina shall cease to
be chief executive officer of LTC and a successor shall not have been appointed
by LTC and approved by the Required Lenders within 90 days thereafter; (vi)
Brett Beveridge shall cease to be the president of LTC and a successor shall
not have been appointed by LTC and approved by the Required Lenders within 90
days thereafter; (vii) the HIG Investor shall cease to be the general partner
of Holdings; or (viii) representatives of the HIG Investor shall cease to
constitute a majority of the board of directors or functional equivalents of
Holdings;
(l) the auditor's report or reports on the audited statements
delivered pursuant to Section 7.01 shall include any material qualification
(including with respect to the scope of audit) or exception;
(m) the Lien created by any of the Security Documents shall at any
time fail to constitute a valid and perfected Lien on all of the Collateral
purported to be secured thereby, subject to no prior or equal Lien except
Permitted Liens, or Holdings or any Company shall so assert in writing;
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(n) any Company shall be prohibited or otherwise materially
restrained from conducting the business theretofore conducted by it by virtue
of any determination, ruling, decision, decree or order of any court or
regulatory authority of competent jurisdiction and such determination, ruling,
decision, decree or order remains unstayed and in effect for any period of 10
days beyond any period for which any business interruption insurance policy of
such Company shall provide full coverage to such Company of any losses and lost
profits; or
(o) any of the Operative Documents shall for any reason fail to
constitute the valid and binding agreement of any party thereto, or Holdings,
any Company or any of such Company's Subsidiaries shall so assert in writing;
then, and in every such event and at any time thereafter during the continuance
of such event, the Agent shall if requested by the Required Lenders, (i) by
notice to the Companies terminate the Commitments and they shall thereupon
terminate and/or (ii) by notice to the Companies declare the Notes (together
with accrued interest thereon) to be, and the Notes shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by Holdings and the
Companies; provided that in the case of any of the Events of Default specified
in clause (g) or (h) above with respect to any Company, without any notice to
such Company or any other act by the Agent or the Lenders, the Commitments
shall thereupon terminate and all of the Notes (together with accrued interest
thereon) shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by each
Company.
SECTION 9.2. Cash Collateral. If any Event of Default specified in
clause (g) or (h) of Section 9.01 with respect to any Company shall occur or
the Loans shall have otherwise been accelerated pursuant to Section 9.01, then
without any request or the taking of any other action by the Agent or any of
the Lenders, the Companies shall be obligated forthwith to deposit in the LC
Collateral Account an amount in immediately available funds equal to the then
aggregate amount available for drawings (regardless of whether any conditions
to any such drawing can then be met) under all Letters of Credit at the time
outstanding, to be held in the LC Collateral Account as provided in Section
5(F) of the Company Security Agreement.
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ARTICLE 10
FEES, EXPENSES AND INDEMNITIES; GENERAL PROVISIONS RELATING TO
PAYMENTS
SECTION 10.01. Fees. (a) Participation Fees. On the LTC Closing
Date, the Companies shall pay to each Lender a fee in an amount equal to 1.50%
of such Lender's aggregate Term Commitment and LTC Working Capital Commitment.
(b) Unused Commitment Fee. During the period from the LTC Closing
Date through the date on which Working Capital Commitments are terminated, the
Companies shall pay to each Lender a fee at the rate of 0.25% per annum on the
daily average amount by which the amount of such Lender's Working Capital
Commitment exceeds the aggregate amount of its Working Capital Outstandings.
Accrued fees under this Section shall be payable quarterly in arrears on each
Quarterly Date prior to the date on which the Working Capital Commitments are
terminated and on the date of such termination.
(c) Letter of Credit Fee. Each Company agrees to pay to the
Lenders, ratably in proportion to their respective Working Capital Commitments,
a letter of credit fee with respect to each Letter of Credit issued for the
account of such Company, computed for each day from and including the date of
issuance of such Letter of Credit to but excluding the date that is two
Business Days after the last day a drawing is available under such Letter of
Credit, at a rate of 1.5% per annum on the sum of (i) the aggregate amount of
such Letter of Credit that is undrawn but available for drawing from time to
time (whether or not any conditions to drawing can then be met) plus (ii) the
aggregate unreimbursed amount payable to the LC Issuer (either by such Company
or by the Lenders pursuant to Section 3.09(a)) in respect of previous drawings
thereunder; provided that to the extent such Letter of Credit is not drawn on
or before the last day a drawing is available under such Letter of Credit, such
letter of credit fee shall cease to accrue on the last such day. Such fee
shall be payable in arrears on each Quarterly Date prior to the date on which
the Working Capital Commitments are terminated and on the date of such
termination.
SECTION 10.02. Computation of Interest and Fees Commitment fees
pursuant to Section 10.01(b), letter of credit fees pursuant to Section
10.01(c) and all interest hereunder and under the Notes shall be calculated on
the basis of a 360-day year for the actual number of days elapsed.
SECTION 10.03. General Provisions Regarding Payments All payments
(including prepayments) to be made by any Company or Holdings under any
Financing Document, including payments of principal of and premium and interest
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on the Notes, Reimbursement Obligations, fees, expenses and indemnities, shall
be made without set-off or counterclaim and in immediately available funds. If
any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension. Each Company and Holdings shall
make all payments in immediately available funds to each Lender's Payment
Account before 11:00 A.M. (New York City time) on the date when due. Each
payment (including prepayments) by any Company on account of principal of and
interest on any Loans shall be made pro rata according to the respective
outstanding principal amounts of such Class of Loans made to such Company held
by each Lender. All amounts payable by any Company or Holdings hereunder or
under any other Financing Document not paid when due (other than payments of
principal and interest on the Notes, which shall bear interest as set forth
therein) shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to 5% plus the rate announced by NationsBank, N.A. from
time to time as its prime rate (calculated on the basis of a 360-day year for
the actual number of days elapsed).
SECTION 10.04. Expenses. Whether or not the transactions
contemplated hereby shall be consummated, the Companies agree, jointly and
severally, to pay on demand (i) all costs and expenses of preparation of this
Agreement, the other Financing Documents and the other Operative Documents and
of each Company's performance of and compliance with all agreements and
conditions contained herein and therein, (ii) the fees, expenses and
disbursements of counsel (including the reasonable allocation of the
compensation, costs and expenses of in-house counsel, based upon time spent)
to, and independent appraisers and consultants retained by, the Lenders in
connection with the negotiation, preparation, execution and administration of
this Agreement, the other Financing Documents and the other Operative Documents
and any amendments hereto or thereto and waivers hereof and thereof, (iii) all
costs and expenses of creating, perfecting and maintaining Liens pursuant to
the Financing Documents, including filing and recording fees and expenses, the
costs of any bonds required to be posted in respect of future filing and
recording fees and expenses, title investigations and fees and expenses of such
local counsel as the Agent shall request, (iv) the fees, expenses and
disbursements of independent accountants or other experts retained by the Agent
in connection with not more than two accounting and collateral audits or
reviews of each Company and its affairs during any calendar year and (v) if an
Event of Default occurs, all out-of-pocket expenses incurred by the Agent and
each Lender, including fees and disbursements of counsel (including the
reasonable allocation of the compensation, costs and expenses of in-house
counsel, based upon time spent), in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
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SECTION 10.05. Indemnity. Whether or not the transactions
contemplated hereby shall be consummated, each Company agrees to indemnify, pay
and hold harmless the Agent and each Lender and any subsequent holder of any of
the Notes, Letter of Credit Liabilities or Lender Interest and the officers,
directors, employees and agents of the Agent, each Lender and such holders
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the fees and disbursements of counsel for such
Indemnitee) in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitee shall be designated a party thereto
and including any such proceeding initiated by or on behalf of such Company or
any of its Subsidiaries or Holdings, and the expenses of investigation by
engineers, environmental consultants and similar technical personnel and any
commission, fee or compensation claimed by any broker (other than any broker
retained by NationsCredit) asserting any right to payment for the transactions
contemplated hereby, which may be imposed on, incurred by or asserted against
such Indemnitee as a result of or in connection with the transactions
contemplated hereby or by the other Operative Documents (including (i)(A) as a
direct or indirect result of the presence on or under, or escape, seepage,
leakage, spillage, discharge, emission or release from, any property now or
previously owned, leased or operated by such Company or any of its Subsidiaries
of any Hazardous Materials or any Hazardous Materials Contamination, (B)
arising out of or relating to the offsite disposal of any materials generated
or present on any such property or (C) arising out of or resulting from the
environmental condition of any such property or the applicability of any
governmental requirements relating to Hazardous Materials, whether or not
occasioned wholly or , accident or event caused by any act or omission of such
Company or any of its Subsidiaries, and (ii) proposed and actual extensions of
credit under this Agreement) and the use or intended use of the proceeds of the
Notes, the Letters of Credit and the Lender Interest, except that such Company
shall have no obligation hereunder to an Indemnitee with respect to any
liability resulting from the gross negligence or wilful misconduct of such
Indemnitee. To the extent that the undertaking set forth in the immediately
preceding sentence may be unenforceable, each Company shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all such indemnified liabilities incurred by
the Indemnitees or any of them. Without limiting the generality of any
provision of this Section, to the fullest extent permitted by law, each Company
hereby waives all rights for contribution or any other rights of recovery with
respect to liabilities, losses, damages, costs and expenses arising under or
relating to Environmental Laws that it might have by statute or otherwise
against any Indemnitee.
72
<PAGE> 79
SECTION 10.06. Taxes. Each Company agrees to pay all governmental
assessments, charges or taxes (except income or other similar taxes imposed on
any Lender or any holder of a Note), including any interest or penalties
thereon, at any time payable or ruled to be payable in respect of the
existence, execution or delivery of this Agreement, the other Financing
Documents or the Lender Interest, or the issuance of the Notes, the Letters of
Credit or the Lender Interest, and to indemnify and hold each Lender and each
and every holder of the Notes, Letter of Credit Liabilities or the Lender
Interest harmless against liability in connection with any such assessments,
charges or taxes.
SECTION 10.07. Funding Losses. If any Company fails to borrow any
Working Capital Loans after notice has been given to any Lender in accordance
with Section 3.04 or make any payment when due by such Company (including
pursuant to a notice of optional prepayment), such Company shall reimburse each
Lender within 15 days after demand for any resulting loss or expense incurred
by it (or by an existing or prospective participant in the related Loan),
including any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period after any such
payment or failure to borrow, provided that such Lender shall have delivered to
such Company a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 10.08. Maximum Interest. (a) In no event shall the
interest charged with respect to the Notes issued by any Company or any other
obligations of such Company under the Financing Documents exceed the maximum
amount permitted under the laws of the State of New York or of any other
applicable jurisdiction.
(b) Notwithstanding anything to the contrary herein or elsewhere, if
at any time the rate of interest payable by any Company for the account of any
Lender hereunder or under any Note or other Financing Document (the "Stated
Rate") would exceed the highest rate of interest permitted under any applicable
law to be charged by such Lender to such Company (the "Maximum Lawful Rate"),
then for so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable by such Company for the account of such Lender shall be equal
to the Maximum Lawful Rate; provided, that if at any time thereafter the Stated
Rate is less than the Maximum Lawful Rate, such Company shall, to the extent
permitted by law, continue to pay interest for the account of such Lender at
the Maximum Lawful Rate until such time as the total interest received by such
Lender is equal to the total interest which such Lender would have received had
the Stated Rate been (but for the operation of this provision) the interest
rate payable. Thereafter, the interest rate payable for the account of such
Lender shall
73
<PAGE> 80
be the Stated Rate unless and until the Stated Rate again would exceed the
Maximum Lawful Rate, in which event this provision shall again apply.
(c) In no event shall the total interest received by any Lender from
any Company exceed the amount which such Lender could lawfully have received
from such Company had the interest been calculated for the full term hereof at
the Maximum Lawful Rate with respect to such Lender and such Company.
(d) In computing interest payable with reference to the Maximum
Lawful Rate applicable to any Lender, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of days in
the year in which such calculation is made.
(e) If any Lender has received interest hereunder in excess of the
Maximum Lawful Rate with respect to such Lender and in respect of Loans made to
such Company, such excess amount shall be applied to the reduction of the
principal balance of its Loans or to other amounts (other than interest)
payable hereunder, and if no such principal or other amounts are then
outstanding, such excess or part thereof remaining shall be paid to such
Company.
ARTICLE 11
THE AGENT
SECTION 11.01. Appointment and Authorization. Each Lender
irrevocably appoints and authorizes the Agent to enter into each of the
Security Documents on its behalf and to take such action as agent on its behalf
and to exercise such powers under the Financing Documents as are delegated to
the Agent by the terms thereof, together with all such powers as are reasonably
incidental thereto.
SECTION 11.02. Agent and Affiliates. NationsCredit shall have the
same rights and powers under the Financing Documents as any other Lender and
may exercise or refrain from exercising the same as though it were not the
Agent, and NationsCredit and its affiliates may lend money to and generally
engage in any kind of business with Holdings, any Company or any of such
Company's Subsidiaries or affiliates as if it were not the Agent hereunder.
SECTION 11.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein and under the other
Financing Documents. Without limiting the generality of the foregoing, the
Agent shall not be required to
74
<PAGE> 81
take any action with respect to any Default, except as expressly provided in
Article 9.
SECTION 11.04. Consultation with Experts. The Agent may consult
with legal counsel (who may be counsel for any Company or Holdings),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 11.05. Liability of Agent. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken
or not taken by it in connection with the Financing Documents (i) with the
consent or at the request of the Required Lenders or (ii) in the absence of its
own gross negligence or willful misconduct. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any Company or Holdings; (iii) the satisfaction of any condition
specified in Article 5, except receipt of items required to be delivered to the
Agent; or (iv) the validity, effectiveness, sufficiency or genuineness of any
Financing Document or any other instrument or writing furnished in connection
therewith. The Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex, facsimile transmission or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 11.06. Indemnification. Each Lender shall, ratably in
accordance with its Working Capital Commitment (whether or not the Working
Capital Commitments have been terminated), indemnify the Agent (to the extent
not reimbursed by any Company) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except such
as result from the Agent's gross negligence or willful misconduct) that the
Agent may suffer or incur in connection with the Financing Documents or any
action taken or omitted by the Agent hereunder or thereunder.
SECTION 11.07. Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking any action under the Financing Documents.
75
<PAGE> 82
SECTION 11.08. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Companies. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent, which shall be an institution
organized or licensed under the laws of the United States of America or of any
State thereof. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Survival. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement, the other Operative Documents and the execution, sale and delivery
of the Notes and the Lender Interest. The indemnities and agreements set forth
in Articles 10 and 11 shall survive the payment of the Notes, the exercise,
redemption or expiration of the Lender Interest and the termination of this
Agreement. 12.2No Waiver No failure or delay by the Agent or any Lender in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein and therein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
SECTION 12.03. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including prepaid
overnight courier, telex, facsimile transmission or similar writing) and shall
be given to such party at its address or telecopy or telex number set forth on
the signature pages hereof (or, in the case of any such Lender who becomes a
Lender after the date hereof, in a notice delivered to each Company and the
Agent by the assignee Lender forthwith upon such assignment) or at such other
address or telecopy or telex number as such party may hereafter specify for the
purpose by notice to the Agent and the Companies. Each such notice, request or
other communication shall be effective
76
<PAGE> 83
(i) if given by telex or telecopy, when such telex or telecopy is transmitted
to the telex or telecopy number specified in this Section and the appropriate
answerback is received (in the case of telex) or telephonic confirmation of
receipt thereof is obtained (in the case of telecopy) or (ii) if given by mail,
prepaid overnight courier or any other means, when received at the address
specified in this Section or when delivery at such address is refused.
SECTION 12.04. Severability. In case any provision of or obligation
under this Agreement or the Notes or any other Financing Document shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 12.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by Holdings, each Company, and the
Required Lenders (and, if the rights or duties of the Agent or the LC Issuer
are affected thereby, by the Agent or the LC Issuer, as the case may be);
provided that no such amendment or waiver shall, unless signed by all the
Lenders, (i) increase or decrease any Commitment of any Lender (except for a
ratable decrease in the Commitments of all Lenders) or subject any Lender to
any additional obligation, (ii) reduce the principal of or rate of interest on
any Loan, Reimbursement Obligation or fees hereunder, (iii) postpone the date
fixed for any payment of principal of any Loan pursuant to Section 2.04(a),
3.05(a), or any Reimbursement Obligation, or of interest on any Loan or any
Reimbursement Obligation or any fees hereunder or for any termination of any
Commitment, (iv) release any of the Collateral or any guaranty or (v) change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the Notes which shall be required for the Lenders or any of them to take any
action under this Section or any other provision of this Agreement.
SECTION 12.06. Successors and Assigns; Registration. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns (including any
transferee of any Note or Lender Interest), except that (i) no Company may
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Lenders and (ii) no assignment or other transfer
by a Lender of its Working Capital Commitments or any portion thereof shall
release it from its obligations in favor of the LC Issuer under Section 3.09
with respect to any Letters of Credit outstanding at the time of such
assignment or other transfer unless such assignment or other transfer was with
the prior written consent of the LC Issuer.
77
<PAGE> 84
(b) The terms and provisions of this Agreement shall inure to the
benefit of any transferee or assignee of any Note or Lender Interest, except
that NationsCredit may not transfer its obligations pursuant to Section 3.08
without the consent of each Company, and, in the event of such transfer or
assignment, the rights and privileges herein conferred upon the assigning
Lender shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof. Any assignment shall
be for an equal percentage of each Class of such assignor Lender's Loans and
its Working Capital Commitments, and any such assignee Lender shall, upon its
registration in the Note Register referred to below, become a "Lender" for all
purposes hereunder. Upon any such assignment, the assignor Lender shall be
released from its Working Capital Commitments to the extent assigned to and
assumed by the assignee Lender.
(c) Upon any assignment of any Note(s) issued by any Company, the
assigning Lender shall surrender its Note(s) to such Company for exchange or
registration of transfer, and such Company will promptly execute and deliver in
exchange therefor a new Note or Note(s) of the same tenor and registered in the
name of the assignor Lender (if less than all of such Lender's Notes are
assigned) and the name of the assignee Lender.
(d) Each Company shall maintain a register (the "Note Register") of
the Lenders and all assignee Lenders that are the holders of all the Notes
issued pursuant to this Agreement. Each Company will allow any Lender to
inspect and copy such list at such Company's principal place of business during
normal business hours. Prior to the due presentment for registration of
transfer of any Note issued by any Company, such Company may deem and treat the
Person in whose name a Note is registered as the absolute owner of such Note
for the purpose of receiving payment of principal of and premium and interest
on such Note and for all other purposes whatsoever, and such Company shall not
be affected by notice to the contrary.
(e) Each Lender (including any assignee Lender at the time of such
assignment) represents that it (i) is acquiring its Notes and Lender Interest
solely for investment purposes and not with a view toward, or for sale in
connection with, any distribution thereof, (ii) has received and reviewed such
information as it deems necessary to evaluate the merits and risks of its
investment in the Notes and the Lender Interest, (iii) is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act and (iv)
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment in the Notes and
the Lender Interest, including a complete loss of its investment.
78
<PAGE> 85
(f) Each Lender understands that the Notes and the Lender Interest
are being offered only in a transaction not involving any public offering
within the meaning of the Securities Act, and that, if in the future such
Lender decides to resell, pledge or otherwise transfer any of the Notes or the
Lender Interest, such Notes or Lender Interest, as the case may be, may be
resold, pledged or transferred only (i) to any Company, (ii) to a person who
such Lender reasonably believes is a qualified institutional buyer that
purchases for its own account or for the account of a qualified institutional
buyer to whom notice is given that such resale, pledge or transfer is being
made in reliance on Rule 144A under the Securities Act or (iii) pursuant to an
exemption from registration under the Securities Act.
(g) Each Lender understands that the Notes and the Lender Interest
will, unless otherwise agreed by each Company and the holder thereof, bear a
legend to the following effect:
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF,
BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE
ISSUER THAT THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO THE COMPANY, (2) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (3)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT.
(h) If any Note issued by any Company becomes mutilated and is
surrendered by the Lender with respect thereto to such Company, or if any
Lender claims that any of its Notes issued by such Company has been lost,
destroyed or wrongfully taken, such Company shall execute and deliver to such
Lender a replacement Note, upon the affidavit of such Lender attesting to such
loss, destruction or wrongful taking with respect to such Note together with,
in the case of any lost, destroyed or wrongfully taken Note, an indemnity if so
requested by such Company, and such lost, destroyed, mutilated, surrendered or
wrongfully taken Note shall be deemed to be canceled for all purposes hereof.
Such affidavit shall be accepted as satisfactory evidence of the loss, wrongful
taking or
79
<PAGE> 86
destruction thereof and no surety or bond shall be required as a condition of
the execution and delivery of a replacement Note. Any costs and expenses of
such Company in replacing any such Note shall be for the account of such
Lender.
SECTION 12.07. Collateral. Each of the Lenders represents to the
Agent and each of the other Lenders that it in good faith is not relying upon
any Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 12.08. Headings. Headings and captions used in the
Financing Documents (including the Exhibits and Schedules hereto and thereto)
are included herein and therein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 12.09. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. EACH OF THE COMPANIES AND HOLDINGS HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING
IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF
THE COMPANIES AND HOLDINGS HEREBY ACKNOWLEDGES AND AGREES THAT NATIONSCREDIT
DOES NOT SUBMIT TO THE JURISDICTION OF THE BANKRUPTCY COURT AND THAT THE
BANKRUPTCY COURT IS NOT THE APPROPRIATE FORUM FOR ANY LEGAL PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH OF THE COMPANIES AND HOLDINGS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE
OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 12.03. NOTHING IN
THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
80
<PAGE> 87
SECTION 12.10. Notice of Breach by Agent or Lender. Each of the
Companies and Holdings agrees to give the Agent and the Lenders notice of any
action or inaction by the Agent or any Lender or any agent or attorney of the
Agent or any Lender in connection with this Agreement or any other Financing
Document or the obligations of such Company or Holdings under this Agreement or
any other Financing Document that may be actionable against the Agent or any
Lender or any agent or attorney of the Agent or any Lender or a defense to
payment of any obligations of any Company or Holdings under this Agreement or
any other Financing Document for any reason, including commission of a tort or
violation of any contractual duty or duty implied by law. Each of the
Companies and Holdings agrees, to the fullest extent that it may lawfully do
so, that unless such notice is given promptly (and in any event within ten (10)
days after such Company or Holdings has knowledge, or with the exercise of
reasonable diligence could have had knowledge, of any such action or inaction),
such Company and Holdings shall not assert, and such Company and Holdings shall
be deemed to have waived, any claim or defense arising therefrom to the extent
that the Agent or any Lender could have mitigated such claim or defense after
receipt of such notice.
SECTION 12.11. WAIVER OF JURY TRIAL. EACH OF THE COMPANIES,
HOLDINGS, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE
FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST
EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE
CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
SECTION 12.12. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement, the other Financing Documents, the Partnership
Agreement and the Equity Agreement constitute the entire agreement and
understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof.
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<PAGE> 88
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
TELEPHONE WAREHOUSE, INC.
By: /s/ Anthony Tamer
------------------------------
Title: Vice President
Address: 1001 South Bayshore Drive
Suite 2708
Miami, Florida 33131
Account Designation:
-------------------
Bank One, Texas, N.A.
ABA No.: 111000614
Account No.: 0014933915
Account Name: Telephone Warehouse
NATIONAL CELLULAR,
INCORPORATED
By: /s/ Anthony Tamer
---------------------------------
Title: Vice President
Address: 1001 South Bayshore Drive
Suite 2708
Miami, Florida 33131
Account Designation:
-------------------
Bank One, Texas, N.A.
ABA No.: 111000614
Account No.: 0014933899
Account Name: National Cellular
Incorporated
<PAGE> 89
LET'S TALK CELLULAR & WIRELESS,
INC.
By: /s/ Brett Beveridge
----------------------------
Title: President
Address: 5200 NW 77th Court
Miami, Florida 33166
Account Designation:
-------------------
Bank Name: Republic National Bank
ABA No.: 066002194
Account No.: 001-129-2723
Account Name: Let's Talk Cellular
<PAGE> 90
TEXAS CELLULAR PARTNERS, L.P.
By HIG Texas Cellular Company,
as Managing General Partner
By: /s/ Anthony Tamer
-------------------------------
Title: President
Address: 1001 South Bayshore Drive
Suite 2708
Miami, Florida 33131
NATIONSCREDIT COMMERCIAL
CORPORATION, as Lender and Agent
By: /s/ Edward Alt
--------------------------------
Title: Authorized Signatory
Address: One Canterbury Green
P.O. Box 120013
Stamford, CT 06912-0013
Telecopy: 203-352-4171
Payment Account Designation:
---------------------------
First Chicago National Bank
Chicago, Illinois
ABA No.: 071000013
Account No.: 52-56933
Account Name: NationsCredit Commercial
Corporation
<PAGE> 91
SCHEDULE 1.01
EXISTING LTC LOAN AGREEMENTS
Credit facility agreements, as amended to date, between Let's Talk
Cellular of America, Inc. and Republic National Bank of Miami.
<PAGE> 92
SCHEDULE 6.17
EMPLOYMENT, SHAREHOLDERS' AND
SUBSCRIPTION AGREEMENTS
Employment Agreement, dated as of May 22, 1995, between Let's Talk Cellular of
America, Inc. and Anne Gozlan, as amended as of June 25, 1996.
<PAGE> 93
SCHEDULE 6.21
ENVIRONMENTAL MATTERS
None
<PAGE> 94
SCHEDULE 6.22
INITIAL CAPITALIZATION
PART 1: EQUITY
PART 1: EQUITY
Texas Cellular Partners, L.P.
1. HIG Texas Cellular Company, as the General Partner, has a
90.25% interest in Texas Cellular Partners, L.P.
2. NationsCredit Commercial Corporation ("NationsCredit"), as a
non-voting limited partner, has in the aggregate a 9.75%
interest in Texas Cellular Partners, L.P. (including a 5%
non-voting limited partnership interest issued pursuant to
Section 2.05 of the Original Agreement (the "Lender Interest")
and a 4.75% non-voting limited partnership interest purchased
by NationsCredit (the "Purchased Interest").
Let's Talk Cellular & Wireless, Inc.
<TABLE>
<CAPTION>
Number of Shares
Name of Common Stock Held
- ---- --------------------
<S> <C>
Texas Cellular Partners, L.P. 192,479
HIG Fund V, Inc. 975,000
Nicolas Molina 282,750
Brett Beveridge 282,750
Allan Sorensen 65,000
Anne Gozlan 19,500
NationsCredit 67,521*
</TABLE>
- ----------------------
* Warrants for 34,626 shares, issued as an adjustment to the Lender
Interest, and Warrants for 32,895 shares, issued as an adjustment to the
Purchased Interest, in each case in connection with the LTC Merger.
<PAGE> 95
National Cellular, Incorporated
10 shares of Common Stock, par value $1.00 per share, outstanding and
issued to Let's Talk Cellular & Wireless, Inc.
Telephone Warehouse, Inc.
10 shares of Common Stock, par value $0.01 per share, outstanding and
issued to Let's Talk Cellular & Wireless, Inc.
<PAGE> 96
SCHEDULE 6.23
REAL PROPERTY LEASES--NATIONAL CELLULAR AND TWI
<TABLE>
<CAPTION>
LESSEE LESSOR ADDRESS
- ------------------------- --------------------------------------- -------------------------------------------
<S> <C> <C>
1. TWI Training Terrane M. Cassey and Phillip C. 712 N. Watson Road
Smith Suites 204 & 206
Arlington, Texas 76011
2. NCI (Operations) MFM Realty Limited Partnership Randol Mill Service Center
2400 E. Randol Mill Road
Arlington, Texas 76011
3. NCI (Sales and MFM Realty Limited Partnership Randol Mill Service Center
Marketing) 2400 E. Randol Mill Road
Arlington, Texas 76011
4. TWI LBJ/Josey Lane Joint Venture Josey Village
2905 Forest Lane, Suite 122
Dallas, Texas 75234
5. NCI Michael G. Friedman 6521 Camp Bowie Blvd.
Fort Worth, Texas 76116
6. TWI Mary P. Moody 19310 Preston Road
Dallas, Texas 75252
7. TWI Red Hill Associates Red Hill Shopping Center
4343 West Camp Wisdom, #180
Ducanville, Texas 75237
8. TWI Market East Associates, L.P. Market East Shopping Center
1515 Town East Blvd., #110
Mesquite, Texas 75150
9. TWI Daniel Morguloff 11446 N. Central Expressway
Dallas, Texas 75243
10. TWI Six Flags Village Joint Venture Six Flags Village Shopping Center
1301 N. Collings, #215
Arlington, Texas 75011
11. TWI Hullen Park Associates Hullen Park Shopping Center
4750 Hullen Park Drive
Fort Worth, Texas 76132
12. TWI Wimbledon Court Ltd. Village by the Parks
4101 South Cooper Street,
Suite 111
Phase 1
Arlington, Texas 76015
13. TWI Annette Lange North Richland Hills
7923A Grapevine Highway
N. Richland, Texas 76180
</TABLE>
<PAGE> 97
<TABLE>
<CAPTION>
LESSEE LESSOR ADDRESS
- ------------------------- --------------------------------------- -------------------------------------------
<S> <C> <C>
14. TWI LaSalle Street Fund Incorporated of Valley View Center
Dallas 1333 Preston Road, #2122
Dallas, Texas 75240
15. TWI Lutine Realty Corp. 5610 Lemon Avenue, Suite B
Dallas, Texas 75209
16. TWI Windsor Place Shopping Center 4917 Walzem Roads
Winderest, Texas 78218
17. TWI Subaco, Inc. 8507 North Broadway
San Antonio, Texas 78228
18. TWI 6100 Callaghan Road, Inc. 6123 Callaghan Road
San Antonio, Texas 78228
19. TWI DOM Company 5315 East Bannister Road
Kansas City, Missouri 64137
20. TWI Price Revocable Trust Independence Plaza Shops
18675 East 39th Street
Independence, Missouri 64057
21. TWI MEG Associates Overland Park
9497 West 75th
Overland Park, Kansas 66204
22. TWI McCaffrey-McIntyre Investments 6265 North Oak Traffic Way
Gladstone, Missouri 64118
</TABLE>
OWNED REAL PROPERTY
1. City of Irving, Dallas County, Texas, being part of block 4 (shopping area)
of second installment of Nichols Park addition according to the plat
thereof recorded in Volume 19 Page 367, Map Records, Dallas County, Texas.
<PAGE> 98
REAL PROPERTY LEASES--LTC
<TABLE>
<CAPTION>
CHIEF EXECUTIVE OFFICES 5200 NW 77TH COURT MIAMI FL 33166
Mall Name Store Address Space # Store City Store St Store Zip
- ----------------------------- ------------------------------------- -------------- --------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
DADELAND MALL 7565 NORTH KENDALL DRIVE 4080 MIAMI FL 33156
AVENTURA MALL 19501 BISCAYNE BLVD. 1961 NORTH MIAMI BEACH FL 33180
BAYSIDE MARKETPLACE 401 BISCAYNE BLVD N229 MIAMI FL 33132
#1
FLORIDA MALL 8001 S. ORANGE BLOSSOM TRAIL 19 ORLANDO FL 32809
LENOX SQUARE 3393 PEACHTREE ROAD NE ATLANTA GA 30326
MANHATTAN MALL 901 AVENUE OF THE AMERICAS C-3A NEW YORK NY 10001
TOWN CENTER AT BOCA 6000 WEST GLADES ROAD 9102 BOCA RATON FL 33431
WESTLAND MALL 1695 WEST 49 STREET 2090 HIALEAH FL 33012
CUTLER RIDGE MALL 20505 SOUTH DIXIE HWY. 1905 MIAMI FL 33189
MIAMI INTERNATIONAL 1455 NW 107 AVENUE MIAMI FL 33172
MALL
ALTAMONTE SPRINGS 451 ALTAMONTE AVE. 172 ALTAMONTE SPRINGS FL 32701
TYSONS CORNER 7903 TYSONS CORNER CENTER F8U MCLEAN VA 22102
MONTGOMERY MALL 7111 DEMOCRACY BLVD. 2335 BETHESDA MD 20817
ST. CHARLES TOWNE 11110 MALL CIRCLE K-5 WALDORF MD 20603
CENTER
ANNAPOLIS MALL 326 ANNAPOLIS MALL 9011 ANNAPOLIS MD 21401
POTOMAC MILLS 2700 POTOMAC MILL CIRCLE 228 WOODBRIDGE VA 22192
UNION STATION 50 MASSACHUSETTS AVE., NE T40 WASHINGTON D.C. 20002
FASHION CENTRE AT 1100 SOUTH HAYES STREET W-3 ARLINGTON VA 22202
PENTAGON CITY
MALL OF THE AMERICAS 7795 WEST FLAGLER STREET 9 MIAMI FL 33144
PEMBROKE LAKES MALL 11401 PINES BOULEVARD K-940 PEMBROKE PINES FL 33026
BAYSIDE MARKETPLACE 401 BISCAYNE BOULEVARD MIAMI FL 33132
DOWNSTAIRS
SAWGRASS MILLS 12801 W. SUNRISE BOULEVARD 731 SUNRISE FL 33323
SEMINOLE TOWN CENTER 183 TOWN CENTER CIRCLE D-6A SANFORD FL 32771
CORAL SQUARE MALL 9345 WEST ATLANTIC BLVD. 9345 CORAL SPRINGS FL 33065
BURLINGTON CENTER 2501 BURLINGTON, MT. HOLLY 2005 BURLINGTON NJ 08016
ROAD
THE GALLERY @ MARKET 901 MARKET ST. LEVEL 2002 PHILADELPHIA PA 19107
EAST
ECHELON MALL 3002 ECHELON MALL VOORHEES NJ 08043-1903
PARK MEADOWS TOWN 8405 PARK MEADOWS CENTER E9-1015 LITTLETON CO 80124
CENTER DRIVE
</TABLE>
<PAGE> 99
<TABLE>
<CAPTION>
Mall Name Store Address Space # Store City Store St Store Zip
- ----------------------------- ----------------------------------- ------------ ---------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BOYNTON BEACH MALL 801 N. CONGRESS AVENUE 265 BOYNTON BEACH FL 33426
CHERRY HILL MALL 2000 ROUTE 38 2009 CHERRY HILL NJ 08002
CHERRY HILL MALL 2000 ROUTE 38 K CHERRY HILL NJ 08002
THE FALLS SHOPPING 8888 S.W. 136 ST. 595 MIAMI FL 33176
MONTGOMERY MALL 230 MONTGOMERY MALL L-2 NORTH WALES PA 19454
WEST OAKS MALL 9401 W. COLONIAL DR. K OCOEE FL 34761
FRANKLIN MILLS 1833 FRANKLIN MILLS CENTER, P.O. 138 PHILADELPHIA PA 19154
BOX 6039
THE CITADEL 750 CITADEL DR., EAST 2128 COLORADO SPRING CO 80908
CHAPEL HILLS 1710 BRIARGATE BLVD. T-20 COLORADO SPRINGS CO 80920
COURT AT KING OF 344 MALL BLVD. K KING OF PRUSSIA PA 19406
PRUSSIA
BEACH PLACE 17 SOUTH ATLANTIC BLVD R209 FT. LAUDERDALE FL 33316
INDIAN RIVER MALL 6200 20TH STREET K-922 VERO BEACH FL 32966
GRANITE RUN MALL 1067 W. BALTIMORE PIKE 135 MEDIA PA 19063
ONTARIO MILLS MALL 4320 EAST MILLS CIRCLE 601 ONTARIO CA 91764
OXFORD VALLEY MALL 2300 E. LINCOLN HIGHWAY P-15 LANGHORNE PA 19047
GWINNETT PLACE MALL 2100 PLEASANT HILL ROAD 2084 DULUTH GA 30136
TOWN CENTER AT COBB 400 BARRETT PARKWAY 159 KENNESAW GA 30144
NORTH POINT MALL 1220 NORTH POINT CIRCLE ALPHARETTA GA 30202
PERIMETER MALL 4400 ASHFORD-DUNWOODY RD. #2 ATLANTA GA 30346
BUCKHEAD 2955 PEACHTREE ROAD N.E. SUITE B ATLANTA GA 30305
NORTHLAKE MALL 1000 NORTHLAKE MALL 9105K ATLANTA GA 30345
SMITH HAVEN MALL ROUTES 25 & 347 G5 (IL) LAKE GROVE NY 11755
WHITE MARSH MALL 8200 PERRY HALL BLVD. 2020 BALTIMORE MD 21236
EXTON SQUARE 100 EXTON SQUARE EXTON PA 19341
LOS CERRITOS CENTER 239 LOS CERRITOS CENTER CERRITOS CA 90703
FOX HILLS MALL 294 FOX HILLS MALL CULVER CA 90230
MAYAGUEZ MALL CARRETERA #2, KILOMETRO 159.4 K-3 MAYAGUEZ P.R. 00680
WILLOW GROVE PARK 2500 MORELAND ROAD 3106 WILLOW GROVE PA 19090
MAIN PLACE @ SANTA 2800 N. MAIN STREET 467 SANTA ANA CA 92705
ANA
PLAZA DEL NORTE 506 TRUNCADO STREET T-146 HATILLO P.R. 00659-2709
PLAZA CAROLINA AVENIDA FRAGOSO, SALIDA 65 3523 CAROLINA P.R. 00988
INFANTERIA
SANTA MONICA PLACE 395 SANTA MONICA PLACE 317 SANTA MONICA CA 90401-2350
</TABLE>
<PAGE> 100
<TABLE>
<CAPTION>
Mall Name Store Address Space # Store City Store St Store Zip
- ------------------------- ------------------------------ ----------- ---------------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
GALLERIA@ S. BAY MALL 1815 HAWTHONE BLVD. 224 REDONDO BEACH CA 90278
COLUMBIA MALL 10300 LITTLE PATUXENT PARKWAY 2084 COLUMBIA MD 21044
OWINGS MILLS 10300 MILL RUN CIRCLE 1125 OWINGS MILLS MD 21117
TOPANGA PLAZA 6600 TOPANGA CANYON BLVD 9005 CANOGA PARK CA 91303
SANTA ANITA FASHION 400 S. BALDWIN AVENUE P-20 ARCADIA CA 91007
PARK
CUMBERLAND MALL 1000 CUMBERLAND MALL K-4 ATLANTA GA 30339
ECHELON MALL 3002 ECHELON MALL 2001 VOORHEES NJ 08043
</TABLE>
<PAGE> 101
SCHEDULE 7.04
REQUIRED INSURANCE
See Attached Insurance Schedules
<PAGE> 102
SCHEDULE 8.01
DEBT OUTSTANDING AFTER GIVING EFFECT
TO THE TRANSACTIONS ON THE LTC CLOSING DATE
(Other than Debt owed to NationsCredit)
None.
<PAGE> 103
EXHIBIT A-1
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO THE
COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (3) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
NATIONAL CELLULAR, INC.
TERM NOTE
$___________ ________ __, 199_
NATIONAL CELLULAR, INC., a Texas corporation (together with its
successors, the "Company"), for value received, promises to pay NATIONSCREDIT
COMMERCIAL CORPORATION (the "Lender"), or registered assigns, an aggregate
principal amount of _______ _______ Dollars ($_________), by paying on each of
the dates set forth in Schedule A attached hereto (or, if any such day is not a
Business Day, on the next succeeding Business Day) the aggregate principal
amount set forth on Schedule A opposite such date, together with accrued and
unpaid interest thereon to but excluding the date of payment, and to pay in
arrears on the first day of each calendar month (or, if such day is not a
Business Day, on the next succeeding Business Day), commencing with January 1,
1997, interest (computed on the basis of the actual number of days elapsed over
a year of 360 days) on the aggregate unpaid principal amount hereof from time to
time at a rate equal to the sum of 4.50% per annum plus the Commercial Paper
Rate (as hereinafter defined) and to pay on demand interest at a rate equal to
the sum of 6.50% per annum plus the Commercial Paper Rate (in each case subject
to Section 10.08 of the Credit Agreement referred to below) on any overdue
principal, premium and interest from the due date thereof to the date of actual
payment (after as well as before judgment and during any bankruptcy proceeding).
Changes in the rate of interest applicable hereto shall occur as of the opening
of business on any day on which the Commercial Paper Rate changes.
<PAGE> 104
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the one-month Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate is
made available on a discount basis or otherwise by the Federal Reserve Bank of
New York and published weekly by the Board of Governors of the Federal Reserve
System in its H.15 report, or any successor publication published by the Board
of Governors of the Federal Reserve System or, if such rate for such date is not
yet published in such statistical release, the rate for that date will be the
rate set forth in the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System. "Interest Determination Date" means December 31, 1996 and the
first Business Day of each calendar month thereafter.
This Note is one of the National Cellular Term Notes referred to in the
Credit Agreement dated as of December 31, 1996 and as amended and restated as of
June __, 1997 (as amended from time to time, the "Credit Agreement") among the
Company, Telephone Warehouse, Inc., Let's Talk Cellular & Wireless, Inc., Texas
Cellular Partners, L.P., the lenders referred to therein and NationsCredit
Commercial Corporation, as Agent. The Credit Agreement and the Security
Documents referred to therein contain additional rights of the holder of, and
the security for, this Note. Capitalized terms used but not defined herein have
the meanings assigned thereto in the Credit Agreement.
If an Event of Default shall occur and be continuing, the unpaid
balance of the principal of this Note together with all accrued but unpaid
interest hereon may become or be declared forthwith due and payable in the
manner and with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit
Agreement, together with any premiums set forth therein, under the circumstances
therein described.
Payments of principal hereof and interest and premium hereon shall be
made in lawful money of the United States of America.
Pursuant to the terms of the Credit Agreement, payment of principal and
interest on this Note is unconditionally guaranteed by Telephone Warehouse,
Inc., Let's Talk Cellular & Wireless, Inc. and Texas Cellular Partners, L.P.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
construction, validity and performance, without regard to the choice of law
provisions thereof.
<PAGE> 105
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the day and year first above written.
NATIONAL CELLULAR,
INCORPORATED
By
--------------------------------
Title:
<PAGE> 106
SCHEDULE A
TO NATIONAL CELLULAR
TERM NOTE
Amortization Schedule
<PAGE> 107
EXHIBIT A-2
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO THE
COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (3) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
TELEPHONE WAREHOUSE, INC.
TERM NOTE
$_________ ________ __, 199_
TELEPHONE WAREHOUSE, INC., a Delaware corporation (together with its
successors, the "Company"), for value received, promises to pay NATIONSCREDIT
COMMERCIAL CORPORATION (the "Lender"), or registered assigns, an aggregate
principal amount of ____ _____ Dollars ($_________), by paying on each of the
dates set forth in Schedule A attached hereto or, if required pursuant to
Section 2.04(a) of the Credit Agreement, on each of the earlier dates required
by such Section (or, if any such day is not a Business Day, on the next
succeeding Business Day) the aggregate principal amount set forth on Schedule A
opposite such date, together with accrued and unpaid interest thereon to but
excluding the date of payment, and to pay in arrears on the first day of each
calendar month (or, if such day is not a Business Day, on the next succeeding
Business Day), commencing with January 1, 1997, interest (computed on the basis
of the actual number of days elapsed over a year of 360 days) on the aggregate
unpaid principal amount hereof from time to time at a rate equal to the sum of
4.50% per annum plus the Commercial Paper Rate (as hereinafter defined) and to
pay on demand interest at a rate equal to the sum of 6.50% per annum plus the
Commercial Paper Rate (in each case subject to Section 10.08 of the Credit
Agreement referred to below) on any overdue principal, premium and interest
<PAGE> 108
from the due date thereof to the date of actual payment (after as well as before
judgment and during any bankruptcy proceeding). Changes in the rate of interest
applicable hereto shall occur as of the opening of business or any day on which
the Commercial Paper Rate changes.
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the one month Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate is
made available on a discount basis or otherwise by the Federal Reserve Bank of
New York and published weekly by the Board of Governors of the Federal Reserve
System in its H.15 report, or any successor publication published by the Board
of Governors of the Federal Reserve System or, if such rate for such date is not
yet published in such statistical release, the rate for that date will be the
rate set forth in the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System. "Interest Determination Date" means December 31, 1996 and the
first Business Day of each calendar month thereafter.
This Note is one of the TWI Term Notes referred to in the Credit
Agreement dated as of December 31, 1996 and amended and restated as of June __,
1997 (as amended from time to time, the "Credit Agreement") among the Company,
National Cellular, Incorporated, Let's Talk Cellular & Wireless, Inc., Texas
Cellular Partners, L.P., the lenders referred to therein and NationsCredit
Commercial Corporation, as Agent. The Credit Agreement and the Security
Documents referred to therein contain additional rights of the holder of, and
the security for, this Note. Capitalized terms used but not defined herein have
the meanings assigned thereto in the Credit Agreement.
If an Event of Default shall occur and be continuing, the unpaid
balance of the principal of this Note together with all accrued but unpaid
interest hereon may become or be declared forthwith due and payable in the
manner and with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit
Agreement, together with any premiums set forth therein, under the circumstances
therein described.
Payments of principal hereof and interest and premium hereon shall be
made in lawful money of the United States of America.
Pursuant to the terms of the Credit Agreement, payment of principal and
interest on this Note is unconditionally guaranteed by National Cellular,
Incorporated, Let's Talk Cellular & Wireless, Inc. and Texas Cellular Partners,
L.P.
<PAGE> 109
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the day and year first above written.
TELEPHONE WAREHOUSE, INC.
By
---------------------------------
Title:
<PAGE> 110
SCHEDULE A
TO TWI TERM NOTE
Amortization Schedule
<PAGE> 111
EXHIBIT A-3
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO THE
COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (3) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
LET'S TALK CELLULAR & WIRELESS, INC.
TERM NOTE
$___________ ________ __, 1997
LET'S TALK CELLULAR & WIRELESS, INC., a Florida corporation (together
with its successors, the "Company"), for value received, promises to pay
NATIONSCREDIT COMMERCIAL CORPORATION (the "Lender"), or registered assigns, an
aggregate principal amount of _______ ______ Dollars ($_________), by paying on
each of the dates set forth in Schedule A attached hereto (or, if any such day
is not a Business Day, on the next succeeding Business Day) the aggregate
principal amount set forth on Schedule A opposite such date, together with
accrued and unpaid interest thereon to but excluding the date of payment, and to
pay in arrears on the first day of each calendar month (or, if such day is not a
Business Day, on the next succeeding Business Day), commencing with July 1,
1997, interest (computed on the basis of the actual number of days elapsed over
a year of 360 days) on the aggregate unpaid principal amount hereof from time to
time at a rate equal to the sum of 4.50% per annum plus the Commercial Paper
Rate (as hereinafter defined) and to pay on demand interest at a rate equal to
the sum of 6.50% per annum plus the Commercial Paper Rate (in each case subject
to Section 10.08 of the Credit Agreement referred to below) on any overdue
principal, premium and interest from the due date thereof to the date of actual
payment (after as well as before judgment and during any bankruptcy proceeding).
Changes in the rate of interest applicable hereto shall occur as of the opening
of business on any day on which the Commercial Paper Rate changes.
<PAGE> 112
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the one-month Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate is
made available on a discount basis or otherwise by the Federal Reserve Bank of
New York and published weekly by the Board of Governors of the Federal Reserve
System in its H.15 report, or any successor publication published by the Board
of Governors of the Federal Reserve System or, if such rate for such date is not
yet published in such statistical release, the rate for that date will be the
rate set forth in the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System. "Interest Determination Date" means June __, 1997 and the first
Business Day of each calendar month thereafter.
This Note is one of the LTC Term Notes referred to in the Credit
Agreement dated as of December 31, 1996, and amended and restated as of June __,
1997 (as amended from time to time, the "Credit Agreement") among the Company,
Telephone Warehouse, Inc., National Cellular, Incorporated, Texas Cellular
Partners, L.P., the lenders referred to therein and NationsCredit Commercial
Corporation, as Agent. The Credit Agreement and the Security Documents referred
to therein contain additional rights of the holder of, and the security for,
this Note. Capitalized terms used but not defined herein have the meanings
assigned thereto in the Credit Agreement.
If an Event of Default shall occur and be continuing, the unpaid
balance of the principal of this Note together with all accrued but unpaid
interest hereon may become or be declared forthwith due and payable in the
manner and with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit
Agreement, together with any premiums set forth therein, under the circumstances
therein described.
Payments of principal hereof and interest and premium hereon shall be
made in lawful money of the United States of America.
Pursuant to the terms of the Credit Agreement, payment of principal and
interest on this Note is unconditionally guaranteed by Telephone Warehouse,
Inc., National Cellular, Incorporated and Texas Cellular Partners, L.P.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
construction, validity and performance, without regard to the choice of law
provisions thereof.
<PAGE> 113
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the day and year first above written.
LET'S TALK CELLULAR & WIRELESS, INC.
By
----------------------------------
Title:
<PAGE> 114
SCHEDULE A
TO LTC TERM NOTE
Amortization Schedule
<TABLE>
<CAPTION>
Quarterly Date
Installment Amount Due
-------------- ----------
<S> <C>
Nos. 1-4 $ 25,000
Nos. 5-8 25,000
Nos. 9-12 25,000
Nos. 13-16 100,000
Nos. 17-20 100,000
Nos. 21-24 100,000
Nos. 25-28 125,000
</TABLE>
As used herein, "Quarterly Date" means the first Business Day of each February,
May, August and November commencing with the Quarterly Date occurring on August
1, 1997.
<PAGE> 115
EXHIBIT B
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO THE
COMPANY, (2) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (3) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
[NAME OF COMPANY]
WORKING CAPITAL NOTE
$_________ ________ __, 199_
[NAME OF COMPANY], a _________ corporation (together with its
successors, the "Company"), for value received, promises to pay NATIONSCREDIT
COMMERCIAL CORPORATION (the "Lender"), or registered assigns, the principal
amount of __________ Dollars ($___________) or the aggregate outstanding
principal amount of the Working Capital Loans made by the Lender to the Company,
whichever is less, on the Working Capital Termination Date (as herein defined),
and to pay in arrears on the first day of each calendar month (or, if any such
day is not a Business Day, on the next succeeding Business Day), commencing with
[January 1, 1997] [July 1, 1997], until the Working Capital Termination Date and
on the Working Capital Termination Date, interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) on the aggregate unpaid
principal amount hereof on each day from time to time at a rate equal to the sum
of 3.75% per annum plus the Commercial Paper Rate (as hereinafter defined) and
to pay on demand interest at a rate equal to the sum of 5.75% per annum plus the
Commercial Paper Rate (in each case subject to Section 10.08 of the Credit
Agreement referred to below) on any overdue principal and interest from the due
date thereof to the date of actual payment (after as well as before judgment and
during any bankruptcy proceeding). Changes in the rate of interest applicable
hereto shall occur as of the opening of business on any day on which the
Commercial Paper Rate changes.
<PAGE> 116
"Working Capital Termination Date" means the earlier of January 1, 2004
and the date on which all of the Term Notes shall have been paid in full in
accordance with their terms.
"Commercial Paper Rate" means for any day in any calendar month, the
rate of interest equivalent to the money market yield for the Interest
Determination Date falling in such month on the one month Commercial Paper Rate
for dealer-placed commercial paper of issuers whose corporate bonds are rated
"AA" or its equivalent by a nationally recognized rating agency, as such rate is
made available on a discount basis or otherwise by the Federal Reserve Bank of
New York and published weekly by the Board of Governors of the Federal Reserve
System in its H.15 report, or any successor publication published by the Board
of Governors of the Federal Reserve System or, if such rate for such date is not
yet published in such statistical release, the rate for that date will be the
rate set forth in the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System. "Interest Determination Date" means [December 31, 1996] [June
__, 1997] and the first Business Day of each calendar month thereafter.
This Note is one of the Working Capital Notes referred to in the Credit
Agreement dated as of December 31, 1996, and amended and restated as of June __,
1997 (as amended from time to time, the "Credit Agreement") among the Company,
[Telephone Warehouse, Inc.,] [National Cellular, Incorporated,] [Let's Talk
Cellular & Wireless, Inc.,] Texas Cellular Partners, L.P., the lenders referred
to therein and NationsCredit Commercial Corporation, as Agent. The Credit
Agreement and the Security Documents referred to therein contain additional
rights of the holder of, and the security for, this Note. Capitalized terms used
but not defined herein have the meanings assigned thereto in the Credit
Agreement.
If an Event of Default shall occur and be continuing, the unpaid
balance of the principal of this Note together with all accrued but unpaid
interest hereon may become or be declared forthwith due and payable in the
manner and with the effect provided in the Credit Agreement.
This Note also may and must be prepaid as provided in the Credit
Agreement, together with any premiums set forth therein, under the circumstances
therein described.
Payments of principal hereof and interest hereon shall be made in
lawful money of the United States of America.
Pursuant to the terms of the Credit Agreement, payment of principal and
interest on this Note is unconditionally guaranteed by [Telephone Warehouse,
Inc.,] [National Cellular, Incorporated,] [Let's Talk Cellular & Wireless,
Inc.,] and Texas Cellular Partners, L.P.
<PAGE> 117
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York in all respects, including all matters of
construction, validity and performance, without regard to the choice of law
provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the day and year first above written.
[NAME OF COMPANY]
By
---------------------------------
Title:
<PAGE> 118
SCHEDULE A TO WORKING CAPITAL NOTE
PRINCIPAL PAYMENT
AMOUNT OF OF NOTATION
DATE LOAN PRINCIPAL BY
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<PAGE> 119
EXHIBIT C
SECURITY AGREEMENT
AGREEMENT dated as of December 31, 1996, as amended and restated as of
June __, 1997, among TELEPHONE WAREHOUSE, INC., a Delaware corporation (together
with its successors, "TWI"), NATIONAL CELLULAR, INCORPORATED, a Texas
corporation (together with its successors, "National Cellular"), LET'S TALK
CELLULAR & WIRELESS, INC., a Florida corporation (together with its successors,
"LTC", and each of LTC, National Cellular and TWI being referred to individually
as a "Company" and collectively as the "Companies") and NATIONSCREDIT COMMERCIAL
CORPORATION, as Agent (the "Agent") for the lenders referred to below.
W I T N E S S E T H :
WHEREAS, National Cellular, TWI and Texas Cellular Partners, L.P., a
Delaware limited partnership ("Holdings"), are parties to a Credit Agreement
dated as of December 31, 1996 (the "Original Credit Agreement") together with
the lenders parties thereto (the "Lenders") and the Agent; and
WHEREAS, TWI, National Cellular and the Agent are parties to a Security
Agreement dated as of December 31, 1996 (the "Original Security Agreement"); and
WHEREAS, in connection with (i) the proposed merger of Merger Sub 1,
Inc., a wholly-owned subsidiary of LTC, with and into TWI and (ii) the proposed
merger of Merger Sub 2, Inc., a wholly-owned subsidiary of LTC, with and into
National Cellular, as a result of which mergers LTC will acquire all of the
capital stock of each of TWI and National Cellular, the Companies, Holdings and
NationsCredit, as Lender and Agent, have entered into an amendment and
restatement of the Original Credit Agreement on and as of the date hereof (as
the same may be amended from time to time, the "Credit Agreement"); and
WHEREAS, in order to induce the Lenders and the Agent to enter into the
Credit Agreement, (i) each of the Companies has agreed to grant a continuing
security interest in and to the Collateral (as hereafter defined), (ii) HIG Fund
V, Inc. is entering into, on and as of the date hereof, an HIG Pledge Agreement
with the Agent and (iii) Holdings is entering into, on and as of the date
hereof, an amended and restated Holdings Pledge Agreement with the Agent, in
each event in order to secure the respective obligations of the Companies and
Holdings under the Financing Documents referred to in the Credit Agreement; and
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NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that the Original Security Agreement is
hereby amended and restated to read in its entirety as follows:
SECTION 1. Definitions
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by any Company, and shall also mean and include all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to any Company arising from the sale, lease or exchange of
goods or other property by it and/or the performance of services by it
(including any such obligation which might be characterized as an account,
contract right or general intangible under the Uniform Commercial Code in effect
in any jurisdiction) and all rights of any Company in, to and under all purchase
orders for goods, services or other property, and all rights of any Company to
any goods, services or other property represented by any of the foregoing
(including returned or repossessed goods and unpaid sellers' rights of
rescission, replevin, reclamation and rights to stoppage in transit) and all
monies due to or to become due to any Company under all contracts for the sale,
lease or exchange of goods or other property and/or the performance of services
by it (whether or not yet earned by performance on the part of such Company), in
each case whether now in existence or hereafter arising or acquired including,
without limitation, the right to receive the proceeds of said purchase orders
and contracts and all collateral security and guarantees of any kind given by
any Person with respect to any of the foregoing.
"Collateral" has the meaning set forth in Section 3.
"Collateral Accounts" means the Lockbox Accounts, the LC Collateral
Account and the Insurance Accounts.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods, now owned or hereafter
acquired by any Company.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by any Company, including without limitation all motor
vehicles, trucks, trailers, railcars and barges.
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"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by any Company, including, without
limitation, (i) all obligations or indebtedness owing to such Company (other
than Accounts) from whatever source arising, (ii) all Patents, Patent Licenses,
Trademarks, Trademark Licenses, rights in intellectual property, goodwill, trade
names, service marks, trade secrets, copyrights, permits and licenses, (iii) all
rights or claims in respect of refunds for taxes paid and (iv) all rights in
respect of any pension plan or similar arrangement maintained for employees of
any member of the ERISA Group.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC), including, without limitation, those
evidencing, representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts, including
(but not limited to) promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by any Company.
"Insurance Accounts" has the meaning set forth in Section 5(C).
"Insurance Proceeds" has the meaning set forth in Section 5(C).
"Inventory" means all "inventory" (as defined in the UCC), now owned or
hereafter acquired by any Company, wherever located, and shall also mean and
include, without limitation, all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"Junior Secured Obligations" means, with respect to any Company, the
obligations of such Company in its capacity as a Guarantor pursuant to Article 4
of the Credit Agreement.
"Liquid Investments" has the meaning set forth in Section 5(E).
"LC Collateral Account " has the meaning set forth in Section 5(F)
"Lockbox Accounts" has the meaning set forth in Section 5(A).
"Lockbox Agreements" has the meaning set forth in Section 5(A).
"Lockbox Bank" has the meaning set forth in Section 5(A).
"Patent License" means any agreement now or hereafter in existence
granting to any Company, or pursuant to which any Company has granted to any
other Person, any right with respect to any Patent or any invention now or
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hereafter in existence, whether patentable or not, whether a patent or
application for patent is in existence on such invention or not, and whether a
patent or application for patent on such invention may come into existence.
"Patents" means all of the following: (i) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including, without limitation, applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State thereof, the District of Columbia or any other country or any
political subdivision of any of the foregoing, (ii) all reissues, divisions,
continuations, continuations-in-part, renewals and extensions of any of the
foregoing, (iii) all claims for, and rights to sue for, past or future
infringements of any of the foregoing and (iv) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including, without limitation, damages and payments for past or
future infringements thereof.
"Perfection Certificate" means, with respect to any Company, a
certificate substantially in the form of Exhibit A, completed and supplemented
with the schedules and attachments contemplated thereby to the satisfaction of
the Agent, and duly executed by the chief executive officer of such Company.
"Permitted Liens" means the Security Interests and the Liens on the
Collateral permitted to be created, to be assumed or to exist pursuant to
Section 8.02 of the Credit Agreement.
"Proceeds" means all proceeds of, and all other profits, products,
rents or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or other realization
upon, collateral, including, without limitation, all claims of any Company
against third parties for loss of, damage to or destruction of, or for proceeds
payable under, or unearned premiums with respect to, policies of insurance in
respect of, any collateral, and any condemnation or requisition payments with
respect to any collateral, in each case whether now existing or hereafter
arising.
"Secured Obligations" means, with respect to any Company, the
obligations of such Company secured by the Security Interest granted by such
Company pursuant hereto, which include the Senior Secured Obligations of such
Company and the Junior Secured Obligations of such Company.
"Secured Parties" means the Agent and the Lenders.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
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"Senior Secured Obligations" means, with respect to any Company,
(a) all principal of and interest (including any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of such Company, whether or not allowed
or allowable as a claim in any such proceeding) on any Loan to such Company
under, or any Note issued by such Company pursuant to, the Credit Agreement,
(b) all other amounts payable by such Company hereunder or under any other
Financing Document (other than Junior Secured Obligations of such Company),
(c) all other obligations of such Company hereunder and the other Financing
Documents (other than Junior Secured Obligations of such Company) and (d) any
amendments, restatements, renewals, extensions or modifications of any of the
foregoing.
"Trademark License" means any agreement now or hereafter in existence
granting to any Company, or pursuant to which any Company has granted to any
other Person, any right to use any Trademark.
"Trademark Security Agreement" means the Trademark Security Agreement
dated as of the date hereof and executed and delivered by LTC in favor of the
Agent for the benefit of the Secured Parties, substantially in the form of
Exhibit D hereto, as the same may be amended from time to time.
"Trademarks" means all of the following: (i) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general intangibles
of like nature, and the rights in any of the foregoing which arise under
applicable law, (ii) the goodwill of the business symbolized thereby or
associated with each of them, (iii) all registrations and applications in
connection therewith, including, without limitation, registrations and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof, the District of
Columbia or any other country or any political subdivision of any of the
foregoing, (iv) all reissues, extensions and renewals of any of the foregoing,
(v) all claims for, and rights to sue for, past or future infringements of any
of the foregoing and (vi) all income, royalties, damages and payments now or
hereafter due or payable with respect to any of the foregoing, including,
without limitation, damages and payments for past or future infringements
thereof.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial
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Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
SECTION 2. Representations and Warranties
Each Company represents and warrants as follows:
(A) Such Company has good and valid title to all of its Collateral,
free and clear of any Liens other than the Permitted Liens. Such Company has
taken all actions necessary under the UCC to perfect its interest in any
Accounts purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors.
(B) Such Company has not performed any acts which might prevent the
Agent from enforcing any of the terms of this Agreement or which would limit the
Agent in any such enforcement. Other than financing statements or other similar
or equivalent documents or instruments with respect to the Security Interests
and Permitted Liens, no financing statement, mortgage, security agreement or
similar or equivalent document or instrument covering all or any part of its
Collateral is on file or of record in any jurisdiction in which such filing or
recording would be effective to perfect a Lien on such Collateral. No Collateral
is in the possession of any Person (other than such Company) asserting any claim
thereto or security interest therein, except that the Agent or its designee may
have possession of Collateral as contemplated hereby.
(C) The information set forth in the Perfection Certificate delivered
to the Agent by such Company prior to the LTC Closing Date is correct and
complete after giving effect to the consummation of the LTC Merger. Not later
than 30 days following the LTC Closing Date, such Company shall furnish to the
Agent file search reports from each UCC filing office set forth in Schedule 7 to
the Perfection Certificate of such Company confirming the filing information set
forth in such Schedule.
(D) The Security Interests granted by such Company constitute valid
security interests under the UCC securing its Secured Obligations. When UCC
financing statements in the form specified in Exhibit A shall have been filed in
the offices specified in its Perfection Certificate, such Security Interests
shall constitute perfected security interests in its Collateral (except
Inventory in transit) to the extent that a security interest therein may be
perfected by filing pursuant to the UCC, prior to all other Liens and rights of
others therein except for the Permitted Liens. When the Trademark Security
Agreement has been recorded with the United States Patent and Trademark Office,
the Security Interests shall
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constitute perfected Security Interests in all right, title and interest of LTC
in the Trademarks listed in Schedule 1 thereto, prior to all other Liens and
rights of others therein except for Permitted Liens.
(E) Its Inventory and Equipment are insured in accordance with the
requirements of the Credit Agreement.
(F) All of its Inventory has or will have been produced in compliance
with the applicable requirements of the Fair Labor Standards Act, as amended.
SECTION 3. The Security Interests
(A) In order to secure the full and punctual payment and performance of
its Senior Secured Obligations in accordance with the terms thereof, each
Company hereby grants to the Agent for the ratable benefit of the Secured
Parties a continuing security interest in and to all of the following property
of such Company, whether now owned or existing or hereafter acquired or arising
and regardless of where located (all being collectively referred to as the
Collateral of such Company" or "its Collateral" and the Collateral of any
Company or both Companies, as the context may require, being referred to as "the
Collateral"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) Equipment;
(7) The Lockbox Accounts, the LC Collateral Account and the
Insurance Accounts, all cash deposited in either of the foregoing from
time to time, the Liquid Investments made pursuant to Section 5(E) and
other monies and property of any kind of such Company in the possession
or under the control of the Agent;
(8) All books and records (including customer lists, credit
files, computer programs, printouts and other computer materials and
records) of such Company pertaining to any of the Collateral; and
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(9) All Proceeds of all or any of the Collateral described in
Clauses 1 through 8 hereof.
(B) In order to secure the full and punctual payment of its Junior
Secured Obligations in accordance with the terms thereof, each Company hereby
grants to the Agent for the benefit of the Secured Parties a continuing security
interest in and to all of its Collateral; provided that the Security Interests
granted under this subsection (B) shall be in all respects junior to the
Security Interests granted by it under subsection (A) of this Section.
(C) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of any Company with respect to any of the Collateral or
any transaction in connection therewith.
SECTION 4. Further Assurances; Covenants
(A) None of the Companies will change its name, identity or corporate
structure in any manner unless it shall have given the Agent prior notice
thereof and delivered an opinion of counsel with respect thereto in accordance
with Section 4(K). None of the Companies will change the location of (i) its
chief executive office or chief place of business or (ii) the locations where it
keeps or holds any Collateral or any records relating thereto from the
applicable location described in the Perfection Certificate delivered by such
Company unless it shall have given the Agent prior notice thereof and delivered
an opinion of counsel with respect thereto in accordance with Section 4(K). None
of the Companies shall in any event change the location of any Collateral if
such change would cause the Security Interests in such Collateral to lapse or
cease to be perfected.
(B) Each Company will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including any filings of
financing or continuation statements under the UCC and the registration in the
United States Patent and Trademark Office or United States Copyright Office, as
the case may be, of any unregistered Patent, Trademark or Copyright that is
material to the business of such Company, now owned or later acquired by such
Company) that from time to time may be necessary or desirable, or that the Agent
may request, in order to create, preserve, perfect, confirm or validate the
Security Interests or to enable the Secured Parties to obtain the full benefits
of this Agreement, or to enable the Agent to exercise and enforce any of its
rights, powers and remedies hereunder with respect to any of the Collateral. To
the extent permitted by applicable law, each Company hereby authorizes the
Agent, and appoints the Agent as its true and lawful attorney (with full power
of substitution, in the name of such Company, the Secured Parties or otherwise,
for
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the sole use and benefit of the Secured Parties), to execute and file financing
statements or continuation statements without such Company's signature appearing
thereon. Each Company agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. Each Company shall pay the costs of, or incidental to, any
recording or filing of any financing or continuation statements concerning its
Collateral.
(C) If any Collateral is at any time in the possession or control of
any warehouseman, bailee or any Company's agents or processors, such Company
shall notify such warehouseman, bailee, agent or processor of the Security
Interests created hereby and to hold all such Collateral for the Agent's account
subject to the Agent's instructions.
(D) Each Company shall keep full and accurate books and records
relating to its Collateral, and stamp or otherwise mark such books and records
in such manner as the Required Lenders may reasonably require in order to
reflect the Security Interests.
(E) Each Company will immediately deliver and pledge each of its
Instruments to the Agent, appropriately endorsed to the Agent, provided that so
long as no Event of Default shall have occurred and be continuing, such Company
may retain for collection in the ordinary course any Instruments (other than
checks and drafts constituting payments in respect of Accounts, as to which the
provisions of Section 5(B) shall apply) received by it in the ordinary course of
business and the Agent shall, promptly upon request of such Company, make
appropriate arrangements for making any other Instrument pledged by such Company
available to it for purposes of presentation, collection or renewal (any such
arrangement to be effected, to the extent deemed appropriate to the Agent,
against trust receipt or like document).
(F) Each Company shall use its best efforts to cause to be collected
from its account debtors, as and when due, any and all amounts owing under or on
account of each Account (including Accounts which are delinquent, such Accounts
to be collected in accordance with lawful collection procedures) and shall apply
forthwith upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Account. Subject to the rights of the Secured
Parties hereunder upon the occurrence and during the continuance of an Event of
Default, each Company may allow in the ordinary course of business as
adjustments to amounts owing under its Accounts (i) an extension or renewal of
the time or times of payment, or settlement for less than the total unpaid
balance, which such Company finds appropriate in accordance with sound business
judgment unless such extension, renewal or settlement results in causing such
Account to not be an Eligible Receivable and thereby causes the aggregate
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outstandings Working Capital Borrowings to exceed the Borrowing Base and (ii) a
refund or credit due as a result of returned or damaged merchandise or as a
discount for prompt payment, all in accordance with such Company's ordinary
course of business consistent with its historical collection practices. The
costs and expenses (including attorney's fees) of collection, whether incurred
by such Company or the Agent, shall be borne by such Company.
(G) Upon the occurrence and during the continuance of any Event of
Default, upon request of the Required Lenders through the Agent, each Company
will promptly notify (and such Company hereby authorizes the Agent so to notify)
each account debtor in respect of any Account or Instrument that such Collateral
has been assigned to the Agent hereunder, and that any payments due or to become
due in respect of such Collateral are to be made directly to the Agent or its
designee.
(H) Each Company shall, (i) on or prior to the LTC Closing Date, in the
case of Equipment now owned and (ii) within 10 days of acquiring any other
Equipment, deliver to the Agent any and all certificates of title, applications
for title or similar evidence of ownership of such Equipment and shall cause the
Agent to be named as lienholder on any such certificate of title or other
evidence of ownership. Each Company shall promptly inform the Agent of any
additions to or deletions from the Equipment and shall not permit any such items
to become a fixture to real estate (unless the Agent has a first priority Lien
thereon pursuant to the Mortgage) or an accession to other personal property.
(I) Without the prior written consent of the Required Lenders, none of
the Companies will sell, lease, exchange, assign or otherwise dispose of, or
grant any option with respect to, any Collateral except, subject to the rights
of the Secured Parties hereunder if an Event of Default shall have occurred and
be continuing, as permitted under the Credit Agreement including Section 8.06,
whereupon, in the case of such a sale or exchange, the Security Interests
created hereby in such item (but not in any Proceeds arising from such sale or
exchange) shall cease immediately without any further action on the part of the
Agent.
(J) Each Company will, promptly upon request, provide to the Agent all
information and evidence it may reasonably request concerning the Collateral to
enable the Agent to enforce the provisions of this Agreement.
(K) Not more than six months nor less than 30 days prior to each date
on which any Company proposes to take any action contemplated by Section 4(A),
such Company shall give notice to the Agent of such proposed action, and, at
such Company's cost and expense, cause to be delivered to the Secured Parties
with such notice, an opinion of counsel, satisfactory to the Agent,
substantially in the form of Exhibit B (which opinion may rely on certificates
of appropriate officers
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of such Company as to factual matters) to the effect that all financing
statements and amendments or supplements thereto, continuation statements and
other documents required to be recorded or filed in order to perfect and protect
the Security Interests in such Company's Collateral for a period (and after
giving effect to the proposed action that is the subject of such notice),
specified in such opinion, continuing until a date not earlier than eighteen
months from the date of such opinion, against all creditors of and purchasers
from such Company have been filed in each filing office necessary for such
purpose and that all filing fees and taxes, if any, payable in connection with
such filings have been paid in full.
(L) From time to time upon request by the Agent, each Company shall, at
its cost and expense, cause to be delivered to the Secured Parties an opinion of
counsel satisfactory to the Agent as to such matters relating to the
transactions contemplated hereby as the Required Lenders may reasonably request.
(M) Each Company shall notify the Agent immediately if it knows that
any application or registration relating to any Patent or Trademark may become
abandoned or dedicated (other than applications or registrations (x) with
respect to any such Patents or Trademarks that are no longer used or useful in
the business of such Company or whose minimal value does not reasonably justify
the cost of maintaining such registration or application, or (y) that have been
refused by the applicable patent or trademark registry) or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, or any court) regarding such Company's ownership of any Patent
or Trademark, its right to register the same, or to keep and maintain the same.
In the event that any right to any Patent, Patent License, Trademark or
Trademark License of any Company is infringed, misappropriated or diluted by a
third party, such Company shall notify the Agent promptly after it learns
thereof and shall, unless such Company shall reasonably determine that any such
action would be of negligible economic value, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as such
Company shall reasonably deem appropriate under the circumstances to protect
such Patent, Patent License, Trademark or Trademark License. In no event shall
any Company, either itself or through any agent, employee or licensee, file an
application for the registration of any Patent or Trademark with the United
States Patent and Trademark Office, or with any similar office or agency of the
United States, any State thereof, the District of Columbia or with any similar
office or agency in any other country or any political subdivision of any of the
foregoing, unless not less than 10 days prior thereto it informs the Agent, and,
upon request of the Agent, executes and delivers any and all agreements,
instruments, documents and papers the Agent may request to evidence the Security
Interests in such Patent or Trademark and the goodwill and general intangibles
of such
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Company relating thereto or represented thereby, and such Company hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power, being coupled with an interest, shall be irrevocable
until the Secured Obligations are paid in full.
SECTION 5. Lockbox Account and Insurance Account
(A) Within 30 days after the LTC Closing Date, the Agent and LTC shall
have established, pursuant to a lockbox agreement in form and substance
satisfactory to the Agent and a letter in the form of Exhibit C hereto (each of
such lockbox agreement and letter and the lockbox agreements and letters entered
into by TWI and National Cellular pursuant to the Original Security Agreement, a
"Lockbox Agreement", and collectively, the "Lockbox Agreements"), a bank account
(each of such lockbox accounts and the lockbox accounts established by TWI and
National Cellular pursuant to the Original Security Agreement, a "Lockbox
Account", and collectively, the "Lockbox Accounts") with a bank reasonably
satisfactory to the Agent (the "Lockbox Bank"), in the name of "Let's Talk
Cellular & Wireless, Inc. - NationsCredit Commercial Corporation, as Agent", and
under the exclusive control of the Agent. The cash Proceeds of the Collateral of
each Company required to be delivered to the Agent pursuant to subsection (B) of
this Section 5 or any other provision of this Agreement shall be deposited from
time to time in such Company's Lockbox Account. Any income received with respect
to the balance from time to time standing to the credit of each Lockbox Account,
including any interest or capital gains on Liquid Investments, shall remain, or
be deposited, in such Lockbox Account. All right, title and interest in and to
the cash amounts on deposit from time to time in each Lockbox Account together
with any Liquid Investments from time to time made pursuant to subsection (E) of
this Section shall vest in the Agent, shall constitute part of the Collateral
hereunder and shall not constitute payment of the Secured Obligations until
applied thereto as hereinafter provided.
(B) Each Company shall instruct all account debtors and other Persons
obligated in respect of all Accounts to make all payments in respect of the
Accounts and shall use its best efforts to cause such account debtors and other
Persons to remit all such payments directly to the relevant Lockbox Account (if
paid by wire transfer) or to a post office box that is subject to the relevant
Lockbox Agreement, for deposit into the relevant Lockbox Account. In addition to
the foregoing, each Company agrees that if the Proceeds of any Collateral
hereunder (including any payments made in respect of Accounts) shall be received
by it, such Company, subject to subsection (C) of this Section, shall as
promptly as possible deposit such Proceeds into the relevant Lockbox Account or
apply such Proceeds to the repayment of Loans outstanding under the Credit
Agreement. Until so deposited, all such Proceeds shall be held in trust by such
Company for
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and as the property of the Secured Parties and shall not be commingled with any
other funds or property of such Company. The balance from time to time standing
to the credit of the relevant Lockbox Account shall, except upon the occurrence
and continuation of an Event of Default, be distributed to the relevant Company
in accordance with the provisions of the relevant Lockbox Agreement. If
immediately available cash on deposit in a Lockbox Account established by any
Company is not sufficient to make any distribution to such Company referred to
in the previous sentence of this Section 5(B), the Agent shall cause to be
liquidated as promptly as practicable Liquid Investments in such Lockbox Account
designated by such Company as required to obtain sufficient cash to make such
distribution and, notwithstanding any other provision of this Section 5, such
distribution (except in respect of available cash then on deposit in such
Lockbox Account) shall not be made until such liquidation has taken place. Upon
the occurrence and continuation of an Event of Default, the Agent shall, if so
instructed by the Required Lenders, apply or cause to be applied (subject to
collection) any or all of the balance from time to time standing to the credit
of the Lockbox Accounts in the manner specified in Section 9.
(C) Promptly upon and at all times after the receipt of any cash
Proceeds of insurance policies, awards of condemnation or other compensation
required to be paid to the Agent pursuant to Section 7.04(d) of the Credit
Agreement (the "Insurance Proceeds"), each Company shall establish and shall
thereafter maintain an additional cash collateral account (an "Insurance
Account" and, collectively, the "Insurance Accounts") at the offices of the
Lockbox Bank or such other bank as such Company and the Agent may agree (the
"Insurance Account Bank"), in the name and under the control of the Agent.
Forthwith upon such establishment, such Company shall notify the Agent of the
location, account name and account number of such account. Each Company hereby
agrees to cause any Insurance Proceeds received from time to time after the
establishment of an Insurance Account by such Company to be deposited therein as
set forth in this paragraph. Any income received with respect to the balance
from time to time standing to the credit of such Insurance Account, including
any interest or capital gains on Liquid Investments, shall remain, or be
deposited, in such Insurance Account. All right, title and interest in and to
the cash amounts on deposit from time to time in the Insurance Accounts together
with any Liquid Investments from time to time made pursuant to subsection (E) of
this Section shall vest in the Agent, shall constitute part of the Collateral
hereunder and shall not constitute payment of the Secured Obligations until
applied thereto as hereinafter provided. The Agent shall apply to repayment of
the Loans of each Company those amounts on deposit in the Insurance Account
established by such Company which are required to be applied to the repayment of
the Loans in accordance with Section 2.04(b)(ii)(A) of the Credit Agreement.
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<PAGE> 132
(D) The balance from time to time standing to the credit of the
Insurance Accounts (to the extent not applied pursuant to the last sentence of
Section 5(C)) shall be subject to withdrawal only upon the instructions of the
Agent. Except upon the occurrence and continuation of an Event of Default, the
Agent agrees to give instructions to distribute such amounts to each Company at
such times and in such amounts as such Company shall request for the purpose of
repairing, reconstructing or replacing the property in respect of which such
Insurance Proceeds were received. Any such request shall be accompanied by a
certificate of the chief financial officer or treasurer of such Company setting
forth in detail reasonably satisfactory to the Required Lenders the repair,
reconstruction or replacement for which such funds will be expended. If
immediately available cash on deposit in such Insurance Account is not
sufficient to make any distribution to such Company referred to in the previous
sentence of this Section 5(D), the Agent shall cause to be liquidated as
promptly as practicable such Liquid Investments in such Insurance Account
designated by such Company as required to obtain sufficient cash to make such
distribution and, notwithstanding any other provision of this Section 5, such
distribution (except in respect of available cash then on deposit in the Lockbox
Accounts) shall not be made until such liquidation has taken place. Upon the
occurrence and continuation of an Event of Default, the Agent shall, if so
instructed by the Required Lenders, apply or cause to be applied (subject to
collection) any or all of the balance from time to time standing to the credit
of the Insurance Accounts in the manner specified in Section 9.
(E) Amounts on deposit in the Lockbox Accounts and the Insurance
Accounts shall be invested and re-invested from time to time in such Liquid
Investments as the relevant Company shall determine, which Liquid Investments
shall be held in the name and be under the control of the Agent; provided that,
if an Event of Default has occurred and is continuing, the Agent shall, if
instructed by the Required Lenders, cause such Liquid Investments to be
liquidated and apply or cause to be applied the proceeds thereof to the payment
of the Secured Obligations in the manner specified in Section 9 hereof. For this
purpose, "Liquid Investments" means Temporary Cash Investments; provided that
(i) each Liquid Investment shall mature within 30 days after it is acquired by
the Agent and (ii) in order to provide the Agent, for the benefit of the Secured
Parties, with a perfected security interest therein, each Liquid Investment
shall be either:
(i) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Agent, which (together
with any appropriate instruments of transfer) are delivered to, and
held by, the Agent or an agent thereof (which shall not be any Company
or any of its Affiliates) in the State of New York; or
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<PAGE> 133
(ii) in book-entry form and issued by the United States and
subject to pledge under applicable state law and Treasury regulations
and as to which (in the opinion of counsel to the Agent) appropriate
measures shall have been taken for perfection of the Security
Interests.
(F) All amounts required to be deposited as cash collateral pursuant to
Section 3.07(b) or Section 9.02 of the Credit Agreement shall be deposited in a
cash collateral account (the "LC Collateral Account") established and maintained
by the Companies at the offices of the Lockbox Bank or such other bank as the
Companies and the Agent may agree, in the name and under the control of the
Agent. Forthwith upon such establishment, the Companies shall notify the agent
of the location, account name and account number of such account. Any income
received with respect to the balance from time to time standing to the credit of
the LC Collateral Account, including any interest or capital gains on Liquid
Investments, shall remain, or be deposited, in the LC Collateral Account. All
right, title and interest in and to the cash amounts on deposit from time to
time in the LC Collateral Account together with any Liquid Investments from time
to time made pursuant to subsection (E) of this Section shall vest in the Agent,
shall constitute part of the Collateral hereunder and shall not constitute
payment of the Secured Obligations until applied thereto as hereinafter
provided. If and when any portion of the Letter of Credit Liabilities on which
any deposit of cash in the LC Collateral Account was based (the "Relevant
Contingent Exposure") shall become fixed (a "Direct Exposure") as a result of
the payment by the LC Issuer of a draft presented under any Letter of Credit,
the amount of such Direct Exposure (but not more than the amount in the LC
Collateral Account at the time) shall be withdrawn by the Agent from the LC
Collateral Account and shall be paid to the Lenders, if and to the extent the
Lenders shall have reimbursed the relevant LC Issuer for the amount of such
drawing pursuant to Section 3.09(a)(ii) of the Credit Agreement and the Relevant
Contingent Exposure shall thereupon be reduced by such amount. If at any time
the amount in the LC Collateral Account exceeds the Relevant Contingent
Exposure, the excess amount shall, so long as no Event of Default shall have
occurred and be continuing, be withdrawn by the Agent and paid to the Companies.
If an Event of Default shall have occurred and be continuing, such excess
amounts shall be retained in the LC Collateral Account and, if and when
requested by the Required Lenders, shall be withdrawn by the Agent and applied
in the manner specified in Section 9. If immediately available cash on deposit
in the LC Collateral Account is not sufficient to make any distribution to the
Companies referred to in this Section 5(F), the Agent shall cause to be
liquidated as promptly as practicable such Liquid Investments in the LC
Collateral Account designated by the Companies as required to obtain sufficient
cash to make such distribution and, notwithstanding any other provision of this
Section 5, such distribution shall not be made until such liquidation has taken
place.
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SECTION 6. General Authority
Each Company hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of such Company, the
Secured Parties or otherwise, for the sole use and benefit of the Secured
Parties, but at such Company's expense, to the extent permitted by law to
exercise, at any time and from time to time while an Event of Default has
occurred and is continuing, all or any of the following powers with respect to
all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due thereon or by virtue
thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the Proceeds or avails thereof, including without
limitation for the implementation of any lease, assignment, license,
sublicense, grant of option, sale or other disposition of any Patent or
Trademark or any action related thereto, as fully and effectually as if
the Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Agent shall give each Company not less than ten days' prior
notice of the time and place of any sale or other intended disposition of any of
the Collateral, except any Collateral of any Company which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market. Each Company agrees that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 7. Remedies upon Event of Default
(A) If any Event of Default has occurred and is continuing, the Agent
may exercise on behalf of the Secured Parties all rights of a secured party
under the UCC (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, the Agent may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) withdraw all cash and Liquid Investments in the
Collateral Accounts and apply such cash and Liquid Investments and other cash,
if any, then held by it as Collateral as specified in Section 9 hereof and
(ii) if there shall be no such cash or Liquid Investments or if such cash and
Liquid Investments shall be insufficient to
16
<PAGE> 135
pay all the Secured Obligations in full, sell the Collateral or any part thereof
at public or private sale, for cash, upon credit or for future delivery, and at
such price or prices as the Agent may deem satisfactory. The Agent or any other
Secured Party may be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). Each Company will execute and
deliver such documents and take such other action as the Agent deems necessary
or advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold to it absolutely and free from any
Lien, claim or right of whatsoever kind, including any equity or right of
redemption of any Company which may be waived, and each Company, to the extent
permitted by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by Section 6 hereof shall
(1) in case of a public sale, state the time and place fixed for such sale, and
(2) in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot as
an entirety or in separate parcels, as the Agent may determine. The Agent shall
not be obligated to make any such sale pursuant to any such notice. The Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Agent until the selling price is paid by the purchaser thereof,
but the Agent shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. The Agent, instead
of exercising the power of sale herein conferred upon it, may proceed by a suit
or suits at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and remedies under
this Agreement the Agent may (i) require any Company to, and each Company agrees
that it will, at its expense and upon the request of the Agent, forthwith
assemble all or any part of the Collateral as directed by the Agent and make it
available at a place designated by the Agent which is, in its opinion,
reasonably convenient to the Agent and such Company, whether at the premises of
such Company or otherwise, (ii) to the extent permitted by applicable law,
enter, with or without process of law and without breach of the peace, any
premise where any
17
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of the Collateral is or may be located, and without charge or liability to it
seize and remove such Collateral from such premises, (iii) have access to and
use such Company's books and records relating to the Collateral and (iv) prior
to the disposition of the Collateral, store or transfer it without charge in or
by means of any storage or transportation facility owned or leased by such
Company, process, repair or recondition it or otherwise prepare it for
disposition in any manner and to the extent the Agent deems appropriate and, in
connection with such preparation and disposition, use without charge any
trademark, trade name, copyright, patent or technical process used by such
Company.
(C) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing,
(i) the Agent may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Patents or Trademarks included in the
Collateral throughout the world for such term or terms, on such
conditions and in such manner as the Agent shall in its sole discretion
determine;
(ii) the Agent may (without assuming any obligations or
liability thereunder), at any time and from time to time, enforce (and
shall have the exclusive right to enforce) against any licensor,
licensee or sublicensee all rights and remedies of any of the Company
in, to and under any Patent Licenses or Trademark Licenses and take or
refrain from taking any action under any thereof, and each Company
hereby releases the Agent and each of the other Secured Parties from,
and agrees to hold the Agent and each of the other Secured Parties free
and harmless from and against any claims arising out of, any lawful
action so taken or omitted to be taken with respect thereto, except any
such claim to the extent that it arises solely as the result of the
gross negligence or willful misconduct of any Secured Party; and
(iii) upon request by the Agent, each Company will execute
and deliver to the Agent a further power of attorney, in form and
substance satisfactory to the Agent, for the implementation of any
lease, assignment, license, sublicense, grant of option, sale or other
disposition of a Patent, Trademark, Patent License or Trademark
License. In the event of any such disposition pursuant to this Section,
each Company shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing Trademarks or the products
or services made or rendered in connection with Patents, and its
customer lists and other records relating to such Patents or Trademarks
and to the distribution of said products, to the Agent.
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SECTION 8. Limitation on Duty of Agent in Respect of Collateral
Beyond the exercise of reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Agent in good faith.
SECTION 9. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default,
the Proceeds of any sale of, or other realization upon, all or any part of the
Collateral of any Company and any cash or the Proceeds of any Liquid Investments
held in the Collateral Accounts of such Company shall be applied by the Agent in
the following order of priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, and any other unreimbursed
expenses for which the Agent or any other Secured Party is to be
reimbursed by such Company pursuant to Section 10.04 of the Credit
Agreement or Section 12 hereof and unpaid fees owing by such Company to
the Agent under the Credit Agreement and the Pledge Agreement (as
defined in the Credit Agreement);
second, to the ratable payment of unpaid principal of the
Senior Secured Obligations of such Company;
third, to the ratable payment of accrued but unpaid interest
on the Senior Secured Obligations of such Company in accordance with
the provisions of the Credit Agreement;
fourth, to the ratable payment of all other Senior Secured
Obligations of such Company, until all such Senior Secured Obligations
shall have been paid in full;
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<PAGE> 138
fifth, to the ratable payment of unpaid principal of the
Junior Secured Obligations of such Company;
sixth, to the ratable payment of accrued but unpaid interest
on the Junior Secured Obligations of such Company in accordance with
the provisions of the Credit Agreement;
seventh, to the ratable payment of all other Junior Secured
Obligations of such Company, until all such Junior Secured Obligations
shall have been paid in full; and
finally, to payment to such Company or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such Proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof.
SECTION 10. Concerning the Agent
The provisions of Section 10.05 and Article 11 of the Credit Agreement
shall inure to the benefit of the Agent in respect of this Agreement and shall
be binding upon the parties to the Credit Agreement in such respect. In
furtherance and not in derogation of the rights, privileges and immunities of
the Agent therein set forth:
(A) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including the
timing and methods of realization upon the Collateral) the Agent shall act or
refrain from acting in accordance with written instructions from the Required
Lenders or, in the absence of such instructions, in accordance with its
discretion.
(B) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by any
Company.
20
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SECTION 11. Appointment of Co-Agents
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other Persons, either to act as co-agent or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Secured Parties
with such power and authority as may be necessary for the effectual operation of
the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions for the
protection of such co-agent or separate agent similar to the provisions of
Section 10 hereof).
SECTION 12. Expenses
In the event that any Company fails to comply with the provisions of
the Credit Agreement or this Agreement, such that the value of any Collateral or
the validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Agent if requested by
the Required Lenders may, but shall not be required to, effect such compliance
on behalf of such Company, and such Company shall reimburse the Agent for the
costs thereof on demand. All insurance expenses and all expenses of protecting,
storing, warehousing, appraising, insuring, handling, maintaining, and shipping
the Collateral, any and all excise, property, sales, and use taxes imposed by
any state, federal, or local authority on any of the Collateral, or in respect
of periodic appraisals and inspections of the Collateral to the extent the same
may be requested by the Required Lenders from time to time, or in respect of the
sale or other disposition thereof shall be borne and paid by the Companies; and
if any Company fails to promptly pay any portion thereof when due, the Agent or
any other Secured Party may, at its option, but shall not be required to, pay
the same and charge such Company's account therefor, and each Company agrees to
reimburse the Agent or such other Secured Party therefor on demand. All sums so
paid or incurred by the Agent or any Lender for any of the foregoing and any and
all other sums for which the Companies may become liable hereunder and all costs
and expenses (including, without limitation, attorneys' fees, legal expenses and
court costs (including, without limitation, the allocation of the compensation,
costs and expenses of in-house counsel, based upon time spent)) reasonably
incurred by the Agent or any other Secured Party in enforcing or protecting the
Security Interests or any of their rights or remedies under this Agreement,
shall, together with, on and after the tenth day of any demand therefor,
interest thereon until paid at an annual rate equal to 5% plus the rate
announced from time to time by NationsBank, N.A. as its prime rate, be
additional Secured Obligations hereunder.
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SECTION 13. Termination of Security Interests; Release of Collateral
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights of each Company to its Collateral shall
revert to such Company. At any time and from time to time prior to such
termination of the Security Interests, the Agent may release any of the
Collateral with the prior written consent of the Required Lenders. Upon any such
termination of the Security Interests or release of Collateral, the Agent will,
at the expense of the Companies, execute and deliver to the Companies such
documents as the Companies shall reasonably request to evidence the termination
of the Security Interests or the release of such Collateral, as the case may be.
SECTION 14. Notices
All notices, communications and distributions hereunder shall be given
in accordance with Section 12.03 of the Credit Agreement.
SECTION 15. Waivers, Non-Exclusive Remedies
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent or any Secured Party of any right under the Credit
Agreement, any of the other Financing Documents or this Agreement preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement, the Credit Agreement and the other Financing Documents are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 16. Successors and Assigns
This Agreement is for the benefit of the Agent and the Secured Parties
and their successors and assigns, and in the event of an assignment of all or
any of the Secured Obligations, the rights hereunder, to the extent applicable
to the indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on each Company and its successors and assigns.
SECTION 17. Changes in Writing
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Companies and
the Agent with the consent of the Required Lenders, provided that no such
modification shall change the equal and ratable nature of the Security Interests
without the consent of all of the Lenders.
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SECTION 18. NEW YORK LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO PRINCIPLES OR CONFLICTS
OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT
TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN
NEW YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 19. Severability
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the other Secured Parties
in order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 20. Counterparts
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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<PAGE> 142
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TELEPHONE WAREHOUSE, INC.
By:
-------------------------------
Name:
Title:
NATIONAL CELLULAR,
INCORPORATED
By:
-------------------------------
Name:
Title:
LET'S TALK CELLULAR &
WIRELESS, INC.
By:
-------------------------------
Name:
Title:
NATIONSCREDIT COMMERCIAL
CORPORATION
By:
-------------------------------
Name:
Title: Authorized Signatory
<PAGE> 143
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, chief executive officer and chief financial officer,
of [Telephone Warehouse, Inc.] [National Cellular, Incorporated] [Let's Talk
Cellular & Wireless, Inc.], a [Delaware] [Texas] [Florida] corporation (the
"Company"), hereby certify with reference to the Security Agreement dated as of
December 31, 1996, as amended and restated as of June __, 1997, among Telephone
Warehouse, Inc., National Cellular, Incorporated, Let's Talk Cellular &
Wireless, Inc., Texas Cellular Partners, L.P. and NationsCredit Commercial
Corporation, as Agent (terms defined therein being used herein as therein
defined), to the Agent and each Lender as follows:
1. Names. (a) The exact corporate name of the Company, after giving
effect to the consummation of LTC Merger, as it appears in its certificate of
incorporation is as follows:
(b) Set forth below is each other corporate name the Company has had
since its organization, together with the date of the relevant change:
(c) The Company has not changed its identity or corporate structure in
any way within the past five years except for the LTC Merger.
(d) The following is a list of all other names (including trade names
or similar appellations) used by the Company or any of its divisions or other
business units at any time during the past five years:
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<PAGE> 144
2. Current Locations. (a) The chief executive office of the Company is
located at the following address:
Mailing
Address County State
(b) The following are all the locations where the Company maintains any
books or records relating to any Accounts:
Mailing
Address County State
(c) The following are all the places of business of the Company not
identified above:
(d) The following are all the locations where the Company maintains any
Inventory not identified above:
(e) The following are the names and addresses of all Persons other than
the Company which have possession of any of the Company's Inventory:
3. Prior Locations. (a) Set forth below is the information required by
subparagraphs (a), (b) and (c) of paragraph 2 with respect to each location or
place of business maintained by the Company at any time during the past five
years:
Mailing
Address County State
(b) Set forth below is the information required by subparagraphs (d)
and (e) of paragraph 2 with respect to each location or bailee where or with
whom Inventory has been lodged at any time during the past four months:
2
<PAGE> 145
4. Unusual Transactions. All Accounts have been originated by the
Company and all Inventory and Equipment has been acquired by the Company in the
ordinary course of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is a true copy
of a file search report from the Uniform Commercial Code filing officer in each
jurisdiction identified in paragraph 2 or 3 above with respect to each name set
forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy of
each financing statement or other filing identified in such file search reports.
6. UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 6(A) hereto has been duly filed in the
Uniform Commercial Code filing office in each jurisdiction identified in
paragraph 2 hereof. Attached hereto as Schedule 6(B) is a true copy of each such
filing duly acknowledged by the filing officer.
7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule
setting forth filing information with respect to the filings described in
paragraph 6 above.
8. Filing Fees. All filing fees and taxes payable in connection with
the filings described in paragraph 6 above have been paid.
9. Patents, Trademarks, Copyrights. All patents, trademarks and
copyrights owned by the Company as of the date hereof and all patent licenses,
trademark licenses and copyright licenses to which the Company is a party as of
the date hereof are listed on Schedule 9 hereto.
3
<PAGE> 146
IN WITNESS WHEREOF, we have hereunto set our hands this __th day of
____, 199_.
----------------------------
Title:
----------------------------
Title:
4
<PAGE> 147
SCHEDULES 5(A) and 5(B)
<PAGE> 148
SCHEDULE 6(A)
Description of Collateral
All accounts, chattel paper, contract rights, general intangibles,
inventory, equipment and documents, now owned or hereafter acquired, wherever
located, and all proceeds thereof.
<PAGE> 149
SCHEDULE 6(B)
<PAGE> 150
SCHEDULE 7
SCHEDULE OF FILINGS
Debtor
Filing Officer File Number Date of Filing*
------------------------
* Indicate lapse date, if other than fifth anniversary.
2
<PAGE> 151
SCHEDULE 9
U.S. Patents
Number Date Issue Title Patentee
Trademark Registrations
Trademark Number Registration Date
Trademark Applications
Common Law Trademarks
Mark Goods
Copyrights
Reg. No. Title Publication Date
3
<PAGE> 152
EXHIBIT B
OPINION OF
COUNSEL FOR THE COMPANIES
* * * *
1. The Security Agreement creates a valid security interest, for the
benefit of the Secured Parties, in all the Companies' right, title and interest
in all Collateral to the extent the UCC is applicable thereto (the "Security
Interest").
2. UCC financing statements and amendments thereto (collectively, the
"Financing Statements") have been filed in the filing offices listed in Schedule
7 to the Perfection Certificate (the "Filing Jurisdictions"), which are all of
the offices in which filings are required to perfect the Security Interest, to
the extent the Security Interest may be perfected by filing under the UCC, and
no further filing or recording of any document or instrument or other action
will be required so to perfect the Security Interest, except that (i)
continuation statements with respect to each Financing Statement must be filed
within the respective time periods set forth on Schedule 7 to the Perfection
Certificate; (ii) additional filings may be necessary if any of the Companies
changes its name, identity or corporate structure or the jurisdiction in which
its places of business, its chief executive office or the Collateral are
located; and (iii) we express no opinion on the perfection of, or need for
further filing or recording to perfect, the Security Interest in goods now or
hereafter located in any jurisdiction other than the Filing Jurisdictions.
3. There are
(i) no UCC financing statements which name any Company as
debtor or seller and cover any of the Collateral, other than the
Financing Statements, [and the financing statements with respect to
Permitted Liens annexed as Schedule 5(A) to the Perfection
Certificate], listed in the available records in the UCC filing offices
set forth in paragraphs 2 and 3 of the Perfection Certificate, which
include all of the offices prescribed under the UCC as the offices in
which filings should have been made to perfect security interests in
the Collateral; and
(ii) no notices of the filing of any federal tax lien
(filed pursuant to Section 6323 of the Internal Revenue Code) or any
lien of the Pension Benefit Guaranty Corporation (filed pursuant to
Section 4068 of ERISA) covering any of the Collateral listed in the
available records in the [UCC filing office in state of each Company's
chief executive office], which is the only office having files which
must be searched in order to fully determine the existence of notices
of the filing of federal tax liens (filed
<PAGE> 153
pursuant to Section 6323 of the Internal Revenue Code) and liens of the
Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of
ERISA) on the Collateral.
4. The Security Interests validly secure the payment of all future
Loans made by the Lenders to the Companies, whether or not at the time such
Loans are made an Event of Default or other event not within the control of the
Lenders has relieved or may relieve the Lenders from their obligations to make
such Loans, and is perfected to the extent set forth in paragraph 2 above with
respect to such future Loans. Insofar as the priority thereof is governed by the
UCC, the Security Interests have the same priority with respect to such future
Loans as such Security Interests do with respect to Loans made on the date
hereof, except that (i) the Security Interests in Collateral acquired after the
filing of a federal tax lien pursuant to Section 6323 of the Internal Revenue
Code or a lien of the Pension Benefit Guaranty Corporation pursuant to Section
4068 of ERISA has priority over such liens only with respect to Collateral
acquired before the 46th day following such filing and (ii) the Security
Interests have priority over such liens to the extent such Security Interests
secure Loans made after the date of filing of such liens only if such future
Loans are made before the earlier of the 46th day after such liens are filed or
the time that the Lenders have actual notice or knowledge that such liens were
filed.
2
<PAGE> 154
EXHIBIT C
[FORM OF LOCKBOX LETTER]
, 19
------------------ --
[Name and Address of Lockbox Bank]
Re: Let's Talk Cellular & Wireless, Inc.
Gentlemen:
We hereby notify you that effective ______ __, 199_, we have
transferred exclusive ownership and control of our lock-box accounts No.
_______________ (the "Lockbox Accounts") maintained with you under the terms of
the Lockbox Agreement attached hereto as Exhibit 1 (the "Lockbox Accounts") to
NationsCredit Commercial Corporation, as Agent (the "Agent").
We hereby irrevocably instruct you to make all payments to be made by
you out of or in connection with the Lockbox Accounts (i) to the Agent for
credit to account no. ___________ maintained by it at its office at
________________ or (ii) as you may otherwise be instructed by the Agent.
We also hereby notify you that the Agent shall be irrevocably entitled
to exercise any and all rights in respect of or in connection with the Lockbox
Accounts, including, without limitation, the right to specify when payments are
to be made out of or in connection with the Lockbox Accounts.
All funds deposited into the Lockbox Accounts will not be subject to
deductions, set-off, banker's lien or any other right in favor of any other
person than the Agent, except that you may set-off against the Lockbox Accounts
the face amount of any check deposited in and credited to such Lockbox Accounts
which is subsequently returned for any reason. Your compensation for providing
the services contemplated herein shall be as mutually agreed between you and us
from time to time and we will continue to pay such compensation.
3
<PAGE> 155
Please confirm your acknowledgment of and agreement to the foregoing
instructions by signing in the space provided below.
Very truly yours,
Let's Talk Cellular & Wireless, Inc.
By:
-----------------------------
Name:
Title:
Acknowledged and agreed to
as of this day of , 19 .
---- ---------- --
[LOCKBOX BANK]
By:
---------------------------------
Name:
Title:
4
<PAGE> 156
EXHIBIT D
TRADEMARK SECURITY AGREEMENT
(TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK
APPLICATIONS AND TRADEMARK LICENSES)
WHEREAS, Let's Talk Cellular & Wireless, Inc., a Florida corporation
(together with its successors being referred to as "Grantor"), owns the
Trademark and Trademark registration listed on Schedule 1 annexed hereto;
WHEREAS, the Grantor, Telephone Warehouse, Inc. (together with its
successors, "TWI"), National Cellular, Incorporated (together with its
successors, "National Cellular", and each of National Cellular, TWI and Grantor
being referred to as the "Companies"), Texas Cellular Partners, L.P., certain
lenders, and NationsCredit Commercial Corporation, are parties to a Credit
Agreement dated as of December 30, 1996, as amended and restated as of June __,
1997 (as the same may be amended and in effect from time to time among said
parties and such lenders (the "Lenders") as may from time to time be parties
thereto, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Security Agreement dated as of
December 30, 1996, as amended and restated as of June __, 1997 (as said
Agreement may be further amended and in effect from time to time, the "Security
Agreement") between the Companies and NationsCredit Commercial Corporation, as
agent for the secured parties referred to therein (in such capacity, together
with its successors in such capacity pursuant to the terms of the Security
Agreement, the "Grantee"), each of the Companies has granted to Grantee for the
ratable benefit of such secured parties, a security interest in substantially
all the assets of each of the Companies, including all right, title and interest
of Grantor in, to and under all Grantor's Trademarks (as defined in the Security
Agreement), Trademark registrations, together with any reissues, extensions or
renewals thereof, Trademark applications and Trademark Licenses (as defined in
the Security Agreement), whether presently existing or hereafter arising or
acquired, together with the goodwill of the business symbolized by the
Trademarks and the applications therefor and the registrations thereof, and all
products and proceeds thereof, including any and all causes of action which may
exist by reason of infringement or dilution thereof or injury to the associated
goodwill, to secure the payment of all amounts owing by the Companies under the
Credit Agreement and the other Financing Documents referred to therein;
1
<PAGE> 157
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of Grantor's right, title and
interest in, to and under the following (all of the following items or types of
property being herein collectively referred to as the "Trademark Collateral"),
whether presently existing or hereafter arising or acquired:
(i) each Trademark, Trademark registration and Trademark
application, and all of the goodwill of the business connected with the
use of, and symbolized by, each Trademark, Trademark registration and
Trademark application, including each Trademark, Trademark
registration, and/or Trademark application referred to in Schedule 1
annexed hereto;
(ii) each Trademark License and all of the goodwill of the
business connected with the use of, and symbolized by, each Trademark
licensed; and
(iii) all products and proceeds of the foregoing, including
any claim by Grantor against third parties for past, present or future
infringement or dilution of any Trademark or Trademark registration,
and any Trademark licensed under any Trademark License, or for injury
to the goodwill associated with any Trademark, Trademark registration
or Trademark licensed under any Trademark License.
This security interest is granted in conjunction with the security interests
granted to the Grantee pursuant to the Security Agreement. Grantor does hereby
further acknowledge and affirm that the rights and remedies of Grantee with
respect to the security interest in the Trademark Collateral made and granted
hereby are more fully set forth in the Security Agreement, the terms and
provisions of which are incorporated by reference herein as if fully set forth
herein.
2
<PAGE> 158
IN WITNESS WHEREOF, Grantor has caused this Trademark Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
__ day of June, 1997.
LET'S TALK CELLULAR &
WIRELESS, INC.
By:
--------------------------------
Name:
Title:
Acknowledged:
NATIONSCREDIT COMMERCIAL CORPORATION,
as Agent
By:
----------------------------------
Name:
Title: Authorized Signatory
3
<PAGE> 159
STATE OF )
: ss.:
COUNTY OF )
On the __ day of June, 1997 before me personally came ______________,
to me personally known and known to me to be the person described in and who
executed the foregoing instrument as the __________________ of LET'S TALK
CELLULAR & WIRELESS, INC. who being by me duly sworn, did depose and say that he
resides at ______________________, ____________________ that he is
_____________________ of LET'S TALK CELLULAR & WIRELESS, INC., the corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that the said instrument was signed and sealed on behalf of said
corporation by order of its Board of Directors; that he signed his name thereto
by like order; and that he acknowledged said instrument to be the free act and
deed of said corporation.
--------------------------------
Notary Public
Notary Public, State of
------------------
My commission expires:
- ----------------------------------------
4
<PAGE> 160
Schedule 1
to Trademark
Security Agreement
TRADEMARK REGISTRATIONS
<TABLE>
<CAPTION>
Mark Serial No. Date
---- ---------- ----
<S> <C> <C>
Let's Talk Cellular - for 1,816,162 January 11, 1994
communications
services
Let's Talk Cellular 1,821,719 February 15, 1994
(special logo) - for
communications
services
Let's Talk Cellular - for 1,931,056 October 31, 1995
communications
apparatus
Let's Talk Wireless - for Pending service Filed August 1995
communications and trademark
services and apparatus
Let's Talk - Misc design Pending service Filed December
(rainbow) - for and 1995
communications trademark - Serial
services and apparatus No. 012,369
Let's Talk - logo (as Pending Service Filed December
displayed on company's and 1995
business cards) - for Trademark - Serial
communication services No. 012,370
and apparatus
</TABLE>
5
<PAGE> 161
EXHIBIT D
HOLDINGS PLEDGE AGREEMENT
AGREEMENT dated as of December 31, 1996, as amended and restated as of
June __, 1997, between Texas Cellular Partners, L.P., a Delaware limited
partnership (with its successors, "Holdings"), and NationsCredit Commercial
Corporation ("NationsCredit"), as Agent.
W I T N E S S E T H :
WHEREAS, Holdings owns 885,000 shares of common stock of Let's Talk
Cellular & Wireless, Inc., a Florida corporation (together with its successors,
"LTC"), par value $.001 per share; and
WHEREAS, Telephone Warehouse, Inc., a Delaware corporation (together
with its successors, "TWI"), National Cellular, Incorporated, a Texas
corporation (together with its successors, "National Cellular", and, together
with LTC and TWI, the "Companies"), Holdings and NationsCredit, as Lender and
Agent, are parties to a Credit Agreement dated as of December 31, 1996 (the
"Original Credit Agreement"); and
WHEREAS, Holdings and NationsCredit, as Agent, are parties to a Pledge
Agreement dated as of December 31, 1996 (the "Original Pledge Agreement"); and
WHEREAS, in connection with (i) the proposed merger of Merger Sub 1,
Inc., a wholly-owned subsidiary of LTC, with and into TWI and (ii) the proposed
merger of Merger Sub 2, Inc., a wholly-owned subsidiary of LTC, with and into
National Cellular, as a result of which mergers LTC will acquire all of the
capital stock of each of TWI and National Cellular, the Companies, Holdings and
NationsCredit, as Lender and Agent, have entered into an amendment and
restatement of the Original Credit Agreement on and as of the date hereof (as
the same may be amended from time to time, the "Credit Agreement"); and
WHEREAS, in order to induce said Lender and Agent to enter into the
Credit Agreement, (i) Holdings has agreed to grant a continuing security
interest in and to the Collateral (as hereafter defined), (ii) HIG Fund V, Inc.
is entering into, on and as of the date hereof, an HIG Pledge Agreement with the
Agent and (iii) each of the Companies is entering into, on and as of the date
hereof, an amended and restated Security Agreement with the Agent, in each event
in order to secure obligations of each of the Companies and Holdings under the
Credit Agreement, the Notes issued pursuant thereto and the other Financing
Documents;
<PAGE> 162
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that the Original Pledge Agreement is
hereby amended and restated to read in its entirety as follows:
SECTION 1. Definitions.
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"LTC Shares" means all of the shares of capital stock of LTC held by
Holdings, consisting of 885,000 shares of common stock of LTC, par value $.001
per share.
"Pledged Securities" means the Pledged Stock and any other instrument
required to be pledged to the Agent pursuant to Section 3(B).
"Pledged Stock" means the LTC Shares and any other capital stock
required to be pledged to the Agent pursuant to Section 3(B).
"Proceeds" means all proceeds of, and all other profits, products,
rents or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or other realization
upon, Collateral, including all claims of Holdings against third parties for
loss of, damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance in respect of, any Collateral,
and any condemnation or requisition payments with respect to any Collateral, in
each case whether now existing or hereafter arising.
"Secured Obligations" means the obligations secured under this
Agreement including (i) all principal of and interest (including any interest
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of any of the Companies
or Holdings, whether or not allowed or allowable as a claim in any such
proceeding) on any Loan under, or any Note issued pursuant to, the Credit
Agreement, (ii) all other amounts payable by any of the Companies or Holdings
under any Financing Document and (iii) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing.
"Secured Parties" means the Lenders and the Agent.
2
<PAGE> 163
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the UCC as in effect on the
date hereof shall have the meanings therein stated.
SECTION 2. Representations and Warranties.
Holdings represents and warrants as follows:
(A) Title to Pledged Securities. Holdings owns all of the Pledged Stock
and will own any Pledged Securities hereafter issued, in each event free and
clear of any Liens other than (i) the Security Interests and (ii) the junior
Lien granted to the Seller pursuant to the Stock Pledge Agreement dated December
31, 1996 between the Seller and Holdings and subject to the Intercreditor
Agreement dated as of December 31, 1996 between the Agent and the Seller. All of
the Pledged Stock has been duly authorized and validly issued, and is fully paid
and non-assessable, and is subject to no options to purchase or similar rights
of any Person. Other than the Seller Pledge Agreement, Holdings is not and will
not become a party to or otherwise bound by any agreement, other than this
Agreement, which restricts in any manner the rights of any present or future
holder of any of the Pledged Stock or any future holder of Pledged Securities
with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of the certificates representing the Pledged Stock to the Agent in
accordance with Section 4 hereof, the Agent will have valid and perfected
security interests in the Collateral subject to no prior Lien. No registration,
recordation or filing with any governmental body, agency or official is required
in connection with the execution or delivery of this Agreement or necessary for
the validity or enforceability hereof or for the perfection or enforcement of
the Security Interests. Neither Holdings nor any of the Companies has performed
or will perform any acts which might prevent the Agent from enforcing any of the
terms and
3
<PAGE> 164
conditions of this Agreement or which would limit the Agent in any such
enforcement.
(C) UCC Filing Locations. The chief executive office of Holdings is
located at its address set forth on the signature pages of the Credit Agreement.
Under the UCC as in effect in the State in which such office is located, no
local filing is required to perfect a security interest in collateral consisting
of general intangibles.
SECTION 3. The Security Interests.
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of Holdings hereunder:
(A) Holdings hereby assigns and pledges to and with the Agent for the
benefit of the Secured Parties and grants to the Agent for the benefit of the
Secured Parties a security interest in the Pledged Securities, and all of its
rights and privileges with respect to the Pledged Securities, and all income and
profits thereon, and all interest, dividends and other payments and
distributions with respect thereto, and all Proceeds of the foregoing (the
"Collateral"). Contemporaneously with the execution and delivery hereof,
Holdings is delivering the certificates representing the LTC Shares in pledge
hereunder.
(B) In the event that LTC at any time (i) issues any additional or
substitute shares of capital stock of any class or any substitute note to
Holdings or any of its Affiliates, or (ii) owes any Debt to Holdings, Holdings
will immediately pledge and deposit with the Agent certificates representing all
such shares and such note or an instrument evidencing such Debt as additional
security for the Secured Obligations. All such shares, notes and instruments
constitute Pledged Securities and are subject to all provisions of this
Agreement.
(C) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of Holdings or any of the Companies with respect to any
of the Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Securities.
All Pledged Securities (other than any Pledged Stock) shall be
delivered to the Agent by Holdings pursuant hereto endorsed to the order of the
Agent, and accompanied by any required transfer tax stamps, all in form and
substance satisfactory to the Agent. All certificates representing Pledged Stock
delivered to the Agent by Holdings pursuant hereto shall be in suitable form for
transfer by
4
<PAGE> 165
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Agent.
SECTION 5. Filing; Further Assurances.
(A) Holdings agrees that it will, at its expense and in such manner and
form as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or other paper and take any other action that may
be necessary or desirable, or that the Agent may request, in order to create,
preserve, perfect or validate any Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the Collateral.
To the extent permitted by applicable law, Holdings hereby authorizes the Agent
to execute and file, in the name of Holdings or otherwise, UCC financing
statements (which may be carbon, photographic, photostatic or other
reproductions of this Agreement or of a financing statement relating to this
Agreement) which the Agent in its sole discretion may deem necessary or
appropriate to further perfect the Security Interests.
(B) Except upon 30 days' prior notice and, if requested by the Agent,
the delivery to the Agent of an opinion of counsel satisfactory to the Agent
that such action shall not have a material adverse effect on the Security
Interests and the Agent's rights hereunder, Holdings agrees that it will not
change (i) its name, identity or legal structure in any manner or (ii) the
location of its chief executive office.
SECTION 6. Record Ownership of Pledged Stock.
The Agent may at any time or from time to time following the occurrence
and during the continuance of an Event of Default, in its sole discretion, cause
any or all of the Pledged Stock to be transferred of record into the name of the
Agent or its nominee. Holdings will promptly give to the Agent copies of any
notices or other communications received by it with respect to Pledged Stock
registered in the name of Holdings and the Agent will promptly give to Holdings
copies of any notices and communications received by the Agent with respect to
Pledged Stock registered in the name of the Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral.
The Agent shall have the right to receive and, upon the occurrence and
during the continuance of any Default, to retain as Collateral hereunder all
dividends, interest and other payments and distributions made upon or with
respect to the Collateral and Holdings shall take all such action as the Agent
may
5
<PAGE> 166
deem necessary or appropriate to give effect to such right; provided that until
the Agent exercises the remedies of sale or foreclosure afforded under Section
10 hereof, the Agent shall have no right to receive or retain, and Holdings
shall have the right to receive and retain, any distributions made to Holdings
in accordance with Section 8.04(iii) of the Credit Agreement ("Exempt
Proceeds"). All such dividends, interest and other payments and distributions
(other than Exempt Proceeds) which are received by Holdings shall be received in
trust for the benefit of the Agent and the Secured Parties and, if the Agent so
directs upon the occurrence and during the continuance of a Default, shall be
segregated from other funds of Holdings and shall, forthwith upon demand by the
Agent during the continuance of a Default, be paid over to the Agent as
Collateral in the same form as received (with any necessary endorsement). After
all Defaults that shall have occurred have been cured, the Agent's right to
retain dividends, interest and other payments and distributions under this
Section 7 shall cease and the Agent shall pay over to Holdings any such
Collateral retained by the Agent during the continuance of a Default.
SECTION 8. Right to Vote Pledged Stock.
Unless an Event of Default shall have occurred and be continuing,
Holdings shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Pledged Stock, and the Agent
shall, upon receiving a written request from Holdings accompanied by a
certificate signed by its principal financial officer stating that no Default
has occurred and is continuing, deliver to Holdings or as specified in such
request such proxies, powers of attorney, consents, ratifications and waivers in
respect of any of the Pledged Stock which is registered in the name of the Agent
or its nominee as shall be specified in such request and be in form and
substance satisfactory to the Agent.
If an Event of Default shall have occurred and be continuing, the Agent
shall have the right to the extent permitted by law and Holdings shall take all
such action as may be necessary or appropriate to give effect to such right, to
vote and to give consents, ratifications and waivers, and take any other action
with respect to any or all of the Pledged Stock with the same force and effect
as if the Agent were the absolute and sole owner thereof.
SECTION 9. General Authority.
Holdings hereby irrevocably appoints the Agent its true and lawful
attorney, with full power of substitution, in the name of Holdings, the Agent,
the Secured Parties or otherwise, for the sole use and benefit of the Agent and
Secured Parties, but at the expense of Holdings, to the extent permitted by law
to exercise, at any time and from time to time while an Event of Default has
6
<PAGE> 167
occurred and is continuing, all or any of the following powers with respect to
all or any of the Collateral:
(i) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due upon or by
virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the Proceeds or avails thereof, as fully and effectually as
if the Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference thereto;
provided that the Agent shall give Holdings not less than ten days' prior notice
of the time and place of any sale or other intended disposition of any of the
Collateral except any Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market. The
Agent and Holdings agree that such notice constitutes "reasonable notification"
within the meaning of Section 9-504(3) of the UCC.
SECTION 10. Remedies upon Event of Default.
If any Event of Default shall have occurred and be continuing, the
Agent may exercise on behalf of the Secured Parties all the rights of a secured
party under the UCC (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Agent may, without being required to
give any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as Collateral as
specified in Section 13 and (ii) if there shall be no such cash or if such cash
shall be insufficient to pay all the Secured Obligations in full, sell the
Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory. Any
Secured Party may be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Agent is authorized, in
connection with any such sale, if it deems it advisable so to do, (i) to
restrict the prospective bidders on or purchasers of any of the Pledged
Securities to a limited number of sophisticated investors who will represent and
agree that they are purchasing for their own account for investment and not with
a view to the distribution or sale of any of such Pledged Securities, (ii) to
cause to
7
<PAGE> 168
be placed on certificates for any or all of the Pledged Securities or on any
other securities pledged hereunder a legend to the effect that such security has
not been registered under the Securities Act of 1933 and may not be disposed of
in violation of the provision of said Act, and (iii) to impose such other
limitations or conditions in connection with any such sale as the Agent deems
necessary or advisable in order to comply with said Act or any other law.
Holdings covenants and agrees that it will execute and deliver such documents
and take such other action as the Agent deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any such sale the
Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any Lien, claim or right of
whatsoever kind, including any equity or right of redemption of Holdings which
may be waived, and Holdings, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted. The notice (if any) of such
sale required by Section 9 shall (1) in case of a public sale, state the time
and place fixed for such sale, (2) in case of sale at a broker's board or on a
securities exchange or quotation system, state the board, exchange or quotation
system at which such sale is to be made and the day on which the Collateral, or
the portion thereof so being sold, will first be offered for sale at such board
or exchange, and (3) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the Agent
may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Agent may determine.
The Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Agent until the selling price is paid by the
purchaser thereof, but the Agent shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
case of any such failure, such Collateral may again be sold upon like notice.
The Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
SECTION 11. Expenses.
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Holdings agrees that it will forthwith upon demand pay to the Agent:
(i) the amount of any taxes which the Agent may have been
required to pay by reason of the Security Interests or to free any of
the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses,
including the fees and disbursements of counsel and of any other
experts, which the Agent may incur in connection with (w) the
administration or enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security Interest, (x)
the collection, sale or other disposition of any of the Collateral, (y)
the exercise by the Agent of any of the rights conferred upon it
hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest (computed on the basis of
the number of days elapsed over a year of 360 days) at a rate per annum equal to
5% plus the rate announced from time to time by NationsBank, N.A. as its prime
rate.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which it accords its own
property, and shall not be liable or responsible for any loss or damage to any
of the Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any agent or bailee selected by the Agent in good faith.
SECTION 13. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default,
the Proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held shall be applied by the Agent in the following
order of priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, and any other unreimbursed
expenses for which the
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Agent or any Secured Party is to be reimbursed pursuant to Section
10.04 of the Credit Agreement or Section 11 hereof and unpaid fees
owing to the Agent under the Credit Agreement and the Security
Agreement (as defined in the Credit Agreement);
second, to the ratable payment of unpaid principal of the
Secured Obligations;
third, to the ratable payment of accrued but unpaid interest
on the Secured Obligations in accordance with the provisions of the
Credit Agreement;
fourth, to the ratable payment of all other Secured
Obligations, until all Secured Obligations shall have been paid in
full; and
finally, to payment to Holdings or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds.
SECTION 14. Concerning the Agent.
The provisions of Article 11 of the Credit Agreement shall inure to the
benefit of the Agent in respect of this Agreement and shall be binding upon the
parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Agent therein set
forth:
(A) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including, without
limitation, the timing and methods of realization upon the Collateral) the Agent
shall act or refrain from acting in accordance with written instructions from
the Required Lenders or, in the absence of such instructions, in accordance with
its discretion.
(B) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by Holdings.
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SECTION 15. Appointment of Co-Agents.
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other persons, either to act as co-agent or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Secured Parties
with such power and authority as may be necessary for the effectual operation of
the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions for the
protection of such co-agent or separate agent similar to the provisions of
Section 14 hereof).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to
Holdings. At any time and from time to time prior to such termination of the
Security Interests, the Agent may release any of the Collateral with the prior
written consent of the Lenders. Upon any such termination of the Security
Interests or release of Collateral, the Agent will, at the expense of Holdings,
execute and deliver to Holdings such documents as Holdings shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be.
SECTION 17. Notices.
All notices, communications and distributions hereunder shall be given
in accordance with Section 12.03 of the Credit Agreement.
SECTION 18. Waivers; Non-Exclusive Remedies.
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent of any right under the Credit Agreement, any other
Financing Document or this Agreement preclude any other or further exercise
thereof or the exercise of any other right. The rights in this Agreement, the
other Security Documents and the Credit Agreement are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns.
This Agreement is for the benefit of the Agent and the other Secured
Parties and their successors and assigns, and in the event of an assignment of
all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to
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the indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on Holdings and its successors and assigns.
SECTION 20. Obligations Unconditional; Discharge of Obligations, etc..
(a) The Security Interests and the obligations of Holdings hereunder
shall not be released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any obligation of the Company under any
Operative Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any
Operative Document;
(iii) any release, non-perfection or invalidity of any
direct or indirect security for any obligation of any of the
Companies under any Operative Document;
(iv) any change in the corporate existence, structure or
ownership of any of the Companies or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any of the
Companies or any of their assets or any resulting release or discharge
of any obligation of any of the Companies contained in any Operative
Document;
(v) the existence of any claim, set-off or other rights
which Holdings may have at any time against any of the Companies, the
Agent, any Lender or any other Person, whether in connection herewith
or any unrelated transactions, provided that nothing herein shall
prevent the assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) any invalidity or unenforceability relating to or
against any of the Companies for any reason of any Operative Document,
or any provision of applicable law or regulation purporting to
prohibit the payment by any of the Companies of the principal of or
interest on any Note or any other amount payable by any of the
Companies under any Operative Document; or
(vii) any other act or omission to act or delay of any kind
by any of the Companies, the Agent, any Lender or any other Person or
any other circumstance whatsoever which might, but for the provisions
of this paragraph, constitute a legal or equitable discharge of the
obligations of a surety.
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(b) If at any time any payment of the principal of or interest on any
Note or any other amount payable by any Company under the Credit Agreement is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of such Company or otherwise, Holdings' obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.
(c) Holdings irrevocably waives acceptance hereof, presentment, demand,
protest and any notice not provided for herein, as well as any requirement that
at any time any action be taken by any corporation or Person against any of the
Companies or any other corporation or Person.
(d) Holdings hereby waives any right or claim of exoneration,
reimbursement, subrogation, contribution or indemnity and any other similar
right or claim arising out of this Agreement.
(e) If acceleration of the time for payment of any amount payable by
any of the Companies under the Credit Agreement or any Note is stayed upon the
insolvency, bankruptcy or reorganization of any of the Companies, the Security
Interests and the obligations of Holdings hereunder may none the less be
enforced as fully as if such acceleration were effective.
SECTION 21. Changes in Writing.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by Holdings and the
Agent with the consent of the Required Lenders (or in the case of Section 16 or
this Section 21, all of the Lenders); provided that no such modification shall
change the equal and ratable nature of the Security Interests without the
consent of all of the Lenders.
SECTION 22. NEW YORK LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW
YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 23. Severability.
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If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 24. Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
Texas Cellular Partners, L.P.
By: HIG Texas Cellular Company, as the
Managing General Partner
By:
-------------------------------------------
Name:
Title:
NationsCredit Commercial Corporation,
as Agent
By:
--------------------------------------------
Name:
Title: Authorized Signatory
<PAGE> 176
EXHIBIT E
HIG PLEDGE AGREEMENT
AGREEMENT dated as of June __, 1997 between HIG Fund V, Inc. (with its
successors, "HIG"), and NationsCredit Commercial Corporation ("NationsCredit"),
as Agent.
W I T N E S S E T H :
WHEREAS, HIG owns 350,000 shares of common stock of Let's Talk Cellular
& Wireless, Inc., a Florida corporation (together with its successors, "LTC"),
par value $.001 per share; and
WHEREAS, Telephone Warehouse, Inc., a Delaware corporation (together
with its successors, "TWI"), National Cellular, Incorporated, a Texas
corporation (together with its successors, "National Cellular", and, together
with LTC and TWI, the "Companies"), Texas Cellular Partners, L.P., a Delaware
limited partnership (together with its successors, "Holdings"), and
NationsCredit, as Lender and Agent, are parties to a Credit Agreement dated as
of December 31, 1996 (the "Original Credit Agreement"); and
WHEREAS, in connection with (i) the proposed merger of Merger Sub 1,
Inc., a wholly-owned subsidiary of LTC, with and into TWI and (ii) the proposed
merger of Merger Sub 2, Inc., a wholly-owned subsidiary of LTC, with and into
National Cellular, as a result of which mergers LTC will acquire all of the
capital stock of each of TWI and National Cellular, the Companies, Holdings and
NationsCredit, as Lender and Agent, have entered into an amendment and
restatement of the Original Credit Agreement on and as of the date hereof (as
the same may be amended from time to time, the "Credit Agreement"); and
WHEREAS, in order to induce said Lender and Agent to enter into the
Credit Agreement, (i) HIG has agreed to grant a continuing security interest in
and to the Collateral (as hereafter defined), (ii) Holdings is entering into, on
and as of the date hereof, an amended and restated Holdings Pledge Agreement
with the Agent and (iii) each of the Companies is entering into, on and as of
the date hereof, an amended and restated Security Agreement with the Agent, in
each event in order to secure obligations of each of the Companies and Holdings
under the Credit Agreement, the Notes issued pursuant thereto and the other
Financing Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 177
SECTION 1. Definitions.
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"LTC Shares" means all of the shares of capital stock of LTC held by
HIG, consisting of 350,000 shares of common stock of LTC, par value $.001 per
share.
"Pledged Securities" means the Pledged Stock and any other instrument
required to be pledged to the Agent pursuant to Section 3(B).
"Pledged Stock" means the LTC Shares and any other capital stock
required to be pledged to the Agent pursuant to Section 3(B).
"Proceeds" means all proceeds of, and all other profits, products,
rents or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or other realization
upon, Collateral, including all claims of HIG against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any Collateral, and any
condemnation or requisition payments with respect to any Collateral, in each
case whether now existing or hereafter arising.
"Secured Obligations" means the obligations secured under this
Agreement including (i) all principal of and interest (including any interest
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of any of the Companies
or Holdings, whether or not allowed or allowable as a claim in any such
proceeding) on any Loan under, or any Note issued pursuant to, the Credit
Agreement, (ii) all other amounts payable by any of the Companies or Holdings
under any Financing Document and (iii) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing.
"Secured Parties" means the Lenders and the Agent.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial
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Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the UCC as in effect on the
date hereof shall have the meanings therein stated.
SECTION 2. Representations and Warranties.
HIG represents and warrants as follows:
(A) Title to Pledged Securities. HIG owns all of the Pledged Stock and
will own any Pledged Securities hereafter issued, in each event free and clear
of any Liens other than the Security Interests. All of the Pledged Stock has
been duly authorized and validly issued, and is fully paid and non-assessable,
and is subject to no options to purchase or similar rights of any Person. HIG is
not and will not become a party to or otherwise bound by any agreement, other
than this Agreement, which restricts in any manner the rights of any present or
future holder of any of the Pledged Stock or any future holder of Pledged
Securities with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of the certificates representing the Pledged Stock to the Agent in
accordance with Section 4 hereof, the Agent will have valid and perfected
security interests in the Collateral subject to no prior Lien. No registration,
recordation or filing with any governmental body, agency or official is required
in connection with the execution or delivery of this Agreement or necessary for
the validity or enforceability hereof or for the perfection or enforcement of
the Security Interests. None of HIG, Holdings nor any of the Companies has
performed or will perform any acts which might prevent the Agent from enforcing
any of the terms and conditions of this Agreement or which would limit the Agent
in any such enforcement.
(C) UCC Filing Locations. The chief executive office of HIG is located
at its address set forth on the signature pages hereof. Under the UCC as in
effect in the State in which such office is located, no local filing is required
to perfect a security interest in collateral consisting of general intangibles.
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SECTION 3. THE SECURITY INTERESTS
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of HIG hereunder:
(A) HIG hereby assigns and pledges to and with the Agent for the
benefit of the Secured Parties and grants to the Agent for the benefit of the
Secured Parties a security interest in the Pledged Securities, and all of its
rights and privileges with respect to the Pledged Securities, and all income and
profits thereon, and all interest, dividends and other payments and
distributions with respect thereto, and all Proceeds of the foregoing (the
"Collateral"). Contemporaneously with the execution and delivery hereof, HIG is
delivering the certificates representing the LTC Shares in pledge hereunder.
(B) In the event that LTC at any time (i) issues any additional or
substitute shares of capital stock of any class or any substitute note to HIG or
any of its Affiliates, or (ii) owes any Debt to HIG, HIG will immediately pledge
and deposit with the Agent certificates representing all such shares and such
note or an instrument evidencing such Debt as additional security for the
Secured Obligations. All such shares, notes and instruments constitute Pledged
Securities and are subject to all provisions of this Agreement.
(C) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of HIG, Holdings or any of the Companies with respect to
any of the Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Securities.
All Pledged Securities (other than any Pledged Stock) shall be
delivered to the Agent by HIG pursuant hereto endorsed to the order of the
Agent, and accompanied by any required transfer tax stamps, all in form and
substance satisfactory to the Agent. All certificates representing Pledged Stock
delivered to the Agent by HIG pursuant hereto shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, with signatures appropriately guaranteed, and
accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Agent.
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SECTION 5. Filing; Further Assurances.
(A) HIG agrees that it will, at its expense and in such manner and form
as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or other paper and take any other action that may
be necessary or desirable, or that the Agent may request, in order to create,
preserve, perfect or validate any Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the Collateral.
To the extent permitted by applicable law, HIG hereby authorizes the Agent to
execute and file, in the name of HIG or otherwise, UCC financing statements
(which may be carbon, photographic, photostatic or other reproductions of this
Agreement or of a financing statement relating to this Agreement) which the
Agent in its sole discretion may deem necessary or appropriate to further
perfect the Security Interests.
(B) Except upon 30 days' prior notice and, if requested by the Agent,
the delivery to the Agent of an opinion of counsel satisfactory to the Agent
that such action shall not have a material adverse effect on the Security
Interests and the Agent's rights hereunder, HIG agrees that it will not change
(i) its name, identity or legal structure in any manner or (ii) the location of
its chief executive office.
SECTION 6. Record Ownership of Pledged Stock.
The Agent may at any time or from time to time following the occurrence
and during the continuance of an Event of Default, in its sole discretion, cause
any or all of the Pledged Stock to be transferred of record into the name of the
Agent or its nominee. HIG will promptly give to the Agent copies of any notices
or other communications received by it with respect to Pledged Stock registered
in the name of HIG and the Agent will promptly give to HIG copies of any notices
and communications received by the Agent with respect to Pledged Stock
registered in the name of the Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral.
The Agent shall have the right to receive and, upon the occurrence and
during the continuance of any Default, to retain as Collateral hereunder all
dividends, interest and other payments and distributions made upon or with
respect to the Collateral and HIG shall take all such action as the Agent may
deem necessary or appropriate to give effect to such right; provided that until
the Agent exercises the remedies of sale or foreclosure afforded under Section
10 hereof, the Agent shall have no right to receive or retain, and HIG shall
have the right to receive and retain, any distributions made to HIG in
accordance with Section 8.04(iii) of the Credit Agreement ("Exempt Proceeds").
All such dividends, interest and other payments and distributions (other than
Exempt Proceeds) which
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are received by HIG shall be received in trust for the benefit of the Agent and
the Secured Parties and, if the Agent so directs upon the occurrence and during
the continuance of a Default, shall be segregated from other funds of HIG and
shall, forthwith upon demand by the Agent during the continuance of a Default,
be paid over to the Agent as Collateral in the same form as received (with any
necessary endorsement). After all Defaults that shall have occurred have been
cured, the Agent's right to retain dividends, interest and other payments and
distributions under this Section 7 shall cease and the Agent shall pay over to
HIG any such Collateral retained by the Agent during the continuance of a
Default.
SECTION 8. Right to Vote Pledged Stock.
Unless an Event of Default shall have occurred and be continuing, HIG
shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Pledged Stock, and the Agent
shall, upon receiving a written request from HIG accompanied by a certificate
signed by its principal financial officer stating that no Default has occurred
and is continuing, deliver to HIG or as specified in such request such proxies,
powers of attorney, consents, ratifications and waivers in respect of any of the
Pledged Stock which is registered in the name of the Agent or its nominee as
shall be specified in such request and be in form and substance satisfactory to
the Agent.
If an Event of Default shall have occurred and be continuing, the Agent
shall have the right to the extent permitted by law and HIG shall take all such
action as may be necessary or appropriate to give effect to such right, to vote
and to give consents, ratifications and waivers, and take any other action with
respect to any or all of the Pledged Stock with the same force and effect as if
the Agent were the absolute and sole owner thereof.
SECTION 9. General Authority.
HIG hereby irrevocably appoints the Agent its true and lawful attorney,
with full power of substitution, in the name of HIG, the Agent, the Secured
Parties or otherwise, for the sole use and benefit of the Agent and Secured
Parties, but at the expense of HIG, to the extent permitted by law to exercise,
at any time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
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(iii) to sell, transfer, assign or otherwise deal in or with
the same or the Proceeds or avails thereof, as fully and effectually as
if the Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference thereto;
provided that the Agent shall give HIG not less than ten days' prior notice of
the time and place of any sale or other intended disposition of any of the
Collateral except any Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market. The
Agent and HIG agree that such notice constitutes "reasonable notification"
within the meaning of Section 9-504(3) of the UCC.
SECTION 10. Remedies upon Event of Default.
If any Event of Default shall have occurred and be continuing, the
Agent may exercise on behalf of the Secured Parties all the rights of a secured
party under the UCC (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Agent may, without being required to
give any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as Collateral as
specified in Section 13 and (ii) if there shall be no such cash or if such cash
shall be insufficient to pay all the Secured Obligations in full, sell the
Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory. Any
Secured Party may be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Agent is authorized, in
connection with any such sale, if it deems it advisable so to do, (i) to
restrict the prospective bidders on or purchasers of any of the Pledged
Securities to a limited number of sophisticated investors who will represent and
agree that they are purchasing for their own account for investment and not with
a view to the distribution or sale of any of such Pledged Securities, (ii) to
cause to be placed on certificates for any or all of the Pledged Securities or
on any other securities pledged hereunder a legend to the effect that such
security has not been registered under the Securities Act of 1933 and may not be
disposed of in violation of the provision of said Act, and (iii) to impose such
other limitations or conditions in connection with any such sale as the Agent
deems necessary or advisable in order to comply with said Act or any other law.
HIG covenants and agrees that it will execute and deliver such documents and
take such other action as the Agent deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the Agent
shall have the right
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to deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold absolutely and
free from any Lien, claim or right of whatsoever kind, including any equity or
right of redemption of HIG which may be waived, and HIG, to the extent permitted
by law, hereby specifically waives all rights of redemption, stay or appraisal
which it has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale required by Section 9 shall (1) in case of a public
sale, state the time and place fixed for such sale, (2) in case of sale at a
broker's board or on a securities exchange or quotation system, state the board,
exchange or quotation system at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Agent may fix in the notice of such sale. At any
such sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Agent may determine. The Agent shall not be obligated to make
any such sale pursuant to any such notice. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Agent, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
SECTION 11. Expenses.
HIG agrees that it will forthwith upon demand pay to the Agent:
(i) the amount of any taxes which the Agent may have been
required to pay by reason of the Security Interests or to free any of
the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses,
including the fees and disbursements of counsel and of any other
experts, which the Agent may incur in connection with (w) the
administration or enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security Interest, (x)
the collection, sale or other disposition of any of the
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Collateral, (y) the exercise by the Agent of any of the rights
conferred upon it hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest (computed on the basis of
the number of days elapsed over a year of 360 days) at a rate per annum equal to
5% plus the rate announced from time to time by NationsBank, N.A. as its prime
rate.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which it accords its own
property, and shall not be liable or responsible for any loss or damage to any
of the Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any agent or bailee selected by the Agent in good faith.
SECTION 13. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default,
the Proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held shall be applied by the Agent in the following
order of priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Agent, and all
expenses, liabilities and advances incurred or made by the Agent in connection
therewith, and any other unreimbursed expenses for which the Agent or any
Secured Party is to be reimbursed pursuant to Section 10.04 of the Credit
Agreement or Section 11 hereof and unpaid fees owing to the Agent under the
Credit Agreement and the Security Agreement (as defined in the Credit
Agreement);
second, to the ratable payment of unpaid principal of the Secured
Obligations;
third, to the ratable payment of accrued but unpaid interest on the
Secured Obligations in accordance with the provisions of the Credit Agreement;
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fourth, to the ratable payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
finally, to payment to HIG or its successors or assigns, or as a court
of competent jurisdiction may direct, of any surplus then remaining from such
Proceeds.
SECTION 14. Concerning the Agent.
The provisions of Article 11 of the Credit Agreement shall inure to the
benefit of the Agent in respect of this Agreement and shall be binding upon the
parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Agent therein set
forth:
(A) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including, without
limitation, the timing and methods of realization upon the Collateral) the Agent
shall act or refrain from acting in accordance with written instructions from
the Required Lenders or, in the absence of such instructions, in accordance with
its discretion.
(B) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by HIG.
SECTION 15. Appointment of Co-Agents.
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other persons, either to act as co-agent or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Secured Parties
with such power and authority as may be necessary for the effectual operation of
the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions for the
protection of such co-agent or separate agent similar to the provisions of
Section 14 hereof).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to HIG.
At any time and
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from time to time prior to such termination of the Security Interests, the Agent
may release any of the Collateral with the prior written consent of the Lenders.
Upon any such termination of the Security Interests or release of Collateral,
the Agent will, at the expense of HIG, execute and deliver to HIG such documents
as HIG shall reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
SECTION 17. Notices.
All notices, communications and distributions hereunder shall be given
in accordance with Section 12.03 of the Credit Agreement.
SECTION 18. Waivers; Non-Exclusive Remedies.
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent of any right under the Credit Agreement, any other
Financing Document or this Agreement preclude any other or further exercise
thereof or the exercise of any other right. The rights in this Agreement, the
other Security Documents and the Credit Agreement are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns.
This Agreement is for the benefit of the Agent and the other Secured
Parties and their successors and assigns, and in the event of an assignment of
all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding on HIG and its successors and
assigns.
SECTION 20. Obligations Unconditional; Discharge of Obligations, etc..
(a) The Security Interests and the obligations of HIG hereunder shall
not be released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any obligation of Holdings or any of the
Companies under any Operative Document, by operation of law or
otherwise;
(ii) any modification or amendment of or supplement to any
Operative Document;
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(iii) any release, non-perfection or invalidity of any direct
or indirect security for any obligation of Holdings or any of the
Companies under any Operative Document;
(iv) any change in the corporate existence, structure or
ownership of Holdings or any of the Companies or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
Holdings or any of the Companies or any of their assets or any
resulting release or discharge of any obligation of Holdings or any of
the Companies contained in any Operative Document;
(v) the existence of any claim, set-off or other rights
which HIG may have at any time against Holdings, any of the Companies,
the Agent, any Lender or any other Person, whether in connection
herewith or any unrelated transactions, provided that nothing herein
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against Holdings or any of the Companies for any reason of
any Operative Document, or any provision of applicable law or
regulation purporting to prohibit the payment by Holdings or any of
the Companies of the principal of or interest on any Note or any other
amount payable by Holdings or any of the Companies under any
Operative Document; or
(vii) any other act or omission to act or delay of any kind by
Holdings, any of the Companies, the Agent, any Lender or any other
Person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge
of the obligations of a surety.
(b) If at any time any payment of the principal of or interest on any
Note or any other amount payable by any Company under the Credit Agreement is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of such Company or otherwise, HIG's obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.
(c) HIG irrevocably waives acceptance hereof, presentment, demand,
protest and any notice not provided for herein, as well as any requirement that
at any time any action be taken by any corporation or Person against Holdings,
any of the Companies or any other corporation or Person.
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(d) HIG hereby waives any right or claim of exoneration, reimbursement,
subrogation, contribution or indemnity and any other similar right or claim
arising out of this Agreement.
(e) If acceleration of the time for payment of any amount payable by
Holdings or any of the Companies under the Credit Agreement or any Note is
stayed upon the insolvency, bankruptcy or reorganization of Holdings or any of
the Companies, the Security Interests and the obligations of HIG hereunder may
none the less be enforced as fully as if such acceleration were effective.
SECTION 21. Changes in Writing.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by HIG and the Agent
with the consent of the Required Lenders (or in the case of Section 16 or this
Section 21, all of the Lenders); provided that no such modification shall change
the equal and ratable nature of the Security Interests without the consent of
all of the Lenders.
SECTION 22. NEW YORK LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW
YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 23. Severability.
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 24. Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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EXHIBIT F
LTC PLEDGE AGREEMENT
AGREEMENT dated as of June __, 1997 between Let's Talk Cellular &
Wireless, Inc., a Florida corporation (together with its successors, "LTC"), and
NationsCredit Commercial Corporation ("NationsCredit"), as Agent.
W I T N E S S E T H :
WHEREAS, LTC is the sole stockholder of (i) Telephone Warehouse, Inc.,
a Delaware corporation (together with its successors, "TWI"), and (ii) National
Cellular, Incorporated, a Texas corporation (together with its successors,
"National Cellular" and, together with TWI, the "Companies"); and
WHEREAS, LTC, the Companies, Texas Cellular Partners, L.P., a Delaware
limited partnership (together with its successors, "Holdings"), and
NationsCredit, as Lender and Agent, are parties to a Credit Agreement dated as
of December 31, 1996 (the "Original Credit Agreement"); and
WHEREAS, in connection with (i) the proposed merger of Merger Sub 1,
Inc., a wholly-owned subsidiary of LTC, with and into TWI and (ii) the proposed
merger of Merger Sub 2, Inc., a wholly-owned subsidiary of LTC, with and into
National Cellular, as a result of which mergers LTC will acquire all of the
capital stock of each of TWI and National Cellular, LTC, the Companies, Holdings
and NationsCredit, as Lender and Agent, have entered into an amendment and
restatement of the Original Credit Agreement on and as of the date hereof (as
the same may be amended from time to time, the "Credit Agreement"); and
WHEREAS, in order to induce said Lender and Agent to enter into the
Credit Agreement, (i) LTC has agreed to grant a continuing security interest in
and to the Collateral (as hereafter defined), (ii) HIG Fund V, Inc. is entering
into, on and as of the date hereof, an HIG Pledge Agreement with the Agent,
(iii) Holdings is entering into, on and as of the date hereof, an amended and
restated Holdings Pledge Agreement with the Agent and (iv) LTC and each of the
Companies is entering into, on and as of the date hereof, an amended and
restated Security Agreement with the Agent, in each event in order to secure
obligations of LTC and each of the Companies and Holdings under the Credit
Agreement, the Notes issued pursuant thereto and the other Financing Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 190
SECTION 1. Definitions.
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"Companies' Shares" means all of the shares of capital stock of each of
the Companies issued and outstanding on the date hereof, consisting of (i) 10
shares of common stock of TWI, par value $.01 per share, and (ii) 10 shares of
common stock of National Cellular, par value $1.00 per share.
"Pledged Securities" means the Pledged Stock and any other instrument
required to be pledged to the Agent pursuant to Section 3(B).
"Pledged Stock" means the Companies' Shares and any other capital stock
required to be pledged to the Agent pursuant to Section 3(B).
"Proceeds" means all proceeds of, and all other profits, products,
rents or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or other realization
upon, Collateral, including all claims of LTC against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any Collateral, and any
condemnation or requisition payments with respect to any Collateral, in each
case whether now existing or hereafter arising.
"Secured Obligations" means the obligations secured under this
Agreement including (i) all principal of and interest (including any interest
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of LTC, any of the
Companies or Holdings, whether or not allowed or allowable as a claim in any
such proceeding) on any Loan under, or any Note issued pursuant to, the Credit
Agreement, (ii) all other amounts payable by LTC, any of the Companies or
Holdings under any Financing Document and (iii) any amendments, restatements,
renewals, extensions or modifications of any of the foregoing.
"Secured Parties" means the Lenders and the Agent.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
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"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the UCC as in effect on the
date hereof shall have the meanings therein stated.
SECTION 2. Representations and Warranties.
LTC represents and warrants as follows:
(A) Title to Pledged Securities. LTC owns all of the Pledged Stock and
will own any Pledged Securities hereafter issued, in each event free and clear
of any Liens other than the Security Interests. All of the Pledged Stock has
been duly authorized and validly issued, and is fully paid and non-assessable,
and is subject to no options to purchase or similar rights of any Person. LTC is
not and will not become a party to or otherwise bound by any agreement, other
than this Agreement, which restricts in any manner the rights of any present or
future holder of any of the Pledged Stock or any future holder of Pledged
Securities with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of the certificates representing the Pledged Stock to the Agent in
accordance with Section 4 hereof, the Agent will have valid and perfected
security interests in the Collateral subject to no prior Lien. No registration,
recordation or filing with any governmental body, agency or official is required
in connection with the execution or delivery of this Agreement or necessary for
the validity or enforceability hereof or for the perfection or enforcement of
the Security Interests. Neither LTC nor any of the Companies has performed or
will perform any acts which might prevent the Agent from enforcing any of the
terms and conditions of this Agreement or which would limit the Agent in any
such enforcement.
(C) UCC Filing Locations. The chief executive office of LTC is located
at its address set forth on the signature pages of the Credit Agreement. Under
the UCC as in effect in the State in which such office is located, no local
filing is required to perfect a security interest in collateral consisting of
general intangibles.
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SECTION 3. The Security Interests.
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of LTC hereunder:
(A) LTC hereby assigns and pledges to and with the Agent for the
benefit of the Secured Parties and grants to the Agent for the benefit of the
Secured Parties a security interest in the Pledged Securities, and all of its
rights and privileges with respect to the Pledged Securities, and all income and
profits thereon, and all interest, dividends and other payments and
distributions with respect thereto, and all Proceeds of the foregoing (the
"Collateral"). Contemporaneously with the execution and delivery hereof, LTC is
delivering the certificates representing the Companies' Shares in pledge
hereunder.
(B) In the event that any of the Companies at any time issues any
additional or substitute shares of capital stock of any class or any substitute
note, or owes any Debt to LTC, LTC will immediately pledge and deposit with the
Agent certificates representing all such shares and such note or an instrument
evidencing such Debt as additional security for the Secured Obligations. All
such shares, notes and instruments constitute Pledged Securities and are subject
to all provisions of this Agreement.
(C) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of LTC, Holdings or any of the Companies with respect to
any of the Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Securities.
All Pledged Securities (other than any Pledged Stock) shall be
delivered to the Agent by LTC pursuant hereto endorsed to the order of the
Agent, and accompanied by any required transfer tax stamps, all in form and
substance satisfactory to the Agent. All certificates representing Pledged Stock
delivered to the Agent by LTC pursuant hereto shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, with signatures appropriately guaranteed, and
accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Agent.
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SECTION 5. Filing; Further Assurances.
(A) LTC agrees that it will, at its expense and in such manner and form
as the Agent may require, execute, deliver, file and record any financing
statement, specific assignment or other paper and take any other action that may
be necessary or desirable, or that the Agent may request, in order to create,
preserve, perfect or validate any Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the Collateral.
To the extent permitted by applicable law, LTC hereby authorizes the Agent to
execute and file, in the name of LTC or otherwise, UCC financing statements
(which may be carbon, photographic, photostatic or other reproductions of this
Agreement or of a financing statement relating to this Agreement) which the
Agent in its sole discretion may deem necessary or appropriate to further
perfect the Security Interests.
(B) Except upon 30 days' prior notice and, if requested by the Agent,
the delivery to the Agent of an opinion of counsel satisfactory to the Agent
that such action shall not have a material adverse effect on the Security
Interests and the Agent's rights hereunder, LTC agrees that it will not change
(i) its name, identity or legal structure in any manner or (ii) the location of
its chief executive office.
SECTION 6. Record Ownership of Pledged Stock.
The Agent may at any time or from time to time following the occurrence
and during the continuance of an Event of Default, in its sole discretion, cause
any or all of the Pledged Stock to be transferred of record into the name of the
Agent or its nominee. LTC will promptly give to the Agent copies of any notices
or other communications received by it with respect to Pledged Stock registered
in the name of LTC and the Agent will promptly give to LTC copies of any notices
and communications received by the Agent with respect to Pledged Stock
registered in the name of the Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral.
The Agent shall have the right to receive and, upon the occurrence and
during the continuance of any Default, to retain as Collateral hereunder all
dividends, interest and other payments and distributions made upon or with
respect to the Collateral and LTC shall take all such action as the Agent may
deem necessary or appropriate to give effect to such right; provided that until
the Agent exercises the remedies of sale or foreclosure afforded under Section
10 hereof, the Agent shall have no right to receive or retain, and LTC shall
have the right to receive and retain, any distributions made to LTC in
accordance with Section 8.04(iii) of the Credit Agreement ("Exempt Proceeds").
All such dividends, interest and other payments and distributions (other than
Exempt
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Proceeds) which are received by LTC shall be received in trust for the benefit
of the Agent and the Secured Parties and, if the Agent so directs upon the
occurrence and during the continuance of a Default, shall be segregated from
other funds of LTC and shall, forthwith upon demand by the Agent during the
continuance of a Default, be paid over to the Agent as Collateral in the same
form as received (with any necessary endorsement). After all Defaults that shall
have occurred have been cured, the Agent's right to retain dividends, interest
and other payments and distributions under this Section 7 shall cease and the
Agent shall pay over to LTC any such Collateral retained by the Agent during the
continuance of a Default.
SECTION 8. Right to Vote Pledged Stock.
Unless an Event of Default shall have occurred and be continuing, LTC
shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Pledged Stock, and the Agent
shall, upon receiving a written request from LTC accompanied by a certificate
signed by its principal financial officer stating that no Default has occurred
and is continuing, deliver to LTC or as specified in such request such proxies,
powers of attorney, consents, ratifications and waivers in respect of any of the
Pledged Stock which is registered in the name of the Agent or its nominee as
shall be specified in such request and be in form and substance satisfactory to
the Agent.
If an Event of Default shall have occurred and be continuing, the Agent
shall have the right to the extent permitted by law and LTC shall take all such
action as may be necessary or appropriate to give effect to such right, to vote
and to give consents, ratifications and waivers, and take any other action with
respect to any or all of the Pledged Stock with the same force and effect as if
the Agent were the absolute and sole owner thereof.
SECTION 9. General Authority.
LTC hereby irrevocably appoints the Agent its true and lawful attorney,
with full power of substitution, in the name of LTC, the Agent, the Secured
Parties or otherwise, for the sole use and benefit of the Agent and Secured
Parties, but at the expense of LTC, to the extent permitted by law to exercise,
at any time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
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(iii) to sell, transfer, assign or otherwise deal in or with
the same or the Proceeds or avails thereof, as fully and effectually as
if the Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof
and to make any allowance and other adjustments with reference thereto;
provided that the Agent shall give LTC not less than ten days' prior notice of
the time and place of any sale or other intended disposition of any of the
Collateral except any Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market. The
Agent and LTC agree that such notice constitutes "reasonable notification"
within the meaning of Section 9-504(3) of the UCC.
SECTION 10. Remedies upon Event of Default.
If any Event of Default shall have occurred and be continuing, the
Agent may exercise on behalf of the Secured Parties all the rights of a secured
party under the UCC (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Agent may, without being required to
give any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as Collateral as
specified in Section 13 and (ii) if there shall be no such cash or if such cash
shall be insufficient to pay all the Secured Obligations in full, sell the
Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory. Any
Secured Party may be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Agent is authorized, in
connection with any such sale, if it deems it advisable so to do, (i) to
restrict the prospective bidders on or purchasers of any of the Pledged
Securities to a limited number of sophisticated investors who will represent and
agree that they are purchasing for their own account for investment and not with
a view to the distribution or sale of any of such Pledged Securities, (ii) to
cause to be placed on certificates for any or all of the Pledged Securities or
on any other securities pledged hereunder a legend to the effect that such
security has not been registered under the Securities Act of 1933 and may not be
disposed of in violation of the provision of said Act, and (iii) to impose such
other limitations or conditions in connection with any such sale as the Agent
deems necessary or advisable in order to comply with said Act or any other law.
LTC covenants and agrees that it will execute and deliver such documents and
take such other action as the Agent deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the Agent
shall have the right
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to deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold absolutely and
free from any Lien, claim or right of whatsoever kind, including any equity or
right of redemption of LTC which may be waived, and LTC, to the extent permitted
by law, hereby specifically waives all rights of redemption, stay or appraisal
which it has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale required by Section 9 shall (1) in case of a public
sale, state the time and place fixed for such sale, (2) in case of sale at a
broker's board or on a securities exchange or quotation system, state the board,
exchange or quotation system at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Agent may fix in the notice of such sale. At any
such sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Agent may determine. The Agent shall not be obligated to make
any such sale pursuant to any such notice. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Agent, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
SECTION 11. Expenses.
LTC agrees that it will forthwith upon demand pay to the Agent:
(i) the amount of any taxes which the Agent may have been
required to pay by reason of the Security Interests or to free any of
the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses,
including the fees and disbursements of counsel and of any other
experts, which the Agent may incur in connection with (w) the
administration or enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security Interest, (x)
the collection, sale or other disposition of any of the
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<PAGE> 197
Collateral, (y) the exercise by the Agent of any of the rights
conferred upon it hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest (computed on the basis of
the number of days elapsed over a year of 360 days) at a rate per annum equal to
5% plus the rate announced from time to time by NationsBank, N.A. as its prime
rate.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which it accords its own
property, and shall not be liable or responsible for any loss or damage to any
of the Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any agent or bailee selected by the Agent in good faith.
SECTION 13. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default,
the Proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held shall be applied by the Agent in the following
order of priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Agent, and all
expenses, liabilities and advances incurred or made by the Agent in connection
therewith, and any other unreimbursed expenses for which the Agent or any
Secured Party is to be reimbursed pursuant to Section 10.04 of the Credit
Agreement or Section 11 hereof and unpaid fees owing to the Agent under the
Credit Agreement and the Security Agreement (as defined in the Credit
Agreement);
second, to the ratable payment of unpaid principal of the Secured
Obligations;
third, to the ratable payment of accrued but unpaid interest on the
Secured Obligations in accordance with the provisions of the Credit Agreement;
9
<PAGE> 198
fourth, to the ratable payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
finally, to payment to LTC or its successors or assigns, or as a court
of competent jurisdiction may direct, of any surplus then remaining from such
Proceeds.
SECTION 14. Concerning the Agent.
The provisions of Article 11 of the Credit Agreement shall inure to the
benefit of the Agent in respect of this Agreement and shall be binding upon the
parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Agent therein set
forth:
(A) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including, without
limitation, the timing and methods of realization upon the Collateral) the Agent
shall act or refrain from acting in accordance with written instructions from
the Required Lenders or, in the absence of such instructions, in accordance with
its discretion.
(B) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests in any of the Collateral, whether
impaired by operation of law or by reason of any action or omission to act on
its part hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by LTC.
SECTION 15. Appointment of Co-Agents.
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Agent may appoint another bank or trust company or one or
more other persons, either to act as co-agent or co-agents, jointly with the
Agent, or to act as separate agent or agents on behalf of the Secured Parties
with such power and authority as may be necessary for the effectual operation of
the provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions for the
protection of such co-agent or separate agent similar to the provisions of
Section 14 hereof).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to LTC.
At any time and
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<PAGE> 199
from time to time prior to such termination of the Security Interests, the Agent
may release any of the Collateral with the prior written consent of the Lenders.
Upon any such termination of the Security Interests or release of Collateral,
the Agent will, at the expense of LTC, execute and deliver to LTC such documents
as LTC shall reasonably request to evidence the termination of the Security
Interests or the release of such Collateral, as the case may be.
SECTION 17. Notices.
All notices, communications and distributions hereunder shall be given
in accordance with Section 12.03 of the Credit Agreement.
SECTION 18. Waivers; Non-Exclusive Remedies.
No failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent of any right under the Credit Agreement, any other
Financing Document or this Agreement preclude any other or further exercise
thereof or the exercise of any other right. The rights in this Agreement, the
other Security Documents and the Credit Agreement are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns.
This Agreement is for the benefit of the Agent and the other Secured
Parties and their successors and assigns, and in the event of an assignment of
all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding on LTC and its successors and
assigns.
SECTION 20. Obligations Unconditional; Discharge of Obligations, etc..
(a) The Security Interests and the obligations of LTC hereunder shall
not be released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of Holdings or the Company under
any Operative Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any
Operative Document;
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(iii) any release, non-perfection or invalidity of any direct
or indirect security for any obligation of Holdings or any of the
Companies under any Operative Document;
(iv) any change in the corporate existence, structure or
ownership of Holdings or any of the Companies or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
Holdings or any of the Companies or any of their assets or any
resulting release or discharge of any obligation of Holdings or any of
the Companies contained in any Operative Document;
(v) the existence of any claim, set-off or other rights
which LTC may have at any time against Holdings, any of the Companies,
the Agent, any Lender or any other Person, whether in connection
herewith or any unrelated transactions, provided that nothing herein
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against Holdings or any of the Companies for any reason of any
Operative Document, or any provision of applicable law or regulation
purporting to prohibit the payment by Holdings or any of the Companies
of the principal of or interest on any Note or any other amount
payable by Holdings or any of the Companies under any Operative
Document; or
(vii) any other act or omission to act or delay of any kind by
Holdings, any of the Companies, the Agent, any Lender or any other
Person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge
of the obligations of a surety.
(b) If at any time any payment of the principal of or interest on any
Note or any other amount payable by any Company under the Credit Agreement is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of such Company or otherwise, LTC's obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.
(c) LTC irrevocably waives acceptance hereof, presentment, demand,
protest and any notice not provided for herein, as well as any requirement that
at any time any action be taken by any corporation or Person against Holdings,
any of the Companies or any other corporation or Person.
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(d) LTC hereby waives any right or claim of exoneration, reimbursement,
subrogation, contribution or indemnity and any other similar right or claim
arising out of this Agreement.
(e) If acceleration of the time for payment of any amount payable by
Holdings or any of the Companies under the Credit Agreement or any Note is
stayed upon the insolvency, bankruptcy or reorganization of Holdings or any of
the Companies, the Security Interests and the obligations of LTC hereunder may
none the less be enforced as fully as if such acceleration were effective.
SECTION 21. Changes in Writing.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by LTC and the Agent
with the consent of the Required Lenders (or in the case of Section 16 or this
Section 21, all of the Lenders); provided that no such modification shall change
the equal and ratable nature of the Security Interests without the consent of
all of the Lenders.
SECTION 22. NEW YORK LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW
YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 23. Severability.
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 24. Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
Let's Talk Cellular & Wireless, Inc.
By:
---------------------------------
Name:
Title:
NationsCredit Commercial Corporation,
as Agent
By:
---------------------------------
Name:
Title: Authorized Signatory
<PAGE> 203
EXHIBIT G
BORROWING BASE CERTIFICATE
I, ________________, the ______________ of Let's Talk Cellular &
Wireless, Inc. ("LTC"), DO HEREBY CERTIFY, pursuant to the Credit Agreement
dated as of December 31, 1996 (as amended from time to time, the "Credit
Agreement") among Telephone Warehouse, Inc., National Cellular, Incorporated,
LTC, Texas Cellular Partners, L.P., the Lenders referred to therein and
NationsCredit Commercial Corporation, as Agent, that attached hereto as Exhibit
A is a true and accurate calculation of the Borrowing Base of LTC as of June __,
1997, determined in accordance with the requirements of the Credit Agreement.
Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Credit Agreement.
IN WITNESS WHEREOF, I have signed this certificate as of this ____ day
of June, 1997.
------------------------------
Name:
Title:
<PAGE> 204
Exhibit A
to
BORROWING BASE CERTIFICATE
(all numbers in thousands)
As at June __, 1997
************************************************************
ACCOUNTS RECEIVABLE
<TABLE>
<S> <C> <C>
Gross Accounts Receivable due to any
Company _________
Less:
(a) Foreign Accounts to the extent
that all Receivables due from
Foreign Accounts exceed
$100,000, other than any
Receivable backed by a letter
of credit issued by a U.S. bank
with combined capital and
surplus in excess of
$250,000,000 and rated A or
higher by S&P or A2 or higher
by Moody's in the possession
of the Agent and accounts
not denominated in U.S. dollars _________
(b) Receivables that do not
comply with all applicable
legal requirements _________
</TABLE>
2
<PAGE> 205
<TABLE>
<S> <C> <C>
(c) Receivables subject to an
unresolved dispute (to the
extent of such dispute) _________
(d) Receivables payable more
than 30 days, in the case
of any Receivables owing
by any paging or other retail
customer, and 60 days, in the
case of any other Receivable,
after the date of the issuance
of the original invoice _________
(e) Receivables that remain unpaid
for more than 45 days, in the
case of any Receivables owing
by any paging or other retail
customer, and 60 days, in the
case of any other Receivable,
from the original due date
specified in the original invoice _________
(f) Unbilled Receivables, and
Receivables for unshipped
goods _________
(g) Receivables arising outside
the ordinary course of
business of such Company _________
(h) Receivables for which have been
established a contra account,
or to an account debtor to whom
such Company owes a trade payable,
but only to the extent of such
account or trade payable _________
</TABLE>
3
<PAGE> 206
<TABLE>
<S> <C> <C>
(i) Receivables not subject
to a first priority
perfected Lien under the
Security Agreement and
Receivables evidenced by an
"instrument" (as defined in
the Uniform Commercial Code)
not in possession of the
Agent _________
(j) Receivables due from an
ineligible account debtor1 _________
(k) Receivables due from an
account debtor that such
Company has not instructed
in its invoice to make to the
Lockbox Account (as defined
in the Security Agreement) or
from any account debtor that
makes payments that cannot be
accepted in the Lockbox
Account _________
Receivables due from an
account debtor (other than
[Bell South Mobility, Bell
Atlantic/Nynex, L.A. Cellular,
CellularOne,] Airtouch Cellular
</TABLE>
- --------------
(1) As used herein, an ineligible account debtor is an account debtor (I) as
to which on such date Receivables representing more than 30% of aggregate amount
of all Receivables of such account debtor have remained unpaid for more than 90
days from the original due date specified at the time of the original issuance
of the invoice therefor, (II) in respect of which a credit loss has been
recognized or reserved by such Company or any of its Subsidiaries, (III) in
respect of which the Agent shall have notified such Company that such account
debtor does not have a satisfactory credit standing as determined in good faith
by the Agent, (IV) that is a Subsidiary or Affiliate of such Company, (V) that
is the United States of America or any department, agency or instrumentality
thereof, unless such Company has complied in all respects with the Federal
Assignment of Claims Act of 1940, or (VI) that is the subject of a case or
proceeding of the type described in clauses (g) and (h) of Section 9.01 of the
Credit Agreement.
4
<PAGE> 207
<TABLE>
<S> <C> <C>
and AT&T Wireless Services)
from whom more than 30% of
the aggregate Receivables of
such Company are due, but
only to the extent of such excess _________
Total Ineligible Receivables $________
ELIGIBLE RECEIVABLES $________ X 85% = ________
INVENTORY
Value (determined at the lower
of cost or market on a basis
consistent with that used
in the preparation of the
financial statements referred
to in Section 6.04(a) of the
Credit Agreement) of all
Inventory owned by any Company
and located in any
jurisdiction in the United
States of America as to which
appropriate UCC financing
statements have been filed
naming such Company as
"debtor" and the Agent as
"secured party", all net of
any amounts payable by such
Company in respect of
commissions, processing fees
or other charges _________
Less:
(i) Inventory shipped to a
provider of services, or
to a customer, even if on
a consignment or "sale or
return" basis _________
</TABLE>
5
<PAGE> 208
<TABLE>
<S> <C> <C>
(ii) Inventory that is subject
to a Lien (other than
Liens created pursuant to
the Security Documents
other than Inventory subject
to a Lien in favor of any
vendor to the extent the
value of such Inventory
exceeds 110% of the
aggregate amount of all
obligations owed by such
Company to such vendor) _________
(iii) Inventory against which
a reserve has been taken
or that is aged more than
365 days _________
(iv) Inventory not subject to a
perfected first priority
lien under the Security
Agreement, and subject to
no prior or equal Lien _________
(v) Inventory not produced in
compliance with the
applicable requirements of
the Fair Labor Standards
Act _________
(vi) Supply, scrap or
obsolete Inventory and
Inventory not reasonably
marketable _________
Total Ineligible Inventory $________
ELIGIBLE INVENTORY $________ X 60% = ________
</TABLE>
6
<PAGE> 209
<TABLE>
<S> <C>
BORROWING BASE TOTAL $________
</TABLE>
7
<PAGE> 210
EXHIBIT H
June 27, 1997
To Lenders and the Agent
Referred to Below
c/o NationsCredit Commercial Corporation,
as Agent
One Canterbury Green
Stamford, Connecticut 06912-0013
Ladies and Gentlemen:
We have acted as counsel for Telephone Warehouse, Inc., a Delaware
corporation ("TWI"), National Cellular, Incorporated, a Texas corporation
("National Cellular"), Let's Talk Cellular & Wireless, Inc., a Florida
corporation ("LTC"), Texas Cellular Partners, L.P., a Delaware limited
partnership ("Holdings"), and HIG Fund V, Inc., a Cayman Islands corporation
("HIG"), in connection with (i) the Credit Agreement dated as of December 31,
1996, and amended and restated as of June 18, 1997 (the "Credit Agreement")
among TWI, National Cellular, LTC, Holdings, the lenders listed on the signature
pages thereof (the "Lenders") and NationsCredit Commercial Corporation, as Agent
for the Lenders (the "Agent"); (ii) the LTC Term Note; (iii) the LTC Working
Capital Note; (iv) the Company Security Agreement; (v) the Trademark Security
Agreement; (vi) the LTC Pledge Agreement; (vii) the HIG Pledge Agreement; (viii)
the Holdings Pledge Agreement; and (ix) the UCC-1's executed by each of
Holdings, HIG and LTC in favor of Agent to be recorded in the office of the
Secretary of State of the States of Florida, Georgia, New York, Virginia,
Maryland, New Jersey, Pennsylvania, Colorado and California, (the "Financing
Statements"), (documents (i) through (vi) are referred to herein collectively as
the "Company Documents", documents (i) and (viii) are referred to herein
collectively as the "Holdings Documents" and documents (i) through (ix) are
referred to herein collectively as the "Financing Documents"). Terms defined in
the Credit Agreement and not otherwise defined herein are used herein as therein
defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and from our clients and other instruments and have conducted
such other investigations of fact and law as we have deemed necessary or
advisable for purposes of this opinion. For purposes of our opinion in paragraph
4 hereof with respect to HIG, we have solely relied as to matters of Cayman
Island law on the opinion of Maples & Calder, addressed to our firm and dated
the date hereof.
<PAGE> 211
NationsCredit Commercial Corporation
as Agent
June 27, 1997
Page 2
Whenever our opinion with respect to the existence or absence of facts
is indicated to be based on our knowledge or awareness, we are referring solely
to the actual knowledge of the particular Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel attorneys who have represented TWI, National Cellular, LTC, HIG
and Holdings in connection with the Financing Documents. Except as expressly set
forth herein, we have not undertaken any independent investigation to determine
the existence or absence of such facts and no inference as to our knowledge
concerning such facts should be drawn from the fact that such representation has
been undertaken by us.
For the purposes of this opinion, we have assumed that: (i) all items
submitted to us as originals are authentic and all signatures thereon are
genuine; (ii) all items submitted to us as copies conform to the originals;
(iii) each such item has been duly executed and delivered by each party (other
than TWI, National Cellular, LTC, HIG and Holdings) pursuant to due
authorization as such party's legal, valid and binding obligation, enforceable
against such party in accordance with its respective terms; (iv) the Financing
Documents contain the entire agreement between the parties concerning the
referenced transaction; and (v) no party to the transactions contemplated by the
Financing Documents has fraudulently induced any other party to become a party
to such transactions.
Our opinions expressed herein are limited to the laws of the State of
New York (the "State"), the General Corporation Law of the State of Delaware,
the Delaware Revised Uniform Limited Partnership Act and the federal laws of the
United States. Except as set forth above, we do not express any opinion herein
concerning any other law.
Based upon the foregoing, we are of the opinion that, on and as of the
date hereof:
1. Immediately prior to giving effect to the Merger Sub 1 Merger
and the Merger Sub 2 Merger (collectively, the "Mergers"), each of Merger Sub 1
and Merger Sub 2 was a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation.
2. After giving effect to the Mergers, each of TWI, National
Cellular and LTC is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and each has
all corporate power and corporate authority required to carry on its business as
now conducted. Holdings is a limited partnership duly formed, validly existing
and in good standing under the laws of the State of Delaware and has all
partnership power and authority to carry on its business as now conducted.
3. After giving effect to the Mergers, all of the outstanding
capital stock of TWI and National Cellular and the capital stock of LTC issued
to Holdings and HIG has been validly issued and is fully paid and
non-assessable.
4. The execution, delivery and performance by TWI, National
Cellular, LTC, HIG and Holdings of the Financing Documents to which each is a
party, and the consummation of the Mergers contemplated by the Operative
Documents: (a) are within TWI's, National Cellular's, LTC's and HIG's respective
corporate powers and Holdings' partnership powers; (b) have been duly authorized
by all necessary corporate and partnership action required of TWI, National
Cellular, LTC, HIG and Holdings (c) require no action by or in respect of, or
filing with, any governmental or regulatory body, agency or official (other than
the filing of the certificate and articles of merger referred to in paragraph 12
and the filing of financing statements), and (d) do
<PAGE> 212
NationsCredit Commercial Corporation
as Agent
June 27, 1997
Page 3
not contravene, or constitute a breach of or default under, any provision of
applicable law or regulation or of the charter or by-laws of TWI, National
Cellular, LTC, HIG or Holdings or, to our knowledge after due inquiry, of any
agreement, judgment, injunction, order, decree or other instrument binding upon
TWI, National Cellular, LTC, HIG or Holdings or result in the creation or
imposition of any lien (other than the liens created by the Financing Documents)
on any revenues or assets of TWI, National Cellular, LTC, HIG or Holdings,
except we express no opinion as to any law to which TWI, National Cellular, LTC,
HIG or Holdings may be subject as a result of your legal or regulatory status or
your involvement in the transactions contemplated by the Financing Documents.
The Financing Statements have been duly authorized by all necessary corporate
action required of each of LTC, HIG and Holdings and have been duly executed and
delivered by each of LTC, HIG and Holdings.
5. Each Company Document to which each of TWI, National Cellular
and LTC is a party constitutes a legal, valid and binding agreement of TWI,
National Cellular and LTC, respectively, as applicable, in each such case
enforceable in accordance with its terms.
6. Each Holdings Document to which Holdings is a party
constitutes a legal, valid and binding agreement of Holdings, enforceable in
accordance with its terms. The HIG Pledge Agreement constitutes a legal, valid
and binding agreement of HIG, enforceable in accordance with its terms.
7. To our knowledge, there is no action, suit or proceeding
pending against, or overtly threatened against or affecting, TWI, National
Cellular, LTC, HIG or Holdings before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision which could materially adversely affect the business,
consolidated financial position or consolidated results of operations of TWI,
National Cellular, LTC, HIG or Holdings or which in any manner draws into
question the Mergers, or the validity of any of the Operative Documents or the
validity, priority or perfection of any Lien granted or to be granted
thereunder. In connection with our participation in the negotiations and
execution of the Operative Documents (and without any independent
investigation), nothing has come to our attention which would indicate that
there was an action, suit or proceeding pending against, or overtly threatened
against any of the parties to the Operative Documents (other than TWI, National
Cellular, LTC, HIG and Holdings) before any court or arbitrator or government
body or agency which would draw into question the Mergers or the validity of the
Operative Documents.
8. The Company Security Agreement creates a valid security
interest under the Uniform Commercial Code as in effect in the State of New York
(the "UCC"), for your benefit, in all of TWI's, National Cellular's and LTC's
right, title and interest in all personal property described in the Company
Security Agreement in which a security interest can be granted under the UCC
(the "Code Collateral") to the extent the UCC is applicable thereto and, to the
extent provided in Section 9-306 of the UCC, all proceeds thereof.
9. The LTC Pledge Agreement creates a valid security interest
(the "LTC Pledge Security Interest") for your benefit, in all right, title and
interest of LTC in the capital stock of TWI and National Cellular described
therein. The delivery to the Agent in the State of New York of the certificates
and related stock powers executed in blank representing the Pledged Stock (as
defined in the LTC Pledge Agreement) is effective to create in favor of the
Agent for the benefit of the Secured Parties named therein a perfected security
interest in the Pledged Stock under the UCC. No registration, recordation or
filing with any governmental body, agency or official is
<PAGE> 213
NationsCredit Commercial Corporation
as Agent
June 27, 1997
Page 4
required in connection with the execution or delivery of the Holdings Pledge
Agreement or necessary for the validity or enforceability thereof or for the
perfection of the LTC Pledge Security Interest.
10. The HIG Pledge Agreement creates a valid security interest
(the "HIG Pledge Security Interests") for your benefit, in all right, title and
interest of HIG in the capital stock of LTC described therein. The delivery to
the Agent in the State of New York of the certificates and related stock powers
executed in blank representing the Pledged Stock (as defined in the HIG Pledge
Agreement) is effective to create in favor of the Agent for the benefit of the
Secured Parties named therein a perfected security interest in the Pledged Stock
under the UCC. No registration, recordation or filing with any governmental
body, agency or official is required in connection with the execution or
delivery of the HIG Pledge Agreement or necessary for the validity or
enforceability thereof or for the perfection of the HIG Pledge Security
Interest.
11. The Holdings Pledge Agreement creates a valid security
interest (the "Holdings Pledge Security Interests") for your benefit, in all
right, title and interest of Holdings in the capital stock of LTC described
therein. The delivery to the Agent in the State of New York of the certificates
and related stock powers executed in blank representing the Pledged Stock (as
defined in the Holdings Pledge Agreement) is effective to create in favor of the
Agent for the benefit of the Secured Parties named therein a perfected security
interest in the Pledged Stock under the UCC. No registration, recordation or
filing with any governmental body, agency or official is required in connection
with the execution or delivery of the Holdings Pledge Agreement or necessary for
the validity or enforceability thereof or for the perfection of the Holdings
Pledge Security Interest.
12. No consents or approvals of, or filings and registrations
with, or any other actions in respect of, any governmental agencies, authorities
or instrumentalities are required on the part of TWI, National Cellular, LTC or
Holdings in order to effect the Mergers under any applicable provision of United
States federal law, the Delaware General Corporation Law (the "DGCL") and the
Texas Business Corporation Act (the "TBCA"), other than the filing by the
parties to the Mergers of certificates and articles of merger in accordance with
the requirements of Section 252 of the DGCL and Section 5.04 of the TBCA. The
parties to the Mergers have duly executed, acknowledged and filed with the
Secretary of State of the States of Delaware and Texas, in the case of the
Secretary of State of Delaware in accordance with the requirement of Section 103
of the DGCL, a certificate of merger that conforms to the requirements of
Section 252 of the DGCL, and, in the case of the Secretary of State of Texas in
accordance with Section 5.04 of the TBCA, articles of merger that conform to the
requirements of Section 5.04 of the TBCA, and under such statutes the Mergers
have become effective in accordance with the DGCL and the TBCA.
The opinions set forth above are subject to the following
qualifications:
(a) Our opinions above are subject to the effect of any
applicable bankruptcy, insolvency, fraudulent conveyance, equitable
subordination, reorganization, moratorium, or similar laws affecting creditors'
rights generally and to the effect of general principles of equity, including
(without limitation) concepts of materiality, reasonableness, good faith and
fair dealing, the exercise of discretionary powers by any court before which
specific performance, injunctive relief, the appointment of a receiver or other
equitable remedies may be sought (regardless of whether considered in a
proceeding in equity or at law).
<PAGE> 214
NationsCredit Commercial Corporation
as Agent
June 27, 1997
Page 5
(b) We call your attention to the following matters (as
well as those matters set out in paragraph (e) below), as to which we express no
opinion:
(i) TWI's, National Cellular's, LTC's, HIG's and
Holdings' agreements in the Financing Documents to pay
interest on overdue interest;
(ii) TWI's, National Cellular's, LTC's, HIG's and
Holdings' agreements in the Financing Documents to indemnify
you against costs or expenses or liability arising out of or
related to the entering into, performance, or enforcement of
the transactions contemplated by the Financing Documents;
(iii) Certain other provisions contained in the
Financing Documents may be limited or rendered ineffective by
applicable laws of the State or judicial decisions governing
such provisions or holding their enforcement to be
unreasonable under the then-existing circumstances, but such
laws and judicial decisions do not in our opinion render the
Financing Documents invalid as a whole and there exists in the
Financing Documents or pursuant to applicable law legally
adequate remedies for a realization of the principal benefits
purported to be provided by the Financing Documents;
(iv) The enforceability of provisions
establishing evidentiary standards, preventing or restricting
the ability of TWI, National Cellular, LTC, HIG and Holdings
to seek legal or equitable relief or to assert counterclaims,
offsets, cause of action or defenses or limiting the ability
of TWI, National Cellular, LTC, HIG and Holdings to plead
matters or introduce matters into evidence;
(v) The enforceability or provisions purporting
to reinstate obligations after discharge or disgorgement or
after a determination that any such obligations were
unenforceable;
(vi) The enforceability of any provision of the
Financing Documents which appoints the Agent as
attorney-in-fact or purports to authorize the Agent to sign or
file financing statements or other documents without the
signature of the applicable debtor (except to the extent a
secured party may execute and file financing statements
without the signature of the debtor under Section 9-402(2) of
the UCC);
(vii) The enforceability of provisions purporting
to give the Agent or any other party the right of "self-help;"
indemnify against an indemnitee's negligence, wrongdoing or
violation of law; impose penalties, forfeitures, late payment
charges or an increase in interest rate upon a delinquency in
payment or occurrence of a default; and purporting to waive a
statutory or common law right, whether prospectively or
retroactively, including, without limitation, the right to
redeem mortgaged property;
(viii) The enforceability, as against other creditors of any
Company, of provisions of the Credit Agreement (including,
without limitation, Section 2.04(d) thereof) which purport to
require, notwithstanding the absence of a continuing
<PAGE> 215
NationsCredit Commercial Corporation
as Agent
June 27, 1997
Page 6
Event of Default, the application of funds or assets of such
Company to pay obligations of another Company under any of the
Financing Documents;
(ix) The effect of Sections 547 and 548 of the
United States Bankruptcy Code, and other fraudulent transfer
laws and principles of equitable subordination, the
applicability of which to this transaction we understand you
have considered;
(x) The priority of your security interests;
(xi) The rights of buyers in the ordinary course
of business or of buyers not in the ordinary course of
business to the extent the Collateral is intended to secure
future advances;
(xii) The provisions of the Federal Bankruptcy
Code limiting the extent to which property acquired after the
commencement of a case under the Federal Bankruptcy Code may
be subjected to a security interest arising from an agreement
entered into prior to the commencement of such case;
(xiii) With respect to our opinions expressed in
paragraphs 4, 8, 9, 10 and 11 above, no opinion is expressed
as to the creation, perfection or enforcement of liens or
security interests in governmental licenses, permits,
approvals and other similar rights and privileges in which it
is ineffective under governmental rules or regulations, or by
the terms of the license, permit, approval right or privilege
itself, to grant a lien or security interest; and
(xiv) Antitrust, securities or banking laws.
(c) In rendering the opinions in paragraphs 4, 8, 9, 10
and 11 above, we have assumed without independent investigation that as of the
date of this letter and (except as otherwise specifically noted) at all relevant
times thereafter:
(i) value has been given, the Collateral exists
and TWI, National Cellular, LTC, HIG and Holdings, as
applicable, have rights or title to each item thereof, as the
case may be (and we do not express any opinion in this letter
as to any of such rights or title);
(ii) all items of Collateral (including, without
limitation, additional instruments) pledged under the Credit
Agreement, the LTC Pledge Agreement, the HIG Pledge Agreement
and the Holdings Pledge Agreement of which possession must be
obtained and retained by a secured party in order to perfect
its security interest pursuant to Section 9-103 and 9-304 of
the UCC are in your actual or constructive possession and not
in the possession of TWI, National Cellular, LTC, HIG or
Holdings or any of their respective subsidiaries, affiliates
or agents;
(iii) all items of Collateral (other than those
items of Collateral described in and subject to Financing
Statements having accurate legal descriptions of the real
estate involved and duly filed as fixture filings) constitute
items which are mobile in nature and, if installed on any
property, do not constitute fixtures;
<PAGE> 216
NationsCredit Commercial Corporation
as Agent
June 27, 1997
Page 7
(iv) none of the Collateral consists of consumer
goods, farm products, crops, timber, minerals or the like
(including oil and gas) or accounts resulting from the sale
thereof, receivables due from any government or agency or
department thereof, beneficial interests in a trust or a
decedent's estate, letters of credit, inventory which is
subject of any negotiable documents of title, such as a
negotiable bill of lading or warehouse receipt held by anyone
other than you or on your behalf, or items which are subject
to a requirement of any jurisdiction, which provides for a
registration or certificate of title or a filing other than
under the Code; and
(v) Appropriate continuation statements will be
filed in respect of the Financing Statements in a timely
manner as required by applicable law.
This opinion is furnished to you solely in connection
with the transactions described above and may not be relied
upon by anyone other than you and then only in connection with
such transactions. This opinion is not to be quoted in whole
or in part, nor is it to be filed with any governmental or
regulatory agency or authority, without our prior written
consent in each instance.
Very truly yours,
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
<PAGE> 217
EXHIBIT I
June __, 1997
To the Lenders and the Agent
Referred to Below
c/o NationsCredit Commercial Corporation,
as Agent
One Canterbury Green
Stamford, Connecticut 06912-0013
Ladies and Gentlemen:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of December 31, 1996, as amended and restated as of
June __, 1997, among Telephone Warehouse, Inc., a Delaware corporation ("TWI"),
National Cellular, Incorporated, a Texas corporation ("National Cellular"),
Let's Talk Cellular & Wireless, Inc., a Florida corporation ("LTC", together
with TWI and National Cellular, the "Companies"), Texas Cellular Partners, L.P.,
a Delaware corporation ("Holdings"), the lenders referred to therein (the
"Lenders") and NationsCredit Commercial Corporation, as agent for the Lenders
(the "Agent"). Terms defined in the Credit Agreement and not otherwise defined
herein are used herein as therein defined.
In this connection, we have reviewed the opinion of counsel (the
"Opinion") dated as of the date hereof of Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A., counsel for the Companies and Holdings and have examined
the Notes delivered by LTC pursuant to the Credit Agreement and the amended and
restated Security Agreement, the amended and restated Holdings Pledge Agreement,
the HIG Pledge Agreement and the LTC Pledge Agreement (collectively, the
"Security Documents") executed in connection therewith.
Based upon our review, it is our opinion that the Opinion is
substantially responsive to the requirements of subsection 5.01(g) of the Credit
Agreement and that the Notes and Security Documents are substantially responsive
to the requirements of subsections 5.01(b) and (c) of the Credit Agreement.
<PAGE> 218
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by or furnished to any other person without our prior written
consent.
Very truly yours,
2
<PAGE> 219
Exhibit J
Filed as Exhibit 10.16 to the
Registrant's Registration Statement
on Form S-1 (No. 333-34595).
<PAGE> 220
Exhibit K
Filed as Exhibit 10.16 to the
Registrant's Registration Statement
on Form S-1 (No. 333-34595).
<PAGE> 1
EXHIBIT 10.16
AMENDED AND RESTATED
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("AGREEMENT") is made and entered into as of
the 8th day of October, 1997, by and between Let's Talk Cellular & Wireless,
Inc., a Florida corporation f/k/a Let's Talk Cellular of America, Inc. ("LTC"),
Telephone Warehouse, Inc., a Texas corporation ("TWI" and collectively with LTC,
the "COMPANIES") and H.I.G. Capital Management, Inc. (the "CONSULTANT").
1. APPOINTMENT OF CONSULTANT. The Companies appoint the Consultant and
the Consultant accepts appointment on the terms and conditions provided in this
Agreement as a consultant to the Companies' businesses, including any other
corporations hereafter formed or acquired by the Companies to engage in any
business. This Agreement has been amended and restated as of the date hereof in
consideration for additional investment banking services to be provided by the
Consultant in connection with a Public Offering planned by the Company.
2. BOARD OF DIRECTORS SUPERVISION. The activities of the Consultant to
be performed under this Agreement shall be subject to the supervision of the
Chief Executive Officer (the "CEO") and the President of LTC and subject to
reasonable policies not inconsistent with the terms of this Agreement adopted by
the Board of Directors of LTC (the "BOARD") and in effect from time to time.
Subject to the foregoing limitations and otherwise where not required by
applicable law or regulation, the Consultant shall not require the prior
approval of the Board to perform its duties under this Agreement.
3. AUTHORITY OF CONSULTANT. Subject to any limitations imposed by
applicable law or regulation or by the CEO, the President or the Board, the
Consultant shall render management, consulting and financial services to the
Companies which services shall include advice and assistance in connection with
the planning and effectuation of a Reorganization or Public Offering. The
Consultant will use its best efforts to cause its employees and agents to give
the Companies the benefit of their special knowledge, skill and business
expertise to the extent relevant to the Companies' businesses and offers.
For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "REORGANIZATION" shall mean (i) a merger or consolidation of
LTC with or into another corporation of which LTC is not the
surviving corporation, (ii) the sale of all or substantially
all of LTC's properties and assets to any other person, or
(iii) any transaction or series of related transactions in
which HIG Fund V, Inc. and its affiliates (including Texas
Cellular Partners, L.P.) cease to own at least fifty percent
(50%) of the outstanding common stock of LTC.
- 1 -
<PAGE> 2
(ii) "PUBLIC OFFERING" shall mean an underwritten pubic offering
pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and
sale of common stock of LTC.
4. REIMBURSEMENT OF EXPENSES; INDEPENDENT CONTRACTOR. The Consultant
shall not, without the written consent of the CEO or the President, (i) make any
advance to or for the account of the Companies, (ii) pay any sums held in
accounts maintained by the Companies, or (iii) incur any liability or obligation
for the account of the Companies. The Consultant shall be an independent
contractor, and nothing obtaining in this Agreement shall be deemed or construed
(i) to create a partnership or joint venture between the Companies and the
Consultant, (ii) to cause the Consultant to be responsible in any way for the
debts, liabilities or obligations of the Companies or any other party, or (iii)
to constitute the Consultant or any of its employees as employees, officers or
agents of either of the Companies.
5. OTHER ACTIVITIES OF CONSULTANT; INVESTMENT OPPORTUNITIES. The
Companies acknowledge and agree that neither the Consultant nor any of the
Consultant's employees, officers, directors, affiliates or associates shall be
required to devote full time and business efforts to the duties of the
Consultant specified in this Agreement, but instead shall devote only so much of
such time and efforts as the Consultant reasonably deems necessary. The
Companies further acknowledge and agree that the Consultant and its affiliates
are engaged in the business of investing in, acquiring and/or managing
businesses for the Consultant's own account, for the account of unaffiliated
parties, and understand that the Consultant plans to continue to be engaged in
such businesses (and other business or investment activities) during the term of
this Agreement. No aspect or element of such activities shall be deemed to be
engaged in for the benefit of the Companies or any of their subsidiaries nor to
constitute a conflict of interest. Furthermore, notwithstanding anything herein
to the contrary, the Consultant shall be required to bring only such investments
and/or business opportunities to the attention of the Companies as the
Consultant, in its sole discretion, deems appropriate, except that if at any
time the Consultant, Texas Cellular Partners, L.P. or HIG Fund V, Inc. or any of
their respective affiliates desires to acquire all or a portion of a company,
partnership or other business entity in the business of the retailing or the
wholesale distribution of cellular or wireless communication services or
products (a "TARGET COMPANY"), the Consultant shall make LTC aware of the Target
Company as soon as the Target Company is identified as a suitable acquisition
candidate by providing written notice of the potential acquisition to LTC and
LTC shall have the right to participate with the Consultant in the due diligence
review and negotiation process and shall also have a right of first refusal to
acquire the Target Company. The directors of LTC that are not affiliated with
the Consultant have the right to determine, on behalf of LTC, whether or not LTC
will exercise its right of first refusal. LTC may exercise its right of first
refusal by (a) notifying the Consultant in writing within thirty (30) days after
the date a fully-executed letter of intent between Consultant, Texas Cellular
Partners, L.P., or HIG Fund V, Inc. or their respective affiliates and the
Target Company is delivered to LTC that it intends to acquire the Target Company
and (b) reimbursing the Consultant for its out-of-pocket fees and expenses, if
any. Once LTC notifies the Consultant of its intent to acquire the Target
Company, LTC shall have the right to acquire the Target Company so long as
acquisition negotiations are actively and substantively continuing. If (a) at
any time
- 2 -
<PAGE> 3
LTC ceases to actively pursue acquiring the Target Company it shall notify the
Consultant of such event or (b) LTC does not exercise its right of first
refusal, then in either case the Consultant shall have the right to acquire the
Target Company. The Consultant's right to acquire the Target Company shall
continue so long as acquisition negotiations are actively and substantively
continued. In the event the Consultant ceases such negotiations for more than
thirty (30) days, LTC shall have an additional right of first refusal to acquire
the Target Company each time such event occurs.
6. EQUITY CAPITAL LOANS. In the event LTC acquires or intends to
acquire one or more businesses which results in the need for LTC to obtain
additional equity capital from its existing shareholders, the Consultant agrees
to lend (i) to Messrs. Molina and Beveridge and Ms. Gozlan and (ii) in the event
the aggregate additional equity required equals or exceeds $2.5 million, to Mr.
Sorensen, the funds necessary to buy their pro rata portion of equity securities
issued for such purpose. The loans shall accrue interest at the prime rate of
NationsBank, N.A. plus 1% per annum payable at maturity, be secured by a first
and only perfected security interest in their shares of LTC's common stock
purchased with such funds, may be prepaid in whole or in part at any time or
from time to time without premium or penalty and shall be repaid as follows:
upon any sale of stock by an individual, each individual shall repay his or her
respective loan up to a maximum payment equal to 50% of the proceeds, after
taxes, received by such individual from such sale or sales, with any remaining
balance due June 25, 2001.
7. COMPENSATION OF CONSULTANT. In full and complete payment and
satisfaction of Consultant's previous agreements to provide the management
services to the Companies, the Companies will pay to the Consultant an
investment banking fee equal to $840,000 upon the occurrence of a Public
Offering (the "PAYMENT DATE"). These fees are for Consultant's provision of
investment banking services in connection with such Public Offering. For future
consulting services described herein, the Companies shall pay the Consultant a
fee of $350,000 per annum, payable monthly in advance on the first day of each
month. For purposes of this Agreement, the term "Liquidation" shall mean any
liquidation, dissolution or winding up of LTC, whether voluntary or involuntary.
8. TERM. This Agreement shall commence as of the date hereof and shall
remain in effect until the earlier to occur of (i) a Liquidation, Reorganization
or Public Offering or (ii) June 25, 2001.
9. TERMINATION UPON BREACH. Either the Companies or the Consultant may
terminate this Agreement in the event of the breach of any of the material terms
or provisions of this Agreement by the other party, which breach is not cured
within 30 business days after notice of the same is given to the party alleged
to be in breach by the other party.
10. STANDARD OF CARE. The Consultant (including any person or entity
acting for or on behalf of the Consultant) shall not be liable for any mistakes
of fact, errors of judgment, for losses sustained by the Companies or for any
acts or omissions of any kind (including acts or omissions of the Consultant),
unless caused by gross negligence or intentional misconduct of the Consultant.
- 3 -
<PAGE> 4
11. INDEMNIFICATION OF CONSULTANT. The Companies hereby agree to
indemnify and hold harmless the Consultant and its present and future officers,
directors, affiliates, employees and agents ("INDEMNIFIED Parties") to the
fullest extent permitted by law. The Companies further agree to reimburse the
Indemnified Parties on a monthly basis for any cost of defending any action or
investigation (including attorneys' fees and expenses), subject to an
undertaking from such Indemnified Party to repay the Companies if such party is
determined not to be entitled to such indemnity.
12. NO ASSIGNMENT. Without the consent of the Consultant, the Companies
shall not assign, transfer or convey any of their respective rights, duties or
interest under this Agreement, nor shall the Companies delegate any of the
obligations or duties required to be kept or performed by them hereunder.
Without the prior written consent of the Companies, the Consultant shall not
assign, transfer or convey any of its rights, duties or interests under this
Agreement, nor shall it delegate any of the obligations or duties required to be
kept or performed by it under this Agreement.
13. NOTICES. All notices, demands, consents, approvals and requests
given by either party to the other hereunder shall be in writing and shall be
personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, to the parties at the following addresses:
If to the Companies: Let's Talk Cellular & Wireless, Inc.
5200 NW 77th Court
Miami, Florida 33166
Attention: Nick Molina,
Chief Executive Officer,
and Brett Beveridge,
President
If to the Consultant: H.I.G. Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Attention: Anthony Tamer
Any party may at any time change its respective address by sending written
notice to the other party of the change in the manner hereinabove prescribed.
14. SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or enforceable, shall not be affected thereby, and each term
or provision of this Agreement shall be valid and be enforced to the fullest
extent permitted by law.
- 4 -
<PAGE> 5
15. NO WAIVER. The failure by any party to exercise any right, remedy
or elections herein contained or permitted by law shall not constitute or be
construed as a waiver or relinquishment for the future exercise of such right,
remedy or election, but the same shall continue and remain in full force and
effect. All rights and remedies that any party may have at law, in equity or
otherwise upon breach of any term or condition of this Agreement, shall be
distinct, separate and cumulative rights and remedies and no one of them,
whether exercised or not, shall be deemed to be in exclusion of any other right
or remedy.
16. ENTIRE AGREEMENT. This Agreement supersedes that certain Consulting
Agreement, dated as of June 25, 1996, between the Consultant and LTC, and that
certain Consulting Agreement, dated as of December 31, 1996, between the
Consultant and TWI, and contains the entire agreement between the parties hereto
with respect to the matters herein contained. Any agreement hereafter made shall
be ineffective to effect any change or modification, in whole or in part, unless
such agreement is in writing and signed by the party against whom enforcement of
the change or modification is sought.
17. GOVERNING LAWS. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without reference to the
laws of any other state.
* * *
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Consulting
Agreement to be duly exercised by their authorized representatives as of the
date first above written.
LET'S TALK CELLULAR & WIRELESS, INC.
By:/s/ NICK MOLINA
-----------------------------------------
Nick Molina, Chief Executive Officer
TELEPHONE WAREHOUSE, INC.
By:/s/ DOUGLAS BERMAN
-----------------------------------------
Douglas Berman, Vice President
H.I.G. CAPITAL MANAGEMENT, INC.
By:/s/ ANTHONY TAMER
-----------------------------------------
Anthony Tamer, President
- 6 -
<PAGE> 1
EXHIBIT 10.17
Let's Talk Cellular of America, Inc.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
Dated as of June 25, 1996
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Preferred Stock .................................1
1.2 The Conversion Shares ................................................1
1.3 Initial Closing ......................................................1
1.4 Release of Funds From Escrow .........................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
2.1 Organization and Corporate Power .....................................3
2.2 Authorization ........................................................3
2.3 Government Approvals .................................................4
2.4 Authorized and Outstanding Stock .....................................4
2.5 Subsidiaries .........................................................4
2.6 Financial Information ................................................5
2.7 Events Subsequent to the Date of the Financial
Statements ...........................................................5
2.8 Litigation ...........................................................6
2.9 Compliance with Laws and Other Instruments ...........................6
2.10 Taxes ................................................................7
2.11 Property .............................................................7
2.12 Governmental and Industrial Approvals ................................8
2.13 Contracts and Commitments ............................................8
2.14 Securities Act .......................................................8
2.15 Insurance Coverage ...................................................9
2.16 Employee Matters .....................................................9
2.17 No Brokers or Finders ...............................................10
2.18 Transactions with Affiliates ........................................10
2.19 Assumptions, Guarantees, etc. of Indebtedness of
Other Persons .......................................................10
2.20 Restrictions on Subsidiaries ........................................10
2.21 Disclosures .........................................................10
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
3.1 Accounts and Reports ................................................11
3.2 Payment of Taxes ....................................................12
3.3 Maintenance of Key Man Insurance ....................................12
3.4 Compliance with Laws, etc ...........................................12
3.5 Inspection ..........................................................13
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
3.6 Corporate Existence; Ownership of Subsidiaries ......................13
3.7 Board Of Directors ..................................................13
3.8 Use of Proceeds .....................................................13
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
4.1 Investments in Other Persons ........................................14
4.2 Distributions .......................................................14
4.3 Dealings with Affiliates ............................................15
4.4 Merger ..............................................................15
4.5 Option Shares .......................................................15
4.6 Indebtedness ........................................................16
4 7 Limitation on Restrictions on Subsidiary Dividends
and Other Distributions .............................................16
4.8 No Conflicting Agreements ...........................................16
4.9 Compensation; Consulting and Other Agreements .......................16
4.10 Fundamental Changes .................................................16
4.11 Capital Expenditures ................................................17
ARTICLE V
PREEMPTIVE RIGHT
5.1 Right of Purchase ...................................................17
5.2 Definition of New Securities ........................................17
5.3 Notice from the Company .............................................17
5.4 Sale by the Company .................................................18
5.5 Termination of Rights ...............................................18
ARTICLE VI
PURCHASER'S REPRESENTATIONS
6.1 Representations and Warranties ......................................18
6.2 Permitted Sales; Legends ............................................19
ARTICLE VII
REGISTRATION RIGHTS
7.1 Certain Definitions .................................................19
7.2 Requested Registrations .............................................20
7.3 "Piggy Back" Registrations ..........................................21
7.4 Expenses of Registration ............................................22
7.5 Registration on Form S-3 ............................................22
7.6 Registration Procedures .............................................22
7.7 Indemnification .....................................................23
7.8 Limitations on Registration Rights ..................................26
7.9 Rule 144 Reporting ..................................................26
7.10 Listing Application .................................................26
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
7.11 Damages .............................................................27
ARTICLE VIII
CONDITIONS OF THE PURCHASER'S OBLIGATION
8.1 Effect of Conditions ................................................27
8.2 Representations and Warranties ......................................27
8.3 Performance .........................................................27
8.4 Board Election ......................................................27
8.5 Certified Documents, etc ............................................27
8.6 Amendment to Articles of Incorporation ..............................27
8.8 Redemption Agreement ................................................28
8.9 Opinion of Counsel ..................................................28
8.10 Employment Agreements ...............................................28
8.11 Consulting Agreement ................................................28
8.12 Shareholder Indebtedness ............................................28
ARTICLE IX
CONDITIONS OF THE COMPANY'S OBLIGATION ................28
ARTICLE X
CERTAIN DEFINITIONS ............................29
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations .........................................31
11.2 Parties in Interest .................................................31
11.3 Shares Owned by Affiliates ..........................................31
11.4 Amendments and Waivers ..............................................31
11.5 Notices .............................................................32
11.6 Expenses ............................................................32
11.7 Counterparts ........................................................32
11.8 Effect of Headings ..................................................33
11.9 Adjustments .........................................................33
11.10 Governing Law .......................................................33
</TABLE>
(iii)
<PAGE> 5
June 25, 1996
HIG Fund V, Inc.
c/o HIG Capital Management, Inc.
1001 South Bayshore Dr.
Suite 2310
Miami, Florida 33131
Re: Series A Preferred Stock
Gentlemen:
Let's Talk Cellular of America, Inc., a Florida corporation {the
"Company"), Nick Molina and Brett Beveridge (individually a "Principal
Shareholder" and collectively, the "Principal Shareholders") hereby agree with
you as follows (terms used herein and not otherwise defined shall have the
meanings as set forth in Article X hereof):
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Preferred Stock. At the Closing, the Company
will sell to you (the "Purchaser") an aggregate of 100,000 shares of the
Company's Series A Preferred Stock, par value $30 per share (the "Preferred
Stock"), at a price of $32.95 per share, for an aggregate purchase price of
$3,295,000 payable as provided in Section 1.3. The Preferred Stock shall have
the rights, terms and privileges set forth on Exhibit A attached hereto. The
shares of Preferred Stock purchased pursuant to this Section 1.1 are referred to
herein as the "Purchased Shares."
1.2 The Conversion Shares. The Company has authorized and reserved and
hereby covenants that it will continue to reserve, free of any preemptive rights
or encumbrances, a sufficient number of its authorized but previously unissued
shares of Common Stock to satisfy the rights of conversion of the holders of the
Purchased Shares. The shares of Common Stock issued or issuable upon conversion
of the Purchased Shares are referred to herein as the "Conversion Shares."
1.3 Initial Closing. Subject to the satisfaction or waiver of the
conditions set forth in Articles VIII and IX hereof, the purchase of the
Purchased Shares shall be made at a closing (the "Closings") to be held at the
offices of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221
Brickell Avenue, Miami, Florida, at 10:00 A.M. on June 25, 1996, or at such
other time and on such other date as the Purchaser and the Company may mutually
agree. Payment at the Closing for the Purchased Shares shall be by wire transfer
payable in immediately available federal
<PAGE> 6
funds. At the Closing, (a) the Company shall deliver a certificate representing
33,334 shares of Preferred Stock to the Purchaser and two certificates, each
representing 33,333 shares of Preferred Stock issued in the name of the
Purchaser, to the Escrow Agent subject to the Escrow Agreement, and (b) the
Purchaser shall deliver $1,285,000 in immediately available funds to the Company
and deposit $2,000,000 in the escrow account subject to the Escrow Agreement.
For purposes of this Agreement and the Escrow Agreement, the $2,000,000 shall be
the property of the Company and the Escrowed Shares shall be validly issued,
fully paid and nonassessable shares of Preferred Stock issued in the name of the
Purchaser, in each case, subject only to the conditions subsequent of the
release of the escrowed funds set forth in Section 1.4 hereof.
1.4 Release of Funds From Escrow.
(a) The Company shall have the right at any time after the Closing
to draw the first and second $1 million held in the Escrow Account upon the
occurrence of each of the following events: (i) the Company shall have used
substantially all of the previous amounts funded at closing or at the first draw
from the Escrow Account in accordance with Schedule 3.8 or as otherwise agreed
to by the Purchaser in writing (ii) there shall have been no material adverse
change in the Company's condition or prospects which would result in a disaster,
(iii) the representations and warranties in Article II shall be true and correct
in all material respects such that the breach thereof has a disasterous effect
on the Company, (iv) the Company shall have complied in all material respects
with the covenants set forth in Articles III and IV and the Related Agreements
as of the date of the Draw Certificate, and (v) there shall have been no fraud
or embezzlement at the Company. The Company shall effect the second and third
draw by delivering (i) a certificate confirming the foregoing and showing the
use of the funds to the Purchaser, executed by one or more of the Principal
Shareholders in their capacity as officers of the Company (the "Draw
Certificate") and (ii) disbursement instructions to the Escrow Agent releasing
the corresponding certificate representing shares of Preferred Stock to the
Purchaser. Within two (2) business days of receiving the Draw Certificate, the
Purchaser shall confirm its contents and upon such confirmation issue
disbursement instructions to the Escrow Agent releasing the second or third $1
million to the Company. In each case, the disbursement instructions shall be in
the form provided for in the Escrow Agreement.
(b) The Purchaser shall have the unilateral right to release all
or a portion of the funds in the Escrow Account and receive the corresponding
number of shares of Preferred Stock (1 share for each $30 released) without any
action or notice required by the Company.
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(c) The Company and the Purchaser can agree in writing to any
other alternative arrangement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
In order to induce the Purchaser to purchase the Purchased Shares, the
Company and the Principal Shareholders, acting jointly and severally, make the
following representations and warranties which shall be true, correct and
complete in all respects as of the Closing and on the date of each Draw
Certificate.
2.1 Organization and Corporate Power. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own its properties and to carry on
its business as presently conducted. The Company and each of its Subsidiaries is
duly licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on the operations or financial conditions of the Company and its
Subsidiaries, taken as a whole.
2.2 Authorization. The Company has all necessary corporate power
and has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Shareholders' Agreement referred to in Section 8.7, the Redemption Agreement
referred to in Section S.8, the Employment Agreements referred to in Section
8.10 and the Consulting Agreement referred to in Section 8.11 (collectively, the
"Related Aqreements"), and any other agreements or instruments executed by the
Company in connection herewith or therewith and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Purchased Shares and the Conversion Shares issuable
upon conversion of the Purchased Shares. Sufficient shares of authorized but
unissued Common Stock have been reserved for issuance upon conversion of the
Purchased Shares. The issuance of the Purchased Shares hereunder does not, and
the issuance of the Conversion Shares upon conversion of the Purchased Shares
will not, require any further corporate action and is not and will not be
subject to any preemptive right, right of first refusal or the like. Assuming
the due execution and delivery by the Purchaser, this Agreement, the Related
Agreements and the other agreements and instruments executed by the Company in
connection herewith or therewith will each be a valid and binding obligation of
the Company enforceable in accordance with its respective terms. Based on the
representations made by the Purchaser in Article VI of this Agreement, the offer
and sale of the Purchased Shares will be
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<PAGE> 8
exempt from the registration or qualification requirements of applicable federal
and state securities laws.
2.3 Government Approvals. No consent, approval, license or
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement, any of the Related Agreements and any other agreements or instruments
executed by the Company in connection herewith or therewith, or in connection
with the issuance of the Purchased Shares or the issuance of the Conversion
Shares upon conversion of the Purchased Shares, except for (i) those which have
already been made or granted and (ii) the filing of registration statements with
the Securities and Exchange Commission (the "Commission") and any applicable
state securities commission as specifically provided for in Article VII hereof.
2.4 Authorized and Outstanding Stock. The authorized capital stock
of the Company consists of (i) 50,000,000 shares of Common Stock, of which
650,000 shares are validly issued and outstanding on the date hereof and are
held of record and owned beneficially as set forth in Schedule 2.4 hereto; and
(ii) 150,000 shares of Preferred Stock, all of which have been designated as
Series A Preferred Stock with the rights, terms and privileges set forth in
Exhibit A, and of which no shares are issued or outstanding. There are no
treasury shares held by the Company. All issued and outstanding shares of
capital stock are, and when issued in accordance with the terms hereof, all
Purchased Shares and Conversion Shares issued upon conversion of the Purchased
Shares will be, duly and validly authorized, validly issued and fully paid and
non-assessable and free from any restrictions on transfer, except for
restrictions imposed by federal or state securities or "blue-sky" laws and
except for those imposed pursuant to this Agreement or any Related Agreement.
Except as set forth on Schedule 2.4 hereto, there are no outstanding warrants,
options, commitments, preemptive rights, rights to acquire or purchase,
conversion rights or demands of any character relating to the capital stock or
other securities of the Company.
2.5 Subsidiaries. Except as set forth in Schedule 2.5 hereto, the
Company has no Subsidiaries nor any investment or other interest in, or any
outstanding loan or advance to or from, any Person, including, without
limitation, any officer, director or shareholder. Except as set forth on
Schedule 2.5 hereto, (a) the Company owns of record and beneficially, free and
clear of all liens, charges, restrictions, claims and encumbrances of any
nature, all of the issued and outstanding capital stock of each of its
Subsidiaries and (b) no shares of capital stock of any subsidiary was redeemed
in violation of any laws or statutes or contract or other rights of any person.
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<PAGE> 9
2.6 Financial Information. Attached hereto as Exhibit 2.6 are true
and complete copies of (x) the audited financial statements of the Company for
each of the fiscal years ended July 31, 1994 and July 31, 1995, certified by
Deloitte & Touche LLP, Company's independent certified public accountants, and
(y) the unaudited balance sheet of the Company at April 30, 1996, and the
related statements of income, retained earnings and statements cash flows for
the nine-months then ended (all of such financial statements being collectively
referred to herein as the "Financial Statements"). The Financial Statements are
complete and correct, are in accordance with the books and records of the
Company and present fairly in accordance with generally accepted account
principles applied on a basis consistent with prior periods the financial
condition and results of operations of the Company as of the dates and for the
periods shown except that the unaudited financial statements in (y) above have
no notes thereto and do not have any year end adjustments (all of which
adjustments are nonrecurring in nature). The Company does not have any
liability, contingent or otherwise, which is not adequately reflected in
reserved against in the Financial Statements that could materially and adversely
affect the financial or condition of the Company. Since the date of the
Financial Statements, (i) there has been no change in the business, assets,
liabilities, condition (financial or otherwise) or operations of the Company
except for changes in the ordinary course of business which, individually or in
the aggregate, have not been materially adverse, and (ii) none of the business,
prospects, condition (financial or otherwise), operations property or affairs of
the Company has been materially adversely affected by any occurrence or
development, individually or in the aggregate, whether or not insured against.
2.7 Events Subsequent to the Date of the Financial Statements.
Except as set forth on Schedule 2.7 hereto, since April 30, 1996, neither the
Company nor any Subsidiary has (i) issued any stock, bond or other corporate
security, (ii) borrowed any amount or incurred or become subject to any
liability (absolute, accrued or contingent), except liabilities under contracts
entered into in the ordinary course of business, (iii) discharged or satisfied
any lien or encumbrance or incurred or paid any obligation or liability
(absolute, accrued or contingent) other than current liabilities shown on the
Financial Statements and current liabilities incurred since July 31, 1995 in the
ordinary course of business, (iv) declared or made any payment or distribution
to stockholders or purchased or redeemed any shares of its capital stock or
other securities, (v) sold, assigned or transferred any of its tangible assets
or cancelled any debt or claim, in each case, except in the ordinary course of
business, (vi) sold, assigned, transferred or granted any license with respect
to any Intellectual Property (as defined in Section 2.11), except pursuant to
license or other agreements entered into in the ordinary course of business,
(vii) suffered any loss of property or waived any right of substantial value
whether or not in the
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<PAGE> 10
ordinary course of business, (viii) made any change in officer compensation,
(ix) entered into any transaction except in the ordinary course of business or
as otherwise contemplated hereby or (x) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
2.8 Litigation. Except as otherwise set forth on Schedule 2.8
hereto, there is no litigation or governmental proceeding or investigation
pending or, to the knowledge of the Company and the Principal Shareholders,
threatened, against the Company or any Subsidiary or affecting any of the
Company's or such Subsidiary's properties or assets, or against any officer,
employee or shareholder of the Company or any Subsidiary in his capacity as
such, which litigation, proceeding or investigation may have any substantial
chance of recovery where such recovery would likely have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, nor, to the
knowledge of the Company and the Principal Shareholders, has there occurred any
event or does there exist any condition on the basis of which any litigation,
proceeding or investigation might properly be instituted with any substantial
chance of recovery where such recovery would likely have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. Neither the
Company nor any Subsidiary, nor any officer, employee, or shareholder of the
Company or any Subsidiary in his capacity as such is, to the knowledge of the
Company and the Principal Shareholders, in default with respect to any order,
writ, injunction, decree, ruling or decision of any court, commission, board or
other government agency which may materially and adversely affect the business
or assets of the Company and its Subsidiaries, taken as a whole.
2.9 Compliance with Laws and Other Instruments. The Company and
its Subsidiaries are in compliance with all of the provisions of this Agreement
and of its charter and by-laws and the agreements set forth in Schedule 2.13
hereto and to the knowledge of the Company and the Principal Shareholders is in
compliance, in all material respects, with the provisions of each other
mortgage, indenture, lease, license, other agreement or instrument, judgment,
decree, judicial order, statute, law, and/or regulation by which any of them is
bound or to which any of them or any of their respective properties are subject.
Neither the execution, delivery or performance of this Agreement and the Related
Agreements, nor the offer, issuance, sale or delivery of the Purchased Shares,
or the Conversion Shares upon conversion of the Purchased Shares, or the
transactions contemplated hereby (including the use of the proceeds in the
manner contemplated by Section 3.8), with or without the giving of notice or
passage of time, or both, will violate, or result in any breach of, or
constitute a default under, or result in the imposition of any encumbrance upon
any asset of the Company or any Subsidiary pursuant to any provision of the
Company's or such Subsidiary's charter or by-laws, or any statute, rule or
regulation, material contract, judgment, decree or, to the
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<PAGE> 11
knowledge of the Company and its Principal Shareholders, other document or
instrument by which the Company or any Subsidiary is bound or to which the
Company or any Subsidiary or any of their respective Properties are subject.
2.10 Taxes. The Company and each of its Subsidiaries has filed all
tax returns (including statements of estimated taxes owed) required to be filed
within the applicable periods for such filings and has paid all taxes required
to be paid, and has established adequate reserves (net of estimated tax payments
already made) for the payment of all taxes payable in respect to the period
subsequent to the last periods covered by such returns. No deficiencies for any
tax in excess of $1,000 are currently assessed against the Company or any
Subsidiary, and no tax returns of the Company or any Subsidiary have ever been
audited, and, to the knowledge of the Company and the Principal Shareholders,
there is no such audit pending or contemplated. There is no tax lien, whether
imposed by any federal, state or local taxing authority, outstanding against the
assets, properties or business of the Company. For the purposes of this
Agreement, the term "tax" shall include all federal, state and local taxes,
including income, franchise, property, sales, withholding, payroll and
employment taxes.
2.11 Property. (a) Schedule 2.11(a)(i) hereto sets forth the
addresses of all real property that the Company or any Subsidiary owns, leases
or subleases, and any material lien or encumbrance on any such owned real
property or the Company's or Subsidiary's leasehold interest therein. Except as
set forth on Schedule 2.11(a)(ii) hereto, the Company or its Subsidiary, as the
case may be, has good and marketable title to, and owns free and clear of all
liens and encumbrances, all real and personal, tangible and intangible property
shown as owned by the Company or any Subsidiary on the Financial Statements
except for such property as sold in the ordinary course of business. Except as
set forth on Schedule 2.11(a)(iii) hereto, there are no defaults by the Company
or any Subsidiary or, to the knowledge of the Company and the Principal
Shareholders, by any other party thereto, which might curtail in any material
respect the present use of the Company's and such Subsidiary's real and
personal, tangible and intangible property. The performance by the Company of
this Agreement and the Related Agreements will not result in the termination of,
or in any increase of any amounts payable under, any lease listed on Schedule
2.11 hereto.
(b) Set forth on Schedule 2.11(b) hereto is a list and brief
description of all material patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications
trade names and copyrights, and all applications for such that are in the
process of being prepared, owned by or registered in the name of the Company or
any Subsidiary, or of which the Company or any Subsidiary is a licensor
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<PAGE> 12
or licensee or in which the Company or any Subsidiary has any right
(collectively, the "Intellectual Property"). The Company and its Subsidiaries
own or possess adequate licenses or other rights to use all Intellectual
Property necessary or desirable to the conduct of their businesses as conducted
and as proposed to be conducted, and has taken all actions reasonably necessary
to protect the Intellectual Property and no claim is pending or, to the
knowledge of the Company and the Principal Shareholders, threatened to the
effect that the operations of the Company infringe upon or conflict with the
asserted rights of any other person under any Intellectual Property, which
claim, if successfully asserted, could have a material adverse effect on the
business of the Company or its Subsidiaries.
2.12 Governmental and Industrial Approvals. The Company and
each of its Subsidiaries has all the material permits, licenses, orders,
franchises and other rights and privileges of all federal, state, local or
foreign governmental or regulatory bodies necessary for the Company and such
Subsidiaries to conduct their respective businesses, the absence of which would
have a material adverse effect on the Company or its Subsidiaries. None of such
permits, licenses, orders, franchises or other rights and privileges will be
affected by the consummation of the transactions contemplated in this Agreement
and the Related Agreements.
2.13 Contracts and Commitments. Except as set forth on
Schedule 2.13 hereto, neither the Company nor any Subsidiary has any contract,
obligation or commitment which is material or which involves a potential
material commitment or any stock redemption or stock purchase agreement,
financing agreement, management agreement, services agreement, license, lease,
or stock option plan. For purposes of this Section 2.13, a contract, obligation
or commitment shall be deemed material if it requires future expenditures by the
Company or any Subsidiary in excess of $10,000 or might result in payments to
the Company or any Subsidiary in excess of $10,000. To the knowledge of the
Company and the Principal Shareholders, the Company and its Subsidiaries and
each other party to such agreement have performed all the obligations required
to be performed by them to date, have received no notice of default and are not
in default (with due notice or lapse of time or both) under the contracts,
obligations and commitments listed on Schedule 2.13 hereto which would have a
material adverse effect on the Company or its Subsidiaries, and such contracts,
obligations and commitments are in full force and effect on the date hereof.
2.14 Securities Act. The Company has complied and will comply
with all applicable federal or state securities laws in connection with the
issuance and sale of the Purchased Shares and the issuance of the Conversion
Shares upon conversion of the Purchased Shares. Neither the Company nor anyone
acting on its behalf has offered any of the Purchased Shares, or similar
securities, or solicited any offers to purchase any of such
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<PAGE> 13
securities, so as to bring the issuance and sale of the Purchased Shares under
the registration provisions of the Securities Act. The Company has not granted
any rights relating to registration of its capital stock under the Securities
Act or state securities laws other than those contained in this Agreement.
2.15 Insurance Coverage. Schedule 2.15 hereto contains an accurate
summary of the insurance policies currently maintained by the Company and its
Subsidiaries. Except as described on Schedule 2.15, there are currently no
material claims pending against the Company or any Subsidiary under any
insurance policies currently in effect and covering the property, business or
employees of the Company and its Subsidiaries, and all premiums due and payable
with respect to the policies maintained by the Company and its Subsidiaries has
been paid to date.
2.16 Employee Matters. Except as set forth on Schedule 2.16 hereto,
neither the Company nor any Subsidiary has in effect any employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. Schedule 2.16 hereto
sets forth a true and complete list of the compensation paid to the Company's
three highest compensated employees for the two years ended July 31, 1994 and
1995. The Company and the Principal Shareholders have no knowledge that any of
the officers or other key employees of the Company or any Subsidiary presently
intends to terminate his employment. The Company and its Subsidiaries are in
compliance in all material respects with all applicable laws and regulations
relating to labor, employment, fair employment practices, terms and conditions
of employment, and wages and hours. The Company and each Subsidiary is in
material compliance with the terms of all plans, programs and agreements listed
on Schedule 2.16, and each such plan, program or agreement is in compliance with
all of the requirements and provisions of the Employee Retirement Income
Security Securities Act of 1974, as amended ("ERISA"). No such plan or program
has engaged in any "prohibited transaction" as defined in Section 4975 of the
Internal Revenue Code of 1986 (the "Code"), or has incurred any "accumulated
funding deficiency" as defined in Section 302 of ERISA, nor has any reportable
event as defined in Section 4043(b) of ERISA occurred with respect to any such
plan or program. Neither the Company nor any Subsidiary has or has maintained
any group health plan subject to Section 4980B of the Code or Section 162(i) or
(k) of the Code as amended by the Consolidated Omnibus Budget Reconciliation
Securities Act of 1985, as amended by the Technical and Miscellaneous Revenue
Securities Act of 1988. With respect to each plan listed on Schedule 2.16
hereto, to the knowledge of the Company and its Principal Shareholders all
required filings, including all filings required to be made with the United
States Department of Labor and Internal Revenue Service, have been timely filed.
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<PAGE> 14
2.17 No Brokers or Finders. No person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or any of its Subsidiaries for any commission, fee
or other compensation as a finder or broker because of any act or omission by
the Company or and of its Subsidiaries.
2.18 Transactions with Affiliates. Except as set forth on Schedule 2.18
hereto, there are no loans, leases or other continuing transactions between the
Company or any Subsidiary on the one hand, and any officer or director of the
Company or any Subsidiary or any person owning five percent (5%) or more of the
Common Stock of the Company or any respective family member or affiliate of such
officer, director or shareholder on the other hand.
2.19 Assumptions. Guarantees etc. of Indebtedness of Other Persons.
Neither the Company nor any Subsidiary has assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on or for any indebtedness of
any other Person, except guarantees by endorsement of negotiable instruments For
deposit or collection or similar transactions in the ordinary course of
business.
2.20 Restrictions on Subsidiaries. There are no restrictions on the
Company or any of its Subsidiaries which prohibit or otherwise restrict the
transfer of cash or other assets between the Company and any of its Subsidiaries
or between any Subsidiaries of the Company.
2.21 Disclosures. Neither this Agreement, any schedule or exhibit to this
Agreement, the Related Agreements, the Financial Statements, nor any other
agreement, document or written statement made by the Company or the Principal
Shareholders and furnished by the Company or the Principal Shareholders to the
Purchaser or the Purchaser's special counsel in connection with the transactions
contemplated hereby, contains any untrue statement of material fact or omits to
state any material fact necessary to make the statements contained herein or
therein not materially misleading. There is no material fact known to the
Company or the Principal Shareholders that has not been disclosed herein or in
any other material agreement, document or written statement furnished by the
Company or any of its Subsidiaries to the Purchaser or its special counsel in
connection with the transactions contemplated hereby which materially adversely
affects the business, properties, assets or financial condition of the Company
or any of its Subsidiaries.
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<PAGE> 15
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the date hereof and until the consummation of the first Qualified Public
Offering:
3.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied and the Company
will, and will cause each of its Subsidiaries to, keep full and complete
financial records. The Company will furnish to the Purchaser the information set
forth in this Section 3.1.
(a) Within ninety (90) days after the end of each fiscal year, a
copy of the consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and duly certified by a "big six" independent public
accountant of national recognition selected by the Board of Directors of the
Company.
(b) Within thirty (30) days after the end of each calendar month,
a preliminary consolidated and consolidating balance sheet of the Company and
its Subsidiaries as of the end of such month and preliminary consolidated and
consolidating statements of income, shareholders, equity and cash flow for such
month and for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail.
(c) Prior to the end of each fiscal year, a copy of the operating
plan and budget for the next fiscal year required under Section 3.7, in form
consistent with good business practice.
(d) Promptly upon receipt thereof, any written report, so called
"management letter", and any other communication submitted to the Company or
any Subsidiary by its independent public accountants relating to the business,
prospects or financial condition of the Company and its Subsidiaries.
(e) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instru-
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<PAGE> 16
mentality, domestic or foreign, affecting the Company (or any Subsidiary) which,
if successful, could have a material adverse effect on the Company and its
Subsidiaries, taken as a whole; (ii) all material defaults by the Company or any
Subsidiary (whether or not declared) under any agreement for money borrowed; and
(iii) any action, event or circumstance that is reasonably likely to have a
material adverse effect on the Company or any Subsidiary, taken as a whole.
(f) Promptly upon sending, making available, or filing the same,
all reports and financial statements as the Company (or any Subsidiary) shall
send or make available generally to the shareholders of the company as such or
to the commission.
(g) Such other information with regard to the business, properties
or the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as the Purchaser may from time to time reasonably request.
3.2 Payment of Taxes. The Company will pay and discharge (and cause any
Subsidiary to pay and discharge) all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto.
3.3 Maintenance of Key Man Insurance. The Company will, at its expense,
within sixty (60) days of the Closing Date maintain a life insurance policy with
a responsible and reputable insurance-company payable to the Company on the life
of each of Nick Molina and Brett Beveridge, each in the face amount of $2
million. The Company will maintain such policies and will not cause or permit
any assignment of the proceeds of such policies and will not borrow against such
policies. The Company will add one designee of the Purchaser as a notice party
to such policies, and will request that the issuer of such policies provide such
designee with ten (10) days, notice before either of such policy is terminated
(for failure to pay premium or otherwise) or assigned, or before any change is
made in the designation of the beneficiary thereof.
3.4 Compliance with Laws, etc. The Company will comply (and cause each
of its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which could
materially adversely affect the
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business or condition, financial or otherwise, of the Company and its
Subsidiaries, taken as a whole.
3.5 Inspection. At any reasonable time during normal business hours and
from time to time upon five (5) days written notice, the Company (and each of
its Subsidiaries) will permit the Purchaser who then owns, of record or
beneficially, or has the right to acquire, at least twenty-five percent (25%) of
the Conversion Shares, or any transferee of a Purchaser who owns, of record or
Beneficially, or has the right to acquire, at least five percent (at) of the
then outstanding Common Stock, or any of the agents or representatives of the
foregoing Persons, to examine and make copies of and extracts from the records
and books of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its officers or directors. If the Purchaser or its transferee or any of
their agents or representatives exercise their inspection rights under this
Section 3.5, then such Person shall agree to execute an acceptable
confidentiality agreement with the Company or its Subsidiaries regarding the
matters or materials to Le reviewed pursuant to such inspection.
3.6 Corporate Existence: Ownership of Subsidiaries. The Company will,
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company and its Subsidiaries, taken as a whole.
3.7 Board Of Directors. Prior to the end of each fiscal year, the
Company will prepare and submit to its Board of Directors for its approval prior
to such year end an operating plan and budget, cash flow projections and profit
and loss projections, all itemized in reasonable month by month detail for the
immediately following year. The budget shall be in form and substance
satisfactory to a majority of the Board of Directors. The Directors shall
schedule regular meetings not less frequently than once every sixty days.
3.8 Use of Proceeds. The Company shall use the proceeds from the sale
of the Purchased Shares in the manner and for the purposes set forth in Schedule
3.8 hereto and for no other manner or purpose.
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ARTIVLE IV
NEGATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and divisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) with each of the provisions of this Article IV on and after the date
hereof and until the consummation of the first Qualified Public Offering;
provided, however, that the provisions of Section 4.2 shall continue in force
only so long as there are Purchased Shares outstanding.
4.1 Investments in Other Persons. The Company will not make or permit
any Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock, assets comprising the business of, obligations of, or any interest in,
any Person, except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America
and having a maturity of not more than one year from the date of
acquisition;
(ii) investments by the Company or a Subsidiary in certificates of
deposit, notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by (A) a bank
organized in the United States having capital, surplus and undivided
profits of at least $250,000,000 or (B) Republic National Bank;
(iii) loans or advances from a Subsidiary to the Company or from a
Subsidiary to another Subsidiary;
(iv) investments by the Company or a Subsidiary in A-rated or
better commercial paper having a maturity of not more than one year from
the date of acquisition;
(v) investments by the Company or a Subsidiary in "money market"
fund shares, or in "money market" accounts fully insured by the Federal
Deposit Insurance Corporation and sponsored by banks and other financial
institutions, provided that such Money market fund or "money market"
accounts invest principally in investments of the types described in
clauses (i), (ii) or (iv) of this subsection 4.1; and
(vi) loans to employees in the aggregate amount of up to $7,500 for
any individual employee and up to $50,000 to all employees at any one
time.
4.2 Distributions. The Company will not declare or pay any dividends,
purchase, redeem, retire, or otherwise acquire for value
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any of its capital stock (or rights, options or warrants to purchase such
shares) now or hereafter outstanding, return any capital to its shareholders as
such, or make any distribution of assets to its shareholders as such, or permit
any Subsidiary to do any of the foregoing, except that the Subsidiaries may
declare and make payment of cash and stock dividends, return capital and make
distributions of assets to the Company and except that nothing herein contained
shall prevent the Company from: (i) effecting a stock split or declaring or
paying any dividend consisting of shares of any class of capital stock to the
holders of shares of such class of capital stock; (ii) complying with any
specific provision of the terms of the Preferred Stock as contained in Exhibit A
hereto relating to the payment of dividends, liquidation preferences or
redemption payments on or with respect to the Preferred Stock or redemption of
the Preferred Stock; or (iii) repurchasing the Purchased Shares or shares of
Common Stock from the Purchaser in accordance with the Redemption Agreement
attached as Exhibit C hereto.
4.3 Dealings with Affiliates. Except for the Consulting Agreement with
HIG Capital Management, Inc., the Company will not enter into (or permit any
Subsidiary to enter into) any transaction including, without limitation, any
loans or extensions of credit or royalty or services agreements with any officer
or director of the Company or any Subsidiary or holder of any class of capital
stock of the Company, or any member of their respective immediate families or
any corporation or other entity directly or indirectly controlled by one or more
of such officers, directors or shareholders or members of their immediate
families.
4.4 Merger. The Company shall not, and shall not permit any Subsidiary
to, merge or consolidate with any other corporation, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) all, or substantially all, of its
assets (whether now owned or hereinafter acquired) or sell, assign or otherwise
dispose of (whether in one transaction or in a series of transactions) any of
its accounts receivable (whether now in existence or hereinafter created) at a
discount or with recourse, to any Person, or permit any Subsidiary to do any of
the foregoing, (i) except for sales or other dispositions of assets in the
ordinary course of business, and (ii) except that (a) any wholly owned
Subsidiary may merge into or consolidate with or transfer assets to any other
wholly owned Subsidiary and (b) any wholly owned Subsidiary may merge into or
transfer assets to the Company.
4.5 Option Shares. The Company will not issue shares of its capital
stock and will not grant any options, rights or warrants to acquire its capital
stock to employees and directors of, and consultants to, the Company and its
Subsidiaries, except that not more than 50,000 shares of Common Stock, which
number includes options previously granted, may be issued to employees of
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the Company (other than the Principal Shareholders), which options granted after
the date hereof have an exercise price per share that is not less than the
greater of (a) fair market value of the Common Stock on the date of grant and
(b) the purchase price for the Purchased Shares. Each grant of stock options
shall be approved by the Compensation Committee of the Company's Board of
Directors established pursuant to the Shareholders' Agreement.
4.6 Indebtedness. The Company shall not (a) be liable for Indebtedness
in excess of the amounts set forth on Schedule 4.6 hereto at any time, (b) issue
additional capital stock, in each case, without the prior written consent of the
Purchaser and (c) repay or prepay any Indebtedness owed the Principal
shareholders except as set forth in Exhibit hereto.
4.7 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions. The Company shall not permit any of its Subsidiaries, directly or
indirectly, to create or suffer to exist or become effective any encumbrances or
restrictions on the ability of any of its Subsidiaries to (i) pay dividends or
make any other distributions on its capital stock or any other interest or
participation in its profit owned by any of the Company or any of its
Subsidiaries, or pay any indebtedness owed by any of the Subsidiaries, (ii) make
loans or advances to the Company, or (iii) transfer any of its properties or
assets to the Company.
4.8 No Conflicting Agreements. The Company agrees that neither it nor
any Subsidiary will, without the consent of the Purchaser, enter into or amend
any agreement, contract, commitment or understanding which would restrict or
prohibit the exercise by the Purchaser of any of their rights under this
Agreement or any of the Related Agreements.
4.9 Compensation; Consulting and Other Agreements. The Company shall not
pay to its management or consultants compensation in excess of that compensation
determined by the Compensation Committee of the Board of Directors established
pursuant to the Shareholders' Agreement.
4.10 Fundamental Changes. Without the consent of a majority of its Board
of Directors, the Company shall not (a) engage in any businesses other than the
businesses in which it is presently engaged or currently proposes to engage in
(including without limitation the business contemplated by the Kiosk Staffing
Agreement by and between Cellular Telephone Company and LTC Kiosk Corporation),
(b) sell, distribute, lease, manufacture or otherwise engage in the business of
new forms of wireless communications systems (including personal communications
systems) and (c) change cellular carriers within an existing geographic area
from the cellular carrier it is using as of the date of this Agreement in such
area Without the prior written consent of the Purchaser, the Company shall not
engage in any other business other than the sale
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<PAGE> 21
and display of retail of communication devices and equipment including but not
limited to all types of cellular and mobile telephones, personal communicators,
long and short range cordless telephones, beepers and other types of paging
devices, radar detectors, facsimile machines, video and novelty telephones, any
device that transmits, receives or stores any type of data and any other types
of electronic devices and accessories related to all such devices and equipment;
provided, that any retail store may sell any other electric devices and
equipment so long as the sales of such other electric devices and equipment do
not exceed ten percent (10%) of such store's gross sales.
4.11 Capital Expenditures. The Company shall not make capital
expenditures in excess of the amounts set forth on Schedule 4.11 hereto without
the prior written consent of the Purchaser.
ARTICLE V
PREEMPTIVE RIGHT
5.1 Right of Purchase. The Company hereby grants to the Purchaser so
long as it shall own, of record or beneficially, or have the right to acquire,
any Purchased Shares, Conversion Shares or Common Stock, the right to purchase
all or part of its pro rata share of New Securities (as defined in Section 5.2)
which the Company, from time to time, proposes to sell and issue. A Purchaser's
pro rata share, for purposes of this preemptive right, is the ratio of the
number of Purchased Shares, Conversion Shares and shares of Common Stock which
such Purchaser owns or has the right to acquire to the total number of Purchased
Shares, Conversion Shares and shares of Common Stock then outstanding.
5.2 Definition of New Securities. "New Securities" shall mean any
capital stock of the Company whether now authorized or not, and rights, options
or warrants to purchase capital stock, and securities of any type whatsoever
that are, or may become convertible into or exchangeable for capital stock,
issued on or after the date hereof; provided that the term "New Securities" does
not include (I) securities purchased under this Agreement or Conversion Shares
issued upon conversion of the Purchased Shares, (ii) Common Stock issued as a
stock dividend to holders of Common Stock or upon any stock split, subdivision
or combination of shares of Common Stock, (iii) Preferred Stock issued as a
dividend to holders of Preferred Stock or upon any stock split, subdivision or
combination of Preferred Stock, (iv) the aggregate number of shares of Common
Stock issued upon exercise of options permitted under Section 4.5 hereof, and
(v) Common Stock issued to a new chief executive officer or President selected
by the Board of Directors and approved by the holders of a majority of the
Preferred Shares.
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5.3 Notice from the Company. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the Purchaser written
notice of its intention, describing the type of New Securities and the price and
the terms upon which the Company proposes to issue the same. The Purchaser shall
have twenty (20) business days from the date of receipt of any such notice to
agree to purchase up to the Purchaser's pro rata share of such New Securities
for the price and upon the terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
5.4 Sale by the Company. In the event the Purchaser fails to exercise in
full its preemptive right, the Company shall have sixty (60) days thereafter to
sell the New Securities with respect to which and to the extent the Purchaser's
option was not exercised at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice. To the extent the
Company does not sell all the New Securities offered within said 60 day period,
the Company shall not thereafter issue or sell such New Securities without first
again offering such securities to the Purchaser in the manner provided above.
5.5 Termination of Rights. The rights granted to the Purchaser under
this Article V shall expire immediately prior to, and shall not apply in
connection with, the consummation of the first Qualified Public Offering.
ARTICLE VI
PURCHASER'S REPRESENTATIONS
6.1 Representations and Warranties. The Purchaser has all necessary
corporate power and has taken all necessary corporate action required for the
due authorization, execution, delivery and performance by the Purchaser of this
Agreement and the Related Agreements, and any other agreements or instruments
executed by the Purchaser in connection herewith or therewith and the
consummation of the transactions contemplated herein or therein. The Purchaser
hereby represents and warrants to the Company that, assuming due execution and
delivery by the Company of the Agreement and the Related Agreements, this
Agreement and the Related Agreements to which the Purchaser is a party
constitute legal, valid and binding obligations of the Purchaser, enforceable
against such Purchaser in accordance with their respective terms; the Purchaser
has been advised and understands that the Purchased Shares have not been
registered under the Securities Act, on the grounds that no distribution or
public offering of the Purchased Shares is to be effected, and that in this
connection, the Company is relying in part on the representations of the
Purchaser set forth in this Article VI; the Purchaser has been further advised
and understands that no public market now exists for any of the securities
issued
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<PAGE> 23
by the Company and that a public market may never exist for the Purchased Shares
or Conversion Shares; the Purchaser is purchasing the Purchased Shares for
investment purposes, for its own account and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof; and by reason of its business or
financial experience, the Purchaser has the capacity to protect its own interest
in connection with the transactions contemplated hereunder.
6.2 Permitted Sales; Legends. Notwithstanding the foregoing
representations, the Company agrees that it will permit a distribution of
Purchased Shares or Conversion Shares by the Purchaser to one or more of its
affiliates and Qualified Institutional Buyers, as defined in Rule 144A of the
Securities Act, if (i) the transfer is in accordance with the Shareholders
Agreement, (ii) the transferee agrees in writing to be subject to the terms
hereof and the Shareholders Agreement to the same extent as if it were an
original Purchaser hereunder and (iii) a sale or other transfer of any of the
Purchased Shares or Conversion Shares upon obtaining an opinion of counsel
satisfactory to the Company that such transaction is exempt from the
registration requirements of, or is covered by an effective registration
statement under, the Securities Act and applicable state securities or
"blue-sky" laws.
6.3 Current Shareholder Guaranties. HIG Fund V, Inc., so long as it is a
holder of Purchased Shares, shall use all reasonable efforts (other than the
extension of money or credit accommodations) to assist the Principal
Shareholders in removing themselves as guarantors of the Company's outstanding
indebtedness and leases; provided, however, that nothing in this Section 6.3
shall result in any liability to HIG Fund V, Inc. in the event the Principal
Shareholders are unable to remove themselves as sureties for the Company's
obligations.
ARTICLE VII
REGISTRATION RIGHTS
7.1 Certain Definitions. As used in this Article VII, the following
terms shall have the following respective meanings:
"Holder" means the person who is then the record owner of Registrable
Securities, which have not been sold to the public.
"Initiating Holders" means any Purchaser or its assignee who in the
aggregate are holders of at least twenty-five percent (25%) of the Registrable
Securities.
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<PAGE> 24
"Registrable Securities" means (i) all of the Conversion Shares owned by
the Purchaser, (ii) all other shares of Common Stock now owned or hereafter
acquired by the Purchaser; (iii) all shares of Common Stock issuable with
respect to securities of the Company convertible into or exercisable for shares
of Common Stock now owned or hereafter acquired by the Purchaser; and (iv) any
Common Stock issued in respect of the shares described in clauses (i) through
(iii) upon any stock split, stock dividend, recapitalization other similar
event.
The term "registers" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public sale of
securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 7.2, 7.3 or 7.5 hereof, including, without limitation,
all registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders and other
security holders, and the expense of any special audits incident to or required
by any such registration.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
7.2 Requested Registrations.
(a) If after the earlier of (i) the fourth anniversary of the date
hereof and (ii) the consummation of a public offering by the Company, the
Company shall receive from one or more Initial Holders a written request that
the Company effect the registration of Registrable Securities representing at
least twenty five percent (25%) of the Registrable Securities then outstanding
or issuable and the reasonably anticipated aggregate price to the public of the
Registrable Securities to be included in such registration would exceed $5
million, in connection with a firm commitment underwriting financed by a
nationally recognized underwriter, the Company shall:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration as may be so requested and as would permit or facilitate the
sale and distribution of such portion of such Registrable Securities as
are specified in such request, together with such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request given within thirty (30) days after
receipt of such written notice from the Company. If
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<PAGE> 25
the underwriter managing the offering advises the Holders who have
requested inclusion of their Registrable Securities in such registration
that marketing considerations require a limitation on the number of shares
offered, such limitation shall be imposed pro rata among such Holders who
requested inclusion of Registrable Securities in such registration
according to the number of Registrable Securities each such Holder
requested to be included in such registration. Neither the Company nor any
other shareholder may include shares in a registration effected under this
Section 7.2 without the consent of the Holders holding a majority of the
Registrable Securities sought to be included in such registration if the
inclusion of shares by the Company or the other shareholders would limit
the number of Registrable Securities sought to be included by the Holders
or reduce the offering price thereof. No registration initiated by
Initiating Holders hereunder shall count as a registration under this
Section 7.2 unless and until it shall have been declared effective.
(iii) the Holders of the Purchased Shares and the Conversion Shares
shall have the right to demand registration twice under this Section
7.2(a).
(b) Selection of Underwriter. The underwriter of any underwriting
requested under this Section 7.2 shall be selected by the Holders holding a
majority of the Registrable Securities included therein; provided that such
underwriter must be acceptable to the Company.
7.3 "Piggy Back" Registrations.
(a) If the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their registration rights, other than a registration relating
solely to employee benefit plans, or a registration on any registration form
which does not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company shall:
(i) Promptly give to each Holder of Registrable Securities written
notice thereof (which shall include the number of shares the Company or
other security holder proposes to register and, if known, the name of the
proposed underwriter); and
(ii) Use its best efforts to include in such
registration all the Registrable Securities specified in a written request
or requests, made by any Holder within ten (10) days after the date of
delivery of the written notice from the Company described in clause (I)
above. If the
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<PAGE> 26
underwriter advises the Company that marketing considerations require a
limitation on the number of shares offered pursuant. to any registration
statement, then the Company may offer all of the Securities it proposes to
register for its own account or the maximum amount that the underwriter
considers saleable and such limitation on any remaining securities that
may, in the opinion of the underwriter, be sold will be imposed pro rata
among all Shareholders who are entitled to include shares in such
Registration Statement according to the number of Registrable Securities
each such shareholder requested to be included In such registration
statement.
(b) The Company shall select the underwriter for an offering made
pursuant to this Section 7.3.
7.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 7.2, 7.3 or 7.5 shall be paid by the Company. All Selling Expenses
incurred in connection with any such registration, qualification or compliance
shall be borne by the holders of the securities registered, pro rata on the
basis of the number of their shares so registered.
7.5 Registration on Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Securities Exchange Act of 1934 (the "Exchange Act)
in Accordance with the provisions of the Exchange Act following the effective
date of the first registration of any securities of the Company on Form S-1 or
any comparable or successor form. After the Company has qualified for the use of
Form S-3, in addition to the rights contained in the foregoing provisions of
this Article VII, the Holders of Registrable Securities shall have the right to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders);
provided that in no event shall the Company be required to register shares with
an aggregate market value of less than $500,000.
7.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Article VII, the Company shall keep each Holder
of Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company shall do the following for the benefit of such Holders:
(a) Use its best efforts to keep such registration effective for a
period of one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first
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occurs, and amend or supplement such registration statement and the prospectus
contained therein from time to time to the extent necessary to comply with the
Securities Act and applicable state securities laws;
(b) Use its best efforts to register or qualify the Registrable
Securities covered by such registration under the applicable securities or "blue
sky" laws of such jurisdictions as the selling shareholders may reasonably
request; provided, that the Company shall not be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or otherwise
required to be so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of such registration;
(c) Furnish such Number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 7.2 hereof, the Company shall
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the Holders and
provided further that, if the underwriter so requests, the underwriting
agreement shall contain customary indemnification and contribution provisions on
the part of the Company;
(e) To the extent then permitted under applicable professional
guidelines and standards, obtain a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's counsel
in customary form and covering such matters of the type customarily covered in a
public issuance of securities, in each case addressed to the Holders, and
provide copies thereof to the Holders; and
(f) Permit the counsel to the selling shareholders to inspect and
copy such corporate documents as he may reasonably request.
7.7 Indemnification.
(a) The Company shall, and hereby does, indemnify each Holder,
each of its officers and stockholders, and each person controlling such Holder
within the meaning of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Article VII, and
each underwriter, if any, and each person who controls such underwriter within
the meaning of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
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based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or: other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein of
necessary to make the statements therein not misleading, or an, violation by the
Company of the Securities Act or the Exchange Act or the securities act of any
state or any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and shall reimburse each such
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, whether or not resulting in any liability, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
based upon written information furnished to the Company by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder shall, if Registrable Securities held by him are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each other such Holder and each of their officers,
directors and partners, and each person controlling such Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holder's directors, officers, partners, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
whether or not resulting in liability, in each case to the extent, but only to
the extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in Conformity with
written information furnished to the Company by such Holder and stated to be
specifically for use therein;
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provided, however, that the obligations of each Holder hereunder shall be
limited to an amount equal to the net proceeds received by such Holder upon sale
of his securities.
(c) Each party entitled to indemnification under this Section 7.7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought, but
the failure of any Indemnifying Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 7.7 (except and to the
extent the Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party shall be entitled to participate in, and to extent that it
may elect by written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its expense to
assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Party, provided that
the Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying Party, and
provided, further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or Parties and the fees and expenses of such counsel shall be
paid by the Indemnifying Party. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall (i) furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom and
(ii) shall reasonably assist the Indemnifying Party in any such defense,
provided that the Indemnified Party shall not be required to expend its funds in
connection with such assistance.
(d) No Holder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under Section 7.2 or 7.3 which imposes
indemnification or contribution obligations on such Holder more onerous than
those imposed hereunder; provided, however, that the Company shall not be deemed
to breach the provisions of Section 7.2 or 7.3 if a Holder
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<PAGE> 30
is not permitted to participate in a registration on account of his refusal to
execute an underwriting agreement on the basis of this subsection (d).
7.8 Limitations on Registration Rights. From and after the date of
this Agreement, the Company shall not enter into any agreement with any holder
or prospective holder of any securities of the Company giving such holder or
prospective holder (a) the right to require the Company, upon any registration
of any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder, unless under the terms of
such agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of its securities
will not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities or reduce the offering price thereof; or (b)
the right to require the Company to initiate any registration of any securities
of the Company.
7.9 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of restricted securities (as that term is used in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to use
its best efforts to:
(a) make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as a Purchaser owns any restricted securities,
furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Purchaser may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Purchaser to sell any such
securities without registration.
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<PAGE> 31
7.10 Listing Application. If shares of any class of stock of the Company
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Purchaser.
7.11 Damages. The Company recognizes and agrees that the holder of
Registrable Shares shall not have an adequate remedy if the Company fails to
comply with the provisions of this Article VII, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Shares shall be entitled to seek specific
performance of the Company's obligations hereunder and that the Company will not
oppose an application seeking such specific performance.
ARTICLE VIII
CONDITIONS OF THE PURCHASER'S OBLIGATION
8.1 Effect of Conditions. The obligation of the Purchaser to purchase
and pay for the Purchased Shares at the Closing shall be subject to the
satisfaction of each of the conditions stated in the following Sections of this
Article.
8.2 Representations and Warranties. The representations and warranties
of the Company and the Principal Shareholders Contained in this Agreement shall
be true and correct on the date of the Closing, and the Purchaser shall have
received a certificate dated as of such Closing and signed on behalf of the
Company and the Principal Shareholders to that effect.
8.3 Performance. The Company and the Principal Shareholders shall have
performed and complied with all of the agreements, covenants and conditions
contained in this Agreement required to be performed or complied with by it and
him at or prior to the Closing, and the Purchaser shall have received a
certificate dated as of such Closing and signed on behalf of the Company and by
the Principal Shareholders to that effect.
8.4 Board Election. Concurrently with the Closing, the Board of
Directors of the Company shall have been expanded to comply with the provisions
of the Shareholders' Agreement.
8.5 Certified Documents. etc. Counsel for the Purchaser shall have
received a copy of the Company's Articles of Incorporation, as amended,
certified by the Secretary of State of the State of Florida and copies of the
Company's By-Laws certified by its Secretary, as well as any and all other
documents, including certificates as to votes adopted and incumbency of officers
and certificates from appropriate authorities as to the legal existence
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<PAGE> 32
and tax good standing of the Company and its Subsidiaries, which the Purchaser
or its counsel may reasonably request.
8.6 Amendment to Articles of Incorporation. The Articles of
Incorporation of the Company shall have been amended to provide for the
authorization of the Preferred Stock with the terms set forth in Exhibit A
hereto.
8.7 Shareholders' Agreement. A Shareholders' Agreement in the form of
Exhibit B attached hereto shall have been executed by he Company and the
shareholders named therein.
8.8 Redemption Agreement. A Redemption Agreement in the form of Exhibit
C attached hereto shall have been executed by the Company.
8.9 Opinion of Counsel. The Purchaser shall have received an opinion,
dated the date of the Closing, from Steel, Hector & Davis, counsel to the
Company, substantially in the form attached as Exhibit D hereto.
8.10 Employment Agreements. The Principal Shareholders shall have
executed an Employment Agreement in the form of Exhibit E hereto.
8.11 Consulting Agreement. A Consulting Agreement in the form of Exhibit
F attached hereto shall have been executed by the Company.
8.12 Shareholder Indebtedness. The Company and the Principal Shareholders
shall have amended and restated all of the Company's indebtedness to the
Principal Shareholders on the terms and the conditions as set forth in the form
of promissory note attached as Exhibit G hereto.
8.13 Side Letters. Mr. Sorenson and Ms. Gozlan, Republic National Bank
and AT&T shall have executed their respective side letters as set forth in
Exhibit H hereto.
ARTICLE IX
CONDITIONS OF THE COMPANY'S OBLIGATION
The obligations of the Company under this Agreement are subject to the
fulfillment, or the waiver, of the following conditions on or before the
Closing:
(a) The representations and warranties of the Purchaser contained in
Article VI shall be true and correct on and as of the date of Closing with the
same effect as though such representations and warranties had been made on and
as of that date.
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<PAGE> 33
(b) The Purchaser shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by the Purchaser prior to or at the Closing.
ARTICLE X
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Agreement" means this Series A Preferred Stock Purchase Agreement as from
time to time amended and in effect between the parties.
"Applicable Conversion Value" shall mean the Applicable Conversion Value
of the Preferred Stock under Section 5(c) of Exhibit A.
"Closing" shall have the meaning set forth in Section 1.3.
"Commission" shall have the meaning set forth in Section 2.3.
"Common Stock" will include (a) the Company's Common Stock, par value
$1.00 per share, as authorized on the date of this Agreement, (b) any other
capital stock of any class or classes of the Company authorized on or after the
date hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and (c) any other securities of the Company into
which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Company" means and shall include Let's Talk Cellular of America, Inc., a
Florida corporation, and its successors and assigns.
"Conversion Shares" shall have the meaning set forth in Section 1.2.
"Escrow Accounts" shall mean the account established in the Custody of the
Escrow Agent pursuant to the Escrow Agreement.
"Escrow Agents" shall mean Greenberg, Traurig and its permitted successors
and assigns.
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<PAGE> 34
"Escrow Agreement" shall mean that certain escrow agreement by and among
the Company, the Purchaser and the Escrow Agent in the form of Exhibit H hereto.
"Holders" shall have the meaning set forth in Section 7.1.
"Indebtedness" means all obligations, contingent and otherwise, for
borrowed money which are required to be reflected an indebtedness on a balance
sheet prepared in accordance with generally accepted accounting principles
including, without limitation, any current portion of long-term indebtedness,
capitalized leases and all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
"Indemnified Party" shall have the meaning set forth in Section 7.7.
"Indemnifying Party" shall have the meaning set forth in Section 7.7.
"Initiating Holders" shall have the meaning set forth in Section 7.1.
"New Securities" shall have the meaning set forth in Section 5.2.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Preferred Stock" shall have the meaning set forth in Section 1.1
"Purchased Shares" shall have the meaning set forth in Section 1.1.
"Purchaser" shall have the meaning set forth in Section 1.1.
"Qualified Public Offerings" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Securities Act covering the offer and sale of Common Stock
for the account of the Company in which the aggregate net proceeds to the
Company equal at least $10,000,000 and in which the price per share of Common
Stock equals or exceeds one point seven five (1.75) times the then Applicable
Conversion Value of the Preferred Stock under Section 5(c) of Exhibit A.
"Registrable Securities" shall have the meaning set forth in Section 7.1.
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<PAGE> 35
"Registration Expense" shall have the meaning set forth in Section 7.1.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"Securities Acts" means the Securities Act of 1933, as amended.
"Selling Expenses" shall have the meaning set forth in Section 7.1.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries tan
herein defined) directly or indirectly owns at the time more than fifty percent
(50~) of the outstanding voting shares of every class of such corporation or
trust other than directors' qualifying shares.
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby for a period of six (6)
months from the date of Closing, or to the extent otherwise specifically set
forth herein.
11.2 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any of the Purchased Shares or Conversion Shares); provided, however, that
the Company may not assign interests hereunder without the consent of the
Purchaser.
11.3 Shares Owned by Affiliates. For the purpose. of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of a
Purchaser shall be deemed to be owned by such Purchaser. For the purpose of this
Agreement, the term "affiliate" shall mean any Person controlling, controlled by
or under common control with, a Purchaser.
11.4 Amendments and Waivers. Amendments or additions to this Agreement
may be made, agreements with any decision of the
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<PAGE> 36
Company may be made, and compliance with any term, covenant, agreement,
condition or provision net forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
upon the written consent of the company and the holders of a majority of the
issued and issuable conversion Shares. Prompt notice of any such amendment or
waiver shall be given to any Person who did not consent thereto. This Agreement
(including the schedules and exhibits annexed hereto, which are an integral part
of this Agreement) constitutes the full and complete agreement of the parties
with respect to the subject matter hereof.
11.5 Notices. All notices, requests, consents, reports and demands shall
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Purchaser at the
address net forth below or to such other address as may be furnished in writing
to the other parties hereto:
The Company: Let's Talk Cellular of America, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attention: Mr. Nick Molina
with copy to: Steel, Hector & Davis
200 South Biscayne Blvd.
Miami, Florida
Attention: Harvey Goldman, Esquire
The Purchaser: HIG Fund V, Inc.
c/o HIG Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Attn: Mr. Anthony Tamer
with copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Guentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Jorge L. Freeland, Esquire
11.6 Expenses. The Company will pay its own expenses and the legal fees
and legal expenses of the Purchaser in connection with the transactions
contemplated hereby.
11.7 Counterparts. This Agreement and any exhibit hereto may be executed
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument.
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<PAGE> 37
11.8 Effect of Headings. The article and section headings herein are for
convenience only and "hall not affect the construction hereof
11.9 Adjustments. All provisions of thin Agreement shall be automatically
adjusted to reflect any stock dividend, stock split or other such form of
recapitalization.
11.10 Governing Law. This Agreement shall be deemed a contract made under
the internal laws of the State of Florida and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such State.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
PRINCIPAL SHAREHOLDERS: Let's Talk Cellular of America,
Inc.
/s/ Nick Molina
- ------------------------------- /s/ Nick Molina
Nick Molina -------------------------------
By: Nick Molina
----------------------------
/s/ Brett Beveridge Name:
- ------------------------------- Title: President
Brett Beveridge
PURCHASER:
HIG Fund V, Inc.
/s/ Anthony Tamer
-------------------------------
By: Anthony Tamer
----------------------------
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<PAGE> 38
CONVERSION AGREEMENT, dated as of the 27th day of June, 1997, by and
between Let's Talk Cellular & Wireless, Inc., a Florida corporation f/k/a Let's
Talk Cellular of America Inc. ("LTC"), HIG Fund V, Inc., a Cayman Islands
corporation ("HIG"), and Texas Cellular Partners, L.P., a Delaware limited
partnership ("TCP").
WHEREAS, HIG currently owns 100,000 shares of Series A Preferred Stock of
LTC (the "Preferred Stock"), purchased pursuant to that certain Series A
Preferred Stock Purchase Agreement, dated as of June 25, 1996 (the "Purchase
Agreement"), by and between LTC and HIG.
WHEREAS, LTC has requested that HIG convert the Preferred Stock into
Common Stock of LTC, par value $.001 per share (the "Common Stock");
WHEREAS, LTC is willing to provide HIG with additional shares of Common
Stock as consideration for HIG's agreement to convert the Preferred Stock prior
to LTC's optional redemption date and for giving up certain rights and
privileges granted to HIG incident thereto;
WHEREAS, HIG has agreed to convert the Preferred Stock into Common Stock
and LTC has agreed to issue Common Stock to HIG on the terms and subject to the
conditions set forth herein; and
WHEREAS, the parties hereto have agreed to terminate certain provisions of
the Purchase Agreement and amend the Purchase Agreement to provide TCP with
registration rights equivalent to those of HIG.
NOW, THEREFORE, the parties hereby agree as follows:
1. Agreement to Convert. HIG agrees to convert its 100,000 shares of
Preferred Stock in return for 650,000 shares of Common Stock, and hereby
delivers to LTC HIG's stock certificates representing the Preferred Stock.
2. Issuance of Shares. LTC hereby agrees to issue to HIG on the date
hereof 650,000 shares of Common Stock as consideration for HIG's conversion of
its Preferred Stock on the date hereof and HIG's agreement to give up the rights
and privileges incident thereto prior to LTC's optional redemption date.
3. Termination of Purchase Agreement Provisions. Articles III, IV and V
of the Purchase Agreement are hereby terminated in their entirety.
4. Registration Rights. The definition of Registrable Securities in
Section 7.1 of the Purchase Agreement is hereby amended and restated in its
entirety as follows:
"Registrable Securities" means (i) all of the Conversion Shares owned by
the Purchaser, (ii) all other shares of Common Stock now owned or hereafter
acquired by the Purchaser or TCP; (iii) all shares of Common Stock issued with
respect to securities of the Company convertible into or exercisable for shares
of Common Stock now owned or hereafter acquired by
<PAGE> 39
the Purchaser or TCP; and (iv) any Common Stock issued in respect of shares
described in clauses (i) through (iii) upon any stock split, stock dividend,
recapitalization or other similar event.
<PAGE> 40
IN WITNESS WHEREOF, the undersigned have execute this Agreement as of the
date first above written.
LETS TALK CELLULAR & WIRELESS, INC.
By: /s/Nick Molina
---------------------------------
Name: Nick Molina
Title: Chief Executive Officer
HIG FUND V,INC.
By: /s/Anthony Tamer
---------------------------------
Name: Anthony Tamer
Title: President
TEXAS CELLULAR PARTNERS, L.P.
By: HIG TEXAS CELLULAR COMPANY
By: /s/Douglas Berman
---------------------------------
Name: Douglas Berman
Title: Vice President
<PAGE> 41
Exhibit A
Let's Talk Cellular of America, Inc.
DESCRIPTION OF SERIES A PREFERRED STOCK
1. Designation. The 150,000 shares of Series A Convertible
Preferred Stock, par value $30.00 per share (the "Preferred Stock"), shall have
the following rights, terms and privileges:
2. Dividends. In the event the Company shall make or issue, or
shall fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution with respect to the Common
Stock payable in (i) securities of the Company other than shares of Common Stock
or (ii) assets, then and in each such event the holders of Preferred Stock shall
receive, at the same time such distribution is made with respect to Common
Stock, the number of securities or such other assets of the Company which they
would have received had their Preferred Stock been converted into Common Stock
immediately prior to the record date for determining holders of Common Stock
entitled to receive such distribution.
3. Liquidation, Dissolution or Winding Up
(a) Treatment at Liquidation, Dissolution or Winding Up.
In the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary (collectively, a "Liquidation"), before any
distribution may be made with respect to the Common Stock or any other series of
capital stock, holders of each share of Preferred Stock shall be entitled to be
paid out of the assets of the Company available for distribution to holders of
the Company's capital stock of all classes, whether such assets are capital,
surplus, or capital earnings, an amount equal to $30 per share of Preferred
Stock (which amount shall be subject to equitable adjustment whenever there
shall occur a stock split, combination, reclassification or other similar event
involving the Preferred Stock) (the "Liquidation Amount").
If the assets of the Company available for distribution to its
shareholders shall be insufficient to pay the holders of shares of Preferred
Stock the full amount of the Liquidation Amount to which they shall be entitled,
the holders of shares of Preferred Stock shall share ratably in any distribution
of assets according to the amounts which would be payable with respect to the
shares of Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full.
After the payment of the Liquidation Amount shall have been
made in full to the holders of the Preferred Stock or funds necessary for such
payment shall have been set aside by the Company
A-1
<PAGE> 42
in trust for the account of holders of the Preferred Stock so as to be available
for such payments, the holders of the Preferred Stock shall be entitled to no
further participation in the distribution of the assets of the Company, and the
remaining assets of the Company legally available for distribution to its
shareholders shall be distributed among the holders of other classes of secur
ities of the Company in accordance with their respective terms.
(b) Treatment of Reorganizations. Any Reorganization (as
such term is defined in Section 5(f)), shall be regarded as a liquidation,
dissolution or winding up of the affairs of the Company within the meaning of
this Section 3; provided, however, that each holder of Preferred Stock shall
have the right to elect the benefits of the provisions of Section 5(h) hereof,
if applic able, in lieu of receiving payment of amounts payable upon liquid
ation, dissolution or winding up of the Company pursuant to this Section 3.
(c) Distributions in Cash. The Liquidation Amount shall
in all events be paid in cash. Whenever a distribution provided for in this
Section 3 is payable in property other than cash, the value of such distribution
shall be the fair market value of such property as determined in good faith by
the Company's Board of Directors.
4. Voting Power. Except as otherwise expressly provided in
Section 8 hereof, or as required by law, each holder of Preferred Stock shall be
entitled to vote on all matters and shall be entitled to that number of votes
equal to the largest number of whole shares of Common Stock into which such
holder's shares of Preferred Stock could be converted, pursuant to the
provisions of Section 5 hereof, at the record date for the determination of
shareholders entitled to vote on such matter or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited. Except as otherwise expressly provided herein or as
required by law, the holders of shares of Preferred Stock and Common Stock shall
vote together as a single class on all matters.
5. Conversion Rights for the Preferred Stock. The holders of the
Preferred Stock shall have following rights with respect to the conversion of
the Preferred Stock into shares of Common Stock:
(a) General. Subject to and in compliance with the
provisions of this Section 5, any share of the Preferred Stock may, at the
option of the holder, be converted at any time into fully-paid and
non-assessable shares of Common Stock. The number of shares of Common Stock to
which a holder of Preferred Stock shall be entitled upon conversion shall be the
product obtained by multiplying the Applicable Conversion Rate (determined as
provided in Section 5(b)) by the number of shares of Preferred Stock being
converted.
A-2
<PAGE> 43
(b) Applicable Conversion Rate. The conversion rate in
effect at any time (the "Applicable Conversion Rate") shall be the quotient
(rounded to the hundredth) obtained by dividing $30.00 by the Applicable
Conversion Value, calculated as provided in Section 5(c); provided, however, if
on the date the conversion is proposed, (i) a Triggering Event has occurred or
can reasonably be expected to occur within the next thirty (30) days, and (ii)
the Preferred Stock Valuation (based upon an Applicable Conversion Rate of
$30.00 divided by the Applicable Conversion Value) is less than the Hurdle Rate,
then the Applicable Conversion Rate applicable at all times thereafter shall be
the quotient obtained by dividing $45.60 by the Applicable Conversion Value,
calculated as provided in Section 5(c). For purposes of this Section 5, the
following terms shall have the following meanings:
(i) "Hurdle Rate" shall mean the amount equal to
$30.00 plus an amount accruing thereon at a compounded rate of twenty
percent (20%) per annum commencing from the Closing Date until the date
of determination of the Applicable Conversion Rate (which amount shall
be subject to equitable adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving
the Preferred Stock).
(ii) "Triggering Event" shall mean the earlier to
occur of (A) a Public Offering, (B) a Reorganization, (C) a
Liquidation, or (D) June 25, 2001.
(iii) "Preferred Stock Valuation" shall mean the
per share fair market value of the consideration received or receivable
by a Holder upon the sale or exchange of a share of the Preferred Stock
in connection with, or at the time of, a Triggering Event (which amount
shall be subject to equitable adjustment whenever there shall occur a
stock split, combination, reclassification or other similar event
involving the Preferred Stock).
(c) Applicable Conversion Value. The Applicable
Conversion Value shall be $8.57, except that such amount shall be adjusted from
time to time in accordance with this Section 5.
(d) Adjustments to Applicable Conversion Values.
(i) (A) Upon Sale of Common Stock. If the
Company shall, while there are any shares of Preferred Stock
outstanding, issue or sell (or in accordance with Section 5(d)(i)(B)
below is deemed to have issued or sold) shares of its Common Stock
without consideration or at a price per share less than the Applicable
Conversion Value in effect immediately prior to such issuance or sale,
then in each such case such Applicable Conversion Value for the
Preferred Stock, upon each such issuance or sale, except as hereinafter
A-3
<PAGE> 44
provided, shall be lowered so as to be equal to an amount determined by
multiplying the Applicable Conversion Value by a fraction:
(1) the numerator of which shall be (a)
the number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares of Common Stock, plus (b) the
number of shares of Common Stock which the net aggregate consideration,
if any, received by the Company for the total number of such additional
shares of Common Stock so issued would purchase at the Applicable
Conversion Value in effect immediately prior to such issuance, and
(2) the denominator of which shall be
(a) the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional shares of Common Stock plus (b) the
number of such additional shares of Common Stock so issued.
(B) Upon Issuance of Warrants, Options and
Rights to Common Stock.
(1) For the purposes of this Section
5(d)(i), the issuance of any warrants, options, subscriptions, or
purchase rights with respect to shares of Common Stock and the issuance
of any securities convertible into or exchangeable for shares of Common
Stock (or the issuance of any warrants, options or any rights with
respect to such convertible or exchangeable securities) shall be deemed
an issuance of such Common Stock at such time if the Net Consideration
Per Share (as hereinafter determined) which may be received by the
Company for such Common Stock shall be less than the Applicable
Conversion Value at the time of such issuance. Any obligation,
agreement, or undertaking to issue warrants, options, subscriptions, or
purchase rights at any time in the future shall be deemed to be an
issuance at the time such obligation, agreement or undertaking is made
or arises. No adjustment of the Applicable Conversion Value shall be
made under this Section 5(d)(i) upon the issuance of any shares of
Common Stock which are issued pursuant to the exercise of any warrants,
options, subscriptions, or purchase rights or pursuant to the exercise
of any conversion or exchange rights in any convertible securities if
any adjustment shall previously have been made or deemed not required
hereunder, upon the issuance of any such warrants, options, or
subscription or purchase rights or upon the issuance of any convertible
securities (or upon the issuance of any warrants, options or any rights
therefor) as provided above.
Should the Net Consideration Per Share of any such warrants, options,
subscriptions, or purchase rights or convertible
A-4
<PAGE> 45
securities be decreased from time to time, then, upon the effectiveness
of each such change, the Applicable Conversion Value shall be adjusted
to such Applicable Conversion Value as would have obtained (1) had the
adjustments made upon the issuance of such warrants, options, rights,
or convertible securities been made upon the basis of the decreased Net
Con sideration per share of such securities, and (2) had adjust ments
made to the Applicable Conversion Value since the date of issuance of
such securities been made to the Applicable Conversion Value as
adjusted pursuant to (1) above.
(2) For purposes of this paragraph, the "Net
Consideration Per Share" which may be received by the Company shall be
determined as follows:
(i) The "Net Consideration Per Share"
shall mean the amount equal to the total amount of con sideration, if
any, received by the Company for the issuance of such warrants,
options, subscriptions, or other purchase rights or convertible or
exchangeable securities, plus the minimum amount of consideration, if
any, payable to the Company upon exercise or conversion thereof,
divided by the aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions, or other purchase
rights or convertible or exchangeable securities were exercised,
exchanged, or converted.
(ii) The "Net Consideration Per Share"
which may be received by the Company shall be determined in each
instance as of the date of issuance of warrants, options,
subscriptions, or other purchase rights or convertible or exchangeable
securities without giving effect to any possible future upward price
adjustments or rate adjustments which may be applicable with respect to
such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities.
(C) Stock Dividends. In the event the Company
shall make or issue a dividend or other distribution payable in Common
Stock or securities of the Company convertible into or otherwise
exchangeable for the Common Stock of the Company, then such Common
Stock or other securities issued in payment of such dividend shall be
deemed to have been issued without consideration (except for dividends
payable in shares of Common Stock payable pro rata to holders of
Preferred Stock and to holders of any other class of stock).
(D) Consideration Other than Cash. For purposes
of this Section 5(d), if a part or all of the consideration received by
the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this
Section 5(d) consists of
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property other than cash, such consideration shall be deemed to have a
fair market value as is reasonably determined in good faith by the
Board of Directors of the Company.
(E) Exceptions. This Section 5(d)(i) shall not
apply under any of the circumstances which would constitute an
Extraordinary Common Stock Event (as hereinafter defined in Section
5(d)(ii)). Further, the provisions of this Section 5(d) shall not apply
to (i) shares issued upon conversion of the Preferred Stock, or (ii)
options (and the shares issuable upon exercise thereof) to purchase up
to an aggregate of 50,000 shares of Common Stock (including options
outstanding on the date hereof) issued to employees of the Company, as
provided in Section 4.5 of that certain Series A Preferred Stock
Purchase Agreement, dated as of June 25, 1996 (the "Purchase
Agreement") as amended from time to time. The number of shares in this
Section (E) shall be proportionately adjusted to reflect any stock
dividend, stock split or other form of recapitalization occurring after
the date hereof.
(ii) Upon Extraordinary Common Stock Event. Upon
the happening of an Extraordinary Common Stock Event (as hereinafter
defined), the Applicable Conversion Value for the Preferred Stock
shall, simultaneously with the happening of such Extraordinary Common
Stock Event, be adjusted by multiplying the then effective Applicable
Conversion Value with respect to the Preferred Stock by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such Extraordinary Common Stock Event
and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such Extraordinary Common Stock
Event, and the product so obtained shall thereafter be the Applicable
Conversion Value. The Applicable Conversion Value for the Preferred
Stock shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (i) the issue of
additional shares of Common Stock as a dividend or other distribution
on outstanding Common Stock or on any class or series of preferred
stock, unless made pro rata to holders of Preferred Stock, (ii) a
subdivision of outstanding shares of Common Stock into a greater number
of shares of Common Stock, or (iii) a combination of outstanding shares
of the Common Stock into a smaller number of shares of Common Stock.
(e) Capital Reorganization or Reclassification. If the
Common Stock issuable upon the conversion of the Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or
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combination of shares or stock dividend provided for elsewhere in this Section 5
or by a Reorganization), then and in each such event, the holder of each share
of Preferred Stock shall have the right thereafter to convert such share into
the kind and amount of shares of stock and other securities and property
receivable upon such capital reorganization, reclassification or other change by
holders of the number of shares of Common Stock into which such shares of
Preferred Stock might have been converted immediately prior to such capital
reorganization, reclassification or other change.
(f) Capital Reorganization, Merger or Sale of Assets. If
at any time or from time to time there shall be (i) a capital reorganization of
the Common Stock (other than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section 5), (ii) a merger or
consolidation of the Company with or into another corporation, (iii) the sale of
all or substantially all of the Company's properties and assets to any other
person, or (iv) any transaction or series of related transactions in which the
Principal Shareholders (as defined in the Purchase Agreement) cease to own at
least fifty percent (50%) of the outstanding common stock of the Company (any of
which events is herein referred to as a "Reorganization"), then as a part of
such Reorganization, provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Preferred Stock, the number of shares of stock or other securities or property
of the Company, or of the successor corporation resulting from such
Reorganization, to which such holder would have been entitled if such holder had
converted its shares of Preferred Stock immediately prior to such
Reorganization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of the Preferred Stock after the Reorganization, to the end that the
provisions of this Section 5 (including adjustment of the Applicable Conversion
Value then in effect and the number of shares issuable upon conversion of the
Preferred Stock) shall be applicable after that event in as nearly equivalent a
manner as may be practicable.
Except as otherwise provided in Section 3(b), upon the
occurrence of a Reorganization, under circumstances which make the preceding
paragraph applicable, each holder of Preferred Stock shall have the option of
electing treatment for his shares of Preferred Stock under either this Section
5(f) or Section 3 hereof, notice of which election shall be submitted in writing
to the Company at its principal offices no later than five (5) business days
before the effective date of such event.
(g) Certificate as to Adjustments; Notice by Company. In
each case of an adjustment or readjustment of the Applicable Conversion Rate,
the Company at its expense will furnish each holder of Preferred Stock with a
certificate, executed by the
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president and chief financial officer (or in the absence of a person designated
as the chief financial officer, by the treasurer) showing such adjustment or
readjustment, and stating in detail the facts upon which such adjustment or
readjustment is based.
(h) Exercise of Conversion Privilege. To exercise its
conversion privilege, a holder of Preferred Stock shall surrender the
certificate or certificates representing the shares being converted to the
Company at its principal office, and shall give written notice to the Company at
that office that such holder elects to convert such shares. Such notice shall
also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable upon such
conversion shall be issued. The certificate or certificates for shares of
Preferred Stock surrendered for conversion shall be accompanied by proper
assignment thereof to the Company or in blank. The date when such written notice
is received by the Company, together with the certificate or certificates
representing the shares of Preferred Stock being converted, shall be the
"Conversion Date." As promptly as practicable after the Conversion Date, the
Company shall issue and shall deliver to the holder of the shares of Preferred
Stock being converted, or on its written order, such certificate or certificates
as it may request for the number of whole shares of Common Stock issuable upon
the conversion of such shares of Preferred Stock in accordance with the
provisions of this Section 5, and cash, as provided in Section 5(j), in respect
of any fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby. The Company shall pay any taxes payable with respect to the issuance of
Common Stock upon conversion of the Preferred Stock, other than any taxes
payable with respect to income by the holders thereof.
(i) Partial Conversion. In the event some but not all of
the shares of Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Company shall execute and deliver to
or on the order of the holder, at the expense of the Company, a new certificate
representing the number of shares of Preferred Stock which were not converted.
(j) Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effect ing the conversion of the shares
of the Preferred Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
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the Preferred Stock, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Preferred Stock, the Company shall take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(k) Minimum Adjustment. Any provision of this Section 5
to the contrary notwithstanding, no adjustment in the Applicable Conversion
Value shall be made if the amount of such adjustment would be less than 1% of
the Applicable Conversion Value then in effect, but any such amount shall be
carried forward and an adjustment with respect thereto shall be made at the time
of and together with any subsequent adjustment which, together with all amounts
so carried forward, aggregates 1% or more of the Applicable Conversion Value
then in effect.
6. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Company shall be
authorized to issue. The Company may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of the Preferred Stock accordingly.
7. Redemption
(a) Optional Redemption by the Company Upon a Qualified
Public Offering. Effective upon the closing of a Qualified Public Offering (as
hereinafter defined), all but not less than all of the then outstanding
Preferred Stock shall be subject to redemption by the Company, at its election,
at a redemption price (the "Company Redemption Price") for each share of
Preferred Stock redeemed pur suant to this Section 7(a) equal to the Liquidation
Amount (includ ing all accrued but unpaid dividends, whether or not declared)
with the amount of accrued dividends due thereon to be calculated and paid
through the date payment is actually made to the holders of the Preferred Stock
with respect to such redemption. The Company shall give the holders of the
Preferred Stock thirty (30) days' written notice of the pendency of a Qualified
Public Offering and, if it so elects, of its election to redeem under this
Section 7(a). Such notice shall be mailed by the Company, postage prepaid, to
each holder of record of Preferred Stock at its address shown on the records of
the Company. If the Company elects to redeem the Preferred Stock, such election
shall be irrevocable on the part of the Company unless such Qualified Public
Offering shall not occur. The Company Redemption Price shall be paid at the
closing of the Qualified Public Offering and shall be paid in cash. For purposes
hereof, the term "Qualified Public Offering" shall mean an under written public
offering pursuant to an effective registration
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statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering the offer and sale of Common Stock for the account of the Company in
which the aggregate net proceeds to the Company equal at least $10,000,000 and
in which the price per share of Common Stock is at least one point seven five
(1.75) times the then applicable Conversion Value of the Preferred Stock.
(b) Optional Redemption by the Holders Upon a Public
Offering. Effective upon the closing of a Public Offering (as hereinafter
defined) (other than a Qualified Public Offering) in which the Company does not
elect to redeem all of the-Preferred Stock as provided above, the holders of at
least fifty-one percent (51%) of the then outstanding shares of Preferred Stock
(the "Requesting Holders") may request the Company to redeem any or all of the
Preferred Stock then held by such holders. Such request (the "Redemption
Request") shall be submitted to the Company in writing within twenty (20) days
after the receipt by the holders of the Preferred Stock of the notice of the
pendency of a Public Offering from the Company and shall contain the same
information as the notice of the pendency of the Public Offering required to be
delivered pursuant to the immediately succeeding paragraph. The Redemption
Request shall be irrevocable on the part of the Requesting Holders unless the
Public Offering shall not occur. The redemption price of each share of Preferred
Stock redeemed pursuant to this paragraph shall be equal to the Company
Redemption Price provided for in Section 7(a) above. Upon receipt of a
Redemption Request, the Company shall promptly give notice thereof (the "Holder
Redemption Notice") to each holder of Preferred Stock. Such Holder Redemption
Notice shall specify the number of shares of Preferred Stock covered by the
Redemption Request and the Company Redemption Price to be paid with respect
thereto. Any holder of Preferred Stock who wishes to join in the Redemption
Request may do so by so advising the Company in writing within fifteen (15) days
after receipt of the Holder Redemption Notice specified in the preceding
sentence. No holder of Preferred Stock shall be required to participate in such
redemption. The Company shall redeem all shares of Preferred Stock covered by
the Redemption Request (including those held by holders who have requested a
redemption following receipt of the Holder Redemption Notice) at a closing to be
held upon the closing of the Public Offering. At the closing, the Company shall
pay for the shares of Preferred Stock so redeemed in an amount equal to the
Redemption Price, payable in cash. For purposes hereof, the term "Public
Offering" shall mean an underwritten public offering pursuant to an effective
registration statement under the Securities Act covering the offer and sale of
Common Stock of the Company. If the Public Offering will not constitute a
Qualified Public Offering, the Company shall give the holders of the Preferred
Stock thirty (30) days' written notice of the pendency of the Public Offering.
Such notice shall be mailed by the Company, postage prepaid, to each holder of
record of Preferred Stock at its address shown on the records of the Company.
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Nothing contained in Section 7(a) or 7(b) shall in any way restrict or prohibit
the holders of the Preferred Stock from exercising their conversion rights
pursuant to Section 5 hereof prior to the effective date of the redemption to be
effected hereunder; provided, however, that any such conversion under Section
7(a) or 7(b) may be subject to the closing of the Qualified Public Offering.
(c) Optional Redemption by the Holder Following Default.
(i) In the event the Company becomes in default
of one or more of the covenants contained in Article III or Article IV
of the Purchase Agreement, any of such events referred to herein as a
"Default," and such Default continues for thirty (30) days after notice
is sent to the Company (during which time the Company may cure such
default), in addition to any other rights the holders of the Preferred
Stock may have in equity or law (including specific performance which
is hereby agreed to), then the holders of at least fifty-one percent
(51%) of the then outstanding shares of Preferred Stock may request the
Company to (A) redeem any or all of the shares of Preferred Stock then
held by such holders and (B) pay in cash any and all sums payable to
HIG Capital Management, Inc. pursuant to the Consulting Agreement. Such
request (the "Default Redemption Request") shall be submitted to the
Company in writing within thirty (30) days after the thirty-first day
following the commencement of the Default. The right to cure such
Default shall expire on the date the Default Redemption Request is
submitted to the Company, then the Default Redemption Request shall be
null and void. If such a Default Redemption Request is not so made
within such thirty (30) day period, holders of Preferred Stock may not
again request redemption under this Section 7(c) unless and until there
shall have occurred another Default which remains uncured for a period
of thirty consecutive days.
(ii) The price (the "Holder Default Redemption
Price") for each share of Preferred Stock redeemed pursuant to this
Section 7(c) shall be equal to the Liquidation Amount.
(iii) Upon receipt of a Default Redemption
Request, the Company shall promptly give notice thereof (the "Default
Redemption Notice") to each holder of Preferred Stock. Such Default
Redemption Notice shall specify the number of shares of Preferred Stock
covered by the Default Redemption Request and the Holder Default
Redemption Price to be paid with respect thereto. Any holder of
Preferred Stock who wishes to join in the Default Redemption Request
may do so by so advising the Company in writing within 15 days after
receipt of the Default Redemption Notice specified in the preceding
sentence. No holder of Preferred Stock shall be required to participate
in such redemption. The Company shall
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redeem all shares of Preferred Stock covered by the Default Redemption
Request (including those held by holders who have requested a
redemption following receipt of the Default Redemption Notice) at a
closing to be held not more than thirty (30) days after the date of the
Default Redemption Request. At the closing, the Company shall pay for
the shares of Preferred Stock so redeemed in an amount equal to the
Holder Default Redemption Price, payable in cash.
(d) Optional Redemption by the Holders. At the election
of the holders of at least fifty-one percent (51%) of the then outstanding
shares of Preferred Stock, the Company shall, to the extent it may do so under
applicable law, redeem all shares pro rata from all holders of Preferred Stock
on June 25, 2001 of the shares of Preferred Stock outstanding on the date of
such redemption (the "Final Redemption Date"). The Company shall give the
holders of the Preferred Stock at least ninety (90) days' notice of the Final
Redemption Date (the "Final Redemption Notice"). In the event that the Company
does not provide the Final Redemption Notice, the option of the holders of the
Preferred Stock to require the Company to redeem the remaining shares of
Preferred Stock on the Final Redemption Date shall be extended beyond the Final
Redemption Date to a date which is ninety (90) days from the date that the
Company elects to mail the Final Redemption Notice. In the event shares of
Preferred Stock scheduled for redemption are not redeemed because of a
prohibition under applicable law, such shares shall be redeemed as soon as such
prohibition no longer exists. The redemption price (the "Holder Redemption
Price") for each share of Preferred Stock redeemed pursuant to this Section 7(d)
shall be equal to the Liquidation Amount.
In the event that the holders of the Preferred Stock do not elect to
have the Preferred Stock redeemed pursuant to this Section 7(d), the shares of
Preferred Stock shall remain outstanding and subject to the rights and
preferences contained herein.
(e) Redemption Notice. If an election is made pursuant to
Section 7(d) hereof, written notice of such election shall be mailed, postage
prepaid, to the Company, not later than sixty (60) days before the date fixed
for redemption pursuant to Section 7(d) or, in the event the Company does not
provide the Final Redemption Notice pursuant to Section 7(d) hereof, not later
than sixty (60) days before the date that the Final Redemption Date has been
extended as provided in Section 7(d) (each of the dates fixed for redemption and
the extended redemption date is hereinafter referred to as a "Redemption Date").
If such election is made and appropriate notice is given then, at least
forty-five (45) days before the Redemption Date, written notice (hereinafter
referred to as the "Redemption Notice") shall be mailed by the Company, postage
prepaid, to each holder of record of Preferred Stock at its address shown on the
records of the Company; provided, however, that the Company's failure to give
such Redemption Notice shall in no way
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affect its obligation to redeem the shares of Preferred Stock or the obligation
of the holders to redeem their shares of Preferred Stock as provided in Section
7(d) hereof. The Redemption Notice shall contain: (i) the number of shares of
Preferred Stock held by the holder and the total number of shares of Preferred
Stock held by all holders subject to redemption as of such Redemption Date; and
(ii) the Redemption Date and the applicable Holder Redemption Price. Any holder
of Preferred Stock who wishes to do so may, by giving notice to the Company
prior to the Redemption Date, convert into Common Stock any or all of the shares
of Preferred Stock held by him and scheduled for redemption on such Redemption
Date.
(f) Surrender of Certificates. Each holder of shares of
Preferred Stock to be redeemed under this Section 7 shall surrender the
certificate or certificates representing such shares to the Company at the place
designated in the Redemption Notice, and thereupon the Company Redemption Price
or Holder Redemption Price, as the case may be, for such shares as set forth in
this Section 7 shall be paid to the order of the person whose name appears on
such certificate or certificates. Irrespective of whether the certifi cates
therefor shall have been surrendered, all shares of Preferred Stock which are
the subject of a Redemption Notice shall be deemed to have been redeemed and
shall be cancelled effective as of the Redemption Date, unless the Company shall
default in the payment of the applicable Redemption Price.
8. Restrictions and Limitations.
(a) Corporate Securities Action. Except as expressly
provided herein or as required by law, so long as any shares of Preferred Stock
remain outstanding, the Company shall not, and shall not permit any subsidiary
(which shall mean any corporation, association or other business entity which
the Company and/or any of its other subsidiaries directly or indirectly owns at
the time more than fifty percent (50%) of the outstanding voting shares of such
corporation or trust, other than directors' qualifying shares) to, without the
approval by vote or written consent by the holders of at least a majority of the
then outstanding shares of Preferred Stock, voting as a separate class:
(i) redeem, purchase or otherwise acquire for value (or
pay into or set aside for a sinking fund for such purpose), or declare
and pay or set aside funds for the payment of any dividend with respect
to, any share or shares of capital stock, except as required or
permitted hereunder or under the terms of Section 4.2 of the Purchase
Agreement;
(ii) authorize or issue, or obligate itself to authorize
or issue, additional shares of Preferred Stock;
(iii) authorize or issue, or obligate itself to authorize
or issue, any equity security senior to or on parity
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with the Preferred Stock as to liquidation preferences, dividend
rights, or voting rights;
(iv) merge or consolidate with any other corporation or
sell, assign, lease or otherwise dispose of or voluntarily part with
the control of (whether in one transaction or in a series of
transactions) all, or substantially all, of its assets (whether now
owned or hereinafter acquired), or consent to any liquidation,
dissolution or winding up of the Company, or permit any subsidiary to
do any of the foregoing, except for (1) any wholly-owned subsidiary may
merge into or consolidate with or transfer assets to any other
wholly-owned subsidiary, and (2) any wholly-owned subsidiary may merge
into or transfer assets to the Company; or
(v) amend, restate, modify or alter the by-laws of the
Company in any way which adversely affects the rights of the holders of
the Preferred Stock.
(b) Amendments to Charter. The Company shall not amend
its Articles of Incorporation without the approval, by vote or written consent,
by the holders of at least a majority of the then outstanding shares of
Preferred Stock, if such amendment would amend any of the rights, preferences,
privileges of or limitations provided for herein for the benefit of any shares
of Preferred Stock. Without limiting the generality of the preceding sentence,
the Company shall not amend its Articles of Incorporation without the approval
by the holders of at least a majority of the then outstanding shares of
Preferred Stock if such amendment would:
(i) change the relative seniority rights of the holders
of Preferred Stock as to the payment of dividends in relation to the
holders of any other capital stock of the Company, or create any other
class or series of capital stock entitled to seniority as to the
payment of dividends in relation to the holders of Preferred Stock;
(ii) reduce the amount payable to the holders of Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Company, or change the relative seniority of the
liquidation preferences of the holders of Preferred Stock to the rights
upon liquidation of the holders of other capital stock of the Company,
or change the dividend rights of the holders of Preferred Stock;
(iii) cancel or modify the conversion rights of the holders
of Preferred Stock provided for in Section 5 herein;
(iv) cancel or modify the redemption rights of the holders
of the Preferred Stock provided for in Section 7 herein; or
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(v) cancel or modify the rights of the holders of the
Preferred Stock provided for in this Section 8.
9. No Dilution or Impairment. The Company shall not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of the Preferred Stock set forth herein, but shall at all times
in good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate in order to protect the
rights of the holders of the Preferred Stock against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
shall not increase the par value of any shares of stock receivable on the
conversion of the Preferred Stock above the amount payable therefor on such
conversion, (b) shall take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the conversion of all Preferred Stock from time
to time outstanding, and (c) shall not consolidate with or merge into any other
person or permit any such person to consolidate with or merge into the Company
(if the Company is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all of the terms of the
Preferred Stock set forth herein.
10. Notices of Record Date. In the event of:
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger of the Company, or any transfer of all or substantially all of the assets
of the Company to any other corporation, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding up of the Company,
then and in each such event the Company shall mail or cause to be mailed to each
holder of Preferred Stock a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right
and a description of such dividend, distribution or right, (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer,
merger, dissolution, liquidation or winding up is expected to become effective
and (iii) the time, if any, that is to be fixed,
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as to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least ten (10) business days prior
to the date specified in such notice on which such action is to be taken.
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EXHIBIT B
SHAREHOLDERS' AGREEMENT
AGREEMENT, made as of the 25th day of June, 1996, by and among Let's
Talk Cellular of America, Inc., a Florida corporation (the "Company"), those
persons listed on the signature page hereto under Current Shareholders (the
"Current Shareholders") and the person listed on the signature page hereto under
Investor (together with its permitted transferees, the "Investor" and, with the
Current Shareholders, the "Shareholders").
WHEREAS, the Investor is acquiring an aggregate of 100,000 shares of
Series A Preferred Stock, par value $30.00 per share (the "Preferred Stock"), of
the Company, pursuant to the terms of a Series A Preferred Stock Purchase
Agreement dated as of June 25, 1996 among the Company, the Investor and the
Current Shareholders (the "Purchase Agreement"); and
WHEREAS, it is a condition to the obligations of the Current
Shareholders and the Investor under the Purchase Agreement that this Agreement
be executed by the parties hereto, and the parties are willing to execute this
Agreement and to be bound by the provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
shareholders, the parties hereby agree with each other as follows:
1. Definition of Shares. As used in this Agreement, "Shares"
shall mean and include all shares of the Preferred Stock or the Common Stock,
now owned or hereafter acquired by the Investor and all shares of Common Stock
now owned or hereafter acquired by a Current Shareholder. Other terms used as
defined terms herein and not otherwise defined shall have the meanings set forth
in the Purchase Agreement.
2. Prohibited Transfers. No Shareholder shall sell, assign,
transfer, pledge, hypothecate, mortgage, encumber or dispose of all or any of
his Shares except in compliance with the terms of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, (a) any
Current Shareholder may transfer without the necessity of prior approval all or
any of his Shares by way of gift to his spouse, to any of his lineal descendants
or ancestors, or to any trust for the benefit of any one or more of such Current
Shareholder, his spouse or his lineal descendants or ancestors, (b) any Current
Shareholder may transfer all or any of his Shares by will or the laws of descent
and distribution, (c) any Current Shareholder may transfer his Shares to the
Investor or to another
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Current Shareholder; (d) HIG Fund V, Inc. may transfer up to thirty five percent
(35%) of the number of Shares it holds as of the date hereof (as adjusted for
stock splits, stock dividends, recapitalizations and similar corporate events)
to any Qualified Institutional Buyer (as defined under Rule 144A of the
Securities Act of 1933, and (e) any Investor may transfer its Shares to an
affiliate (as defined under the Securities Exchange Act of 1934) of such
Investor; provided that in the event such transferee under this Section 2 is not
already a party to this Agreement, such transferee shall agree in writing with
the Company and the other Shareholders, as a condition to such transfer, to be
bound by all of the provisions of this Agreement to the same extent as if such
transferee were the Shareholder transferring such Shares.
3. Right of First Refusal on Dispositions.
(a) Except for the transfers permitted in Section 2, if at any
time a Current Shareholder (a "Selling Current Shareholder") desires to sell or
otherwise transfer all or any part of his Shares pursuant to a bona fide offer
from a third party (the "Proposed Transferee"), the Selling Current Shareholder
shall submit a written offer (the "Offer") by delivering the Offer to the
Company and the other Shareholders (the "Other Shareholders"), to sell such
Shares (the "Offered Shares") to the Other Shareholders on terms and conditions,
including price, not less favorable than those on which the Selling Current
Shareholder proposes to sell such Offered Shares to the Proposed Transferee. The
Offer shall disclose the identity of the Proposed Transferee, the number of
Offered Shares proposed to be sold, the total number of Shares owned by the
Selling Current Shareholder, the terms and conditions, including price, of the
proposed sale, and any other material facts relating to the proposed sale. The
Offer shall further state (i) that the Other Shareholders may acquire, in
accordance with the provisions of this Agreement, any of the Offered Shares for
the price and upon the other terms and conditions set forth therein and (ii)
that if all such Offered Shares are not purchased by the Other Shareholders, the
Other Shareholders may exercise their rights provided pursuant to Section 5
hereof.
(b) Each Other Shareholder shall have the right to purchase
that number of Offered Shares as shall be equal to the number of Offered Shares
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock then owned by such Other Shareholder (including shares issuable
upon conversion of Preferred Stock held by such person) and the denominator of
which shall be the aggregate number of shares of Common Stock (including shares
issuable upon conversion of Preferred Stock) then owned by all of the Other
Shareholders who elect to purchase the Offered Shares. The amount of such
Offered Shares that each Other Shareholder is entitled to purchase under this
Section 3(b) shall be referred to as its "Pro Rata Fraction."
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(c) The Other Shareholders shall have a right of
oversubscription such that if any Other Shareholder fails to accept the Offer as
to its full Pro Rata Fraction, the remaining Other Shareholders shall, among
them, have the right to purchase up to the balance of such Offered Shares not so
purchased.
(d) Those Other Shareholders who desire to purchase all or any
part of the Offered Shares shall communicate in writing their election to
purchase to the Selling Current Shareholder, which communication shall state the
number of Offered Shares said Other Shareholders desire to purchase and shall be
provided to the Selling Current Shareholder within 20 days of the date the Offer
was made. Such communication shall, when taken in conjunction with the Offer, be
deemed to constitute a valid, legally binding and enforceable agreement for the
sale and purchase of such Offered Shares (subject to the aforesaid limitations
as to the right of the Other Shareholders to purchase more than their Pro Rata
Fraction). Sales of such Offered Shares to be sold to the Other Shareholders
pursuant to this Section 3 shall be made at the offices of the Company within
sixty (60) days following the date the Offer was made.
(e) If the Other Shareholders do not purchase all of the
Offered Shares, the remaining Offered Shares may be sold by the Selling Current
Shareholder at any time within ninety (90) days after the date the Offer was
made, subject to the provisions of Section 5. Any such sale shall be to the
Proposed Transferee, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. Any remaining Offered Shares not sold within such ninety
(90) day period shall continue to be subject to the requirements of a prior
offer pursuant to this Section 3. If Offered Shares are sold pursuant to this
Section 3 to any purchaser who is not a party to this Agreement, the purchaser
of such Offered Shares shall execute a counterpart of this Agreement as a
precondition of the purchase of such Offered Shares and any Offered Shares sold
to such purchaser shall continue to be subject to the provisions of this
Agreement.
4. Right of First Offer on Investor Dispositions.
(a) Except for the transfers permitted in Section 2, if at any
time an Investor (a "Selling Investor") desires to sell or otherwise transfer
all or part of its Shares to a third party, the Selling Investor shall notify
the Other Shareholders in writing (the "Investor Offer") of the number of Shares
proposed to be sold or transferred (the "Investor Offered Shares") and the name
of any proposed transferee who has made a written offer for such Shares, if
applicable. Each Other Shareholder shall have the right to offer to acquire the
Offered Shares by submitting a proposal in writing to the Selling Investor
within twenty (20) days of delivery of the Investor Offer. The proposal shall
state the number of
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Investor Offered Shares proposed to be purchased, the terms and conditions,
including price, of the proposed purchase and any other material facts relating
to such proposed purchase.
(b) The Selling Investor may within twenty (20) days of
delivery of the proposals select the best proposal(s) from one or more Other
Shareholders or a portion of one or more proposals from several Other
Shareholders (if permitted by such proposals) and sell the Investor Offered
Shares to the Other Shareholders who have the highest and best offer(s) as
determined by the Selling Investor (collectively, the "Best Offer"). The Best
Offer shall constitute an irrevocable, valid, legally binding and enforceable
offer for the sale and purchase of the Investor Offered Shares which shall
remain outstanding for twenty (20) days after the delivery of the Best Offer
(calculated using the date the last proposal was submitted to the Selling
Investor). Sales of Investor Offered Shares to be sold to the Other Shareholders
pursuant to this Section 4(b) shall be made at the offices of the Company within
sixty (60) days following acceptance by the Selling Investor of the Best Offer.
(c) The Selling Investor may elect not to sell the Investor
Offered Shares to the Other Shareholders pursuant to the Best Offer and proceed
to offer to sell or transfer the Offered Shares to a third party. In such event,
the Selling Investor may sell its shares to a third party provided that (a) the
aggregate cash consideration to be received at the closing of such sale exceeds
the aggregate cash consideration to be received pursuant to the Best Offer, (b)
the Selling Investor must sell the Offered Shares to any third party prior to
the six month anniversary of the date of the Offer or the Selling Investor must
allow the Other Shareholders to propose new offers in accordance with Section
4(a) hereof and (c) such third party agrees to be bound by the terms hereof.
5. Right of Participation in Sales.
(a) If at any time a Current Shareholder desires to sell all
or any part of the Shares owned by him to a Proposed Trans feree, and those
Shares to be transferred have not been purchased by the Investor under Section
3, the Investor (unless it has elected to purchase Shares pursuant to Section 3)
shall have the right to sell to the Proposed Transferee, as a condition to such
sale by the Selling Current Shareholder, at the same price per share and on the
same terms and conditions as involved in such sale by the Selling Current
Shareholder, a pro rata portion of the amount of Shares proposed to be sold to
the Proposed Transferee. The "pro rata portion" of Shares which the Investor
shall be entitled to sell to the Proposed Transferee shall be that number of
Shares as shall equal the number of Offered Shares proposed to be sold to the
Proposed Transferee multiplied by a fraction, the numerator of which is the
aggregate of all shares of Common Stock
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(including shares issuable upon conversion of Preferred Stock held by such
person) which are then held by the Investor, and the denominator of which is the
aggregate of all shares of Common Stock (including shares issuable upon
conversion of Preferred Stock) which are then held by the Selling Current
Shareholder and all Investors wishing to participate in any sale under this
Section 5.
(b) Each Current Shareholder who wishes to make a sale to a
Proposed Transferee which is subject to this Section 5 shall, after complying
with the provisions of Section 3, give to each Investor notice of such proposed
sale, and stating that all Offered Shares were not purchased pursuant to the
Offer as discussed in Section 3. Such notice shall be given at least 20 days
prior to the date of the proposed sale to the Proposed Transferee. Each Investor
wishing to so participate in any sale under this Section 5 shall notify the
Selling Current Shareholder in writing of such intention within 15 days after
such Investor's receipt of the notice described in the preceding sentence.
(c) The Selling Current Shareholder and each participating
Investor shall sell to the Proposed Transferee all, or at the option of the
Proposed Transferee, any part of the Shares proposed to be sold by them at not
less than the price and upon other terms and conditions, if any, not more
favorable to the Proposed Transferee than those in the notice provided by the
Selling Current Shareholder under subparagraph (b) above; provided, however,
that any purchase of less than all of such Shares by the Proposed Transferee
shall be made from the Selling Current Shareholder and each participating
Investor pro rata based upon the relative number of the Shares that the Selling
Current Shareholder and each participating Investor is otherwise entitled to
sell pursuant to Section 5(a).
(d) If any Shares are sold pursuant to this Section 5 to any
purchaser who is not a party to this Agreement, the purchaser of such Shares
shall execute a counterpart of this Agreement as a precondition to the purchase
of such Shares and such Shares shall continue to be subject to the provisions of
this Agreement.
6. Board of Directors.
(a) At each annual meeting of the shareholders of the Company,
and at each special meeting of the shareholders of the Company called for the
purpose of electing directors of the Company, and at any time at which
shareholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Shareholders shall vote
all Shares owned by them for the election of a Board of Directors as follows:
(i) Except as provided in Section 6(a)(ii), the Board of
Directors shall consist of not more than four directors, designated as
follows:
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(A) one director shall be designated by
HIG Fund V, Inc. (which designee shall initially be Anthony Tamer); and
(B) three directors shall be designated
by the holders of a majority of the Common Stock (which designees shall
initially be Nick Molina, Brett Beveridge and Allan Sorenson).
In addition, HIG Fund V, Inc. shall be entitled to have an observer
present at all Board meetings.
(ii) if the Company's EBIT (as hereinafter
defined) for the preceding applicable months is less than the Minimum
EBIT Target (as defined in Section 6(c)) on any Determination Date (as
defined in Section 6(c)) (an "EBIT Default"), the Board of Directors
shall consist of not more than five directors designated as follows:
(A) three directors shall be designated
by HIG Fund V, Inc.; and
(B) two directors shall be designated
by the holders of a majority of the Common Stock.
For purposes of this Agreement "EBIT" shall mean the Company's earnings
before interest and taxes, (excluding extraordinary gains and losses
and consulting fees paid or payable to HIG Capital Management, Inc.)
calculated based upon generally accepted accounting principles
consistently applied ("EBIT"). EBIT shall exclude charges for inventory
reserves mandated by the Company's outside auditors up to 2.5% of the
value of the inventory provided such reserve only relates to year end
adjustments which are not caused by a realized loss in the value of the
inventory.
(b) The Company shall calculate its EBIT for purposes of this
Section 6 within 30 days following a Determination Date and shall deliver a copy
of such calculations to the Shareholders within two business days thereafter. If
Section 6(a)(ii) shall cause a change in the rights of any Stockholder to elect
a majority of the Board of Directors, the Chief Executive Officer of the Company
shall within five (5) business days of delivery of the calculation of the EBIT,
send notice of a special telephonic or other meeting of the Shareholders to be
held as soon as allowed by Florida law after such Determination Date to elect a
new Board of Directors as required by Section 6(a)(ii). The Company shall not be
required to follow the procedures in this Section 6(b) if the new Board of
Directors is elected in a more expedient manner (i.e., by written Shareholder
consent executed within 40 days of the Determination Date). The rights of HIG
Fund V, Inc. to elect a
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majority of the members of the Board of Directors may be exercised at any time
after an EBIT Default, subject to the following:
(i) the Current Shareholders shall have the
right to cure an EBIT Default and elect a majority of the members of
the Board of Directors pursuant to Section 6(a)(i) on any two occasions
if the Company earns an EBIT equal to or greater than the six month
Minimum EBIT Target for the six months immediately following the
Determination Date in which the EBIT Default occurred; provided, that
the right to cure an EBIT Default shall only exist if there shall not
have been an EBIT Default in either of the two preceding Determination
Dates (the six month period during which the Company has the right to
cure an EBIT Default is referred to herein as the "Cure Period");
(ii) The Company shall not terminate the
employment of any executive officer of the Company during a Cure
Period; and
(iii) Section 6(a)(i) shall have no further force
or effect after an EBIT Default.
(c) The following schedule reflects the Minimum EBIT
Targets corresponding with the applicable Determination Dates:
<TABLE>
<CAPTION>
NUMBER OF TRAILING
MINIMUM EBIT MONTHS USED TO
DETERMINATION DATE TARGET CALCULATE EBIT
- ---------------------- -------------- -------------------
<S> <C> <C>
January 31, 1997 $ 185,790 6
April 30, 1997 289,871 6
July 31, 1997 283,937 6
July 31, 1997 548,015 12
October 31, 1997 306,016 6
October 31, 1997 695,202 12
January 31, 1998 650,170 6
January 31, 1998 1,089,791 12
April 30, 1998 854,926 6
April 30, 1998 1,354,432 12
July 31, 1998 777,364 6
July 31, 1998 1,665,456 12
October 31, 1998 668,605 6
October 31, 1998 1,657,252 12
January 31, 1999 1,101,027 6
January 31, 1999 2,098,597 12
April 30, 1999 1,360,723 6
April 30, 1999 2,435,194 12
July 31, 1999 1,244,532 6
July 31, 1999 2,814,670 12
October 31, 1999 1,165,264 6
October 31, 1999 3,031,184 12
</TABLE>
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<PAGE> 64
<TABLE>
<CAPTION>
NUMBER OF TRAILING
MINIMUM EBIT MONTHS USED TO
DETERMINATION DATE TARGET CALCULATE EBIT
- ---------------------- -------------- -------------------
<S> <C> <C>
January 31, 2000 1,755,121 6
January 31, 2000 3,599,583 12
April 30, 2000 2,169,097 6
April 30, 2000 4,001,232 12
July 31, 2000 1,983,879 6
July 31, 2000 4,486,799 12
</TABLE>
(d) In the event HIG Fund V, Inc. elects a majority of
the members of the Board of Directors pursuant to Section 6(a)(ii), the Company
shall not, without the approval of the holders of fifty one percent (51%) of the
outstanding voting securities of the Company, take any of the actions described
in Section 8 of Exhibit A to the Purchase Agreement or engage in any business
activity not in conformity with Section 4.10 of the Purchase Agreement.
7. Compensation Committee. There shall be established at all
times during the term of this Agreement a Compensation Committee of the Board of
Directors (the "Compensation Committee") which shall be comprised of two
directors as follows: one of whom shall be the director designated by the
Principal Shareholders so long as they are in the employment of the Company (and
by the Board of Directors if they are no longer in the employment of the
Company); and one of whom shall be one of the directors designated HIG Fund VI,
Inc. The Compensation Committee shall determine the compensation of all senior
employees and consultants of the Company (including salary, bonus, equity
participation and benefits) as well as the nomination of officers to be
appointed by the Board of Directors. The decisions of the Compensation Committee
must be unanimous.
8. Term. This Agreement shall terminate immediately prior to (a)
the consummation of the first Qualified Public Offering or (b) the tenth
anniversary of the date of this Agreement, whichever occurs first.
9. Failure to Deliver Shares. If a Current Shareholder becomes
obligated to sell any Shares to another Shareholder under this Agreement and
fails to deliver such Shares in accordance with the terms of this Agreement, the
Other Shareholders may, at their option, in addition to all other remedies they
may have, send to the defaulting Current Shareholder the purchase price for such
Shares as is herein specified. Thereupon, the Company, upon written notice to
the defaulting Current Shareholder, (a) shall cancel on its books the
certificate or certificates representing the Shares to be sold and (b) shall
issue, in lieu thereof, in the name of such other Shareholder, a new certificate
or certificates
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<PAGE> 65
representing such Shares, and thereupon all of the defaulting Current
Shareholder's rights in and to such Shares shall terminate.
10. Specific Enforcement. Each Shareholder and the Company
expressly agrees that the other Shareholders and the Company may be irreparably
damaged if this Agreement is not specifically enforced. Upon a breach or
threatened breach of the terms, covenants and/or conditions of this Agreement by
any Shareholder, the other Shareholders and the Company shall, in addition to
all other remedies, each be entitled to apply for a temporary or permanent
injunction, and/or a decree for specific performance, in accordance with the
provisions hereof.
11. Legend. Each certificate evidencing any of the Shares now
owned or hereafter acquired by the Current Shareholders shall bear a legend in
addition to any other required legend, substantially as follows:
"ANY SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF
THE SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED
BY, AND SUBJECT TO, THE TERMS AND PROVISIONS OF A CERTAIN
SHAREHOLDERS' AGREEMENT DATED AS OF JUNE 25, 1996. A
COPY OF SAID AGREEMENT IS ON FILE WITH THE SECRETARY OF
THE CORPORATION."
12. Notices. Notices given hereunder shall be deemed to have been
duly given on the date of personal delivery or on the date of postmark if mailed
by certified or registered mail, return receipt requested, to the party being
notified at his or its address specified on the applicable schedule hereto or
such other address as the addressee may subsequently notify the other parties of
in writing.
13. Entire Agreement and Amendments. This Agreement con stitutes
the entire agreement of the parties with respect to the subject matter hereof
and neither this Agreement nor any provision hereof may be waived, modified,
amended or terminated except by a written agreement signed by the parties
hereto; provided, however, that Investor owning at least a majority of the
Shares owned by all Investors may effect any such waiver, modification,
amendment or termination on behalf of all of the Investors and 80% of the Shares
owned by all Current Shareholders may effect any such waiver, modification,
amendment or termination on behalf of all of the Current Shareholders. Each of
the Shareholders represents that he or it is not a party to any other agreement
which would prevent him or it from performing his or its obligations hereunder.
No waiver of any breach or default hereunder shall be considered valid unless in
writing, and no such waiver shall be deemed a waiver of any subsequent breach or
default of the same or similar nature.
14. Governing Law; Successors and Assigns. This Agreement shall be
governed by the internal laws of the State of Florida
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<PAGE> 66
without giving effect to the conflicts of laws principles thereof and, except as
otherwise provided herein, shall be binding upon the heirs, personal
representatives, executors, administrators, successors and assigns of the
parties.
15. Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein. This Agreement
supersedes any and all agreements between (a) the Company on the one hand and
any Shareholder on the other hand (other than the Purchase Agreement and the
agreements which are exhibits thereto) and (b) any two or more Shareholders.
Each Shareholder represents and warrants that he is not subject to any agreement
which may conflict with or violate the terms of this Agreement and covenants
that he will not enter into any such agreement.
16. Captions. Captions are for convenience only and are not deemed
to be part of this Agreement.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
CURRENT SHAREHOLDERS: COMPANY:
- ---------------------------- Let's Talk Cellular of America,
Nick Molina Inc.
- ----------------------------
Brett Beveridge By:
-------------------------
Name:
Title:
- ---------------------------- INVESTOR:
Allan Sorenson
HIG Fund V, Inc.
By:
- ---------------------------- -------------------------
Ann Gozlan Name:
Title:
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<PAGE> 67
EXHIBIT C
REDEMPTION AGREEMENT
This Redemption Agreement (the "Agreement") is dated as of the 25th day
of June, 1996 by and between Let's Talk Cellular of America, Inc., a Florida
corporation (the "Company"), and HIG Fund V, Inc. (together with its permitted
assigns, each an "Investor" and collectively the "Investors").
As of the date of this Agreement, the Investor has purchased an
aggregate of 100,000 shares of the Series A Preferred Stock, par value $30 per
share, of the Company (the "Preferred Stock"), pursuant to a Series A Preferred
Stock Purchase Agreement dated as of June 25, 1996 (the "Purchase Agreement").
The shares of Series A Preferred Stock, together with the shares of Common
Stock, par value $1.00 per share of the Company (the "Common Stock") issuable
upon conversion of the Series A Preferred Stock and any other Common Stock now
owned or hereafter acquired by the Investors (together with any shares issued
with respect thereto pursuant to any stock split, stock dividend or the like)
are referred to herein as the "Shares." Capitalized terms used herein and not
otherwise defined in this Agreement shall have the meanings assigned to them in
the Purchase Agreement.
In consideration of the execution and delivery of the Purchase
Agreement and the agreements set forth below, the parties agree with each other
as follows:
1. Option to Sell Shares to Company. (a) In the event that prior
to the earlier to occur of (i) the liquidation, dissolution or winding up of the
Company, (ii) the merger or consolidation of the Company with any Person, or the
sale or other disposition of all or substantially all of the Company's
properties and assets to any Person, or the transfer of ownership of any voting
shares of the Company to any Person as a consequence of which those Persons who
held all of the voting shares of the Company immediately prior to such transfer
do not hold a majority of the voting shares of the Company after the
consummation of such transfer (the "Control Sale"), (iii) a default by the
Company under the Purchase Agreement or (iv) June 25, 2001 ((i), (ii) and
(iii) being referred to herein as "Exercise Events"), the Company shall not have
consummated a Qualified Public Offering, the Investors may require the Company
to redeem the Shares then held by them on the terms herein provided. In such
event any Investor or Investors holding an aggregate of not less than twenty
percent (20%) of the total Shares held by the Investors may notify the Company
that it or they intend to offer to the Company any or all of the Shares then
held by him or them for purchase by the Company. The Company shall promptly give
notice of such intention to all other Investors who own Shares, and any Investor
may, within ten (10) days of such
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notice, give the Company notice that he intends to offer to the Company any or
all of the Shares then held by him. The Company shall repurchase all Shares so
offered under this Agreement as set forth below, provided that the amount of
Shares so offered equals or exceeds twenty percent (20%) of the total Shares
held by the Investors. The option to sell Shares pursuant to this Section 1
shall be referred to as the "Option."
(b) The Company agrees to provide each Investor thirty (30) days'
written notice of the pendency of an Exercise Event and each Investor shall have
the right to exercise this Option in the manner provided in Section 1(a) above.
If the Exercise Event giving rise to the exercise of the Option is a
liquidation, dissolution or winding up of the Company or a Control Sale, the
Option may be exercised immediately prior to, or concurrently with, the
effective date of the liquidation, dissolution or winding up of the Company or
Control Sale, as the case may be. The Company agrees that the transaction giving
rise to the Exercise Event shall not be consum mated until it has satisfied its
obligation to repurchase the Shares as provided herein. In all other
circumstances, the Investors holding at least twenty percent (20%) of the Shares
held by the Investors which remain outstanding from time to time may exercise
the right to require the Company to purchase the Shares hereunder. In the event
that an Investor elects to exercise the Option in connection with a liquidation,
dissolution or winding up of the Company or Control Sale, any such election
shall be contingent upon the consummation of such event.
2. Price.
(a) The price to be paid by the Company for the Shares to
be sold under the Option shall be the fair market value thereof, as of the date
of such proposed repurchase, as agreed upon in good faith by the Company and the
Representative (who shall be a Person selected by the Investors owning a
majority of the Shares to be redeemed hereunder and who shall be hereinafter
referred to as the "Representative"), taking into account, in valuing such
Shares, all relevant facts and circumstances; provided, however, that (i) there
shall be no discount to reflect the fact that the Shares represent a minority
interest in the Company and (ii) in no event (whether by agreement of the
parties or after appraisal as described below) shall the aggregate purchase
price to be paid for such Shares being redeemed be less than the original
purchase price paid by the Investors therefor (as adjusted to reflect any stock
split, stock dividend or other form of recapitalization). If no such agreement
is reached within thirty (30) days after notice is given to the Company of the
Investors' exercise of the Option, the fair market value shall be determined by
appraisal as set forth below.
(b) All appraisals shall be undertaken by two appraisers,
one selected by the shareholders (other than HIG Fund V, Inc. and its
transferees) of the Company and one selected by the
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<PAGE> 69
Representative. No Director whose Shares are being appraised or who is
affiliated with a person whose Shares are being appraised shall vote on the
selection of the appraiser chosen by the Company. The fair market value shall be
the fair market value arrived at by those appraisers within thirty (30) days
following the appointment of the last appraiser to be appointed. In the event
that the two appraisers agree in good faith on such fair market value within
such a period of time, such agreed value shall be used for these purposes. If
the appraisers cannot agree but their valuations are within ten percent (10%) of
each other, the fair market value shall be the mean of the two valuations. If
the appraisers cannot agree and the differences in the valuations are greater
than ten percent (10%), the appraisers shall select a third appraiser who will
calculate fair market value independently, and, except as provided in the next
sentence, the fair market value of the Shares shall be the average of the two
fair market values arrived at by the appraisers who are closest in amount. If
one appraiser's valuation is the mean of the other two valuations, such mean
valuation shall be the fair market value. In the event that the two original
appraisers cannot agree upon a third appraiser within ten (10) days following
the end of the thirty (30) day period referred to above, then the third
appraiser shall be appointed by the American Arbitration Association in Miami,
Florida. If, following the final determination of the purchase price for the
Shares, any Investor previously offering his Shares for repurchase shall choose
not to sell any or all of its Shares, then such Investor shall so notify the
Company within ten (10) days following receipt of the results of the appraisal
and may do so by paying the fees of such appraisal and up to $5,000 of other
documented expenses. The expenses of the appraiser chosen by the Company will be
borne by it, the expenses of the appraiser chosen by the Investors will be borne
by them, pro rata based on the number of Shares being redeemed, and the expenses
of the third appraiser will be borne fifty percent (50%) by the Company and
fifty percent (50%) by the Investors, pro rata based on the number of Shares
being redeemed.
3. Payment.
(a) Within forty-five (45) days following either the
agreement, as provided above, of the Company and the Representative concerning
the fair market value of the Shares or the receipt of the results of the last of
the appraisals referred to above, the Company shall purchase the Shares tendered
to it at the price established by this Agreement (the "Redemption Price"), and
the Investors shall deliver to the Company, upon receipt of payment therefor,
the certificates for the Shares duly endorsed by them for transfer.
(b) Notwithstanding the other provisions of this Agree
ment, the Company shall not be obligated to repurchase any Shares to the extent
such repurchase would violate applicable law, as determined by an opinion of
counsel to the Company, which opinion
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and counsel shall be reasonably satisfactory to the Representative; provided,
however, that the Company shall use its best efforts to comply with such
restriction. In the event a repurchase is delayed on account of the preceding
sentence, it shall be made at the first time it would not violate such law and
the Redemption Price shall bear interest at a rate equal to fifteen percent(15%)
per annum, until such time as the redemption is completed. If on account of the
first sentence of this subparagraph (b) the Company may purchase fewer than all
of the Shares offered for redemption, the Company shall repurchase all Shares
when permitted, allocated pro rata among those who requested that their Shares
be redeemed, in proportion to the amount which would have been paid to such
holder had all Shares as to which it requested redemption been redeemed. If on
account of the first sentence of this subparagraph (b) the Company may purchase
fewer than all of the Shares offered for redemption, the holders of the Shares
not redeemed shall continue to receive the benefit of the rights and privileges
afforded the Shares under the Purchase Agreement and the Related Agreements.
(c) Payment shall be made by check or wire transfer of
funds to such bank account as each Investor shall direct.
4. Termination of Option. The obligations of the Company to
purchase the Shares as provided in this Agreement shall terminate upon the
consummation of a Qualified Public Offering or a sale of all of the Common Stock
of the Company.
5. Notices. All notices or other communications required or
permitted to be delivered hereunder shall be in writing signed by the party
giving the notice and sent by telecopier, express delivery service, or regular
or certified mail to the address specified in the Purchase Agreement.
6. Entire Agreement. This Agreement and the agreements referred
to herein constitute the entire agreement of the parties with respect to the
matters contemplated herein. This Agreement and such other agreements supersede
any and all prior understand ings as to the subject matter of this Agreement.
7. Amendments, Waivers and Consents. Any provision in this
Agreement to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein set
forth may be omitted or waived, if the Company shall obtain consent thereto in
writing from Persons holding an aggregate of at least a majority of the Shares
owned by the Investors.
8. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the respective
parties hereto.
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9. General; Definitions. The headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural the singu lar, the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and con
strued under the laws of the State of Florida. Terms used as defined terms
herein and not otherwise defined shall have the meanings set forth in the
Purchase Agreement.
10. Severability. If any provision of this Agreement shall be
found by any court of competent jurisdiction to be invalid or unenforceable, the
parties hereby waive such provision to the extent that it is found to be invalid
or unenforceable. Such pro vision shall, to the maximum extent allowable by law,
be modified by such court so that it becomes enforceable, and, as modified,
shall be enforced as any other provision hereof, with all the other provisions
hereof continuing in full force and effect.
11. Counterparts. This Agreement may be executed in counter parts,
all of which together shall constitute one and the same instrument.
* * * * * *
Let's Talk Cellular of America, Inc.
By:
-----------------------------------
HIG Fund V, Inc.
By:
-----------------------------------
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EXHIBIT D
[Letterhead of Steel, Hector & Davis]
___________, 1996
HIG Fund V, Inc.
c/o H.I.G. Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Re: Let's Talk Cellular America, Inc.
Gentlemen:
This opinion is furnished to you pursuant to Section 8.9 of the Series
A Preferred Stock Purchase Agreement, dated as of June __, 1996 (the "Purchase
Agreement"), between Let's Talk Cellular America, Inc., a Florida corporation
(the "Company"), the stockholders of the Company and HIG Fund V, Inc. (the
"Purchasers"). Terms not otherwise defined herein shall have the meanings as set
forth in the Purchase Agreement.
We have acted as counsel for the Company in connection with the
negotiation, execution and delivery of the Purchase Agreement and consummation
of the transactions contemplated thereby. Whenever our opinion with respect to
the existence or absence of facts is indicated to be based on our knowledge or
awareness, we are referring solely to the actual knowledge of the particular
attorneys within our firm who represented the Company in connection with the
Purchase Agreement.
As to the various questions of fact material to our opinion, we have
relied without independent verification upon the representations made in the
Agreement and upon certificates of officers of the Company. We have also
examined such certificates of public officials, corporate documents and records
and other certificates and instruments as we have deemed necessary in connection
with the opinions set forth herein.
We have assumed the genuineness of all signatures and the authenticity
of all items submitted to us as originals, the legal capacity of natural
persons, and the conformity with originals of all items submitted to us as
copies. In making our examination of documents executed by entities other than
the Company, we have assumed that each such entity had the power, authority and
legal right to enter into and perform all its obligations thereunder and we have
also assumed the due authorization, execution and delivery of such documents by
each such entity.
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With respect to the opinion expressed in paragraph 6 below, we have
relied upon the representations contained in Section 6.1 of the Purchase
Agreement. Our opinions expressed herein are limited to the laws of the State of
Florida and applicable Federal law in effect on the date hereof and we do not
express any opinion herein concerning any other law.
Based upon and subject to the foregoing, we are of the opinion that:
(1) The Company is duly incorporated and validly existing
corporation in good standing under the laws of the State of Florida, and is
qualified to do business and is in good standing in each jurisdiction in which
it has its principal place of business. The Subsidiaries are each an existing
corporation in good standing under the laws of the jurisdictions in which they
are incorporated and are each qualified to do business and are in good standing
in each jurisdiction in which it has its principal place of business. The
Company has the corporate power and authority to enter into and perform its
obligations under the Purchase Agreement and each Related Agreement and to issue
and deliver the Preferred Stock pursuant to the Purchase Agreement.
(2) The Company has all necessary corporate power and has taken
all necessary corporate action required for the due authorization, execution,
delivery and performance by the Company of the Purchase Agreement and the
Related Agreements and the consummation of the transactions contemplated
thereby, and for the due authorization, issuance and delivery of the Purchased
Shares and the Conversion Shares issuable upon conversion of the Purchased
Shares. Sufficient shares of authorized but unissued Common Stock have been
reserved for issuance upon conversion of the Purchased Shares, based on the
conversion rates in effect on the date hereof. The sale and issuance of the
Purchased Shares does not, and the issuance of the Conversion Shares upon
conversion of the Purchased Shares will not, require any further corporate
action (other than execution and delivery of the certificates relating thereto),
and is not and will not be subject to any statutory or, to our knowledge,
preemptive rights of stockholders or rights of first refusal to purchase shares.
The Purchase Agreement and each of the Related Agreements have been duly
authorized, executed and delivered by the Company. The Purchase Agreement and
the Related Agreements constitute the legal, valid and binding obligations of
the Company enforceable against the Company in accordance with their respective
terms.
(3) Assuming the consummation of the Purchase Agreement, (a) the
Company's authorized capital stock consists of (i) ________ shares of common
stock, par value $____ per share, and (ii) ________ shares of Preferred Stock,
all of which have been designated as Series A Convertible Preferred Stock and
(b) based solely on an officer's certificate, there are ________ shares of
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common stock issued and outstanding and held of record by the individuals set
forth on Schedule 2.4 to the Agreement and there will be ________ shares of
Preferred Stock issued and outstanding. The Purchased Shares have been duly
authorized by the Company under the Business Corporation Act of the State of
Florida for issuance pursuant to the Purchase Agreement and, when issued and
delivered against payment therefor in accordance with the terms of the Purchase
Agreement, will be validly issued, fully paid and nonassessable.
(4) The execution and delivery of the Purchase Agreement and the
Related Agreements, the performance by the Company of its obligations
thereunder, the issuance of the Purchased Shares and the consummation of the
transactions contemplated thereby do not conflict with the Articles of
Incorporation or By-Laws of the Company or any Affiliate, any material
agreements of the Company or any Florida or Federal statute, rule or regulation.
(5) No approval, authorization or other action by any governmental
authority is required for the execution, delivery and performance by the Company
of the Purchase Agreement or the Related Agreements and the consummation of the
transactions contemplated thereby (including the sale and issuance of the
Purchased Shares or the issuance of the Conversion Shares upon conversion of the
Purchased Shares) or in connection with the consummation of the transactions
contemplated thereby except for (i) those which have already been made or
granted, and (ii) the filing of registration statements with the Commission and
any applicable state securities commission as specifically provided for in
Article VII of the Purchase Agreement.
(6) It is not necessary in connection with the issuance and
delivery of the Purchased Shares under the circumstances contemplated by the
Purchase Agreement to register the issuance of the Purchased Shares under the
Securities Act of 1933 or any Florida securities or blue sky laws.
(7) The amendment and restatement of the Company's Articles of
Incorporation containing the provisions set forth in Exhibit A to the Purchase
Agreement has been duly adopted by the requisite vote of the Board of Directors
and the Shareholders of the Company, has been transmitted for filing with the
Secretary of State of the State of Florida and upon acceptance for filing shall
become effective under the laws of the State of Florida.
(8) To our knowledge, no action or proceeding before any court or
government body is pending or threatened against the Company wherein an
unfavorable judgment, decree or order would prevent the consummation of the
Purchase Agreement or any of the transactions contemplated thereby, declare
unlawful the transactions contemplated thereby, or cause such transactions to be
rescinded. Without any independent investigation other than
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inquiry of the Company's officers, in the course of our representation of the
Company in connection with the Purchase Agreement, nothing has come to our
actual attention which would lead us to believe that the Company or any
Subsidiary is involved in any litigation or government proceeding or
investigation other than as set forth in the schedules to the Purchase
Agreement.
The opinions set forth above are subject to the following
qualifications:
(a) Our opinion in paragraph (2) above is subject to the effect of
any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar law affecting creditors' rights generally and to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law) and public policy
considerations or court decisions which may limit rights to obtain
indemnification or contribution. In addition, provisions of the Purchase
Agreement and Related Documents which permit the Purchasers, the Company or the
Principal Shareholders to take action or make determinations may be subject to a
requirement that such action be taken or such determinations be made in a
commercially reasonable manner and in good faith.
(b) We call your attention to the following matters as to which we
express no opinion: (i) the Company's and the Principal Stockholders' agreements
in the Purchase Agreement and Related Documents to indemnify you against any
cost, expense or liability arising out of or related to any Federal, state or
other securities laws: (ii) fraudulent transfer laws, (iii) title to property;
(iv) any order of any court or other authority directed specifically to any
party to the Purchase Agreement and Related Documents of which we do not have
knowledge; (v) disposition of securities under any Purchase Agreement or Related
Document may be subject to federal or state securities laws; (vi) the
enforceability of (A) rights of debtors, lessees or others that may not be
waived or that may be waived only under certain circumstances under applicable
law, and (B) provisions of the Purchase Agreement and Related Documents to the
extent, if any, purporting to compensate any party in excess of actual loss or
reasonable expenses.
This opinion is solely for your benefit and may not be relied upon by
any other person without our prior written consent or used for any other
purpose.
Very truly yours,
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EXHIBIT E
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the __ day of June, 1996,
by and between Let's Talk Cellular of America, Inc., a Florida corporation (the
"Company"), and ______________, an individual residing at ____________________
(the "Executive").
WITNESSETH THAT:
WHEREAS, the Company desires to employ the Executive in the capacity
hereinafter stated, and the Executive desires to enter into the employ of the
Company in such capacity for the period and on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the Company and the
Executive as follows:
1. Employment Period. The Company hereby agrees to continue to
employ the Executive as its __________________ and the Executive, in such
capacity, agrees to provide services to the Company for the period beginning on
the date first above written (the "Commencement Date") and ending on the third
anniversary of the Commencement Date (the "Employment Period"); provided,
however, that this Agreement shall automatically be extended for an additional
year on each anniversary of the Commencement Date unless the Company provides
the Executive notice of non-extension at least sixty (60) days prior to such
anniversary.
2. Performance of Duties. The Executive agrees that during the
Employment Period, while he is employed by the Company, he shall devote his full
time, energies and talents exclusively to serving in the capacity of ________ of
the Company in the best interests of the Company, and to perform the duties
assigned to him by the Board faithfully, efficiently and in a professional
manner; provided that, without the Board's consent (which consent shall not be
unreasonably withheld), the Executive shall not:
(a) serve as or be a consultant to or employee, officer,
agent or director of any competing corporation,
partnership or other entity other than the Company
(other than civic, charitable, or other public
service organizations or as a consultant or director
for a company in an industry outside the Business for
up to five hours in any calendar month); or
(b) have more than a three percent (3%) ownership
interest in any enterprise other than the Company
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if such ownership interest would have a material
impact upon the ability of the Executive to perform
his duties hereunder.
3. Compensation. Subject to the terms and conditions of this
Agreement, during the Employment Period, the Executive shall be
compensated by the Company for his services as follows:
(a) He shall receive, for each 12-consecutive month
period beginning on the Commencement Date and each
anniversary thereof, a rate of salary which is not
less than $200,000 per year (as adjusted annually
for the greater of (i) for the increase in the
Consumer Price Index as published by the U.S.
Department of Labor or (ii) five percent (5%),
payable in substantially equal monthly or more
frequent installments, plus any additional
discretionary bonus approved by unanimous consent
of the Compensation Committee.
(b) He shall be entitled to receive the following
perquisites which shall not be less favorable to the
Executive than the perquisites provided by the
Company immediately prior to the Employment Period:
Nick:
Auto Lease (1 car)
Auto Insurance
Health Insurance
Country Club-Dues
Life Insurance
Disability Insurance
401(K)
Brett:
Auto Lease (1 car)
Auto Insurance
Health Insurance
Country Club-Dues
Life Insurance
Disability Insurance
401(K)
(c) He shall be reimbursed by the Company for all
reasonable business, promotional, travel and
entertainment expenses incurred or paid by him during
the employment period in the performance of his
services under this Agreement provided that the
Executive furnishes to the Company appropriate
documentation in a timely fashion required by the
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Internal Revenue Code in connection with such
expenses and shall furnish such other documentation
and accounting as the Company may from time to time
reasonably request.
4. Compensation Due Upon Termination. Except as otherwise
provided under the executive benefit plans maintained by the Com pany in which
the Executive participates in accordance with sub paragraph 3(b), the
Executive's right to compensation for periods after the date his employment with
the Company terminates shall be determined in accordance with the following:
(a) Discharge Without Cause. In the event the Company
terminates the Executive's employment under this
Agreement without cause, the Executive shall be
entitled to receive $10,416.66 per month (less
applicable taxes) for the twenty four (24) months
following the date of termination, payable in
accordance with the Company's payroll procedures
and prorated for periods less than a full month.
(b) Voluntary Resignation. The Company shall have no
obligation to make payments to the Executive in
accordance with the provisions of paragraph 3 for
periods after the date on which the Executive's
employment with the Company terminates due to the
Executive's voluntary resignation; provided,
however, that the Company shall be obligated to pay
the amount set forth in Section 4(a) of this
Agreement if the Executive voluntarily resigns due
to Constructive Termination (as hereinafter
defined).
For purposes of this Agreement, "Constructive Termination" shall mean any one or
more of the following: (i) a significant change in the nature or scope of the
Executive's authority or duties or title against the will of the Executive or
(ii) the relocation of the Executive's office outside Dade County or to a site
other than the Company's headquarters against the will of the Executive.
(c) Discharge for Cause. The Company shall have no
obligation to make payments to the Executive in
accordance with the provisions of paragraph 3 for
periods after the Executive's employment with the
Company is terminated on account of the Executive's
discharge for cause. For purposes of this
subparagraph 4(c), in addition to the right to
terminate the Executive's employment for fraud, the
Executive shall be considered discharged for
"cause" if he is discharged by the Company on
account of the occurrence of one or more of the
following events:
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(i) the Executive becomes habitually addicted to
drugs or alcohol;
(ii) the Executive discloses material
confidential information in violation of
paragraph 6;
(iii) the Executive engages in competition in
violation of paragraph 7;
(iv) the Company is directed by regulatory or
governmental authorities to terminate the
employment of the Executive or the Executive
engages in activities that cause actions to
be taken by regulatory or governmental
authorities that have a material adverse
effect on the Company;
(v) the Executive is convicted of a felony
(other than a felony resulting from a
traffic violation or minor tax disputes); or
(vi) The Executive flagrantly disregards his
duties under this Agreement after (A) notice
has been given to the Executive by the Board
of Directors of the Company that it views
the Executive to be flagrantly disregarding
his duties under this Agreement and (B) the
Executive has been given a period of 15 days
after such notice to cure such misconduct.
(d) Disability. The Company shall have no obligation
to make payments to the Executive in accordance
with the provisions of paragraph 3 at any time six
months after the date the Executive's employment
with the Company terminates on account of
disability. For purposes of this subparagraph 4(d),
determination of whether the Executive is disabled
shall be determined in accordance with the
Company's long term disability plan.
(e) Death. The Company shall have no obligation to make
payments to the Executive in accordance with the
provisions of paragraph 3 for periods after the
date of the Executive's death.
5. Tax Limitations. If any payments under this Agreement, after
taking into account all other payments to which the Executive is entitled from
the Company, or any affiliate thereof, are more likely than not to result in a
loss of a deduction to the Company
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by reason of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor provision to that section, such payments shall be
reduced by the least amount required to avoid such loss of deduction. If the
Executive and the Company shall disagree as to whether a payment under this
Agreement is more likely than not to result in the loss of a deduction, the
matter shall be resolved by a written opinion of tax counsel chosen by the
Company's independent auditors. The Company shall pay the fees and expenses of
such counsel, and shall make available such information as may be reasonably
requested by such counsel to prepare the opinion. If, by reason of the
limitations of this paragraph 5, the maximum amount payable to the Executive
under subparagraph 4(a) above cannot be determined prior to the due date of
payment, the Company shall pay on such due date the minimum amount which it in
good faith determines to be payable and shall pay the difference, with interest
calculated at the rate prescribed by section 1274(b)(2)(B) of the Code, as soon
as such difference is determined in accordance with this paragraph 5; provided,
however, that the Company shall used its best efforts to determine the amount of
the difference within six months after the due date for such payment.
6. Confidential Information. Except as may be required by the
lawful order of a court or agency of competent jurisdiction, the Executive
agrees to keep secret and confidential for a period of two (2) years all
non-public information concerning the Company and its affiliates which was
acquired by or disclosed to the Executive during the course of his employment by
the Company, any of its affiliates, including information relating to customers
(including, without limitation, credit history, repayment history, financial
information and financial statements), costs, and operations, financial data and
plans, whether past, current or planned and not to disclose the same, either
directly or indirectly, to any other person, firm or business entity, or to use
it in any way; provided, however, that the provisions of this paragraph 6 shall
not apply to information which is in the public domain or that was disclosed to
the Executive by independent third parties who were not bound by an obligation
of confidentiality; and provided further, that the Company recognizes that the
Executive shall, during the course of his employment with the Company, acquire
certain general information regarding the financial condition, and borrowing
trends of the Company's customers and agrees that the provisions of this
paragraph 6 shall not apply to the use of such general information provided the
use thereof does not violate applicable Federal or state laws or the provisions
of paragraph 7 hereof. The Executive further agrees that he will not make any
statement or disclosure which would be prohibited by applicable Federal or state
laws and, during the Employment Period while he is employed by the Company, he
will not make any statement or disclosure which is intended or reasonably likely
to be detrimental to the Company or any of its subsidiaries or affiliates.
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7. Non-competition. The Executive agrees that for the
Non-competition Period, the Executive agrees not to directly or indirectly serve
as or be a consultant to or employee, officer, agent, director or owner of more
than three percent (3%) of another corporation, partnership or other entity
which engages in the business of selling cellular or wireless communication
services or products (the "Business") in the Restricted Area. The "Restricted
Area" shall include any metropolitan area or proposed metropolitan area in which
the Company is doing or will do business within six months of the date of
termination of the Executive's employment (the "Termination Date"). The
"Noncompetition Period" shall mean the period commencing on the Commencement
Date and terminating on (i) the second anniversary of the Termination Date if
the Executive resigns or otherwise leaves the Company's employment on his own
accord (excluding Construction Termination), or (ii) the first anniversary of
the Termination Date if the Executive's employment terminates for any reason
other than (i) above. The Executive further agrees that for the Non-competition
Period, he will not solicit for employment or endeavor to entice away from
employment with the Company or its affiliates any employee of the Company or its
affiliates who is an officer or a manager of any department.
8. Successors. This Agreement shall be binding on, and inure to
the benefit of, the Company and its successors and assigns and any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company's assets and business.
9. Nonalienation. The interests of the Executive under this
Agreement are not subject to the claims of his creditors, other than the
Company, and may not otherwise be voluntarily or involun tarily assigned,
alienated or encumbered.
10. Remedies. The Executive acknowledges that the Company would be
irreparably injured by a violation of paragraphs 6 or 7, and agrees that the
Company shall be entitled to an injunction restraining the Executive from any
actual or threatened breach of paragraph 6 or 7, or to any other appropriate
equitable remedy.
11. Waiver of Breach. The waiver by either the Company or the
Executive of a breach of any provision of this Agreement shall not operate as or
be deemed a waiver of any subsequent breach by either the Company or the
Executive.
12. Notice. Any notice to be given hereunder by a party hereto
shall be in writing and shall be deemed to have been given when received or,
when deposited in the U.S. mail, certified or registered mail, postage prepaid:
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(a) to the Executive addressed as follows:
(b) to the Company addressed as follows:
Let's Talk Cellular of America, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attention: Board of Directors
13. Amendment. This Agreement may be amended or cancelled by
mutual agreement of the parties in writing without the consent of any other
person and, so long as the Executive lives, no person, other than the parties
thereto, shall have any rights under or interest in this Agreement or the
subject matter hereof.
14. Applicable Law. The provisions of this Agreement shall be
construed in accordance with the internal laws of the State of Florida.
15. Termination. All of the provisions of this Agreement shall
terminate after the expiration of the Employment Period, except that paragraph 6
shall only terminate upon the expiration of the Confidentiality Period and
paragraph 7 shall terminate upon the expiration of the later of Non-competition
Period or the Nonsolicitation Period.
* * *
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IN WITNESS WHEREOF, the Executive and the Company have executed this
Employment Agreement as of the day and year first written above.
[Executive]
-------------------------------------
Let's Talk Cellular of America,
Inc.
By:
----------------------------------
Its:
----------------------------------
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EXHIBIT F
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as of
the 25th day of June, 1996, by and between Let's Talk Cellular of America, Inc.,
a Florida corporation (the "Company"), and H.I.G. Capital Management, Inc. (the
"Consultant").
1. Appointment of Consultant. The Company appoints the Consultant
and the Consultant accepts appointment on the terms and conditions provided in
this Agreement as a consultant to the Company's business, including any other
corporations hereafter formed or acquired by the Company to engage in any
business.
2. Board of Directors Supervision. The activities of the
Consultant to be performed under this Agreement shall be subject to the
supervision of the Board of Directors of the Company (the "Board") to the extent
required by applicable law or regulation and subject to reasonable policies not
inconsistent with the terms of this Agreement adopted by the Board and in effect
from time to time. Where not required by applicable law or regulation, the
Consultant shall not require the prior approval of the Board to perform its
duties under this Agreement.
3. Authority of Consultant. Subject to any limitations imposed by
applicable law or regulation or by the Board, the Consultant shall render
management, consulting and financial services to the Company, at the Company's
sole discretion, which services shall include advice and assistance in
connection with the planning and effectuation of a Triggering Event (as defined
in the Company's Description of Series A Preferred Stock in its articles of
incorporation). The Consultant will use its best efforts to cause its employees
and agents to give the Company the benefit of their special knowledge, skill and
business expertise to the extent relevant to the Company's business and offers.
4. Reimbursement of Expenses; Independent Contractor. The
Consultant shall not be obligated to make any advance to or for the account of
the Company or to pay any sums, except out of funds held in accounts maintained
by the Company nor shall the Consultant be obligated to incur any liability or
obligation for the account of the Company without assurance that the necessary
funds for the discharge of such liability or obligation will be provided. The
Consultant shall be an independent contractor, and nothing obtaining in this
Agreement shall be deemed or construed (i) to create a partnership or joint
venture between the Company and the Consultant, or (ii) to cause the Consultant
to be responsible in any way for the debts, liabilities or obligations of the
Company or
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<PAGE> 85
any other party, or (iii) to constitute the Consultant or any of its employees
as employees, officers or agents of the Company.
5. Other Activities of Consultant; Investment Opportunities. The
Company acknowledges and agrees that neither the Consultant nor any of the
Consultant's employees, officers, directors, affiliates or associates shall be
required to devote full time and business efforts to the duties of the
Consultant specified in this Agreement, but instead shall devote only so much of
such time and efforts as the Consultant reasonably deems necessary. The Company
further acknowledges and agrees that the Consultant and its affiliates are
engaged in the business of investing in, acquiring and/or managing businesses
for the Consultant's own account, for the account of unaffiliated parties, and
understands that the Consultant plans to continue to be engaged in such
businesses (and other business or investment activities) during the term of this
Agreement. No aspect or element of such activities shall be deemed to be engaged
in for the benefit of the Company or any of its subsidiaries nor to constitute a
conflict of interest. Furthermore, notwithstanding anything herein to the
contrary, the Consultant shall be required to bring only such investments and/or
business opportunities to the attention of the Company as the Consultant, in its
sole discretion, deems appropriate.
6. Compensation of Consultant. In consideration of Consultant's
agreement to provide the management services described herein, the Company will
pay to the Consultant a consulting and management fee upon the occurrence of the
earlier of (i) a Triggering Event or (ii) a default under the Series A Preferred
Stock Purchase Agreement (the "Payment Date"). The consulting fee shall be equal
to the product of (A) the number of months that have passed between the Payment
Date and June 1996 divided by 12 and (B) at the option of the Company, (i)
$240,000 or (ii) 8,000 shares of Series A Preferred Stock (as equitably adjusted
from time to time to reflect stock splits combinations, recapitalizations or
other similar event affecting the Preferred Stock); provided that the fair
market value of the 8,000 shares equals or exceeds $240,000.
7. Term. This Agreement shall commence as of the date hereof and
shall remain in effect through the occurrence of a Triggering Event.
8. Termination Upon Breach. Either the Company or the Consultant
may terminate this Agreement in the event of the breach of any of the material
terms or provisions of this Agreement by the other party, which breach is not
cured within 30 business days after notice of the same is given to the party
alleged to be in breach by the other party.
9. Standard of Care. The Consultant (including any person or
entity acting for or on behalf of the Consultant) shall not be liable for any
mistakes of fact, errors of judgment, for losses
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<PAGE> 86
sustained by the Company or for any acts or omissions of any kind (including
acts or omissions of the Consultant), unless caused by intentional misconduct of
the Consultant.
10. Indemnification of Consultant. The Company hereby agrees to
indemnify and hold harmless the Consultant and its present and future officers,
directors, affiliates, employees and agents ("Indemnified Parties") to the
fullest extent permitted by law. The Company further agrees to reimburse the
Indemnified Parties on a monthly basis for any cost of defending any action or
investigation (including attorneys' fees and expenses), subject to an
undertaking from such Indemnified Party to repay the Company if such party is
determined not to be entitled to such indemnity.
11. No Assignment. Without the consent of the Consultant, the
Company shall not assign, transfer or convey any of its rights, duties or
interest under this Agreement, nor shall it delegate any of the obligations or
duties required to be kept or performed by it hereunder. Without the prior
written consent of the Company, the Consultant shall not assign, transfer or
convey any of its rights, duties or interests under this Agreement, nor shall it
delegate any of the obligations or duties required to be kept or performed by it
under this Agreement.
12. Notices. All notices, demands, consents, approvals and
requests given by either party to the other hereunder shall be in writing and
shall be personally delivered or sent by registered or certified mail, return
receipt requested, postage prepaid, to the parties at the following addresses:
If to the Company: Let's Talk Cellular of America,
Inc.
5200 NW 77th Court
Miami, Florida 33166
Attention: Nick Molina,
Chief Executive Officer
If to the Consultant: H.I.G. Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Attention: Anthony Tamer
Any party may at any time change its respective address by sending written
notice to the other party of the change in the manner hereinabove prescribed.
13. Severability. If any term or provision of this Agreement or
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or
F-3
<PAGE> 87
enforceable, shall not be affected thereby, and each term or provision of this
Agreement shall be valid and be enforced to the fullest extent permitted by law.
14. No Waiver. The failure by any party to exercise any right,
remedy or elections herein contained or permitted by law shall not constitute or
be construed as a waiver or relinquishment for the future exercise of such
right, remedy or election, but the same shall continue and remain in full force
and effect. All rights and remedies that any party may have at law, in equity or
otherwise upon breach of any term or condition of this Agreement, shall be
distinct, separate and cumulative rights and remedies and no one of them,
whether exercised or not, shall be deemed to be in exclusion of any other right
or remedy.
15. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the matters herein contained and any
agreement hereafter made shall be ineffective to effect any change or
modification, in whole or in part, unless such agreement is in writing and
signed by the party against whom enforcement of the change or modification is
sought.
16. Governing Laws. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without reference
to the laws of any other state.
* * *
F-4
<PAGE> 88
IN WITNESS WHEREOF, the parties hereto have caused this Consulting
Agreement to be duly exercised by their authorized representatives as of the
date first above written.
LET'S TALK CELLULAR OF AMERICA, INC.
By:
---------------------------
Nick Molina, President
H.I.G. CAPITAL MANAGEMENT, INC.
By:
---------------------------
Anthony Tamer, President
F-5
<PAGE> 89
EXHIBIT G
RENEWAL PROMISSORY NOTE
$129,050.00
Dated as of June 25, 1996
FOR VALUE RECEIVED, the undersigned, LET'S TALK CELLULAR OF AMERICA,
INC. a Florida corporation (the "Borrower"), hereby promises to pay to the order
of BRETT BEVERIDGE, a Florida resident ("Lender"), the principal sum of One
Hundred and Twenty-Nine Thousand and Fifty and no/100 Dollars ($129,050.00),
together with interest on the unpaid principal balance hereof from time to time
outstanding, from the date hereof until the principal hereof shall have become
due and payable (whether by acceleration, maturity or otherwise) at a fixed rate
equal to eight percent (8%) per annum. Said principal and interest shall be
payable in lawful money of the United States of America and in immediately
available funds, computed on a daily basis, based upon a 360-day year. All
payments shall be made to the Lender at the Borrower's principal office at 5200
N.W. 77th Court, Miami, Florida 33166, or at such other place as the holder
hereof may, from time to time, designate in writing.
All outstanding principal shall be due and payable in full to the
Lender on the earlier to occur of (a) a Qualified Public Offering (as that term
is defined in that certain Series A Preferred Stock Purchase Agreement, dated as
of the date hereof, by and among the Borrower, the Lender, HIG Fund V, Inc.
("HIG") and Nick Molina) or (b) October 1, 2001 (each a "Final Payment Date").
All accrued and unpaid interest under this Note shall be due and payable monthly
in arrears, commencing on July 1, 1996 and continuing monthly on the first day
of each month thereafter until this Note is paid in full, and at maturity.
This Note evidences the outstanding balance of any and all prior loans
made by the Lender to the Borrower (the "Shareholder Loan"), the outstanding
principal balance of which Shareholder Loan as of the date hereof equals the
original principal balance of this Note. As of the date hereof, no interest
which has heretofore accrued with respect to the Shareholder Loan remains
unpaid. All principal outstanding pursuant to the Shareholder Loan as of the
date hereof shall, as of the date hereof and without any action on the part of
any party, be deemed to be outstanding under this Note. Acceptance by the Lender
of this Note shall not be deemed or construed as payment or satisfaction of the
Shareholder Loan, which shall continue to remain outstanding although the
indebtedness represented thereby is consolidated herein. This Note represents
any and all amounts that are currently owed by the Borrower to the Lender.
If the principal of this Note or any portion hereof and, to the extent
permitted by law, interest hereon shall not be paid when due, whether by
acceleration or otherwise, the same shall, or in the event of the occurrence of
an Event of Default (as hereinafter defined), the outstanding principal balance
of this Note shall at the option
<PAGE> 90
of the Lender, thereafter bear interest for any period during which the same
shall be overdue, or during the pendency of any such Event of Default, at a rate
per annum equal to the lower of (a) the maximum rate permitted by applicable
law, or (b) a rate of fourteen percent (14%) per annum, and payable on demand.
Upon the happening of any of the following events, each of which shall
constitute a default hereunder (herein referred to as an "Event of Default"),
all liabilities of the Borrower to the Lender, whether or not evidenced by this
Note, shall thereupon or thereafter, at the option of the Lender, without notice
or demand become due and payable (the "Acceleration Rights"):
(a) failure of the Borrower to perform any agreement hereunder
or under any other instrument or agreement evidencing, securing and/or
guaranteeing the obligations and indebtedness of the Borrower to the
Lender evidenced by this Note, or to pay in full, when due, any
liability whatsoever or any principal installment of this Note or
interest installment hereon, when the same shall become due and
payable;
(b) the Borrower shall at the direction of the Board of
Directors (excluding the vote of the Lender);
(i) make an assignment for the benefit of creditors,
petition or apply to any court or other tribunal for the appointment of
a custodian, receiver or any trustee or shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or if there shall have been filed
any such petition or application, or any such proceeding shall have
been commenced against the Borrower in which an order for relief is
entered or which remains undismissed for a period of thirty (30) days
or more; the Borrower, by any act or omission shall indicate consent
to, approval of or fail to timely object to any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or any trustee or shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for
a period of thirty (30) days or more;
(ii) generally not pay its debts as such debts become
due or admit in writing its inability to pay its debts as they mature;
or
(iii) have concealed, removed or permitted to be
concealed or removed any part of its properties or assets, with intent
to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have not
been paid; or
2
<PAGE> 91
(iv) be "insolvent", as such term is defined in the
federal bankruptcy code;
(c) the taking of possession of any substantial part of the
property of the Borrower at the instance of any governmental authority;
Notwithstanding the foregoing paragraph, the Lender's Acceleration
Rights shall not be exercisable prior to a Final Payment Date if at the time of
the Event of Default the Lender and Nick Molina are in control of the Borrower's
Board of Directors pursuant to the terms of that certain Shareholders Agreement,
dated as of the date hereof (the "Shareholders Agreement"), by and among the
Borrower, HIG, the Lender, Nick Molina, Allan Sorensen and Anne Gozlan. If HIG
is in control of the Board of Directors pursuant to the terms of the
Shareholders Agreement, then the Lender's Acceleration Rights shall be
exercisable immediately upon an Event of Default; provided, however, that in the
event that an Event of Default is due to a failure to make a payment of interest
when due hereunder and such missed payment is not cured within fifteen (15) days
after the failure to make such payment, then the Lender shall stay the exercise
of its Acceleration Rights for a period of six months from the date that the
Borrower failed to make a payment of interest when due.
The Borrower agrees to pay all reasonable costs incurred by any holder
hereof, including reasonable attorneys' fees and costs (including those for
appellate proceedings), incurred in connection with any Event of Default, or in
connection with the collection or attempted collection or enforcement hereof
whether or not legal proceedings may have been instituted.
All parties to this Note, including the Borrower and any sureties,
endorsers or guarantors, hereby waive presentment for payment, demand, protest,
notice of dishonor, notice of acceleration of maturity, and all defenses on the
ground of extension of time for payment hereof, and agree to continue and remain
bound for the payment of principal, interest and all other sums payable
hereunder, notwithstanding any change or changes by way of release, surrender,
exchange or substitution of any security for this Note or by way of any
extension or extensions of time for payment of principal or interest; and all
such parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice to or consent of any of them. The
rights and remedies of the holder as provided herein shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the holder, and may be exercised as often as occasion therefor
shall occur, and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release of the same.
The Borrower does not intend or expect to pay, nor does the Lender
intend or expect to charge, accept or collect any interest which, when added to
any commitment fee or any other charge upon the principal, shall be in excess of
the highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited. Should acceleration,
prepayment
3
<PAGE> 92
or any other charges upon the principal or any portion thereof result in the
computation or earning of interest in excess of the highest lawful rate
allowable under the laws of the State of Florida or the United States of
America, whichever is higher or unlimited, any and all such excess is hereby
waived and shall be credited to the outstanding principal balance and/or, to the
extent such excess exceeds such outstanding principal balance, returned to the
Borrower.
The unpaid balance of this Note may be prepaid at any time and from
time to time without premium or penalty. All prepayments made hereunder shall be
credited first to accrued interest and then to principal; however, in the event
of default hereunder, the Lender may, in its sole discretion, and in such order
as it may choose, apply any payments(s) to interest, principal and/or lawful
charges and expenses then accrued.
No delay or omission on the part of the holder of this Note in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Note, nor shall any waiver on one occasion be construed
as a bar to or waiver of any such right on any future occasion. No waiver shall
be effective unless in writing and signed by the holder of this Note.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Florida. In the event the Lender
determines it necessary to institute suit to collect on this Note, the action
may be maintained in Miami, Florida and the Borrower does hereby consent to the
institution of action in that jurisdiction and waive any and all defenses it may
have to the maintenance of the suit in Miami, Florida. This Note is binding upon
the Borrower and its personal representatives, successors and assigns.
THE BORROWER HEREBY, AND THE LENDER BY ITS ACCEPTANCE OF THIS NOTE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT, DOCUMENT OR INSTRUMENT
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO MAKE CERTAIN MODIFICATIONS
TO THE SHAREHOLDER LOAN AS EVIDENCED BY THIS NOTE.
4
<PAGE> 93
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed and delivered as of the day and year first written above.
LET'S TALK CELLULAR OF AMERICA, INC.
By: /s/ Nick Molina
-----------------------------------------
Print Name: Nick Molina
------------------------------
Its: PRESIDENT
-------------------------------------
5
<PAGE> 94
EXHIBIT G
RENEWAL PROMISSORY NOTE
$129,050.00
Dated as of June 25, 1996
FOR VALUE RECEIVED, the undersigned, LET'S TALK CELLULAR OF AMERICA,
INC. a Florida corporation (the "Borrower"), hereby promises to pay to the order
of NICK MOLINA, a Florida resident ("Lender"), the principal sum of One Hundred
and Twenty-Nine Thousand and Fifty and no/100 Dollars ($129,050.00), together
with interest on the unpaid principal balance hereof from time to time
outstanding, from the date hereof until the principal hereof shall have become
due and payable (whether by acceleration, maturity or otherwise) at a fixed rate
equal to eight percent (8%) per annum. Said principal and interest shall be
payable in lawful money of the United States of America and in immediately
available funds, computed on a daily basis, based upon a 360-day year. All
payments shall be made to the Lender at the Borrower's principal office at 5200
N.W. 77th Court, Miami, Florida 33166, or at such other place as the holder
hereof may, from time to time, designate in writing.
All outstanding principal shall be due and payable in full to the
Lender on the earlier to occur of (a) a Qualified Public Offering (as that term
is defined in that certain Series A Preferred Stock Purchase Agreement, dated as
of the date hereof, by and among the Borrower, the Lender, HIG Fund V, Inc.
("HIG") and Brett Beveridge) or (b) October 1, 2001 (each a "Final Payment
Date"). All accrued and unpaid interest under this Note shall be due and payable
monthly in arrears, commencing on July 1, 1996 and continuing monthly on the
first day of each month thereafter until this Note is paid in full, and at
maturity.
This Note evidences the outstanding balance of any and all prior loans
made by the Lender to the Borrower (the "Shareholder Loan"), the outstanding
principal balance of which Shareholder Loan as of the date hereof equals the
original principal balance of this Note. As of the date hereof, no interest
which has heretofore accrued with respect to the Shareholder Loan remains
unpaid. All principal outstanding pursuant to the Shareholder Loan as of the
date hereof shall, as of the date hereof and without any action on the part of
any party, be deemed to be outstanding under this Note. Acceptance by the Lender
of this Note shall not be deemed or construed as payment or satisfaction of the
Shareholder Loan, which shall continue to remain outstanding although the
indebtedness represented thereby is consolidated herein. This Note represents
any and all amounts that are currently owed by the Borrower to the Lender.
If the principal of this Note or any portion hereof and, to the extent
permitted by law, interest hereon shall not be paid when due, whether by
acceleration or otherwise, the same shall, or in the event of the occurrence of
an Event of Default (as hereinafter defined), the outstanding principal balance
of this Note shall, at the option
<PAGE> 95
of the Lender, thereafter bear interest for any period during which the same
shall be overdue, or during the pendency of any such Event of Default, at a rate
per annum equal to the lower of (a) the maximum rate permitted by applicable
law, or (b) a rate of fourteen percent (14%) per annum, and payable on demand.
Upon the happening of any of the following events, each of which shall
constitute a default hereunder (herein referred to as an "Event of Default"),
all liabilities of the Borrower to the Lender, whether or not evidenced by this
Note, shall thereupon or thereafter, at the option of the Lender, without notice
or demand, become due and payable (the "Acceleration Rights"):
(a) failure of the Borrower to perform any agreement hereunder
or under any other instrument or agreement evidencing, securing and/or
guaranteeing the obligations and indebtedness of the Borrower to the
Lender evidenced by this Note, or to pay in full, when due, any
liability whatsoever or any principal installment of this Note or
interest installment hereon, when the same shall become due and
payable;
(b) the Borrower shall at the direction of the Board of
Directors (excluding the vote of the Lender):
(i) make an assignment for the benefit of creditors,
petition or apply to any court or other tribunal for the appointment of
a custodian, receiver or any trustee or shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or if there shall have been filed
any such petition or application, or any such proceeding shall have
been commenced against the Borrower in which an order for relief is
entered or which remains undismissed for a period of thirty (30) days
or more; the Borrower, by any act or omission shall indicate consent
to, approval of or fail to timely object to any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or any trustee or shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for
a period of thirty (30) days or more;
(ii) generally not pay its debts as such debts become
due or admit in writing its inability to pay its debts as they mature;
or
(iii) have concealed, removed or permitted to be
concealed or removed any part of its properties or assets, with intent
to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have not
been paid; or
2
<PAGE> 96
(iv) be "insolvent", as such term is defined in the
federal bankruptcy code;
(c) the taking of possession of any substantial part of the
property of the Borrower at the instance of any governmental authority;
Notwithstanding the foregoing paragraph, the Lender's Acceleration
Rights shall not be exercisable prior to a Final Payment Date if at the time of
the Event of Default the Lender and Brett Beveridge are in control of the
Borrower's Board of Directors pursuant to the terms of that certain Shareholders
Agreement, dated as of the date hereof (the "Shareholders Agreement"), by and
among the Borrower, HIG, the Lender, Brett Beveridge, Allan Sorensen and Anne
Gozlan. If HIG is in control of the Board of Directors pursuant to the terms of
the Shareholders Agreement, then the Lender's Acceleration Rights shall be
exercisable immediately upon an Event of Default; provided, however, that in the
event that an Event of Default is due to a failure to make a payment of interest
when due hereunder and such missed payment is not cured within fifteen (15) days
after the failure to make such payment, then the Lender shall stay the exercise
of its Acceleration Rights for a period of six months from the date that the
Borrower failed to make a payment of interest when due.
The Borrower agrees to pay all reasonable costs incurred by any holder
hereof, including reasonable attorneys' fees and costs (including those for
appellate proceedings), incurred in connection with any Event of Default, or in
connection with the collection or attempted collection or enforcement hereof
whether or not legal proceedings may have been instituted.
All parties to this Note, including the Borrower and any sureties,
endorsers or guarantors, hereby waive presentment for payment, demand, protest,
notice of dishonor, notice of acceleration of maturity, and all defenses on the
ground of extension of time for payment hereof, and agree to continue and remain
bound for the payment of principal, interest and all other sums payable
hereunder, notwithstanding any change or changes by way of release, surrender,
exchange or substitution of any security for this Note or by way of any
extension or extensions of time for payment of principal or interest; and all
such parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice to or consent of any of them. The
rights and remedies of the holder as provided herein shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the holder, and may be exercised as often as occasion therefor
shall occur, and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release of the same.
The Borrower does not intend or expect to pay, nor does the Lender
intend or expect to charge, accept or collect any interest which, when added to
any commitment fee or any other charge upon the principal, shall be in excess of
the highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited. Should acceleration,
prepayment
3
<PAGE> 97
or any other charges upon the principal or any portion thereof result in the
computation or earning of interest in excess of the highest lawful rate
allowable under the laws of the State of Florida or the United States of
America, whichever is higher or unlimited, any and all such excess is hereby
waived and shall be credited to the outstanding principal balance and/or, to the
extent such excess exceeds such outstanding principal balance, returned to the
Borrower.
The unpaid balance of this Note may be prepaid at any time and from
time to time without premium or penalty. All prepayments made hereunder shall be
credited first to accrued interest and then to principal; however, in the event
of default hereunder, the Lender may, in its sole discretion, and in such order
as it may choose, apply any payments(s) to interest, principal and/or lawful
charges and expenses then accrued.
No delay or omission on the part of the holder of this Note in
exercising any right hereunder shall operate as a waiver of such right or any
other right under this Note, nor shall any waiver on one occasion be construed
as a bar to or waiver of any such right on any future occasion. No waiver shall
be effective unless in writing and signed by the holder of this Note.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Florida. In the event the Lender
determines it necessary to institute suit to collect on this Note, the action
may be maintained in Miami, Florida and the Borrower does hereby consent to the
institution of action in that jurisdiction and waive any and all defenses it may
have to the maintenance of the suit in Miami, Florida. This Note is binding upon
the Borrower and its personal representatives, successors and assigns.
THE BORROWER HEREBY, AND THE LENDER BY ITS ACCEPTANCE OF THIS NOTE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT, DOCUMENT OR INSTRUMENT
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO MAKE CERTAIN MODIFICATIONS
TO THE SHAREHOLDER LOAN AS EVIDENCED BY THIS NOTE.
4
<PAGE> 98
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed and delivered as of the day and year first written above.
LET'S TALK CELLULAR OF AMERICA, INC.
By: /s/ Brett Beveridge
-----------------------------------------
Print Name: Brett Beveridge
---------------
Its: Vice President
----------------------------------------
5
<PAGE> 99
EXHIBIT H
ESCROW AGREEMENT
June 25, 1996
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Jorge L. Freeland, Esq.
Gentlemen:
Your firm has agreed to act as the escrow agent (the "Escrow Agent") in
connection with certain of the transactions contemplated by and pursuant to the
provisions of that certain Series A Preferred Stock Purchase Agreement, dated as
of June 25, 1996, (the "Purchase Agreement"), among Let's Talk Cellular of
America, Inc., a Florida corporation and HIG Fund V, Inc. (the "Purchaser"),
Let's Talk Cellular of America, Inc. (the "Company") and the shareholders of the
Company listed on the signature pages thereto (the "Principal Shareholders").
Terms used herein and not otherwise defined shall have the same meaning as used
in the Purchase Agreement.
Pursuant to Section 1.3 of the Purchase Agreement, the Purchaser and
the Company are to deposit 66,666 shares of the Company's Series A Preferred
Stock, par value $30 per share (the "Escrowed Shares") and $2 million (the
"Escrowed Funds" and together with the Escrowed Shares, the "Escrowed Assets")
with you to be held in escrow pending the consummation of the transactions
contemplated by Sections 1.3 and 1.4 of the Purchase Agreement. The placement of
the Escrowed Assets with you in escrow is a condition precedent to the
Purchaser's investment in the Company pursuant to the Purchase Agreement.
The Escrowed Assets shall be held by you in a place of safe keeping
until the Purchaser and the Company shall have instructed you to deliver the
Escrowed Assets to the persons described in their disbursement instructions.
In the event the Escrow Agent shall have received a claim as to the
Escrowed Assets, the Escrow Agent may, at any time and from time-to-time in its
sole discretion, take either of the following actions:
A. Continue to hold the Escrowed Assets until the dispute is settled
between the parties and it receives (i) written instructions signed by the
Company and the Purchaser as to the delivery of the Escrowed Assets or (ii) a
final nonappealable order from a court of
<PAGE> 100
Greenberg, Traurig, Hoffman
Lipoff, Rosen & Quentel, P.A.
June 25, 1996
Page 2
competent jurisdiction stating to whom and in what amounts the Escrowed Assets
should be released and delivered; or
B. Commence an interpleader action in any court of competent
jurisdiction whereupon it shall be relieved of any further obligations pursuant
hereto.
In the event that any other claim or claims are made against you or if
there is any other dispute in respect of the Escrow Assets, you shall have the
power and authority, in your sole discretion, to hold such Escrow Assets until
such claims are resolved, either through judicial process or otherwise, and/or
to file an interpleader action with respect to such claim or claims in any court
of competent jurisdiction.
Except in the case of willful misconduct or gross negligence, you shall
have no liability whatsoever for any loss sustained as a result of this Escrow
Agreement. You shall have no duties or obligations except as set forth in this
Escrow Agreement, and you shall not be required to take any action or actions
other than in accordance with the terms hereof. Without limiting the generality
of the foregoing, this Escrow Agreement imposes no duty or obligation on you.
In the event you incur any costs, losses, liabilities, damages or
expenses, including reasonable attorneys' fees, in connection with your
activities as Escrow Agent, your holding of the Escrow Assets or your filing of
any interpleader action, it is understood and agreed by all of the parties to
the Purchase Agreement that you may, after giving a 3 day notice, set-off
against any and all amounts held by you and retain for your own account the full
amount of any and all such costs, losses, liabilities, damages or expenses.
Each of the Company, the Principal Shareholders and the Purchaser
jointly and severally agree to indemnify and hold you harmless from and against
the full amount of any and all claims, costs, damages, judgments, fees,
expenses, obligations, taxes, assessments, liabilities, actions, suits, or
charges, including reasonable attorneys' fees and expenses, made against you or
incurred by you by reason of any act or omission to act by you as Escrow Agent
hereunder or in connection with any of the transactions referred to herein or
contemplated hereby or your holding of the Escrow Shares or your filing of any
interpleader action and against any loss you may sustain in carrying out the
terms of this Escrow Agreement, other than as a result of your gross negligence
or willful misconduct.
Each of the Company and the Principal Shareholders understands that the
Escrow Agent is counsel to the Purchaser and agrees that the Escrow Agent shall
not be precluded
<PAGE> 101
Greenberg, Traurig, Hoffman
Lipoff, Rosen & Quentel, P.A.
June 25, 1996
Page 3
from continuing to represent the Purchaser in any controversy or litigation
arising in connection with this Escrow Agreement by reason of acting as the
Escrow Agent.
The Company, the Purchaser and the Principal Shareholders are
beneficiaries to this Escrow Agreement, and its terms may not be changed without
their written consent and the consent of the Escrow Agent. No third party shall
be deemed a beneficiary of this Agreement and no such party shall have the right
to commence or maintain any suit or action with respect to this Agreement;
provided that this provision shall not be deemed a waiver of any of the rights
which the Purchaser has under the Purchase Agreement. This Agreement may be
executed in one or more counterparts, all of which will be deemed to be the same
original agreement.
Please acknowledge your Agreement to the foregoing terms and provisions
by executing the enclosed copy of this Escrow Agreement and returning it to the
undersigned.
HIG FUND V, INC.
By:
-------------------------------------
(Signatures continue on next page)
Accepted this 25th day
of June, 1996
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
By:
-------------------------------
<PAGE> 102
Escrow Agreement
Signature Page
Let's Talk Cellular of America, Inc.
By:
-----------------------------------------
Nick Molina
By:
-----------------------------------------
Brett Beveridge
<PAGE> 103
Schedule 2.4 to the Series A Preferred Stock Agreement
<TABLE>
<CAPTION>
Ownership of shares at closing:
- -------------------------------
<S> <C>
HIG Fund V, Inc. 350,000(1)
Brett Beveridge 282,750(2)
Nick Molina 282,750(2)
Al Sorensen 65,000
Anne Gozlan 19,500(2)
---------
1,000,000
</TABLE>
(1) Assumes full conversion of 100,000 shares of Series A preferred stock
(2) Assumes full vesting of Anne Gozlan's bonus shares of common stock, which
will occur on second and third anniversary of employment (6,500 shares vesting
on each anniversary date). As of closing, 289,250 shares are owned by Brett
Beveridge and Nick Molina, respectively, and 6,500 shares are owned by Anne
Gozlan.
Employment agreement with Anne Gozlan - May 1995
Right of first refusal: see description in Shareholders' Agreement (Exhibit B to
Series A Preferred Stock Agreement)
<PAGE> 104
Schedule 2.5 to the Series A Preferred Stock Agreement
Subsidiaries:
- - Let's Talk Cellular, Inc.
- - Let's Talk Cellular of Aventura, Inc.
- - Let's Talk Cellular of Bayside, Inc.
- - Let's Talk Cellular of Florida Mall, Inc.
- - Let's Talk Cellular of Lenox Square, Inc.
- - LTC Kiosk Management Corporation
Loans from shareholders:
- - Loan from Brett Beveridge in the amount of $129,050, bearing interest at 8%
- - Loan from Nick Molina in the amount of $129,050, bearing interest at 8%
<PAGE> 105
LET'S TALK CELLULAR OF AMERICA, INC.
FINANCIAL STATEMENTS
APRIL 30, 1996
<PAGE> 106
LET'S TALK CELLULAR OF AMERICA, INC.
BALANCE SHEET
APRIL 30, 1996
<TABLE>
<CAPTION>
April
<S> <C>
CURRENT ASSETS:
Cash $ 175,612
Trade accounts receivable 45,575
Carriers receivable 664,177
Inventory 1,197,687
Prepaid expenses 45,246
Other current assets 34,967
-----------
Total current assets 2,163,264
-----------
Fixed assets, cost 1,694,145
Accumulated depreciation (335,855)
-----------
Fixed assets, net 1,358,290
-----------
Preopenings - cost 80,970
Accumulated amortization (62,866)
-----------
Preopenings, net 18,104
Deposits 19,250
Other non-current assets 18,540
-----------
Other non-current assets 55,894
-----------
TOTAL $ 3,577,448
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payabl $ 828,948
Line of credit 865,800
Accrued expenses and other liabilities 284,680
Capital lease obligations 76,955
Customer deposits 88,022
Income taxes payable 62,264
-----------
Total current liabilities 2,206,669
-----------
Loans from shareholders 258,100
Bank term loan 265,000
Deferred revenue 105,056
Other liabilities 36,652
-----------
Total other liabilities 664,808
-----------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 1,000 shares
authorized, issued and outstanding 1,000
Additional paid-in capital 257,250
Retained earnings 447,721
-----------
Total shareholders' equity 705,971
-----------
TOTAL $ 3,577,448
===========
</TABLE>
<PAGE> 107
LET'S TALK CELLULAR OF AMERICA
FISCAL YEAR ENDING JULY 31, 1996
<TABLE>
<CAPTION>
April 1996 YTD
---------- ----------
<S> <C> <C>
NET REVENUE - CELLULAR $ 990,355 $9,410,229
NET REVENUE - PAGER 60,711 518,099
TOTAL REVENUE 1,051,066 9,928,328
COST OF GOODS SOLD 475,351 4,714,601
GROSS PROFIT 575,715 5,213,727
CELLULAR OPERATING EXP 369,928 3,421,158
PAGER OPERATING EXP 7,117 73,383
GENERAL AND ADMINIST. 185,709 1,328,744
TOTAL EXPENSES 562,754 4,823,285
OPERATING INCOME 12,961 390,442
DEPRECIATION/AMORTIZATION 24,416 195,981
INTEREST EXPENSE 13,626 117,737
EARNINGS BEFORE TAXES (25,081) 76,724
INCOME TAXES 0 27,000
NET INCOME/(LOSS) $ (25,081) $ 49,724
<CAPTION>
April 1996 YTD
---------- ----------
<S> <C> <C>
NET REVENUE - CELLULAR 94.22% 94.78%
NET REVENUE - PAGER 5.78% 5.22%
TOTAL REVENUE 100.00% 100.00%
COST OF GOODS SOLD 45.23% 47.49%
GROSS PROFIT 54.77% 52.51%
CELLULAR OPERATING EXP. 35.20% 34.46%
PAGER OPERATING EXP. 0.68% 0.74%
GENERAL AND ADMINISTRATIVE 17.67% 13.38%
TOTAL EXPENSES 53.54% 48.58%
OPERATING INCOME 1.23% 3.93%
DEPRECIATION/AMORTIZATION 2.32% 1.97%
INTEREST EXPENSE 1.30% 1.19%
EARNINGS BEFORE TAXES (-2.39)% 0.77%
INCOME TAXES .00% 0.27%
NET INCOME: (-2.39)% 0.50%
</TABLE>
<PAGE> 108
LET'S TALK CELLULAR OF AMERICA, INC.
STATEMENT OF CASH FLOWS
PERIOD ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
April YTD
<S> <C> <C>
CASH FROM OPERATING ACTIVITIES
Net income/(loss) $ (25,081) $ 49,724
Income tax expense 0 27,000
Gain/Loss on disposal 22,065 22,065
Depreciation and amortization 19,918 155,034
Preopening amortization 4,498 40,947
(Increase)/Decrease in:
Carrier receivables 285,099 (192,049)
Inventory (69,972) (6,336)
Prepaid expenses 10,010 125,208
Trade receivables (c/c) 43,695 (7,061)
Other assets 3,132 75,242
Increase/(Decrease) in: 0
Trade accounts payable (83,408) (402,655)
Accrued expenses and other liab (167,029) (41,576)
Customer deposits (8,957) 41,144
Cash provided by/(used in) --------- ---------
operating activities 33,970 (113,313)
--------- ---------
CASH FROM INVESTING ACTIVITIES
Fixed assets acquisitions (49,945) (535,891)
Store preopening costs 2,320 (8,168)
Proceeds from disposals 63,750 63,750
Cash provided by/(used in) --------- ---------
investing activities 16,125 (480,309)
--------- ---------
CASH FROM FINANCING ACTIVITIES
OTHER THAN LINE OF CREDIT
Capital lease (4,214) (39,996)
Term Loan RNB (5,000) 265,000
Due to shareholders 0 (100,897)
Proceeds from capital contributions
Citibank LOC 0 (462,493)
RNB LOC 101,800 865,800
Cash provided by/(used in)
financing activities other --------- ---------
than line of credit 92,586 527,414
--------- ---------
Net increase/(decrease) in cash 142,681 (66,208)
Cash, beginning 32,931 241,820
Cash, ending $ 175,612 $ 175,612
</TABLE>
<PAGE> 109
Schedule 2.7 to the Series A Preferred Stock Agreement
First amendment to stock purchase agreement with Al Sorensen - May 1996
First amendment to consulting agreement with Al Sorensen - May 1996
Pay off of loan from Al Sorensen - September 1995
Termination of escrow agreement with Al Sorensen - May, 1996
Increase in Brett Beveridge's and Nick Molina's salary from $150,000 to
$198,000, effective August 16, 1995
Sale of the store located at Brandon Town Center, FL on March 29, 1996
Kiosk staffing agreement with AT&T dated June 1, 1996
Closing of the store located at Roosevelt Field, NY - June 1996
Credit facility agreements with Republic National Bank dated September 5, 1995:
- - Letter agreement
- - Master promissory note
- - Term note
- - Security agreement
Credit facility agreements with republic National Bank dated December 4, 1995:
- - Amendment to letter agreement
- - Renewal note
- - Incremental note
- - Combined note
<PAGE> 110
Schedule 2.8 to the Series A Preferred Stock Agreement
U.S. Equal Employment Opportunity Commission charge #10960012
Demand by St. George Productions dated April 25, 1996
Complaint filed by Jay Wasserman - March 1996
Judgment relative to the Westchester Mall, White Plains NY - September 1995
(filed-in City Court of White Plains, County of Westchester, State of New York,
Index No. SP5542/95)
Lawsuit filed by The O'Connor Group against Let's Talk Cellular of America, Inc.
(filed in Dade County, Case No.96-5267, not served as of June 14, 1996)
<PAGE> 111
Schedule 2.11(a)(i) to the Series A Preferred Stock Agreement
Corporate office 5200 NW, 77 Court. Miami, FL 33166
Dadeland Mall 7565 N. Kendall Drive. Miami, FL 33156
Aventura Mall 19501 Biscayne Blvd. North Miami Beach, FL 33180
Bayside Market Place #1 401 Biscayne Blvd. Miami, FL 33132
Florida Mall 8001 S. Orange Blossom Trail. Orlando, FL 32809
Lenox Square 3393 Peachtree Road NE. Atlanta, GA 30326
Manhattan Mall 901 Avenue of the Americas. New York NY 10001
Town Center at Boca 6000 West Glades Road Boca Raton, FL 33431
Westland Mall 1695 West 49 Street. Hialeah, FL 33012
Cutler Ridge Mall 20505 South Dixie Hwy. Miami, FL 33189
Miami International Mall 1455 NW 107 Avenue. Miami, FL 33172
Altamonte Springs 451 Altamonte Ave. Altamonte Springs, FL 32701
Tysons Corner 7903 Tysons Corner Center. Mclean, VA 22102
Montgomery Mall 7111 Democracy Blvd. Bethesda, MD 20817
St. Charles Towne Center 11110 Mall Circle. Waldorf, MD 20603
Annapolis Mall 2002 Annapolis Mall. Annapolis, MD 21401
Potomac Mills 2700 Potomac Mill Circle. Woodbridge, VA 22192
Union Station 50 Massachusetts Ave. Washington, DC 20002
Fashion Center at Pentagon City 1100 South Hayes Street. Arlington, VA 22202
Mall of the Americas 7795 West Flagler. Miami, FL 33144
Pembroke Lakes Mall 11401 pines Boulevard, FL 33026
Bayside Market Place #2 401 Biscayne Blvd. Miami, FL 33132
Orlando Airport 9341 Airport Blvd #A. Orlando, FL 32827
Sawgrass Mills 12801 W. Sunrise Blvd. Sunrise, FL 33323
Seminole Town Center 183 Town Center Circle. Sanford, FL 32771
Coral Square Mall 9345 West Atlantic Blvd. Coral Springs, FL 33065
<PAGE> 112
Schedule 2.11(a)(ii) to the Series A Preferred Stock Agreement
Security interest in accounts receivable, inventory, equipment, general
intangibles, chattel paper, instruments and documents granted to Republic
National Bank in connection with credit facility agreements entered into on
September 5, and December 4. 1995, respectively (see Schedule 2.7). For a more
complete description of the security interest, please refer to the security
agreement.
<PAGE> 113
Schedule 2.11(a)(iii) to the Series A Preferred Stock Agreement
None
<PAGE> 114
Schedule 2.11(b) to the Series A Preferred Stock Agreement
Service Mark Reg. No. 1,816,162 - Jan. 11, 1994 - Let's Talk Cellular - for
communications services
Service Mark Reg. 1,821,719 - Feb. 15, 1994 - Let's Talk Cellular (special
logo) - for communications services
Trademark Reg. No. 1,931,056 - Oct. 31, 1995 - Let's Talk Cellular - for
communications apparatus
Pending Service and Trademark - Let's Talk Wireless - filed Aug. 1995 - for
communications services and apparatus
Pending Service and Trademark - Let's Talk - Misc design (rainbow) - filed Dec.
1995 - for communication services and apparatus - Serial No. 012,369
Pending Service and Trademark - Let's Talk - logo (as displayed on company's
business cards) - for Dec. 1995 - for communication services and apparatus -
Serial No. 012,370
<PAGE> 115
Schedule 2.13 to the Series A Preferred Stock Agreement
Retail representative agreement between BellSouth Cellular National Marketing,
Inc. and Let's Talk Cellular of America, Inc. dated April 12, 1995
Authorized agency agreement between Bell Atlantic Mobile Systems of Washington,
Inc., Atlantic Mobile Systems of Baltimore, Inc. and Let's Talk Cellular of
America. Inc. Agency dated December 22, 1994
Agency agreement between Cellular Telephone Company and Let's Talk Cellular of
America, Inc. dated December 30, 1993
Stores and corporate office leases (see Schedule 2.11(a)(i))
Credit facility agreements Republic National Bank (see Schedule 2.7)
Capital lease agreement with Panasonic Communications (corporate office
telephone system)
Capital lease agreements with Citicorp Leasing (eight stores point-of-sales
systems)
Capital lease agreement with Minolta Business Systems (one copier)
Capital lease agreements with Heritage Financial Services (two stores
point-of-sales systems)
Insurance policies (see Schedule 2.15)
Stock purchase agreement with Al Sorensen - October 1994
First amendment to stock purchase agreement with Al Sorensen May 1996
Consulting agreement with Al Sorensen - October 1994
First amendment to consulting agreement with Al Sorensen - May 1996
Kiosk staffing agreement with AT&T dated June 1, 1996
Loan from Nick Molina in the amount of $129.050. bearing interest at 8%
Loan from Brett Beveridge in the amount of $129,050, bearing interest at 8%
Employment agreement with Anne Gozlan - May, 1995
<PAGE> 116
Schedule 2.15 to the Series A Preferred Stock Agreement
<TABLE>
<CAPTION>
Coverage Carrier
- -------- -------
<S> <C>
Property Atlantic Mutual
General liability Atlantic Mutual
Automobile Atlantic Mutual
Inland Marine Atlantic Mutual
Excess umbrella liability Atlantic Mutual
Workers' compensation - FL Riscorp
Workers' compensation - NY The State Insurance Fund
Workers' compensation - VA & DC Employers Insurance of WAUSAU
Workers' compensation - GA Georgia Casualty & Surety Co
Workers' compensation - MD The Injured Workers' Insurance Fund
</TABLE>
Workers' Compensation Claims Pending
- - Four reports of injury filed in NY. all relative to the Roosevelt Field Mall
store
<PAGE> 117
Schedule 2.16 to the Series A Preferred Stock Agreement
Consulting agreement with Al Sorenson - October 1994
First amendment to consulting agreement with Al Sorensen - May 1996
Employment agreement with Anne Gozlan - May 1995
Employment agreements with automatic annual renewals unless written notice is
given 90 days prior to the respective expiration dates of the annual terms:
(i) Fully executed:
- - Warehouse manager - April 20, 1995
- - Controller - June 26, 1995
- - Training manager - April 17, 1995
- - District manager, North Dade, FL - January 3, 1994
- - District manager, New York - December 3, 1993
- - District manager, South Dade, FL - April 21, 1994
- - District manager, Washington, DC - August 5, 1994
- - Store manager - January 3, 1994
- - Sales associate - October 3, 1994
- - Sales associate - December 5, 1994
- - Sales associate - October 21, 1994
- - Sales associate - April 6, 1994
- - Store manager - February 20, 1995
- - Store manager - March 28, 1994
- - Sales associate - March 13, 1995
- - Store manager - February 20, 1995
- - Store manager - February 6, 1994
(ii) Witnessed and signed by employee only, not executed by company and
therefore not legally binding:
- - Pager department clerk - June 29, 1995
- - Staff accountant - September 26, 1994
- - Pager department manager - May 1, 1995
- - District Manager, Central Florida - June 5, 1995
- - Store manager - September 27, 1994
- - Sales associate - November 17, 1994
- - Sales associate - November 9, 1994
- - Store manager - January 16, 1996
- - Store manager - January 3, 1994
- - Store manager - October 12, 1994
- - Sales associate - January 17, 1996
- - Store manager - October 5, 1994
- - Store manager - January 3, 1994
- - Store manager - December 6, 1994
The highest paid employees during the years ended July 31 1994 and 1995,
respectively, were:
<TABLE>
<CAPTION>
Compensation paid during the year ended
---------------------------------------
Employee's Name July 31, 1994 July 31, 1995
--------------- ------------- -------------
<S> <C> <C>
Nick Molina $221,234 $210,000
Brett Beveridge $220,415 $210,000
Robert Ortega $ 49,570 $ 63,488
</TABLE>
<PAGE> 118
Schedule 2.18 to the Series A Preferred Stock Agreement
Loan from Nick Molina in the amount of $129,050, bearing interest at 8%
Loan from Brett Beveridge in the amount of $129,050, bearing interest at 8%
Long-term disability policy in the name of Brett Beveridge
Long-term disability policy in the name of Nick Molina
Term life insurance policy in the name of Brett Beveridge
Term life insurance policy in the name of Nick Molina
Lease payments relative to Brett Beveridge's and Nick Molina's vehicles
Insurance payments relative to Brett Beveridge's and Nick Molina's vehicles
<PAGE> 119
Schedule 3.8 to the Series A Preferred Stock Agreement
Proceeds in the amount of $3,295,000 from the sale of the Purchased Shares shall
be used consistently with the following:
- - $295,000 shall be used to pay HIG Fund V, Inc.'s accounting, brokers and other
transaction expenses, excluding legal expenses;
- - to pay all legal expenses incurred in connection with the Series A Preferred
Stock Agreement
- - up to $350,000 shall be used to purchase an MIS system:
- - the balance shall be used to fund capital expenditures in accordance with
Schedule 4.11 to the Series A Preferred Stock Agreement:
- - the balance shall not be used to repay the shareholders' notes:
- - the balance shall not be used to pay down the line of credit to less than
$800,000 or the applicable borrowing base until after the final $1 million is
drawn.
<PAGE> 120
Schedule 4.6
Indebtedness
The Company shall not be liable for Indebtedness at any one time (other
than for the Principal Shareholder Notes which shall not exceed the aggregate
principal amount of $258,100) in excess of the following amounts:
<TABLE>
<CAPTION>
PERMITTED
FISCAL YEAR INDEBTEDNESS
-------------------- ------------------------
<S> <C>
1997 $1,300,000
1998 $2,200,000
1999 $1,500,000
2000 $ 70,000
</TABLE>
In addition to the foregoing, the Company may be liable at any one time for up
to $600,000 of additional Indebtedness to fund the opening of new AT&T stores
until July 31, 1998. After July 31, 1998, the Company may be liable for the
total additional Indebtedness set forth below to fund the opening of new AT&T
stores so long as the Company has exceeded the EBIT Target (as defined in the
Shareholders Agreement) on each Determination Date (as defined in the
Shareholders Agreement) since June 1996 by at least $10,000 per AT&T store open
for at least 12 months as of such Determination Date. The maximum amount of such
additional indebtedness shall be $25,000 per AT&T store open for at least 12
months as of such Determination Date up to the follwoing aggregate amounts:
<TABLE>
<CAPTION>
PERMITTED
ADDITIONAL
FISCAL YEAR INDEBTEDNESS
-------------------- ------------------------
<S> <C>
1998 $480,000
1999 $360,000
2000 $240,000
</TABLE>
<PAGE> 121
Schedule 4.11
Capital Expenditures
The Company shall not fund or become obligated to fund capital
expenditures in any calendar year in excess of (i) $2 million in the aggregate,
(ii) $1.85 million for new stores, and (iii) $150,000 for remodeling existing
stores or for other general corporate purposes. Notwithstanding the foregoing,
the Company shall be permitted to fund or become obligated to fund more than an
aggregate of $350,000 of capital expenditures relating to management information
systems prior to December 31, 1997.
<PAGE> 1
EXHIBIT 10.19
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LET'S TALK CELLULAR & WIRELESS, INC.,
MERGER SUB 1, INC.
MERGER SUB 2, INC.
TELEPHONE WAREHOUSE, INC.
NATIONAL CELLULAR, INCORPORATED
AND
TEXAS CELLULAR PARTNERS, L.P.
DATED AS OF JUNE 27, 1997
<PAGE> 2
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of the
27th day of June, 1997, by and among LET'S TALK CELLULAR & WIRELESS, INC., a
Florida corporation f/k/a Let's Talk Cellular of America, Inc. ("LTC"), MERGER
SUB 1, INC., a Delaware corporation ("Merger Sub 1"), MERGER SUB 2, INC., a
Texas corporation ("Merger Sub 2" and collectively with Merger Sub 1, the
"Buyers"), TELEPHONE WAREHOUSE, INC., a Delaware corporation ("TWI"), NATIONAL
CELLULAR, INCORPORATED, a Texas corporation ("NCI") and TEXAS CELLULAR
PARTNERS, L.P., a Delaware limited partnership ("TCP"). Terms used herein and
not otherwise defined shall have the meanings set forth in Section 11.3 hereof.
WHEREAS, Merger Sub 1 desires to merge with and into TWI and TWI
desires that Merger Sub 1 be merged with and into TWI (the "TWI Merger"), so
that TWI will be the surviving corporation, all upon the terms and subject to
the conditions set forth herein and in accordance with the laws of the State of
Delaware;
WHEREAS, Merger Sub 2 desires to merge with and into NCI and NCI
desires that Merger Sub 2 be merged with and into NCI (the "NCI Merger" and
collectively with the TWI Merger, the "Mergers"), so that NCI will be the
surviving corporation, all upon the terms and subject to the conditions set
forth herein and in accordance with the laws of the State of Texas; and
WHEREAS, the parties hereto have previously executed an Agreement and
Plan of Merger on April 11, 1997 and now desire to amend and restate such
agreement to amend certain provisions thereof.
NOW, THEREFORE, in consideration of the representations and
warranties, covenants and agreements, and subject to the conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1 TWI Merger. At the Effective Time, (i) Merger Sub 1 shall be
merged with and into TWI on the terms and in accordance with the provisions
contained in this Agreement; (ii) the separate corporate existence of Merger
Sub 1 shall cease; (iii) the corporate existence of TWI shall continue under
the laws of the State of Delaware unaffected and unimpaired by the TWI Merger;
and (iv) TWI shall be the surviving corporation of the TWI Merger. At the
Effective Time, all of the assets and properties of Merger Sub 1, whether real,
personal or mixed, and whether tangible or intangible, and all of the
liabilities and obligations of Merger Sub 1, whether fixed or contingent, shall
vest in TWI as the surviving corporation, without any further action of either
Merger Sub 1 or TWI. From and after the Effective Time, TWI shall (i) possess
all of the
<PAGE> 3
rights, privileges, immunities, franchises (both public and private), assets
and properties whether real, personal or mixed, and (ii) shall be responsible
and liable for all of the liabilities and obligations of Merger Sub 1.
1.2 NCI Merger. At the Effective Time, (i) Merger Sub 2 shall be
merged with and into NCI on the terms and in accordance with the provisions
contained in this Agreement; (ii) the separate corporate existence of Merger
Sub 2 shall cease; (iii) the corporate existence of NCI shall continue under
the laws of the State of Texas unaffected and unimpaired by the NCI Merger; and
(iv) NCI shall be the surviving corporation of the NCI Merger. At the Effective
Time, all of the assets and properties of Merger Sub 2, whether real, personal
or mixed, and whether tangible or intangible, and all of the liabilities and
obligations of Merger Sub 2, whether fixed or contingent, shall vest in NCI as
the surviving corporation, without any further action of either Merger Sub 2 or
NCI. From and after the Effective Time, NCI shall (i) possess all of the
rights, privileges, immunities, franchises (both public and private), assets
and properties (whether real, personal or mixed and whether tangible or
intangible) of Merger Sub 2; and (ii) shall be responsible and liable for all
of the liabilities and obligations of Merger Sub 2.
1.3 Filing. As soon as practicable following fulfillment of the
conditions specified in Article VII and Article VIII hereof, and provided that
the Agreement has not been terminated and abandoned pursuant to Article X
hereof, (i) TWI and Merger Sub 1 will cause an executed counterpart of a
certificate of merger to be filed with the Secretary of State of Delaware, and
(ii) NCI and Merger Sub 2 will cause an executed counterpart of articles of
merger to be filed with the Secretary of the State of Texas.
1.4 Effective Time of the Mergers. The term "Effective Time" as
used herein is defined to mean the time that the filing of the certificate of
merger with the Secretary of State of Delaware (as to the TWI Merger) and the
filing of the articles of merger with the Secretary of State of Texas (as to
the NCI Merger) are completed.
1.5 Conversion of Shares. At the Effective Time, (i) each issued
and outstanding share of Common Stock of TWI shall be converted into 276.295
shares of Common Stock of LTC, (ii) each issued and outstanding share of
common stock of Merger Sub 1 shall be converted into one share common stock of
TWI, as the surviving corporation of the TWI Merger; (iii) each issued and
outstanding share of common stock of NCI shall be converted into 276.295 shares
of common stock of LTC, and (iv) each issued and outstanding share of common
stock of Merger Sub 2 shall be converted into one share of common stock of NCI,
as the surviving corporation of the NCI Merger.
1.6 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of TWI in effect at the Effective Time shall be the
certificate of incorporation and bylaws of the surviving corporation of the TWI
Merger. The articles of incorporation and bylaws of NCI in effect at the
Effective Time shall be the articles of incorporation and bylaws of the
surviving corporation of the NCI Merger.
1.7 Officers and Directors. The officers of TWI in effect at the
Effective Time shall be the officers of the surviving corporation of the TWI
Merger. The directors of the surviving
-2-
<PAGE> 4
corporation of the TWI Merger shall be Nicholas Molina, Brett Beveridge and
Douglas Berman. The officers of NCI in effect at the Effective Time shall be
the officers and directors of the surviving corporation of the NCI Merger. The
directors of the surviving corporation of the NCI Merger shall be Nicholas
Molina, Brett Beveridge and Douglas Berman.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TCP, TWI AND NCI
TCP, TWI and NCI, jointly and severally, represent and warrant to the
Buyers as of the date hereof and as of the Closing Date:
2.1 Organization, Etc. Each of TWI and NCI is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and proposed to be conducted, and
to own, operate and lease its properties and assets. Each of TWI and NCI is
duly qualified or licensed to do business and is in corporate and tax good
standing in every jurisdiction in which the conduct of its business or the
ownership or lease of its properties require it to be so qualified or licensed,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect.
2.2 Subsidiaries. Neither TWI nor NCI has any subsidiaries.
2.3 Stock Record Books. The stock record books of TWI and NCI
which have been delivered to LTC for inspection prior to the date hereof are
complete and correct in all material respects. The issued and outstanding
capital stock of each of TWI and NCI is 1,000 shares of Common Stock issued to
Texas Cellular Partners, L.P. There are no shares of capital stock of TWI or
NCI held in the treasury of TWI or NCI and no shares of capital stock of TWI or
NCI are currently reserved for issuance for any purpose or upon the occurrence
of any event or condition.
2.4 Title to Stock. All of the outstanding shares of capital
stock of TWI and NCI are owned by TCP free of all Liens and Contracts, except
for Liens in favor of NationsCredit Commercial Corporation and Mr. Ronald L.
Koonsman, and have been issued in compliance with all applicable securities
laws. Neither TWI nor NCI is a party to any outstanding Contract with any other
Person to purchase, redeem or otherwise acquire any outstanding capital stock
of TWI or NCI. Neither TWI nor NCI has redeemed any securities in violation of
any Contract or Regulation (including, without limitation, any state or federal
securities laws). All of the outstanding shares of the capital stock of TWI and
NCI are owned by TCP, are duly authorized, validly issued, fully paid and
nonassessable.
2.5 Authorization.
(a) TWI and NCI each have full power and authority to
enter into this Agreement and the agreements contemplated hereby and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement
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and all other agreements and transactions contemplated hereby have been duly
authorized by the respective boards of directors and shareholders of TWI and
NCI and no other corporate proceedings on their respective parts are necessary
to authorize this Agreement and the transactions contemplated hereby. This
Agreement and all other agreements contemplated hereby to be entered into by
TWI and NCI each constitutes a legal, valid and binding obligation of TWI and
NCI, enforceable against TWI and NCI in accordance with its terms.
(b) TCP is the sole owner of and has full right, power
and authority to sell the capital stock of TWI and NCI. TCP has full
partnership power and authority to enter into this Agreement and the agreements
contemplated hereby and to deliver the shares of outstanding capital stock of
TWI and NCI and the certificates evidencing such shares to LTC as provided for
herein, free and clear of all Liens, except for Liens in favor of NationsCredit
Commercial Corporation and Mr. Ronald L. Koonsman. This Agreement and all other
agreements contemplated hereby to be entered into by TCP each constitute a
legal, valid and binding obligation of TCP enforceable against TCP in
accordance with its terms.
2.6 Options and Rights. At the Closing Date there shall be no
outstanding Options with respect to TWI's or NCI's outstanding capital stock or
TCP's partnership interests, except the warrant issued to NationsCredit
Commercial Corporation. There are no existing Contracts or Options between TCP
on the one hand, and any other Person, on the other hand, regarding the shares
of outstanding capital stock of TWI and NCI, except as may relate to
NationsCredit Commercial Corporation and Mr. Ronald L. Koonsman.
2.7 No Violation. Except as set forth in Schedule 2.7 hereto, the
execution, delivery and performance by TCP, TWI and NCI of this Agreement, and
all other agreements contemplated hereby, and the fulfillment of and compliance
with the respective terms hereof and thereof by TCP, TWI and NCI, do not and
will not (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default or event of default under (with due
notice, lapse of time or both), (c) result in the creation of any Lien upon
TWI's or NCI's capital stock or assets pursuant to, (d) give any third party
the right to accelerate any obligation under, (e) result in a violation of, or
(f) require any authorization, consent, approval, exemption or other action by,
notice to, or filing with any Authority pursuant to, the organizational
documents of TCP, TWI or NCI or any applicable Regulation (including, without
limitation, approvals pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976), Order or any material Contract to which TCP, TWI or NCI or their
respective properties, partnership interests or capital stock are subject. Each
of TCP, TWI and NCI will comply with all applicable Regulations and Orders in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
2.8 Financial Statements. Attached as Schedule 2.8 hereto are
unaudited consolidated year-end balance sheets and statements of operations of
TCP for 1996 and audited year-end balance sheets and statements of operations
of TCP's predecessors as for each of the years 1995 and 1994. Such balance
sheets and the notes thereto have been prepared in accordance with GAAP (except
as stated therein or in the notes thereto) and fairly present the financial
position of TCP or its predecessors, as applicable, at the respective dates
thereof, and such statements of operations and the notes thereto (i) fairly
present the results of operations for the periods therein
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referred to, all in accordance with GAAP (except as stated therein or in the
notes thereto), and (ii) fairly present the financial condition of TCP at the
respective date of, and for the period covered by such statements.
2.9 Absence of Certain Changes. Since the date of TCP's most
recent financial statements, there has not been (a) any Material Adverse Change
in the business, operations, properties, assets, condition (financial or
otherwise) of TCP, TWI or NCI; (b) any damage, destruction or loss, whether
covered by insurance or not, having a Material Adverse Effect, with regard to
TWI's or NCI's property and business; (c) any declaration, setting aside or
payment of any dividend or distribution (whether in cash, stock or property) in
respect of TCP's partnership interests, or any redemption or other acquisition
of such partnership interests by TCP; (d) any entry into any material Contract
not in the ordinary course of business, including without limitation, any
borrowing or capital expenditure; or (e) any change by TCP in accounting
methods or principles.
2.10 Litigation. There is no Claim pending or, to the best
knowledge of TCP, TWI or NCI threatened against TWI or NCI which, if adversely
determined, would have a Material Adverse Effect on TWI or NCI, nor is there
any Order outstanding against TWI or NCI having, or which, insofar as can be
reasonably foreseen, in the future may have, a Material Adverse Effect on TWI
or NCI.
2.11 Compliance with Law. TWI and NCI are presently in material
compliance with regard to their respective operations, practices, real property
and other property, and all other aspects of its business, with all applicable
Regulations and Orders. There are no Claims pending, or threatened, nor has
TCP, TWI or NCI received any written notice, regarding any violations of any
Regulations and Orders enforced by any Authority which could reasonably be
expected to have a Material Adverse Effect.
2.12 Contracts.
(a) Except as set forth in Schedule 2.12 hereto, as of
the Closing Date, neither TWI nor NCI is a party to any written or oral:
(i) pension, profit sharing, stock option,
employee stock purchase or other plan providing for deferred
or other compensation to employees or any other employee
benefit plan, or any Contract with any labor union;
(ii) Contract relating to loans to officers,
directors, or Affiliates;
(iii) Contract relating to the borrowing of money
or the mortgaging, pledging or otherwise placing a Lien on
any asset of TWI or NCI;
(iv) Guarantee of any obligation;
(v) Contract under which TWI or NCI has advanced
or loaned any Person amounts in the aggregate exceeding
$10,000;
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(vi) Contract under which TWI or NCI is lessee of
or holds or operates any property, real or personal, owned by
any other party, except for any lease of real or personal
property under which the aggregate annual rental payments do
not exceed $25,000;
(vii) Contract pursuant to which TWI or NCI is
lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by TWI or
NCI;
(viii) Contract or group of related Contracts with
the same party or group of affiliated parties the performance
of which involves annual consideration in excess of $25,000;
(ix) assignment, license, indemnification or
Contract with respect to any intangible property;
(x) Contract for the purchase, acquisition or
supply of inventory and other property and assets, whether
for resale or otherwise in excess of $25,000;
(xi) Contracts with independent agents, brokers,
dealers or distributors which provide for annual payments in
excess of $25,000;
(xii) employment or consulting Contracts;
(xiii) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations; or
(xiv) Contracts with Persons with which, directly
or indirectly, TCP also has a Contract.
(b) TWI and NCI have performed in all material respects
all obligations required to be performed by them and are not in default in any
respect under or in breach of nor in receipt of any claim of default or breach
under any material Contract to which TWI or NCI is subject (including without
limitation all performance bonds, warranty obligations or otherwise); no event
has occurred which with the passage of time or the giving of notice or both
would result in a default, breach or event of non-compliance under any material
Contract to which TWI or NCI is subject (including without limitation all
performance bonds, warranty obligations or otherwise); neither TWI nor NCI have
any present expectation or intention of not fully performing all such
obligations; neither TWI nor NCI have any knowledge of any breach or
anticipated breach by the other parties to any such Contract to which it is a
party.
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2.13 Title and Related Matters.
(a) Except as set forth in Schedule 2.13(a) hereto, TWI
and NCI have good and marketable title to all of their real and personal
property and other assets in TCP's financial statements provided pursuant to
Section 2.8 hereof or acquired after the date of such financial statements,
free and clear of all Liens, except Permitted Liens.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE BUYERS
The Buyers and LTC represent and warrant to TCP, TWI and NCI as
follows as of the date hereof and as of the Closing Date:
3.1 Corporate Organization, Etc. Each of the Buyers and LTC is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation with full corporate power and
authority to carry on its business as it is now being conducted and to own,
operate and lease its properties and assets. Each of the Buyers and LTC is
duly qualified or licensed to do business and is in corporate and tax good
standing in every jurisdiction in which the conduct of its business or the
ownership or lease of its properties require it to be so qualified or licensed,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect.
3.2 Subsidiaries and Affiliates. Each of the Buyers is a
wholly-owned subsidiary of LTC.
3.3 Authorization. Each of the Buyers and LTC has full corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby and thereby. The Board of Directors of each of
the Buyers and LTC and the shareholders of each of the Buyers has duly
authorized the execution, delivery and performance of this Agreement and to
consummate the transactions contemplated hereby, and no other corporate
proceedings on their part are necessary to authorize this Agreement and the
transactions contemplated hereby and thereby. This Agreement constitutes the
legal, valid and binding obligation of each of the Buyers and LTC enforceable
against such Buyer and LTC in accordance with its terms.
3.4 No Violation. Except as set forth in Schedule 3.4 hereto, the
execution, delivery and performance by each of the Buyers and LTC of this
Agreement, and all other agreements contemplated hereby, and the fulfillment of
and compliance with the respective terms hereof and thereof by such Buyer and
LTC, do not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, or (b) result in a violation of, or require any
authorization, consent, approval, exemption or other action by, or notice to,
or filing with any court or Authority pursuant to, the charter or bylaws of any
of the Buyers or LTC or, to the best knowledge of any of the Buyers and LTC,
any applicable Regulation (including, without limitation, approvals pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976),
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Order or any material Contract to which any of the Buyers or LTC, or their
respective properties are subject. The Buyers and LTC will comply in all
material respects with all applicable Regulations and Orders in connection with
its execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
3.5 Financial Statements. Attached as Schedule 3.5 hereto are
audited consolidated year-end balance sheets and statements of operations,
shareholders' equity and cash flow of LTC as for each of the years ended July
31, 1996, 1995 and 1994 and an unaudited consolidated balance sheet for the six
month period commencing August 1, 1996 and ending January 31, 1997 and
unaudited consolidated statements of operations, shareholders' equity and cash
flow for the six month period then ended. Such balance sheets and the notes
thereto fairly present the financial position of LTC as applicable, at the
respective dates thereof, and such statements of operations, shareholders'
equity and cash flow and the notes thereto (i) fairly present the results of
operations for the periods therein referred to, all in accordance with GAAP
(except as stated therein or in the notes thereto), and (ii) fairly present the
financial condition of LTC at the respective date of, and for the period
covered by such statements.
3.6 Absence of Certain Changes. Since the date of LTC's most
recent financial statements, there has not been (a) any Material Adverse Change
in the business, operations, properties, assets, condition (financial or
otherwise) of LTC; (b) any damage, destruction or loss, whether covered by
insurance or not, having a Material Adverse Effect, with regard to LTC's
property and business; (c) any declaration, setting aside or payment of any
dividend or distribution (whether in cash, stock or property) in respect of
LTC's capital stock, or any redemption or other acquisition of such stock by
LTC; (d) any entry into any material Contract not in the ordinary course of
business, including without limitation, any borrowing or capital expenditure;
or (e) any change by LTC in accounting methods or principles.
3.7 Litigation. There is no Claim pending or, to the best
knowledge of LTC, threatened against LTC which, if adversely determined, would
have a Material Adverse Effect on LTC, nor is there any Order outstanding
against LTC having, or which, insofar as can be reasonably foreseen, in the
future may have, a Material Adverse Effect on LTC.
3.8 Compliance with Law. LTC is presently in material compliance
with regard to its operations, practices, real property and other property, and
all other aspects of its business, with all applicable Regulations and Orders.
There are no Claims pending, or threatened, nor has LTC received any written
notice, regarding any violations of any Regulations and Orders enforced by any
Authority which could reasonably be expected to have a Material Adverse Effect.
3.9 Contracts.
(a) Except as set forth in Schedule 3.9 hereto, as of the
Closing Date, LTC is not a party to any written or oral:
(i) pension, profit sharing, stock option,
employee stock purchase or other plan providing for deferred
or other compensation to employees or any other employee
benefit plan, or any Contract with any labor union;
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(ii) Contract relating to loans to officers,
directors, or Affiliates;
(iii) Contract relating to the borrowing of money
or the mortgaging, pledging or otherwise placing a Lien on
any asset of LTC;
(iv) Guarantee of any obligation;
(v) Contract under which LTC has advanced or
loaned any Person amounts in the aggregate exceeding $10,000;
(vi) Contract under which LTC is lessee of or
holds or operates any property, real or personal, owned by
any other party, except for any lease of real or personal
property under which the aggregate annual rental payments do
not exceed $25,000;
(vii) Contract pursuant to which LTC is lessor of
or permits any third party to hold or operate any property,
real or personal, owned or controlled by LTC;
(viii) Contract or group of related Contracts with
the same party or group of affiliated parties the performance
of which involves annual consideration in excess of $25,000;
(ix) assignment, license, indemnification or
Contract with respect to any intangible property;
(x) Contract for the purchase, acquisition or
supply of inventory and other property and assets, whether
for resale or otherwise in excess of $25,000;
(xi) Contracts with independent agents, brokers,
dealers or distributors which provide for annual payments in
excess of $25,000;
(xii) employment or consulting Contracts;
(xiii) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations; or
(xiv) Contracts with Persons with which, directly
or indirectly, a shareholder of LTC also has a Contract.
(b) LTC has performed in all material respects all
obligations required to be performed by it and is not in default in any respect
under or in breach of nor in receipt of any claim of default or breach under
any material Contract to which LTC is subject (including without limitation all
performance bonds, warranty obligations or otherwise); no event has occurred
which with the passage of time or the giving of notice or both would result in
a default, breach or event of non-compliance under any material Contract to
which LTC is subject (including without limitation all performance bonds,
warranty obligations or otherwise); LTC has no present
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expectation or intention of not fully performing all such obligations; LTC has
no knowledge of any breach or anticipated breach by the other parties to any
such Contract to which it is a party.
3.10 Title and Related Matters.
(a) Except as set forth in Schedule 3.10(a) hereto, LTC
has good and marketable title to all real and personal property and other
assets reflected in LTC's financial statements provided pursuant to Section 3.5
hereto or acquired after the date of such financial statements free and clear
of all Liens, except Permitted Liens.
ARTICLE IV
COVENANTS OF TCP, TWI AND NCI
Until the Closing Date, except as otherwise consented to or approved
by the Buyers in writing, TCP, TWI and NCI agree that they shall act, or
refrain from acting where required hereinafter, to comply with the following:
4.1 Regular Course of Business. TCP, TWI and NCI shall operate
their respective business diligently and in good faith, consistent with past
management practices; shall maintain all of its properties in customary repair,
order and condition, reasonable wear and tear excepted; shall maintain (except
for expiration due to lapse of time), all material leases and material
Contracts in effect which are in the best interests of their respective
businesses; shall comply in all material respects with the provisions of all
Regulations and Orders applicable to TCP, TWI and NCI and the conduct of their
respective businesses; and shall not cancel, release, waive or compromise any
debt, Claim or right in their respective favors having a value in the aggregate
in excess of $20,000 other than in connection with returns for credit or
replacement in the ordinary course of business. Neither TWI nor NCI shall
incur, assume or guarantee any Indebtedness not reflected in TCP's financial
statements, except in the ordinary course of business.
4.2 Amendments. No change or amendment shall be made in the
organizational documents of TWI or NCI. Neither TWI nor NCI shall merge into
or consolidate with any other Person or change the character of its business.
4.3 Capital Changes; Pledges. Neither TWI nor NCI shall issue or
sell any shares of capital stock or issue or sell any securities convertible
into, or Options to subscribe for any shares of capital stock and TCP shall not
pledge or otherwise encumber any of their capital stock except for the Liens in
favor of NationsCredit Commercial Corporation and Mr. Ronald L. Koonsman. In
addition, neither TWI nor NCI shall allow the transfer of any capital stock on
their respective transfer ledger or other books and records.
4.4 Dividends. Neither TWI nor NCI shall declare, pay or set
aside for payment any dividend or other distribution in respect of its
outstanding capital stock, nor shall TWI nor NCI, directly or indirectly,
redeem, purchase or otherwise acquire any of their capital stock.
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ARTICLE V
COVENANTS OF LTC
LTC hereby covenants and agrees with TCP and the Sellers that:
5.1 Regular Course of Business. LTC shall operate its business
diligently and in good faith, consistent with past management practices; shall
maintain all of its properties in customary repair, order and condition,
reasonable wear and tear excepted; shall maintain (except for expiration due to
lapse of time), all material leases and material Contracts in effect which are
in the best interests of its business; shall comply in all material respects
with the provisions of all Regulations and Orders applicable to LTC and the
conduct of its business; and shall not cancel, release, waive or compromise any
debt, Claim or right in its favor having a value in the aggregate in excess of
$20,000 other than in connection with returns for credit or replacement in the
ordinary course of business. LTC shall not incur, assume or guarantee any
Indebtedness not reflected on LTC's financial statements except in the ordinary
course of business.
5.2 Amendments. Except as required for the transactions
contemplated in this Agreement, no change or amendment shall be made in the
charter or bylaws of LTC. LTC shall not merge into or consolidate with any
other Person or change the character of its business.
5.3 Capital Changes; Pledges. LTC shall not issue or sell any
shares of its capital stock of any class or issue or sell any securities
convertible into, or Options to subscribe for any shares of its capital stock
and LTC shall not pledge or otherwise encumber any shares of its capital stock,
with the exception of shares of Common Stock issued upon the conversion of
LTC's Series A Convertible Preferred Stock. In addition, LTC shall not allow
the transfer of any shares of its capital stock on the stock transfer ledger or
other books and records.
5.4 Dividends. LTC shall not declare, pay or set aside for
payment any dividend or other distribution in respect of its capital stock, nor
shall LTC, directly or indirectly, redeem, purchase or otherwise acquire any
shares of its capital stock.
ARTICLE VI
OTHER AGREEMENTS
The parties further agree as follows:
6.1 Agreement to Defend. In the event any action, suit,
proceeding or investigation of the nature specified in Section 7.4 or Section
8.4 hereof is commenced all the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto.
6.2 Further Assurances. Subject to the terms and conditions of
this Agreement, the parties hereto shall use their best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and Regulations
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to consummate and make effective as promptly as possible the transactions
contemplated by this Agreement, and to cooperate with each other in connection
with the foregoing.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF LTC AND THE BUYERS
Each and every obligation of LTC and the Buyers under this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions unless waived in writing by the Buyers:
7.1 Representations and Warranties; Performance. The
representations and warranties of TCP, TWI and NCI contained in Article II of
this Agreement shall be true and correct in all material respects when made and
on the Closing Date as though then made, except as expressly provided herein.
TCP, TWI and NCI shall have performed and complied in all material respects
with all agreements, covenants and conditions required by this Agreement to be
performed and complied with by them prior to the Closing Date. The general
partner of TCP and the president of each of TWI and NCI shall have delivered to
LTC certificates, dated the Closing Date, in the form designated Exhibit 7.1
hereto, certifying to the foregoing.
7.2 Consents and Approvals. TCP, TWI and NCI shall have obtained
any and all consents, approvals, qualifications, licenses or other
authorizations required by all applicable Regulations with respect to the
execution, delivery and performance of the Agreement.
7.3 No Material Adverse Change. There shall have been no Material
Adverse Change in the business or properties of TWI or NCI since the date of
this Agreement. LTC shall have received certificates, dated the Closing Date,
of the president and chief financial officer of each of TWI and NCI, in the
form of Exhibit 7.3 hereto, certifying to the foregoing.
7.4 No Proceeding or Litigation. No preliminary or permanent
injunction or other Order issued by a court of competent jurisdiction or by any
governmental agency, or any Regulation shall be in effect, which would prevent
the consummation of the transactions contemplated hereby.
7.5 Shareholders Agreement of LTC. The Shareholders Agreement of
LTC shall be amended and restated in the form of Exhibit 7.5 hereto.
7.6 Modification of Employment Agreements. The Employment
Agreements of Brett Beveridge and Nicholas Molina with LTC shall be amended and
restated in the form attached hereto as Exhibit 7.6.
7.7 Conversion of Preferred Stock. HIG Fund V, Inc., the owner of
100,000 shares of LTC's Series A Preferred Stock, shall have converted such
preferred stock into common stock of LTC and Articles III, IV and V of the
Series A Preferred Stock Purchase Agreement shall terminate upon the
consummation of the transactions contemplated hereby.
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7.8 Consulting Agreement. HIG Capital Management, Inc. shall have
executed and delivered to LTC and TWI the Consulting Agreement, in the form of
Exhibit 7.8 hereto.
7.9 Lenders' Consents. NationsCredit Commercial Corporation and
Mr. Ronald L. Koonsman (if required) shall have consented to the transactions
contemplated hereby.
7.10 Termination of Redemption Agreement. The Redemption Agreement
between LTC and HIG Fund V, Inc. shall have been terminated.
7.11 Grant of Options. LTC shall have granted to each of Messrs.
Molina and Beveridge options to purchase 27,721 shares of LTC's Common Stock,
such options to vest upon consummation of an initial public offering of LTC's
Common Stock.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF TCP, TWI AND NCI
Each and every obligation of TCP, TWI and NCI under this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions unless waived in writing by TCP, TWI and NCI:
8.1 Representations and Warranties; Performance. The
representations and warranties of the Buyers contained in Article III of this
Agreement shall be true and correct in all material respects when made and on
the Closing Date as though then made, except as expressly provided herein. The
Buyers shall have performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing Date. The president of each of the Buyers shall have
delivered to TCP, TWI and NCI certificates, dated the Closing Date, in the form
designated Exhibit 8.1 hereto, certifying to the foregoing.
8.2 Consents and Approvals. The Buyers shall have obtained any
and all material consents, approvals, qualifications, licenses or other
authorizations required by all applicable Regulations with respect to the
execution, delivery and performance of the Agreement.
8.3 No Material Adverse Change. There shall have been no Material
Adverse Change in the business or properties of the Buyers since the date of
this Agreement. TCP, TWI and NCI shall have received certificates dated the
Closing Date, of the president and chief financial officer of each of the
Buyers, in the form of Exhibit 7.3 hereto, certifying to the foregoing.
8.4 No Proceeding or Litigation. No preliminary or permanent
injunction or other Order issued by a court of competent jurisdiction or by any
governmental agency, or any Regulation shall be in effect, which would prevent
the consummation of the transactions contemplated hereby.
8.5 Lenders Consents. NationsCredit Commercial Corporation and
Mr. Ronald L. Koonsman (if required) shall have consented to the transactions
contemplated hereby.
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8.6 Shareholders Agreement of LTC. The Shareholders Agreement of
LTC shall be amended and restated in the form of Exhibit 7.5 hereto.
8.7 Conversion of Preferred Stock. HIG Fund V, Inc. shall have
received 350,000 shares of LTC common stock upon conversion of the Series A
Preferred Stock.
8.8 Consulting Agreement. LTC and TWI shall have executed a new
consulting agreement with HIG Capital Management, Inc.
ARTICLE IX
CLOSING
9.1 Closing. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "Closing") shall be held on
June 27, 1997, or on such other date (the "Closing Date") designated by the
parties in the offices of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., 1221 Brickell Avenue, Miami, Florida 33131, provided that the Closing
shall not occur, in any event, after July 11, 1997.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination. This Agreement may be terminated and
the transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of LTC, the Buyers, TCP, TWI and
NCI;
(b) by any of LTC the Buyers, TCP, TWI or NCI if this
Agreement is not consummated on or before July 11, 1997; provided that if any
party has breached or defaulted with respect to its respective obligations
under this Agreement on or before such date, such party may not terminate this
Agreement pursuant to this Section 10.1(b), and each other party to this
Agreement shall at its option enforce its rights against such breaching or
defaulting party and seek any remedies against such party, in either case as
provided hereunder and by applicable law;
(c) by any of LTC or the Buyers if as of the Closing Date
any of the conditions specified in Article VII hereof have not been satisfied
in any material respect or if TCP, TWI or NCI are otherwise in default in any
material respect under this Agreement; or
(d) by TCP, TWI or NCI if as of the Closing Date any of
the conditions specified in Article VIII hereof have not been satisfied in any
material respect or if any of LTC or the Buyers are otherwise in default in any
material respect under this Agreement.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement
of the parties hereto, at any time prior to the Closing Date with respect to
any of the terms contained herein.
11.2 Waiver of Compliance; Consents. Any failure of any party
hereto to comply with any obligation, covenant, agreement or condition herein
may be waived in writing by the other parties hereto, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
or permits consent by or on behalf of any party hereto, such consent shall be
given in writing.
11.3 Certain Definitions.
"Affiliate" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or
controlling such Person, (b) any Person, directly or indirectly, in
which such Person holds, of record or beneficially, five percent or
more of the equity or voting securities, (c) any Person that holds,
of record or beneficially, five percent or more of the equity or
voting securities of such Person, (d) any Person that, through
Contract, relationship or otherwise, exerts a substantial influence
on the management of such person's affairs, (e) any Person that,
through Contract, relationship or otherwise, is influenced
substantially in the management of their affairs by such Person, or
(f) any director, officer, partner or individual holding a similar
position in respect of such Person.
"Authority" means any governmental, regulatory or
administrative body, agency, commission, board, arbitrator or
authority, any court or judicial authority, any public, private or
industry regulatory authority, whether international, national,
federal, state or local.
"Claim" means any action, claim, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation, litigation,
proceeding, arbitration, appeals or other dispute, whether civil,
criminal, administrative or otherwise.
"Closing" shall have the meaning set forth in Section 9.1.
"Closing Date" shall have the meaning set forth in Section
9.1.
"Contract" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether
written or oral.
"Effective Time" shall have the meaning set forth in Section
1.4.
-15-
<PAGE> 17
"GAAP" means generally-accepted accounting principles,
consistently applied, as in existence at the date hereof.
"Guarantee" means any guarantee or other contingent liability
(other than any endorsement for collection or deposit in the ordinary
course of business), direct or indirect with respect to any
obligations of another Person, through an agreement or otherwise,
including, without limitation, (a) any endorsement or discount with
recourse or undertaking substantially equivalent to or having
economic effect similar to a guarantee in respect of any such
obligations and (b) any Contract (i) to purchase, or to advance or
supply funds for the payment or purchase of, any such obligations,
(ii) to purchase, sell or lease property, products, materials or
supplies, or transportation or services, in respect of enabling such
other Person to pay any such obligation or to assure the owner
thereof against loss regardless of the delivery or nondelivery of the
property, products, materials or supplies or transportation or
services or (iii) to make any loan, advance or capital contribution
to or other investment in, or to otherwise provide funds to or for,
such other Person in respect of enabling such Person to satisfy an
obligation (including any liability for a dividend, stock liquidation
payment or expense) or to assure a minimum equity, working capital or
other balance sheet condition in respect of any such obligation.
"Indebtedness" with respect to any Person means any
obligation of such Person for borrowed money, but in any event shall
include (a) any obligation or liabilities incurred for all or any
part of the purchase price of property or other assets or for the
cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities
and incurred in respect of property purchased in the ordinary course
of business, (whether or not such Person has assumed or become liable
for the payment of such obligation) (whether accrued, absolute,
contingent, unliquidated or otherwise, known or unknown, whether due
or to become due), (b) the face amount of all letters of credit
issued for the account of such Person and all drafts drawn
thereunder, (c) obligations incurred for all or any part of the
purchase price of property or other assets or for the cost of
property or other assets constructed or of improvements thereto,
other than accounts payable included in current liabilities and
incurred in respect of property purchased in the ordinary course of
business (whether or not such Person has assumed or become liable for
the payment of such obligation) secured by Liens, (d) capitalized
lease obligations, and (e) all Guarantees of such Person.
"Lien" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction on transfer
or otherwise, or interest of another Person of any kind or nature.
"Material Adverse Change" means any developments or changes
which would have a Material Adverse Effect.
"Material Adverse Effect" means any circumstances, state of
facts or matters which might reasonably be expected to have a
material adverse effect in respect of LTC's or TCP's, TWI's or NCI's
respective business, operations, properties, assets, condition
(financial or otherwise), results, plans, strategies or prospects.
-16-
<PAGE> 18
"Option" means any subscription, option, warrant, right,
security, Contract, commitment, understanding, outstanding or stock
appreciation, phantom stock option, profit participation or
arrangement by which with respect to any of the Buyers, LTC, TWI or
NCI such corporation is or may become bound to issue any additional
partnership interests or shares of its capital stock (as applicable)
or rights pursuant to which any Person has a right to purchase or
otherwise acquire shares of capital stock or (ii) with respect to a
Person, such Person is or may become bound to sell or allow another
Person to vote, encumber or control the disposition of any
partnership interests or capital stock or rights pursuant to which
any Person has a right to purchase or otherwise acquire, vote,
encumber or control the disposition of partnership interests of TCP
or shares of capital stock of any of the Buyers, LTC, TWI or NCI.
"Order" means any decree, order, judgment, injunction, rule,
lien, voting right, consent of or by an Authority.
"Permits" means all permits, licenses, registrations,
certificates, orders or approvals from any Authority or other Person
(including without limitation those relating to the occupancy or use
of owned or leased real property) issued to or held by any Buyer,
LTC, TCP, TWI or NCI.
"Permitted Liens" means (i) statutory Liens not yet
delinquent, (ii) such imperfections or irregularities of title,
Liens, easements, charges or encumbrances as do not materially
detract from or interfere with the present use of the properties or
assets subject thereto or affected thereby, otherwise impair present
business operations at such properties, or do not detract from the
value of such properties and assets, taken as a whole, (iii) Liens
reflected in TCP's or LTC's financial statements or the notes
thereto, (iv) the rights of customers of TWI, NCI or LTC with respect
to inventory or work in progress under orders or contracts entered
into by TWI, NCI or LTC in the ordinary course of business, (v)
mechanics', carriers', workers', repairmen's, warehousemen's, or
other similar Liens arising in the ordinary course of business in
respect of obligations not overdue or which are being contested in
good faith and covered by a bond in an amount at least equal to the
amount of the Lien, and (vi) deposits or pledges to secure workmen's
compensation, unemployment insurance, old age benefits or other
social security obligations in connection with, or to secure the
performance of, bids, tenders, trade contracts not for the payment of
money or leases, or to secure statutory obligations or surety or
appeal bonds or other pledges or deposits for purposes of like nature
in the ordinary course of business.
"Person" means any corporation, partnership, joint venture,
organization, entity, Authority or natural person.
"Regulation" means any rule, law, code, statute, regulation,
ordinance, requirement, announcement or other binding action of or by
an Authority.
11.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when
-17-
<PAGE> 19
delivered by hand or mailed, first class certified mail with postage paid or by
overnight receipted courier service:
(a) If to the Buyers to:
5200 N.W. 77th Court
Miami, Florida 33166
Attn: Nicholas Molina and Brett Beveridge
with a copy to:
Buchanan Ingersoll
NationsBank Tower
100 S.E. Second Street, Suite 2950
Miami, Florida 33131
Attention: John Schwartz
or to such other person or address as LTC and the Buyers shall furnish by
notice to TCP, TWI and NCI in writing.
(b) If to TCP, TWI or NCI, to:
1001 South Bayshore Drive, Suite 2708
Miami, Florida 33131
Attn: Anthony Tamer and
Douglas Berman
with a copy to:
Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Jorge L. Freeland, Esq.
or to such other person or address as TCP, TWI or NCI shall furnish by notice
to LTC and the Buyers in writing.
11.5 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
11.6 Governing Law. The Agreement shall be governed by the law of
the State of Florida as to all matters, including but not limited to matters of
validity, construction, effect and performance.
-18-
<PAGE> 20
11.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.9 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and the documents, certificates and instruments referred to
herein, embodies the entire agreement and understanding of the parties hereto
in respect of the mergers contemplated hereby.
11.10 Binding Effect. This Agreement shall not be construed so as
to confer any right or benefit upon any Person other than the signatories to
this Agreement and each of their respective successors and permitted assigns.
11.11 Injunctive Relief. The parties hereto agree that in the event
of a breach of any provision of this Agreement, the aggrieved party or parties
may be without an adequate remedy at law. The parties therefore agree that in
the event of a breach of any provision of this Agreement, the aggrieved party
or parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
11.12 Survival of Representations, Warranties and Covenants. Each
and every representation, warranty and covenant shall expire with, and be
terminated and extinguished by, the earlier to occur of the Closing or the
termination of this Agreement pursuant to Section 10.1 hereof or otherwise, and
thereafter neither the Buyers, LTC, TCP, TWI or NCI, nor any partner, officer,
director or principal thereof shall be under any liability whatsoever with
respect to such representation, warranty or covenant.
* * *
-19-
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have made and entered into
this Agreement the date first hereinabove set forth.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ Nicolas Molina
------------------------------------
Title: Chief Executive Officer
---------------------------------
MERGER SUB 1, INC.
By: /s/ Nicolas Molina
------------------------------------
Title: Chief Executive Officer
---------------------------------
MERGER SUB 2, INC.
By: /s/ Bucikas Molina
------------------------------------
Title: Chief Executive Officer
---------------------------------
TEXAS CELLULAR PARTNERS, L.P.
By: HIG Texan Cellular Company, its
managing general partner
By: /s/ Anthony Tamer
------------------------------------
Title: President
---------------------------------
TELEPHONE WAREHOUSE, INC.
By: /s/ Anthony Tamer
------------------------------------
Title: Vice President
---------------------------------
NATIONAL CELLULAR, INCORPORATED
By: /s/ Anthony Tamer
------------------------------------
Title: Vice President
---------------------------------
-20-
<PAGE> 22
Schedule 2.7 - No Violation
Consents required pursuant to the terms of the following documents:
1. Credit Agreement, dated as of December 31, 1996, among HIG Cellular
Acquisition Corporation, HIG Cellular Acquisition Corporation II, Texas Cellular
Partners, L.P., the Lenders referred to therein and NationsCredit Commercial
Corporation, and certain documents executed in connection with the Credit
Agreement, including, but not limited to, the Security Agreement, the Holdings
Pledge Agreement and the Guaranty Agreement
2. Subordinated Note, dated as of December 31, 1996, by Texas Cellular
Partners, L.P. in favor of Mr. Ronald L. Koonsman
3. Stock Pledge Agreement, dated as of December 31, 1996, by and
between Texas Cellular Partners, L.P. and Ronald L. Koonsman
4. Carrier contracts with:
a) AT&T Wireless
b) AT&T Wireless - San Antonio
c) CellularOne
d) Parkway Paging
e) PageNet - Kansas
f) McCaw Communications
g) PageNet - DFW
5. Leases with:
a) LBJ/Josey Lane Joint Venture
b) Red Hill Associates
c) Market East RPF III
d) Six Flags Joint Venture
e) Hulen Park Associates
f) Wimbledon Court
g) Richland Square Shopping Center
h) TMPC Realty Services Group
i) Windsor Place Shopping Center
j) Subiaco, Inc.
k) 6100 Callaghan Road, Inc.
1) DOM Company
m) Kessinger/Hunter & Co., Inc.
n) Meg Associates
o) MFM Realty Ltd. (2 leases)
<PAGE> 23
6. Consulting Agreement, dated as of December 31, 1996, between HIG
Capital Management, Inc. and Telephone Warehouse, Inc.
7. The filing of a Notification and Report Form pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 will be required to
consummate this transaction.
<PAGE> 24
Schedule 2.8 - Financial Statements
See attached.
<PAGE> 25
NATIONAL CELLULAR, INC.
BALANCE SHEET
As of 12/31/96
ASSET:
<TABLE>
<CAPTION>
Current Assets
<S> <C> <C>
Desk on hand $ 3,153.32
A/R-Accrual-PTAT 22,986.26
A/R Trade 2,981,472.32
A/P Usage 273,983.09
A/R Intercompany 2,588,433.66
A/P Other 3,149.88
A/P-Employee advances 100.00
A/P-Employee purchases 41.35
allowance for office
Inventory
-------------
Total $3,402,224.44
Other Assets
$ 2,355.00
----------
Total Other assets $ 3,655.00
------------
Total Assets $8,704,133.76
</TABLE> =============
<PAGE> 26
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
Current Liabilities
<S> <C>
A/P-Trade $2,569,708.78
A-p- Accreals 616,273.78
A/P Bal & wages payable 37,973.98
Uninvoiced receiving 1,107,131.70
Intercompany A/P TN-BF4 94,711.80
Intercompany A/P TN-SA 17,001.25
Intercompany A/P TN-KO 4,781.03
Sales tax payable 274.73
S/Security and Fed tax payable 19,187.86
Unemployment tax payable 186.91
Accrued property taxes 32,207.12
Accrued professional 11,232.00
Accrued franchise taxes 3,617.35
Circuit 30.00
Income tax payable 1986 848,687.00
-------------
Total current Liabilities $4,895.096.61
-------------
Total Long Term Dis $ .00
-------------
Total Liabilities
$3,909,037.15
-------------
Total Liability and Equity $8,764,133.76
=============
</TABLE>
<PAGE> 27
NATIONAL CELLULAR, INC.
CONSOLIDATED INCOME STATEMENT
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting Year-to-date Budget-reporting-period Budget-year-to-date
Amount Amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Total equipment
sales 3390647.98 32497426.91 3912686.00 (522938.02) 13.3- 28580495.00 3916931.91 13.7
Total Freight Sales 31128.08 276510.70 26125.00 5003.83 19.2 261997.00 14313.70 5.5
Misc. Income 1370.39 393.17 100.00 (620.59) 600.6- 2456.00 (2062.83) 84.0-
Residual Income 22908.16 284927.48 23800.00 91.74) .4 317500.00 (32372.52) 10.3-
Interest Income 4046.03 42937.57 4000.00 46.03 1.2 33800.00 9127.57 27.0
Pencal property
income 4500.00 49300.09 4500.00 .08 .0 49580.00 .00 .0
---------- ----------- ---------- ---------- ----------- ----------
Total Income 3452709.76 331551685.83 3970411.00 (517701.24) 13.0 29249748.00 3905937.83 13.4
COST OF GOODS SOLD
Total
cost of sales 1219708.18 30189027.92 3716621.00 (525912.74) 14.2 26926176.00 3228028.92 12.0
Freight paid 11618.39 319886.83 24440.00 (2921.41) 12.0- 231485.88 (11514.16) 5.0-
Shipping supplies 1167.99 19816.77 2750.00 487.99 15.9 27685.00 1681.77 6.1
Warranty supplies 786.86 10121.69 1250.00 (492.14) 39.4- 10068.00 61.69 .6
Credit and charge 787.78 6848.22 450.00 307.79 68.4 4081.00 2912.22 57.4
Inventory adjustments .00 96410.68 .00 .00 .0 67580.00 28918.68 42.8
---------- ----------- ---------- ---------- ----------- ----------
Total Cost of Sales 3745511.00 (528588.51) 14.1- 27266908.99 3244981.06 11.9
---------- ----------- ---------- ---------- ----------- ----------
Gross Profit 285778.37 2840804.75 224900.00 10879.27 4.8 1978848.00 661456.75 88.4
========== =========== ========== ========== =========== ==========
EXPENSES
Expenses -
Administrative 669095.24 60689.00 (207.30) .3 670418.88 (1532.76) .2-
Expenses - Taxes 688932.22 64749.00 (21173.27) 32.7- 723227.00 (41274.73) 5.7-
---------- ----------- ---------- ---------- ----------- ----------
Total Expenses 1849857.42 1398827.46 123438.00 (21380.57) 17.0- 1395655.00 (42627.54) 3.1-
Aec Income ( )
Before Tax 1612721.14 1287277.29 99462.00 32259.34) 32.4- 583193.00 704034.29) 120.7-
---------- ----------- ---------- ---------- ----------- ----------
Income Tax Expenses 44634.60 426047.00 .00 44640.00 .0 .00 426034.00 .0
Net Income (Loss)
After Tax 87087.84 861243.29 99462.00 (12374.16) 12.4 583198.00 278850.29 47.7
========== =========== ========== ========== =========== ==========
</TABLE>
<PAGE> 28
NATIONAL CELLULAR, INC.
INCOME STATEMENT
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-pre Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income: Administrative
Misc. income (638.49) 67.32 100.00 (738.49) 758.5- 2400.00 (2332.68) 97.2-
Residual income 22908.26 284927.48 28000.00 (91.74) .4- 317500.00 (32572.52) 10.3-
Interest income 4016.08 42927.57 4000.00 46.03 1.2 33800.00 9127.57 27.0
Rental property income 4500.00 49500.00 4500.00 .00 .0 49500.00 .00 .0
-------- --------- -------- ------- --------- ---------
Total Income: Administrative 30315.36 377422.37 31600.00 (784.20) 2.5- 403200.00 (25777.63) 6.4-
Cost of Sales: Administrative
-------- --------- -------- ------- --------- ---------
Total Cost of Sales: Admin. .00 .00 .00 .00 .0 .00 .00 .0
-------- --------- -------- ------- --------- ---------
Gross Profit: Administrative 40913.80 877422.87 81600.00 (784.20) 2.5- 408200.00 (25777.68) 6.4-
======== ========= ======== ======= ========= =========
</TABLE>
<PAGE> 29
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses: Administrative
Salaries-administrative 50800.00 603000.00 54000.00 .00 .0 604000.00 (1000.00) .2-
Advertising-cellular .00 4936.99 .00 .00 .0 100.00 4836.99 999.9
Advertising-cellular access .00 37.71 .00 .00 .0 .00 37.71 .0
Alarm expense .00 124.10 .00 .00 .0 135.00 (10.90) 8.1-
Auto expense .00 48.62 .00 .00 .0 35.00 13.62 38.9
Donations expense .00 100.00 .00 .00 .0 .00 100.00 .0
Travel expense 348.45 488.59 150.00 198.45 132.3 150.00 338.59 225.7
Postage/Freight expense .00 1186.89 .00 .00 .0 540.00 646.89 119.8
Insurance expense 70.13 771.48 70.00 .13 .2 770.00 1.43 .2
Personnel .00 105.99 60.00 (60.00) 100.0- 440.00 (254.01) 57.7-
Office supplies expense 470.00 5061.05 750.00 (279.40) 37.3- 7089.00 (2027.95) 28.6-
Payroll taxes-Social security 9065.67 18064.17 2000.00 65.67 3.3 12511.80 553.17 4.4
Payroll taxes-Unemployment 266.70 292.62 250.00 16.70 6.7 277.00 15.62 5.6
Health Insurance expense 77.68 834.26 78.00 (.34) .4- 858.00 (3.74) .4-
Collection expense .00 10.00 .00 .00 .0 .00 10.00 .0
Printing expense 213.30 1871.28 150.00 65.50 48.7 1753.00 113.28 6.4
Professional fees expense 16.11 635.54 .00 10.11 .0 265.00 370.54 139.8
Rent expense 3062.76 8158.15 960.00 102.70 10.7 9420.00 (1261.85) 13.4-
Repairs/maintenance expense 156.92 1934.33 200.00 (69.08) 34.5- 2000.00 (65.17) 3.3-
Telephone expense 331.34 11906.16 1021.00 (189.16) 18.5- 13305.00 (1398.84) 10.5-
Utilities expense 266.60 2767.75 825.00 (58.40) 13.0- 2750.00 17.75 .6
Computer expense 342.95 3998.89 400.00 (57.05) 14.3- 11100.00 (2201.11) 18.9-
Janitorial expense 172.48 1820.88 200.00 (27.52) 18.8- 2150.00 (329.12) 15.3-
Refreshment expense 147.39 839.34 75.00 74.39 99.2 775.00 64.34 8.3
--------- ---------- --------- ------- ---------- ---------
Total Expenses: Administrative 60481.76 669095.24 60689.00 (207.30) .3- 670428.00 (1332.76) .2-
--------- ---------- --------- ------- ---------- ---------
Net Profit (Loss): Admin. (28665.90) (251672.87) (29089.00) (576.90) 2.0- (267228.00) (24444.87) 9.1-
========= ========== ========= ======= ========== =========
</TABLE>
<PAGE> 30
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income: Taxes
Paper 61.25 8863.51 .00 61.25 .0 150.00 3713.51 999.9
Cellular 2114726.89 21728607.91 2210000.00 (95273.61) 4.6- 19589528.00 2139079.91 10.9
Cellular-digital 40100.00 850102.00 250000.00 (209900.00) 84.0- 480000.00 370102.00 77.1
Cellular accessories 208388.08 2878412.43 244100.00 (36011.92) 14.7- 1958190.00 420222.43 21.5
Fax 5817.00 189461.00 26000.00 (20688.00) 79.6- 238658.00 (49197.00) 20.6-
Fax accessories 810.00 18176.75 8250.00 (2440.00) 75.1- 36170.00 (17993.25) 49.7-
Automotive electronics 78.20 4160.14 .00 78.20 .0 3886.00 274.14 7.1
Freight earned: KCI 80149.76 278902.34 26000.00 4149.75 16.0 262228.00 11674.34 4.5
Freight earned: TW-D/FW 28.28 308.86 .00 28.28 .0 24.00 284.86 999.9
Freight earned: TW-S/A 594.41 2967.91 350.00 244.41 69.8 2424.00 548.91 22.4
Freight earned: TW-K/C 622.77 4251.61 325.00 297.77 91.6 3166.00 1085.61 34.3
Misc. income 117.90 325.85 .00 117.90 .0 56.00 269.85 481.9
Cellular accessories .00 8.84 .00 .00 .0 .00 8.84 .0
---------- ----------- ---------- ---------- ----------- ----------
Total Income: Taxes 2488994.00 25454548.65 2760325.00 (359330.97) 18.0- 22574480.00 2880068.65 12.8
Cost of Sales: Taxes
Papers 749.45 2412.26 .00 749.45 .0 90.00 2314.26 999.9
Cellular 1977648.35 19903913.86 2082200.00 (104559.65) 5.0- 18236356.00 1667557.86 9.1
Cellular-virtual 38896.50 324186.00 231250.00 (192354.00) 83.2- 450375.00 373811.00 83.0
Cellular accessories 242682.83 1851394.71 193520.00 (52837.12) 27.0- 1576536.00 274858.71 17.4
Fax 5039.68 179784.02 23400.00 (18360.32) 78.5- 215853.00 (36063.98) 16.7-
Fax accessories 627.37 13651.43 2600.00 (1972.63) 75.9- 25900.00 (12248.57) 47.8-
Automotive electronics 78.20 2910.51 .00 78.20 .0 2133.00 772.51 36.1
Freight paid: HCI 21318.59 219930.85 24440.00 (2921.41) 12.0- 231495.00 (11514.15) 5.0-
Shipping supplies-HK 3127.39 28714.28 2750.00 437.99 15.9 27565.00 1129.28 4.1
Shipping supplies-TW-DFW .90 602.49 .00 .00 .0 70.00 552.49 999.9
Warranty expense 757.33 10121.69 1250.00 (492.14) 39.4- 10060.00 61.69 .6
Credit card finance charge 757.79 6343.22 450.00 307.79 68.4 4031.00 2312.22 37.4
Inventory adjustment .00 96410.63 .00 .00 .0 67500.00 28910.63 42.8
---------- ----------- ---------- ---------- ----------- ----------
Total Cost of Sales: Taxes 2191936.16 23140425.95 2563860.00 (371923.34) 14.5- 20347977.00 2292448.95 11.0
---------- ----------- ---------- ---------- ----------- ----------
Gross Profit: Taxes 204057.37 2314122.70 196465.00 12592.87 6.4 1726503.00 587619.70 34.0
========== =========== ========== ========== =========== ==========
</TABLE>
<PAGE> 31
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses: Taxes
Salaries-administrative 9063.87 264071.39 25000.00 (15936.13) 63.7 275000.00 (10928.61) 4.0-
Salaries-warehouse 1814.93 19952.37 1816.00 (1.02) .1- 13423.00 1529.37 8.3
Salaries-sales 17380.46 204410.37 20799.00 (3418.54) 16.4- 205504.00 (1093.11) .5-
Advertising-cellular .00 49.70 .00 .00 .0 .00 49.70 .0
Alarm expense .00 124.10 .00 .00 .0 135.00 (10.90) 8.1-
Auto expense .00 138.00 .00 .00 .0 124.00 14.00 11.3
Bad debts expense .00 7500.00 .00 .00 .0 7500.00 .00 .0
Depreciation expense 4055.00 38371.65 4035.00 .00 .0 44385.00 (6013.35) 13.5-
Dues/subscriptions expense .00 32.40 .00 .00 .0 .00 32.40 .0
Travel expense 233.56 1208.22 150.00 83.56 55.7 300.00 908.22 302.7
Postage/freight expense .00 3270.13 .00 .00 .0 7435.00 (2164.87) 29.1-
Insurance expense 1073.38 7054.75 1050.00 28.33 2.7 11550.00 (4495.25) 38.9-
Personnel .00 394.46 .00 .00 .0 730.00 (335.54) 46.0-
Office supplies expense 158.20 3491.96 750.00 (591.80) 78.9- 8462.00 (2970.04) 35.1-
Payroll taxes-Social security 2786.76 31695.38 8037.00 (300.24) 9.9- 35472.00 (3776.42) 10.6-
Payroll taxes-Unemployment 487.98 2998.38 500.00 (12.07) 2.4- 3837.00 (338.42) 21.9-
Health insurance expense 543.59 3979.49 545.00 (1.41) .3- 5992.00 (12.51) .2-
Collection expense 69.05 2329.62 168.00 (98.95) 58.9- 1440.00 889.62 61.8
Printing expense 803.75 9032.67 700.00 (394.25) 56.8- 8625.00 407.67 4.7
Professional Fees expense 64.63 6201.65 .00 64.65 .0 7125.00 (923.35) 13.0-
Pest expense 1062.70 16676.81 960.00 102.70 10.7 26254.00 (9577.19) 36.5-
Repairs/maintenance expense 180.92 1847.10 230.00 (119.08) 47.6- 2750.00 (902.90) 32.8-
Other taxes expense 5373.00 60158.00 5385.00 (10.00) .2- 59705.00 445.00 .7
Telephone expense 2349.57 27756.14 2800.00 (450.43) 16.1- 30725.00 (2968.86) 9.7-
Utilities expense 266.59 2767.72 325.00 (58.41) 18.0- 2750.00 17.72 .6
Computer expense 342.95 3897.95 450.00 (107.05) 23.9- 4600.00 1297.95 28.2
Janitorial expense 172.48 2400.06 200.00 (27.52) 13.8- 2475.00 (74.94) 3.0-
Refreshment expense 149.97 834.93 75.00 74.39 99.2 635.00 199.83 31.5
Common operating expense (4246.00) (46706.00) (4246.00) .00 .0 (46706.00) .00 .0
----------- ----------- ----------- --------- ---- ----------- ---------
Total Expenses Taxes 48373.79 603932.22 64749.00 (21173.27) 32.7- 725227.00 (41294.73) 5.7-
----------- ----------- ----------- --------- ----------- ---------
Net Profit (Loss) Taxes 165482.14 1680190.48 131716.00 33766.14 25.6 1001276.00 628914.48 62.8
=========== =========== =========== ========= =========== =========
</TABLE>
<PAGE> 32
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income: Telephone Warehouse-Dallas/Ft. Worth
Pager 120121.70 1014245.73 125175.00 (5053.80) 4.0- 1059790.00 (45544.27) 4.3-
Cellular 465144.60 2931360.54 696500.00 (231355.40) 33.2- 3152919.00 (221558.46) 7.0-
Cellular-digital 23358.00 214118.00 41608.00 (17750.00) 42.7- 249158.00 (35240.00) 14.1-
Cellular accessories 181265.66 850220.00 100263.00 31002.66 80.9 739621.00 110599.00 15.0
Fax (1855.50) (725.54) .00 (1355.50) .0- .00 (725.54) .0-
Fax accessories 60.76 (104.25) .00 60.76 .0 .00 (104.25) .0-
Automotive electronics 20047.78 169688.48 21000.00 (952.25) 4.5- 178868.00 (9179.52) 5.1-
------------- ------------ ------------ ---------- ---- ------------ ----------
Total Income: TW-D/FW 759142.97 5178802.96 984546.00 (225403.03) 22.9- 5380556.00 (201753.04) 3.8
Cost of Sales: Telephone Warehouse-D/FW
Pagers 120121.70 1014245.73 125175.00 (5053.30) 4.0- 1059790.00 (45544.27) 4.3-
Cellular 465144.60 2931360.54 696500.00 (231355.40) 33.2- 3142919.00 (211538.46) 6.7-
Cellular-digital 23858.00 214118.00 41608.00 (17750.00) 42.7- 249358.00 (35240.00) 14.1-
Cellular accessories 181265.66 850220.00 100263.00 31002.66 30.9 739621.00 110599.00 15.0
Fax (1855.50) (725.54) .00 (1355.50) .0- .00 (725.54) .0-
Fax accessories 60.76 (104.25) .00 60.76 .0 .00 (104.25) .0-
Automotive electronics 20047.75 169688.48 21000.00 (952.23) 4.5- 178868.00 (19179.52) 5.1-
------------- ------------ ------------ ---------- ---- ------------ ----------
Total Cost of Sales: TW-D/FW 759142.97 5178802.96 984546.00 (225403.03) 22.9- 5370556.00 (191753.04) 3.6-
------------- ------------ ------------ ---------- ------------ ----------
Gross Profit: TW-D/FW .00 .00 .00 .00 .0 10000.00 (10000.00)100.0-
Net Profit (Loss): TW/D/FW .00 .00 .00 .00 .0 10000.00 (10000.00)100.0-
============= ============ ============ ========== ============ ==========
</TABLE>
<PAGE> 33
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income: Telephone Warehouse-San Antonio
Pager 43135.58 169551.18 28620.00 14515.58 50.7 151852.00 17699.18 11.7
Cellular 46092.38 391520.21 71090.00 (24997.62) 35.2- 360042.00 21478.21 6.0
Cellular-digital 906.00 5134.00 .00 906.00 .0 .00 5134.00 .0
Cellular accessories 8881.52 76985.23 7532.00 1349.52 17.9 65364.00 11621.23 17.8
Fax accessories .00 377.40 .00 .00 .0 .00 377.40 .0
Automotive electronics 2446.01 22960.45 2400.00 46.01 1.9 22950.00 10.45 .0
------------ ----------- ----------- ---------- ---- ------------ ----------
Total Income: TW-S/A 101461.49 656528.47 109642.00 (8180.51) 7.5- 600208.00 56320.47 9.4
Cost of Sales: Telephone Warehouse-San Antonio
Pagers 43135.58 169551.18 28620.00 14515.58 50.7 151852.00 17699.18 11.7
Cellular 46092.38 391520.21 71090.00 (24997.62) 35.2- 360042.00 21478.21 6.0
Cellular-digital 906.00 5134.00 .00 906.00 .0 .00 5134.00 .0
Cellular accessories 8891.52 76985.23 7532.00 1349.52 17.9 65364.00 11621.23 17.8
Fax accessories .00 377.40 .00 .00 .0 .00 377.40 .0
Automotive electronics 2446.01 22960.45 2400.00 46.01 1.9 22950.00 10.45 .0
------------ ----------- ----------- ---------- ---- ------------ ----------
Total Cost of Sales: TW-S/A 101461.49 656528.47 109642.00 (8180.51) 7.5- 600208.00 56320.47 9.4
------------ ----------- ----------- ---------- ---- ------------ ----------
Gross Profit: TW-S/A .00 .00 .00 .00 .0 .00 .00 .0
Net Profit (Loss): TW-S/A .00 .00 .00 .00 .0 .00 .00 .0
============ =========== =========== ========== ============ ==========
</TABLE>
<PAGE> 34
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period
amount amount Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C>
Income: Telephone Warehouse-KC
Pager 24136.57 192448.64 32256.00 (8119.48) 25.2-
Cellular 77365.12 482137.02 81354.00 (3988.88) 4.9-
Cellular accessories 12482.12 88697.59 6188.00 6294.12 101.7
Fax 1855.50 1354.78 .00 1355.50 .0
Fax accessories .00 117.66 .00 .00 .0
Automotive electronics 2897.87 23990.81 3600.00 (702.13) 19.5-
--------- --------- --------- ---------
Total Income: TW-K/C 118287.18 788746.00 128398.00 (5160.82) 4.2-
Cost of Sales: Telephone Warehouse-KC
Pagers 24136.37 192448.64 32256.00 (8119.48) 25.2-
Cellular 77865.12 482137.02 81354.00 (3988.88) 4.9-
Cellular accessories 12482.12 88697.59 6188.00 6294.12 101.7
Fax 1855.50 1354.78 .00 1355.50 .0
Fax accessories .00 117.66 .00 .00 .0
Automotive electronics 2897.87 23990.81 3600.00 (702.13) 19.5-
--------- --------- --------- ---------
Total Cost of Sales: TW-K/C 118287.18 788746.00 128398.00 (5160.82) 4.2-
--------- --------- --------- ---------
Gross Profit: TW-K/C .00 .00 .00 .00 .0
Net Profit (Loss): TW-K/C .00 .00 .00 .00 .0
========= ========= ========= =========
<CAPTION>
Budget-year-to-date
Amount Var-amt Var-%
<S> <C> <C> <C>
Income: Telephone Warehouse-KC
Pager 165418.00 27030.64 16.3
Cellular 426132.00 56005.02 13.1
Cellular accessories 56584.00 32113.59 56.8
Fax .00 1354.78 .0
Fax accessories .00 117.66 .0
Automotive electronics 15410.00 8580.31 55.7
--------- ---------
Total Income: TW-K/C 663544.00 125202.00 18.9
Cost of Sales: Telephone Warehouse-KC
Pagers 165418.00 27030.64 16.3
Cellular 426133.00 54004.02 12.6
Cellular accessories 56584.00 32113.59 56.8
Fax .00 1354.78 .0
Fax accessories .00 117.66 .0
Automotive electronics 15410.00 8580.31 55.7
--------- ---------
Total Cost of Sales: TW-K/C 663545.00 123201.00 18.5
--------- ---------
Gross Profit: TW-K/C (2001.00) 2001.00 100.0
Net Profit (Loss): TW-K/C (2001.00) 2001.00 100.0
========= =========
</TABLE>
<PAGE> 35
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period
amount amount Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C>
Income: Vendors
Pager .00 (6664.82) .00 .00 .0
Cellular 30029.00 924717.22 .00 30029.00 .0
Cellular accessories 34699.52 108885.29 .00 34699.52 .0
Automotive electronics .00 892.80 .00 .00 .0
Freight earned: Vendors .00 (20.00) .00 .00 .0
--------- ---------- --------- ---------
Total Income: Vendors 64728.52 1022760.99 .00 64728.52 .0
Cost of Sales: Vendors
Pagers .00 (6664.32) .00 .00 .0
Cellular 29990.00 933244.82 .00 30029.00 .0
Cellular accessories 34965.52 100077.94 .00 34699.52 .0
Automotive electronics .00 892.80 .00 .00 .0
--------- ---------- --------- ---------
Total Cost of Sales: Vendors 64955.52 1027551.24 .00 64955.52 .0
--------- ---------- --------- ---------
Net Profit (Loss): Vendors (227.00) (4790.25) .00 (227.00) .0-
========= ========== ========= =========
<CAPTION>
Budget-year-to-date
Amount Var-amt Var-%
<S> <C> <C> <C>
Income: Vendors
Pager .00 (6664.82) .0
Cellular .00 924717.22 .0
Cellular accessories .00 103835.29 .0
Automotive electronics .00 892.80 .0
Freight earned: Vendors (20.00)
--------- ----------
Total Income: Vendors .00 1022760.99 .0
Cost of Sales: Vendors
Pagers .00 (6664.32) .0
Cellular .00 933244.82 .0
Cellular accessories .00 100077.94 .0
Automotive electronics .00 892.80 .0
--------- ----------
Total Cost of Sales: Vendors .00 1027551.24 .0
--------- ----------
Net Profit (Loss): Vendors .00 (4790.25) .0-
========= ==========
</TABLE>
<PAGE> 36
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-& Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income: Credit Memos
Cellular (16888.00) (268285.57) (88500.00) 17167.00 51.2 (315100.00) 51814.43 16.4
Cellular accessories (6070.10) (52684.02) (4000.00) (2070.10) 51.8- (46110.00) (6574.02) 14.3-
Fax .00 (4848.00) (700.00) 700.00 100.0 (3950.00) (898.00) 22.7
Fax accessories .00 (1406.00) (350.00) 350.00 100.0 (1235.00) (171.00) 13.8-
Automotive electronics .00 .00 .00 .00 .0 (4000.00) 4000.00 100.0
Freight earned: Credit memos (267.18) (4900.02) (550.00) 282.87 51.4 (5845.00) 944.98 16.2
---------- ----------- --------- ---------- ----------- ----------
Total Income: Credit Memos (22670.29) (827128.61) (89100.00) (16429.77) 42.0 (376240.00) 49116.89 18.1
Cost of Sales: Credit Memos
Cellular (14819.15) (240001.05) (31825.00) 17005.83 53.4 (176565.00) (63436.05) 35.9-
Cellular accessories (8988.66) (85287.10) (3200.00) (783.66) 24.5- (36288.00) 1000.90 2.8
Fax .00 (4408.50) (680.00) 630.00 100.0 (3545.00) (863.50) 24.4-
Fax accessories .00 (976.89) (280.00) 280.00 100.0 (983.00) 11.11 1.1
---------- ----------- --------- ---------- ----------- ----------
Total Cost/Sales Credit Memos (10802.63) (280678.54) (28935.00) 17132.17 47.7 (217886.00) (68287.54) 29.1-
---------- ----------- --------- ---------- ----------- ----------
Net Profit (Loss) Credit Menus (8867.40) (46450.07) (3165.00) (702.40) 22.2- (158854.00) 112408.93 70.8
========== =========== ========= ========== =========== ==========
Net Income (Loss) Before Tax 181721.84 1287277.29 99462.00 82259.84 32.4 583193.00 704084.29 120.7
Income tax expense 44634.00 426034.00 .00 44634.00 .0 .00 426034.00 .0
---------- ----------- --------- ---------- ----------- ----------
Net Income (Loss) After Tax 87087.84 861243.29 99462.00 (12874.16) 12.4- 583193.00 278050.29 47.7
========== =========== ========= ========== =========== ==========
</TABLE>
<PAGE> 37
Telephone Warehouse, Inc.
Balance Sheet
As of 12/31/96
Assets
<TABLE>
<S> <C> <C> <C>
Current Assets
Cash on hand $ 541,202.49
A/R-trade 116,710.98
A/R-allowance doubtful accts (24,225.78)
A/R-AT&T 1,229,803.13
A/R AT&T xx 1,348.14
AR-nsf returned checks 22,944.80
A/R-other 56,777.18
A/R-employee advance/purchase 2,245.28
A/R-child support (701.99)
A/R-student loans (214.60)
A/R-employee purchases (281.76)
Inventory 528,795.86
Inventory reserve (60,727.88)
Intercompany A/R: xx 94,711.80
Intercompany A/R xx 248,181.99
Intercompany A/R: xxx 265,614.77
Prepaid rent 57,479.12
Prepaid xx insurance 2,181.98
Prepaid workers comp insurance 17,087.86
Prepaid HMO health insurance 5,420.77
Prepaid PPO health insurance 1,585.58
----------------
Total current assets $ 3,842,988.72
Fixed assets
Furniture & fixtures $ 178,868.17
Transportation equipment 28,245.18
xxxxx 161,400.12
xxxx 185,007.40
Computer & software equipment 74,801.09
Annualized depreciation (845,771.05)
----------------
Total fixed assets $ 266,785.90
Other assets
Deposits $ 89,160.64
----------------
Total other assets $ 39,160.64
---------------
Total assets $ 3,648,830.26
================
</TABLE>
<PAGE> 38
Telephone Warehouse, Inc.
Balance Sheet
As of 12/31/96
Liabilities and stockholder's equity
<TABLE>
<S> <C> <C> <C>
Current Liabilities
A/P-trade $ 1,564,268.05
A/P-accruals 344,288.35
Note Payable-National Cellular 1,000,000.00
Salaries & wages payable 266,396.51
A/P-check request refunds 4,258.98
A/P-AT&T deposits 2,250.00
A/P-customer deposits 68,018.76
A/P-credit union 12.50
S/Security & Fed W/H payable 48,557.04
FUI/SUIA payable 3,014.97
Accrued-property taxes 61,964.41
Accrued-professional 19,500.00
Accrued-franchise tax 17,147.88
----------------
Total current liabilities $ 3,869,198.40
Total long term liabilities $ .00
---------------
Total liabilities $ 3,869,193.40
Stockholders equity
Common stock $ 1,000.00
Retained earnings-prior years (1,834,510.29)
Net Income (loss) 2,118,147.15
----------------
Total equity $ 279,686.86
===============
Total liabilities and equity $ 3,648,330.26
===============
</TABLE>
<PAGE> 39
Telephone Warehouse, Inc.
Consolidated
Profit & Loss Statement
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-Period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
------------- ------------ ---------- ---------- ---- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income
Pagers ..................... 64744.19 685380.08 61406.00 3338.18 5.4 767422.00 (82091.92) 10.7-
Cellular - digital ......... 27996.50 249968.75 43205.00 (15208.50) 35.2- 201268.00 48680.75 24.2
Cellular ................... 615523.33 4553996.07 858964.00 (243440.62) 28.3- 4848319.00 (294322.93) 6.1-
Cellular accessories ....... 216853.90 1783727.09 244544.00 (27690.10) 11.3- 1844133.00 (60455.910 3.3-
Other equipment ............ 1699.95 5674.45 315.00 1384.95 489.7 2967.00 1707.45 43.0
Alarms ..................... 34429.68 257751.20 58034.00 (23604.32) 47.7- 328870.00 (71118.80) 21.6-
Service parts .............. 56733.00 526676.45 50383.00 6850.00 12.6 491082.00 35594.45 7.2
Non-commissionable labor ... 9015.62 101117.55 10624.00 (1608.38) 15.1- 101423.00 (305.45) .3-
XXX certificates ........... 656.00 4509.00 452.00 204.00 45.1 1002.00 3507.80 350.1
Programming labor-cellular . 44479.87 336681.62 61181.00 (16701.33) 27.3- 350737.00 (14105.58) 4.0-
Programming labor-pager .... 73636.16 492028.67 55980.00 18306.18 33.1 471952.00 20076.67 4.3
Labor ...................... 22185.35 295784.92 54803.00 (32667.65) 59.6- 311722.00 (15937.68) 5.1-
Labor shares ............... 23518.45 203300.21 40041.00 (16527.55) 41.3 255946.00 (52645.79) 20.6-
xxx activators ............. (24.00) 865.10 .00 (24.00) .0- 865.00 865.10 .0
Promotional/Rate plan bonus 37269.77 606797.16 112164.00 (24894.21) 22.2- 665035.00 (58237.84) 8.8-
Loaner phone rental......... 2412.00 35986.82 3103.00 (691.00) 22.3- 38976.00 (2989.18) 7.7-
Service work ............... 28723.81 242117.29 18250.00 5473.81 30.0 235959.00 7058.29 3.0
Freight-in ................. 155.21 1540.18 126.00 29.21 28.2 1328.00 212.13 16.0
Miscellaneous .............. 2500.00 25799.20 2680.00 (329.80) 12.5- 57865.00 (32065.80) 55.4-
xxx connects recovery ...... 7515.32 93928.20 7110.00 405.32 5.7 79425.00 14503.20 18.3
Customer discount-analog ... (546609.30) (3320490.41) (747753.00) 201144.70 26.9 (4014109.00) 193618.59 4.8
Carrier xxx earnee - analog 740320.56 5104960.00 938483.00 (218163.00) 22.8- 5358469.00 (253509.00) 4.7-
Carrier xxx deactivations .. (86850.00) (743292.68) (61101.00) 24751.00 40.5 (76380.00) (16912.63) 2.3
Carrier xx true up ......... 7789.00 191293.00 21719.00 (13930.00) 64.1- 119369.00 71929.00 60.3
Digital rebate paid ........ .00 (100.00) .00 .00 .0 .00 (100.00) .0-
Discount discount - digital. (10209.51) (78465.42) (12087.00) 1877.49 15.5 (76343.00) 5877.58 7.7
Carrier xxx earned - digital 10800.00 69625.00 18035.00 (2235.00) 17.1 47462.00 22163.00 46.7
Carrier xxx deacts - digital (150.00) (1500.00) .00 (150.00) .0- .00 (1500.00) .0-
Residual ................... 240287.49 2689484.82 237000.00 3287.44 1.4 2829500.00 (140015.18) 4.9-
Advertising xxx ............ 142070.40 923573.02 175383.00 (33312.60) 19.0- 380759.00 42814.02 4.9
Airtime certificates ....... 8395.00 114371.85 9706.00 (811.00) 8.4- 116057.00 (1685.15) 1.5-
Pager service .............. 377401.36 4003515.29 372396.00 5005.36 1.3 4023981.00 (20465.71) .5-
Pager service-extended ..... 19918.50 146165.33 14460.00 5458.50 37.7 146893.00 (727.62) .5-
Warranty ................... 6837.28 149585.42 10500.00 (3662.72) 34.9- 133846.00 10789.42 7.7
Vending machine ............ 407.55 3963.85 394.00 13.55 3.4 3985.00 (21.15) .5-
Interest income ............ 3845.72 49380.96 2650.00 1195.72 45.1 61823.00 (912442.04) 20.1-
---------- ----------- --------- --------- ----------- ----------
Total income ............ 2290023.68 19313705.29 2677450.00 (397426.37) 14.8 19966013.00 (652307.71) 3.3-
</TABLE>
<PAGE> 40
Telephone Warehouse, Inc.
Consolidated
Profit & loss statement
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
Cost of Sales
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pages 147022.80 1106547.91 125174.00 218989.30 17.5 1109016.00 (2468.09) .2-
Cellular-digital 21139.91 188749.57 33111.00 (11971.09) 36.2- 144485.00 44264.57 30.6
Cellular 405583.92 3058842.12 554288.00 (148704.08) 26.8- 3244469.00 (195626.88) 5.7-
Cellular accessories 103359.66 800448.36 100263.00 3096.66 3.1 789616.00 10832.36 1.4
Other equipment 8347.49 115271.29 9766.00 (1418.51) 14.5- 99723.00 15548.29 15.6
Alarms 92364.80 176372.45 35982.00 (13617.20) 37.8- 223650.00 (47277.55) 21.1-
Service parts 26548.16 295375.53 28243.00 (1699.84) 6.0- 279833.00 15542.53 5.6
Dealer service 14.98 464.85 .00 14.93 .0 .00 464.85 .0
Credit card finance charge 5161.29 55995.19 4518.00 663.29 14.7 52927.00 8068.19 5.8
Pre tax 29625.08 160664.78 28064.00 5561.09 24.1 158805.00 7859.78 .8
Pager service Telecom. assess 6998.78 81803.75 2703.00 4295.78 158.9 27262.00 4041.75 14.8
Pager retention discount 8559.95 82507.69 9000.00 (460.05) 5.1- 75200.00 7807.69 9.7
Pager retention cost .00 1713.83 .00 .00 .0 1480.00 233.83 15.8
Freight paid 1890.61 14599.67 1203.00 147.61 12.3 11301.00 3298.67 29.2
Pager service 76574.02 889200.87 76000.00 574.08 .8 886670.00 2580.87 .3
Outside labor 8768.09 128100.62 8909.00 (139.91) 1.6- 124134.00 (1088.88) .8-
Airline certificates 27516.00 293988.00 21019.00 6497.00 30.9 184817.00 109671.00 59.5
Inventory adjustment 10229.44 121875.12 2800.00 7429.44 265.8 93471.00 27904.12 29.9
---------- ----------- ---------- ---------- ----------- ----------
Total cost of sales 900218.50 7516521.10 1036043.00 (127832.50) 12.8- 7500859.00 15662.10 .2
---------- ----------- ---------- ---------- ----------- ----------
Gross profit 1971918.18 11797184.19 1641407.00 (269598.87) 16.4- 12465154.00 (667969.81) 5.4-
</TABLE>
<PAGE> 41
Telephone Warehouse, Inc.
Consolidated
Profit & loss statement
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period
amount amount Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C>
Operating expenses
Salaries- officers .00 1050000.00 .00 .00 .0
Salaries- accounting admin. 28129.80 254057.37 22000.00 1129.80 5.1
Salaries- sales admin. 68424.48 676180.62 100308.00 (31883.57) 31.8-
Salaries- operations admin. 28807.49 297845.84 19200.00 4107.49 21.4
Salaries- warehouse admin. 6290.01 86206.02 7500.00 (1209.99) 16.1-
Salaries- store manager 48658.00 562175.26 46800.00 1853.00 4.0
Salaries- asst. store manager 49810.52 424650.71 55500.00 (5689.48) 10.8
Salaries- sales persons 106963.98 833392.70 128000.00 (21036.02) 16.4-
Salaries- clerical 11489.56 83923.80 20150.00 (8710.44) 43.2-
Salaries- service manager 85748.50 845464.88 80100.00 5643.50 18.7
Salaries- service persons 82749.81 879274.54 80525.00 2224.81 7.3
Salaries- repair technicians 2257.86 32708.52 3740.00 (1482.14) 39.6-
Salaries- repair dept. 20428.20 288786.80 28530.00 (3106.80) 13.2-
Salaries- pager dept. 88989.64 381803.81 38320.00 119.64 .4
Salary- special promotions .00 40762.99 .00 .00 .0
Payroll taxes- social security 28629.60 846194.47 29574.00 (944.40) 3.2-
Payroll taxes- fed unemployment 1559.86 12517.86 1643.00 (92.20) 5.6-
Payroll taxes- st unemployment 754.67 10609.79 1834.00 (2088.67) 156.6-
Health insurance expense 7048.71 87618.10 8165.00 (1121.29) 19.7-
Training .00 17503.96 .00 .00 .0
Advertising 982123.11 1618195.64 323560.00 8568.12 2.6
Alarm 608.19 6985.18 595.00 18.18 2.2
Auto 2708.68 22483.23 1808.00 (99.66) 5.5-
Bad debts .00 25000.00 2300.00 (2500.00) 100.0-
Bank charges 7.66 975.66 80.00 (22.50) 75.0-
Credit and finance charge 9.09 1417.26 142.00 (182.91) 93.6-
Contract labor .00 .00 200.00 (200.00) 100.0-
Depreciation 17618.93 82131.79 5864.00 11754.55 200.3
Donations .00 875.05 63.00 (63.00) 100.0-
Dues and subscriptions 462.90 2838.83 215.00 267.90 124.6
Awards 2334.62 23331.03 1100.00 1234.62 112.2
Entertainment .00 2500.00 .00 .00 .0
Travel (26.60) 848.07 121.00 (147.60) 122.0-
Postage & Freight 8110.11 82825.24 2483.00 687.42 25.7
Billing- pager dept. 1983.92 69563.00 5800.00 (4466.08) 77.0-
Insurance 9997.00 50814.70 3992.00 .00 .0
Insurance - workers comp 8058.86 78117.65 9281.00 (1227.64) 13.2-
Miscellaneous 75.00 2400.07 .00 75.00 .0
<CAPTION>
Budget-year-to-date
Amount Var-amt Var-%
<S> <C> <C> <C>
Operating expenses
Salaries- officers 1050000.00 .00 .0
Salaries- accounting admin. 254000.00 57.87 .0
Salaries- sales admin. 731887.00 (55756.88) 7.6-
Salaries- operations admin. 297200.00 645.84 .2
Salaries- warehouse admin. 98000.00 (6793.98) 7.3-
Salaries- store manager 567470.00 (5294.64) .9-
Salaries- asst. store manager 411950.00 12700.71 3.1
Salaries- sales persons 879526.00 (46133.30) 5.2-
Salaries- clerical 40657.00 (6733.20) 16.6-
Salaries- service manager 331950.00 18514.88 4.1
Salaries- service persons 368431.00 10843.54 2.9
Salaries- repair technicians 44800.00 (12096.68) 27.0-
Salaries- repair dept. 280080.00 3756.80 1.6
Salaries- pager dept. 376261.00 5542.31 1.5
Salary- social promotions 41880.00 (1117.01) 2.7-
Payroll taxes- social security 348762.00 (2567.58) .7-
Payroll taxes- fed unemployment 12885.00 (817.64) 2.5-
Payroll taxes- st unemployment 12885.00 (2275.21) 17.7-
Health insurance expense 92772.00 (5153.90 5.6-
Training 2789.00 14764.96 539.1
Advertising 1559847.00 58348.64 3.7
Alarm 6865.00 70.18 1.0
Auto 28898.00 (899.75) 3.8-
Bad debts 27500.00 (2500.00) 9.1-
Bank charges 148.00 282.66 162.7
Credit and finance charge 2061.00 (643.74) 31.2-
Contract labor 600.00 (600.00) 100.0-
Depreciation 70403.00 11728.79 16.7
Donations 705.00 (329.95) 46.8-
Dues and subscriptions 2288.00 615.03 27.5
Awards 14750.00 8581.03 58.2
Entertainment .00 2500.00 .0
Travel 2166.00 (1822.93) 61.1-
Postage & Freight 31992.00 833.24 2.6
Billing- pager dept. 65764.00 3799.00 5.8
Insurance 50240.00 74.70 .1
Insurance - workers comp 81026.00 (2908.85) 3.6-
Miscellaneous .00 2400.07 .0
</TABLE>
<PAGE> 42
Telephone Warehouse, Inc.
Consolidated
Profit & loss statement
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-&
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating expenses (continue)
Personnel 4275.01 70039.25 4109.00 166.01 4.0 39042.00 30997.25 79.4
Office 6760.77 65038.50 5225.00 1535.77 29.4 67049.00 (2010.50) 3.0-
Collection Fees 27.06 239.23 40.00 (12.94) 32.4- 8645.00 (8405.77) 97.2-
Printing 5750.64 102452.83 6900.00 (1149.36) 16.7- 91825.00 10627.83 11.6
Survey/referral fees .00 9100.88 611.00 (611.00) 100.0- 7303.00 1797.88 24.6
Professional fees 8091.76 20557.76 1806.00 1285.76 71.2 19281.00 1276.76 6.6
Rent 56438.22 681700.56 56878.00 (439.78) .8- 658720.00 22980.56 3.5
Repairs and maintenance 4026.34 105630.58 8200.00 (4173.66) 50.9- 97964.09 7666.58 7.8
Property taxes 2261.00 27132.00 2261.00 .00 .0 27132.00 .00 .0
Other taxes .00 112866.57 9150.00 (9150.00) 100.0- 121500.00 (8633.43) 7.1-
Shop supplies 4799.78 41574.26 3169.00 1630.78 51.5 40632.00 942.26 2.3
Telephone 9735.42 120088.40 9575.00 160.42 1.7 111449.00 8639.40 7.8
Utilities 18077.80 126983.87 9937.00 140.80 1.4 123655.00 8328.87 2.7
Computer (19912.28) 60560.12 3675.00 (28587.28) 641.3- 6233.30 (1827.88) 2.9-
Vending machine 84.19 3714.88 626.00 (541.81) 86.6- 6732.00 (1017.12) 15.1-
Installation 117.41 10634.26 594.00 (476.59) 80.2- 7989.00 2643.26 33.1
Janitorial 3704.92 43119.56 2995.00 709.92 23.7 36842.00 6277.56 17.0
Refreshment 2434.08 17209.71 1570.00 (135.91) 8.7- 15136.00 2078.71 13.7
Cash over and short 360.70 8023.01 .00 860.70 .0 .00 3023.01 .0
Common operating expenses 4246.00 50952.00 4246.00 .00 .0 50952.00 .00 .0
Common operating salaries (11180.00) (116865.00) (11130.00) .00 .0 (116865.00) .00 .0
---------- ----------- ---------- ---------- ----------- ----------
Total operating expenses 967696.42 9684037.04 1040085.00 (82388.58) 7.9- 9606089.00 77948.04 .3
---------- ----------- ---------- ---------- ----------- ----------
Consolidated profit/Class 414116.71 2118147.15 601322.00 (187205.29) 31.1- 2859865.00 (745917.85) 26.1-
========== =========== ========== ========== =========== ==========
</TABLE>
<PAGE> 43
Telephone Warehouse, Inc.
Profit & loss statement
Administrative
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income - administrative
Miscellaneous 2300.20 25798.20 2630.00 (329.80) 12.5- 57865.00 (32066.80) 55.4-
Disconnects recovery 7315.32 93928.20 7110.00 405.32 5.7 79425.00 14503.20 18.3
Residual 240287.44 2689484.82 237000.00 3287.44 1.4 2829500.00 (140015.18) 4.9-
Advertising CD-DP carriers 117073.00 811699.62 157883.00 (40310.00) 25.6- 826984.00 (15284.33) 1.8-
Advertising CD-DP Vendors 24997.40 111873.40 18000.00 6997.40 38.9 53775.00 58098.40 108.0
Interest income 3843.72 49380.96 2650.00 1195.72 45.1 61823.00 (12442.04) 20.1-
--------- ---------- ---------- --------- ---------- ----------
Total administrative income 396019.08 3782165.20 424773.00 (28758.92) 6.8- 3909872.00 (127206.80) 3.3-
</TABLE>
<PAGE> 44
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses - Administrative
Credit card finance charge 9.09 1417.26 142.00 (132.91) 98.6- 2061.00 (643.74) 31.2-
Freight paid .00 25.80 .00 .00 .0 .00 25.80 .0
Inventory adjustment .00 56000.00 .00 .00 .0 56000.00 .00 .0
Salaries- officers .00 1050000.00 .00 .00 .0 1050000.00 .00 .0
Salaries- accounting admin. 28129.80 254057.87 22000.00 1129.80 5.1 254000.00 57.37 .0
Salaries- sales admin. 68424.48 676130.62 100308.00 (31883.57) 31.8- 731887.00 (55756.38) 7.6-
Salaries- operations admin. 28807.49 297845.84 19200.00 4107.49 21.4 297200.00 645.84 .2
Salaries- warehouse admin. 6290.01 86206.02 7500.00 (1209.99) 16.1- 93000.00 (6793.98) 7.3-
Payroll taxes- social security 7102.84 98518.04 6694.00 408.84 6.1 98259.00 259.04 .3
Payroll taxes - fed unemployment 338.00 2444.03 317.00 21.00 6.6 2442.00 2.03 .1
Payroll taxes - SUTA 168.27 2420.48 271.00 (107.73) 39.8- 2559.00 (138.52) 5.4-
Health insurance expense 1408.74 20036.36 1900.00 (491.26) 25.9- 21525.00 (1488.64) 6.9-
Training .00 17503.96 .00 .00 .0 2789.00 14764.96 539.1
Advertising - cellular 296880.77 1324016.57 287412.00 6468.77 2.8 1313543.00 10473.57 .8
Advertising - vehicle security 610.38 11132.12 556.00 54.38 9.8 12869.00 (1236.88) 10.0-
Advertising - pagers 86022.21 223419.16 34342.00 1680.21 4.9 212821.00 10598.16 5.0
Advertising-signs & displays 1609.76 48705.24 1250.00 359.76 28.8 17540.00 31165.24 177.7
Adverising-shows & promos .00 50.00 .00 .00 .0 .00 50.00 .0
Alarm 76.79 625.84 62.00 14.73 28.8 462.00 163.84 85.5
Auto 1846.35 16627.50 1377.00 (30.65) 2.2- 16954.00 (326.50) 1.9-
Bad debt .00 25000.00 2500.00 (2500.00) 100.0- 27500.00 (2500.00) 9.1-
Bank charges 7.50 375.66 30.00 (22.50) 75.0- 148.00 232.66 162.7
Contract labor .00 .00 200.00 (200.00) 100.0- 600.00 (600.00) 100.0-
Depreciation 9355.86 21500.52 1104.00 8251.86 747.5 13248.00 8252.52 62.3
Donations .00 375.05 63.00 (63.00) 100.0- 705.00 (329.95) 46.8-
Dues & subscriptions 268.00 1831.10 215.00 48.00 22.8 2218.00 (381.90) 17.3-
Awards 2334.62 22868.66 1100.00 1234.62 112.2 14050.00 8813.66 62.7
Entertainment .00 2500.00 .00 .00 .0 .00 2500.00 .0
Travel (26.60) 848.07 121.00 (147.60) 122.0- 2166.00 (1322.98) 61.1-
Postage & Freight 1712.90 21839.78 1868.00 (155.10) 8.9- 25893.00 (4003.22) 15.5-
Insurance 138.00 1808.70 138.00 .00 .0 1734.00 74.70 4.3
</TABLE>
<PAGE> 45
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses - Administrative (continue)
Insurance - workers comp. 335.61 4319.80 425.00 (89.39) 21.0- 4444.00 (124.20) 2.8-
Miscellaneous .00 139.64 .00 .00 .0 .00 139.64 .0
Personnel 4725.01 57758.40 2958.00 1317.01 44.5 26056.00 31702.40 121.7
Office 2956.75 28302.73 2500.00 456.75 18.3 30549.00 (2246.27) 7.4-
Collection fee .00 667.11 103.00 (103.00) 100.0- 1312.00 (644.89) 49.2-
Collections - WSF checks 27.06 (427.88) (63.00) 90.06 143.0 7333.00 (7760.88) 105.8-
Printing 884.15 12590.41 900.00 (15.85) 1.8- 11698.00 892.41 7.6
Professional Fees 2671.31 17165.48 1394.00 1277.31 91.6 15907.00 1258.48 7.9
Rent 5171.28 58085.38 3800.00 (628.72) 10.3- 49580.00 9505.33 19.6
Repairs & maintenance 1081.43 24020.87 2500.00 (1418.52) 56.7- 25250.00 (1229.13) 4.9-
Other taxes .00 112850.00 9150.00 (9150.00) 100.0- 121500.00 (9150.00) 7.5-
Telephone 2967.52 30558.84 2725.00 242.52 8.9 29043.00 1515.84 5.2
Utilities 1089.91 13589.95 1250.00 (160.09) 12.8- 13153.00 436.95 3.3
Computer (16041.49) 26846.03 1150.00 (17191.49) 999.9- 36074.00 (9227.97) 25.6-
Vending (383.48) 96.92 84.00 (467.48) 556.5- 1128.00 (1031.03) 91.4-
Interest .00 1809.99 .00 .00 .0 .00 1809.99 .0
Janitorial 416.95 5571.24 350.00 66.95 19.1 4426.00 1145.24 25.9
Refreshment 529.86 3211.52 1100.00 (570.14) 51.3- 9300.00 (1088.48) 11.7-
Common operating expenses 1246.00 50952.00 4246.00 .00 .0 50952.00 .00 .0
Common operating salaries (11130.00) (116865.00) (11130.00) .00 .0 (116865.00) .00 .0
--------- ---------- --------- --------- ---------- ----------
Total expenses-administrative 476603.87 4621913.18 516112.00 (39508.93) 7.7- 4593453.00 28460.18 .6
--------- ---------- --------- --------- ---------- ----------
Net profit (loss) (80583.99) (839747.98) (91339.00) 10755.01 11.8 (684081.00) (155666.93) 22.3-
========= ========== ========= ========= ========== ==========
</TABLE>
<PAGE> 46
Telephone Warehouse, Kansas City
Balance Sheet
As of 12/31/96
<TABLE>
<CAPTION>
Assets
<S> <C> <C> <C>
Current assets
Cash on hand $285,897.22
A/R-Cellularune 216,586.57
A/R-trade 299.55
A/R-allow for doubtful accts. (1,437.98)
A/R-asf returned checks 4,074.09
Intercompany A/R: NCI 4,562.05
Inventory 207,113.05
Inventory valuation reserve (2,301.62)
Prepaid rent 12,633.18
-----------
Total current assets $726,932.11
Fixed assets
Office equipment $ 15,750.72
Signs & displays 81,652.38
Test equipment 20,698.48
Leasehold improvements 29,274.56
Computer & software equipment 2,194.62
Accumulated depreciation (84,258.28)
-----------
Total fixed assets $115,312.53
Other assets
Deposits $ 28,277.80
-----------
Total other assets $ 23,177.80
-----------
$863,422.44
===========
</TABLE>
<PAGE> 47
Telephone Warehouse -- Kansas City
Balance Sheet
As of 12/31/96
Liabilities and stockholder's equity
<TABLE>
<S> <C> <C> <C>
Current Liabilities
A/P-trade $ 360,392.25
A/R-accruals 69,261.88
A/P-check request refunds 1,053.95
A/P-CellOne deposits .00
A/R-customer deposits 21,050.00
A/R-salaries & wages 22,979.96
Intercompany A/P: TW/DFW 205,614.77
Intercompany A/P: TW-S/A 4,022.58
Sales tax payable-Missouri 3,588.75
Sales tax payable -Kansas 2,379.34
Use tax payable 7,597.71
Payroll taxes payable 4,474.38
Accrued-insurance 6,740.25
Accrued-property taxes 2,333.89
Accrued-professional 20,460.15
Accrued-interest 20,460.15
----------------
Total current liabilities $ 736,676.86
Long term liabilities
Note payable-shareholder $ 590,000.00
---------------
Total long term liabilities $ 590,000,00
---------------
Total liabilities $ 1,326,676.86
Stockholders equity
Common stock $ 1,000.00
Retained earnings-prior years (419,280.26)
Net Income (loss) (42,974.16)
----------------
Total equity $ (461,254.42)
----------------
Total liabilities and equity $ 865,422.44
================
</TABLE>
<PAGE> 48
Telephone Warehouse, Kansas City
Classification
Profit & loss statement
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total equipment sales 127792.26 1020104.61 151415.00 (13622.74) 9.0 1015655.00 4449.61 .4
Total labor income 25487.45 146898.24 24643.00 844.45 3.4 140990.00 5908.24 4.2
Coe activations .00 (288.00) .00 .00 .0 .00 (238.00) .0-
Volume bonus income 86900.00 74075.00 28000.00 8900.00) 31.8 45300.00 28775.00 63.5
Misc. income all stores 1505.41 14097.15 1815.00 (309.59 17.1- 16713.00 (2615.00) 15.7-
Customer discount (97048.52) (684419.72) (124000.00) 26156.48 21.1 (694954.00 10534.28) 1.5
Commission earned all stores 146900.00 1028075.00 182800.00 (35900.00 19.6- 1018138.00 9937.00 1.0
Commission: all stores (7050.00) (74125.00) (7656.00) 606.00 7.9 (88316.00) 14191.00 16.1
Commission trueup: all stores (722.94) (10915.69) 606.00 (1878.94) 227.5- 322.00 (11237.69) 999.9-
Residuals 9557.84 82495.66 7500.00 2057.84 27.4 74209.00 8286.66 11.2
Advertising CO-DP 16079.55 182756.83 28600.00 (12520.45) 43.8 161327.00 21429.83 13.3
Pager income all stores 40778.76 307667.73 39975.00 803.73 2.0- 284437.00 23170.73 8.1
Pager service extended 206.85 2013.45 432.00 (225.15) 52.1 3014.00 (1000.55) 33.2-
Warranty 15.00 950.00 175.00 (160.00) 91.4- 787.00 168.00 20.7
--------- ---------- --------- --------- ---------- ---------
Total Income 309556.63 2089435.26 334305.00 (24746.37) 7.4- 1977682.00 111758.26 5.7-
Cost of Sales
Total equipment cost of sales 116069.25 770452.87 123792.00 (7632.77) 6.2- 771862.00 (1409.13) .2-
Use tax 4115.95 22362.28 2987.00 1128.95 37.8 22722.00 (359.72) 1.6-
Freight paid 622.77 4555.65 286.00 336.77 117.8 3222.00 1333.65 41.4
Warranty expense 197.00 1997.13 386.00 (189.00) 49.0- 2689.00 (691.87) 25.7-
Pager service 6284.64 67432.50 7400.00 (1115.36) 15.1- 64150.00 3282.80 5.1
Pager retention discount 879.90 6169.80 800.00 79.90 10.0 4483.00 1686.80 37.6
Inventory adjustment 2919.30 19675.59 800.00 2119.30 264.9 12500.00 7175.59 57.4
--------- ---------- --------- --------- ---------- ---------
Total cost of sales 181088.79 892646.12 136361.00 (5272.21) 3.9- 831628.00 11018.12 1.3
--------- ---------- --------- --------- ---------- ---------
Gross profit 178467.84 1196789.14 197944.00 (19476.16) 9.8- 1096054.00 100735.14 9.2
========= ========== ========= ========= ========== =========
Operating Expenses
Expenses - Administrative 82485.76 526443.15 77599.00 4886.76 6.3 511683.00 14760.15 2.9
Expenses - Bannister 17805.71 187532.97 17996.00 (190.29) 1.1- 184903.00 2629.97 1.4
Expenses - Independence 22100.50 191446.12 19751.00 2349.58 11.9- 181510.00 9936.12 5.5
Expenses - Overland Park 22076.10 184930.38 23032.00 (955.90) 4.2- 180842.00 4088.38 2.3
Expenses - Gladstone 15518.87 148020.86 18123.00 (2604.13) 14.4- 152460.00 (9439.14) 6.2-
Expenses - Pager dept. 421.09 6389.82 520.00 (98.91) 19.0- 6255.00 134.82 2.2
--------- ---------- --------- --------- ---------- ---------
Total expenses 160408.11 1239763.30 157021.00 3397.11 2.2 1217653.00 22110.38 1.8
Net profit (loss) 18059.78 (42974.16) 40923.00 (22863.27) 55.9- (121599.00) 78624.84 64.7
========= ========== ========= ========= ========== =========
</TABLE>
<PAGE> 49
Telephone Warehouse, Kansas City
Consolidated
Profit & loss statement
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income
Pagers 11128.27 116930.29 10944.00 184.27 1.7 133009.00 (16077.71) 12.1-
Cellular 102239.79 717221.25 119574.00 (17324.21) 14.5- 706474.00 10747.25 1.5
Cellular accessories 16109.89 137959.17 14390.00 1719.89 12.0 128242.00 9717.17 7.6
Other equipment .00 399.95 0.00 0.00 .0 975.00 (75.05) 7.7-
Alarms 4547.63 27170.55 3690.00 875.63 23.2 30519.00 (3348.45 11.0-
Service parts 3251.68 13363.83 2185.00 1066.68 48.8 10665.00 2698.83) 25.3
Dealer service 440.00 4451.12 394.00 46.00 11.7 4716.00 (264.88) 5.6-
Programming labor-pager 16410.00 81527.00 13800.00 2610.00 18.9 73608.00 7919.00 10.8
Gift certificates 73.00 2108.45 238.00 (163.00) 68.5- 1056.00 1052.45 99.7
Programming labor-cellular 6855.00 44145.14 7800.00 (1445.00) 18.9- 43863.00 277.14 .6
Labor - misc 549.95 2643.95 275.00 274.95) 100.0- 2520.00 123.95 4.9
Labor alarms 2172.56 18582.15 2768.00 (595.50) 21.5- 20944.00 (2411.85) 11.5-
COE activation .00 (238.00) .00 .00 .0- .00 (238.00) .0-
Volume bonus 36900.00 74075.00 28000.00 8900.00 31.8 45300.00 28775.00 63.5
Miscellaneous 56.46 2065.30 215.00 (158.54) 73.7- 1971.00 94.30 4.3
Disconnects recovery 1443.95 12081.85 1600.00 (151.05) 9.4 14742.00 (2710.15) 18.4-
Customer discount (97843.52) (684419.72) (124000.00) 26156.48 21.1 (694954.00) 10534.28 1.5
Commission earned 146900.00 1028075.00 182800.00 (35900.00) 19.6- 1018139.00 9937.00 1.0
Commission deacts (7050.00) (74125.00) (7656.00) 606.00 7.9 (88316.00) 14191.00 16.1
Commission trueup (772.94) (10915.69) 606.00 (1378.94) 227.5- 322.00 (11237.69) 999.9-
Residuals 9357.34 82495.66 7500.00 2057.84 27.4 74209.00 8286.66 11.2
Advertising 16079.38 182756.88 28600.00 (12520.45) 43.8- 161327.00 21429.83 13.3
Pager service 40778.73 307667.73 39975.00 803.73 2.0 284497.00 23170.73 8.1
Pager service extended 206.35 2013.45 432.00 (225.15) 52.1- 3014.00 91000.55) 33.2-
Warranty 15.00 950.00 175.00 (160.00) 91.4- 737.00 163.00) 20.7
--------- ---------- --------- --------- ---------- ----------
Total income 809556.63 2089435.26 334805.00 (24748.37) 7.4- 1977682.00 111753.26 5.7
Pagers 81706.69 184479.39 32256.00 (549.31) 1.7- 194944.00 (10464.61) 5.4
Cellular 71000.82 480468.44 81353.00 (10352.18) 12.7- 482149.00 (1680.56) .3
Cellular accessories 9089.95 71543.60 6187.00 2902.95 46.9 61762.00 9781.60 15.8
Other equipment 755.27 4186.04 326.00 492.27 131.7 2794.00 1392.04 49.8
Alarms 2888.88 16566.82 2066.00 317.88 15.4 20288.00 (3721.18) 18.3
Service parts 768.80 8395.50 1092.00 (328.70) 29.6- 5700.00 2695.50 47.3
Credit card finance charges 364.32 4813.09 422.00 (57.68) 13.7 4225.00 568.08 13.9
Use tax 4115.93 22362.28 2987.00 1128.95 37.8 22722.00 (359.72) 1.6-
Freight paid 622.77 4555.65 286.00 336.77 117.8 3222.00 1333.65 41.4
Pager service 6284.64 67432.80 7400.00 (1115.36) 15.1- 64150.00 3282.80) 5.1
Pager retention discount 879.90 6169.80 800.00 79.90 10.0 4483.00 1686.80) 37.6
Outside labor 197.00 1997.13 386.00 (189.00) 49.0- 2689.00 9691.87) 25.7
Inventory adjustment 2919.30 19675.59 800.00 2119.30 264.9 12500.00 7175.59) 57.4
--------- ---------- --------- --------- ---------- ----------
Total cost of sales 181088.79 892646.12 136361.00 (5272.21) 3.9- 881628.00 11016.12 1.3
--------- ---------- --------- --------- ---------- ----------
Gross profit 178467.84 1196789.14 197944.00 (19476.16 9.8 1096054.00 1096054.00 9.2
</TABLE>
<PAGE> 50
Telephone Warehouse, Kansas City
Consolidated Profit & Loss Statement
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating expenses
Salaries - operations admin. 5095.54 55683.78 4320.00 775.54 18.0 55540.00 148.78 .3
Salaries - store manager 15555.46 159775.33 16000.00 (444.54) 2.8- 157000.00 2775.33 1.8
Salaries - asst. store manager 5397.57 67100.73 12500.00 (7102.43) 56.8- 84020.00 (16919.27) 20.1
Salaries - salespersons 14510.56 126572.28 16800.00 (2289.44) 13.6- 127950.00 (1377.72) 1.1-
Salaries - service manager 1476.20 18691.81 2050.00 (573.80) 28.0- 19478.00 (786.19) 4.0-
Salaries - installers 5805.86 37459.86 3100.00 2205.86 71.2 30452.00 7007.36 23.0
Payroll taxes-social security 3291.52 35025.08 3676.00 (384.48) 10.5- 35633.00 (607.92) 1.7-
Payroll taxes-fed unemployment 155.28 1392.99 173.00 (17.72) 10.2- 1425.00 (32.01) 2.2-
Payroll taxes-st unemployment 456.65 5396.91 684.00 (227.35) 33.2- 5786.00 (389.09) 6.7-
Training .00 2448.19 206.00 (206.00) 100.0- 1098.00 1350.19 123.0
Advertising 65917.85 317262.38 62915.00 3002.85 4.8 309482.00 7780.38 2.5
Alarm 113.67 1780.83 152.00 (38.33) 25.2- 1824.00 (43.17) 2.4-
Auto 523.55 6680.26 534.00 (10.45) 2.0- 6768.00 (87.74) 1.3-
Bad debts 500.00 6000.00 500.00 .00 .0 6000.00 .00 .0
Payroll fees - ADP 347.75 3962.60 348.00 (.25) .1- 4091.00 (128.40) 3.1-
Bank charges .00 510.63 59.00 (59.00) 100.0- 649.00 (138.37) 21.3-
Depreciation 5489.50 19245.66 1250.00 4239.50 339.2 15009.00 4236.66 28.2
Dues and subscriptions 43.87 915.94 100.00 (54.63) 54.6- 567.00 348.94 61.5
Awards .00 1571.20 .00 .00 .0 190.00 1381.20 726.9
Travel .00 3864.48 237.00 (237.00) 100.0- 1282.00 2582.48 201.4
Freight/postage & billing 1162.78 10372.67 815.00 347.78 42.7 8944.00 1428.67 16.0
Insurance 688.00 7803.00 624.00 9.00 1.4 7794.00 9.00 .1
Insurance-workers comp 417.89 3960.32 586.00 (168.11) 28.7- 4138.00 (177.68) 4.3-
Personnel 2037.59 8376.23 411.00 1626.59 395.8 6449.00 1927.23 29.9
Office 614.91 5156.58 400.00 214.91 53.7 5450.00 (293.47) 5.4-
Collection fees .00 1038.83 5.00 (5.00) 100.0- 952.00 186.88 14.4
Collection-ASf check .00 (275.72) (46.00) 46.00 100.0 (391.00) 115.28 29.5
Printing 702.58 12806.48 1150.00 (447.42) 38.9- 15175.00 (2368.52) 15.6-
Survey/referral fees 375.00 4341.68 333.00 42.00 12.6 2135.00 2206.68 103.4
Professional fees 80.00 3970.00 80.00 .00 .0 4117.00 (147.00) 3.6-
License & permits .00 726.83 .00 .00 .0 .00 726.83 .0
Rent 16421.41 151328.81 16388.00 33.41 .2 146801.00 4527.81 3.1
Repairs and maintenance 683.88 6690.96 425.00 178.88 42.1 5640.00 1020.96 18.1
Property taxes 400.00 4800.00 400.00 .00 .0 4800.00 .00 .0
Other taxes .00 296.00 .00 .00 .0 .00 296.00 .0
Shop supplies 576.90 3644.67 60.00 516.90 861.5 1656.00 1988.67 120.1
Telephone 1364.96 17670.70 1463.00 (98.04) 6.7- 19187.00 (1516.30) 7.9-
Utilities 1994.45 23432.43 2175.00 (180.55) 8.3- 24729.00 (1296.57) 5.2-
Computer 108.70 2207.17 228.00 (119.30) 52.3- 3851.00 (1643.83) 42.7-
Interest .00 36982.62 .00 .00 .0 36983.00 (.38) .0-
Installation 2045.66 3545.50 20.00 2025.66 999.9 534.00 3011.50 564.0
Janitorial 653.66 4506.25 195.00 158.66 81.4 2360.00 2146.25 90.9
Refreshment 565.45 3847.25 140.00 425.45 303.9 2020.00 1827.25 90.5
Cash over and short 202.01 1088.65 .60 202.01 .0 .00 1088.65 .0
Common operating salaries 5565.00 50085.00 5565.00 .00 .0 50085.00 .00 .0
------------- ------------ ----------- ------------ ---------- ---------
Total operating expenses 160400.11 1239763.30 157021.00 3387.11 2.2 1217653.00 22110.30 1.8
------------- ------------ ----------- ------------ ---------- ---------
Consolidated profit/ (loss) 18059.78 (42974.16) 40923.00 (22863.27) 55.9 (121599.00) 78624.84 64.7
============= ============ =========== ============ ========== =========
</TABLE>
<PAGE> 51
Telephone Warehouse, Kansas City
Profit & loss statement
Administrative
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income-administrative
Miscellaneous 56.46 2065.30 215.00 (158.54) 73.7- 1971.00 94.30 4.8
Disconnects recovery 1448.95 12031.85 1600.00 (151.05) 9.4- 14742.00 (2710.15) 18.4-
Residuals 9557.84 32495.66 7500.00 2057.84 27.4 74209.00 8286.66 11.2
Advertising CO-OP Cellular Inc 12279.55 146910.86 28600.00 (16320.45) 57.1- 148127.00 (1216.14) .8-
Advertising CO-OP Vendors 3800.00 35845.97 .00 3800.00 .0 13200.00 22645.97 171.6
---------- --------- --------- --------- --------- ---------
Total administrative income 27142.80 279349.64 37915.00 (10772.20) 28.4 252249.64 27100.64 10.7
Cost of sales - Administrative
Freight paid .00 57.34 .00 .00 .0 .00 57.34 .0
Inventory adjustments .00 2100.00 .00 .00 .0 2100.00 .00 .0
---------- --------- --------- --------- --------- --------
Total cost of sales - Admin .00 2157.84 .00 .00 .0 2100.00 57.34 2.7
---------- --------- --------- --------- --------- --------
Gross profit- Administrative 27142.90 277192.80 37915.00 (10772.20) 28.4- 250149.00 27043.30 10.8
</TABLE>
<PAGE> 52
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses Administrative
Salaries-operations admin. 5095.54 55683.78 4320.00 775.54 18.0 55540.00 143.78 .3
Payroll taxes-social security 271.15 4124.42 230.00 41.15 17.9 4095.00 29.42 .7
Payroll taxes-fed unemployment 16.33 103.15 14.00 2.33 16.6 102.00 1.15 1.1
Payroll taxes-st unemployement 38.38 488.13 61.00 (22.62) 37.1- 506.00 (17.87) 3.5-
Training .00 2448.19 206.00 (206.00) 100.0- 1098.00 1350.19 123.0
Advertising-cellular 57251.26 278364.53 53285.00 8966.26 7.4 273069.00 5295.53 1.9
Advertising-vehicle security 264.00 2487.52 136.00 128.00 94.1 2279.00 208.52 9.2
Advertising-pagers 7964.88 32796.88 9194.00 (1229.12) 13.4- 32344.00 452.88 1.4
Advertising-signs & displays 437.71 3613.45 300.00 137.71 45.9 1790.00 1823.45 101.9
Auto 463.57 6326.84 511.00 (47.43) 9.3- 6457.00 (130.16) 2.0-
Bad debt 300.00 6000.00 500.00 .00 .0 6000.00 .00 .0
Payroll fees - ADP 347.75 3962.60 348.00 (.25) .1- 4091.00 (128.40) 3.1-
Bank charges .00 510.63 59.00 (59.00) 100.0- 649.00 (138.37) 21.3-
Dues & subscriptions 45.37 899.74 100.00 (54.63) 54.6- 567.00 332.74 58.7
Awards .00 1571.20 .00 .00 .0 190.00 1381.20 726.9
Travel .00 3864.48 237.00 (237.00) 100.0- 1282.00 2582.48 201.4
Postage & Freight 750.39 4625.02 255.00 495.69 194.4 2953.00 1672.02 56.6
Insurance 9.00 99.00 9.00 .00 .0 99.00 .00 .0
Insurance-workers comp. 9.56 104.51 8.00 1.56 19.5 102.00 2.51 2.5
Personnel 1037.57 8376.23 411.00 1626.59 395.3 6449.00 1927.23 29.9
Office 84.12 1900.74 200.00 (115.88) 57.9- 2350.00 (449.26) 19.1-
Collection Fee .00 1088.83 5.00 (5.00) 100.0- 952.00 136.83 14.4
Collections - NSF checks .00 (275.72) (46.00) 46.00 100.0 (391.00) 115.28 29.5
Printing 20.12 1803.03 350.00 (329.38) 94.3- 2800.00 (1496.97) 53.5-
Survey/referral fees 373.00 3215.00 333.00 42.00 12.6 1901.00 1314.00 69.1
Professional fees .00 3810.00 .00 .00 .0 4037.00 (227.00) 5.6-
Rent 354.23 3554.02 320.00 34.23 10.7 2240.00 1314.02 58.7
Repairs & maintenance 5.61 293.85 25.00 (19.39) 77.6 250.00 43.85 17.5
Other taxes .00 296.00 .00 .00 .0 .00 296.00 .0
Telephone 167.32 3328.28 280.00 (114.48) 40.9- 4789.00 (1460.80) 30.5-
Utilities 36.96 1073.91 75.00 (18.04) 24.1- 1249.00 (175.09) 14.0-
Computer 108.70 2207.17 228.00 (119.30) 52.3- 3851.00 (1643.83) 42.7-
Interest .00 36982.62 .00 .00 .0 36983.00 (.38) .0-
Janitorial 48.48 503.25 40.00 8.48 21.2 445.00 58.25 13.1
Refreshment 199.24 626.95 40.00 159.24 398.1 480.00 146.95 30.6
Common operating salaries 5565.00 50085.00 5565.00 .00 .0 50085.00 .00 .0
---------- ---------- --------- -------- ---------- --------
Total expenses-administrative 82485.76 526443.15 77599.00 4886.76 6.3 511683.00 14760.15 2.9
Net profit (loss) (55342.96) (249250.85) (39684.00) (15658.96) 39.5- (261534.00) 12283.15 4.7
========== ========== ========= ======== ========== ========
</TABLE>
<PAGE> 53
Telephone Warehouse -- Kansas City
Profit & loss statement
Bannister Store
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income - Bannister
Pagers 1778.15 36723.15 2918.00 (1139.85) 39.1- 37078.00 (354.85) 1.0-
Cellular 21135.61 202984.09 33879.00 (12743.39) 37.6- 214812.00 (11827.91) 5.5-
Cellular accessories 3996.86 42431.62 3847.00 149.86 3.9 39090.00 3341.62 8.5
Alarms 1941.14 8502.45 840.00 1101.14 131.1 8330.00 172.45 2.1
Service parts 727.54 3163.80 716.00 11.54 1.6 3179.00 (15.20) .5-
Non-commisionable labor 120.00 1451.68 142.00 (22.00) 15.5- 2068.00 (616.32) 29.8-
Programming labor-pager 4110.00 21305.00 3680.00 430.00 11.7 19210.00 2095.00 10.9
Gift certificates .00 41.65 .00 .00 .0 8.00 33.65 420.6
Programming labor-cellular 1820.00 11819.09 2210.00 (890.00) 40.3- 13461.00 (1641.99) 12.2-
Labor 195.00 729.00 78.00 27.00 34.6 765.00 (36.00) 4.7
Labor alarms 1075.00 7931.50 630.00 445.00 70.6 5861.00 2070.50 35.3
CDE activation .00 12.00 .00 .00 .0 .00 12.00 .0
Volume bonus 7800.00 17650.00 6500.00 1300.00 20.0 10850.00 6800.00 62.7
Customer discount (20086.80) (196892.75) (35850.00) 15813.20 44.1 (214597.00) 17704.25 8.3
Carrier comm earned 32425.00 307225.00 50860.00 (17935.00) 35.6- 312109.00 (4884.00) 1.60-
Carrier comm deactivations (4725.00) (31375.00) (3190.00) (1535.00) 48.1- (33426.00) 2051.00 6.1
Carrier comm true-up (424.94) (1433.76) 6.00 (430.94) 999.9- 710.00 (2143.76) 301.9-
Pager service 4936.00 27465.07 5040.00 (84.00) 1.7- 27673.00 (207.93) .8-
---------- ----------- --------- ---------- ----- ----------- ----------
Total income - Bannister 56808.56 459733.39 71806.00 (15502.44) 21.6- 447181.00 12552.59 2.3
Cost of sales - Bannister
Pagers
Pagers 7524.54 51772.41 8602.00 (1077.46) 12.5- 54029.00 (2256.59) 4.2-
Cellular 14185.85 184607.98 28050.00 (8914.65) 38.7- 143104.00 (13496.07) 9.1-
Cellular accessories 2189.02 20464.40 1654.00 529.02 32.0 18711.00 1753.40 9.4
Other equipment 109.26 897.97 69.00 40.26 58.3 513.80 384.97 75.0
Alarms 906.65 5394.48 470.00 436.63 92.9 5703.00 (308.52) 5.4-
Service parts 38.92 2403.73 858.00 (269.08) 75.2- 1813.00 590.73 32.6
Credit card finance charge 68.58 921.88 74.00 (10.42) 14.1- 870.00 51.38 5.9
Use tax 1054.18 6517.05 841.00 213.18 25.3 6904.00 (386.95) 5.6-
Freight paid 141.78 1017.59 68.00 78.78 108.4 886.00 131.59 14.9
Outside labor 120.00 450.00 51.00 69.00 135.3 818.00 147.00 47.0
Inventory adjustment 8826.66 6799.97 200.00 3126.66 999.9 2600.00 4199.97 161.5
---------- ----------- --------- ---------- ----------- ----------
Total cost of sales-Bannister 29658.87 281256.91 35437.00 (578.13) 16.3- 240446.00 (9189.09) 8.8-
---------- ----------- --------- ---------- ----------- ----------
Gross profit-Bannister 26649.69 228476.68 36369.00 (9719.31) 26.7- 206735.00 21741.68 10.5
</TABLE>
<PAGE> 54
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries-store manager 2852.14 36498.07 3200.00 (347.86) 10.9- 36200.00 293.07 .8
Salaries-asst. store manager 1405.52 28915.21 2500.00 (1094.48) 43.8- 26700.00 (2784.79) 10.4-
Salaries-salespersons 4584.22 25499.56 4200.00 384.21 9.1 27600.00 (2100.44) 7.6-
Salaries-service manager .00 (249.51) .00 .00 .0 .00 (249.51) .0-
Salaries-installers 1597.62 22153.43 1550.00 47.62 3.1 18600.00 3553.48 19.1
Payroll taxes-social security 768.17 8180.34 843.00 (74.83) 8.9- 8432.00 (301.66) 3.6-
Payroll taxes-fed unemployment 82.82 323.17 86.00 (3.18) 8.8- 339.00 (15.83) 4.7-
Payroll taxes-st unemployment 110.70 1467.78 158.00 (47.30) 29.9- 1584.00 (116.22) 7.3-
Alarm 37.89 454.68 38.00 (.11) .3- 436.00 (1.32) .3-
Auto .00 81.12 9.00 (9.00) 100.0- 121.00 (39.88) 33.0-
Depreciation 1162.15 7679.65 592.00 570.15 96.3 7118.00 566.65 8.0
Postage & Freight .00 116.80 10.00 (10.00) 100.0- 125.00 (8.20) 6.6-
Insurance 154.00 1904.00 154.00 .00 .0 1904.00 .00 .0
Insurance-workers comp 100.98 1018.84 126.00 (25.10) 19.9- 1056.00 (42.16) 4.0-
Office 129.81 861.74 50.00 79.81 159.6 775.00 86.74 11.2
Printing 164.76 2847.26 200.00 (35.24) 17.6- 8100.00 (252.74) 8.2-
Survey/referral fees .00 125.00 .00 .00 .0 .00 125.00 .0
Professional fees 20.00 40.00 20.00 .00 .0 20.00 20.00 100.0
License & permits .80 614.56 .00 .00 .0 .00 614.56 .0
Rent 8007.20 86372.08 8007.00 .20 .0 35438.00 934.08 2.6
Repairs & maintenance 802.00 833.06 100.00 202.00 202.0 1150.00 (316.94) 27.6-
Property taxes 100.00 1200.00 100.00 .00 .0 1200.00 .00 .0
Shop supplies 152.49 1823.80 23.00 129.49 563.0 692.00 1131.00 163.4
Telephone 298.43 3760.64 881.00 (37.55) 11.8- 3878.00 (117.36) 3.0-
Utilities 684.28 7790.24 689.00 (4.72) .7- 7701.00 89.24 1.2
Installation .00 406.69 10.00 (10.00) 100.0- 209.00 197.69 94.6
Janitorial 29.60 524.73 25.00 4.60 18.4 265.00 259.78 98.0
Refreshment 19.39 540.41 25.00 (5.61) 21.4- 245.00 295.41 120.6
Cash over & short 96.61 810.47 .00 96.61 .0 .00 810.47 .0
---------- ----------- --------- ---------- ----------- ----------
Total expenses - Bannister 17805.71 187532.97 17996.00 (190.29) 1.1- 184908.00 2629.97 1.4
---------- ----------- --------- ---------- ----------- ----------
Net profit (loss) - Bannister 8848.98 40948.71 18873.00 (9529.02) 51.9- 21882.00 19111.71 87.5
========== =========== ========= ========== =========== ==========
</TABLE>
<PAGE> 55
Telephone Warehouse - Kansas City
Profit & loss statement
Independence Store
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income - Independence
Pagers 3134.99 30924.47 3010.00 124.99 4.2 34957.00 (4032.53) 11.5-
Cellular 27117.54 153329.91 30890.00 (372.46) 12.2- 155933.00 (2603.09) 1.7
Cellular accessories 41419.50 31615.92 3094.00 1325.50 42.8 28057.00 3558.92 12.7
Alarms 209.91 4874.26 1025.00 (815.09) 79.5- 7477.00 (2602.74) 34.8-
Service parts 1294.85 5375.13 796.00 498.35 62.6 3977.00 1398.13 35.2
Non-commisionable labor 140.00 1355.00 113.00 27.00 23.9 1230.00 125.00 10.2
Programming labor - pager 4555.00 24357.00 3795.00 760.00 20.0 19906.00 4451.00 22.4
Gift certificates 73.00 1656.85 176.00 (101.00) 57.4- 800.00 856.85 107.1
Programming labor - cellular 1905.00 10147.05 2015.00 (110.00) 5.5- 9565.00 582.05 6.1
Labor 50.00 480.00 71.00 (21.00) 29.6- 557.00 (77.00) 13.8-
Labor alarms 170.00 4026.20 769.00 (559.00) 77.9- 5254.00 (1227.80) 23.4-
Volume bonus 10275.00 17925.00 7750.00 2525.00 32.6 11150.00 6775.00 60.8
Customer discount (26445.78) (147476.08) (31775.00) 5326.22 16.8 (152721.00) 5244.92 3.4
Carrier comm earned 39500.00 222575.00 47740.00 (8240.00) 17.3- 223675.00 (1100.00) .5-
Carrier comm deactivations 1675.00 (12150.80) (1276.00) 601.00 47.1 (15511.00) 3361.88 21.7
Carrier comm true-up (97.70) (3042.93) 164.00 (261.70) 159.6- (1985.00) (1057.93) 53.3-
Pager service 5967.80 32965.25 5198.00 769.30 14.3 26640.00 6825.25 23.7
Warranty .90 465.80 175.00 (175.00) 100.0- 626.00 (161.00) 25.7-
---------- ----------- --------- ---------- ----------- ----------
Total income - Independence 71592.11 379403.03 73730.00 (2137.89) 2.9- 359587.00 19816.03 5.5
Cost of sales - Independence
Pagers 8668.91 52777.70 8870.00 (209.99) 2.4- 51607.00 1170.70 2.3
Cellular 18885.08 101890.92 21016.00 (2179.97) 10.4- 105199.00 (3308.08) 3.1-
Cellular accessories 2368.81 15785.52 1880.00 1033.91 77.7 13901.00 1884.52 13.6
Other equipment 343.79 1743.94 77.00 466.75 606.2 524.80 1219.94 232.8
Alarms 174.87 4023.02 574.00 (399.93) 69.7- 5071.00 (1047.98) 20.7-
Service parts 179.08 2886.55 398.00 (213.12) 54.8- 2085.00 331.55 16.5
Credit card finance charge 146.55 1948.06 185.00 (33.45) 20.8- 1618.00 330.06 20.4
Use tax 727.21 4430.90 758.00 (30.79) 4.1- 5078.80 (647.10) 12.7-
Freight paid 180.80 1580.90 90.00 90.63 100.7 754.00 826.90 109.7
Outside labor 40.00 450.00 50.00 (10.00) 20.0- 270.00 180.00 66.7
Inventory adjustment (2275.29) 3654.54 200.00 (2475.29) 999.9- 2600.00 1054.54 40.6
---------- ----------- --------- ---------- ----------- ----------
Total cost of sales Ind. 29576.79 190622.05 33548.00 (8971.25) 11.8- 183627.00 1995.05 1.1
---------- ----------- --------- ---------- ----------- ----------
Gross profit - Independence 42015.36 188780.98 40182.00 1833.36 4.6 170960.00 17820.98 10.4
</TABLE>
<PAGE> 56
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses-Independence
Salaries-store managers 3565.41 38297.59 3200.00 365.41 11.4 36200.00 2097.59 5.8
Salaries-asst. store managers 2653.10 24912.68 5000.00 (2346.90) 46.9- 24490.00 422.68 1.7
Salaries-saleperson 4148.50 37136.31 4200.00 (51.50) 1.2- 36150.00 986.31 2.7
Salaries-service manager 1476.20 18693.00 2050.00 (573.80) 28.0 19478.00 (784.68) 4.0-
Salaries-installers 1669.34 3922.63 .00 1689.34 .0 1088.00 2834.63 260.5
Payroll taxes-social security 708.68 8954.55 757.00 (48.32) 6.4- 8664.00 290.55 3.4
Payroll taxes-fed unemployment 32.07 318.51 34.00 (1.93) 5.7- 290.00 28.51 9.8
Payroll taxes-st unemployment 107.48 1599.74 150.00 (42.57) 28.4- 1461.00 138.74 9.5
Alarm 37.89 454.68 38.00 (.11) .3- 456.00 (1.32) .3-
Auto 59.98 223.30 9.00 50.98 566.4- 110.00 113.30 103.0
Depreciation 1448.67 5355.98 355.00 1093.67 308.1- 4260.00 1095.98 25.7
Postage & freight .00 318.09 10.00 (10.00) 100.0- 125.00 193.09 154.5
Insurance 127.00 1607.00 127.00 .00 .0 1607.00 .00 .0
Insurance-workers comp. 130.00 1166.21 155.00 (24.20) 15.6- 1101.00 65.21 5.9
Office 104.27 795.57 50.00 54.27 108.5 775.00 20.57 2.7
Printing 164.76 2847.24 200.00 (35.24) 17.6- 2975.00 (127.76) 4.3-
Professional fees 20.00 40.00 20.00 .00 .0 20.00 20.00 100.0
License & permits .00 81.27 .00 .00 .0 .00 81.27 .0
Rent 2319.51 27834.12 2320.00 (.49) .0- 27839.00 (4.88) .0-
Repairs & maintenance 296.22 1440.37 100.00 196.22 196.2 2040.00 (599.63) 29.4-
Property taxes 100.00 1200.00 100.00 .00 .0 1200.00 .00 .0
Shop supplies .00 306.82 14.00 (14.00) 100.0- 359.00 (52.18) 14.5-
Telephone 377.68 4336.98 361.00 16.63 4.6 4485.00 (98.02) 2.2-
Utilities 367.11 5098.08 447.00 (79.89) 17.9- 5593.00 (494.92) 8.8-
Installation 1930.92 2712.75 4.00 1946.92 999.9 154.00 2558.75 999.9
Janitorial 26.80 741.00 25.00 11.60 46.4 265.00 476.00 176.6
Refreshment 137.84 831.86 25.00 112.34 449.4 375.60 436.86 121.8
Cash over & short 41.15 219.47 .00 41.15 .0- .00 219.47 .0
-------- --------- -------- ------- --------- ---------
Total expenses-Independence 22100.53 191446.12 19751.00 2349.58 11.9 181510.00 9936.12 5.5
-------- --------- -------- ------- --------- ---------
Net profit (loss)-Independence 19914.73 (2665.14) 20431.00 (516.22) 2.5- (10550.80) 7884.86 74.7
======== ========= ======== ======= ========= =========
</TABLE>
<PAGE> 57
Telephone Warehouse - Kansas City
Profit & loss statement
Overland Park Store
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income- Overland Park
Pagers 4610.50 36598.66 3192.00 1418.50 44.4 39203.00 (2609.34) 6.7-
Cellular 34500.56 220922.18 34876.00 (375.44) 1.1- 192917.00 28005.18 14.5
Cellular accessories 5208.54 89018.55 4959.00 249.54 5.0 36189.00 2829.55 7.8
Other equipment .00 899.95 .00 .00 .0 975.00 (75.05) 7.7-
Alarms 2113.53 11179.59 935.00 1178.53 126.0 9852.00 1327.59 13.5-
Service parts 690.44 3474.40 426.00 264.44 62.1 2674.60 800.00) 29.9
Non-commissionable labor 180.00 1154.44 99.00 81.00 81.8 1111.00 43.44 3.9
Programming labor-pager 5240.00 25075.00 4025.00 1215.00 30.2 22278.00 2797.00 12.6
Gift certificates .00 409.95 62.00 (62.00) 100.0- 248.00 161.95 65.3
Programming labor-cellular 1980.00 13404.00 2275.00 (345.00) 15.2- 11960.00 1444.00 12.1
Labor 229.95 854.95 80.00 149.95 187.4 684.00 170.95 25.0
Labor alarms 827.50 3855.20 701.00 126.50 18.0 7103.00 (1247.80 17.6-
ODE activators .00 (250.00) .00 .00 .0 .00 (250.00) .0-
Volume bonus 12075.00 23850.00 8750.00 3325.00 38.0 14275.00 9575.00 67.1
Customer discount (32809.77) (20514.38) (35875.00) 3065.23 8.5 (183235.00) (16905.38) 9.0-
Carrier comm earned 42925.00 293525.00 53900.00 (5975.00) 11.1- 277315.00 15710.00 5.7
Carrier comm deactivations (1325.00) (17775.00) (1595.00) 270.00 16.9 (23123.00) 5348.00 23.1
Carrier comm true-up (250.80) (3016.10) 165.00 (415.30) 251.7- 1053.00 (4069.10) 386.4-
Pager service 6821.70 33841.30 5513.00 1308.70 23.7 29307.00 4034.30 13.5
--------- ---------- --------- --------- ---------- ----------
Total Income-Overland Park 37967.65 483881.69 82488.00 5479.65 6.6- 436791.00 47090.69 10.3
Cost of sales-Overland Park
Pagers 10615.62 55522.34 9408.00 1207.68 12.8 57714.00 (2919.66) 3.8-
Cellular 24069.71 149867.25 23728.00 341.71 1.4 131485.00 18382.25 14.0
Cellular accessories 2852.61 20810.98 2132.00 720.61 33.8 17174.00 3636.98 21.2
Other equipment 68.76 1377.06 163.00 (99.24) 60.9- 1633.00 (255.94) 15.7-
Alarms 1061.37 6217.76 524.00 537.85 102.6 6270.00 (52.24) .8-
Service parts 264.64 3102.72 213.00 51.64 24.2 1372.00 1730.72 126.1
Credit card finance charges 122.85 1445.89 118.00 4.85 4.1 1145.00 300.89 26.3
Use tax 1342.71 6599.96 888.00 454.71 51.2 6173.00 426.96 6.9
Freight paid 152.32 1174.25 82.00 70.32 85.8 921.00 253.23 27.5
Outside labor .00 268.01 42.00 (42.00) 100.0 271.00 (2.99) 1.1-
Inventory adjustment 389.22 3427.48 200.00 189.22 94.6 2600.00 827.48 31.8
--------- ---------- --------- --------- ---------- ----------
Total cost of sales-Overland 40935.30 249813.70 37498.00 3737.30 9.2 226758.00 23055.70 10.2
--------- ---------- --------- --------- ---------- ----------
Gross profit - Overland Park 47032.35 234067.99 44990.00 2042.35 4.5 210033.00 24034.99 11.4
</TABLE>
<PAGE> 58
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
------------- ------------ ---------- ---------- ---- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses-Overland Park
Salaries-store managers 4008.98 38932.78 3200.00 808.98 25.3 36200.00 2732.78 7.5
Salaries-asst. store managers 1338.95 13624.26 2500.00 (1161.05) 46.4- 19330.00 (5705.74) 29.5-
Salaries-salesperson 1659.83 27894.61 4200.00 (2540.17) 60.5- 27600.00 294.61 1.1
Salaries-service manager .00 248.00 .00 .00 .0 .00 248.00 .0
Salaries-installers 2018.90 10893.23 1550.00 468.90 30.3 10494.00 399.23 3.8
Payroll taxes-social security 651.68 6877.70 801.00 (169.32) 21.1- 7254.00 (376.30) 5.2-
Payroll taxes-fed unemployment 80.36 280.67 39.00 (8.64) 22.2- 305.00 (24.33) 8.0
Payroll taxes-st unemployment 41.66 299.77 95.00 (53.34) 56.1- 525.00 (225.23) 42.9-
Alarm .00 416.79 38.00 (38.00) 100.0- 456.00 (39.21) 8.6-
Auto .00 49.00 5.00 (5.00) 100.0- 65.00 (16.00) 24.6-
Depreciation 1786.41 4769.61 271.00 1515.41 599.2- 3252.00 1517.61 46.7
Postage & freight .00 114.87 10.00 (10.00) 100.0- 125.00 (10.13) 8.1-
Insurance 201.00 2421.00 201.00 .00 .0 2421.00 .00 .0
Insurance-workers comp. 87.25 848.71 155.00 (67.75) 43.7- 919.00 (70.29) 7.6-
Office 97.59 718.58 50.00 47.59 95.2 775.00 (56.42) 7.3-
Printing 164.76 2580.56 200.00 (35.24) 17.6- 2975.00 (394.44) 13.3-
Survey/referral fees .00 266.68 .00 .00 .0 50.00 216.68 488.4
Professional fees 20.00 40.00 20.00 .00 .0 20.00 20.00 100.0
Rent 8494.67 56619.04 8495.00 (.33) .0- 54332.00 2287.04 4.2
Repairs & maintenance .00 3654.85 100.00 (100.00) .0- 1150.00 2504.85 217.8
Property taxes 100.00 1200.00 100.00 .00 .0 1200.00 .00 .0
Shop supplies 328.64 1373.56 23.00 305.64 999.9 447.00 926.56 207.3
Telephone 240.06 2803.92 228.00 12.06 5.3 2819.00 (15.08) 5-
Utilities 528.61 5637.83 650.00 (121.19) 18.6- 6748.00 (1110.17) 16.5-
Installation 94.74 94.74 6.00 88.74 999.9 165.00 (70.26) 42.6-
Janitorial 87.70 1970.00 70.00 17.70 25.3 950.00 1020.72) 107.4
Refreshment 40.84 239.06 25.00 20.34 81.4 265.00 (25.94) 9.8-
Cash over & short 68.77 59.84 .00 68.77 .0 .00 59.84 .0
--------- ---------- --------- --------- ---------- ---------
Total expenses-Overland Park 22076.10 184930.38 29032.38 (955.90) 4.2- 180842.00 4088.38 2.3
--------- ---------- --------- --------- ---------- ---------
Net profit (loss)-Overland Park 24956.25 49137.61 21958.00 2998.25 13.7- 29191.00 19946.61 68.3
========= ========== ========= ========= ========== =========
</TABLE>
<PAGE> 59
Telephone Warehouse - Kansas City
Profit & loss statement
Gladstone store
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income - Gladstone
Pagers 1604.68 12684.01 1824.00 (219.37) 12.0- 21765.00 (9080.99) 41.7-
Cellular 19486.08 139985.07 19929.00 (442.92) 2.2- 142812.00 (2826.93) 2.0-
Cellular accessories 2484.99 24893.08 2490.00 (5.01) .2- 24906.00 (12.92) .1-
Alarms 283.05 2614.25 890.00 (606.95) 68.2- 4860.00 (2245.75) 46.2-
Service parts 539.35 1350.50 247.00 292.35 118.4 835.00 515.50 61.7
Non - commissionable labor .00 490.00 40.00 (40.00) 100.0- 307.00 183.00 59.6
Programming labor - pager 2585.00 10790.00 2300.00 205.00 8.9 12214.00 (1424.00) 11.7-
Programming labor - cellular 1208.00 8775.00 1300.00 (100.00) 7.7- 8882.00 (107.00) 1.2-
Labor 165.00 580.00 46.00 119.00 258.7 514.00 66.00 12.8
Labor alarms 100.00 769.25 668.00 (568.00) 85.0- 2776.00 (2006.75) 72.3-
Volume bonus 6750.00 14650.00 5000.00 1750.00 35.0 9025.00 5625.00 62.3
Customer discount (18548.17) (134910.51) (20500.00) 1951.83 9.5 (139401.00) 4490.49 3.2
Carrier comm earned 27050.00 204750.00 30900.00 (3750.00) 12.2- 204539.00 211.00 .1
Carrier comm deactivations (325.00) (12825.00) (1595.00) 1270.00 79.6 (16256.00) 3431.00 21.1
Carrier comm tune-up .00 (3422.90) 271.00 (271.00) 100.0- 544.00 (3966.90) 729.2-
Pager service 8862.60 14666.85 3150.00 282.60 7.4 16314.00 (1647.15) 10.1-
------------- ------------ ------------ --------- --------- --------
Total Income - Gladstone 46677.58 285839.60 46860.00 (182.47) .4- 294636.00 (8796.40) 8.0-
Cost of Sales - Gladstone
Pagers 4906.51 24406.94 5376.00 (469.49) 8.7- 31594.00 (7187.06) 22.7-
Cellular 18959.78 94102.84 13559.00 400.73 3.0 97361.00 (3258.66) 3.3-
Cellular accessories 1690.41 14482.70 1071.00 619.41 57.8 11976.00 2506.70 20.9
Other equipment 68.50 167.07 17.00 21.50 126.5 124.00 43.07 34.7
Alarms 241.88 931.56 498.00 (256.67) 51.5- 3244.00 (2312.44) 71.3-
Service parts 284.86 552.50 123.00 111.86 90.9 510.00 42.50 8.3
Credit card finance charge 31.94 497.75 45.00 (13.66) 30.4- 592.00 (94.25) 15.9-
US tax 991.85 4814.37 500.00 491.41 98.4 4567.00 247.37 5.4
Freight paid 148.09 725.57 46.00 102.09 221.9 661.00 64.57 9.8
Outside labor .00 40.00 30.00 (30.00) 100.0- 116.00 (76.00) 65.5-
Inventory adjustment 1478.71 3693.60 200.00 1278.71 639.4 2600.00 1093.60 42.1
------------ ------------ ------------ --------- ----- --------- ---------
Total cost of sales-Gladstone 28721.38 144414.40 21465.00 2256.33 10.5 158843.00 (8980.60) 5.8-
------------ ------------ ------------ --------- ----- --------- ---------
Gross Profit - Gladstone 22956.20 141425.20 25395.00 (2438.80) 9.6- 141291.00 134.20 .1
</TABLE>
<PAGE> 60
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses - Gladstone
Salaries - store manager 5128.98 46051.89 6400.00 (1271.07) 19.9- 48400.00 (2348.11) 4.9-
Salaries - asst. store manager .00 4648.58 2500.00 (2500.00)100.0- 13500.00 (8851.42) 65.6-
Salaries - salespersons 4118.02 36041.80 4200.00 (81.98) 2.0- 36600.00 (558.20) 1.5
Salaries - installers .00 490.07 .00 .00 .0 270.00 220.07 81.5
Payroll taxes-social security 911.84 6938.07 1045.00 (133.16) 12.7- 7188.00 (249.93) 3.5-
Payroll taxes-fed umemployment 43.70 367.49 50.00 (6.30) 12.6- 389.00 (21.51) 5.5-
Payroll taxes-st umemployment 158.48 1541.49 220.00 (61.52) 28.0- 1710.00 (168.51) 9.9-
Alarm 37.89 454.68 38.00 (.11) .3- 456.00 (1.32) .3-
Auto .00 .00 .00 .00 .0 15.00 (15.00) 100.0-
Depreciation 1092.27 1440.42 37.00 1060.27 999.9 384.00 1056.42 275.1
Dues & subscriptions .00 16.20 .00 .00 .0 .00 16.20 .0
Postage & freight .00 130.87 10.00 (10.00)100.0- 135.00 (4.13) 3.1-
Insurance 133.00 1673.00 133.00 .00 .0 1673.00 .00 .0
Insurance-workers comp. 89.38 827.05 142.00 (52.62) 37.1 960.00 (132.95) 13.8-
Office 199.12 827.90 50.00 149.12 298.2 775.00 104.90 13.5
Printing 188.18 2870.66 200.00 (11.82) 5.9- 2975.00 (104.34) 3.5-
Survey/referral fees .00 25.00 .00 .00 .0 .00 25.00 .0
Professional fees 20.00 40.00 20.00 .00 .0 20.00 20.00 100.0
License & permits .00 31.00 .00 .00 .0 .00 31.00 .0
Rent 2245.80 26949.60 2246.00 (.20) .0- 26952.00 (2.40) .0-
Repairs & maintenance .00 438.83 100.00 (100.00)100.0- 1050.00 (611.17) 58.2-
Property taxes 100.00 1200.00 100.00 .00 .0 1200.00 .00 .0
Shop supplies 95.77 141.29 .00 95.77 .0 158.00 (16.71) 10.6-
Telephone 288.80 3284.89 263.00 25.30 9.6 3116.00 168.89 5.4
Utilities 357.25 3832.37 314.00 43.29 13.8 3438.00 394.37 11.5
Installation .00 331.32 .00 .00 .0 6.00 325.32 999.9
Janitorial 151.28 766.55 35.00 116.28 332.2 435.00 331.55 76.2
Refreshment 164.14 1608.97 25.00 139.14 556.6 655.00 953.97 145.6
Cash over & short (4.52) (1.18) .00 (4.52) .0- .00 (1.18) .0-
---------- --------- -------- --------- --------- --------
Total expenses - Gladstone 15518.87 143020.86 18123.00 (2604.13) 14.4- 152460.00 (9439.14) 6.2-
---------- --------- -------- --------- --------- --------
Net profit (loss) - Gladstone 7487.80 (1595.66) 7272.00 165.33 2.3 (11169.00) 9573.34 85.7
========== ========= ======== ========= ========= ========
</TABLE>
<PAGE> 61
Telephone Warehouse, Inc.
Profit & loss statement
Administrative
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income - Page dept.
Pager billing 19651.13 198729.26 21074.00 (1422.87) 6.8- 184063.00 14666.26 8.0
Pager service-extended 206.85 2013.45 432.00 (225.15) 52.1- 3014.00 (1880.55) 33.2-
Warranty 15.00 485.00 .00 15.00 .0 161.00 324.00 201.2
---------- ----------- --------- ---------- ----------- ----------
Total income - Pager dept. 19872.98 201227.71 21506.00 (1633.02) 7.6- 187238.00 139889.71 7.5
Cost of sales - Pager dept.
Pager service 6284.64 67432.80 7400.00 (1115.86) 15.1- 64150.00 3282.80 5.1
Pager retention discount 879.90 6169.80 800.00 79.90 10.0 4483.00 1686.80 37.6
Outside labor 37.00 779.12 213.00 (176.00) 82.6- 1719.00 (939.88) 54.7-
---------- ----------- --------- ---------- ----------- ----------
Total cost of sales-Pager dept 7201.54 74881.72 8413.00 (1211.46) 14.4- 70352.00 4029.72 5.7
---------- ----------- --------- ---------- ----------- ----------
Gross Profit - Pager dept. 12671.44 126845.99 18093.00 (421.56) 8.2- 116886.00 9959.99 8.5
Expenses - Pager department
Postage & freight .90 295.68 .00 .00 .0 10.00 285.68 999.9
Billing - pager dept. 412.89 4771.34 520.00 (107.91) 20.3- 5471.00 (699.66) 12.8-
Insurance 9.00 99.00 .00 9.00 .0 90.00 9.00 10.0
Printing .00 357.73 .00 .00 .0 350.00 7.73 2.2
Survey/referral fees .00 710.00 .00 .00 .0 184.00 526.00 285.9
Telephone .00 156.07 .00 .00 .0 150.00 6.07 4.0
---------- ----------- --------- ---------- ----------- ----------
Total expenses - Pager dept. 421.89 6889.82 520.00 (98.91) 19.0- 6255.00 134.82 2.2
---------- ----------- --------- ---------- ----------- ----------
Net profit (loss) - Pager dept. 12250.95 120456.17 12573.00 (322.65) 2.6- 110681.00 9825.17 8.9
========== =========== ========= ========== =========== ==========
</TABLE>
<PAGE> 62
Telephone Warehouse - Kansas City
Profit & loss statement
All Stores
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting prd Year-to-date Budget-reporting-period Budget year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net profit (loss) all stores 18509.73 (42974.16) 40923.00 (22863.27) 55.9 (121599.00) 78624.04 64.7
======== ========= ======== ========= ========== ========
</TABLE>
<PAGE> 63
Telephone Warehouse, San Antonio
Balance Sheet
As of 12/31/96
Assets
<TABLE>
<S> <C> <C> <C>
Current assets
Cash on hand $ 488,168.13
A/P-Trade 10,269.51
Allowance for doubtful accts. (4,288.48)
A/R-AT&T 156,049.04
A/R-RSF returned checks 8,678.75
A/R-Other 15,007.28
Intercompany A/R TW-KC 4,099.58
Intercompany A/R HCI 17,826.25
Inventory 114,169.28
Inventory valuation reserve (6,821.50)
Prepaid rent 12,818.98
-------------
Total current assets $ 755,961.82
Fixed assets
Furniture & Fixtures $ 1,492.78
Office equipment 2,782.69
Signs & displays 25,881.78
Test equipment 17,888.11
Computer & software equipment 1,904.97
Accumulated depreciation (18,955.40)
-------------
Total fixed assets $ 29,945.90
Other assets
Deposits $ 14,176.00
-------------
Total other assets $ 14,176.00
-------------
Total assets $800,033.72
===========
</TABLE>
<PAGE> 64
Telephone Warehouse, San Antonio
Balance Sheet
As of 12/31/96
Liabilities and stockholder's equity
<TABLE>
<S> <C> <C>
Current liabilities
A/P-trade $ 183,169.63
A/P-accounts 77,106.85
Intercompany A/P 243,101.99
A/P-check request subagent 1,550.00
A/P-AT&T deposits (700.00)
A/P-salaries & wages 24,666.16
A/P-customer deposits 7,615.00
A/Security & Fed W/H payable 5,124.46
FUI/SUIA payable 428.17
Telecom assessment payable (639.45)
Accrued-property taxes 3,844.00
Accrued-professional 3,052.00
Accrued-interest 18,169.37
--------------
Total current Liabilities $ 568,562.68
Long term liabilities
Note payable-shareholder $ 475,000.00
Total long term liabilities $ 475,000.00
-------------
Total liabilities $1,043,362.68
Stockholder's equity
Common stock $ 1,000.00
Requires earnings prior years (942,828.22)
Net Income (loss) 96,988.26
--------------
Total equity $ (248,478.96)
-------------
Total liabilities and equity $ 800,088.72
=============
</TABLE>
<PAGE> 65
Telephone Warehouse, San Antonio
Classification Profit & loss statement
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Total equipment sales 93995.27 944859.29 124705.00 (30709.73) 24.6- 969176.00 (24816.71) 2.6-
Total labor income 17988.75 161814.97 23115.00 (5126.25) 22.2- 151864.00 9950.97 6.6
Volume bonus income 16755.60 153210.00 22344.00 (5589.00) 25.0- 148930.00 4280.00 2.9
Features income 835.00 7200.00 494.00 341.00 69.0 6296.00 904.00 14.4
Loaner phone rental 185.00 1116.00 104.00 82.00 78.8 1056.00 60.00 5.7
Total service work .00 390.00 .00 .00 .0 .00 390.00 .0
Total freight income .00 11.00 .00 .00 .0 .00 11.00 .0
Misc. income all stores 430.19 11143.68 1072.00 (641.81) 59.9- 10000.00 1143.68 11.4
Total customer discounts (62765.23) (603262.60) (91200.00) 28434.77 31.2 (611278.00) 8015.40 1.3
Total carrier commissions 92425.00 872199.00 123120.00 (30695.00) 24.9- 846429.00 25770.00 3.0
Total carrier comm disc (16523.00) (112749.00) (16048.00) 5523.00 34.4 (116460.00) 3711.00 3.2
Carrier comm true-up (1130.90) 6544.82 631.00 (1761.00) 279.1- 6805.00 (260.18) 3.8-
Residual 20233.38 208666.35 17550.00 2683.88 15.3 215885.00 (7218.65) 3.8-
Advertising DH-DP 83664.54 174422.51 37234.00 (1569.16) 4.2- 167057.00 7365.51 4.4
Pager income all sections 59800.97 517613.96 56449.00 3351.97 5.9 311670.00 5943.96 1.2
Pager service extended 261.00 7446.90 1535.00 (1274.00) 83.0- 11247.00 (3800.10) 33.8-
Warranty 240.00 6370.00 675.00 (435.00) 64.4- 5636.00 734.00 13.0
---------- ----------- --------- ---------- ----------- ----------
Total income 264395.57 2857496.88 801780.00 (37384.33) 12.4- 2324318.00 32183.88 1.4
COST OF SALES
Total equipment use of sales 97927.68 727885.81 94150.00 3777.68 4.0 715881.00 12004.81 1.7
Use tax 6153.88 24988.48 8019.00 181.88 4.4 25145.00 (161.52) .6-
Freight paid 694.41 4864.69 889.00 255.41 75.8 8086.00 1828.69 48.8
Warranty expenses 950.75 6297.65 1252.00 (801.25) 24.1- 5852.00 445.66 7.6
Pager billing 12626.88 187449.82 11250.00 1876.79 12.2 189450.00 (2000.98) 1.4-
Pager service Telephone assess 587.80 4282.55 344.00 213.80 62.0 8566.00 716.55 20.1
Pager retention discount 2289.95 12871.68 4800.00 (3510.05) 78.1- 22012.00 (9640.87) 48.8-
Pager retention cost .00 110.00 .00 .00 .0 175.00 (65.00) 87.1-
Inventory adjustment 1405.66 18272.10 600.00 805.66 134.8 14200.00 (927.90) 6.5-
---------- ----------- --------- ---------- ----------- ----------
Total cost of sales 128502.87 980516.44 115754.00 2748.87 2.4 928817.00 1699.99 .2
---------- ----------- --------- ---------- ----------- ----------
Gross profit 147892.60 1425980.44 185026.00 (40133.20) 21.6- 1895496.00 30484.44 2.2
OPERATING EXPENSES
Expenses-Administrative 84988.96 570671.42 86447.00 (1458.67) 1.7- 574217.00 (3545.58) .6-
Expenses-Walzen 25038.98 272298.40 26066.00 (1027.02) 8.9- 274558.00 (2254.60) .8-
Expenses-Broadway 15410.76 181338.55 21764.00 (6353.24) 29.2- 192306.00 (10967.45) 5.7-
Expenses-Callaghan 26108.40 273154.17 27043.00 (934.60) 3.5- 270389.00 4765.17 1.8
Expenses-Pager dept. 2109.55 2968.64 2346.00 (236.45) 10.1- 26413.00 3265.64 12.4
---------- ----------- --------- ---------- ----------- ----------
Total expenses 158656.02 1329141.18 163666.00 (10009.98) 6.1- 1337878.00 (8736.82) .7-
Net profit (loss) (7763.22) 96839.26 22360.00 (30128.22) 134.7- 57618.00 39221.26 68.1
========== =========== ========= ========== =========== ==========
</TABLE>
<PAGE> 66
Telephone Warehouse - San Antonio
Consolidated Profit & loss statement
Administrative
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period
amount amount Amount Var-amt
<S> <C> <C> <C> <C>
Pagers 6827.81 84195.68 14629.00 (7801.69)
Cellular-digital 2899.70 7599.05 .00 2399.70
Cellular-analog 68877.96 607905.43 79337.00 (15959.04)
Cellular accessories 14424.72 165836.11 21519.00 (7094.28)
Alarms 2743.20 44052.82 5919.00 (3173.89)
Service parts 4085.88 28066.06 2724.00 1361.38
Non-commisionable labor 185.00 3897.79 506.00 (371.00)
Programming labor-pager 8277.00 67447.58 11438.00 (3161.00)
Gift certificates .00 606.85 71.00 (71.00)
Airtime certificates .00 200.00 .00 .00
Programming labor-cellular 5255.00 47749.43 6840.00 (1585.00)
Labor-misc 2815.79 21589.60 1227.00 1088.79
Labor alarms 2141.00 25028.41 8610.00 (1469.00)
Volume loans 16755.80 153210.00 22344.00 (5589.00)
Features 893.00 7200.00 494.00 341.00
Loaner phone rental 186.00 1116.00 104.00 82.00
Service work .00 390.00 .00 .00
Freight-in .00 11.00 .00 .00
Miscellaneous (845.76) 404.44 72.00 (417.77)
Disconnects recovery 773.95 10739.24 1000.00 (224.00)
Customer discount-analog (62087.48) (601804.35) (91200.00) 29112.51
Carrier comm earned-analog 91975.00 870774.00 123120.00 (31145.00)
Carrier comm debts-analog (10325.00) (112674.00) (16048.00) 5523.00
Carrier comm true-up (1180.00) 6544.82 681.00 (1761.00)
Customer discount-digital (677.77) (1977.75) .00 (677.77)
Carrier comm earned-digital 450.00 1425.00 .00 450.00
Carrier comm deacts-digital .00 (75.00) .00 .00
Residual 20288.88 208666.85 17530.00 2683.88
Advertising DU-DP 35664.84 174422.51 37234.00 (1569.19)
Pager service 39800.99 517613.96 56449.00 3351.97
Pager service extended 261.00 7446.90 1535.00 (1274.09)
Warranty 240.00 6970.00 675.00 (435.00)
---------- ----------- --------- ----------
Total income 264395.87 2856496.88 801780.00 (37384.38)
</TABLE>
<PAGE> 67
Telephone Warehouse, San Antonio
Consolidated - profit & loss statement
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pagers 40217.98 180159.43 28716.00 11501.98 40.1 166653.00 13506.43 8.1
Cellular-digital 1812.00 5738.00 .00 1812.00 .0 .00 5738.00 .0
Cellular-analog 41880.24 400877.31 51851.00 (10470.76) 20.2- 408075.00 (7197.69) 1.8-
Cellular accessories 9260.29 81791.89 7531.00 1729.29 23.0 80598.00 1193.89 1.5
Other equipment 982.80 15890.40 1248.00 (265.20) 21.3- 12642.00 2748.40 21.7
Alarms 1963.78 28872.19 2960.00 (996.27) 33.7- 28202.00 (4329.81) 15.4-
Service parts 2012.67 14247.27 1361.00 651.67 47.9 13458.00 794.27 5.9
Credit card finance charge 297.92 4808.82 409.00 (111.08) 27.2- 4983.00 (174.18) 3.5-
Airline certificates .00 500.00 74.00 (74.00) 100.0- 775.00 (275.00) 35.5-
Use tax 3150.38 24983.48 8019.00 131.38 4.4 25145.00 (161.52) .6-
Freight paid 594.41 4364.69 339.00 255.41 75.3 3036.00 1328.69 43.8
Pager service 12626.79 137449.02 11250.00 1376.79 12.2 139450.00 (2000.93) 1.4-
Pager service Telecom assess 557.20 4282.55 344.00 213.80 62.0 3566.00 716.55 20.1
Pager retention discount 1289.95 12371.63 4800.00 (3510.05) 73.1- 22012.00 (9640.37) 43.8-
Pager retention cost .00 110.00 .00 .00 .0 175.00 (65.00) 37.1-
Outside labor 950.75 6297.66 1252.00 (301.25) 24.1- 5852.00 445.66 7.6
Inventory adjustment 1405.66 13272.10 600.00 805.66 134.3 14200.00 (927.90) 6.5-
---------- ----------- --------- ---------- ----------- ----------
Total cost of sales 118502.97 980516.44 115754.00 2748.87 2.4 928817.00 16699.44 .2
---------- ----------- --------- ---------- ----------- ----------
Gross profit 1145592.80 1425980.44 186026.00 (40133.20) 21.6- 1395496.00 30484.44 2.2
</TABLE>
<PAGE> 68
Telephone Warehouse, San Antonio
Consolidated
Profit & loss statement
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating expenses
Salaries-operations admin. 6275.00 52453.88 6820.00 (545.00) 8.0- 53690.00 (1236.67) 2.3-
Salaries-store manager 9835.00 111324.70 12800.00 (2965.00) 23.2- 111800.00 (475.30) .4-
Salaries-dept. store manager 7258.98 78418.69 6870.00 388.93 5.7 75920.00 2498.69 3.3
Salaries-sales persons 16398.69 157395.78 16800.00 (461.31) 2.7- 157200.00 195.78 .1
Salaries-clerical 1033.45 1033.45 4650.00 (3616.55) 77.8- 4650.00 (3616.55) 77.8-
Salaries-service manager 4638.81 56651.95 5125.00 (491.19) 9.6- 59685.00 (3033.05) 5.1-
Salaries-installers 3014.05 36720.16 3875.00 (830.95) 21.4- 40171.00 (3450.84) 8.6-
Payroll taxes-social security 3442.68 37666.68 3568.00 (125.34) 3.5- 38170.00 (503.82) 1.3-
Payroll taxes-fed unemployment 210.27 1593.26 193.00 17.27 8.9 1655.00 (61.74) 3.7-
Payroll taxes-st unemployment (106.48) 689.88 113.00 (219.48) 194.2- 925.00 (235.92) 25.5-
Training .00 2118.15 232.00 (232.00) 100.0- 1078.00 1040.15 96.5
Advertising 69266.73 357884.67 69572.00 (305.27) .4- 358953.00 (1573.88) .4-
Alarm 118.67 1364.04 114.00 (.33) .3- 1368.00 (3.96) .3-
Auto 226.24 2838.52 242.00 (15.76) 6.5- 3063.00 (224.48) 7.3-
Bad debts 380.00 3800.00 300.00 .00 .0 3600.00 (300.00) 8.3-
Bank changes 10.00 285.50 3.00 7.00 233.3 58.00 227.50 392.2
Depreciation 929.53 6098.88 651.00 278.58 42.8 7812.00 276.88 3.5
Dues and subscriptions 180.00 1865.41 130.00 .00 .0 1088.00 277.41 25.5
Awards .00 3380.99 230.00 (250.00) 100.0- 4526.00 (1145.01) 25.8-
Travel 116.00 4012.75 100.00 16.00 16.0 2477.00 1535.75 62.0
Freight/postage billing 1029.37 13965.77 1201.00 (171.68) 14.3- 12538.00 1427.77 11.4
Insurance 625.00 7554.50 625.00 .00 .0 7527.00 27.50 .4
Insurance-workers comp 1085.75 11575.99 1264.00 (178.25) 14.1- 11768.00 (187.01) 1.6-
Personnel 786.49 6845.45 364.00 372.49 102.3 7967.00 (1121.55) 14.1-
Office 214.76 3611.52 400.00 (185.24) 46.3- 5500.00 111.52 2.0
Collection fees .00 394.89 56.00 (56.00) 100.0- 911.00 (516.11) 56.7-
Collection-ASF checks .00 (15.00) (2.00) 2.00 100.0 34.00 (49.00) 144.1-
Printing 891.81 11978.71 975.00 (283.69) 29.1- 18675.00 (1696.29) 12.4-
Survey/referral fees 123.00 5770.00 615.00 (490.00) 79.7- 4506.00 1264.00 28.1
Professional fees 64.79 8561.85 66.00 (1.05) 1.6- 8521.00 40.35 1.1
Rent 18178.22 156086.79 18139.00 34.21 .3 154908.00 1183.79 .8
Repairs and maintenance 653.62 17568.04 750.00 (91.38) 12.2- 17700.00 (131.96) .7-
Property taxes 487.90 5844.00 487.00 .00 .0 5844.00 .00 .0
Shop supplies 297.97 3411.52 282.00 15.37 5.5 2537.00 874.52 34.5
Telephone 3439.42 86149.01 2906.00 533.42 18.4 34855.00 1794.01 5.2
Utilities 1598.60 19871.54 1672.00 (163.38) 9.8- 20965.00 (1093.46) 5.2-
Computer 109.70 2478.54 247.00 (138.30) 56.0- 4681.00 (2202.46) 47.1-
Interest .00 26237.90 .00 .00 .0 26241.00 (3.10) .0-
Installation .00 1850.68 71.00 (71.00) 100.0- 876.00 974.63 111.3
Janitorial 317.99 4853.80 320.00 (2.01) .6- 3995.00 358.80 9.0
Refreshment 288.85 2160.83 255.00 (21.35) 8.4- 3165.00 (1004.17) 31.7-
Cash over and short 236.21 1019.91 .00 236.21 .0 .00 1019.91 .0
Common operating expenses 5565.00 66780.00 5565.00 .00 .0 66780.00 .00 .0
----------- ---------- --------- ---------- ----- ----------- ----------
Total operating expenses 158656.02 1329141.18 163666.00 (10009.98) 6.1- 1337878.80 (8736.82) .7-
----------- ---------- --------- ---------- ----------- ----------
Consolidated profit/(loss) (7763.22) 96839.26 22860.00 (30123.22) 134.7- 57618.00 39221.26 68.1
=========== ========== ========= ========== =========== ==========
</TABLE>
<PAGE> 69
Telephone Warehouse
Profit & loss statement
Administrative
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-ant Var-% Amount Var-ant Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income - Administrative
Miscellaneous (345.76) 412.44 72.00 (417.76) 580.2- 384.00 78.44 23.5
Disconnects recovery 775.95 10739.24 1000.00 (224.05) 22.4- 9666.00 1073.24 11.1
Residual 20285.88 208666.85 17550.00 2683.88 15.8 215885.00 (7218.65) 8.8-
Advertising CO-OP AT&T 29964.84 151262.52 37234.00 (7269.16) 19.5- 156882.00 (5069.48) 8.2-
Advertising CO-OP Vendors 5700.00 28159.99 .00 5700.00) 0 10725.00 12434.99 115.9
-------- --------- -------- -------- --------- --------
Total Income - Administrative 56828.91 894240.54 55856.00 472.91 .8 392942.00 1298.54 3-
</TABLE>
<PAGE> 70
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-ant Var-% Amount Var-ant Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses-Administrative
Inventory adjustment .00 7000.00 .00 .00 .0 7000.00 .00 .0
Salaries-operations admin. 6275.00 52458.33 6820.00 (545.00) 8.0- 58690.00 (1236.67) 2.8-
Payroll taxes-social security 484.98 5777.30 527.00 (42.07) 8.0- 5618.00 159.30 2.8
Payroll taxes-fed unemployment 26.90 124.91 29.00 (2.02) 7.0- 117.00 7.91 6.8
Payroll taxes-st unemployment (196.78) (135.05) 31.00 (227.79) 734.8- 91.00 (226.05) 248.4-
Training .00 2118.15 232.00 (232.00) 100.0- 1078.00 1040.15 96.5-
Advertising-cellular 57905.46 804817.75 59086.00 (1180.52) 2.0- 309847.00 (5029.25) 1.6-
Advertising-vehicle security 118.89 2440.24 113.00 .00 .0 1988.00 452.24 22.7
Advertising-pagers 11099.90 47155.07 10088.00 1011.30 10.0 44276.00 2879.07 6.5
Advertising-signs & displays 148.95 2971.61 285.00 (136.05) 47.7- 2847.00 124.61 4.4
Auto 199.75 2420.93 205.00 (5.25) 2.6- 2525.00 (104.07) 4.1-
Bad debt 280.00 3800.00 300.00 .00 .0 3625.00 (300.00) 8.8-
Bank charges 10.00 285.50 3.00 7.00 233.3 58.00 227.50 392.2
Dues & subscriptions 180.00 1865.41 180.00 .00 .0 1088.00 277.41 25.5
Awards .00 3880.59 250.00 (250.00) 100.0- 4526.00 (1145.01) 25.3-
Travel 116.00 4012.75 100.00 16.00 16.0 2477.00 1535.75 62.0
Postage & freight 586.00 4445.84 437.00 99.70 22.8 3765.00 680.34 18.1
Insurance 11.00 148.50 11.00 .00 .0 121.00 27.50 22.7
Insurance-workers comp. 14.72 128.07 10.00 4.72 47.2 113.00 10.07 8.9
Personnel 786.49 6788.16 364.00 372.49 102.3 7962.00 (1173.84) 14.7-
Office 51.96 2733.83 100.00 (48.02) 48.0- 1700.00 1033.33 60.8
Collection fees .00 394.89 56.00 (56.00) 100.0- 911.00 (516.11) 56.7-
Collections - NSF checks .00 (15.00) (2.00) 2.00 100.0 84.00 (49.00) 144.1-
Printing 68.87 1404.72 75.00 8.97 12.0 1525.00 (120.22) 7.9-
Surveys/professional fees 125.00 3490.00 387.00 (262.00) 67.7- 6107.00 383.00 12.3
Professional fees .00 3150.00 .00 .03 .0 3081.00 69.00 2.2
Rent 854.28 3554.08 320.00 34.23 10.7 2240.00 1314.03 58.7
Repairs & maintenance 117.32 9854.28 75.00 40.52 54.0 10075.00 (120.72) 1.2-
Telephone 864.82 4080.80 290.00 104.02 85.9 4265.00 (234.70) 5.5-
Utilities 36.87 1076.51 98.00 (41.03) 41.9- 1420.00 (346.09) 24.4-
Computer 108.70 2878.88 247.00 (138.30) 56.0- 3981.00 (1602.67) 40.3-
Interest .00 26287.90 .00 .03) .0 26241.00 (3.10) .0-
Janitorial 48.50 367.98 65.00 (16.50) 25.4- 1045.00 (477.07) 45.7-
Refreshment 172.89 942.78 150.00 22.93 15.3 2025.60 (1082.22) 58.4-
Common operating salaries 5565.30 66780.00 5565.00 .00 .0 66780.00 .00 .0
-------- --------- -------- ------- --------- ---------
Total expenses-Administrative 84988.82 577671.42 86447.00 (1458.67) 1.7- 581217.00 (3545.58) .6-
Net profit (loss) (28659.42) (183430.83) (30591.00) 1931.58 6.3 (188275.00) 4844.12 2.6
========= ========== ========= ======= ========= =========
</TABLE>
<PAGE> 71
Telephone Warehouse - San Antonio
Profit & loss statement - Walzen
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-ant Var-% Amount Var-ant Var-%
Income- Walzen
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pagers 2344.93 35401.69 5832.00 (3487.07) 59.8- 38419.00 (3017.11) 7.9-
Cellular - digital 1199.85 3599.55 .00 1199.85 .0 .00 3599.55 .0
Cellular - analog 29143.65 231179.26 28623.00 520.65 1.8 225535.00 5644.26 2.5
Cellular accessories 6938.20 73792.04 8567.00 (1628.80) 19.0- 70165.00 3627.04 5.2
Alarms 1648.63 23281.50 4194.00 (2545.37) 60.7- 28671.00 (5389,50) 18.8-
Service parts 1831.40 12368.81 1175.00 656.40 55.9 12765.00 (401.19) 3.1
Non-commissionable labor 125.00 2715.95 145.00 (20.00) 13.8- 1770.00 945.95 53.4
Programming labor-pager 3427.00 28887.00 4560.00 (1133.00) 24.8- 27720.00 1167.00 4.2
Gift certificates .00 274.40 34.00 (34.00) 100.0- 161.00 113.40 70.4
Programming labor-cellular 2265.00 18114.43 2475.00 (110.00) 4.4- 17202.00 912.43 5.3
Labor 771.95 8092.66 487.00 284.95) 58.5 4125.00 3967.66 96.2
Labor alarms 1043.50 15406.45 2558.00 (1514.50) 59.2- 15428.00 (21.55) .1-
Volume bonus 7657.29 59743.32 8085.00 (427.72) 5.3 53962.00 5781.52 10.7
Features 415.00 2411.09 158.00 257.00 162.7 2126.00 285.09 13.4
Loaner phone rental 72.00 261.09 27.00 45.00 166.7 447.00 (186.00) 41.6-
Customer discount - analog (26185.00) (281526.73) (88000.00) 4865.00 14.7 (222502.00) (9024.73) 4.1-
Carrier comm earned - analog 41800.00 335079.00 44550.00 (3250.00) 7.3- 308011.00 27068.00 8.8
Carrier comm deactivations (3200.00) (40997.00) (2448.00) (752.00) 30.7- (39806.00) (1191.00) 3.0-
Carrier comm true-up 513.00 1629.20 4.00 509.00 999.9 476.00 1133.20 228.5
Customer discount - digital (380.00) (880.00) .00 (380.00) .0- .00 (880.00) .0-
Carrier comm earned - digital 300.00 750.00 .00 300.00 .0 .00 750.00 .0
Carrier comm deacts - digital .00 (75.00) .00 .00 .0 .00 (75.00) .0-
Airline certificates .00 200.00 .00 .00 .0 67.00 133.00 198.5
Pager service - xxx 10670.55 62890.75 9120.00 1559.55 17.1 54423.00 8467.75 15.6
Warranty .00 .00 .00 .00 .0 790.00 (790.00) 100.0-
--------- ---------- --------- --------- ---------- ----------
Total Income-Walzen 30560.94 642594.77 87146.00 (5085.06) 6.0- 599975.00 42619.77 7.1
Cost of sales-Walzen
Pagers 18075.21 76002.01 11448.00 2427.21 21.2 69597.01 6405.01 9.2
Cellular - digital 906.00 2718.00 .00 906.00 .0 .00 2718.00 .0
Cellular - analog 19422.00 152406.61 18762.00 661.90 8.5 149098.00 3313.61 2.2
Cellular accessories 4841.95 35608.12 2998.00 1843.95 61.5 38932.00 1676.12 4.9
Alarms 886.29 14323.89 2097.00 (1210.71) 57.7- 15432.00 (1108.12) 7.2-
Other equipment 488.00 6718.16 587.00 (48.70) 9.1- 5861.00 1857.16 25.3-
Service parts 1000.32 6272.73 587.00 413.53 70.4 6248.00 24.73 .4
Credit card finance charges 118.65 1978.23 171.00 (52.37) 30.6- 2087.00 (118.77) 5.7-
Use tax 1409.02 9071.76 1116.00 293.80 26.8 9429.00 (357.24) 3.8-
Freight paid 313.90 1314.37 85.00 228.90 269.8 1019.00 295.87 29.0
Outside labor 165.00 990.00 245.00 (80.00) 32.7- 1318.00 (328.00) 24.9-
Airline certificates .00 212.50 30.00 (30.00) 100.0- 297.00 (84.50) 28.5-
Inventory adjustment 45.02 2468.27 200.00 (154.98) 77.5- 2400.00 63.27 2.6
--------- ---------- --------- --------- ---------- ----------
Total cost of sales-Walzen 48474.52 810079.64 38276.00 5198.52 13.6 296223.00 18856.64 4.7
--------- ---------- --------- --------- ---------- ----------
Gross profit - Walzen 86586.42 332515.18 46870.00 (10283.58) 21.9- 303752.00 28763.13 9.5
</TABLE>
<PAGE> 72
Period 12/01/96 to 12/01/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses - Walzen
Salaries- store manager 3371.00 38285.02 3200.00 171.00 5.3 36200.00 2085.02 5.8
Salaries-asst. store manager 1928.30 25739.27 2500.00 (571.40) 22.9- 26700.00 (960.73) 3.6-
Salaries-salespersons 6938.75 64487.99 6300.00 638.75 10.1 62100.00 2387.99 3.8
Salaries- clerical 143.75 145.75 1550.00 (1404.25) 90.6- 1550.00 (1404.25) 90.6-
Salaries- service manager 1977.68 22291.21 2050.00 (72.32) 3.5- 24600.00 (2308.79) 9.4-
Salaries- installers 1357.10 14523.12 1550.00 (192.90) 12.4- 18600.00 (4076.88) 21.9-
Payrol taxes-social security 1111.76 11365.56 1114.00 (2.24) .2- 11437.00 (71.44) .6-
Payroll taxes-fed unemployment 68.54 563.18 64.00 (.46) .7- 558.00 5.18 .9
Payroll taxes-st unemployment 81.69 314.65 32.00 (.31) 1.0- 301.00 13.65 4.5
Alarm 87.89 454.68 38.00 (.11) .3- 456.00 (1.32) .3-
Auto 26.49 143.89 6.00 20.49 341.5 29.00 114.89 396.2
Depreciation 411.72 1874.06 133.00 278.72 209.6 1596.00 278.06 17.4
Dues & subscriptions .00 (15.01) .00 .00 .00 .0 (15.01) .0-
Postage & freight .00 38.47 5.00 (5.00) 100.0- 60.00 (21.53) 35.9-
Insurance 206.00 2488.00 206.00 .00 .0 2433.00 .00 .0
Insurance-workers cont. 405.14 4297.78 446.00 (40.36) 9.2- 4354.00 (56.22) 1.3-
Personnel .00 57.29 .00 .00 .0 5.00 52.29 999.9
Office 60.48 1005.61 100.00 (39.52) 39.5- 1316.00 (309.39) 23.5-
Printing 211.99 8951.46 300.00 (88.01) 29.3- 4050.00 (98.54) 2.4-
Professional fees 21.55 151.55 22.0 (.35) 1.6- 154.00 (2.45) 1.6-
Rent 4736.00 56832.00 4736.00 .00 .0 56962.00 .00 .2-
Repairs & maintenance 410.77 3482.43 225.00 185.77 82.6 2616.00 866.43 33.1
Property tax 163.00 2016.00 168.00 .00 .0 2016.00 .00 .0
Shop supplies 136.12 1853.85 122.00 64.12 52.6 1074.00 281.85 26.2
Telephone 328.28 6141.30 504.00 24.23 4.3 6115.00 26.30 .4
Utilities 318.54 6569.58 544.00 (25.66) 4.7- 6888.00 (318.42) 4.6-
Commuter .00 .00 .00 .00 .0 500.00 (500.00) 100.0-
Installation 00 1120.68 31.00 (31.00) 100.0- 354.00 766.68 216.6
Janitorial 64.66 1502.66 85.00 (20.34) 28.9- 1045.00 457.66 43.8
Refreshement 10.65 712.77 83.00 (24.03) 68.7- 485.00 277.77 63.9
Cash over & short 108.66 407.10 .00 108.66 .0 .00 407.10 .0
-------- --------- -------- -------- --------- --------
Total express-Walzen 15022.88 272298.40 26066.00 (1027.02) 3.9- 274553.00 (2254.60) 8-
-------- --------- -------- -------- --------- --------
Net profit (loss) - Walzen 11347.44 60216.73 20804.00 (9256.56) 44.5- 29199.00 31017.73 106.2
======== ========= ======== ======== ========= ========
</TABLE>
<PAGE> 73
Telephone Warehouse - San Antonio
Profit & loss statement - Broadway store
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income - Broadway
Pagers 1060.43 13428.03 8086.00 (2025.5) 65.6- 18211.00 (4782.97) 26.3-
Cellular - digital 899.95 1199.85 .00 899.95 .0 .00 1199.85 .0
Cellular - analog 12162.05 149774.18 21857.00 (9694.95) 44.4- 164392.00 (14617.82) 8.9-
Cellular accessories 2075.54 37587.63 5664.00 (3588.46) 63.4- 45070.00 (7582.87) 16.7-
Alarms 883.86 6523.88 751.00 (865.64) 48.7- 10429.00 (3905.12) 87.4-
Service parts 678.69 6712.84 640.00 38.69 6.0 6678.00 34.84 .5
For-commissionable labor 10.00 1803.00 241.00 (231.00) 95.9- 2460.00 (657.00) 26.7-
Programming labor - pager 1195.00 11013.53 2413.00 (1218.00) 50.5- 18182.00 (2168.47) 16.5-
Programming labor - cellular 983.00 11460.00 1890.00 (905.00) 47.9- 12415.00 (955.00) 7.7-
Labor 428.75 6185.11 432.00 56.75 13.1 8063.00 3122.11 101.9
Labor alrams 170.00 3488.00 458.00 (288.00) 62.9- 5510.00 (2022.00) 86.7-
Volume bonus 8117.98 36274.81 6174.00 (3056.07) 49.5- 39670.00 (3395.19) 8.6-
Features 60.00 1348.10 114.00 (54.00) 47.4- 16729.00 (380.90) 22.0-
Loaner phone rental .00 403.50 38.00 (38.00) 100.0- 217.00 186.50 85.9
Miscellaneous .00 (8.00) .00 .00 .0 .00 (8.00) .0-
Customer discount - analog (15999.08) (146813.89) (23200.00) 13200.92 52.4 (162743.00) 15929.61 9.8
Carrier comm earned - analog 17150.00 209558.00 34020.00 (16870.00) 47.6- 224185.00 (14582.00) 6.5-
Carrier comm deactivations (1675.00) (26680.00) (3308.00) 2133.00 56.0 (31268.00) 4588.00 14.7
Carrier comm true-up (569.30) 4095.93 434.00 (993.00) 228.8- 3941.00 144.93 3.7
Customer discount - digital (160.00) (850.00) .00 (150.00) .0- .00 (850.00) .0-
Carrier comm earned - digital 150.00 300.00 .00 150.00 .0 .00 380.00 .0-
Pager service - 1st 3 mths 4584.00 26027.70 4026.00 (291.80) 6.0- 25465.00 562.70 2.2
Service parts .00 390.00 .00 .00 .0 .00 390.00 .0
Warranty 240.00 6870.00 700.00 (460.00) 65.7- 4357.00 1813.00 39.8
--------- --------- ---------- ----------- ---------- -----------
Total Income - Broadway 30479.54 860027.70 54780.00 (24250.16) 44.8- 387113.00 (27085.30) 7.0-
Cost of sales - Broadway
Pagers 7439.41 33314.78 6038.00 1331.41 22.3 33419.00 (104.22) .3-
Cellular - digital 802.00 906.00 .00 302.00 .0 .00 906.00 .0
Cellular - analog 7733.71 99609.56 14327.00 (6593.29) 46.0- 108506.00 (8896.44) 8.2-
Cellular accessories 1834.30 19225.95 1982.00 (647.20) 32.7- 20602.00 (1376.05) 6.7-
Alarms 217.52 3494.89 376.00 (158.48) 42.1- 3816.00 (1821.61) 34.3-
Other equipment 57.63 3127.79 286.00 (228.37) 79.9- 3106.00 21.79 .7
Service paarts 838.14 3267.85 320.00 33.24 10.4 3272.00 (4.15) .1-
Credit corp Finance charge 44.18 1070.80 98.00 (53.77) 54.9- 1348.00 (272.20) 20.3-
Income tax 653.37 6431.21 826.00 (172.13) 20.8- 6652.00 (220.79) 3.3-
Freight paid 103.25 2173.64 200.00 (96.75) 48.4- 1267.00 906.64 71.6
Outside labor 113.00 848.00 42.00 71.00 169.0 486.00 (138.00) 28.4-
Airline certificates .00 162.50 23.00 (23.00) 100.0- 293.00 (130.50) 44.5-
Inventory adjustment 366.71 497.34 200.00 166.71 83.4 2400.00 (1902.66) 79.3-
--------- --------- ---------- ----------- ---------- -----------
Total cost of sales - Broadway 18719.37 173629.81 24738.00 (6018.63) 24.3- 186662.00 (13032.19) 7.0-
--------- --------- ---------- ----------- ---------- -----------
Gross profit - Broadway 11760.47 186897.89 29992.00 (18231.53) 60.8- 200451.00 (14053.11) 7.0-
</TABLE>
<PAGE> 74
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-perid Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses - Broadway
Salaries- store manager 3139.50 34008.55 6400.00 (3260.50) 50.7- 39400.00 (5391.45) 13.7-
Salaries- asst. store manager 1800.00 22036.15 1870.00 (70.00) 3.7- 22220.00 (183.85) .8-
Salaries- salespersons 3401.65 39773.89 4200.00 (798.35) 19.0- 43300.00 (4026.11) 9.2-
Salaries- clerical 449.35 449.35 1550.00 (1100.65) 71.0- 1550.00 (1100.65) 71.0-
Salaries- service manager 921.47 12349.65 1025.00 (103.53) 10.1- 10485.00 1864.65 17.8
Salaries- installers 850.95 6091.70 775.00 (424.05) 54.7- 5283.00 808.70 15.3
Payroll taxes-social security 642.53 8379.69 722.00 (79.47) 11.0- 9079.00 (699.31) 7.7-
Payroll taxes-fed unemployment 41.41 418.72 47.00 (5.59) 11.9- 430.00 (61.28) 12.8-
Payroll taxes-st unemployment 21.09 225.83 24.00 (2.91) 12.1- 251.00 (25.17) 10.0-
Alarm 37.89 454.68 38.00 (.11) .3- 456.00 (1.32) .3-
Auto .00 225.76 25.00 (25.00) 100.00- 277.00 (51.24) 18.5-
Depreciation 102.92 1235.04 103.00 (.08) .1- 1236.00 (.96) .1-
Postage & Freight .00 25.19 3.00 (3.00) 100.0- 12.0 13.19 109.9
Insurance 193.00 2394.00 198.00 .00 .0 2394.00 .00 .0
Insurance-owners comp 250.94 9054.52 382.00 (131.06) 39.3- 3195.00 (140.48) 4.4-
Office 37.40 871.59 100.00 (62.60) 62.6- 1225.00 (353.91) 28.9-
Printing 202.81 3014.30 300.00 (97.39) 32.5- 4050.00 (1035.20) 25.6-
Professional fees 21.65 151.56 22.00 (.85) 1.6- 154.00 (2.45) 1.6-
Part 2639.68 31679.76 2640.00 (.02) .0- 31680.00 (.24) .0-
Repairs & Maintenance 8.03 1211.82 225.0 (221.97) 98.7- 1794.00 (582.18) 32.5-
Property tax 134.06 1608.00 134.00 .00 .0 1608.00 .00 .0
Shop supplies 39.66 1004.95 81.00 (21.37) 26.4)- 728.00 276.95 33.0
Telephone 335.88 3895.29 318.00 37.83 11.9 3714.00 181.29 4.9
Utilities 421.68 5221.71 442.00 (20.37) 4.6- 5360.00 (138.29) 2.6-
Computer .00 100.21 .00 .00 .0 200.00 (99.79) 49.9-
Installation .00 28.95 20.00 (20.00) 100.0- 275.00 (246.05) 89.5-
Janitorial 124.00 1064.26 65.00 39.83 46.9 1025.00 39.26 3.3
Retirement 47.78 326.25 35.00 12.73 36.5 375.00 (48.75) 13.0-
Cash over & short 4.64 37.19 .00 4.64 .0 .00 37.19 .0
---------- ---------- ----------- ----------- ---------- ----------
Total expenses - Broadway 15420.789 181338.55 21764.00 (6553.24) 29.2- 192306.00 (10967.45) 5.7-
---------- ---------- ----------- ----------- ---------- ----------
Net profit (loss) - Broadway (8550.29) 5059.84 8228.00 (11876.29) 144.4- 8145.00 (3085.66) 37.9-
========== ========== =========== =========== ========== ==========
</TABLE>
<PAGE> 75
Telephone Warehouse -- San Antonio
Profit & loss statement - Callaghan Store
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income - Callaghan
Pagers 3421.93 35365.76 5711.00 (2289.07) 40.1- 34796.00 569.76 1.6
Cellular - digital 799.90 2799.65 .00 799.90 .0 .00 2799.65 .0
Cellular - analog 22072.26 226951.99 28857.00 (6784.74) 23.5- 228244.00 (1292.01) .6-
Cellular accessories 5410.98 54506.44 7288.00 (1877.02) 25.8- 57183.00 (2681.56) 4.7-
Alarms 711.21 14246.94 974.00 (262.79) 27.0- 14790.00 (543.06) 3.7-
Service parts 1575.29 8989.41 909.00 666.29 73.3 7917.00 1072.41) 13.5
Non-commisionable labor .00 1378.84 120.00 (120.00) 100.0- 1237.00 91.84) 7.1
Programming labor-pager 3455.00 27547.00 4465.00 (810.00) 18.1- 25094.00 2453.00 9.3
Gift certificates .00 332.45 37.00 (37.00) 100.0- 161.00 171.45 106.5
Programming labor-cellular 1905.00 18175.90 2475.00 (570.00) 23.0- 17269.00 906.00 5.2
Labor 1055.00 311.93 308.00 747.05 242.5 3244.00 4067.83 125.4
Labor alarms 927.35 6133.96 594.00 333.50 56.1 7612.00 (1478.04) 19.4-
Volume bonus 5979.79 57191.67 8085.00 (2105.21) 26.0- 55298.00 1893.67 3.4
Features 260.00 3440.81 222.00 138.00 62.2 2441.00 999.81 41.0
Corner Store rental 114.00 451.50 39.00 75.00 192.8 392.00 59.50 15.2
Freight - in .00 11.00 .00 .00 .0 .00 11.00 .0
Customer discount - analog (22952.40) (223044.73) (33000.00) 11046.60 33.5 (226033.88 2988.27 1.3
Carrier comm earned - analog 38325.50 326142.00 44550.00 (11025.00) 24.7- 314288.00 11859.00 3.8
Carrier comm deactivations (5650.99) (44997.00) (9792.00) 4142.00 42.3 (45886.00 389.00 .9
Carrier comm true-up (1084.00) 829.69) 193.00 (1277.00) 661.7- 2368.00 (1538.31) 65.0-
Customer discount - digital (147.70) (647.75) .00 (147.75) .0- .00 (647.75) .0-
Carrier comm earned - digital .00 375.00 .00 .00 .0 .00 375.00 .0
Pager service - net & amts 12554.00 55971.85 3930.00 3624.00 40.6 48589.00 7882.85 15.2-
Expenses .00 .00 .00 .00 .0 55.00 (55.00) 100.0-
---------- ----------- --------- ---------- ----------- ----------
Total income - Callaghan 35251.73 579463.31 70965.00 (5733.24) 8.1- 47181.00 29854.81 5.4
Cost of sales - Callaghan
Pagers 18903.00 70342.64 11210.00 7693.36 68.6 63637.00 7205.64 11.3
Cellular - digital 604.00 2114.00 .00 604.00 .0 .00 2114.00 .0
Cellular - analog 14222.63 148861.14 18762.00 (4539.37) 24.2- 150476.00 (1614.86) 1.1-
Cellular accessories 3888.34 26937.82 2351.00 532.54 20.9 26064.00 893.82 3.4
Alarms 859.92 6053.92 487.00 372.92 76.6 7454.00 (1400.08) 18.6-
Other equipment 486.97 5544.45 425.00 11.87 2.8 4175.80 1369.45 32.8
Service parts 659.91 4706.69 454.00 204.91 45.1- 8933.00 773.69 19.7
Credit card finance charge 185.96 1759.79 140.00 (4.94) 3.5- 1543.00 216.79 14.1
Use tax 1036.72 9480.51 1077.00 9.71 .9 9064.00 416.51 4.6
Freight paid 177.26 876.68 54.00 123.26 228.8 750.00 126.68 16.9
Outside labor .00 559.50 654.00 (654.00) 100.0- 1786.00 (1226.50) 68.7-
Airfare certificates .00 125.00 21.00 (21.00) 100.0- 185.00 (60.00) 32.4-
Inventory adjustment 998.98 3311.49 200.00 793.93 397.0 2400.00 911.49 38.0
---------- ----------- --------- ---------- ----------- ----------
Total cost of sales-Gallaghan 41162.19 281193.63 36035.00 5127.19) 14.2 271467.00 9726.63 3.6
---------- ----------- --------- ---------- ----------- ----------
Gross profit-Gallaghan 24069.37 298269.63 34930.00 (10860.43) 31.1- 278142.00 20127.68 7.2
</TABLE>
<PAGE> 76
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses - Callaghan
Salaries- store manager 8824.70 59031.13 3200.00 124.50 8.9 86200.00 2831.18 7.8
Salaries- asst. store manager 8530.66 80648.27 2500.00 1030.33 41.2 27000.00 3643.27 13.5
Salaries- salespersons 5998.29 58183.90 6300.00 (301.71) 4.8- 51300.00 1833.90 3.6
Salaries- clerical 486.85 438.35 1550.00 (1111.65) 71.7- 1550.00 (1111.65) 71.7-
Salaries- service manager 1784.66 22011.09 2050.00 (315.34) 15.4- 24600.00 (2588.91) 10.5-
Salaries- installers 1886.00 16105.84 1550.00 (214.00) 18.8- 16288.00 (182.66) 1.1-
Payroll taxes-social security 1296.44 12144.13 1205.00 (1.56) .1- 12036.00 108.13 .9
Payroll taxes-fed unemployment 78.94 436.43 53.00 25.34 47.8 500.00 (13.55) 2.7-
Payroll taxes-st unemployment 87.56 288.65 26.00 11.53 44.8 282.00 1.65 .6
Alarm 97.85 434.63 38.00 (.11) .3- 456.00 (1.82) .3-
Auto .00 47.94 6.00 (6.00) 100.0- 282.00 (184.06) 79.3-
Depreciation 414.94 4979.28 415.00 (.06) .0- 4980.00 (.72) .0-
Dues & subscriptions .00 15.01 .00 .00 .0 .00 15.01 .0
Postage & freight .00 47.08 6.00 (6.00) 100.0- 26.00 21.08 81.1
Insurance 199.80 2408.00 199.00 .00 .0 2408.00 .00 .0
Insurance-workers comp 414.96 4100.62 426.00 (11.05) 2.6- 4101.00 (.38) .0-
Office 64.90 1001.49 100.00 (35.10) 35.1- 1260.00 (258.51) 20.5-
Printing 192.74 8834.01 300.00 (107.26) 35.8- 4058.00 (695.99) 17.2-
Professional fees 11.63 108.15 22.00 (.35) 1.6- 182.00 (23.75) 18.0-
Rent 3448.44 64021.00 5443.00 .00 .0 64021.00 .00 .0
Repairs & maintenance 129.20 2919.51 225.00 (95.70) 42.5- 3215.00 (295.49) 9.2-
Property tax 183.44 2220.00 185.00 .00 .0 2220.00 .00 .0
Shop supplies 51.12 1851.22 79.00 (27.88) 34.7- 735.00 316.22 43.0
Telephone 535.41 4467.88 437.00 118.41 27.1 4043.00 424.83 10.5
Utilities 511.46 7096.84 588.00 (76.32) 13.6- 7297.00 (290.66) 4.0-
Installation .92 701.80 20.00 (20.00) 100.0- 247.00 454.08 183.8
Janitorial 50.64 1218.95 85.00 (5.00) 5.9- 880.00 338.95 38.5
Refreshment 1.97 179.08 85.00 (33.03) 94.4- 880.00 (150.97) 45.7-
Cash over & short 122.21 575.62 .00 122.91 8 .00 575.62 .0
----------- ------------ -------- --------- -------- --------
Total express-Callaghan 16168.14 275154.17 27048.00 (934.60) 8.5- 270389.00 4765.17 1.8
---------- ------------ -------- -------- --------- --------
Net profit (loss) - Callaghan (2088.02) 23115.51 7887.00 (9925.83) 125.9- 7753.00 15362.51 198.1
========== ============ ======== ======== ======== ========
</TABLE>
<PAGE> 77
Telephone Warehouse - San Antonio
Profit & loss statement
Pager Department
Period 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period
amount amount Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C>
Income - Pager dept.
Pager billing 32033.12 372723.66 33573.00 (1539.78) 4.6-
Pager service - extended 261.00 7446.90 1535.00 (1274.00) 33.0-
Warranty .00 .00 (25.00) 25.00 100.0
-------- --------- -------- --------
Total income - Pager dept. 32294.12 380170.56 35083.00 (2788.78) 7.9-
Cost of sales - Pager dept.
Pager service 22626.79 187449.02 11230.00 1376.79 12.2
Pager extention discount 1289.95 12371.63 4800.00 (8510.85) 78.1-
Pager extention cost .00 110.96 .00 .00 .0
Pager service Telecom scase 957.38 4282.55 344.00 213.50 62.0
Inside Light 672.55 4400.16 311.00 361.75 116.3
-------- --------- -------- --------
Total cost of sales-Pager dept. 15146.70 158613.36 16705.00 (1558.21) 9.3-
-------- --------- -------- --------
Gross profit - Pager dept. 17247.48 221387.20 19378.00 (1230.57) 4.7-
Expense - Pager dept.
Billing-pager dept. 492.47 9409.85 750.00 (257.33) 34.3-
Clearance 11.80 121.99 11.00 .00 .0
Printing .98 258.66 .00 .00 .0
Current/Referral Pace .98 2280.33 228.00 (228.00) 100.0-
Telephone 1607.68 17614.29 1857.00 248.88 18.3
-------- --------- -------- --------
Total expenses - Pager dept. 2109.33 29678.64 2346.00 (236.45) 10.1-
-------- --------- -------- --------
Net profit (Loss) - Pager dept. 15037.33 191873.56 16032.00 (994.12) 6.2-
======== ========= ======== ========
<CAPTION>
Budget-year-to-date
Amount Var-amt Var-%
<S> <C> <C> <C>
Income - Pager dept.
Pager billing 383193.00 (10469.34) 2.7-
Pager service - extended 11247.00 (3800.10) 33.8-
Warranty 234.00 (234.00) 100.0-
--------- ---------
Total income - Pager dept. 394674.00 (14303.44) 3.7-
Cost of sales - Pager dept.
Pager service 139450.00 (2000.98) 1.4-
Pager extention discount 22012.00 (9640.37) 43.8-
Pager extention cost 175.00 (65.00) 37.1-
Pager service Telecom scase 3566.00 716.55 20.1
Inside Light 2262.00 2138.16 94.3
--------- ---------
Total cost of sales-Pager dept. 167465.00 (8851.64) 5.3-
--------- ---------
Gross profit - Pager dept. 227209.00 (5651.80) 2.5-
Expense - Pager dept.
Billing-pager dept. 3675.00 734.69 3.5
Clearance 121.00 .00 .0
Printing .00 253.66 .0
Current/Referral Pace 1599.00 331.00 63.0
Telephone 16213.00 1396.29 8.6
--------- ---------
Total expenses - Pager dept. 26413.00 3265.64 12.4
--------- ---------
Net profit (Loss) - Pager dept. 200796.00 (8917.44) 4.4-
========= =========
</TABLE>
<PAGE> 78
Telephone Warehouse - San Antonio
Profit & loss statement
Period: 12/01/96 to 12/31/96
<TABLE>
<CAPTION>
Reporting-prd Year-to-date Budget-reporting-period Budget-year-to-date
amount amount Amount Var-amt Var-% Amount Var-amt Var-%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net profit loss, all stores 8763.00 96889.26 22360.00 (30123.22) 134.7- 57618.00 39221.26 63.1
======= ======== ======== ======== ======== ========
</TABLE>
<PAGE> 79
Schedule 2.12 - Contracts
1. Credit Agreement, dated as of December 31, 1996, amount HIG
Cellular Acquisition Corporation, HIG Cellular Acquisition Corporation II, Texas
Cellular Partner, L.P., the Lenders referred to therein and NationsCredit
Commercial Corporation, and certain documents executed in connection with the
Credit Agreement, including, but not limited to, the Security Agreement, the
Holdings Pledge Agreement and the Guaranty Agreement
2. TWI has guaranteed leases for
5315 E. Bannister Road, Kansas City, MO
9497 W. 75th Street, Overland Park, KS
3. See attached schedule of leases
4. Carrier Contracts with:
a) AT&T Wireless
b) AT&T Wireless - San Antonio
c) CelularOne
d) Parkway Paging
e) Page Net - Kansas
f) McCaw Communications
g) Page Net - DFW
5. None of the companies has a contract for the purchase of a
specific amount of inventory over a long period of time. However, we do issue
purchase orders for product to be delivered over the next 60 days.
6. Employment Agreement, dated as of December 31, 1996, between
Ronald L. Koonsman and HIG Cellular Acquisition Corporation.
7. Consulting Agreement, dated as of December 31, 1996, between HIG
Capital Management, Inc. and Telephone Warehouse, Inc.
8. Subordinated Note, dated as of December 31, 1996, by Texas
Cellular Partners, L.P. in favor of Mr. Ronald L. Koonsman (guaranteed by TWI
and NCI).
<PAGE> 80
SCHEDULE 2.14(b) LEASES
Telephone Warehouse
Rental Information (North Texas Locations)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DECEMBER 1996 Lease Annual Written Co
Rental Payment Expiration Rental for Stock
Store Address Payee and Location Date Payment Transfers
==============================================================================================================================
Administrative MFM Realty Ltd $35,592.00 Yes
Sales & Mktg 1201 Third Ave # 1480 $37,596.00
2436 E Randol Mill Seattle, WA 96101 3/96 $38,868.00
==============================================================================================================================
(NCI)
Operations MFM Realty Ltd $69,909.00
2400 E. Randal 1201 Third Ave # 1480 $74,206.56 Yes
Seattle, WA 98101 $76,795.56
206-623-2700 12/99 $85,016.16
==============================================================================================================================
Administrative PIE VI $9,480.00
(TRAINING & STORAGE) Teel Enterprises, Inc. No
712 N Watson 9900 N Central Expressway, Ste 500
214-363-9184
==============================================================================================================================
# 100 JOSEY LBJ/Josey Lane Joint Venture 1/31/99 $56,734.80
3102 Maple Ave., L.B. 38 $58,484.88 Yes
Dallas, TX 75201 $60,234.84
214-954-0300
==============================================================================================================================
#200 FT. WORTH Mike Friedman 9/95 $37,813.06
1600 Two Lincoln Center 09/30/98 $38,400.00 No
5420 LBJ Freeway
Dallas, TX 75240
214/748-9171
(2) Upon periodic invoicing by
the Landlord, the monthly rent
may change and will include pass-
through of taxes and insurance.
==============================================================================================================================
#300 PLANO Mrs. Mary Moody 8/95 $38,400.00
4345 Manning Lane 8/98 $42,000.00 No
Dallas, TX 75220
(3) Tenant is to maintain insur-
ance coverage on the property.
The lease is silent regarding
taxes.
==============================================================================================================================
#400 DUNCANVILLE Red Hill Associates 12/95 $28,464.00
14001 N. Dallas Pkwy, Ste 8900 12/97 $46,042.20 Yes
Dallas, TX 75240
Attn: Ms Traci McFadden
214/960-8060
Charges for CAM, insurance and
Taxes subject to adjustment by
Landlord.
==============================================================================================================================
Market East RPF III
#500 MESQUITE Madison Marquette Realty 9/98 $50,652.48 Yes
P O Box 200156
Dallas, TX 75320-0156
214/613-6350
</TABLE>
<PAGE> 81
SCHEDULE 2.14(b) LEASES
Telephone Warehouse
Rental Information (North Texas Locations)
<TABLE>
<CAPTION>
DECEMBER 1996 Lease Annual Written Co
Rental Payment Expiration Lease for Transfer
Store Address Payee and Location Date Pmts of Stock
==============================================================================================================================
<S> <C> <C> <C> <C>
CENTRAL Daniel Morguioff 09/30/97 $30,000.00 No
11440 N. Central Expressway
Dallas, TX 75243
214-368-1359
Tenant pays all insurance & taxes, by
separate payment
==============================================================================================================================
ARLINGTON Six Flags Joint Venture $42,430.06
17400 Dallas Pkwy, Ste 216 $43,030.08 Yes
Dallas, TX 75287 $43,630.08
214-407-9067 $44,230.08
12/99 $44,830.08
==============================================================================================================================
IRVING National Cellular $54,000.00 No
2400 E. Randol Mill
Arlington, TX 76011
==============================================================================================================================
HULEN Hulen Park Associates
PO Box 782257 $53,460.00
Wichita, KS 67278 8/99 $57,060.00 Yes
The $555.00 amount is estimate
for CAM insurance, and taxes
for the first year of the lease.
The amount is subject to change
by the landlord.
==============================================================================================================================
ARLINGTON Wimbledon Court 11/96 $39,275.88
6500 West Freeway, Ste. #900 11/99 $45,347.88 Yes
Ft. Worth, TX 76116
The tenant will pay its share
of CAM, insurance, and taxes,
included in the monthly payment.
==============================================================================================================================
HILLS Richland Square Shopping Center $22,374.96
10/99 $23,625.00 Yes
Attn: Danny Wilkerson
110 W. 7th, Ste. #1100
Ft. Worth, TX 76102
The tenant will pay its share
of CAM, insurance, and taxes,
included in the monthly payment.
==============================================================================================================================
MOCERICH VALLEY VIEW Mocerich Valley View Ltd. Partnership 1/31/96 $54,000.00 Yes
c/o Valley View Center
2040 Valley View Center
Dallas, TX 75240
==============================================================================================================================
GROVE FIELD TMPC Realty Services Gr. 4/97 $42,720.00 Yes
2741 S Baltline Rd #106
Carroltton, TX 75006
</TABLE>
<PAGE> 82
SCHEDULE 2.14(b) LEASES
TELEPHONE WAREHOUSE
RENTAL INFORMATION (SAN ANTONIO LOCATIONS)
<TABLE>
<CAPTION>
DECEMBER 1996
- -------------
Lease ANNUAL Written Consent
RENTAL PAYMENT Expiration RENTAL for Stock
STORE ADDRESS PAYEE AND LOCATION Date PMTS Transfer
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
#210 WALZEM Windsor Place Shopping Center 3/97 $56,832.00 Yes
c/o Meridian Management Group
301 Howard St. Ste 1320
San Francisco, CA 94105
(1) Tenant will pay its proportionate
share of shopping center insurance
and taxes upon invoicing by the
Landlord. Final 36 months of lease
term begins 7-1-94
- ------------------------------------------------------
#220 BROADWAY Subiaco, Inc. 2/99 $31,679.76 Yes
115 Broadway, First Floor
San Antonio, TX 78205-1903
(2) The $254.98 of "CAM" also includes
tenants projected share of taxes and
insurance. The lease provides for
yearly reconciliation and reprojection
of monthly CAM deposits.
- ------------------------------------------------------
#230 CALLAGHAN 6100 CALLAGHAN ROAD, INC. $59,100.00
7401 WURZBACH $62,208.00
SAN ANTONIO, TX 78229 $65,316.00 Yes
5/98 $68,424.00
(3) The lease is silent regarding
CAM. The tenant agrees to pay its
proportionate share of insurance
and taxes as they become due and
are invoiced by the Landlord.
</TABLE>
<PAGE> 83
SCHEDULE 2.14(b) LEASES
Telephone Warehouse
Rental Information (Kansas City)
December 1996
<TABLE>
<CAPTION>
Lease Annual Written Consent
Expiration Rental for Stock
Payee & Address Date Payments Transfer
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
#310 Bannister Square DOM Company 2/00 $33,000.00 Yes
A Tier of MD Management $36,086.40
5201 Johnson Dr. #450 $37,586.40
Mission, KS 66205 $40,586.40
913-831-3020
- ------------------------------------------------------
#320 Independence Square Kessinger/Hunter & Co. Inc. 7/00 $27,834.12 Yes
2600 Grand Ave., Ste 700 $30,334.08
Kansas City, MO 64108 $32,834.04
816-842-2690
*CAM includes trash removal
- ------------------------------------------------------
#330 Overland Park Meg Associates 5/98 $50,000.04 Yes
c/o Jack Fingersh
Lewis, Rice & Fingersh
1010 Walnut, Ste 500
Kansas City, MO 64106
- ------------------------------------------------------
#340 Gladstone McCaffrey-McIntyre 9/98 $26,949.60 Yes
Investments
9627 W. 87th Street
Overland Park, KS 66212
</TABLE>
<PAGE> 84
Schedule 2.13 - Title and Related Matters
The following is a list of UCC filings for TWI and NCI:
<TABLE>
<CAPTION>
Number Jurisdiction Debtor Date Filed Secured Party
------ ------------ ------ ---------- -------------
<S> <C> <C> <C> <C>
92154494 Florida NCI Aug. 5, 1992 Matsushita
8700107681 Texas NCI Apr. 20, 1987 Matsushita
8800121853 Texas NCI May 20, 1988 Matsushita
8900105914 Texas NCI May 8, 1989 Mitsubsishi
9200026629 Texas NCI Feb. 11, 1992 Pioneer Elec.
9500123892 Texas NCI June 26, 1995 Mitsubishi
9600137662 Texas NCI July 12, 1996 Sony Elec.
9200015344 Texas TWI Jan. 24, 1992 MetroCel
9200026629 Texas TWI Feb. 11, 1992 Pioneer
9400009278 Texas TWI Jan. 14, 1994 Wimbledon Ct
1782766 Indiana NCI May 20, 1992 Panasonic
Communications
and
Systems Company
9600143463 Texas TWSA July 22, 1996 ACC/McCaw
Cellular of
San Antonio
</TABLE>
In addition, numerous UCC's were filed by NationsCredit Commercial Corporation
in connection with the Credit Agreement with NationsCredit. These UCC's covered
all accounts, chattel paper, contract rights, general intangibles, inventory,
equipment and documents now owned by hereafter acquired by both TWI and NCI.
NationsCredit also recorded a Deed of Trust, Assignment, Assignment of Leases
and Rents, Security Agreement and Fixture Filing, dated as of December 31, 1996,
covering land owned by National Cellular, Incorporated in Irving, Texas.
<PAGE> 85
Schedule S-4
Carrier contracts - LA Cellular Distribution Agreement with Lets Talk Cellular
of America, Inc.
Retail representative agreement between BellSouth Cellular National Marketing,
Inc. and Let's Talk Cellular of America, Inc. dated July 20, 1995
Authorized agency agreement for cellular radio service between Bell Atlantic
Mobile Systems of Washington, Inc., Bell Atlantic Mobile Systems of Baltimore,
Inc. and Let's Talk Cellular of America, Inc. dated January 6, 1995 - Amended
effective 11/1/96
Agency agreement between Cellular Telephone Company and Let's Talk Cellular of
America, Inc. dated December 30, 1993 - Last Amendment dated October 2, 1996
Kiosk staffing agreement with AT&T dated June 1, 1996
Kiosk staffing agreement with AT&T Wireless of Colorado, Inc. ("ATWS") and
I.TC. Kiosk Management Corporation dated September 12, 1996
Sales dealer agreement between (PR Services, Inc. a/k/a Cellular One and Let's
Talk Cellular of America, Inc. dated January 24, 1997
Sales representation agreement between Los Angeles Cellular Telephone Company
and Let's Talk Cellular of America dated January 22, 1997
General purchase agreement between BellSouth Mobility Inc. and Let's Talk
Cellular, Inc. dated July 31, 1991
Retail product distribution agreement between Prime Co. Personal
Communications. LP and Let's Talk Cellular of America, Inc.
Assignment assumption and consent agreement between Airtouch Cellular of
Georgia.
("Airtouch") and Let's Talk Cellular of America, Inc. dated August 30, 1996
Memorandum of Understanding between Omnipoint and Let's Talk Cellular of
America, Inc. Cellular One PR Paging
Universal
Sprint PCS sales agreement with Let's Talk Cellular of America, Inc.
Credit facility agreements with Republic National Bank dated September 5, 1995:
- - Letter agreement
- - Master promissory note
- - Term note I
- - Security agreement
Credit facility agreements with Republic National Bank dated December 4, 1995:
- - Amendment to letter agreement ("First Amendment")
- - Renewal note
- - Incremental note
- - Combined note
Consent letter from Republic National Bank dated June 27, 1996 ("Second
Amendment")
Consent letter from Republic National Bank dated July 29, 1996 ("Consent
Letter")
Credit facility agreements with Republic National Bank dated September 3, 1996:
- - Amendment to letter agreement ("Third Amendment")
- - Term not II
<PAGE> 86
Schedule 3.7
------------
Complaint filed by Jay Wasserman-March 1996 Case #96-17295-CA-01(09)
Judgment relative to the Westchester Mall, White Plains, NY-September 1995
(filed in City Court of White Plains, County of Westchester, State of New York
Index No. SP5542/95)
Workers' Compensation Claims Pending-
- -Four reports of injury filed in NY all relative to the Roosevelt Field Mall
store
<PAGE> 87
SCHEDULE 3.8
U.S. Equal Employment Opportunity Commission charge #100960012 (9/24/95)
FLSA Self-Audit Letter of Request (3/25/97)
<PAGE> 88
Schedule 3.9
Carrier contracts-
Retail representative agreement between BellSouth Cellular National Marketing,
Inc. and Lets Talk Cellular of America, Inc. dated July 20, 1995
Authorized agency agreement for cellular radio service between Bell Atlantic
Mobile Systems of Washington, Inc., Bell Atlantic Mobile Systems of Baltimore,
Inc. and Let's Talk Cellular of America, Inc. dated January 6, 1995 - Amended
effective 11/1/96
Agency agreement between Cellular Telephone Company and Let's Talk Cellular of
America, Inc. dated December 30, 1993 - Last Amendment dated October 2, 1996
Kiosk staffing agreement with AT&T dated June 1, 1996
Kiosk staffing agreement with AT&T Wireless of Colorado, Inc. ("ATWS") and LTC
Kiosk Management Corporation dated September 12, 1996
Sales dealer agreement between CCPR Services, Inc. a/k/a Cellular One and Let's
Talk Cellular of America, Inc. dated January 24, 1997
Sales representation agreement between Los Angeles Cellular Telephone Company
and Let's Talk Cellular of America dated January 22, 1997
General purchase agreement between BellSouth Mobility Inc. and Let's Talk
Cellular of America dated July 31, 1991
Retail product distribution agreement between PrimeCo. Personal Communications,
LP and Let's Talk Cellular of America, Inc.
Assignment, assumption and consent agreement between Airtouch Cellular of
Georgia, ("Airtouch") and Let's Talk Cellular of America, Inc. date August 30,
1996
Memorandum of Understanding between Omnipoint and Let's Talk Cellular of
America, Inc.
Cellular One PR Paging
Universal
Vendor contracts-
Dealer contract agreement between Mobile Security Communications, Inc. and Lets'
Talk Cellular of America, Inc. dated January 31, 1997
Reseller agreement between Pagemart, Inc. and Let's Talk Cellular of America,
Inc. dated October 6, 1995.
Sales agent program agreement between Camotel, Inc. and Let's Talk Cellular of
America, Inc. dated
Motorola (to confirm)
Sony (to confirm)
Credit facility agreements Republic National Bank (see Schedule 3.4)
Capital lease agreement with Panasonic Communications (corporate office
telephone system)
Capital lease agreements with Citicorp Leasing (eight stores point-of-sales
systems)
Capital lease agreement with Minolta Business Systems (one copier)
Capital lease agreements with Heritage Financial Services (two stores
point-of-slaes systems)
<PAGE> 89
Schedule 3.9(cont'd)
Insurance policies -
Coverage Carrier
- --------
Property Atlantic Mutual Insurance Companies
General liability Atlantic Mutual Insurance Companies
Automobile Atlantic Mutual Insurance Companies
Inland Marine Atlantic Mutual Insurance Companies
Excess umbrellas liability Atlantic Mutual Insurance Companies
Workers' compensation -
All states except PR Firemen's Fund Insurance Co.
Puerto Rico Puerto Rico State Insurance Fund Corporation
Stock purchase agreement with Al Sorensen - October 1994
First amendment to stock purchase agreement with Al Sorensen - May 1996
Consulting agreement with Al Sorensen - October 1994
First amendment to consulting agreement with Al Sorensen - May 1996
Series A Preferred Stock Purchase Agreement dated June 25, 1996 between Let's
Talk Cellular of America, Inc. and HIG Fund V. Inc.
Shareholders Agreement dated June 25, 1996
Redemption Agreement dated June 25, 1996
Employment Agreement with Nick Molina, dated June 25, 1996
Employment Agreement with Brett Bencridge dated June 25, 1996
Employment agreement with Anne Gozlan - May 1995
Amendment to Employment Agreement with Anne Gozlan dated June 25, 1996
Consulting Agreement with HIG Capital Management dated June 25, 1996
Renewal Promissory Note with Nick Molina dated June 25, 1996
Renewal Promissory Note with Brett Beveridge dated June 25, 1996
Escrow Agreement dated June 25, 1996
Asset Purchase Agreement between Let's Talk Cellular of America. Inc. and North
Point Cellular. Inc. and Michael Weinstock and Marc Green dated August 31, 1996
Real Estate Leases
Corporate office 5200 NW 77 Court, Miami, FL 33166
Dadeland Mall 7565 N. Kendall Drive Miami FL 33156
Aventura Mall 19501 Biscayne Blvd. North Miami Beach, FL 33180
Bayside Market Place #1 401 Biscayne Blvd. Miami, FL 33132
Florida Mall 8601 S. Orange Blossom Trail. Orlando FL 32809
Lexox Square 3393 Peachtree Road NE. Atlanta. GA 30326
Manhattan Mall 901 Avenue of the Americas, New York, NY 10001
Town Center at Boca 6000 West Glades Road Boca Raton, FL 33431
Westland Mall 1695 West 49 Street, Hialeah. FL 33012
Cutler Ridge Mall 20505 South Dixie Hwy, Miami, FL 33189
Miami International Mall 1455 NW 107 Avenue, Miami, FL 33172
Altamonte Springs 451 Altamonte Ave Altamonte Springs, FL 32701
Tysons Corner 7903 Tysons Corner Center, Mclean, VA 22102
Montgomery Mall 7111 Democracy Blvd. Bethesda, MD 20817
<PAGE> 90
Schedule 3.9 Cont'd
<TABLE>
<S> <C>
St. Charles Towne Center 11110 Mall Circle, Waldorf, MD 20603
Annapolis Mall 2002 Annapolis Mall, Annapolis, MD 21401
Potomac Mills 2700 Potomac Mill Circle, Woodbridge, VA 22192
Union Station 50 Massachusetts Ave. Washington, DC 20002
Fashion Center at Pentagon City 1100 South Hayes Street Arlington, VA 22202
Mall of the Americas 7795 West Flagler, Miami, FL 33144
Pombroke Lakes Mall 11401 pines Boulevard, FL 33026
Bayside Market Place #2 401 Biscayne Blvd. Miami, FL 33132
Orlando Airport 9341 Airport Blvd. #A. Orlando, FL 32827
Sawgrass Mills 12801 W. Sunrise Blvd. Sunrise, FL 33323
Seminole Town Center 183 Town Center Circle Sanford, FL 32771
Coral Square Mall 9345 West Atlantic Blvd. Coral Springs, FL 33065
Burlington Center 2501 Burlington, Mt, Holly Rd. Burlington, NJ 08016
Market East 901 Market St. Philadelphia, PA 19107
Echelon Mall 3002 Echelon Mall Voorhes, NJ 08043-1903
Park Meadows 8405 Park Meadows Center Drive Littleton, CO 80124
Boyaton Beach Mall 801 N. Congress Avenue, Boynton Beach, FL 33426
Cherry Hill Mall 2000 Route 38, Space #2009, Cherry Hill NJ 08002
Cherry Hill Mall #2 2000 Route 38, Space #K, Cherry Hill NJ 08002
The Falls 8888SW 136 St. Miami FL, 33176
Montgomery Mall PA 230 Montgomery Mall, North Wales, PA 19454
West Oaks 9401 W Colonial Dr. Ocoec. FL 34761
Franklin Mills 1833 Franklin Mill Center, Philadelphia, PA 19154
The Citadel 750 Citadel Dr. East, Colorado Spring, CO 80908
Chapel Hills 1710 Briargate Blvd. Colorado Spring, CO 80920
Court at King of Prussia 344 mall Blvd. King of Prussia, PA 19406
Beach Place 17 South Atlantic Blvd., Ft. Lauderdale, FL 33316
Indian River Mall 6200 20th Street, Vero Beach, FL 32966
Granite Run Mall 1067 W. Baltimore Pike, Media, PA 19063
Oxford Valley Mall 2300 E. Lincoln Highway Lanhorne, PA 19047
Gwinnett Place 2100 Pleasant Hill Rd. Duluth, GA 30136
Towne Center at Cobb 400 Barrett Parkway, Kennesaw GA 30144
North Point Mall 1220 North Point Circle, Alpharetta, GA 30302
Perimeter Mall 4400 Ashford-Dunwoody Rd. Atlanta, GA 30346
Buckhead 2955 Peachtree Rd. NE, Atlanta GA 30305
Northlake Mall 1000 Northlake Mall, Atlanta GA 30345
Smith Haven Mall Routes 25 & 347, Lake Grove, NY 11755
White Marsh Mall 8200 Perry Hall, Baltimore MD 21236
Exton Square 100 Exton Square, Exton, PA 19341
Los Cerritos 239 Los Cerritos Center, Cerritos , CA 90703
Fox Hills Mall 294 Fox Hills Mall, Culter, CA 90230
Mayaguez Mall Carretera #2, Kilometro 159.4, Mayaguez PR 00680
Willow Grove Park 2500 Moreland Road, Willow Grove, PA 19090
Santa Ana 2800 N. Main Street, Santa Ana CA 92705
Plaza Carolina Avenida Fragoso, Salida 65 Infraicria, Carolina, PR 00988
Owings Mills 10500 Mill Run Circle, Ownings, MD 21117-4205
</TABLE>
<PAGE> 91
Schedule 3.9 (cont'd)
---------------------
Plaza Del Norte 506 Truncado Street Hatillo, PR 00659-2709
Roosevelt Field Roosevelt Field Mall, Garden City, NY 11530
Broadway Mall 358 B Broadway Mall, Hicksville, NY 11801
Galleria South Bay 1815 Hawthone Blvd. Redondo Beach, CA 90278
The Mall in Columbia 10300 Little Patuxent Parkway, Columbia, MD 21044
<PAGE> 92
Schedule 3.10(a)
Security interest in accounts receivable inventory equipment, general
intangibles, chattel paper, instruments and documents granted to Republic
National Bank in connection with credit facility agreements entered into on
September 5, and December 4, 1995, June 27, and July 29, 1996, respectively (see
Schedule 3.4). For a more complete description of the security interest please
refer to the security agreement.
<PAGE> 93
LET'S TALK CELLULAR OF AMERICA, INC.
FINANCIAL STATEMENTS
JANUARY 1997
<PAGE> 94
<TABLE>
<CAPTION>
BALANCE SHEET
JANUARY 31, 1997
- ----------------------------------------------------------------------
January
<S> <C>
CURRENT ASSETS:
Cash $1,016,479
Trade accounts receivable 25,344
Carriers receivable 1,458,234
Inventory 3,400,757
Prepaid expenses 490,743
Other current assets 131,106
----------
Total current assets 6,522,663
----------
Fixed assets, cost 3,302,219
Accumulated depreciation (569,516)
----------
Fixed assets, net 2,732,703
----------
Preopenings-cost 202,637
Accumulated amortization (86.090)
----------
Preopenings, net 116,547
Deferred tax asset 17,174
Other non-current assets 47,263
----------
Other non-current assets 180,984
----------
TOTAL $9,436,350
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $1,882,545
Line of credit 800,000
Accrued expenses and other liabilities 830,231
Capital lease obligations 26,817
Customer deposits 38,752
Deferred revenue 92,485
Income taxes payable 327,086
----------
Total current liabilities 3,997,916
----------
Loans from shareholders 258,100
Bank term loan 753,333
Long-term portion of capital lease obligations 26,226
Deferred tax liability 19,294
Other liabilities 42,404
----------
Total other liabilities 1,099,357
----------
SERIES A PREFERRED STOCK & SHAREHOLDER'S EQUITY:
Common stock, $.001 par value, 50,000,000 shares
authorized, 650,000 issued and outstanding 650
Series A preferred stock, $30 par value, 150,000 shares
authorized, 33,334 issued and outstanding 3,000,000
Additional paid-in capital 211,118
Retained earnings 1,127,309
----------
Total shareholders' equity 4,339,007
----------
TOTAL $9,436,350
==========
</TABLE>
<PAGE> 95
LET'S TALK CELLULAR OF AMERICA, INC.
STATEMENT OF OPERATIONS
PERIOD ENDED JANUARY 31, 1997 (6 months)
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
REVENUES:
Sales $ 5,615,016
Usage commissions 6,064,381
Other 300,000
-------------
Total revenues 11,979,397
COST OF SALES 5,346,647
-------------
GROSS PROFIT 6,632,750
-------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative 5,325,324
Depreciation and amortization 193,011
-------------
Total operating expenses 5,518,335
-------------
INCOME FROM OPERATIONS 1,114,415
OTHER EXPENSE- Interest expense, net 80,681
-------------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,033,734
PROVISION FOR INCOME TAXES 356,000
-------------
NET INCOME $ 677,734
=============
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
PERIOD ENDED JANUARY 31, 1997
- ----------------------------------------------------------------------
YTD 1997
---------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) $ 677,734
Income tax (expense)/credit 356,000
Losses on store closings -
Provision for settlements of litigation -
Depreciation and amortization 167,379
Preopening amortization 25,633
(Increase)/Decrease in: -
Carrier receivables (855,462)
Inventory (2,190,599)
Prepaid expenses (459,519)
Trade receivables (c/c) (7,594)
Other assets (103,078)
Increase/(Decrease) in: -
Trade accounts payable 1,041,055
Accrued expense and other liab. 347,136
Income taxes payable (89,675)
Customer deposits (25,864)
Cash provided by/(used in) -----------
operating activities (1,116,854)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed assets acquisitions (1,575,230)
Store preopening costs (105,717)
Proceeds from disposals -
Cash provided by/(used in) -----------
investing activities (1,680,947)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital lease (28,419)
Term Loan RNB 503,333
Proceeds from/(repayments of) shareholders loans -
Proceeds from capital contributions -
Line of credit increase/(decrease) (27,000)
Cash provided by/(used in) -----------
financing activities 447,914
-----------
Net increase/(decrease) in cash (2,349,887)
Cash, beginning (including $1,009,194 in escrow) 3,366,366
Cash, ending $ 1,016,479
</TABLE>
<PAGE> 97
Exhibits 7.1/7.3
OFFICERS' CERTIFICATE
This certificate is delivered to Let's Talk Cellular & Wireless, Inc.,
a Florida corporation f/k/a Let's Talk Cellular of America, Inc., Merger Sub 1,
Inc., a Delaware corporation, and Merger Sub 2, Inc., a Texas corporation
(collectively, the "Buyers"), pursuant to Sections 7.1 and 7.3 of the Agreement
and Plan of Merger (the "Agreement"), dated as of April 11, 1997 as amended and
restated as of June __, 1997 by and between the Buyers and Telephone Warehouse,
Inc., a Delaware corporation, National Cellular, Incorporated, a Texas
corporation and Texas Cellular Partners, L.P., a Delaware limited partnership
("TCP"). Capitalized terms used herein without definition shall have the
meanings as set forth in the Agreement.
The undersigned hereby certify that they are the duly elected and
acting President and Vice President and Secretary, respectively, of HIG Texas
Cellular Company, the general partner of TCP and that the representations and
warranties of TCP in Article II of the Agreement are true and complete on the
date hereof and TCP has taken all actions and performed all covenants required
under the Agreement to be performed by it, unless waived in writing by the
Buyers.
There has been no Material Adverse Change since April 11, 1997. No
preliminary or permanent injunction or other Order issued by a court of
competent jurisdiction or by any governmental agency, or any Regulation is in
effect which would prevent the consummation of the transactions contemplated by
the Agreement.
<PAGE> 98
IN WITNESS WHEREOF, we have signed this certificate this ____ day of
June, 1997.
TEXAS CELLULAR PARTNERS, L.P.
By: HIG Texas Cellular Company
By:
-------------------------------------
Name: Anthony Tamer
Title: President
By:
-------------------------------------
Name: Douglas Berman
Title: Vice President & Secretary
<PAGE> 99
Exhibit 7.5
Filed as Exhibit 10.3 to the
Registrant's Registration Statement
on Form S-1 (No. 333-34595).
<PAGE> 100
Exhibit 7.6
Filed as Exhibits 10.9 and 10.10 to the
Registrant's Registration Statement
on Form S-1 (No. 333-34595).
<PAGE> 101
Exhibit 7.8
Filed as Exhibit 10.16 to the
Registrant's Registration Statement
on Form S-1 (No. 333-34595).
<PAGE> 102
Exhibits 8.1/8.3
OFFICERS' CERTIFICATE
This certificate is delivered to Telephone Warehouse, Inc., a Delaware
corporation ("TWI"), National Cellular, Incorporated, a Texas corporation
("NCI"), and Texas Cellular Partners, L.P., a Delaware limited partnership
("TCP" and, together with TWI and NCI, the "TWI Parties"), pursuant to Sections
8.1 and 8.3 of the Amended and Restated Agreement and Plan of Merger (the
"Agreement"), dated as of June ___, 1997 by and between the TWI Parties and
Let's Talk Cellular & Wireless, Inc., a Florida corporation, Merger Sub 1, Inc.,
a Delaware corporation ("Merger Sub 1"), and Merger Sub 2, Inc., a Texas
corporation ("Merger Sub 2" and, together with Merger Sub 1, the "Buyers").
Capitalized terms used herein without definition shall have the meanings as set
forth in the Agreement.
The undersigned hereby certify that they are the duly elected and
acting Chief Executive Officer and Chief Operating Office of each Buyer, and
that the representations and warranties of each Buyer in Article III of the
Agreement are true and complete on the date hereof and the Buyers have taken all
actions and performed all covenants required under the Agreement to be performed
by them, unless waived in writing by the TWI Parties.
There has been no Material Adverse Change since April 11, 1997. No
preliminary or permanent injunction or other Order issued by a court of
competent jurisdiction or by any governmental agency, or any Regulation is in
effect which would prevent the consummation of the transactions contemplated by
the Agreement.
<PAGE> 103
IN WITNESS WHEREOF, we have signed this certificate this ____ day of
June, 1997.
MERGER SUB 1, INC.
By:
------------------------------------------
Name: Nick Molina
Title: Chief Executive Officer
By:
------------------------------------------
Name: Brett Beveridge
Title: Chief Operating Officer
MERGER SUB 2, INC.
By:
------------------------------------------
Name: Nick Molina
Title: Chief Executive Officer
By:
------------------------------------------
Name: Brett Beveridge
Title: Chief Operating Officer
<PAGE> 1
EXHIBIT 10.20
ASSET PURCHASE AGREEMENT
BETWEEN
LET'S TALK CELLULAR OF AMERICA, INC.
AND
NORTH POINT CELLULAR, INC.
AND
MICHAEL WEINSTOCK
AND
MARC GREENE
AUGUST 31, 1996
<PAGE> 2
THIS AGREEMENT, dated as of August 31, 1996, is entered into by and
among Let's Talk Cellular of America, Inc., a Florida corporation having its
principal offices at 5200 N.W. 77th Court, Miami, Florida 33166 (the "Buyer"),
and North Point Cellular, Inc., a Georgia corporation having its principal
offices at 990 Holcomb Bridge Road, Suite 2, Roswell, Georgia 30076 (the
"Seller"), and Michael Weinstock and Marc Greene (each individually, a
"Shareholder" and together, the "Shareholders"; and the Shareholders and the
Seller are collectively, the "Selling Parties" and each individually, a "Selling
Party").
ARTICLE 1
PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1 Purchase of Assets. Subject to the terms and conditions set forth
in this Agreement, the Seller agrees to sell, assign and transfer to the Buyer,
and the Buyer agrees to purchase and acquire from the Seller on the Closing
Date, all of the assets of the Seller, except for the Excluded Assets
(collectively, the "Purchased Assets"), including, without limitation, the
assets of the Seller set forth on Schedule 1.1 hereto.
1.2 Excluded Assets. The assets of the Seller set forth on Schedule
1.2 hereto shall not be transferred to the Buyer and are excluded from this
Agreement (collectively, the "Excluded Assets").
1.3 Assumption of Liabilities. The Buyer agrees to assume and
discharge only the liabilities and obligations of the Seller set forth on
Schedule 1.3 hereto (collectively, the "Assumed Liabilities").
1.4 Excluded Liabilities. All other liabilities of the Seller (the
"Excluded Liabilities"), including, without limitation, the liabilities set
forth on Schedule 1.4 hereto, shall not be assumed by the Buyer and shall be
paid by the Seller.
ARTICLE 2
CLOSING MATTERS
2.1 Date and Time. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Weinstock & Scavo, P.C., at
10:00 a.m. on the date hereof (the "Closing Date").
2.2 Closing. At the Closing, and on the basis of the representations,
warranties, covenants and agreements made herein and in the schedules hereto and
in the certificates and other instruments delivered pursuant hereto, and subject
to the terms and conditions hereof:
(a) Transfer of Purchased Assets. The Seller shall transfer,
convey, sell, assign and deliver to the Buyer all of the Seller's right, title
and interest in the Purchased Assets by delivering to the Buyer bills of sale,
assignments, and documents of conveyance, each duly executed and acknowledged by
the Seller, and such other good and sufficient instruments of
<PAGE> 3
transfer and conveyance as shall be effective to vest in the Buyer all of the
Seller's right, title and interest in the Purchased Assets.
(b) Purchase Price. The Buyer shall pay to the Seller the
purchase price (the "Purchase Price") for the Purchased Assets by paying to the
Seller the sum of $250,000.00 in cash or other immediately available funds, as
adjusted pursuant to Section 2.4.
2.3 Deliveries at Closing. At the Closing, the following documents
shall be delivered:
(a) Assignments. The Seller shall execute and deliver to the
Buyer the following assignments:
(i) an assignment of the Airtouch Agreement (as
hereinafter defined), in the form attached hereto as
Exhibit 2.3(a)(i) (the "Airtouch Assignment"),
(ii) an assignment of each Lease (as hereinafter defined),
substantially in the form attached hereto as Exhibit
2.3(a)(ii),
(iii) an assignment of the Advertising Agreement (as
hereinafter defined), substantially in the form
attached hereto as Exhibit 2.3(a)(iii); and
(iv) an assignment covering each Customer Activation
Agreement (as hereinafter defined) in the form attached
hereto as Exhibit 2.3(a)(iv).
(b) Bill of Sale. The Seller shall execute and deliver to the
Buyer a bill of sale in the form attached hereto as Exhibit 2.3(b) (the "Bill of
Sale").
(c) [Intentionally Omitted]
(d) Legal Opinion. Legal counsel for the Selling Parties shall
deliver a legal opinion to the Buyer in substantially the form attached hereto
as Exhibit 2.3(d).
(e) Employee Records. The Seller shall deliver to the Buyer all
personnel records in the Seller's possession.
(f) Secretary's Certificate. The Seller shall execute and
deliver to the Buyer a Secretary's Certificate, in the form attached hereto as
Exhibit 2.3(f).
(g) Name Change by the Seller. The Seller shall deliver to
Buyer, prior to the earlier of (x) the date 30 days from the date hereof and (y)
the date of the release of funds from escrow provided for in the Consulting
Agreement, evidence that it has changed its corporate name to a name that is
dissimilar to, and not a variation of, North Point Cellular, Inc.
(h) Affidavit of Michael Weinstock. Michael Weinstock shall
execute and deliver to the Buyer an affidavit, in the form attached hereto as
Exhibit 2.3(h).
2
<PAGE> 4
(i) Customer Activation Agreements. The Seller shall deliver to
the Buyer substantially all copies and originals of the Customer Activation
Agreements.
(j) Consulting Agreements. The Seller shall execute and deliver
to the Buyer a consulting agreement in the form attached hereto as Exhibit
2.3(j) (the "Consulting Agreement").
(k) Advertising Agreement. The Seller shall deliver to the Buyer
a true and complete copy of the Advertising Agreement.
2.4 Closing Date Adjustments to the Purchase Price. All payments of
rent, utilities, real estate taxes and other similar obligations for the account
of the Seller shall be prorated as of the Closing Date, and the Purchase Price
shall be adjusted accordingly.
2.5 Amounts owed under Airtouch Agreement. Without making any
adjustment to the Purchase Price: (i) amounts due and payable to the Seller by
Airtouch under the Airtouch Agreement as of the Closing Date shall be paid
directly to the Seller by the Buyer upon receipt by the Buyer of such amounts
from Airtouch; and (ii) amounts due and payable to Airtouch by the Seller under
the Airtouch Agreement as of the Closing Date shall be offset from the amounts
received by the Buyer from Airtouch which are due and payable to the Seller by
Airtouch under the Airtouch Agreement as of the Closing Date described in clause
(i), provided that if such amounts due and payable to Airtouch by the Seller
exceed the amounts due and payable to the Seller by Airtouch and received by the
Buyer, then the Seller shall promptly reimburse the Buyer for such excess.
2.6 Estoppel Letters . The Seller shall deliver to the Buyer as soon
as practicable after Closing (i) an estoppel letter from each lessor pursuant to
each of the Leases, substantially in the form attached hereto as Exhibit 2.6
(each individually, an "Estoppel Letter" and collectively, the "Estoppel
Letters") and (ii) the written consent of 990 Holcomb Bridge Road Associates,
the lessor pursuant to Section 8 of the lease agreement set forth in Section 5.8
with respect to the sublease set forth therein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER.
Each Selling Party hereby jointly and severally represents and warrants
to the Buyer as follows as of the Closing Date:
3.1 Due Organization. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia
with full corporate power and authority to carry on its business as it is now
being conducted, and to own, operate and lease its properties and assets. The
Seller is duly qualified or licensed to transact business in good standing in
every jurisdiction in which the conduct of its business or the ownership or
lease of its properties requires it to be so qualified or licensed. The Seller
has no subsidiaries.
3.2 Due Authorization. Each Selling Party has full power and authority
to enter into this Agreement and the agreements contemplated hereby and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement
3
<PAGE> 5
and all other agreements and transactions contemplated hereby have been duly
authorized by the Board of Directors and shareholders of the Seller. This
Agreement and all other agreements contemplated hereby to be entered into by any
Selling Party each constitutes a legal, valid and binding obligation of such
Selling Party, enforceable in accordance with its terms.
3.3 No Violation. The execution, delivery and performance by the
Selling Parties of this Agreement, and all other agreements contemplated hereby,
and the fulfillment of and compliance with the respective terms hereof and
thereof by such Selling Parties, do not and will not (a) conflict with or result
in a breach of the terms, conditions or provisions of, (b) constitute a default
or event of default under, (c) result in the creation of any lien, security
interest, encumbrance or charge upon the Seller's capital stock or assets
(including, without limitation, the Purchased Assets) pursuant to, (d) give any
third party the right to accelerate any obligations under, (e) result in a
violation of, or (f) require any authorization, consent, approval, exemption or
other action by, notice to, or filing with any third party or court or
governmental instrumentality pursuant to, the charter or bylaws of the Seller,
or, to the best knowledge of the each Selling Party, any applicable law,
regulation, order, writ, statute, rule, injunction or decree of any court or
governmental instrumentality or any agreement or instrument to which any of the
Selling Parties or any of their properties are subject. Each Selling Party has
complied, in all material respects, with all applicable laws, regulations and
orders in connection with the execution, delivery and performance of this
Agreement and all other agreements and transactions contemplated hereby.
3.4 Airtouch Commission Reports. Attached as Exhibit 3.4 hereto are
true and complete copies of the commission reports prepared by Airtouch for the
12 most recent monthly periods (the "Airtouch Commission Reports").
3.5 Financial and Operating Information. The Seller has provided the
Buyer with true and complete copies of each of the Seller's 12 most recent
monthly statements for account number 8801317465 at Sun Trust [Atlanta, N.A.].
(a) Leases. Each of the lease and license agreements (each
individually, a "Lease" and collectively, the "Leases") to which the Seller is a
party. Each Lease is set forth under item (b) in Schedule 1.1.
(b) Customer Activation Agreements. Each customer activation
agreement (collectively, the "Customer Activation Agreements") between the
Seller and each customer of the Seller that is delivered to the Buyer pursuant
to Section 2.3(i), which Customer Activation Agreements provide for, among other
things, charge-backs to be paid to the Seller by each customer.
(c) Advertising Agreements. That certain Advertising Agreement
by and between the Seller and The Atlanta Journal Constitution (the "Advertising
Agreement"),
3.6 Assumed Liabilities. Except for the Assumed Liabilities, the
Buyer shall not be subject to and shall not have assumed any obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
of the Seller.
4
<PAGE> 6
3.7 Title to Purchased Assets. The Seller has good, valid and
marketable title to all Purchased Assets, and none of such property is held by
the Seller under any lease or conditional sales contract, or is subject to any
security agreement, lien, encumbrance, charge, equity or claim. Upon delivery to
the Buyer of the bills of sale, assignments and documents of conveyance referred
to in Section 2.2(a), the Buyer shall receive good, valid and marketable title
to all of the Purchased Assets free and clear of all liens, encumbrances,
charges, equities and claims.
3.8 Absence of Certain Change of Events. Except as set forth on
Schedule 3.8 hereto, since June 30, 1996, (a) there has not been, to the best
knowledge of each Selling Party, (i) any material adverse change in the
business, operations, properties, assets, technology, condition (financial or
otherwise) or liabilities of the Seller, in its employee, customer, supplier,
distributor or franchise relations or relations with Airtouch or in the
prospects of the Seller's business, or (ii) any damage, destruction or loss
(whether or not covered by insurance) materially and adversely affecting the
business, operations, properties, assets or condition (financial or otherwise)
of the Seller, its employee, customer, supplier, distributor or franchise
relations or relations with Airtouch or the prospects of the Seller's business;
and (b) the Seller has not (i) sold, transferred, leased, pledged or mortgaged
or agreed to sell, transfer, lease, pledge, or mortgage any of its material
assets, property or rights or canceled, waived or compromised or agreed to
cancel, waive or compromise, any material debts, claims or rights, (ii) made or
permitted any material amendment or early termination of any material contract,
lease, agreement or license relating to the operation of its business, (iii)
made any significant change in any method of accounting, or (iv) granted any
general increase in the compensation of officers or employees (including,
without limitation, any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment).
3.9 Condition of Purchased Assets. To the best knowledge of each
Selling Party, the Purchased Assets set forth under item (c) of Schedule 1.1 are
in good operating condition and repair consistent with normal industry
standards, except for ordinary wear and tear, and except for such assets which
shall have been taken out of service on a temporary basis for repairs or
replacement consistent with the Seller's prior practices and normal industry
standards.
3.10 Patents, Trademarks, Etc. Schedule 3.10 hereto contains a list of
all of the material patents, trademarks, trade names, service marks and
copyrights, and applications therefor, which are owned by or licensed to the
Seller, or in which the Seller has any interest or which are presently being
used in connection with the business, products or processes of the Seller's
business, and any pending or current registration of any of the foregoing is set
forth in Schedule 3.10 hereto. No Selling Party has been charged with
infringement of, nor to the best knowledge of each Selling Party is any Selling
Party threatened to be charged with infringement of, nor has any Selling Party
infringed in any material respect, any unexpired patent, trademark, trademark
registration, trade name, service mark, copyright, copyright registration or
other proprietary right of any party in connection with the Seller's business.
3.11 Litigation. Except as set forth on Schedule 3.11 hereto, there
are no actions, suits or proceedings pending or, to the best of the knowledge of
each Selling Party, threatened by or against any Selling Party, at law or in
equity or before or by any governmental authority or instrumentality or before
any arbitrator of any kind, (a) with respect to this Agreement or any of
5
<PAGE> 7
the other agreements or transactions contemplated hereby, or (b) with respect to
the Purchased Assets, Assumed Liabilities or the Seller's business.
3.12 Compliance with Law. To the best knowledge of each Selling
Party, the Seller is and has been in material compliance with all applicable
statutes, rules, regulations, ordinances, codes, orders, licenses, franchises,
permits, authorizations and concessions, as such apply to the Seller's business,
including, without limitation, any applicable building, zoning, antipollution,
hazardous chemical, waste disposal, occupational safety, health or other law,
ordinance or regulation in respect of any of the, offices, structures or
operations of the Seller's business, and no Selling Party has received any
notification alleging any violation of any of the foregoing.
3.13 Consents and Approvals. To the best knowledge of each Selling
Party, no notice to, consent, approval or authorization of, or declaration,
filing or registration with, any federal, state or local governmental or
regulatory authority, and no consent, approval or authorization of or notice to
any other person or entity, is required to be made or obtained by or on behalf
of any Selling Party in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby.
3.14 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon any Selling Party.
3.15 Leases. All amounts due and payable thereunder by the Seller,
including, without limitation, all rental, maintenance and marketing payments,
have been made. To the best knowledge of each Selling Party, (i) each of the
Leases is valid and enforceable and is in full force and effect, and, except as
set forth on Schedule 3.15 hereto, there are no defaults, or events which
constitute or would constitute (with notice or lapse of time or both) defaults,
by the Seller or any subsidiary under any of such Leases or, to the knowledge of
any Selling Party, by any other party thereto; (ii) the execution, delivery and
performance by the Selling Parties of this Agreement and the agreements
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby will not result in the termination of, or in any increase of any
amounts payable under, any Lease; (iii) no Selling Party has received any notice
that the landlord with respect to any Lease would refuse to renew such Lease
upon expiration of the period thereof upon substantially the same terms; and
(iv) each Lease contains the entire agreement of the parties thereto with
respect to the subject matter thereof.
3.16 Airtouch Agreement. To the best knowledge of each Selling Party,
that certain Sales Agent Agreement for Cellular Radiotelephone Service dated
October 19, 1993 by and between Airtouch and the Seller, as amended by that
certain Amendment to Sales Agent Agreement for Cellular Radiotelephone Service
dated April 6, 1995 by and between Airtouch and the Seller, true and complete
copies of which agreement and amendment are attached hereto as Exhibit 3.16 (the
Sales Agent Agreement for Cellular Radiotelephone Service as so amended, the
"Airtouch Agreement") is valid and enforceable. The Airtouch Agreement contains
the entire agreement of the parties thereto with respect to the subject matter
thereof.
3.17 Disclosure. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Buyer by or on
6
<PAGE> 8
behalf of any Selling Party with respect to the transactions contemplated hereby
contains any untrue statement of a material fact or omits a material fact known
to any Selling Party necessary to make each statement contained herein or
therein not misleading. There is no fact known to any Selling Party which any
Selling Party has not disclosed to the Buyer in writing and of which any Selling
Party or any of the Seller's officers, directors or executive employees is aware
and which could reasonably be anticipated to have a material adverse effect upon
the execution, delivery or performance of this Agreement or the agreements
contemplated hereby or on the consummation of the transactions contemplated
hereby and thereby.
3.18 Activations. To the best knowledge of each Selling Party, all
activations of radiotelephone service pursuant to the Customer Activation
Agreements and all other activations of radiotelephone service reported by the
Seller to Airtouch for payment pursuant to the Airtouch Agreement are good and
collectible. All such activations are valid, genuine and subsisting, arise out
of bona fide sales of radiotelephone service.
3.19 Customer Activation Agreements. To the best knowledge of each
Selling Party, each of the Customer Activation Agreements is valid and
enforceable.
3.20 Advertising Agreement. To the best knowledge of each Selling
Party, the Advertising Agreement is valid and enforceable and contains the
entire agreement of the parties thereto with respect to the subject matter
thereof.
3.21 Affidavit of Michael Weinstock. To the best knowledge of each
Selling Party, the Affidavit of Michael Weinstock referred to in Section 2.3(h)
is true and correct as of the date hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Seller as follows as of
the Closing Date:
4.1 Due Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida
with full corporate power and authority to carry on its business as it is now
being conducted, and to own, operate and lease its properties and assets. The
Buyer is duly qualified or licensed to transact business in good standing in
every jurisdiction in which the conduct of its business or the ownership or
lease of its properties requires it to be so qualified or licensed.
4.2 Due Authorization. The Buyer has full corporate power and
authority to enter into this Agreement and the agreements contemplated hereby
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and all other agreements
and transactions contemplated hereby have been duly authorized by the Board of
Directors of the Buyer and no other corporate proceedings on its part are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement and all other agreements contemplated hereby to be entered into
by the Buyer each constitutes a legal, valid and binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms.
7
<PAGE> 9
4.3 No Violation. The execution, delivery and performance by the
Buyer of this Agreement, and all other agreements contemplated hereby, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Buyer, do not and will not (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) constitute a default or event of default
under, (c) result in the creation of any lien, security interest, encumbrance or
charge upon the Buyer's capital stock or assets pursuant to, (d) give any third
party the right to accelerate any obligations under, (e) result in a violation
of, or (f) require any authorization, consent, approval, exemption or other
action by, notice to, or filing with any third party or court or governmental
instrumentality pursuant to, the charter or bylaws of the Buyer, or, to the best
knowledge of the Buyer, any applicable law, regulation, order, writ, statute,
rule, injunction or decree of any court or governmental instrumentality or any
agreement or instrument to which the Buyer or any of its properties are subject.
The Buyer has complied, in all material respects, with all applicable laws,
regulations and orders in connection with the execution, delivery and
performance of this Agreement and all other agreements and transactions
contemplated hereby.
4.4 Brokerage. There are no brokerage commissions, finder's fees or
similar compensation arrangements in connection with the transactions
contemplated by this Agreement such as to give rise to any valid claim against
the Buyer.
ARTICLE 5
OTHER AGREEMENTS
5.1 The Buyer to Make Records Available. After the Closing, the Buyer
shall make available to the Seller as reasonably requested by the Seller or any
taxing authority all information, records or documents relating to the Purchased
Assets for all periods prior to Closing and shall preserve all such information,
records and documents until two years after the Closing. Prior to destroying any
records related to the Seller's business after the Closing Date, the Buyer shall
notify the Seller of its intent to destroy such records, and the Buyer shall
permit the Seller to retain any such records.
5.2 Tax Allocation. The allocation of the Purchase Price to the
Purchased Assets shall be as set forth in Schedule 5.2 hereto so as to comply
with Section 1060 of the Internal Revenue Code of 1986, as amended.
5.3 Employment Matters. The Buyer shall have the right, but not the
duty, to offer employment to any or all of the employees currently or formerly
employed by the Seller in the conduct of the Seller's business. The Buyer shall
have no obligation in respect of, and assumes no responsibility for, accrued
employment benefits of any kind claimed to belong or belonging to such employees
(should there be any), including but not limited to pension or retirement
benefits, stock, profit sharing, bonus or other incentive compensation plans,
vacation pay, severance pay and benefits, payroll withholding, medical or dental
plans or insurance plans.
5.4. Non-Competition
(a) General. Marc Greene agrees that for the period commencing
on the Closing Date and ending on the third anniversary of the Closing Date, he
will not serve as or be a consultant to or employee, officer, agent, director or
owner of more than three percent (3%) of
8
<PAGE> 10
another corporation, partnership or other entity which competes with the Buyer
within a 75 mile radius of the City of Atlanta in the Buyer's Business. The term
"Buyer's Business" shall mean the business of selling cellular or wireless
communications services or products. Marc Greene further agrees that for the
period commencing on the Closing Date and ending on the third anniversary of the
Closing Date, he (i) will not (x) solicit for employment, (y) endeavor in any
way to entice away from employment with the Buyer, the Seller or their
affiliates or (z) employ or contract with any employee of the Buyer or (for the
purpose of competing with the Buyer in the Buyer's Business) the Seller or any
of their affiliates who is an officer, a manager of any department, salesperson
or any sub-agent, sub-contractor or other independent contractor of the Buyer or
(for the purpose of competing with the Buyer in the Buyer's Business) the Seller
or any of their affiliates, including, without limitation, any resellers of
cellular or wireless communications services and (ii) will not solicit any
person, corporation, partnership or other entity that is a customers of the
Seller immediately prior to the Closing for the purpose of selling cellular or
wireless communications services or products.
(b) Non-Disclosure. Marc Greene hereby agrees that he shall,
and shall cause his affiliates and their respective agents, accountants, legal
counsel and other representatives and advisers (and shall use his best efforts
to cause his employees), to hold in strict confidence all, and not divulge or
disclose any, information concerning the Seller's trade secrets or the other
information set forth under item (f) to Schedule 1.1 for the purpose of
permitting such information to be used to compete with the Buyer in the Buyer's
Business within a 75 mile radius of the City of Atlanta; provided, however, that
the foregoing obligation of confidence shall not apply to (i) information that
is or becomes generally available to the public other than as a result of a
disclosure by any of the Selling Parties or any of their respective affiliates,
employees, agents, accountants, legal counsel or other representatives or
advisors (collectively, "Related Persons"), (ii) information that is or becomes
available to the Selling Parties or any of their Related Persons after the
Closing on a non-confidential basis prior to its disclosure by any of the
Selling Parties or any of their Related Persons and (iii) information that is
required to be disclosed by any of the Selling Parties or any of their Related
Persons as a result of any applicable law, rule or regulation of any federal,
state or local governmental authority; and provided, further, that the Selling
Parties shall promptly notify the Buyer of any disclosure pursuant to clause
(iii) above.
(c) Injunction. The parties hereto hereby acknowledge that a
breach or violation by any of the Selling Parties or their Related Persons of
any or all of the covenants and agreements contained in Section 5.4 may cause
irreparable harm and damage to the Buyer in a monetary amount which may be
virtually impossible to ascertain. As a result, each of the Selling Parties
acknowledges and agrees that the Buyer shall be entitled to an injunction from
any court of competent jurisdiction without having to post a bond and
restraining any breach or violation of any or all of the covenants and
agreements contained in Section 5.4 by the Selling Parties and/or their Related
Persons, either directly or indirectly, and that such right to injunction shall
be cumulative and in addition to whatever other rights or remedies that the
Buyer may possess hereunder, at law or in equity. Nothing contained in this
Section 5.4 shall be construed to prevent the Buyer from seeking and recovering
from the Selling Parties damages sustained by it as a result of any breach or
violation by any of them of any of the covenants or agreements contained in this
Section 5.4.
9
<PAGE> 11
5.5 Confidential Documents. No Selling Party shall retain any
originals or copies of any of the following, whether written, printed or another
form of hard copy, or in electronic or magnetic form or contained on a computer
diskette or other similar media: (i) any of the Seller's customer lists; and
(ii) any product pricing materials relating to the Seller's business.
5.6 Fees for Assignment of Leases. The Seller shall be liable for
fees, if any, charged by the landlords in connection with the assignment of the
Leases set forth under item (b) in Schedule 1.1 and for any fees related to any
liabilities or obligations of the Seller (or any other person that is a party to
the Lease) that arose or are otherwise asserted by reason of events, acts (or
failure to act) or transactions occurring prior to the Closing Date.
5.7 Bulk Sales. The Buyer and the Selling Parties each hereby
acknowledge that the Selling Parties do not intend to comply with the Georgia
Bulk Sales Act in connection with the execution, delivery and performance of
this Agreement and the agreements contemplated hereby and the consummation of
the transactions contemplated hereby and thereby. The Selling Parties, jointly
and severally, shall indemnify and hold the Buyer harmless from any loss,
liability or expense resulting from the Selling Parties' failure to comply
therewith.
5.8 Sublease of Seller's Principal Offices. The Buyer hereby agrees
to sublease from the Seller the premises leased by Seller pursuant to that
certain lease agreement dated as of October 24, 1995 by and between North Point
Cellular, Inc. (d/b/a Peachtree Mobility) and 990 Holcomb Bridge Road Associates
relating to the lease of Suite 2 in the building located at 990 Holcomb Bridge
Road, Roswell, Fulton County, Georgia for a period of 90 days commencing on the
Closing Date and to pay rent at the rate of $4,790 per month, which rent shall
include all utilities. At the expiration of such 90-day period, the Buyer shall
promptly vacate such premises. The Buyer and the Seller each hereby acknowledge
and agree that whether or not such lease is so assigned, the Buyer shall be
entitled to remove or otherwise dispose of the furniture, equipment and other
contents of the leased premises that constitute the Purchases Assets purchased
by the Buyer on the Closing Date.
5.9 Claims of Shareholders. Each Shareholder hereby releases and
gives up any and all claims that he has against the Purchased Assets, including,
without limitation, those claims referred to in Schedule 5.9.
5.10 Reimbursement. The Buyer shall promptly reimburse the Seller for
any obligations of the Buyer after Closing that the Seller pays on behalf of the
Buyer as agreed by the Buyer and Seller.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by the Seller. Each Selling Party agrees, jointly
and severally, to indemnify and hold harmless the Buyer and its affiliates at
all times against and in respect of all losses, liabilities, costs and expenses
(including reasonable attorneys' fees) which arise out of or are based on (a)
any taxes (federal, state or local) payable by the Seller or arising from the
transactions contemplated hereby, (b) any breach of the representations,
warranties, covenants or
10
<PAGE> 12
agreements of the Selling Parties set forth in this Agreement and (c) any
Excluded Liabilities. The Buyer shall promptly notify any one of the Selling
Parties in writing of all matters which may give rise to the right to
indemnification hereunder. The Selling Parties shall not, without the prior
written consent of the Buyer, settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not the Buyer is an actual or potential party to such claim, action, suit or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of the Buyer from all liability arising out of such claim,
action, suit or proceeding. The Buyer and the Selling Parties shall keep each
other informed of all settlement negotiations with third parties and of the
progress of any litigation with third parties. The Buyer and the Selling Parties
shall permit each other reasonable access to books and records and otherwise
cooperate with all reasonable requests of each other in connection with any
matter or claim for indemnification by a third party.
6.2 Indemnification by the Buyer. The Buyer agrees to indemnify and
hold harmless the Seller at all times against and in respect of (i) all losses,
liabilities, costs and expenses (including reasonable attorneys' fees) which are
caused by any breach of the representations, warranties, covenants or agreements
of the Buyer set forth in this Agreement and (ii) any liabilities that accrue
after the Closing Date in connection with the operation of the Seller's
business. The Seller shall promptly notify the Buyer in writing of all matters
which may give rise to the right to indemnification hereunder, it being
understood that if the Buyer does not receive notice of any matter known to the
Seller and as to which the Seller is entitled to indemnification hereunder in
time to contest the determination of any such liability which is susceptible to
being successfully contested, the Buyer shall not be obligated to indemnify the
Seller with respect thereto. The Buyer shall have the right with the consent of
the Seller, which shall not be unreasonably withheld, to settle all
indemnifiable matters related to claims by third parties which are susceptible
to being settled, and to defend (without the consent of the Seller) through
counsel of its own choosing, at its own expense, any action which may be brought
by a third party in connection therewith; provided, however, that the Seller
shall have the right to have its counsel participate fully in such defense at
its own expense. The Buyer and the Seller shall keep each other informed of all
settlement negotiations with third parties and of the progress of any litigation
with third parties. The Buyer and the Seller shall permit each other reasonable
access to books and records and otherwise cooperate with all reasonable requests
of each other in connection with any matter or claim for indemnification by a
third party.
ARTICLE 7
MISCELLANEOUS
7.1 Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided, that neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned or transferred, by
operation of law or otherwise, by any Selling Party without the prior written
consent of the Buyer.
7.2 Survival. Any provision of this Agreement which contemplates the
performance or existence of obligations after the Closing Date, and any and all
representations and warranties set
11
<PAGE> 13
forth in this Agreement, shall not be deemed to be merged into or waived by the
execution and delivery of the instruments executed at the Closing, but shall
expressly survive Closing and shall be binding upon the party or parties
obligated thereby in accordance with the terms of this Agreement, subject to any
limitations expressly set forth in this Agreement.
7.3 Severability. Each of the provisions contained in this Agreement
shall be severable, and the unenforceability of one shall not affect the
enforceability of any others or of the remainder of this Agreement.
7.4 Entire Agreement. This Agreement contains the entire agreement of
the parties hereto with respect to the transactions covered hereby, superseding
all negotiations, prior discussions and preliminary agreements made prior to the
date hereof and is not intended to confer upon any other person any rights or
remedies hereunder.
7.5 Modification. This Agreement may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by all of the
parties hereto.
7.6 Waiver The failure of any party to enforce any condition or part
of this Agreement at any time shall not be construed as a waiver of that
condition or part, nor shall such party forfeit any rights to future enforcement
thereof.
7.7 Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the internal laws of the State of Georgia.
7.8 The headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
7.9 More than one counterpart of this Agreement may be executed by the
parties hereto, and each fully executed counterpart shall be deemed an original.
7.10 Remedies. The rights and remedies provided by this Agreement are
cumulative, and the use of any one right or remedy by any party hereto shall not
preclude or constitute a waiver of its right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights and remedies
a party may have by law, statute or otherwise.
7.11 Attorneys' Fees. In the event any suit or other legal proceeding
is brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys' fees, including attorneys' fees for any appeal, and the
costs incurred in bringing such suit or proceeding.
7.12 Each party hereto shall, at the request of any other party,
execute and deliver to such other party all such further instruments,
assignments, assurances and other documents as such other party may reasonably
request in connection with the carrying out of this Agreement.
12
<PAGE> 14
7.13 Notices. All communications, notices and consents provided for
herein shall be in writing and be given in person or by means of telex, telecopy
or other wire transmission (with confirmation of receipt in a manner typical
with respect to communications of that type) or by mail, and shall become
effective (i) on delivery if given in person, (ii) on the date of transmission
and confirmation of receipt if sent by telex, telecopy or other wire
transmission, or (iii) four business days after being deposited in the mails,
with proper postage for first-class registered or certified air mail, prepaid.
Notices shall be addressed as follows:
If to the Buyer, to: Let's Talk Cellular of America, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attn: Mr. Nick Molina and Mr. Brett Beveridge
Fax: (305) 477-1359
with a copy to: Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Jorge L. Freeland, Esq.
Fax: (305) 579-0717
If to the Seller, to: Weinstock & Scavo, P.C.
305 Piedmont Road, N.E.
Suite 300
Atlanta, Georgia 30305
Attn: Michael Weinstock
Fax: (404) 231-1618
provided, however, that if either party shall have designated a different
address by notice to the other as provided herein, then to the last address so
designated.
7.14 Expenses. The Seller shall bear its own expenses, including
without limitation, legal fees and expenses, with respect to this Agreement and
the transactions contemplated hereby. The Buyer shall bear its own expenses,
including without limitation, legal fees and expenses, with respect to this
Agreement and the transactions contemplated hereby.
* * *
13
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
LET'S TALK CELLULAR OF AMERICA, INC.
By: /s/Brett Beveridge
------------------------
Name: Brett Beveridge
Title: President
NORTH POINT CELLULAR, INC.
By: /s/Marc Greene
------------------------
Name: Marc Greene
Title: President
/s/Michael Weinstock
------------------------
Michael Weinstock
/s/Marc Greene
------------------------
Marc Greene
14
<PAGE> 16
SCHEDULE 1.1
PURCHASED ASSETS
"Purchased Assets" shall be transferred to the Buyer and include,
without limitation, the following:
(a) Tradenames; Trademarks. All right, title and interest of the
Seller in and to all tradenames and trademarks used in the operation of the
Seller's business, all variants thereof and all goodwill associated therewith,
including, but not limited to all rights in and to the names, "Peachtree
Mobility" and "North Point Cellular, Inc."
(b) Leases. All of the Seller's right, title and interest in and
to the following Leases:
(i) Lease dated as of August 31, 1993 by and between
Buckhead Cellular, Inc. (d/b/a Peachtree Mobility) and James B. Cummings related
to the lease of a portion of a building located at 2955 Peachtree Road, City of
Atlanta, Fulton County, Georgia.
(ii) Lease dated as of July 29, 1993 by and between North
Point Cellular, Inc. (d/b/a Peachtree Mobility) and North Point Mall Limited
Partnership relating to the lease of a portion of North Point Mall located in
the City of Alpharetta, Fulton County, Georgia.
(iii) Lease dated as of April 13, 1994 by and between Town
Center Cellular, Inc. (d/b/a AirTouch) and Cobb Place Associates, L.P. relating
to the lease of Store No. 1424 in the Town Center at Cobb located in the City of
Kennesaw, Cobb County, Georgia.
(iv) Lease dated as of April 13, 1994 by and between
Gwinnett Cellular, Inc. (d/b/a Air Touch) and Gwinnett Place Associates, L.P.
relating to the lease of Store No. 0522 in the Gwinnett Place Mall located in
the City of Duluth, Gwinnett County, Georgia.
(v) License No. 1177 dated as of May 16, 1996 by and
between North Point Cellular, Inc. (d/b/a Peachtree Mobility) and Perimeter
Mall, Inc. relating to the license to sell from June 3, 1996 to August 31, 1996
retail cellular phones, phone accessories and phone services within Location No.
1002 of the Perimeter Mall located in the City of ___________ , Fulton/DeKalb
County, Georgia.
(vi) License No. 1178 dated as of May 16, 1996 by and
between North Point Cellular, Inc. (d/b/a Peachtree Mobility) and Perimeter
Mall, Inc. relating to the license to sell from September 1, 1996 to December
31, 1996 retail cellular phones, phone accessories and phone services within
Location No. 1002 of the Perimeter Mall located in the City of ___________,
Fulton/DeKalb County, Georgia.
(c) Equipment. All supplies, equipment, machinery, fixtures,
furniture (except as set forth under item (e) on Schedule 1.2), leasehold
improvements and other tangible property currently owned or used by the Seller
in connection with the operation of its business, including,
F-11
<PAGE> 17
without limitation, the computer system used to catalogue the Seller's inventory
and all of the foregoing property located at the premises leased by the Seller
pursuant to that certain lease agreement set forth in Section 5.8 of this
Agreement.
(d) Airtouch Carrier Agreement. All of the Seller's right, title
and interest in and to the Airtouch Agreement.
(e) Business as a Going Concern. The business of the Seller as a
going concern, including, without limitation, its franchises, permits, licenses,
telephone numbers (including without limitation, the following numbers: (770)
645-6900, (770) 497-9330, (770) 425-7900, (770) 751-1211, (770) 395-9144 and
(404) 816-3663), signage, customer deposits, customer lists, vendor lists,
referral lists and contracts, advertising materials and data, restrictive
covenants, causes of action and similar obligations owing to the Seller, its
officers, employees, agents and others, together with all books, computer
software, files, papers, records and other data of the Seller relating to the
assets, properties, business and operations of the Seller's business.
(f) Trade Information. All proprietary knowledge, technical
information, quality control data, processes (whether secret or not), methods,
and other similar know-how or rights used in the conduct of the Seller's
business, including, but not limited to, the areas of retailing, sales,
marketing, advertising and personnel training and recruitment, together with all
rights to use any and all information, trade secrets, patents, copyrights,
trademarks, tradenames and other intangible properties that are necessary or
customarily used by the Seller for the ownership, management or operation of its
business.
(g) Deposits. All utility, security, lease and other deposits and
prepaid expenses attributable to the operation of the Seller's business,
including, without limitation, the deposits under the Leases set forth in item
(b) of this Schedule 1.1.
(h) Customer Activation Agreements. All of the Seller's right
title and interest in and to the Customer Activation Agreements.
(i) Invoices. All of the Seller's right title and interest in and
to the invoices for fixtures, fixed assets and construction on the premises
leased by the Seller pursuant to the Leases.
(j) Advertising Agreement. All of the Seller's right, title and
interest in and to the Advertising Agreement.
(k) Other. All other property and rights of every kind or nature
used by the Seller in the operation of its business (other than the Excluded
Assets).
<PAGE> 18
SCHEDULE 1.2
EXCLUDED ASSETS
"Excluded Assets" shall not be transferred to the Buyer and are as follows:
(a) All inventories of the Seller relating to the operation of its
business.
(b) All corporate minute books of the Seller and any copies
thereof.
(c) All of the Seller's accounts receivable.
(d) All cash of the Seller in any of its cash registers, other
point of sale equipment or in any other location.
(e) All furniture located in Marc Greene's office at the principal
offices of the Seller leased pursuant to the lease agreement set forth in
Section 5.8 of this Agreement.
(f) Marc Greene's personal computer located at the premises set
forth in item (e) above.
(g) All of the Seller's bank records (excluding copies thereof),
tax returns and personal correspondence between the Shareholders.
(h) The Seller's account credit at the Chateau Elan Resort in
Braselton, Georgia.
<PAGE> 19
SCHEDULE 1.3
ASSUMED LIABILITIES
"Assumed Liabilities" shall be transferred to the buyer and are as
follows:
(a) The liabilities of the Seller under the Airtouch Agreement
that accrue after the Closing Date or charge-backs which have accrued and have
not been reported to the Seller by Airtouch as of the Closing Date for
activations of radiotelephone service that have been subsequently terminated.
(b) The liabilities of the Seller under the Leases that accrue
after the Closing Date.
<PAGE> 20
SCHEDULE 1.4
EXCLUDED LIABILITIES
"Excluded Liabilities" shall not be transferred to the Buyer and
include, without limitation, the following:
(a) With regard to the Airtouch Agreement, the following:
(i) Any and all expenses, obligations or liabilities in
connection with fraudulent activations reported to Airtouch by the Seller.
(ii) Cooperative charges for the account of the Seller
relating to marketing expenses.
(b) All sales, value added and other taxes, permit fees and other
similar obligations or liabilities of the Seller.
(c) Seller's pro rata share of the portions of the rental payments
under the Leases which are based upon a percentage of the Seller's annual 1996
sales ("percentage rent"). For each Lease, such pro rata share shall be equal to
the product of (i) the sum of such percentage rent and (ii) the result of
dividing the number of days elapsed in 1996 prior to the Closing Date by 365.
(d) All matters set forth on Schedule 3.11.
<PAGE> 21
SCHEDULE 3.8
CERTAIN CHANGES OR EVENTS
<PAGE> 22
SCHEDULE 3.10
PATENTS, TRADEMARKS, ETC.
The Notice of Publication under Section 12(a) of the Trademark Act of
1946, as amended, from the United States Department of Commerce, Patent and
Trademark Office, dated June 14, 1996, Serial Number 75/023.838, and the related
publication of the service mark pertaining thereto in the Marks Published For
Opposition Section of the Official Gazette of The United States Patent and
Trademark Office, Volume 1188, Number 3, dated July 16, 1996, page TM 265,
copies of each of which are attached hereto.
<PAGE> 23
SCHEDULE 3.11
LITIGATION
(a) North Point Mall Limited Partnership vs. North Point Cellular,
Inc., Civil Action File No. 96-ED-0275925, in the Magistrate Court of Fulton
County, State of Georgia, and Civil Action File No. 96DD0002523 in the State
Court of Fulton County, State of Georgia.
<PAGE> 24
SCHEDULE 3.15
LEASE DEFAULTS/CLAIMS
(a) [List of signage claims under certain Leases.]
<PAGE> 25
SCHEDULE 5.2
ALLOCATION OF PURCHASE PRICE
(a) The Buyer will submit within 30 days a proposal for allocating
the Purchase Price.
<PAGE> 26
SCHEDULE 5.9
SHAREHOLDER CLAIMS
[See attached]
<PAGE> 27
EXHIBIT 2.3(A)(II)
ASSIGNMENT OF LEASE
THIS ASSIGNMENT OF LEASE (this "Assignment"), made as of August __,
1996 by and between NORTH POINT CELLULAR, INC. a Georgia corporation (the
"Seller"), having its principal offices at 990 Holcomb Bridge Road, Suite 2,
Roswell, Georgia 30076 and LET'S TALK CELLULAR OF AMERICA, INC., a Florida
corporation (the "Buyer"), having its principal offices at 5200 N.W. 77th Court,
Miami, Florida 33176.
WHEREAS, the Seller and the Buyer, have entered into an Asset Purchase
Agreement dated as of August ___, 1996 (the "Acquisition Agreement"; capitalized
terms used herein without further definition are used with the meanings
specified therefore in the Acquisition Agreement);
WHEREAS, pursuant to the Acquisition Agreement, the Seller has agreed
to assign to the Buyer the Lease; and
WHEREAS, the Seller and the Buyer desire to execute this Assignment to
further evidence the transfer of the Lease by the Seller to the Buyer;
NOW THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged, the Seller and the Buyer agree as follows:
The Seller does hereby convey, assign and set over to the Buyer, its
respective successors and assigns, all of the Seller's right, title and
interest in and to the Lease Agreement dated as of ______________ by and
between _______________ and ________________ (the "Lease").
The Seller hereby represents to the best of its knowledge that:
(1) The Seller has good title to the Lease;
(2) The Seller has not heretofore assigned any of its right, title
and interest in and to the Lease;
(3) The Lease is in full force and effect.
(4) The Seller is not in default in the performance of any of its
covenants under the Lease and no event has occurred and no
condition exists that, with the giving of notice or the
passage of time, or both, would constitute a default in any
material respect, and to its best knowledge, no event has
occurred and no condition exists that, with the giving of
notice or the passage of time, or both, would constitute a
default, under the terms of the Lease.
<PAGE> 28
(5) The Lease has not been modified, altered or amended in any
respect.
(6) The Lease contains the entire agreement of the parties thereto
with respect to the subject matter thereof.
(7) Funds totaling $_________ have been deposited by the Seller
under the Lease and are assigned to the Buyer hereunder.
Other than as set forth herein, the Seller makes no representation or
warranty, express or implied, with respect to the Lease.
By its execution hereof, the Buyer accepts this Assignment, including
all of the terms, conditions and obligations hereof imposed upon the Buyer.
Except as otherwise expressly provided in the Acquisition Agreement or in any of
the other documents executed in connection therewith; the Buyer assumes and
agrees to perform and observe all of the terms, conditions, covenants and
agreements required to be performed or observed by the Seller under the Lease
accruing on or after the date hereof.
This Assignment shall be governed by and construed in accordance with
the laws of the State of Georgia.
2
<PAGE> 29
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Assignment to be duly executed and delivered as of this ____ day of August,
1996.
SELLER:
NORTH POINT CELLULAR, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
BUYER:
LET'S TALK CELLULAR OF AMERICA,
INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
3
<PAGE> 30
EXHIBIT 2.3(A)(III)
ASSIGNMENT OF ADVERTISING AGREEMENT
THIS ASSIGNMENT (this "Assignment"), made as of August __, 1996 by and
between NORTH POINT CELLULAR, INC. a Georgia corporation (the "Seller"), having
its principal offices at 990 Holcomb Bridge Road, Suite 2, Roswell, Georgia
30076 and LET'S TALK CELLULAR OF AMERICA, INC., a Florida corporation (the
"Buyer"), having its principal offices at 5200 N.W. 77th Court, Miami, Florida
33176.
WHEREAS, the Seller and the Buyer, have entered into an Asset Purchase
Agreement dated as of August ___, 1996 (the "Acquisition Agreement"; capitalized
terms used herein without further definition are used with the meanings
specified therefore in the Acquisition Agreement);
WHEREAS, pursuant to the Acquisition Agreement, the Seller has agreed
to assign to the Buyer the Advertising Agreement; and
WHEREAS, the Seller and the Buyer desire to execute this Assignment to
further evidence the transfer of the Advertising Agreement by the Seller to the
Buyer;
NOW THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged, the Seller and the Buyer agree as follows:
The Seller does hereby convey, assign and set over to the Buyer, its
respective successors and assigns, all of the Seller's right, title and
interest in and to the Advertising Agreement dated as of ______________ by and
between the Seller and The Atlanta Journal Constitution (the "Advertising
Agreement").
The Seller hereby represents to the best of its knowledge that:
(1) The Seller has not heretofore assigned any of its right, title
and interest in and to the Advertising Agreement;
(2) The Advertising Agreement is in full force and effect.
(3) The Seller is not in default in the performance of any of its
covenants under the Advertising Agreement and no event has
occurred and no condition exists that, with the giving of
notice or the passage of time, or both, would constitute a
default in any material respect, and to its best knowledge, no
event has occurred and no condition exists that, with the
giving of notice or the passage of time, or both, would
constitute a default, under the terms of the Advertising
Agreement.
4
<PAGE> 31
(4) The Advertising Agreement has not been modified, altered or
amended in any respect.
(5) The Advertising Agreement contains the entire agreement of the
parties with respect to the subject matter thereof.
(7) Funds totaling $0 have been deposited by the Seller under the
Advertising Agreement and are assigned to the Buyer hereunder.
Other than as set forth herein, the Seller makes no representation or
warranty, express or implied, with respect to the Advertising Agreement.
By its execution hereof, the Buyer accepts this Assignment, including
all of the terms, conditions and obligations hereof imposed upon the Buyer.
Except as otherwise expressly provided in the Acquisition Agreement or in any of
the other documents executed in connection therewith; the Buyer assumes and
agrees to perform and observe all of the terms, conditions, covenants and
agreements required to be performed or observed by the Seller under the
Advertising Agreement accruing on or after the date hereof.
This Assignment shall be governed by and construed in accordance with
the laws of the State of Georgia.
2
<PAGE> 32
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Assignment to be duly executed and delivered as of this ____ day of August,
1996.
SELLER:
NORTH POINT CELLULAR, INC.
By:
---------------------------
Name:
-------------------------
Title:
-----------------------
BUYER:
LET'S TALK CELLULAR OF AMERICA,
INC.
By:
---------------------------
Name:
-------------------------
Title:
-----------------------
3
<PAGE> 33
EXHIBIT 2.3(A)(IV)
ASSIGNMENT OF CUSTOMER ACTIVATION AGREEMENTS
THIS ASSIGNMENT (this "Assignment"), made as of August __, 1996 by and
between NORTH POINT CELLULAR, INC. a Georgia corporation (the "Seller"), having
its principal offices at 990 Holcomb Bridge Road, Suite 2, Roswell, Georgia
30076 and LET'S TALK CELLULAR OF AMERICA, INC., a Florida corporation (the
"Buyer"), having its principal offices at 5200 N.W. 77th Court, Miami, Florida
33176.
WHEREAS, the Seller and the Buyer, have entered into an Asset Purchase
Agreement dated as of August ___, 1996 (the "Acquisition Agreement"; capitalized
terms used herein without further definition are used with the meanings
specified therefore in the Acquisition Agreement);
WHEREAS, pursuant to the Acquisition Agreement, the Seller has agreed
to assign to the Buyer each Activation Agreement; and
WHEREAS, the Seller and the Buyer desire to execute this Assignment to
further evidence the transfer of each Activation Agreement by the Seller to the
Buyer;
NOW THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged, the Seller and the Buyer agree as follows:
The Seller does hereby convey, assign and set over to the Buyer, its
respective successors and assigns, all of the Seller's right, title and interest
in and to each customer Activation Agreement by and between the Seller and each
customer providing for the activation of radio-telephone service in connection
with the Airtouch Agreement (each, an "Activation Agreement" and collectively,
the "Activation Agreements").
The Seller hereby represents that to the best of his knowledge that:
(1) The Seller has not heretofore assigned any of its right, title
and interest in and to any Activation Agreement;
(2) Each Activation Agreement is in full force and effect.
(3) The Seller is not in default in the performance of any of its
covenants under any Activation Agreement and no event has
occurred and no condition exists that, with the giving of
notice or the passage of time, or both, would constitute a
default in any material respect, and to its best knowledge, no
event has occurred and no condition exists that, with the
giving of notice or the passage of time, or both, would
constitute a default, under the terms of any Activation
Agreement.
(4) No Activation Agreement has been modified, altered or amended
in any respect.
<PAGE> 34
(5) Attached hereto are true and complete copies of the Activation
Agreements delivered to the Buyer pursuant to Section 2.3(i)
of the Acquisition Agreement.
Other than as set forth herein, the Seller makes no representation or
warranty, express or implied, with respect to the Activation Agreements.
By its execution hereof, the Buyer accepts this Assignment, including
all of the terms, conditions and obligations hereof imposed upon the Buyer.
Except as otherwise expressly provided in the Acquisition Agreement or in any of
the other documents executed in connection therewith; the Buyer assumes and
agrees to perform and observe all of the terms, conditions, covenants and
agreements required to be performed or observed by the Seller under the
Activation Agreements accruing on or after the date hereof.
This Assignment shall be governed by and construed in accordance with
the laws of the State of Georgia.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Assignment to be duly executed and delivered as of this ____ day of August,
1996.
SELLER:
NORTH POINT CELLULAR, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
BUYER:
LET'S TALK CELLULAR OF AMERICA,
INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
2
<PAGE> 35
Exhibit 2.3(b)
BILL OF SALE
THIS BILL OF SALE effective as of August __, 1996, from NORTH POINT
CELLULAR, INC., a Georgia corporation ("SELLER"), to LET'S TALK CELLULAR OF
AMERICA, INC., a Florida corporation ("BUYER").
KNOW ALL MEN BY THESE PRESENTS, that pursuant to that certain Asset
Purchase Agreement dated August __, 1996, among BUYER, SELLER, and Michael
Weinstock and Marc Greene (the "Asset Purchase Agreement") and in consideration
of the payment of the Purchase Price (as defined in the Asset Purchase
Agreement), the assumption by BUYER of certain of the liabilities, obligations
and commitments of SELLER, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, SELLER hereby grants,
conveys, assigns, transfers and delivers to BUYER, its successors and assigns,
all of SELLER's right, title, interest and benefit in and to the Purchased
Assets (as defined in the Asset Purchase Agreement), free and clear of any and
all liabilities, liens, encumbrances, mortgages, security interests, pledges,
restrictions and claims of any kind or nature, contingent or otherwise, except
as expressly provided in that certain Asset Purchase Agreement of even date
herewith.
This Bill of Sale is subject to the terms and conditions of the Asset
Purchase Agreement and the transactions contemplated thereby.
All of the terms and provisions of this Bill of Sale shall be binding
upon SELLER and its successors and assigns and shall inure to the benefit of
BUYER and its successors and assigns.
IN WITNESS WHEREOF, SELLER has caused this Bill of Sale to be signed in
its name by its officer thereunto duly authorized as of the date first above
written.
NORTH POINT CELLULAR, INC.
By:
---------------------------------
<PAGE> 36
EXHIBIT 2.3(D)
OPINION OF COUNSEL FOR SELLING PARTIES
The following opinion shall be addressed to Let's Talk Cellular of
America, Inc. Capitalized terms used herein without definition shall have the
meanings as set forth in the Asset Purchase Agreement (the "Acquisition
Agreement") dated as of August __, 1996 by and between Let's Talk Cellular of
America, Inc., North Point Cellular, Inc., Michael Weinstock and Marc Greene.
In such counsel's opinion, the Acquisition Agreement and the exhibits
attached thereto, other than the consulting agreement, to be entered into by
each Selling Party each constitutes a legal, valid and binding obligation of
such Selling Party, enforceable in accordance with its terms.
In such counsel's opinion and to the best of such counsel's knowledge:
(1) The Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia with full corporate
power and authority to carry on its business as it is now being conducted, and
to own, operate and lease its properties and assets. The Seller is duly
qualified or licensed to transact business in good standing in every
jurisdiction in which the conduct of its business or the ownership or lease of
its properties requires it to be so qualified or licensed. The Seller has no
subsidiaries.
(2) The Seller has good, valid and marketable title to all
Purchased Assets, and none of such property is held by the Seller under any
lease or conditional sales contract, or is subject to any security agreement,
lien, encumbrance, charge, equity or claim. Upon delivery to the Buyer of the
bills of sale, assignments and documents of conveyance referred to in Section
2.2(a) of the Acquisition Agreement, the Buyer shall receive good, valid and
marketable title to all of the Purchased Assets free and clear of all liens,
encumbrances, charges, equities and claims.
(3) Each Selling Party has full power and authority to enter into
the Acquisition Agreement and the agreements contemplated thereby and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Acquisition Agreement and all other agreements and
transactions contemplated thereby have been duly authorized by the Board of
Directors and shareholders of the Seller.
(4) The execution, delivery and performance by the Selling Parties
of the Acquisition Agreement, and all other agreements contemplated thereby, and
the fulfillment of and compliance with the respective terms thereof by such
Selling Parties, do not and will not (a) conflict with or result in a breach of
the terms, conditions or provisions of, (b) constitute a default or event of
default under, (c) result in the creation of any lien, security interest,
encumbrance or charge upon the Seller's capital stock or assets (including,
without limitation, the Purchased Assets) pursuant to, (d) give any third party
the right to accelerate any obligations under, (e) result in a violation of, or
(f) require any authorization, consent, approval, exemption or other action by,
notice to, or filing with any third party or court or governmental
instrumentality pursuant to, the charter or bylaws of the Seller, or, to the
best
<PAGE> 37
of our knowledge, any applicable law or regulation or any order, writ, statute,
rule, injunction or decree of any court or governmental instrumentality known to
us to which the Seller is subject or any agreement or instrument known to us to
which any of the Selling Parties or any of their properties are subject. Each
Selling Party has complied, in all material respects, with all applicable laws,
regulations and orders in connection with the execution, delivery and
performance of the Acquisition Agreement and all other agreements and
transactions contemplated thereby.
(5) Except as set forth in the Acquisition Agreement, there are no
actions, suits or proceedings pending or, to the best of our knowledge,
threatened by or against any Selling Party, at law or in equity or before or by
any governmental authority or instrumentality or before any arbitrator of any
kind, (a) with respect to the Acquisition Agreement or any of the other
agreements or transactions contemplated thereby, or (b) with respect to the
Purchased Assets, Assumed Liabilities or the Seller's business.
(6) No notice to, consent, approval or authorization of, or
declaration, filing or registration with, any federal, state or local
governmental or regulatory authority, and no consent, approval or authorization
of or notice to any other person or entity, is required to be made or obtained
by or on behalf of any Selling Party in connection with the execution, delivery
and performance of the Acquisition Agreement and the consummation of the
transactions contemplated thereby.
2
<PAGE> 38
EXHIBIT 2.3(F)
CERTIFICATE OF SECRETARY OF NORTH POINT CELULAR, INC.
I, Michael Weinstock, hereby certifiy that:
1. I am duly elected, qualified and acting Secretary of North
Point Cellular, Inc., a Georgia corporation (the "Corporation"), and as such,
have access to the books and records of the Corporation, and am personally
familiar with the facts concerning the matters herein certified.
2. Attached hereto as Exhibit "A" is a true and correct copy of
a Consent to Actions Taken by the Shareholders and Directors of the Corporation,
as of the date of this Certificate, and such Consent is in full force and
effect, and is filed with the records of the Corporation.
4. The following named persons are, as of the date hereof, the
only directors of the Corporation, and each is qualified and acting in the
office set forth below, opposite his name.
<TABLE>
<CAPTION>
NAME OFFICE SIGNATURE
- ---- ------ ---------
<S> <C> <C>
Marc S. Greene President
-------------------------
Michael Weinstock Secretary
-------------------------
</TABLE>
5. The signature appearing opposite the name of such persons as
set forth above is such person's genuine signature and Let's Talk Cellular,
Inc. may rely on the form of such signature in accepting any document
referred to in the Consent attached hereto as Exhibit "A".
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal of the Corporation on this day of , 1996.
---- --------------
NORTH POINT CELLULAR, INC.
-----------------------------------------
Michael Weinstock, Secretary
<PAGE> 39
EXHIBIT 2.3(H)
AFFIDAVIT
STATE OF GEORGIA )
) SS:
COUNTY OF __________ )
BEFORE ME, the undersigned authority, personally appeared Michael
Weinstock, who, after first being duly sworn, deposes and says that the
following facts are true and correct and given on personal knowledge:
1. I, Michael Weinstock, have no present intent (i) to serve as or be a
consultant to or employee, officer, agent, director or owner of more than three
percent (3%) of another corporation, partnership or other entity which competes
with the Buyer within a 75 mile radius of the City of Atlanta in the Buyer's
Business (the term "Buyer's Business" means the business of selling cellular or
wireless communications services or products); (ii) either (x) to solicit for
employment, (y) to endeavor in any way to entice away from employment with the
Buyer or its affiliates or (z) to employ any employee of the Buyer or any of its
affiliates who is an officer, a manger of any department, salesperson or any
sub-agent, sub-contractor or other independent contractor, including, without
limitation, any resellers of cellular or wireless communications services; or
(iii) to solicit any person, corporation, partnership or other entity that is a
customer of the Seller immediately prior to the Closing for the purpose of
selling cellular or wireless communications services or products. Capitalized
terms not defined above have the meanings given in that certain Asset Purchase
Agreement dated as of August __, 1996 by and
<PAGE> 40
among Let's Talk Cellular of America, Inc., North Point Cellular, Inc., Michael
Weinstock and Marc Greene.
FURTHER AFFIANT SAYETH NAUGHT.
---------------------------------
STATE OF GEORGIA )
) SS:
COUNTY OF __________ )
Sworn to and subscribed before me this _____ day of ______________,
19_____. He/she/they personally appeared before me, is/are personally known to
me or produced ____________ ____________________ as identification, and [did]
[did not] take an oath.
Notary:
---------------------------------
[NOTARIAL SEAL] Print Name:
------------------------------
Notary Public, State of
-----------------
My commission expires:
------------------
2
<PAGE> 41
EXHIBIT 2.3(J)
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement") dated as of August __, 1996,
between Let's Talk Cellular of America, Inc., a Florida corporation (the
"Corporation"), and North Point Cellular, Inc., a Georgia corporation (the
"Consultant").
WHEREAS, the Consultant is willing to make its expertise and experience
available to the Corporation upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto do hereby agree as follows:
1. Term. For the period commencing on the date hereof and ending
on the date 30 months after the date thereof (the "Term"), the Consultant shall
provide advisory services to the Corporation as provided in Section 2.
2. Services.
(a) Subject to the restrictions set forth in paragraph
(b) below, during the Term the Consultant shall provide to the Corporation on a
non-exclusive basis advisory services relating to budgeting, developing
projections, administrative issues, financial reporting and other projects as
reasonably requested by the Corporation. The Consultant may provide its services
hereunder from its own place of business during the Consultant's normal business
hours according to a schedule reasonably acceptable to the Consultant and by way
of, among other means, telephone consultation or written correspondence and
otherwise in the manner reasonably acceptable to the Consultant. The Corporation
shall provide the Consultant with reasonable notice of any services requested.
The Consultant's services shall include obtaining on behalf of the Corporation
those certain estoppel letters set forth in the Escrow Agreement (as hereinafter
defined). With respect to each such estoppel letter that the Consultant delivers
to the Corporation, the Corporation shall promptly pay to the consultant an
amount equal to the deposit held by the landlord with respect to the lease
referred to in such estoppel letter. The Consultant shall not be obligated to
devote more than hours in any month to the provision of services hereunder
(b) The Consultant agrees that agrees that for the period
commencing on the date hereof (the "Closing Date") and ending on the third
anniversary of the Closing Date, it will not serve as or be a consultant to or
owner of more than three percent (3%) of another corporation, partnership or
other entity which competes with the Corporation within a 75 mile radius of the
City of Atlanta in the Corporation's Business. The term "Corporation's Business"
<PAGE> 42
shall mean the business of selling cellular or wireless communications services
or products. The Consultant further agrees that for the period commencing on the
Closing Date and ending on the third anniversary of the Closing Date, it (i)
will not (x) solicit for employment, (y) endeavor in any way to entice away from
employment with the Corporation or its affiliates or (z) employ any employee of
the Corporation or any of its affiliates who is an officer, a manager of any
department, salesperson or any sub-agent, sub-contractor or other independent
contractor, including, without limitation, any resellers of cellular or wireless
communications services and (ii) will not solicit any person, corporation,
partnership or other entity that is a customer of the Corporation for the
purpose of selling cellular or wireless communications services or products.
(c) The parties hereto hereby acknowledge that a breach
or violation by the Consultant of any or all of the covenants and agreements
contained in paragraph (b) above may cause irreparable harm and damage to the
Corporation in a monetary amount which may be virtually impossible to ascertain.
As a result, the Consultant acknowledges and agrees that the Corporation shall
be entitled to an injunction from any court of competent jurisdiction without
having to post a bond and restraining any breach or violation of any or all of
the covenants and agreements contained in paragraph (b) above by the Consultant,
either directly or indirectly, and that such right to injunction shall be
cumulative and in addition to whatever other rights or remedies that the
Corporation may possess hereunder, at law or in equity. Nothing contained in
this Section 2 shall be construed to prevent the Corporation from seeking and
recovering from the Consultant damages sustained by it as a result of any breach
or violation by it of any of the covenants or agreements contained in this
Section 2.
3. Fees. In consideration of its agreement to act as a Consultant
pursuant to the terms of this Agreement, the Corporation hereby agrees to pay
the Consultant at the execution of this Agreement the sum of (i) $175,000 by
wire transfer of immediately available funds and (ii) $425,000 subject to an
escrow agreement in the form attached hereto as Exhibit A.
4. Expenses. The Consultant shall pay any and all costs or
expenses incurred by it in connection with any services it provides to the
Corporation hereunder.
5. Confidentiality. All information, knowledge and data relating
to or concerned with the operations, business and affairs of either the
Consultant or the Corporation, as the case may be, which are exchanged by the
parties hereto in connection with the performance by the Consultant of its
duties hereunder (including the existence of this Agreement) shall be the
property of the Corporation and be treated as confidential information and shall
be held in a fiduciary capacity by the parties hereunder. The Consultant shall
not disclose or divulge such information to any firm, person, corporation or
other entity other than in connection with the performance of its duties
hereunder.
6. Independent Contractor. In performing the services provided
for hereunder, the Consultant is acting as an independent contractor, and the
Consultant's employees at all times during the term of this Agreement shall be
in the employment of and under the supervision and responsibility of the
Consultant, and no person employed by the Consultant either directly or
indirectly shall be deemed by virtue of this Agreement, or any other agreement
related to the Business, to be the servant, agent or employee of the Corporation
or any affiliate of the Corporation for any purpose whatsoever.
-2-
<PAGE> 43
7. Assignment. All of the terms of this Agreement shall inure to
the benefit of, be enforceable by and be binding upon the parties hereto and
their respective successors and assigns; provided, that the Consultant shall not
have the right to assign his rights or duties hereunder or any interest herein
without the prior written consent of the Corporation.
8. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if sent by registered or certified mail, return receipt requested,
with first-class postage fees prepaid, or if hand delivered against receipt or
if sent via facsimile transmission upon electronic confirmation of receipt
thereof during normal business hours, to the applicable party at the address
indicated below:
If to the Consultant:
If to the Corporation:
or, to each party, to such other address as shall be designated by such party in
a written notice to the other party pursuant to the provisions of this Section
8. All such notices, requests, demands and other communications shall be
effective when sent.
9. Severability. In the event any part of this Agreement, for any
reason, shall be finally adjudged by any court of competent jurisdiction to be
invalid, such judgment shall not affect, impair or invalidate the remainder of
this Agreement and this Agreement shall be reformed consistent with the original
objectives of this Agreement. The invalidity of any part or parts of this
Agreement shall not relieve the parties from their other duties and obligations
under this Agreement.
10. Waiver. The failure of either party to enforce any provision
of this Agreement or exercise any right granted hereby shall not be construed to
be a waiver of such provision or right nor shall it affect the validity of this
Agreement or any part hereof or limit in any way the right of either party
subsequently to enforce any such provision or exercise such right in accordance
with its terms.
11. No Third-Party Beneficiaries. This Agreement shall be
construed to be for the benefit of only the parties hereto and shall confer no
right or benefit upon any other person based on the theory of third party
beneficiaries or otherwise.
12. Amendments. The term of this Agreement may be amended,
modified, discharged, waived or terminated only by a written instrument executed
by both parties or, in the case of a waiver, by the party waiving compliance,
unless such waiver is conditional.
-3-
<PAGE> 44
13. Titles and Headings. The titles and headings included in this
Agreement are inserted for convenience only and shall not be deemed to be a part
of or considered in construing this Agreement, nor limit or otherwise affect the
meaning hereof.
14. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, and which
together shall constitute but one and the same instrument.
15. Entire Agreement. This Agreement and the Full Unconditional
Release constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof, and no amendment or modification hereof shall be
valid or binding unless made in writing and signed by the party against whom
enforcement thereof is sought.
16. Applicable Law. This Agreement shall be governed, interpreted
and construed in accordance with the laws of the State of Georgia without regard
to choice-of-law principles thereof.
17. Limits of Liability. No party shall have any liability
hereunder to the other except for wilful misconduct or violation of any
applicable law. No direct or indirect shareholder, officer, director or agent of
the Consultant shall have any obligation or liability hereunder or with respect
to any judgments obtained by any party against such corporation.
* * *
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Consulting
Agreement to be duly executed on the date and year first above written.
LET'S TALK CELLULAR OF AMERICA,
INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
NORTH POINT CELLULAR, INC.
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE> 46
EXHIBIT 2.6
ESTOPPEL LETTER
THIS ESTOPPEL LETTER (this "Agreement") dated as of _____________,
199_, by and between __________________________________________________, whose
address is _________________________________ ("Landlord"),
_______________________________, a ___________ corporation ("Tenant").
WHEREAS, the Tenant has by a written lease dated ______________, 19__
(as amended from time to time hereinafter called the "Lease") leased from the
Landlord all or part of certain real estate and improvements thereon located on
the property more particularly described in Exhibit A hereto (the "Premises");
WHEREAS, Let's Talk Cellular of America, Inc., a Florida corporation
(the "Purchaser") intends to acquire all of the assets of the Tenant (the
"Acquisition") and desires to have the Lease assigned to it prior to the
consummation of the Acquisition;
WHEREAS, the Purchaser and the Tenant desire to obtain the consent of
the Landlord to facilitate the consummation of the Acquisition.
NOW, THEREFORE, in consideration of the premises hereof and mutual
promises and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Consent to Acquisition. The Landlord hereby acknowledges and
agrees that (a) the Purchaser may acquire the assets of the Tenant and such
Acquisition does not constitute a breach of, or default under, or modify the
terms of, the Lease and, to the extent the Lease contains any provision to the
contrary, such provisions are hereby waived with respect to the Acquisition, and
(b) the Tenant may assign the Lease to the Purchaser.
2. Acknowledgement of Security Interest. The Landlord
acknowledges that the Purchaser and/or Tenant has or will execute and deliver a
security agreement (the "Security Agreement") in favor of its lenders on the
Lease and (a) all property, including, without limitation, trade fixtures,
equipment and inventory located on or used in connection with the Premises by
the Tenant, and (b) operating licenses and permits now or at any time hereafter
relating to the use of the Premises (all such property being collectively
referred to as the "Collateral") and the Landlord agrees that the execution,
delivery and performance of the Security Agreement by the Purchaser and its
lenders do not constitute a breach of, or default under, or modify the terms of,
the Lease.
3. Acknowledgment of Certain Rights. The Landlord hereby
acknowledges that (i) the Tenant intends to enter into (A) an Assignment,
Assumption and Consent Agreement (the "AirTouch Assignment") by and among the
Tenant, the Purchaser and AirTouch Cellular of Georgia ("AirTouch") providing
for, among other things, the assignment to the Purchaser of that certain Sales
Agent Agreement dated October 19, 1993 by and between AirTouch and the
<PAGE> 47
Tenant, as amended by an Amendment to Sales Agent Agreement for Cellular
Radiotelephone Service dated April 6, 1995 (as so amended, the "Sales Agent
Agreement") and (B) an Amendment Number Two to Sales Agent Agreement for
Cellular Radiotelephone Service by and between AirTouch and Purchaser and (ii)
pursuant to the AirTouch Assignment, AirTouch will have (A) the right to approve
or disapprove certain transfers of the Purchaser's right, title or interest in
any lease for certain of its retail stores, including the Lease, or any right,
title or interest in either of the trade names "Peachtree Mobility" or "Let's
Talk Cellular and Wireless" and (B) a right of first refusal in certain
circumstances to purchase Tenant's right, title or interest in any or all of the
leases for certain of its retail stores, including the Lease, or any of Tenant's
right, title or interest in either of the trade names "Peachtree Mobility" or
"Let's Talk Cellular and Wireless."
4. No Defaults. The Landlord acknowledges and agrees that there
are no existing defaults under the Lease on the part of the Landlord and the
Tenant, the Tenant has paid all rent through the last day of the whole calendar
month ending prior to the date hereof and the Tenant has performed all covenants
required of the Tenant under the terms of the Lease prior to the date hereof.
5. Notices. Any notice(s) required or desired to be given
hereunder (a) to the Landlord shall be in writing directed to
__________________________________, Attention: _____________________________,
and (b) to the Purchaser shall be directed to Let's Talk Cellular of America,
Inc., Attention: ___________________________. All notices hereunder shall be
sent by prepaid certified or registered mail, return receipt requested, or
delivered to a regularly scheduled overnight delivery carrier with delivery fees
either prepaid or an arrangement, satisfactory with such carrier, made for the
payment of such fees.
6. Amendments; Notice of Assignment of Interests. The agreements
contained herein may not be modified or terminated orally and shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors or assigns. The Lenders shall promptly notify the Landlord, in the
event that the Lenders shall assign their right, title and interest in or under
the Security Agreement to any third person. The Landlord shall promptly notify
the Lenders in the event that the Landlord shall assign or encumber its interest
in the Premises or under the Lease.
7. Deposits. The Landlord currently holds deposits of the Tenant
under the Lease totaling $________________.
8. Tenant's Obligations. THIS AGREEMENT SHALL NOT IMPAIR OR
OTHERWISE AFFECT TENANT'S OBLIGATIONS TO PAY RENT AND ANY OTHER SUMS PAYABLE BY
TENANT OR TO OTHERWISE PERFORM ITS OBLIGATIONS TO THE LANDLORD PURSUANT TO THE
TERMS OF THE LEASE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
[LANDLORD]
By:
----------------------------
Title:
------------------------
[TENANT]
By:
----------------------------
Title:
------------------------
-2-
<PAGE> 48
STATE OF _________________ )
) SS
COUNTY OF ________________ )
On this ____ day of __________________, 199_, before me, the
undersigned, a Notary Public in and for the __________________________,
personally appeared _________________ _________________________, to me
personally known, who, being by me duly sworn, did say that he is the
_____________________________ of said corporation executing the within and
foregoing instrument; that (no seal has been procured by the said) (the seal
affixed thereto is the seal of said) corporation; that said instrument was
signed (and sealed) on behalf of said corporation by authority of its Board of
Directors; and that the said ________________ _______________________________ as
such officer acknowledged the execution of said instrument to be the voluntary
act and deed of said corporation, by it and by him voluntarily executed.
-------------------------------------
Notary Public in and for the
----------------------------
-3-
<PAGE> 1
EXHIBIT 11.1
EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1995 1996 1997
---------------------------------------
<S> <C> <C> <C>
Primary
Average shares outstanding 2,137,848 2,137,848 2,137,848
Issuance of common stock to purchase
Telephone Warehouse 1,817,468 1,817,468 1,817,468
Assumed conversion of Series A,
Preferred Stock 2,137,850 2,137,850 2,137,850
Warrants issued in connection with
debt refinancing 106,596 106,596 106,596
--------------------------------------
Total 6,199,762 6,199,762 6,199,762
Net income (loss) $ 8,139 $ 65,998 $ (45,831)
Accretion of Series A Preferred Stock to
redemption value - (1,062) (62,640)
Fair value of Common Stock
distributed to preferred shareholder
to induce conversion of Series A
Preferred Stock - - (320,000)
--------------------------------------
Net income (loss) per share
applicable to common shareholders $ 8,139 $ 64,936 $ (428,471)
--------------------------------------
Per share amount $ - $ .01 $ (.07)
--------------------------------------
Fully Diluted
Average shares outstanding 2,137,848 2,137,848 2,137,848
Issuance of Common Stock to purchase
Telephone Warehouse 1,817,468 1,817,468 1,817,468
Assumed conversion of Series A
Preferred Stock 2,137,850 2,137,850 2,137,850
Warrants issued in connection with
debt refinancing 106,596 106,596 106,596
--------------------------------------
Total 6,199,762 6,199,762 6,199,762
Net income (loss) $ 8,139 $ 65,998 $ (45,831)
Accretion of Series A Preferred Stock
to redemption value - (1,062) (62,640)
Fair value of Common Stock
distributed to preferred shareholder
to induce conversion of Series A
Preferred Stock - - (320,000)
--------------------------------------
Net income (loss) per share applicable
to common shareholders $ 8,139 $ 64,936 $ (428,471)
--------------------------------------
Per share amount $ - $ .01 $ (.07)
--------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated
September 19, 1997, except for Note 18, as to which the date is October ,
1997, with respect to the financial statements and schedule of Let's Talk
Cellular & Wireless, Inc. as of July 31, 1996 and 1997 and for the years then
ended, in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-34595)
and related Prospectus of Let's Talk Cellular & Wireless, Inc. for the
registration of 3,000,000 shares of its Common Stock.
ERNST & YOUNG LLP
Miami, Florida
The foregoing consent is in the form that will be signed upon the completion of
the stock split described in Note 18 to the financial statements.
Miami, Florida
October 3, 1997
/s/ ERNST & YOUNG LLP
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 25, 1997, with respect to the combined financial
statements of National Cellular, Inc., Telephone Warehouse, Inc., Telephone
Warehouse-San Antonio, Inc., and Telephone Warehouse-KC, Inc. in Amendment No. 2
to the Registration Statement (Form S-1 No. 333-34595) and related Prospectus
of Let's Talk Cellular & Wireless, Inc. for the registration of 3,000,000 shares
of its Common Stock.
/s/ ERNST & YOUNG LLP
Dallas, Texas
October 3, 1997
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-34595 of Let's Talk Cellular & Wireless, Inc. (formerly Let's Talk Cellular
of America, Inc.) on Form S-1 of our report dated October 31, 1995, appearing
in the Prospectus, which is part of this Registration Statement and to the
reference to us under the headings "Selected Consolidated Financial Data" and
"Experts" in such Prospectus.
Miami, Florida
October 3, 1997
-----------------------
The consolidated financial statements reflect the 3.289 for one split of the
Company's outstanding common stock which is to be effected immediately prior to
the effective date of the offering contemplated by this Prospectus. Our consent
is in the form which will be furnished by Deloitte & Touche LLP upon completion
of such stock split, which is described in Note 18 to the consolidated
financial statements and assuming that from October 31, 1995 to the date of
such stock split, no other events shall have occurred that would affect the
accompanying consolidated financial statements and notes thereto.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
October 3, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 1,080,014
<SECURITIES> 0
<RECEIVABLES> 6,393,787
<ALLOWANCES> 686,804
<INVENTORY> 5,712,420
<CURRENT-ASSETS> 14,132,005
<PP&E> 6,115,324
<DEPRECIATION> 818,581
<TOTAL-ASSETS> 34,537,541
<CURRENT-LIABILITIES> 12,519,326
<BONDS> 0
0
0
<COMMON> 60,932
<OTHER-SE> 6,166,474
<TOTAL-LIABILITY-AND-EQUITY> 34,537,541
<SALES> 30,061,969
<TOTAL-REVENUES> 30,061,969
<CGS> 14,822,617
<TOTAL-COSTS> 14,822,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 340,102
<INCOME-PRETAX> (42,989)
<INCOME-TAX> 2,842
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,831)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
