<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1997
REGISTRATION NO. 333-34595
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 5
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]
---------------------
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 , 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 $14 and $16 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. SALOMON BROTHERS INC
------------------------
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 reflects a 3.289-for-one stock split effected
on October 20, 1997. 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 entered into definitive agreements 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 Corp. ("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
5
<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." From June 1996 through September 30,
1997, the Company opened 54 stores and acquired 24 stores, and as of September
30, 1997, the Company operated a total of 102 stores. 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 October 31, 1997, the Company entered
into a binding agreement 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 agreement provides for a cash purchase price of $2.1 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 October 28, 1997, the Company entered into a
binding agreement 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 agreement
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......................... $ 3,572 $ 6,120 $ 8,152 $ 13,230 $ 19,239
Activation commissions............... 461 1,651 4,366 12,575 19,194
Residual income...................... 228 533 1,075 1,948 10,135
Wholesale sales...................... -- -- -- 2,309 25,838
--------- --------- --------- --------- ---------
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 23,547
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 $ 3,530
Income (loss) before provision for
income taxes......................... $ 159 $ 8 $ 105 $ (43) $ 3,428
Income tax provision................... 70 -- 39 3 1,470
--------- --------- --------- --------- ---------
Net income (loss)...................... $ 89 $ 8 $ 66 $ (46) $ 1,958
========= ========= ========= ========= =========
Net income (loss) per share applicable
to common shareholders............... $ .01 $ -- $ .01 $ (.07)(2)(3) $ .23(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 $ 6,405
========= ========= ========= ========= =========
Net cash provided by (used in)
operating activities................. $ 17 $ 92 $ 252 $ (472)
========= ========= ========= =========
Net cash used in investing
activities........................... $ 182 $ 809 $ 2,530 $ 1,666
========= ========= ========= =========
Net cash provided by financing
activities........................... $ 148 $ 895 $ 3,393 $ 1,860
========= ========= ========= =========
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
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<TABLE>
<CAPTION>
AS OF JULY 31, 1997
-------------------------
ACTUAL AS ADJUSTED(8)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 1,613 $15,556
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 ("GAAP")), but because it is a widely accepted
supplemental financial measure, and management believes it provides relevant
and useful information. The Company's calculation of EBITDA may not be
comparable to similarly titled measures reported by other companies since
all companies do not calculate this non-GAAP measure in the same fashion.
The Company's EBITDA calculation is not intended to represent cash provided
by (used in) operating activities, since it does not include interest and
taxes and changes in operating assets and liabilities, nor is it intended to
represent the net increase in cash, since it does not include cash provided
by (used in) investing and financing activities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(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 the 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
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.
12
<PAGE> 14
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, including, without
limitation, executive officers and key employees to manage the Company's
anticipated growth. 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 substantially 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-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."
13
<PAGE> 15
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 employees, officers, directors and independent contractors of the
Company under the Incentive Plan on the date of this Prospectus, a third of
which, in general, will vest in October of each of 1998, 1999 and 2000. 118,404
of such options will be held by two executive officers and will vest immediately
upon the termination of their employment for any reason other than cause. 3,289
of such options will be granted to a consultant to the Company and will vest
immediately upon the consummation of the offering. 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 $2.1 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 $.00003, upon exercise of warrants that are held by the bank
lender to the Company. See "Certain Transactions."
(2) Includes 106,596 shares of Common Stock that will be issued upon exercise of
warrants immediately prior to the sale of the Common Stock offered hereby.
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.
16
<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 $.00003, 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 effected on October 20, 1997. 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
$.00003 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........................... $13,230,085 $ 6,008,790 $19,238,875
Activation commissions................. 12,574,633 6,618,948 19,193,581
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) 23,546,903
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(2) 2,176,378
----------- ----------- ----------- -----------
Total operating expenses............ 14,942,239 11,978,512 (457,358) 26,463,393
----------- ----------- ----------- -----------
Income from operations................... 297,113 2,775,559 457,358 3,530,030
Interest expense, net.................... (340,102) (714,997) (846,477)(3) (109,550)
1,792,026(4)
Other.................................... -- 7,598 7,598
----------- ----------- ----------- -----------
Income (loss) before provision for income
taxes.................................. (42,989) 2,068,160 1,402,907 3,428,078
Income tax provision..................... 2,842 680,402 786,315(5) 1,469,559
----------- ----------- ----------- -----------
Net income (loss)................... (45,831) 1,387,758 616,592 1,958,519
Fair value of Common Stock distributed to
preferred shareholder to induce
conversion of Series A Preferred
Stock.................................. (320,000) -- 320,000(6) --
----------- ----------- ----------- -----------
Net income (loss) applicable to
common shareholders............... $ (365,831) $ 1,387,758 $ 936,592(7) $ 1,958,519
=========== =========== =========== ===========
Net income (loss) per share
applicable to common
shareholders...................... $ (0.07) $ 0.23(7)(8)
=========== ===========
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 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>
(3) 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>
(4) 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.
(5) 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..................................................... 816,220
Tax benefit associated with the incremental amortization of
the acquired residual income.............................. (175,325)
---------
Pro forma adjustment.............................. $ 786,315
</TABLE>
(6) 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
20
<PAGE> 22
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME -- (CONTINUED)
2,137,850 shares of Common Stock. The conversion of the Series A Preferred
Stock was a condition precedent to the Telephone Warehouse Acquisition.
(7) 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.
(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.
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.......................... $ 2,834 $ 3,572 $ 6,120 $ 8,152 $ 13,230
Activation commissions................ 371 461 1,651 4,366 12,575
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
========= ========= ========= ========= =========
Net cash provided by (used in) operating
activities............................ $ 270 $ 17 $ 92 $ 252 $ (472)
========= ========= ========= ========= =========
Net cash used in investing activities... $ 89 $ 182 $ 809 $ 2,530 $ 1,666
========= ========= ========= ========= =========
Net cash provided by (used in) financing
activities............................ $ (100) $ 148 $ 895 $ 3,393 $ 1,860
========= ========= ========= ========= =========
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 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 GAAP), but because it is a
widely accepted supplemental financial measure, and management believes it
provides relevant and useful information. The Company's calculation of
EBITDA may not be comparable to similarly titled measures reported by other
companies since all companies do not calculate this non-GAAP measure in the
same fashion. The Company's EBITDA calculation is not intended to represent
cash provided by (used in) operating activities, since it does not include
interest and taxes and changes in operating assets and liabilities, nor is
it intended to represent the net increase in cash, since it does not include
cash provided by (used in) investing and financing activities. As such,
EBITDA does not address cash used to support increased inventory
requirements and build-out costs for new store expansion and to fund
acquisitions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for further discussion of significant
trends and cash requirements not captured by EBITDA.
(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 Commissions. The Company receives an activation
commission from the applicable cellular carrier when a customer initially
subscribes for the cellular carrier's service. The amount of the activation
commission paid by cellular carriers is based upon 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 commissions, 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 commissions have become increasingly significant to the
Company's net revenues. Activation commissions for the Company were $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 commissions 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 commissions 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 commissions 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 commissions.
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 commissions 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 commissions
for Telephone Warehouse were $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 commissions 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 increased 62.2% to $13.2 million from $8.2 million, activation
commissions increased 188.0% to $12.6 million from $4.4 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.
Net loss applicable to common shareholders was $366,000 in fiscal 1997 as
compared to $66,000 of income in fiscal 1996 primarily due to the fair value of
the Common Stock, $320,000, distributed to the
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<PAGE> 29
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 increased 33.2% to
$8.2 million from $6.1 million, activation commissions increased 164.6% to $4.4
million from $1.7 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 increased 71.3% to
$6.1 million in fiscal 1995 from $3.6 million in fiscal 1994, activation
commissions increased 258.0% to $1.7 million in fiscal 1995 from $461,000 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 commissions 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
commissions, were flat. The decrease in retail sales, activation commissions 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 commissions 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 commissions 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.
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<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
36
<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 October 1997, the
Company entered into definitive agreements 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 or 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; (ii) AirTouch Cellular represented
0%, 0% and 12%, respectively; and (iii) Bell Atlantic/NyNex represented 5%, 11%
and 13%, 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
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<PAGE> 43
cancellation or non-renewal could have a significant effect on the Company's
financial condition and results of operations. The Company is also a reseller of
paging services, buying blocks of paging time from paging carriers at a
substantial discount and reselling paging services to its customers. The
Company's paging carrier agreements 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
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<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.
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<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
Sheril Miller............................. 41 Vice President -- 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.
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<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.
Sheril Miller has served as Vice President -- 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 until July 1994, 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.
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
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<PAGE> 48
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 $20,199 for
Messrs. Molina and Beveridge, respectively.
(3) See "Option Grants Table" below for additional information about these
options.
OPTION GRANTS, EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to grants of
options to purchase shares of Common Stock during the fiscal year ended July 31,
1997 to the Named Officers. The amounts shown as potential realizable values on
the options are based on assumed annualized rates of appreciation in the price
of the Common Stock of 0%, 5% and 10% over the term of the options, as set forth
in rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent on future performance of the Common Stock.
There can be no assurance that the potential realizable values reflected in this
table will be achieved.
47
<PAGE> 49
STOCK OPTION GRANTS IN THE FISCAL YEAR ENDED JULY 31, 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(1)
---------------------------------------------------------------- ------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/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 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
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<PAGE> 50
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.
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.
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<PAGE> 51
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."
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<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 $.00003 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
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<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 any such company
acquired.
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<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 64.9% 839,958 3,115,360 38.0%
Nicolas Molina(4)(5)..................... 1,021,138 16.5 -- 1,021,138 12.3
Brett Beveridge(4)(5).................... 1,021,138 16.5 -- 1,021,138 12.3
NationsCredit Commercial
Corporation(6)......................... 283,799 4.6 283,799 -- --
Anne Gozlan(7)........................... 64,135 1.1 -- 64,135 1.0
Ronald Koonsman.......................... -- -- -- -- --
Anthony Tamer(4)(8)...................... 3,955,318 64.9 839,958 3,115,360 38.0
Sami Mnaymneh(4)(8)...................... 3,955,318 64.9 839,958 3,115,360 38.0
John Bolduc(4)(8)........................ 3,955,318 64.9 839,958 3,115,360 38.0
Douglas Berman(4)(8)(9).................. 3,955,318 64.9 839,958 3,115,360 38.0
Allan Sorensen(10)....................... 213,785 3.5 53,446 160,339 2.0
All directors and executive officers of
the Company as a group (9
persons)(11)........................... 6,275,514 100.0% 1,000,000(4) 5,382,110 64.2%
</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 and warrants 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 be 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, in general, will vest in October of each
of 1998, 1999 and 2000. 118,404 of such options will be held by two executive
officers and will vest immediately upon the termination of their employment for
any reason other than cause. 3,289 of such options will be granted to a
consultant to the Company and will vest immediately upon the consummation of the
offering. 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,
56
<PAGE> 58
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 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 and Salomon Brothers Inc are acting as
representatives (the "Representatives"), 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...................................
Salomon Brothers Inc........................................
---------
Total.......................................... 3,000,000
=========
</TABLE>
The Representatives have 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 agreement or with respect to which the person executing the
agreement thereafter acquires the power of
58
<PAGE> 60
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
Representatives. 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 Representatives believe 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.
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<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.
/s/ ERNST & YOUNG LLP
Miami, Florida
September 19, 1997, except for the
third paragraph of Note 18, as to
which the date is October 20, 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.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
October 31, 1995
(October 20, 1997 as to the effects
of the stock split discussed in the
third paragraph of Note 18)
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....................................... $6,119,990 $ 8,151,904 $13,230,085
Activation commissions............................. 1,650,318 4,366,343 12,574,633
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 effected on October 20, 1997 (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 Commissions
The Company receives activation commissions 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 (approximately $385,000, $689,000
and $1,054,000 for the fiscal years ended July 31, 1995, 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
$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 $.00003 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 an
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 13% of net revenues for the years
ended July 31, 1996 and 1997, respectively. This customer accounted for 25% and
8% 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. SUBSEQUENT EVENTS
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
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 Corp. 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-19
<PAGE> 81
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 20, 1997, the Company effected 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.
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
commissions................ $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 Commissions
The Company receives activation commissions 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.
SALOMON BROTHERS INC
, 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>
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.
In October 1997, the Registrant issued 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 were issued pursuant to the exemption set
forth in Section 3(a)(9) 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.
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.***
10.23 -- Stock Purchase Agreement, dated as of October 28, 1997, by
and among the Registrant, Barry A. Warren, Mark Quinlan and
Louis Dutson.**
10.24 -- Asset Purchase Agreement, dated as of October 31, 1997, by
and among the Registrant, Cellular Unlimited Corp. and Craig
J. Jerabeck.**
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.**
</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
II-4
<PAGE> 101
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.
(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 November 18, 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 November 18, 1997
- ----------------------------------------------------- and Director (principal
Nicolas Molina executive officer)
ANNE GOZLAN* Chief Financial Officer November 18, 1997
- ----------------------------------------------------- (principal accounting
Anne Gozlan officer)
BRETT BEVERIDGE* President and Chairman of November 18, 1997
- ----------------------------------------------------- the Board
Brett Beveridge
ANTHONY TAMER* Director November 18, 1997
- -----------------------------------------------------
Anthony Tamer
DOUGLAS BERMAN* Director November 18, 1997
- -----------------------------------------------------
Douglas Berman
SAMI MNAYMNEH* Director November 18, 1997
- -----------------------------------------------------
Sami Mnaymneh
JOHN BOLDUC* Director November 18, 1997
- -----------------------------------------------------
John Bolduc
ALLAN SORENSEN* Director November 18, 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 the third
paragraph of Note 18, as to which the date is October 20, 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.
/s/ ERNST & YOUNG LLP
Miami, Florida
September 19, 1997, except for the third
paragraph of Note 18, as to which
the date is October 20, 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 for the year 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.***
10.23 -- Stock Purchase Agreement, dated as of October 28, 1997, by
and among the Registrant, Barry A. Warren, Mark Quinlan and
Louise Dutson.**
10.24 -- Asset Purchase Agreement, dated as of October 31, 1997, by
and among the Registrant, Cellular Unlimited Corp. and Craig
J. Jerabeck.**
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.**
</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 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,
<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
None
<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
DOCKETED UNITED STATES DEPARTMENT OF COMMERCE
Patent and Trademark Office
Assistant Commissioner For Trademarks
2900 Crystal Drive
Arlington, Virginia 22202-3513
June 14, 1996
NOTICE OF PUBLICATION UNDER 12(a)
1. Serial No.: 2. Mark:
75/023,838 Miscellaneous Design
3. Applicant: 4. Publication Date:
NORTHPOINT CELLULAR, INC. JUL 16, 1996
The mark of the application identified appears to be entitled to registration.
The mark will, in accordance with Section 12(a) of the Trademark Act of 1946,
as amended, be published in the Official Gazette on the date indicated above
for the purpose of opposition by any person who believes he will be damaged by
the registration of the mark. If no opposition is filed within the time
specified by Section 13(a) of the Statute or by rules 2.101 or 2.102 of the
Trademark Rules, the Commissioner of Patents and Trademarks may issue a
certificate of registration.
Copies of the trademark portion of the Official Gazette containing the
publication of the mark may be obtained at $28.00 each for domestic orders, or
at $35.00 each for foreign orders from:
The Superintendent of Documents
U.S. Government Printing Office
Washington, D.C. 20402
By direction of the Commissioner.
<PAGE> 24
Class 35--(Continued).
SN 75-019.037. Pacific Telesis Group, San Francisco, CA. Filed 11-14-1995.
SMART DELIVERY
OWNER OF U.S. REG. NOS. 1,473,114, 1,588,103 AND OTHERS.
NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE "DELIVERY", APART FROM THE
MARK SHOWN.
FOR ADVERTISING AND BUSINESS SERVICES, NAMELY PROMOTING THE GOODS AND
SERVICES OF OTHERS BY INCLUDING PROMOTIONAL MATERIALS AND PRODUCTS IN THE
DELIVERY OF TELEPHONE DIRECTORIES (U.S. CLS. 100, 101 AND 102).
FIRST USE 3-9-1994; IN COMMERCE 3-9-1994.
---------------
SN 75-019.064 ZAMOISKI CO., THE, BALTIMORE, MD. FILED 11-14-1995.
KAC
FOR BUSINESS MERCHANDISING IN THE FIELD OF KITCHEN DISPLAY SERVICES (U.S.
CLS. 100, 101 AND 102).
FIRST USE 9-13-1994; IN COMMERCE 9-13-1994.
---------------
SN 75-021,597. WANDTKE, JEFFREY C., ENCINITAS, CA. FILED 11-17-1995.
MYDENTIST
FOR DIRECTORY INFORMATION REGARDING THE SERVICES OF DENTISTRY ACCESSED
THROUGH A GLOBAL COMPUTER NETWORK (U.S. CLS. 100, 101 AND 102).
FIRST USE 11-1-1995; IN COMMERCE 11-1-1995.
---------------
SN 75-021.957. THEME PROMOTIONS, INC., DBA THEME CO-OP PROMOTIONS, SAN
FRANCISCO, CA. FILED 11-20-1995.
MARKET ACTION
FOR DEVELOPING PROMOTIONAL CAMPAIGNS FOR THE FOOD PRODUCTS, HEALTH AND
BEAUTY PRODUCTS AND HOUSEHOLD PRODUCTS INDUSTRIES AND DISSEMINATING
ADVERTISING MATTER IN CONJUNCTION THEREWITH (U.S. CLS. 100, 101 AND 102).
FIRST USE 12-0-1994; IN COMMERCE 12-0-1994.
SN 75-022.596. HARRISON COMPANY, INC., THE, AURORA, CO. FILED 11-20 1995.
LOYALTY MILES
OWNER OF U.S. REG. NOS. 1,618,994 AND 1,643,840.
FOR PROMOTING THE SERVICES OF BANKING INSTITUTIONS BY CREATING AND
ADMINISTERING PROGRAMS OFFERING BANKING INSTITUTION CUSTOMERS WITH THE
OPPORTUNITY TO ACCRUE POINTS REDEEMABLE FOR TRAVEL BENEFITS (U.S. CLS. 100, 101
AND 102).
---------------
SN 75-022,598. HARRISON COMPANY, INC., THE, AURORA, CO. FILED 11-20-1995.
LOYALTY MINUTES
OWNER OF U.S. REG. NOS. 1,618,994 AND 1,643,840.
FOR PROMOTING THE SERVICES OF BANKING INSTITUTIONS BY CREATING AND
ADMINISTERING PROGRAMS OFFERING BANKING INSTITUTION CUSTOMERS WITH THE
OPPORTUNITY TO ACCRUE POINTS REDEEMABLE FOR LONG DISTANCE TELEPHONE BENEFITS
(U.S. CLS. 100, 101 AND 102).
---------------
SN 75-023,838. NORTHPOINT CELLULAR, INC., DBA PEACHTREE MOBILITY,
ALPHARETTA, GA. FILED 11-24-1995.
[The service mark consists of the image of a peach, with two leaves
protruding from the top, two eyes, a nose, a smiling face and an attached hand
holding a cellular telephone.]
THE STIPPLING IS A FEATURE OF THE MARK AND DOES NOT INDICATE COLOR.
FOR SERVICE PROVIDER REPRESENTATIVES IN THE FIELD OF CELLULAR SERVICES;
AND MANUFACTURER REPRESENTATIVES IN THE FIELD OF CELLULAR PHONES AND ACCESSORIES
(U.S. CLS. 100, 101 AND 102).
FIRST USE 12-0-1994; IN COMMERCE 12-0-1994.
<PAGE> 25
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> 26
SCHEDULE 3.15
LEASE DEFAULTS/CLAIMS
None
<PAGE> 27
SCHEDULE 5.2
ALLOCATION OF PURCHASE PRICE
(a) The Buyer will submit within 30 days a proposal for allocating
the Purchase Price.
<PAGE> 28
SCHEDULE 5.9
SHAREHOLDER CLAIMS
None
<PAGE> 29
Exhibit 2.3(a)(i)
ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT
This Assignment, Assumption and Consent Agreement (this
"Agreement") is executed and delivered on August 30, 1996 by and among North
Point Cellular, Inc. d/b/a Peachtree Mobility ("Assignor"), a Georgia
corporation, Let's Talk Cellular of America, Inc. ("Assignee"), a Florida
corporation, and AirTouch Cellular of Georgia ("AirTouch"), a Nevada
corporation.
WHEREAS, Assignor and AirTouch are parties to a Sales Agent
Agreement dated October 19, 1993, as amended by that certain "Amendment to Sales
Agent Agreement for Cellular Radiotelephone Service" between such parties dated
April 6, 1995, a copy of which agreement and amendment are attached as Exhibit A
and Exhibit B, respectively (such agreement, as so amended, the "Sales Agent
Agreement");
WHEREAS, Assignor wishes to assign the Sales Agent Agreement to
Assignee, and Assignee wishes to accept such assignment, effective as of the
"Effective Date" set forth below;
WHEREAS, Sales Agent Agreement Section 10(d) prohibits the
assignment of such agreement without AirTouch's prior written consent;
WHEREAS, the parties wish to set forth the terms and conditions on
which AirTouch is willing to consent to the assignment; and
WHEREAS, this Agreement is intended to govern the relationship of
each of Assignor and Assignee to AirTouch with respect to the Sales Agent
Agreement, but the relationship between Assignor and Assignee is or may be the
subject of additional arrangements between them with respect to commissions,
charge backs and other matters;
NOW, THEREFORE, for and in consideration of the premises, the
mutual covenants and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Assignment. Assignor hereby assigns to Assignee, as
of the Effective Date (as defined below), all of Assignee's rights, titles and
interests in and to the Sales Agent Agreement, including without limitation
rights to the payment of commissions and cooperative and other advertising
allowances, whether such commissions or allowances shall have accrued before, on
or after the Effective Date.
2. Assumption. Assignee hereby accepts the foregoing
assignment and agrees that, from and after the Effective Date, Assignee assumes
(a) all liabilities and obligations of Assignor under the Sales Agent Agreement
and (b) all liabilities and obligations of Assignor to AirTouch incurred in the
ordinary course of Assignor's service as an AirTouch agent, including without
limitation those obligations listed on Exhibit C. Without limiting the
foregoing, Assignee
<PAGE> 30
agrees that any and all charge backs under the Sales Agent Agreement and any
other amounts due AirTouch under the Sales Agent Agreement may be charged to
Assignee and set-off against commissions otherwise payable to Assignee, whether
such charge backs and other amounts due shall have accrued before, on or after
the Effective Date. Notwithstanding the foregoing, except for the obligations
set forth on Exhibit C, if a liability or obligation under the Sales Agent
Agreement exists or arises as a result of any act or omission of Assignor
occurring prior to the Effective Date, and in AirTouch's judgment Assignee did
not contribute to the existence of such liability or obligation and shall not
have benefitted from such act or omission, then such liability or obligation
shall remain an obligation of Assignor and shall not be assumed by Assignee.
3. Consent of AirTouch. Subject to its receipt of the
executed documents listed in Section 7 below in form and substance satisfactory
to AirTouch, AirTouch consents to the foregoing assignment and assumption,
effective the Effective Date.
4. Effective Date. The "Effective Date" is August 31, 1996.
5. Continuing Obligations of Assignor. Without limiting
Section 2 above, Assignor shall continue to be bound from and after the
Effective Date by the provisions of the Sales Agent Agreement listed on Exhibit
D, which provisions shall continue to bind Assignor notwithstanding any
termination or expiration of the Sales Agent Agreement.
6. Additional Obligations of Assignor. On the Effective Date,
Assignee will immediately: (a) cease marketing, selling, leasing or offering in
any manner any AirTouch cellular radiotelephone service ("CRS") or equipment
provided by AirTouch to use AirTouch's CRS; (b) cease using in any manner any
"Proprietary Property" (as defined in Sales Agent Agreement Section 7(a)(iii))
and (C) provide to Assignee all Proprietary Property and all copies thereof in
whatever form in the possession of Assignor, or of any "Sub-Agents" or
"Sub-Subagents" (as such terms are defined in Exhibit C to the Sales Agent
Agreement) who are not going to continue to act as such on behalf of Assignee,
or of any of their respective employees, representatives or agents (all such
Sub-Agents, Sub-Subjects and others, collectively, "Assignor's
Affiliates")(including, without limitations, an updated list containing names,
addresses and all other relevant information Assignor's or any of Assignor's
Affiliates then possess concerning "New Customers" (as defined in the Sales
Agent Agreement) that Assignor or Assignor's Affiliates have enrolled in the
"CRS Coverage Area" (as defined in the Sales Agent Agreement) and prospective
customers, and all copies of such information in Assignor's or Assignor's
Affiliates' possession).
7. Additional Documents Delivered. The parties acknowledge
that contemporaneously with the execution of this Agreement they are executing
and delivering among themselves, as applicable, the following documents: (a) a
noncompetition agreement between AirTouch and Marc S. Greene; (b) a release or
similar agreement between BellSouth Cellular National Marketing, Inc.
(Individually and collectively with any applicable affiliates, "BellSouth"),
Assignee and AirTouch; (c) an amendment to the Sales Agent Agreement as
assigned and assumed hereunder, between AirTouch and Assignee; and (d) a credit
service agreement between AirTouch and Assignee.
-2-
<PAGE> 31
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
8. Representations and Warranties.
(a) Generally. Assignor and Assignee each severally
represent and warrant to AirTouch (i) that such party has the power and
authority to enter into this Agreement and to carry out terms and conditions
hereof and (ii) that neither such party's negotiation, execution, delivery nor
performance of this Agreement, nor its acting as an AirTouch Agent, is
restricted by or in violation of any agreement, commitment, order, ruling or
proceeding to which it is a party or to which it or any of its assets are
subject, including without limitation any agreements with BellSouth and any
leases of store locations.
(b) Assignment of Leases. Assignor, Assignee and each
of the "Additional Lessees" listed on Exhibit E jointly and severally represent
and warrant to AirTouch that (i) all of the lessees under the leases for each of
the Primary Stores (as defined in the Sales Agent Agreement but not including
the Lenox Mall store) have assigned their respective interests in and to such
leases to Assignee, (ii) each of Assignor and Assignee shall have used and shall
continue after the date hereof to use its best efforts to obtain estoppel
agreements, executed by each landlord under any such leases and evidencing such
landlord's consent to the foregoing assignments, on terms and conditions not
adverse to AirTouch, (iii) best efforts shall include without limitation the
payment of all amounts reasonably requested by the applicable lessor, and
without limitation the payment of all amounts reasonably requested by the
applicable lessor, and (iv) Assignor and Assignee will keep AirTouch informed,
on at least a weekly basis, of the status of these consents and of their efforts
to obtain such consents, which shall include without limitation copying AirTouch
on all correspondence between Assignor or Assignee and any such landlord
regarding or in any way relating to such consent. Assignor further represents
and warrants to AirTouch that (A) immediately upon AirTouch's request, Assignor
will pay any assignment or similar fees required by any such landlords in
connection with obtaining such consents and (B) Assignor will pay all
outstanding rent due to the landlord or the North Point Mall store at the
earlier of September 30, 1996 or the first business day after such landlord
provides written consent to the assignment (however such consent may be
conditioned). Assignee further represents and warrants to AirTouch (I) that
Assignee has spoken to the respective landlord of each Primary Store and has
obtained from each such landlord verbal consent to the assignment to Assignee of
the applicable Primary Store lease and (II) that Assignee will comply with any
conditions involving signage at the North Point Mall Store as may be imposed by
the North Point Mall store landlord for such landlord's consent.
(c) No Known Defaults. AirTouch represents to Assignee
that to AirTouch's knowledge as of the date hereof, there are no existing
defaults under the Sales Agent Agreement.
(d) Certain Amounts Payable. AirTouch represents to
Assignee that commissions, charge backs and equipment charges under the Sales
Agent Agreement for the period August 10, 1996 to August 23, 1996 were as
follows:
<TABLE>
<S> <C>
Commissions:
Miscellaneous Reimbursements ***
Charge Backs:
</TABLE>
-3-
<PAGE> 32
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C>
Equipment Charges: ***
Net Total:
</TABLE>
AirTouch will pay this net total amount to Assignee on September 9, 1996.
9. Indemnification.
(a) With Respect to Certain Breaches. Assignor,
Assignee and each Additional Lessee Shall severally indemnify, defend and hold
AirTouch and its affiliates, successors and assigns harmless from, against and
in respect of any liability, loss, cost, damage, expense or payment (including
attorneys' fees and expenses and amounts paid in good faith by way of
settlement)incurred or suffered by AirTouch and its affiliates, successors and
assigns with respect to, as a result of or involving any breach by Assignor,
Assignee or such Additional Lessee, respectively, of any representation,
warranty, covenant or agreement made by it in this Agreement or in any document
or agreement delivered by it pursuant to this Agreement.
(b) With Respect to Certain Claims by BellSouth.
Without limiting the foregoing, Assignee shall indemnify, defend and hold
AirTouch and its affiliates, successors and assigns harmless from, against and
in respect of any liability, loss, cost, damage, expense or payment (including
without limitation attorney's fees and expenses and amounts paid in good faith
by way of settlement) involving, resulting from or with respect to any dispute
with BellSouth arising from or relating to (i) the purchase by Assignee of all
or any part of Assignor's business, (ii) Assignee's becoming an AirTouch agent
in Georgia, (iii) any discussions or negotiations relating to such purchase or
agency or (iv) any breach or alleged breach by Assignee of any agreement with
BellSouth (including without limitation any agreement restricting Assignee's
ability to compete with BellSouth in Georgia). Assignor and Assignee each
acknowledge (A) that AirTouch has used reasonable efforts to ensure that the
transactions contemplated hereby do not result in any such claims and has also
reasonably relied on certain representations and warranties of Assignee to that
end and (B) that AirTouch did not approach or attempt to induce any way Assignee
to terminate its relationship with BellSouth in Georgia or to become an agent of
AirTouch.
10. Releases.
(a) Release by Assignor. Assignor does hereby
unconditionally and irrevocably forever release and discharge AirTouch, its
subsidiaries and affiliates, the officers, directors, employees or agents of any
of them, and the successors, assigns, legal representatives, executors and
administrators of any of them (collectively, the "AirTouch Released Parties")
from all obligations and liabilities of the AirTouch Released Parties to
Assignor, all agreements and understandings of the AirTouch Released Parties
involving Assignor, and all claims and causes of action (whether at law or in
equity) of Assignor against the AirTouch Released Parties, that are a result of,
involve or otherwise exist by reason of any act or omission occurring or fact or
circumstance existing prior to the date hereof; provided, however, that this
release does not apply to obligations and liabilities that are a result of,
involve or otherwise exist by reason of (i) fraud, (ii) theft, (iii) cloning of
CRS or CRS telephone numbers or equipment by AirTouch or its
-4-
<PAGE> 33
officers, directors, employees or agents or (iv) AirTouch's liabilities and
obligations under this Agreement.
(b) Release by Assignee. Assignee does hereby
unconditionally and irrevocably forever release and discharge AirTouch, its
subsidiaries and affiliates, the officers, directors, employees or agents of any
of them, and the successors, assigns, legal representatives, executors, and
administrators of any of them (collectively, the "AirTouch Released Parties")
from all obligations and liabilities of the AirTouch Released Parties to
Assignee, all agreements and understandings of the AirTouch Released Parties
involving Assignee, and all claims and causes of action (whether at law or in
equity) of Assignee against the AirTouch Released parties, that are a result of,
involve or otherwise exist by reason of any act or omission occurring or fact or
circumstance existing prior to the date hereof, provided, however, that Assignee
does not release AirTouch from any obligation to pay commissions and cooperative
and other advertising payments that are earned or accrued (but not yet paid)
under the specific terms of the Sales Agent Agreement (subject to charge backs
and set-offs as provided herein and in the Sales Agent Agreement); and provided,
further, that this release does not apply to obligations and liabilities that
are a result of, involve or otherwise exist by reason of (i) fraud, (ii) theft,
(iii) cloning of CRS or CRS telephone numbers or equipment by AirTouch or its
officers, directors, employees or agents of (iv) AirTouch's liabilities and
obligations under this Agreement.
(c) Release by AirTouch. AirTouch does hereby
unconditionally and irrevocably forever release and discharge Assignor, its
subsidiaries and affiliates, the officers, directors, employees or agents of any
of them, and the successors, assigns, legal representatives, executors and
administrators of any of them (collectively, the "Assignor Released parties")
from all obligations and liabilities of the Assignor Released Parties to
AirTouch, all agreements and understandings of the Assignor Release Parties
involving AirTouch, and all claims and causes of action (whether at law or in
equity) of AirTouch against the Assignor Related Parties, that are a result of,
involve or otherwise exist by reason of any act or omission occurring or fact or
circumstance existing prior to the date hereof; provided, however, that this
release does not apply to obligations and liabilities that are a result of,
involve or otherwise exist by reason of (i) fraud, (ii) theft, (iii) cloning of
CRS or CRS telephone numbers or equipment by Assignor or its officers,
directors, employees or agents or (iv) Assignor's liabilities and obligations
under this Agreement.
11. Miscellaneous Provisions.
(a) Further Assurances. Each party hereby agrees to
take all such actions and execute and deliver all such agreements and other
documents as the other shall reasonably request to evidence more effectively the
transactions contemplated by this Agreement.
(b) Notices. All notices under this Agreement shall
be in writing and given either in person or by telecopier, overnight delivery
service or first class mail, postage and any other costs prepaid, to the address
of the party to this Agreement being given notice set forth below or to such
other address as a party to this Agreement may furnish to the other as provided
in this sentence; and if notice is given pursuant to the foregoing of a
permitted successor or
-5-
<PAGE> 34
assign, then notice shall thereafter be given pursuant to the foregoing also to
such permitted successor or assign.
AirTouch Cellular of Georgia North Point Cellular, Inc.
4151 Ashford Dunwoody Road d/b/a Peachtree Mobility
Suite 300 1220 North Point Circle
Atlanta, Georgia 30319 Alpharetta, Georgia 30302
Attn: Debbie Heald Attn: Marc S. Green
Fax No: (404)705-4806 Fax No: (770)645-2815
Tel No: (404)257-5124 Tel No: (770)645-6900
Let's Talk Cellular of America, Inc.
5200 NW 77 Court
Miami, Florida 33166
Attn: Brett Beveridge
Fax No: (305)477-8255
Tel No: (305)477-4119
(c) Exhibits. Each exhibit to this Agreement is hereby
incorporated into, and is hereby made a part of, this Agreement as if set out in
full in the first place that reference is made to it.
(d) Headings. Titles or captions of or in this
Agreement are inserted only as a matter of convenience and for reference and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
(e) Assignment. No assignment, transfer or delegation,
whether by merger or other operation of law or otherwise, of any rights or
obligations of Assignor or Assignee under this Agreement shall be made without
the prior written consent of AirTouch.
(f) Integration and Amendment. This Agreement (i)
constitutes the entire agreement of the parties to this Agreement with respect
to its subject matter, (ii) supersedes all prior agreements, if any, of the
parties to this Agreement with respect to its subject matter, and (iii) may not
be amended except in writing signed by the party to this Agreement against whom
the change is being asserted.
(g) Waiver. The failure of any party of this
Agreement at any time or times to require the performance of any provision of
this Agreement shall in no manner affect the right to enforce the same; and no
waiver by any party to this Agreement of any provision (or of a breach of any
provision) of this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed or construed either as a further or continuing
waiver of any such provision or breach or as a waiver of any other provision (or
of a breach of any other provision) of this Agreement.
-6-
<PAGE> 35
(h) Controlling Law. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the State of Georgia.
(i) Counterparts. This Agreement may be executed by
each party to this Agreement upon a separate copy, and in such case one
counterpart of this Agreement shall consist of enough of such copies to reflect
the signature of all of the parties to this Agreement. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this Agreement or its terms to
produce or account for more than one of such counterparts.
DULY EXECUTED and delivered by the parties to this Agreement on
the date first set forth above.
Assignor: NORTH POINT CELLULAR, INC. d/b/a
PEACHTREE MOBILITY
By:/s/Marc S. Greene, President
----------------------------------------
Marc S. Greene
President
Assignee: LET'S TALK CELLULAR OF AMERICA, INC.
By:/s/Brett Beveridge
----------------------------------------
Brett Beveridge
Vice President
AirTouch: AIRTOUCH CELLULAR OF GEORGIA
By:/s/Kenneth R. Molinaro
----------------------------------------
Name: Kenneth R. Molinaro
-----------------------------------
Title: Director of Finance
----------------------------------
Additional Lessees: The following Additional Lessees hereby
execute this Agreement solely to evidence their Agreement to be bound by the
provisions of Section 8(b) and Section 9 (a) of this Agreement.
TOWN CENTER CELLULAR, INC.
/s/Marc S. Greene By:/s/Marc S. Greene, President
- -------------------------------- --------------------------------
Marc S. Greene Marc S. Greene, President
GWINNETT PLACE CELLULAR, INC. BUCKHEAD CELLULAR, INC.
By:/s/Marc S. Greene, President By:/s/Marc S. Greene, President
------------------------------ ---------------------------------
Marc S. Greene, President Marc S. Greene, President
* * * * *
-7-
<PAGE> 36
EXHIBITS A and B
----------------
Exhibit A - Sales Agent Agreement for Radiotelephone Service
Exhibit B - Amendment thereto
Exhibits A and B are filed together as Exhibit 3.16 to Exhibit 10.20 to the
Registration Statement.
<PAGE> 37
EXHIBIT C
---------
CERTAIN ASSUMED OBLIGATIONS
Short Term Rental Cellular Lines
Complimentary/Courtesy Cellular Lines
Equipment Charges
Charge backs of Commissions
Cooperative Advertising Liabilities
<PAGE> 38
EXHIBIT D
---------
CERTAIN CONTINUING OBLIGATIONS
Section No. Brief Description
- ----------- -----------------
ss. 1(b) independent contractor
ss. 3(d) non-competition for one year from the Effective Date
ss. 3(e) non-solicitation of customers for two years from the
Effective Date
ss. 5(d) charge backs
ss. 5(g)(iii) sales and use taxes
ss. 5(g)(iv) purchase money security interests and financing statements
ss. 6(b) AirTouch's disclaimer of representations and warranties
ss. 7 proprietary property
ss. 8(b) indemnity
ss. 10 audit privileges, record retention for a minimum of two
years following performance of the subject services and
other miscellaneous provisions
<PAGE> 39
EXHIBIT E
---------
ADDITIONAL LESSEES
Marc S. Greene
Towne Center Cellular, Inc.
Gwinnett Place Cellular, Inc.
Buckhead Cellular, Inc.
<PAGE> 40
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> 41
(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> 42
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> 43
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> 44
(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> 45
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> 46
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> 47
(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> 48
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> 49
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> 50
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> 51
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> 52
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> 53
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> 54
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> 55
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> 56
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> 57
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> 58
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> 59
Exhibit A
ESCROW AGREEMENT
August ___, 1996
Weinstock & Scavo, P.C.
3405 Piedmont Road, N.E.
Suite 300
Atlanta, GA 30305
Attn: Michael Weinstock, 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 Asset Purchase Agreement dated as of the date hereof
(the "Purchase Agreement") among Let's Talk Cellular of America, Inc., a Florida
corporation (the "Purchaser"), North Point Cellular, Inc., a Georgia corporation
(the "Company"), and the shareholders of the Company, Michael Weinstock and Marc
Greene (the "Shareholders" and together with the Company, the "Selling
Parties"). Capitalized terms used herein and not otherwise defined shall have
the same meaning as used in the Purchase Agreement.
The Purchaser hereby delivers to you pursuant to Section 3 of the
Consulting Agreement, to hold in escrow subject to the terms below, $425,000.00
in immediately available funds (the "Escrow Funds").
The Escrow Funds shall be held by you in a place of safe keeping until
they have been released from escrow in accordance with the following terms:
A. Upon the occurrence of the following conditions prior to a release
of the Escrow Funds pursuant to B or C below, you are hereby instructed (i) to
notify in writing the parties to the Purchase Agreement that you will release
from escrow and deliver the Escrow Funds, together with interest earned thereon,
if any, to the Consultant and (ii) to so release such funds and any interest
only upon the expiration of 48 hours after each of the parties to the Purchase
Agreement shall have received written notice of such release:
1. At any time prior to the release of the Escrow Funds
pursuant to B or C below, each and every Estoppel Letter
required under Section 2.5 of the Purchase Agreement shall
have been executed and delivered to the Buyer; or
2. At any time prior to the release of the Escrow Funds
pursuant to B or C below, the Purchaser instructs the
Escrow Agent in writing to release the Escrow Funds.
B. If on the 45th day after the date hereof, (x) the Escrow Funds
have not been released pursuant to A above and (y) the Purchaser shall NOT have
notified the Escrow Agent in writing of its election to exercise its right to
purchase all of the capital stock of the Seller, you are hereby instructed (i)
to notify in writing the parties to the Purchase Agreement that you will release
from escrow and deliver the Escrow Funds, together with interest earned thereon,
if any,
<PAGE> 60
Weinstock & Scavo, P.C.
August __, 1996
Page 2
to the Consultant and (ii) to so release such funds and any interest only upon
the expiration of 48 hours after each of the parties to the Purchase Agreement
shall have received written notice of such release.
C. If on the 45th day and after the date hereof, (x) the Escrow Funds
have not been released pursuant to A above and (y) the Purchaser shall have
notified the Escrow Agent in writing of its election to exercise its right to
purchase all of the capital stock of the Seller, you are hereby instructed (i)
to notify in writing the parties to the Purchase Agreement that you will release
from escrow and deliver the Escrow Funds, together with interest earned thereon,
if any, to the Consultant on the later of the dates set forth in 1, 2 and 3
below and (ii) to so release such funds and any interest only upon the later of
1. the 52nd day after the date hereof,
2. the expiration of 48 hours after each of the parties to the
Purchase Agreement shall have received written notice of
such release, and
3. the execution by the Selling Parties of all necessary
instruments of transfer to the Purchaser on the Agreed
Terms of all of the Shareholders' right, title and interest
in and to the capital stock of the Seller.
The "Agreed Terms" are: (i) the purchase price for such capital stock shall be
$1.00; and (ii) the Selling Parties jointly and severally shall indemnify and
hold harmless the Purchaser and its affiliates at all times against and in
respect of all losses, liabilities, costs and expenses (including reasonable
attorney's fees) which arise out of or are based on such stock acquisition,
other than such losses, liabilities, costs or expenses pursuant to any Leases.
In the event the Escrow Agent shall have received a claim as to the
Escrow Funds, the Escrow Agent may, at any time and from time-to-time in its
sole discretion, take either of the following actions:
(i) Continue to hold the Escrow Funds until the dispute is settled
between the parties to the Purchase Agreement and it receives (x) written
instructions signed by such parties as to the delivery of the Escrow Funds or
(y) a final nonappealable order from a court of competent jurisdiction stating
to whom and in what amounts the Escrow Funds should be released and delivered;
or
(ii) Commence an interpleader action in any a 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 Funds, you shall have the
power and authority, in you sole discretion, to hold such Escrow Funds 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
<PAGE> 61
Weinstock & Scavo, P.C.
August __, 1996
Page 3
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 Funds 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 7 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 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 Funds 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.
The Purchaser understands that the Escrow Agent is counsel to the Selling
Parties and agrees that the Escrow Agent shall not be precluded from continuing
to represent the Selling Parties 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 Shareholders are beneficiaries to
the Escrow Agreement, and its terms may not be changed without their written
consent of the Escrow Agent. No third party shall be deemed a beneficiary of
this Escrow Agreement and no such party shall have the right to commerce or
maintain any suit or action with respect to this Escrow Agreement. This Escrow
Agreement may be executed in one or more counterparts, all of which will be
deemed to be the same original agreement.
<PAGE> 62
Weinstock & Scavo, P.C.
August __, 1996
Page 4
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.
LET'S TALK CELLULAR OF AMERICA,
INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
NORTH POINT CELLULAR, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
----------------------------
Michael Weinstock
By:
----------------------------
Mark Greene
Accepted this _____ day
of August, 1996
WEINSTOCK & SCAVO, P.C.
By:
---------------------------------
Michael Weinstock, Esq.
<PAGE> 63
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> 64
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> 65
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> 66
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Exhibit 3.4
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
MAY 24, 1996
<TABLE>
<S> <C>
Total Contracts for the Period 5/11-5/24 ***
-----------
COMMISSION RATE OF ***-1/1/96
CREDIT LIMIT AND SAFETY CONTRACTS @ ***-1/1/96
COMMISSION RATE OF ***-4/1/96 *** ***
CREDIT LIMIT CONTRACTS @ ***-4/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements-
LESS:
Charged Back Commission ***
Amount to be deducted - *** Bonus ***
Amount to be deducted -
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 5/11-5/24 ***
Total contracts Received for the Month 5/11/96-6/10/96
</TABLE>
<PAGE> 67
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
June 10, 1995
<TABLE>
<S> <C>
TOTAL CONTRACTS FOR THE PERIOD 5/26-6/10 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @ *** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commissions ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 5/26-6/10 ***
Total contracts Received for the Month 5/11/95-6/10/95 ***
</TABLE>
<PAGE> 68
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 23-JUNE-95 207146
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM 06109 20-JUN-92 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 69
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
June 23, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 6/10-6/23/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @ *** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commission ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 6/10-6/23/95 ***
Total contracts Received for the Month 6/10/95-7/10/95
</TABLE>
<PAGE> 70
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 06-JUNE-95 207637
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM 06239 05-JUL-95 RENT REIMB 6-28-95 ***
COMM 07059 05-JUL-95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 71
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
JULY 10, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 6/24-7/10/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements ***
LESS:
Charged Back Commission ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 6/24-7/10/95 ***
Total contracts Received for the Month 6/10/95-7/10/95 ***
</TABLE>
<PAGE> 72
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM 071095 20-JUL-95 ***
RRO71295 19-JUL-95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 73
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
JULY 25, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 7/11-7/25/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @ *** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements ***
LESS:
Charged Back Commission ***
Amount to be deducted ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 7/11-7/25/95 ***
Total contracts Received for the Month 7/11/95-8/10/95
</TABLE>
<PAGE> 74
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM 07259 02-AUG-95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 75
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
AUGUST 10, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 7/26/95-8/10/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements ***
LESS:
Charged Back Commissions ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 7/26/95-8/10/95 ***
Total contracts Received for the Month 7/11/95-8/10/95 ***
</TABLE>
<PAGE> 76
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 23-JUNE-95 209399
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
081095 COMM 18-AUG-95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 77
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
AUGUST 25, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 8/11-8/25/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commissions ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 8/11-8/25/95 ***
Total contracts Received for the Month 8/11/95-9/10/95
</TABLE>
<PAGE> 78
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 07-SEP-95 209877
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM082595 05-SEP-952 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
---------------------------------------
</TABLE>
<PAGE> 79
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
SEPT. 10, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 8/26-9/10/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @ *** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commission ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 8/26-9/10/95 ***
Total contracts Received for the Month 8/11/95-9/10/95 ***
</TABLE>
<PAGE> 80
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 207146
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM 09109 21-SEP-95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 81
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
SEPT. 25,1995
<TABLE>
<S> <C>
Total Contracts for the Period 9/11-9/25/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @ *** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commission ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 9/11/-9/25/95 ***
Total contracts Received for the Month 9/11/95-10/10/95
</TABLE>
<PAGE> 82
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 06-OCT-95 210908
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
??2995 29-SEP-95 LEONARD DEAL REBATE ***
COMM092595 04-OCT-95 ***
RR 100395 03-OCT-95 RENT REIMB 9-27-95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 83
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
OCT. 10, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 9/26-10/10/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commission ***
Amount to be deducted ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 9/26-10/10/95 ***
Total contracts Received for the Month 9/11/95-10/10/95 ***
</TABLE>
<PAGE> 84
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 20-0CT-95 211359
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
101095COMM 19-OCT-95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 85
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
OCT. 25, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 10/11-10/25/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commission ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 10/11-10/25/95 ***
Total contracts Received for the Month 10/11/95-11/10/95
</TABLE>
<PAGE> 86
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 09-NOV-95 212093
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
110795 07-NOV-95 LEONARD DEAL REBATE ***
COMM 10259 02-NOV-95 ***
COOP 11069 06-NOV-95 CLAIM #87,88,89,90 & 91 ***
??OP 11079 07-NOV-95 CLAIM #92,93 & 94 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 87
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
NOV. 10, 1995
<TABLE>
<S> <C>
Total Contracts for the Period 10/26-11/10/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commission ***
Amount to be deducted ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 10/26-11/10/95 ***
Total contracts Received for the Month 10/11/95-11/10/95 ***
</TABLE>
<PAGE> 88
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 22-NOV-95 212476
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM111095 17-NOV-95 ***
COOP111795 17-NOV-95 CLAIM CHECKS 79 & 95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 89
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
NOV. 25, 1995
<TABLE>
<S> <C>
Total Activations for the Period 11/11-11/25/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements ***
LESS:
Charged Back Commission ***
Amount to be deducted ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Activations for the Period 11/11-11/25/95 ***
Total Activations Received for the Month 11/11/95-12/10/95
</TABLE>
<PAGE> 90
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 08-DEC-95 213068
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM112595 04-DEC-95 ***
COOP112895 28-NOV-95 CLAIM #96,#97 & #98 ***
LD120195 01-DEC-95 LEONARD DEAL REBATE ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 91
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
DEC. 10, 1995
<TABLE>
<S> <C> <C>
Total Contracts for the Period 11/25/95-12/8/95 ***
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
COMMISSION RATE OF *** -1/1/96
CREDIT LIMIT CONTRACTS @*** -1/1/96
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commissions ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 11/25/95-12/8/95 ***
Total contracts Received for the Month 11/11/95-12/8/95 ***
</TABLE>
<PAGE> 92
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 22-DEC-95 213558
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM121095 18-DEC-95 ***
COOP121595 15-DEC-95 CLAIM #104 & 105 ***
RR121395 18-DEC-95 RENT REIMB 12-13-95 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 93
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
DEC.25,1995
<TABLE>
<S> <C>
Total Contracts for the Period 12/9/95-12/22/95 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
COMMISSION RATE OF *** -1/1/96
CREDIT LIMIT CONTRACTS @*** -1/1/96
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commission ***
Amount to be deducted
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 12/9/95-12/22/95 ***
Total contracts Received for the Month 12/9/95-1/10/95
</TABLE>
<PAGE> 94
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 05-JAN-96 214207
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM010496 05-JAN-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 95
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
JAN. 10, 1996
<TABLE>
<S> <C>
Total Contracts for the Period 12/23/95-1/10/96 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @*** *** ***
COMMISSION RATE OF *** -1/1/96 *** ***
CREDIT LIMIT CONTRACTS @*** -1/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements-*** BONUS ***
LESS:
Charged Back Commission ***
Amount to be deducted ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 12/23/95-1/10/96 ***
Total contracts Received for the Month 12/9/95-1/10/95 ***
</TABLE>
<PAGE> 96
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 22-JAN-96 214594
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM011096 21-JAN-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 97
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
JAN.25, 1996
<TABLE>
<S> <C>
Total Contracts for the Period 1/11/96-1/25/96 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @ ***
COMMISSION RATE OF *** -1/1/96 *** ***
CREDIT LIMIT CONTRACTS @*** -1/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements- ***
LESS:
Charged Back Commission ***
Amount to be deducted ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 1/11/96-1/25/96 ***
Total contracts Received for the Month 1/11/96-1/25/96
</TABLE>
<PAGE> 98
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 09-FEB-96 215284
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM012596 07-FEB-96 ***
COOP013196 31-JAN-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 99
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
FEB 10, 1996
<TABLE>
<S> <C>
Total Contracts for the Period 1/26/96-2/10/96 ***
-----------
COMMISSION RATE OF *** *** ***
CREDIT LIMIT CONTRACTS @ ***
COMMISSION RATE OF *** -1/1/96 *** ***
CREDIT LIMIT CONTRACTS @*** 1/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements
LESS:
Charged Back Commission ***
Amount to be deducted ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 1/26/96-2/10/96 ***
Total contracts Received for the Month 1/11/96-2/10/96 ***
</TABLE>
<PAGE> 100
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 22-FEB-96 215678
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM021096 21-FEB-96 ***
COOP021596 15-FEB-96 CLAIM# 009, 011 & 012 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 101
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
FEB 23, 1996
<TABLE>
<S> <C> <C>
Total Contracts for the Period 2/11-2/25/96 ***
COMMISSION RATE OF ***
CREDIT LIMIT CONTRACTS @***
COMMISSION RATE OF *** -1/1/96 *** ***
CREDIT LIMIT CONTRACTS @*** -1/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements-
LESS:
Charged Back Commissions ***
Amount to be deducted-*** BONUS ***
Amount to be deducted- ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 2/11-2/25/96 ***
Total contracts Received for the Month 2/11/96-3/10/96
</TABLE>
<PAGE> 102
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 06-MAR-96 216273
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM022396 23-FEB-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 103
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
MARCH 10, 1996
<TABLE>
<S> <C> <C>
Total Contracts for the Period 2/26-3/10/96 ***
COMMISSION RATE OF ***
CREDIT LIMIT CONTRACTS @***
COMMISSION RATE OF ***-1/1/96 *** ***
CREDIT LIMIT CONTRACTS @***-1/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements- ***
LESS:
Charged Back Commissions ***
Amount to be deducted-*** BONUS ***
Amount to be deducted-
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 2/26-3/10/96 ***
Total contracts Received for the Month 2/11/96-3/10/96 ***
</TABLE>
<PAGE> 104
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 22-MAR-96 216821
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM031096 20-MAR-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 105
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
MARCH 25, 1996
<TABLE>
<S> <C> <C>
Total Contracts for the Period 3/9-3/25/96 ***
COMMISSION RATE OF *** -1/1/96
CREDIT LIMIT CONTRACTS @*** -1/1/96
COMMISSION RATE OF *** -4/1/96 *** ***
CREDIT LIMIT CONTRACTS @*** -4/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements- ***
LESS:
Charged Back Commissions ***
Amount to be deducted-*** BONUS
Amount to be deducted-
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 3/9-3/25/96 ***
Total contracts Received for the Month 2/11/96-3/10/96
</TABLE>
<PAGE> 106
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 04-APR-96 217437
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM032596 02-APR-96 ***
COOP032896 28-MAR-96 CLAIM # 17 & 18 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 107
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
APRIL 10, 1996
<TABLE>
<S> <C> <C>
Total Contracts for the Period 3/26-4/10 ***
COMMISSION RATE OF *** -1/1/96 *** ***
CREDIT LIMIT CONTRACTS @*** -1/1/96 *** ***
COMMISSION RATE OF *** -4/1/96 *** ***
CREDIT LIMIT CONTRACTS @*** -4/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements- ***
LESS:
Charged Back Commissions ***
Amount to be deducted-*** BONUS ***
Amount to be deducted- ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 3/26-4/10 ***
Total contracts Received for the Month 3/11/96-4/10/96 ***
</TABLE>
<PAGE> 108
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 20-APR-96 218011
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM041896 18-APR-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 109
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
APRIL 25, 1996
<TABLE>
<CAPTION>
Total Contracts for the Period 4/11-4/25/96 610
<S> <C>
COMMISSION RATE OF ***-1/1/96
CREDIT LIMIT AND SAFETY CONTRACTS @ ***-1/1/96
COMMISSION RATE OF ***-4/1/96 *** ***
CREDIT LIMIT CONTRACTS @ ***-4/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements- ***
LESS:
Charged Back Commissions ***
Amount to be deducted-*** BONUS ***
Amount to be deducted-
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 4/11-4/25/96 610
Total contracts Received for the Month 4/11/96-5/10/96 ---
</TABLE>
<PAGE> 110
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 09-MAY-96 218818
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM050796 07-MAY-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 111
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
APRIL 25, 1996
<TABLE>
<C> <C>
Total Contracts for the Period 4/11-4/25/96 ***
-----------
COMMISSION RATE OF *** -1/1/96 *** ***
CREDIT LIMIT AND SAFETY CONTRACTS @ ***-1/1/96
COMMISSION RATE OF ***-4/1/96 *** ***
CREDIT LIMIT CONTRACTS @ ***-4/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements-
LESS:
Charged Back Commissions
Amount to be deducted-*** BONUS
Amount to be deducted-
----------
SUBTOTAL = ***
Equipment Purchases
==========
TOTAL COMMISSION PAID ***
Total Contracts for the Period 4/11-4/25/96 ***
Total contracts Received for the Month 4/11/96-5/10/96 ***
</TABLE>
<PAGE> 112
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 23-MAY-96 219272
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
052296 22-MAY-96 Commissions for 4/25/96 ***
COMM052196 21-MAY-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 113
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
APRIL 25, 1996
<TABLE>
<S> <C>
Total Contracts for the Periods 4/11-4/25/96 & 1/26-5/10/96 ***
-----------
COMMISSION RATE OF ***-1/1/96
CREDIT LIMIT AND SAFETY CONTRACTS @***-1/1/96
COMMISSION RATE OF ***-4/1/96 *** ***
CREDIT LIMIT CONTRACTS @***-4/1/96 *** ***
-----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements-
LESS:
Charged Back Commissions ***
Amount to be deducted-*** BONUS ***
Amount to be deducted- ***
-----------
SUBTOTAL = ***
Equipment Purchases ***
===========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 4/11-4/25/96 ***
Total contracts Received for the Month 4/11/96-5/10/96 ***
</TABLE>
<PAGE> 114
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 23-MAY-95 219272
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
052296 22-MAY-96 Commissions for 4/25/96 ***
COMM052196 21-MAY-96 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 115
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
AirTouch Cellular COMMISSION SCHEDULE
NORTH POINT CELLULAR/PEACHTREE MOBILITY
APRIL 25, 1996
PAY 5/31
<TABLE>
<S> <C>
Total Contracts for the Period 4/26-5/10 ***
----------
COMMISSION RATE OF *** -1/1/96
CREDIT LIMIT AND SAFETY CONTRACTS @*** -1/1/96
COMMISSION RATE OF *** -4/1/96 *** ***
CREDIT LIMIT CONTRACTS @*** -4/1/96
----------
GROSS COMMISSION FOR THE PERIOD ***
Reimbursements-
LESS:
Charged Back Commissions
Amount to be deducted-*** BONUS
Amount to be deducted-
----------
SUBTOTAL = ***
Equipment Purchases
==========
TOTAL COMMISSIONS PAID ***
Total Contracts for the Period 4/26-5/10 ***
Total contracts Received for the Month 4/11/96-5/10/96 ***
</TABLE>
<PAGE> 116
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C> <C>
VENDOR NUMBER PAYEE CHECK DATE CHECK NO.
- -------------------------------------------------------------------------------------------------------------------------------
100602 NORTH POINTE CELLULA 01-JUN-95 219593
- -------------------------------------------------------------------------------------------------------------------------------
INVOICE INVOICE DESCRIPTION DISCOUNT NET AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER DATE
- -------------------------------------------------------------------------------------------------------------------------------
COMM052996 29-MAY-92 ***
- -------------------------------------------------------------------------------------------------------------------------------
Totals ***
-----------------------------------------
</TABLE>
<PAGE> 117
EXHIBIT 3.16
June 1993 Version
SALES AGENT AGREEMENT
FOR CELLULAR RADIOTELEPHONE SERVICE
THIS SALES AGENT AGREEMENT (the "Agreement") is made and entered into
this 17 day of October, 1993, by and between PACTEL CELLULAR INC. OF GEORGIA
("PacTel"), a Nevada corporation with its principal place of business at 4151
Ashford Dunwoody Road, Suite 300, Atlanta, Georgia 30319, and NORTH POINT
CELLULAR, INC. d/b/a PEACHTREE MOBILITY ("Agent"), a Georgia corporation with
its principal place of business at 1220 North Point Circle, Alpharetta, Georgia
30202 ("Agent's Office").
W I T N E S S E T H:
WHEREAS, PacTel provides cellular radiotelephone service ("CRS") in
certain portions of the Atlanta, Georgia and surrounding area (the "CRS Coverage
Area"); and
WHEREAS, Agent desires to act as PacTel's agent to solicit orders for
PacTel's CRS in the CRS Coverage Area, to sell, lease, rent and otherwise
provide equipment to use PacTel's CRS ("CRS Equipment"); and
WHEREAS, Agent represents and warrants that it is capable of meeting the
performance standards set forth on Schedule 1 attached hereto and by this
reference made a part hereof (the "Performance Standards"); and
WHEREAS, Agent represents and warrants that it is capable of meeting the
portable installation standards (the "Portable Standards") set forth on Schedule
2(a) attached hereto and by this reference made a part hereof; and
WHEREAS, unless and until Agent is capable of meeting the vehicle
installation and service standards set forth on Schedule 2(b) attached hereto
and incorporated herein by reference (the "Installation Standards"), Agent
represents and warrants that it will handle all vehicle installation requests in
the manner set forth in Section 2(b)(i); and
WHEREAS, the parties believe it to be in their mutual best interests to
enter into the arrangement established in this Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
covenants and promises herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound, do hereby agree as follows:
1. APPOINTMENT OF AGENT AS INDEPENDENT CONTRACTOR.
(a) Appointment, Acceptance. Subject to the terms and conditions set
forth in this Agreement, PacTel hereby appoints Agent as an independent
contractor of PacTel, on a non-exclusive basis, solely to exercise Agent's
reasonable best efforts to: (i) solicit CRS customers for PacTel's CRS
(collectively, "CRS Customers" and individually, a "CRS Customer") in accordance
with Section 2(a) hereof; (ii) sell, lease or rent CRS Equipment to CRS
Customers in accordance with Section 2(b) hereof; (iii) provide portable
installation ("Portable Installation") for the CRS Customers pursuant to
Schedule 2(a) attached hereto; (iv)
<PAGE> 118
handle all vehicle installation requests in the manner set forth in the manner
in Section 2(b),(i) unless and until Agent is capable of meeting the
Installation Standards set forth in Schedule 2(b) attached hereto; (v) resolve
for those CRS Customers solicited by Agent pursuant to this Agreement ("Agent's
Solicitees") any problems regarding CRS Equipment that may arise during the term
of this Agreement; and (vi) coordinate with PacTel's customer service personnel
to resolve for Agent's Solicitees any problems regarding PacTel's CRS or billing
that may arise during the term of this Agreement, and Agent hereby accepts such
appointment. Agent's responsibilities under this Section 1(a) are sometimes
hereinafter referred to collectively as the "Services".
(b) Relationship of Parties. Notwithstanding the use of the business
title "Agent" in this Agreement and elsewhere, this Agreement constitutes Agent
as an independent contractor only and not as PacTel's general agent. Neither
this Agreement nor any performance hereunder does or will constitute Agent or
any of its "Subagents" (as defined in Exhibit C attached hereto or
"Sub-Subagents" (as defined in Exhibit C attached hereto) or any of their
respective employees, representatives or agents (collectively, "Agent's
Affiliates"), as an employee, partner, joint venturer or legal representative of
PacTel.
2. AGENT'S AUTHORITY.
(a) CRS Customers. Agent may contact and solicit CRS Customers from
among all classes of potential users of CRS, except PacTel's present CRS
Customers, only upon the same customer prices, terms and considerations as
PacTel makes CRS available to CRS Customers directly solicited by PacTel. Agent
acknowledges that all of Agent's Solicitees will be customers of PacTel, and not
Agent, with respect to all CRS and with respect to all CRS Equipment purchased
or leased from PacTel.
(b) CRS Equipment. Agent may sell, lease or rent CRS Equipment
obtained from any source available to Agent, subject to the following
conditions, which Agent acknowledges are necessary in order to protect the
reputation and goodwill of PacTel's CRS and the value of the "Marks" (as defined
in Section 7(a) hereof), and breach of which will entitle PacTel to terminate
this Agreement without notice to Agent or Agent's opportunity to cure:
(i) Unless and until Agent is capable of meeting the
Installation Standards set forth on Schedule 2(b) attached hereto, Agent
will either (A) refer all vehicle installation and service requests to
PacTel or (B) on receipt of written approval from PacTel regarding the
use of a third party installation and service provider (an "Approved
Installer") refer all such vehicle installation and service requests to
such Approved Installer;
(ii) Agent will sell, lease, rent or otherwise provide only CRS
Equipment that (A) meets the compatibility specifications for CRS
Equipment established by the Electronic Industries Association (and such
other similar or additional specifications as PacTel may establish from
time to time) in effect on the date of sale, lease or rental, and (B) has
received an appropriate type acceptance certificate from the Federal
Communications Commission ("FCC");
(iii) Except as otherwise provided herein or as PacTel and Agent
may otherwise agree in writing, Agent will provide all needs relating to
all CRS
-2-
<PAGE> 119
Equipment sold, leased, rented or otherwise provided by Agent, at Agent's
office or such additional locations as PacTel may approve in writing in
accordance with the Portable Standards;
(iv) PacTel may determine, in its sole discretion, whether or
not any CRS Equipment is fully compatible with the CRS provided by
PacTel, and Agent will not sell, lease, rent or otherwise provide any
item of CRS Equipment to any CRS Customer after any determination by
PacTel of such item's incompatibility; and
(v) PacTel may refuse CRS to any customer utilizing CRS
Equipment not meeting PacTel's quality or other requirements for CRS
Equipment, all without recourse against PacTel.
(c) Express Limitations on Authority. The scope of Agent's authority
pursuant to this Agreement is specifically limited to the minimum authority
necessary for Agent to perform the specific duties of Agent set forth herein.
Agent is not granted and Agent will not represent that it has been granted any
right or authority to bind PacTel by contract or otherwise or to make any
representation or warranty or to assume or create any obligation or
responsibility, express or implied, for or on behalf of or in the name of
PacTel, to incur debts for PacTel or to bind PacTel in any manner whatsoever.
Agent has no authority other than that expressly granted in Sections 2(a) and
2(b) hereof, and Agent covenants not to engage in any unauthorized activity,
including, without limitation: (i) varying any term or condition appearing on
any PacTel form, agreement or customer service contract, either orally or in
writing; (ii) except in connection with the sale, lease or rental of CRS
Equipment by Agent on its own behalf (rather than on PacTel's behalf) as
provided for in Section 2(b) hereof, charging CRS Customers any fees or expenses
(including, without limitation, any charges triggered by the Customer's
termination of CRS prior to expiration of the applicable service contract) not
specifically required or authorized by PacTel in writing; (iii) making any
representations or warranties concerning PacTel's CRS other than those made in
writing by PacTel, or any representations or warranties concerning CRS Equipment
other than those made in writing by the manufacturer of such equipment; or (iv)
accepting any orders for CRS on behalf of PacTel, or binding or purporting to
bind PacTel in any manner concerning CRS or otherwise.
(d) Credit Approval Service. If Agent complies with all of PacTel's
requirements, PacTel will make available to Agent either (i) any internal credit
approval services, or (ii) certain expedited credit approval services in
accordance with a credit service agreement in the form attached hereto as
Exhibit A and by the reference made a part hereof (a "Credit Service
Agreement"), as same may be amended from time to time. Every Credit Service
Agreement executed pursuant to this Agreement is incorporated herein by
reference, regardless of its time of execution and regardless of whether an
executed copy thereof is attached hereto.
3. AGENT'S RESPONSIBILITIES.
(a) Compliance with Standards. Agent will meet and comply with the
Performance Standards, the Portable Standards and, if applicable, the
Installation Standards at all time during the term of this Agreement, and will
ensure that all of Agent's Affiliates meet and comply therewith.
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(b) Subagents and Employees. Agent will allow only its formal,
salaried employees who are acting within the scope of their employment and who
have executed an employment agreement with Agent in a form approved by PacTel,
including at least the minimum provisions attached hereto as Exhibit B and by
this reference made a part hereof (an "Employment Agreement"), to perform any of
Agent's obligations pursuant to this Agreement. Agent may, however, following
approval by PacTel, appoint one or more independent contractors (individually, a
"Subagent" and collectively, the "Subagents") for the limited purpose of
soliciting CRS Customers, by, in each case: (i) providing written notice to
PacTel of Agent's intent to appoint such Subagent, which notice must include
such information regarding the proposed Subagent as PacTel may deem pertinent;
(ii) following receipt of approval of such prospective Subagent by PacTel, which
approval may be withheld by PacTel in its sole discretion, entering into a
subagent agreement with such Subagent in a form approved by PacTel, including at
least the minimum provisions attached hereto as Exhibit C and by this reference
made a part hereof (a "Subagent Agreement"), and such additional instruments and
agreements as PacTel may dictate; and (iii) requiring the Subagent to require
each of its employees to execute an Employment Agreement and such additional
instruments and agreements as PacTel may dictate. As to issues other than those
addressed in Exhibits B and C hereto, Agent is free to reach any agreement Agent
desires with employees and Subagents as long as such Employment Agreements and
Subagent Agreements do not require or authorize actions contrary to any of the
terms and conditions of this Agreement. Agent will provide to PacTel a copy of
every executed Subagent Agreement and Employment Agreement, along with a copy of
every "Sub-Subagent Agreement" (as defined on Exhibit C hereto) and Employment
Agreement executed pursuant to each Subagent Agreement, prior to permitting any
Subagent, Sub-Subagent, or employee to engage in any activities governed by this
Agreement. Agent shall promptly pursue and enforce all remedies available
against any of its employees, Subagents or Sub-Subagents in the case of a
breach or default by same under any Employment Agreement, Subagent Agreement or
Sub-Subagent Agreement executed pursuant to this Section 3(b), including,
without limitation, termination of the subject agreement.
(c) Exclusive Dealing. During the term of this Agreement, Agent will
not, directly or indirectly: (i) market, sell, offer or otherwise provide CRS in
competition with that provided by PacTel; (ii) refer potential or actual CRS
Customers to any person or entity providing or selling CRS other than PacTel (a
"Competitor"); (iii) in any manner assist or render services to any Competitor;
or (iv) serve as a reseller of PacTel's CRS or as an agent for a reseller of
PacTel's CRS.
(d) Non-Competition. During the term of this Agreement and for a
period of one (1) year after expiration or any termination hereof, neither
Agent, nor any parent, subsidiary, affiliate or entity owned or controlled by
any individual or entity that owns or controls Agent, will directly or
indirectly provide, market, sell, lease, rent or otherwise offer CRS or CRS
Equipment within the CRS Coverage Area.
(e) Non-Solicitation. During the term of this Agreement and for a
period of two (2) years after expiration or any termination hereof, Agent will
not, either directly or indirectly, request any present or future customers of
PacTel whose identity became known to Agent as a result of Agent's dealings for
or on behalf of PacTel or pursuant to this Agreement, to curtail or cancel their
business or CRS with PacTel within the CRS Coverage Area, or to switch their CRS
within the CRS Coverage Area to a Competitor.
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(f) Investigations. Agent will cooperate with PacTel in all instances
in which PacTel suspects that Agent or any of Agent's Affiliates have engaged in
fraudulent practices in connection with CRS or CRS Equipment, including, without
limitation, conducting such investigations as PacTel may deem advisable and
making written reports to PacTel of the results of such investigations.
(g) Notice of Proceedings. Agent will notify PacTel in writing within
five (5) days of the commencement of any action, suit or proceeding, or of the
issuance of any order, writ, injunction, award or decree of any court, agency or
other government instrumentality, involving Agent or its business or if any such
action, suit or proceeding could create potential liability of the Agent in
excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00).
(h) Costs and Expenses. Agent is solely responsible and liable for all
expenses, costs, liabilities, undertakings, assessments, taxes, insurance and
other obligations incurred by Agent or any of Agent's Affiliates at any time and
for any reason as a result of this Agreement, including, without limitation,
withholding taxes, social security taxes, unemployment taxes, and workers'
compensation insurance premiums.
(i) Agent's Affiliates. Agent will be fully responsible and liable for
all actions or omissions of any Agent's Affiliates.
4. PACTEL'S RESPONSIBILITIES.
(a) Availability of CRS. During the term of this Agreement, PacTel
will make PacTel's CRS available to Agent's Solicitees under the same customer
prices, terms and considerations as PacTel makes its CRS available to CRS
Customers directly solicited by PacTel.
(b) Acceptance of Agent's Solicitees. Subject to PacTel's sole
discretion to reject or terminate any potential or existing CRS Customer or to
require a deposit in accordance with Section 5(a) hereof, PacTel will accept
Agent's Solicitees as CRS Customers. PacTel will have no obligation to provide
CRS to any of Agent's Solicitees unless and until PacTel has accepted a customer
service contract therefrom in writing.
PACTEL WILL HAVE NO LIABILITY TO AGENT OR ANY OTHER INDIVIDUAL OR ENTITY
FOR ANY LOSS, DAMAGE OR INJURY OF ANY KIND CAUSED BY OR RESULTING FROM
PACTEL'S REJECTION OR TERMINATION OF ANY CUSTOMER SERVICE CONTRACT FOR
CRS FOR ANY PROSPECTIVE OR CURRENT CRS CUSTOMER.
(c) Billings and Collections. Except for sales, leases or rentals of
CRS Equipment by Agent on its own behalf as provided for in Section 2(b) hereof,
PacTel will bill all of PacTel's CRS Customers and conduct all collection
activities with respect to accounts for CRS and/or CRS Equipment sold or leased
by or on behalf of PacTel, with enforcement of such claims solely within
PacTel's discretion.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
(d) Commissions. If: (i) PacTel accepts any of Agent's Solicitees as a
new CRS Customer (a "New Customer") pursuant to PacTel's then-applicable
standard form customer service contract signed by the New Customer and forwarded
to PacTel by Agent within one (1) month of the activation of a CRS phone number
for such New Customer, accompanied by proof satisfactory to PacTel that the New
Customer is entitled to any discounted rate for CRS for which Agent has enrolled
the New Customer; and (ii) the New Customer pays all applicable charges; and
(iii) the New Customer actively uses PacTel's CRS for at least *** after
activation thereof (subject, however, to Section 5(d) hereof); and (iv) the New
Customer was not a CRS Customer of PacTel within six (6) months prior to
PacTel's acceptance of the customer service contract signed by such New
Customer, then as the sole compensation from PacTel to Agent for the Services
and only after PacTel has received from Agent a complete, accurate and fully
executed standard form customer service contract for such New Customer, PacTel
will pay Agent a commission (collectively, the "Commissions" and individually a
"Commission") determined in accordance with and pursuant to Schedule 3 attached
hereto and by this reference made a part hereof (as same may be amended from
time to time in accordance with Section 5(e) hereof). PacTel may, however, in
its sole discretion, determine not to pay any Commission generated by any person
or entity who PacTel determines has engaged in "Fraud" (as defined in paragraph
1(e) of Schedule 5 hereto). The payment of any Commission is subject to any of
PacTel's right of chargeback and setoff granted in Section 5(d) hereof, or at
law or in equity.
(e) Residuals. In addition to the Commission, PacTel will pay Agent
residual payments (collectively, "Residuals" and individually a "Residual") for
each New Customer who remains an active user of PacTel's CRS. Such Residuals
shall be payable from time to time during the term of this Agreement for as long
as Agent continues to provide the Services, based upon each New Customer's use
of PacTel's CRS and calculated pursuant to Schedule 4 attached hereto and by
this reference made a part hereof (as same may be amended from time to time in
accordance with Section 5(e) hereof). The payment of any Residual is subject any
of PacTel's rights of chargeback and setoff granted in Section 5(d) hereof, or
at law or in equity.
5. PACTEL'S RIGHTS. PacTel expressly reserves all rights to itself
not specifically and exclusively granted to Agent in this Agreement. Without
limiting the generality of the previous sentence, PacTel expressly reserves,
without limitation, all of the following rights:
(a) Acceptance and Termination of CRS Customers: Deposits. PacTel may
accept, reject or terminate any CRS order or prospective or current CRS Customer
or may require any prospective or current CRS Customer to post a deposit with
PacTel, in PacTel's sole discretion, for any reason, all without recourse
against PacTel. Notwithstanding any purported agreement between Agent and the
CRS Customer to the contrary, PacTel will not be obligated to return any deposit
to Agent although PacTel may, in its sole discretion, return such deposit
directly to the CRS Customer on behalf of whom the deposit was paid.
(b) Non-Exclusivity. PacTel may appoint other agents, distributors or
representatives of any kind for the sale of CRS or the sale, rental or leasing
of CRS Equipment, and not necessarily under the same terms and conditions set
forth in this Agreement. Agent understands and acknowledges that Agent is not
PacTel's exclusive agent and that PacTel itself and other entities with whom
PacTel contracts will be directly
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competing with Agent in the business covered under this Agreement and for the
sale of CRS and the sale, rental and leasing of CRS Equipment in the CRS
Coverage Area.
(c) Direct Sales. PacTel may sell CRS, sell, rent or lease CRS
Equipment, and provide installation and maintenance of CRS Equipment to any
prospective or existing CRS Customers, directly or indirectly through its
employees, parent corporations, subsidiaries and affiliates and by such other
means as PacTel may desire.
(d) Chargeback. PacTel may charge back and set off against any
Commissions, Residuals and any other sums due to Agent from PacTel, any or all
of those liabilities of Agent to PacTel set forth on Schedule 5 attached hereto
and by this reference made a part hereof (as same may be amended from time to
time pursuant to Section 5(e) hereof). If PacTel charges back or sets off
against any Commissions, Residuals or other sum pursuant to this Section
5(d),then each New Customer with respect to whom such chargeback or setoff is
made will not be considered to be a New Customer procured by Agent for purposes
of calculating Commissions, Residuals or otherwise.
(e) Amendment of Commission, Residual and Chargeback Schedules. PacTel
may amend any or all of the terms or provisions of any or all of Schedules 3, 4,
and 5 hereto from time to time, in any manner and in PacTel's sole discretion;
provided, however, that PacTel may not amend any such Schedule more often than
once in a six (6)-month period; and further provided that PacTel will give
thirty (30) days' prior written notice to Agent before any such amendment will
take effect.
(f) Review of Agent's Performance. PacTel may, but is not obligated
to, require Agent to meet with PacTel on a quarterly basis in order to review
Agent's performance under this Agreement. No failure by PacTel to (i) conduct
any such review; (ii) address any breach or default of any provision of this
Agreement in any such review; or (iii) otherwise use any such review to enforce
any of the provisions of this Agreement, will in any way be construed to be a
waiver of any provision of this Agreement, nor will any such failure in any way
affect the validity of this Agreement or any part hereof, or the right of PacTel
thereafter to enforce each and every provision of this Agreement.
(g) Provision of CRS Equipment to Agent. PacTel may, but is not
obligated to, provide CRS Equipment to Agent, on terms established by PacTel in
its sole discretion, for Agent to sell, rent or lease on its behalf to CRS
Customers, subject at all times to the following conditions:
(i) PacTel may, in its sole discretion, determine the types of
and prices for CRS Equipment made available for sale, rent or lease to
Agent or CRS Customers (but not the prices at which Agent may, on its own
behalf, make such CRS Equipment available for sale);
(ii) Agent will not be required to purchase or lease any CRS
Equipment from PacTel;
(iii) Agent will either (A) pay to PacTel all applicable sales,
use or similar taxes which PacTel determines should be collected as a
result of any CRS Equipment sales by PacTel to Agent or by Agent on
behalf of PacTel, or (B) provide PacTel with evidence, satisfactory to
PacTel in its sole discretion, that such sales are exempt from taxation;
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(iv) Agent hereby grants to PacTel a first priority purchase
money security interest in and to each item of CRS Equipment sold by
PacTel to Agent, and all proceeds, products and accessions thereto,
whether now owned or hereafter acquired or wherever located, until PacTel
has been paid in full for such item of CRS Equipment, and Agent will
execute any Uniform Commercial Code Financing Statements or similar
instruments PacTel may deem necessary to perfect the foregoing security
interest; and
(v) Agent will promptly pay PacTel, in accordance with PacTel's
billing and payment procedures in effect from time to time, the full
amount due for all CRS Equipment obtained from PacTel.
(h) Major Accounts. PacTel may, in its sole discretion and upon
written notice to Agent, reserve for itself exclusive rights to market, sell,
offer or otherwise solicit potential entities designated by PacTel as "Major
Accounts." Upon PacTel's designation of an entity as a Major Account, Agent will
refrain from soliciting the Major Account and from soliciting or accepting
potential CRS Customers who work for such Major Account.
6. REPRESENTATIONS AND WARRANTIES.
(a) Agent's Representations and Warranties. Agent hereby represents
and warrants to PacTel that:
(i) PacTel has not made, and Agent has not received or relied
upon, any representations, guaranties or warranties, express or implied,
as to the amount of Commission, Residual or other revenues Agent might
receive or earn as a result of this Agreement or its agency relationship
with PacTel; and
(ii) Agent has all necessary power and authority to enter into
this Agreement and perform Agent's duties and obligations pursuant hereto
in accordance with the provisions hereof; and
(iii) This Agreement has been duly approved by all necessary
parties on behalf of Agent and does not violate, breach or cause a
default in any contract, agreement, order or other understanding to which
Agent is a party or by which it is bound.
(b) PacTel's Disclaimer of Representations and Warranties. PACTEL
MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, AND HEREBY DISCLAIMS ALL
WARRANTIES, WHETHER EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE, WITH RESPECT TO PACTEL'S CRS OR ANY CRS EQUIPMENT. IN
NO EVENT WILL PACTEL BE LIABLE TO AGENT, ANY OF AGENT'S AFFILIATES OR ANY
CUSTOMER OR OTHER INDIVIDUAL OR ENTITY FOR ANY DAMAGES OF INJURIES INCURRED ON
ACCOUNT OF ANY FAILURE OF, OR DEFECTS OR PROBLEMS WITH RESPECT TO, CRS OR ANY
CRS EQUIPMENT. UNDER NO CIRCUMSTANCES WILL PACTEL BE LIABLE TO AGENT, ANY OF
AGENT'S AFFILIATES OR ANY CUSTOMER OR OTHER INDIVIDUAL OR ENTITY FOR ANY LOST
PROFITS, CONSEQUENTIAL, INCIDENTAL OR SIMILAR DAMAGES, EVEN
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IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING ANYTHING HEREIN
TO THE CONTRARY, UNDER NO CIRCUMSTANCES WILL PACTEL BE LIABLE TO AGENT, ANY OF
AGENT'S AFFILIATES OR ANY CUSTOMER OR OTHER INDIVIDUAL OR ENTITY FOR ANY DAMAGES
IN ANY WAY CONNECTED WITH PACTEL'S CRS OR ANY CRS EQUIPMENT IN AN AMOUNT THAT
EXCEEDS THE MONIES RECEIVED BY PACTEL FOR SUCH CRS OR CRS EQUIPMENT.
7. PROPRIETARY PROPERTY.
(a) Defined Terms. As used herein, the following terms shall have the
following meanings:
(i) "Confidential Information". "Confidential Information"
means any and all confidential, proprietary or secret information of
PacTel, other than "Trade Secrets" (as hereinafter defined), which is of
tangible or intangible value to PacTel and is not public information or
is not generally known or available to PacTel's competitors but is known
only to PacTel and those of its employees, independent contractors,
customers or agents to whom it must be confided in order to apply it to
the uses intended, including, without limitation, any customer or lead
lists and other customer information regarding PacTel's CRS Customers or
potential customers, including any such information developed or recorded
in any form by Agent or any of Agent's Affiliates, the contents of this
Agreement and the Schedules and Exhibits attached hereto.
(ii) "Marks". "Marks" means PacTel's corporate name, service
marks, trademarks, trade names, insignias, symbols, decorative designs
and slogans, and the trademarks and service marks of PacTel's parent
corporations, subsidiaries and affiliates, or the like, both presently
existing or hereafter created or used, whether PacTel owns, uses or is
licensed or sublicensed to use the same.
(iii) "Proprietary Property". "Proprietary Property" means the
Marks, the "Work Product" (as hereinafter defined), the Confidential
Information and the Trade Secrets, whether or not all or any portion
thereof is or may be validly copyrighted, patented, or registered as a
trademark or service mark.
(iv) "Trade Secrets". "Trade Secrets" means any and all
information of PacTel, including, without limitation, technical or
non-technical data, formulas, patterns, compilations, programs, devices,
methods, techniques, drawings, processes, financial data, financial
plans, products plans, or lists of actual or potential customers or
suppliers, which: (A) derives economic value, actual or potential, from
not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from their
disclosure or use; and (B) is the subject of efforts that are reasonable
under the circumstances to maintain their secrecy; including, without
limitation, confidential business, pricing and marketing plans, and other
customer information developed or recorded in any form.
(v) "Work Product". "Work Product" means any and all work
product, property, data, documentation or information of any kind,
whether tangible, intangible or intellectual, prepared, conceived,
discovered, developed or created by
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Agent or any of Agent's Affiliates in connection with this Agreement,
whether or not subject to protection under the trade secret, patent or
copyright laws of any jurisdiction, including, without limitation, any
customer or lead lists and other customer or potential customer
information developed or recorded in any form.
(b) Acknowledgments. Agent acknowledges and agrees that: (i) Agent and
Agent's Affiliates will become aware of Confidential Information and Trade
Secrets in the course of providing the Services; (ii) the Proprietary Property
represents a substantial investment by PacTel; (iii) the Proprietary Property is
secret, confidential and unique; (iv) at least as between PacTel and Agent,
PacTel is the sole owner of all right, title and interest in and to the
Proprietary Property; (v) any right Agent has to use the Proprietary Property is
derived solely from this Agreement; (vi) this Agreement does not confer upon
Agent any rights, goodwill or other interests in any of the Proprietary
Property; (vii) any usage by Agent of the Proprietary Property or any goodwill
established thereby or associated therewith is intended to inure the exclusive
benefit of PacTel and its affiliated companies; (viii) Agent's covenants and
agreements contained in this Section 7 are special, unique and of an
extraordinary character; (ix) any disclosure or use of the Proprietary Property,
except as otherwise authorized by PacTel in writing, or any other violation of
the provisions of this Section 7, would be wrongful and cause immediate,
significant, continuing and irreparable injury and damage to PacTel that is not
fully compensable by monetary damages; and (x) should Agent breach or threaten
to breach any provision of this Section 7, PacTel will be entitled to obtain
immediate relief and remedies in a court of competent jurisdiction (including
but not limited to damages, preliminary or permanent injunctive relief to
require Agent to honor its obligations under this Agreement, and an accounting
for all profits and benefits arising out of Agent's breach), cumulative of and
in addition to any other rights or remedies to which PacTel may be entitled by
this Agreement, at law or in equity.
(c) Treatment of Proprietary Property. During the term of this
Agreement and thereafter as provided herein, and for all purposes, Agent will
regard and treat the Proprietary Property, as strictly confidential and trade
secret, wholly owned by PacTel. Agent will exercise its best efforts to ensure
the continued confidentiality and ownership by PacTel of all Proprietary
Property known by or disclosed or made available to Agent or Agent's Affiliates,
whether in connection with this Agreement or any other past or present
relationship with PacTel. Agent will cooperate with any additional
confidentiality and other similar requirements PacTel may establish from time to
time for the protection of the Proprietary Property. Agent will not, during the
term of this Agreement or thereafter, claim any interest in or attack the title
or any rights of PacTel in or to any or all of the Propriety Property or take
any action that would adversely affect PacTel's rights therein, or remove, alter
or obfuscate or permit the removal, alteration of obfuscation of any product
identification, proprietary restriction, copyright, trademark, service mark or
trade secret notice or label on any Proprietary Property or other property owned
by or licensed to PacTel. Agent will immediately notify PacTel of any
unauthorized disclosure or use of any Proprietary Property of which Agent
becomes aware; provided, however, that PacTel will have the sole right to
determine what, if any, action should or will be taken on account of any such
disclosure. Agent will assist PacTel, to the extent necessary, in the
procurement of or any protection of PacTel's rights to or in any of the
Proprietary Property, and PacTel will reimburse Agent for all pre-approved costs
incurred in connection therewith.
(d) Use of Marks. Agent will use the Marks only with such notices of
proprietary rights, ownership or registration and such words qualifying or
identifying the relationship of PacTel and Agent as PacTel may from time to time
prescribe. Agent will
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not use any of the Marks, or any material portion thereof, as a part of Agent's
corporate or trade name or with any prefix, suffix or other modifying words,
terms, designs or symbols, or in any modified form, nor will agent use the Marks
in connection with the sale or leasing of any unauthorized product or service or
in any manner not expressly authorized by this Agreement or separately in
writing by PacTel. If PacTel notifies Agent to modify or discontinue the use of
any or all of the Marks, Agent will do so as soon as possible after such notice,
at Agent's sole cost and expense. Agent will immediately discontinue any use of
the Marks upon any expiration or termination of this Agreement.
(e) Confidentiality. At all times during the term of this Agreement
and: (i) with respect to any Confidential Information, for two (2) years after
any expiration or termination hereof; and (ii) with respect to each item of
Trade Secrets, for such time as such item shall constitute a trade secret under
applicable law, Agent and Agent's Affiliates will maintain the Confidential
Information and Trade Secrets in strict confidence, and neither Agent nor any of
Agent's Affiliates will, for any reason in any fashion, form or manner, either
directly or indirectly: (A) sell, lend, lease, distribute, market, license,
sublicense, give, transfer, assign, show, divulge, disclose, disseminate or
otherwise communicate any Confidential Information or Trade Secrets to any third
party; or (B) use of any Confidential Information or Trade Secrets for any
purpose other than providing the Services for PacTel pursuant to this Agreement;
or (C) keep any Confidential Information or Trade Secrets in any form after
expiration or any termination of this Agreement or the expiration or any
termination of such Agent's Affiliates' association with Agent; or (D)
duplicate, reproduce, copy, distribute, disclose or disseminate any Confidential
Information or Trade Secrets.
(f) Ownership of Work Product. To the greatest extent possible, all
Work Product will be deemed to be "work made for hire" (as defined in the
Copyright Act, 17 U.S.C.A. Section 101 et seq., as amended), owned exclusively
by PacTel. No Work Product will be or will be deemed to be "joint work" (as
defined in the Copyright Act). Agent hereby unconditionally and irrevocably
transfers and assigns to PacTel all embodiments of and all worldwide right,
title and interest Agent may have or obtain in or to any and all Work Product,
including, without limitation, all worldwide copyrights, trade secrets,
confidential information and other intellectual property, proprietary and other
rights constituting or associated with the Work Product. Agent will execute and
deliver to PacTel, and cause any of Agent's Affiliates to execute and deliver to
PacTel, any transfers, assignments, documents, or other instruments PacTel may
deem necessary or appropriate to vest complete possession, title and ownership
of all or any portion of the Work Product, and all rights therein, exclusively
in PacTel (including, without limitation, the sole and exclusive rights to use,
license, market, sell, distribute, copy, modify, enhance, create derivative
works of and exercise complete and exclusive dominion and control over the Work
Product).
8. LIABILITY MATTERS.
(a) Insurance. Agent represents and warrants that it now has in
effect, and covenants that it will maintain in effect throughout the term of
this Agreement, the following insurance policies with a reputable commercial
carrier acceptable to PacTel, providing for not less that thirty (30) days'
prior written notice to PacTel of any modification, cancellation or non-renewal
thereof: (i) Comprehensive General Liability insurance in the minimum amount of
One Million Dollars ($1,000,000.00); and (ii) Workers' Compensation insurance in
at least the minimum amount and with at least the minimum scope of coverage
required by any applicable state or workers' compensation law. Agent will
provide PacTel
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with certificates of insurance evidencing such coverage prior to the
commencement of the Services.
(b) Indemnity. Agent will indemnify and hold harmless PacTel, together
with its officers, directors, shareholders, parent corporations, affiliates,
subsidiaries, employees, representatives, assigns, agents and successors, from
and against any and all liabilities, fees, debts, damages, suits, actions,
judgments, injuries, losses, costs and expenses (including, without limitation,
all attorneys' fees and court costs) or claims of whatsoever nature relating to
or arising out of any of the following: (i) any acts or omissions of Agent or
any of Agent's Affiliates, including, without limitation, any injuries to or
death of persons or any damage to property or equipment, including any repairs
to vehicles necessitated by any installation performed by Agent or any of
Agent's Affiliates; or (ii) any breach or default of any provision hereof by
Agent or any of Agent's Affiliates; or (iii) any breach or inaccuracy of any
representation or warranty made by Agent herein, including, without limitation,
the representations and warranties set forth in Section 6 hereof; or (iv) any
violation by Agent or any of Agent's Affiliates of any law, rule, regulation,
statute, order or promulgation of any court, agency or administrative body; or
(v) any fraudulent or misleading act or statement made by Agent or any of
Agent's Affiliates; or (vi) any and all taxes of any kind arising out or the
performance of the Services. Agent further agrees to defend any and all such
actions in any court or in arbitration.
9. TERM.
(a) Term. Unless sooner terminated in accordance with Section 9(b)
hereof, the initial term of this Agreement (the "Initial Term") will commence as
of October 19, 1993, and continue thereafter for a period of five (5) years
and the term of this Agreement shall be renewed automatically for additional
periods of one (1) year (a "Renewal Term") upon the expiration of the Initial
Term or immediately preceding Renewal Term, as the case may be, unless either
party delivers written notice to the other of its intention not to renew for a
subsequent Renewal Term at least thirty (30) days before the expiration of the
Initial Term or then-current Renewal Term, as the case may be.
(b) Termination. Notwithstanding anything herein to the contrary,
PacTel may terminate this Agreement in PacTel's sole discretion upon the
occurrence of any of the following:
(i) Agent fails to cure any breach or default of any of its
duties or obligations under this Agreement, including, without
limitation, Agent's responsibility to comply with the Performance
Standards, the Portable Standards and, if applicable, the Installation
Standards, within ten (10) days after the date PacTel gives written
notice thereof to Agent (unless pursuant to any other terms of this
Agreement PacTel has the right to terminate this Agreement immediately
upon such breach or default by Agent); or
(ii) Agent or any of Agent's Affiliates engage in any illegal or
dishonest acts, including, without limitation, any practices of Agent or
any of Agent's Affiliates in which new customer orders are placed with
PacTel that are without said customer's knowledge or consent or are
otherwise fraudulent; or
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(iii) Agent refuses to follow the reasonable instructions of
PacTel consistent with the Agent's responsibilities and obligations
hereunder, or otherwise acts in a manner inconsistent with promoting the
goodwill of PacTel; or
(iv) the entry of a decree or order, voluntarily or
involuntarily, for relief by a court or entity having jurisdiction over
Agent in any action involving bankruptcy, insolvency or similar law, or
the appointment of a receiver, liquidator, assignee, custodian, trustee
or sequestor (or similar official) of or for Agent, or the ordering of
the winding up or liquidation of Agent's affairs; or
(v) Agent makes any change in the control or management of
Agent unacceptable to PacTel in PacTel's sole discretion; or
(vi) Agent terminates its business as a going concern; or
(vii) Agent dissolves, liquidates, or merges or consolidates with
another entity, or sells all or a material portion of its assets; or
(viii) Agent or any of Agent's Affiliates makes any unauthorized
or unfulfilled commitments, representations or warranties to potential or
existing CRS Customers or with respect to PacTel's CRS or CRS Equipment.
(c) Effect of Termination. Immediately upon any termination of this
Agreement, Agent will immediately: (i) cease marketing, selling, leasing or
offering in any manner any PacTel, CRS or CRS Equipment provided by PacTel; (ii)
cease using in any manner any Proprietary Property; and (iii) return to PacTel
all Proprietary Property and all copies thereof in whatever form in the
possession of Agent or any of Agent's Affiliates (including, without limitation,
and updated list containing names, addresses and all other relevant information
Agent or any of Agent's Affiliates then possess concerning New Customers Agent
has enrolled in the CRS Coverage Area and prospective customers, and all copies
of such information in Agent's or Agent's Affiliates' possession).
(d) Survival. Notwithstanding any termination or expiration of this
Agreement, the provisions of Sections 1(b), 3(d), 3(e), 5(d), 5(g)(iii),
5(g)(iv), 5(g)(v), 6(b), 7, 8(b), 9(c), 9(d), and 10 hereof will survive, as
will any other provision hereof that, by its terms or reasonable interpretation
thereof, sets forth obligations that extend beyond the termination or expiration
hereof.
10. GENERAL PROVISIONS.
(a) Audit Privileges/Records Retention. Agent hereby authorizes PacTel
to inspect the books, accounts and such other records of Agent that reflect,
deal with or are related to the Agent's performance of the Services hereunder,
and to make copies of or extracts from any or all of the same at any reasonable
time during normal business hours. Agent further agrees to retain copies of all
such records for not less than two (2) years following performance of the
subject Services.
(b) Regulatory Matters. This Agreement is subject to any changes or
modifications that may be required or suggested by the FCC or any applicable
federal, state or other agency or court with jurisdiction over PacTel, CRS or
CRS Equipment.
-13-
<PAGE> 130
(c) Interpretation. The interpretation, validity and effect of this
Agreement will be governed by the laws of the state of Georgia. The captions
preceding the text of this Agreement are for convenience and reference only, and
will not constitute a part of this Agreement, nor will they affect its meaning.
Should a provision of this Agreement require judicial interpretation, it is
agreed that the judicial body interpreting or construing the Agreement shall not
apply the assumption that the terms hereof shall be more strictly construed
against one party by reason of the rule of construction that an instrument is to
be construed more strictly against the party which itself or through its agents
prepared the agreement, it being agreed that all parties and/or their agents
have participated in the preparation hereof.
(d) Assignment. This is a personal appointment of Agent and Agent may
not transfer or assign this Agreement, Agent's interest herein or any duties,
obligations, rights or privileges of Agent pursuant hereto, in any manner,
including acquisition of Agent, without the prior written approval of PacTel,
and any attempted transfer or assignment without such consent will be null and
void. If the ownership, controlling interest or management of Agent changes at
any time during the term of this Agreement, whether by sale, transfer, merger or
operation of law, then PacTel may immediately terminate this Agreement without
notice or opportunity to cure. This Agreement will be binding upon the parties
hereto and their respective successors and permitted assigns. PacTel may fully
assign this Agreement to any person or entity, and this Agreement will inure to
the benefit of any assignee or other legal successor to the interests of PacTel
herein.
(e) Entire Agreement. This Agreement constitutes the entire agreement,
understanding and representations, express or implied, between PacTel and Agent
with respect to the subject matter hereof, including all oral or written
proposals. This Agreement may be modified or amended only by a written
instrument signed by Agent and a duly authorized representative of PacTel.
Neither party will be obligated by or have any liability under any agreements or
representations made by the other party that are not expressly authorized in
this Agreement or agreed to in writing by both parties.
(f) Severability. The unenforceability or invalidity of any term,
provision or Section of this Agreement shall not affect the validity or
enforceability of the remaining terms, provisions, or Sections hereof, but such
remaining terms, provisions or Sections shall be construed and interpreted in
such a manner as to carry out fully the intent of the parties hereto; provided,
however, that should any judicial body interpreting this Agreement deem any
provision hereof to be unreasonably broad in time, territory, scope or
otherwise, it is the intent and desire of the parties hereto that such judicial
body, to the greatest extent possible, reduce the breadth of such provision to
the maximum legally allowable parameters rather than deeming such provision
totally unenforceable or invalid.
(g) No Waiver. The failure of any party to enforce any of the
provisions of this Agreement at any time will in no way be construed to be a
waiver of such provision, nor in any way affect the validity of this Agreement
or any part hereof, or the right of any party thereafter to enforce each and
every provision of this Agreement.
(h) Notices. All notices and legal process delivered or deliverable
pursuant to this Agreement will be in writing and deemed delivered: (i) upon
personal or telecopy (with receipt confirmed) delivery; (ii) one (1) day after
being sent by reliable overnight delivery; or (iii) three (3) days after being
sent by certified mail, postage prepaid, return receipt
-14-
<PAGE> 131
requested, to the addresses set forth on the first page of the Agreement, or to
such other address as a party may designate pursuant hereto:
If to PacTel: If to Agent:
Director of Sales and Marketing North Point Cellular, Inc.
PacTel Cellular Inc. of Georgia d/b/a Peachtree Mobility
4151 Ashford Dunwoody Road 1220 North Point Circle
Suite 300 Alpharetta, GA 30202
Atlanta, GA 30319
COPY TO:
Legal Department
PacTel Cellular
P.O. Box 19707
Irvine, CA 92713
(i) Time of the Essence. Time is of the essence in Agent's performance
under this Agreement.
(j) Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original but all of which will constitute
one and the same agreement.
-15-
<PAGE> 132
IN WITNESS WHEREOF, the parties have executed or caused their duly
authorized officer to execute this Agreement, under seal, as of the day and year
first above written.
"PacTel" "Agent"
PACTEL CELLULAR, INC. NORTH POINT CELLULAR, INC.
OF GEORGIA d/b/a PEACHTREE MOBILITY
By:/s/ By:/s/
-------------------------- --------------------------
Title: Title: President
----------------------- -----------------------
[CORPORATE SEAL] [CORPORATE SEAL]
-16-
<PAGE> 133
<TABLE>
List of Schedules
-----------------
<S> <C>
Schedule 1 Performance Standards
Schedule 2(a) Portable Standards
Schedule 2(b) Installation Standards
Schedule 3 Commission Schedule
Schedule 4 Residual Schedule
Schedule 5 Chargeback Schedule
</TABLE>
<TABLE>
List of Exhibits
----------------
<S> <C>
Exhibit A Credit Service Agreement
Exhibit B Employment Agreement
Exhibit C Subagent Agreement
</TABLE>
<PAGE> 134
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
SCHEDULE 1
Performance Standards
(a) Agent will properly present PacTel's CRS and CRS Equipment, and
assist PacTel in ensuring that the same is presented in the most professional,
ethical and positive manner possible by: (i) allowing only those Agent's
Affiliates who are fully trained, competent and professional, and otherwise
qualified pursuant to Section 3(b) of the Agreement, to solicit orders for CRS
or CRS Equipment; and (ii) providing all reasonable information PacTel requests
from time to time regarding Agent's and Agent's Affiliates who solicit orders
for CRS or CRS Equipment.
(b) Agent will conduct its business so as to maintain and increase the
goodwill and reputation of PacTel, PacTel's CRS, other PacTel agents, PacTel's
CRS Customers and any of PacTel's parent corporations, subsidiaries or
affiliates, and will conform, and cause Agent's Affiliates to conform, to all
laws, rulings, regulations and codes of ethics applicable to the provision of
services similar to the Services, as well as such other rules, regulations and
guidelines as PacTel may establish from time to time. Agent will conform to all
applicable laws, tariffs, rules, orders, judgments and regulations and the
highest standards of honesty, integrity and ethical conduct in all dealings with
potential CRS Customers, existing CRS customers, PacTel, other PacTel agents and
the public.
(c) Agent will maintain sufficient skilled sales persons, tools and
equipment, and devote such effort, time and attention of its employees as may be
necessary to enroll an average of at least *** New Customers (or such
lower or higher number as PacTel and Agent may mutually agree in writing to
establish as a target for agent) per month tested on a quarterly basis based on
an average of immediately preceding three (3) months, and otherwise use Agent's
reasonable best efforts to perform the Services pursuant to the terms and
conditions of the Agreement.
(d) Agent will ensure that all selling, advertising, promotion and
marketing done by or on behalf of Agent is completely factual and fully ethical
and is consistent with all applicable laws and regulations, and with PacTel's
marketing strategy and philosophies. Except for credits that PacTel makes
available for CRS Customers to send directly to PacTel, Agent will not offer,
give or promise CRS Customers any credits for CRS Service.
(e) Agent will ensure that it and all of Agent's Affiliates perform
the Services in accordance with the highest standards of the industry and all
applicable laws, regulations and ordinances, and guidelines as PacTel may
establish from time to time.
(f) Agent will submit all sales orders for CRS for the CRS Coverage
Area promptly to PacTel in accordance with the Agreement and in accordance with
such other procedures as PacTel may establish from time to time.
(g) Agent will use solely the standard PacTel CRS forms for recording
CRS sales orders and customer service contracts from potential customers. Agent
will follow PacTel's established specifications, policies, terms and conditions
of sale with respect to PacTel's CRS, which Agent understands PacTel may change
at any time, in whole or in part, in PacTel's sole discretion, upon written
notice to Agent.
<PAGE> 135
(h) Agent will comply, and will cause each of Agent's Affiliates to
comply, with all procedures PacTel may establish from time to time to be used in
presentations to and solicitation and enrollment of CRS Customers or the sale,
rental or leasing of CRS Equipment.
(i) At its own expense, Agent will market, promote and advertise
PacTel's CRS in the CRS Coverage Area; provided, however, that Agent must submit
any and all promotional or advertising materials and all marketing programs for
PacTel's written approval before any use thereof.
(j) At all times Agent will give prompt, courteous and efficient
service to the public and all prospective and existing CRS Customers.
(k) Agent will secure and maintain in force all licenses and permits
required by law to operate its business and to perform its duties pursuant
hereto.
(l) Agent will keep and maintain, for a period of at least six (6)
years, all records required by any governmental agencies and PacTel, as well as
all records reasonably necessary to administer, evaluate and enforce the
Agreement and to perform Agent's duties pursuant hereto, including without
limitation, complete and accurate records of all business conducted pursuant to
or resulting from the Agreement.
(m) Agent will assist PacTel in any reasonable request to facilitate
customer evaluation, credit review and collection of any amounts owed by CRS
Customers solicited by Agent.
(n) At its own expense, Agent will obtain and provide training for all
of Agent's Affiliates who will be involved in the solicitation of CRS orders or
the sale, rental or lease of CRS Equipment, which training must be appropriate
in PacTel's reasonable discretion.
(o) Agent will promptly report to PacTel orally, followed by written
confirmation, any CRS Customer complaints or any trouble with CRS or CRS
Equipment sold or leased by PacTel.
(p) Agent will ensure that all customer remittances or deposits
received by Agent or any of Agent's Affiliates in connection with PacTel's CRS
and CRS Equipment are made payable to PacTel, and Agent will transmit to PacTel
any such remittances or deposits immediately upon receipt thereof by Agent.
(q) Agent will not, without PacTel's prior written consent, open or
use a new, additional or replacement location other than Agent's Office from
which Agent solicits or services CRS Customers or performs Installation and
Maintenance.
Schedule 1
Page 2
<PAGE> 136
Schedule 2(a)
Portable Standards
(a) Portable Installation will include: (i) testing the battery and
charger; (ii) programming the telephone number in the transceiver logic; and
(iii) testing the portable for proper performance.
(b) Agent will install CRS Equipment as to conform fully to all FCC
regulations as they apply to portable installation. Agent will maintain all
required technical records and make all necessary filings and reports, or if
appropriate, assist PacTel in preparing such filings and reports. Agent will
maintain complete books and records of customers, complaints received from
customers of PacTel, telephone numbers in use, and such other records and forms
as PacTel may require from time to time. In the case of any customer who seeks
to have Agent change or alter any electronic serial number of a unit of CRS
Equipment, or seeks to have a number address module changed to reflect an area
code, telephone number, or both, that is not assigned to the local cellular
telephone system, Agent will record and forward to PacTel, the number(s) before
any change, the number(s) after any change, and the name, address, home phone
number and driver's license identification data for the requesting customer.
<PAGE> 137
Schedule 2(b)
Installation Standards
(a) Agent will ensure that all service centers established to provide
installation (the "Service Centers") are: (i) large enough to accommodate the
volume of installation reasonably anticipated by the parties hereto without
undue delays to customers; (ii) maintained at all times in a neat, clean and
orderly manner; and (iii) equipped with test and other equipment sufficient to
obtain maximum efficiency in the use of CRS Equipment, including, without
limitation, (A) a cell site simulator, (B) a watt meter, (C) a volt meter, (D) a
coaxial crimping tool, and (E) other reasonably necessary hand tools. Such
Service Centers will maintain extra stocks of installation materials for CRS
Equipment at its own expense at each Service Center to compensate for losses or
shortages in manufacturer-supplied kits and to avoid delays for customers.
PacTel may inspect the Service Centers on a periodic basis during regular
business hours to verify Agent's compliance herewith and that such facilities
are adequate for the purposes set forth herein and that Agent is maintaining
equipment and supplies proper for efficient installation of CRS Equipment.
(b) Agent will ensure that all vehicles used to provide installation
services (the "Service Vehicles") are maintained at all times in a neat, clean
and orderly manner and in good repair, and equipped with test and other
equipment sufficient to obtain maximum efficiency in the use of CRS Equipment,
including, without limitation, the following: (i) a watt meter; (ii) a volt
meter; (iii) a coaxial crimping tool; and (iv) other reasonably necessary hand
tools. Service Vehicles must be equipped with extra stocks of installation
materials for CRS Equipment to compensate for losses or shortages in
manufacturer-supplied kits and to avoid delays for customers. PacTel may inspect
Agent's Service Vehicles on a periodic basis during regular business hours to
verify that Agent's Service Vehicles are maintained as required herein and that
Agent is maintaining equipment and supplies proper for efficient installation of
CRS Equipment.
(c) Agent will ensure the installation of CRS Equipment includes
vehicle installation and portable and transportable installation, and that all
installation work is accomplished in a neat and workmanlike fashion. Vehicle
installation will include, among other things: (i) reviewing installation with
customer; (ii) mounting the CRS Equipment in the vehicle; (iii) inspecting the
electrical system for proper operation; (iv) installing the antenna; (v)
programming the telephone number in the transceiver logic; (vi) installing the
transceiver serial number in the mobile exchange files and enabling operation of
the CRS Equipment; and (vii) testing the installed unit for proper performance.
(d) Agent will install CRS Equipment as to conform fully to all FCC
regulations as they apply to installation. Agent will maintain all required
technical records and make all necessary filings and reports or if appropriate,
assist PacTel in preparing such filings and reports. Agent will maintain
complete books and records of customers, complaints received from customers of
PacTel, telephone numbers in use and such other records or forms as PacTel may
require from time to time. In the case of any customer who seeks to have Agent
change or alter an electronic serial number of a unit of CRS Equipment, or seeks
to have a number address module changed to reflect an area code, telephone
number, or both, that is not assigned to the local cellular telephone systems,
Agent will record and forward to PacTel, the number(s) before any change, the
number(s) after any change, and the name, address, home phone number and
driver's license identification data for the requesting customer.
<PAGE> 138
Schedule 3
Commission Schedule
1. Subject to all applicable chargebacks, setoffs and other
provisions of the Agreement, for each period throughout the term of the
Agreement starting (i) on the eleventh (11th) day of each calendar month and
ending on the twenty-fifth (25th) day of the same calendar month; and (ii) on
the twenty-sixth (26th) day of each calendar month and ending on the tenth
(10th) day of the next calendar month (each of such periods being hereinafter
referred to as a "Determination Period"), upon receipt by PacTel of an accurate,
complete and fully executed standard form customer service contract for CRS for
a New Customer, PacTel will calculate and pay to Agent a one-time Commission for
each New Customer solicited by Agent and accepted by PacTel in accordance with
this Schedule 3. Commissions payable for the Determination Period set forth in
(i) above will be paid by PacTel on the second (2nd) Monday of the month
immediately following such Determination Period. Commissions payable for the
Determination Period set forth in (ii) above will be paid by PacTel on the
fourth (4th) Monday of the month in which such Determination Period ends. PacTel
may change the payment periods from time to time in PacTel's sole discretion
upon notice to Agent; provided, however, that PacTel shall pay Agent the
Commissions no less than once per month.
2. Except as set forth in Section 2(c) hereof and except for any
"Discount Commission" (as defined in Section 3 of this Schedule 3),
"Commissions" are determined by the following formula (the "Formula"):
ARPU, multiplied by .65, which result is reduced by $20.00, which result is
multiplied by the multiplier set forth opposite the applicable Churn number on
the table set forth on Schedule 3(a) which result is the "Customer Incremental
Gross Margin." The "Commission" is the dollar amount set forth opposite the
applicable Customer Incremental Gross Margin on the table set forth on
Schedule 3(a). A sample of the application of the Formula is set forth on
Schedule 3(a).
(a) Definitions
"ARPU" means the average monthly billings by PacTel for the
"Recent CRS Customers" (as such term is hereafter defined) during the
"Measuring Period" (as such term is hereafter defined). ARPU includes
billings generated by access, air time, features, discounts, and other
charges and credits, but excludes billings generated by service
establishment, installation, equipment, reaming, tolls and rental fees.
"Churn" means the average monthly number of permanent and
temporary-to-permanent deactivations during the Measuring Period for all
CRS Customers, divided by Agent's average monthly number of CRS Customers
during the Measuring Period.
"Measuring Period" means, as to any Determination Period, the
applicable three (3) month period occurring prior to such Determination
Period which is used to determine ARPU and Churn for the purpose of
calculating Agent's Commission, and which is set forth opposite the
applicable Determination Period below:
<PAGE> 139
<TABLE>
<CAPTION>
TO DETERMINE COMMISSIONS FOR ALL
DETERMINATION PERIODS COMMENCING DURING MEASURING PERIOD
--------------------------------------- -----------------------
<S> <C>
September, October, November May 1 - July 31
December, January, February August 1 - October 31
March, April, May November 1 - January 31
June, July, August February 1 - April 30
</TABLE>
"Recent CRS Customers" mean those active CRS Customers solicited
by Agent, accepted by PacTel and activated within the *** period
immediately preceding the beginning of the then-applicable Measuring
Period.
(b) Except as set forth in Section 2(c) hereof and except for
Discount Commissions, Agent's Commission shall be determined by applying
Agent's ARPU and Churn factors to the formula. An applicable Commission
computed for a Measuring Period applies to all New Customers solicited
by Agent and accepted by PacTel during the applicable Determination
Periods commencing during the three (3) month periods set forth above
opposite such Measuring Period, regardless of the type of service plan
selected by a New Customer. Commissions are re-calculated every three
(3) months beginning with the three (3) month period of September,
October and November 1993, using Agent's ARPU and Churn factors for the
then-applicable Measuring Period.
(c) If at the later of (i) September 11, 1993, or (ii) the date
of execution of this Agreement, the number of CRS Customers solicited by
Agent and activated by PacTel shall be less than 100 (without deducting
for deactivation), then Agent's Commission shall be equal to the average
Commission per New Customer for all PacTel sales for PacTel sales Agents
for the then-curent Measuring Period, as determined by Pactel, as
determined by Pactel, until such time as: (i) the number of CRS Customers
solicited by Agent and activated by PacTel shall be 100 or greater
(without deducting for deactivations); and (ii) a full Measuring Period
exists for the purpose of determining Agent's Commission.
3. "Discount Commissions" will be the amount set forth by PacTel as
the Commission for any discounted program PacTel may determine to make available
from time to time.
4. NOTE: Pursuant to Section 5(e) of the Agreement, PacTel has the
right to amend this Schedule 3(a) from time to time in PacTel's sole discretion.
5. Commissions and any Residuals are only payable after receipt by
PacTel of an accurate, complete and fully executed standard form customer
contract for CRS for a New Customer and shall not be paid by PacTel until it has
received such contract. If Agent does not forward the then applicable standard
form customer service contract signed by a New Customer to PacTel within one (1)
month of the activation of a CRS phone number for such New Customer, then Agent
shall not be entitled to receive any Commission for such New Customer.
Schedule 3
Page 2
<PAGE> 140
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Schedule 3(a)
PacTel Cellular - Georgia
Agent Gold Plan Compensation
SAMPLE
<TABLE>
<CAPTION>
Churn Multiplier
- ----- ---------
<S> <C> <C> <C> <C> <C>
*** ***
3 Month Average ARPU $56.00
times technical adjustment x 65%
Equals $36.40
less maintenance adjustment - $20.00 Commission Rate
Customer Incremental Per Contract
Gross Margin 9/93 - 8/94
-------------------- --------------
EQUALS MONTHLY MARGIN $16.40 *** ***
times churn multiplier 46.3
<<<<< (from box to left)
EQUALS INCREMENTAL 759.32
GROSS MARGIN
(excludes Selling & G&A expense)
CUSTOMER VALUE EQUATES TO COMMISSION RATE FROM CHART
SAMPLE COMMISSION RATE $260
Updated: August 4, 1993
</TABLE>
<PAGE> 141
Schedule 4
Residual Schedule
1. Subject to all applicable chargebacks, setoffs and other
provisions of the Agreement, for each period throughout the term of the
Agreement starting on the eleventh (11th) day of each calendar month and ending
on the tenth (10th) day of the next calendar month (such period being
hereinafter referred to as a "Full Month") during which Agent continues to
provide the Services, and only after receipt by PacTel of an accurate, complete
and fully executed standard form customer service contract for CRS for a New
Customer, PacTel will calculate and pay the Residuals payable to Agent in
accordance with this Schedule 4. Residuals payable for a Full Month will be paid
by PacTel on the fourth (4th) Monday of the month in which such Full Month ends.
Residuals are calculated as six percent (6%) of the "Monthly Air Time Revenue"
(as defined in paragraph 1(b) of this Schedule 4 paid by "Agent's New Customer
Base" (as defined in paragraph 1(a) of this Schedule 4) for the preceding Full
Month, excluding taxes and tolls.
(a) "Agent's New Customer Base" means the total number of New
Customers procured by Agent who were active users of PacTel's CRS during
the entire applicable Full Month.
(b) "Monthly Air Time Revenue" means all revenues actually
collected by PacTel in the applicable Full Month in payment of local air
time charges by Agent's New Customer Base. Monthly Air Time Revenue does
not include any of the following charges: (i) service establishment
charges; or (ii) long distance charges; or (iii) special feature charges;
or (iv) roamer charges; or (v) monthly access charges; or (vi) taxes; or
(vii) any other charge for CRS (except for local air time charges).
PacTel reserves the right to designate a reasonable portion of the
monthly charge for any "flat-rate" service plan now or hereafter made
available as an "access charge" not included in the calculation of
Monthly Air Time Revenue.
NOTE: Residuals are only payable after receipt by PacTel of an
accurate, complete and fully executed standard form of customer
service contract for CRS for a New Customer and shall not be paid
by PacTel until it has received such contract.
2. NOTE: Pursuant to Section 5(e) of the Agreement, PacTel has the
right to amend this Schedule 4 from time to time in PacTel's sole discretion.
<PAGE> 142
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Schedule 5
Chargeback Schedule
1. PacTel will have the right to charge back and set off the
following against any amount due from PacTel to Agent at any time from any
source:
(a) The entire price, including sales and any other similar taxes that
may be required to be paid, of any CRS Equipment PacTel sells to Agent, but
remains unpaid for more than ten (10) days after such sale.
(b) The entire cost of any installation and maintenance that PacTel
provides, if it was Agent's responsibility under the Agreement to provide such
installation and maintenance.
(c) The entire cost, loss, expense or value of any unauthorized
concessions, commitments, representations or warranties that PacTel determines,
in its sole discretion, were promised by Agent or any of Agent's Affiliates to
any potential or existing CRS Customer, but not delivered.
(d) Any obligation of Agent to indemnify PacTel pursuant to Section
8(b) of the Agreement.
(e) The entire amount of Commissions and any Residuals paid or payable
with respect to any New Customer, plus any charges on the New Customer's account
that have not been paid timely, if PacTel determines, in its sole discretion,
that any kind of fraud was involved in the enrollment of the New Customer,
including, without limitation, any of the following: (i) enrolling non-existent
persons as New Customers; (ii) enrolling Agent or any of Agent's Affiliates as
New Customers; or (iii) "churning" otherwise bona fide CRS Customers
(collectively, "Fraud"). Without limiting the generality of the foregoing, the
failure of any New Customer to incur air time charges within a reasonable period
of time after the activation of a new number, or the use of any fictitious ESN
will be deemed to be presumptive evidence of Fraud.
(f) The entire price, cost or amount owed to PacTel by Agent which
Agent has failed to pay promptly for any (i) cooperative advertising program,
(ii) equipment consignment program or any loan of equipment to Agent, (iii)
charges payable by Agent on any courtesy cellular line, access line or other
cellular line provided to Agent by PacTel, or (iv) other program or transaction
pursuant to which Agent owes PacTel any amount and has not paid such amount.
(g) The entire amount of Commissions and any Residuals paid or payable
with respect to any New Customer if:
(i) the New Customer fails to continue to be an active user of
PacTel's CRS for at least *** after PacTel's activation of a
CRS phone number for the new Customer; or
(ii) PacTel determines, in its sole discretion, that the New
Customer is Agent or one of Agent's Affiliates; or
<PAGE> 143
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
(ii) PacTel determines, in its sole discretion, that the person
soliciting the New Customer has in the past engaged in Fraud.
(iv) PacTel, in its sole discretion, disconnects such New
Customer for failure to pay any charges due PacTel at any time during the
*** period after the activation of such New Customer's CRS phone number.
(h) *** of Commissions paid or payable with respect to any New Customer
if the New Customer fails to continue to be an active user of PacTel's CRS for
at least *** after PacTel's activation of a CRS phone number for the New
Customer.
2. NOTE: Pursuant to Section 5(e) of the Agreement, PacTel has the
right to amend this Schedule 5 from time to time in PacTel's sole discretion.
SCHEDULE 5
PAGE 2
<PAGE> 144
Exhibit A
Credit Service Agreement
[PacTel Letterhead]
[Sales Agent]
[Address]
Re: Availability and Use of Credit Reporting Services
Dear______________:
To assist its sales agents in soliciting orders for cellular
radiotelephone services ("CRS"), PacTel Cellular Inc. of Georgia ("PacTel") may
from time to time enter into credit reporting arrangements with credit reporting
agencies or other processors of credit information (collectively, "Reporting
Agencies" and individually, a "Reporting Agency") pursuant to which PacTel's
sales agents, including [Sales Agent] (the "Agent"), may initiate credit checks
for prospective CRS customers by or through one or more Reporting Agencies. The
purpose of this letter is to set forth the terms and conditions pursuant to
which PacTel is willing to allow the Agent's use, as a PacTel sales agent, of
credit reporting and other services (collectively, "Credit Reporting Services")
which may be or become available through Reporting Agencies.
(i) Available Credit Reporting Services. The Credit Reporting Services
currently available allow PacTel's designated agents to call a toll-free number,
give certain information regarding a prospective CRS customer, and receive a
response regarding the amount of security deposit, if any, which will be
required in order to enroll the customer as a PacTel CRS system user.
(ii) Terms and Conditions Regarding Use of Credit Reporting Services.
By execution of this letter and compliance with the requirements set forth
herein, Agent agrees that if Credit Reporting Services are made available to it,
it shall use such services, and shall insure that all of its employees,
sub-agents, dealers, representatives and agents, including their employees
(collectively, the "Agent's Affiliates"), use such services strictly in
accordance with the following terms and conditions, as well as any other
procedures which PacTel may put in place regarding use of Credit Reporting
Services:
A. Agent must comply, and insure that the Agent's Affiliates
comply, with all laws, regulations and other legal requirements applicable to
the use of the Credit Reporting Services. Accordingly, Agent is advised to
obtain the advice of legal counsel as to the specifics of compliance with such
laws, regulations and requirements.
B. The Credit Reporting Services are made available by PacTel
to its designated agents free of charge, except to the extent that the number of
prospective customers as to which an agent requests Credit Reporting Services in
any month exceeds 125% of such agent's activations for that month. In such case
the agent will be responsible for the charges to PacTel by the subject Reporting
Agencies for provision of Credit Reporting Services in connection with such
excess requests; provided, however, that regardless of any such payment(s) by
any agent, the results of all Credit Reporting Services and all reports and
other documentation generated in connection therewith shall at all times remain
the sole and exclusive property of PacTel.
<PAGE> 145
C. Prior to using the Credit Reporting Services, Agent may be
required to post and maintain a bond with PacTel in an amount deemed adequate by
PacTel to protect PacTel against any failure of the indemnity protections of
Paragraph 4 hereof.
D. Credit Reporting Services shall be used for the sole
purpose of determining the amount of security deposit, if any, which PacTel will
require prior to providing CRS to a potential customer.
E. Credit Reporting Services shall be requested and utilized
only in connection with potential customers who have specifically expressed to
the Agent or one of Agent's Affiliates a desire to purchase CRS from PacTel.
F. Each potential customer shall be informed that Credit
Reporting Services will be performed prior to the Agent's or any of Agent's
Affiliates' contacting any Reporting Agency or otherwise initiating Credit
Reporting Services in connection with such potential customer.
G. If a potential customer as to whom Credit Reporting
Services have been utilized ultimately executes a Customer Service Agreement
with PacTel, Agent shall complete the section of such agreement acknowledging
customer notification of the credit verification requirement.
(iii) Failure to Comply. The Agent acknowledges and agrees that any use
of Credit Reporting Services by the Agent or any of Agent's Affiliates other
than in strict compliance with the provisions of Paragraph 2 hereof will
constitute a material breach of Agent's responsibilities as a sales agent of
PacTel and will authorize PacTel to terminate its Sales Agent Agreement with
Agent and any and all rights of the Agent and Agent's Affiliates to act on
behalf of PacTel in any representative manner.
(iv) Indemnity. The Agent shall and does hereby agree to indemnify and
hold harmless PacTel, together with its officers, directors, parent and
affiliates, from and against any and all liabilities, fees, debts, damages,
suits, actions, judgments, losses, costs and expenses (including, without
limitation, attorneys' fees and court costs) or claims of whatsoever nature
relating to or arising out of the Agent's or any of the Agent's Affiliates'
failure to comply with the terms and conditions of Paragraph 2 hereof.
(v) General. This letter constitutes the complete understanding of the
parties with respect to the subject matter hereof, and may not be assigned,
amended or discharged unless in a writing signed by all parties. This agreement
shall be governed by and construed in accordance with the laws and decisions of
the State of Georgia. Failure by either party hereto to enforce any terms and
conditions of this agreement shall not constitute a waiver of any such terms and
conditions at any future time. This letter will become a part of the Sales Agent
Agreement between PacTel and the Agent.
If you would like to use Credit Reporting Services, please have an
authorized officer execute this letter in the place set forth below. Upon
receipt of an executed copy of this letter (and any required bond) and PacTel's
acceptance thereof, you will be authorized to
EXHIBIT A
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use the Credit Reporting Services and will receive instructions on how to access
and use such services.
-----------------------------------------
[Name and Title of PacTel Representative]
Agreed to this ______ day of
____________________, 199__:
- ----------------------------------------
[Sales Agent]
By:
-------------------------------------
Title:President
----------------------------------
[CORPORATE SEAL] Accepted this ________ day of
_____________________, 199__:
PacTel Cellular Inc. of Georgia
By:
---------------------------------
Title:
------------------------------
EXHIBIT A
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Exhibit B
Minimum Employment Agreement Provisions
1. EMPLOYEE'S RESPONSIBILITIES.
(a) Exclusive Dealing. During the term of this Agreement, Employee
will not directly or indirectly: (i) market, sell, offer or otherwise provide
CRS in competition with that offered by Employer; or (ii) refer potential or
actual CRS Customers to any person or entity offering, providing or selling CRS
other than Employer (a "Competitor"); or (iii) in any manner assist or render
services to any Competitor.
(b) Non-Competition. During the term of this Agreement and for a
period of one (1) year after expiration or any termination hereof, neither
Employee, nor any entity substantially owned or controlled by Employee, will
directly or indirectly provide, market, sell, lease, rent or otherwise offer CRS
or CRS Equipment within the coverage area for the CRS offered by Employer (the
"CRS Coverage Area").
(c) Non-Solicitation. During the term of this Agreement and for a
period of two (2) years after expiration or any termination hereof, Employee
will not, either directly or indirectly, request any present or future customers
of Employer whose identity became known to Employee as a result of Employee's
dealings for or on behalf of Employer or pursuant to this Agreement, to curtail
or cancel their business or CRS with Employer within the CRS Coverage Area, or
to switch their CRS within the CRS Coverage Area to a Competitor.
2. PACTEL'S PROPRIETARY PROPERTY.
(a) Defined Terms. As used herein, the following terms shall have the
following meanings:
(i) "Confidential Information". "Confidential Information"
means any and all confidential, proprietary or secret information of
PacTel Cellular Inc. of Georgia ("PacTel"), other than "Trade Secrets"
(as hereinafter defined), which is of tangible or intangible value to
PacTel and is not public information or is not generally known or
available to PacTel's competitors but is known only to PacTel and those
of its employees, independent contractors, customers or agents to whom it
must be confided in order to apply it to the uses intended, including,
without limitation, any customer or lead lists and other customer
information regarding PacTel's CRS Customers or potential customers,
including any such information developed or recorded in any form by
Employee.
(ii) "Marks". "Marks" means PacTel's corporate name, service
marks, trademarks, trade names, insignias, symbols, decorative designs
and slogans, and the trademarks and service marks of PacTel's parent
corporations, subsidiaries and affiliates, or the like, both presently
existing or hereafter created or used, whether PacTel owns, uses or is
licensed or sublicensed to use the same.
(iii) "Proprietary Property". "Proprietary Property" means the
Marks, the "Work Product" (as hereinafter defined), the Confidential
Information and the Trade Secrets, whether or not all or any portion
thereof is or may be validly copyrighted, patented, or registered as a
trademark or service mark.
<PAGE> 148
(iv) "Trade Secrets". "Trade Secrets" means any and all
information of PacTel, including, without limitation, technical or
non-technical data, formulas, patterns, compilations, programs, devices,
methods, techniques, drawings, processes, financial data, financial
plans, products plans, or lists of actual or potential customers or
suppliers, which: (A) derives economic value, actual or potential, from
not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from their
disclosure or use; and (B) is the subject of efforts that are reasonable
under the circumstances to maintain their secrecy; including, without
limitation, confidential business, pricing and marketing plans, and other
customer information developed or recorded in any form.
(v) "Work Product". "Work Product" means any and all work
product, property, data, documentation or information of any kind,
whether tangible, intangible or intellectual, prepared, conceived,
discovered, developed or created by Employee in connection with this
Agreement, whether or not subject to protection under the trade secret,
patent or copyright laws of any jurisdiction, including, without
limitation, any customer or lead lists and other customer or potential
customer information developed or recorded in any form.
(b) Acknowledgements. Employee acknowledges and agrees that: (i)
Employee will become aware of Confidential Information and Trade Secrets in the
course of performing under this Agreement; (ii) the Proprietary Property
represents a substantial investment by PacTel; (iii) the Proprietary Property is
secret, confidential and unique; (iv) at least as between PacTel and Employee,
PacTel is the sole owner of all right, title and interest in and to the
Proprietary Property; (v) any right Employee has to use the Proprietary Property
is derived solely from this Agreement; (vi) this Agreement does not confer upon
Employee any rights, goodwill or other interests in any of the Proprietary
Property; (vii) any usage by Employee of the Proprietary Property or any
goodwill established thereby or associated therewith is intended to inure to the
exclusive benefit of PacTel and its affiliated companies; (viii) Employee's
covenants and agreements contained in this Section are special, unique and of
an extraordinary character; (ix) any disclosure or use of the Proprietary
Property, except as otherwise authorized by PacTel in writing, or any other
violation of the provisions of this Section, would be wrongful and cause
immediate relief significant, continuing and irreparable injury and damage to
PacTel that is not fully compensable by monetary damages; and (x) should
Employee breach or threaten to breach any provision of this Section, PacTel will
be entitled to obtain immediate relief and remedies in a court of competent
jurisdiction (including but not limited to damages, preliminary or permanent
injunctive relief to require Employee to honor its obligations under this
Agreement, and an accounting for all profits and benefits arising out of
Employee's breach), cumulative of and in addition to any other rights or
remedies to which PacTel may be entitled by this Agreement, at law or in
equity.
(c) Treatment of Proprietary Property. During the term of this
Agreement and thereafter as provided herein, and for all purposes, Employee will
regard and treat the Proprietary Property as strictly confidential and trade
secret, wholly owned by PacTel. Employee will exercise its best efforts to
ensure the continued confidentiality and ownership by PacTel of all Proprietary
Property known by or disclosed or made available to Employee, whether in
connection with this Agreement or any other past or present relationship with
PacTel. Employee will cooperate with any additional confidentiality and other
similar requirements PacTel may establish from time to time for the protection
of the Proprietary Property. Employee will not, during the term of this
Agreement or thereafter, claim any
EXHIBIT B
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<PAGE> 149
interest in or attack the title or any rights of PacTel in or to any or all of
the Proprietary Property or take any action that would adversely affect PacTel's
rights therein, or remove, alter or obfuscate or permit the removal, alteration
or obfuscation of any product identification, proprietary restriction,
copyright, trademark, service mark or trade secret notice or label on any
Proprietary Property or other property owned by or licensed to PacTel. Employee
will immediately notify PacTel of any unauthorized disclosure or use of any
Proprietary Property of which Employee becomes aware; provided, however, that
PacTel will have the sole right to determine what, if any, action should or will
be taken on account of any such disclosure. Employee will assist PacTel, to the
extent necessary, in the procurement of or any protection of PacTel's rights to
or in any of the Proprietary Property, and PacTel will reimburse Employee for
all pre-approved costs incurred in connection therewith.
(d) Confidentiality. At all times during the term of this Agreement
and: (i) with respect to any Confidential Information, for two (2) years after
any expiration or termination hereof; and (ii) with respect to each item of
Trade Secrets, for such time as such item shall constitute a trade secret under
applicable law, Employee will maintain the Confidential Information and Trade
Secrets in strict confidence, and Employee will not, for any reason in any
fashion, form or manner, either directly or indirectly: (A) sell, lend, lease,
distribute, market, license, sublicense, give, transfer, assign, show, divulge,
disclose, disseminate or otherwise communicate any Confidential Information or
Trade Secrets to any third party; or (B) use any Confidential Information or
Trade Secrets for any purpose other than performing pursuant to this Agreement;
or (C) keep any Confidential Information or Trade Secrets in any form after the
expiration or any termination of this Agreement; or (D) duplicate, reproduce,
copy, distribute, disclose or disseminate any Confidential Information or Trade
Secrets.
(e) Ownership of Work Product. To the greatest extent possible, all
Work Product will be deemed to be "works made for hire" (as defined in the
Copyright Act, 17 U.S.C.A. Section 101 et seq., as amended), owned, as between
Employer and Employee, exclusively by Employer. No Work Product will be or will
be deemed to be "joint work" (as defined in the Copyright Act). Employee hereby
unconditionally and irrevocably transfers and assigns to Employer all
embodiments of and all worldwide right, title and interest Employee may have or
obtain in or to any and all Work Product, including, without limitation, all
worldwide copyrights, trade secrets, confidential information and other
intellectual property, proprietary and other rights constituting or associated
with the Work Product. Employee will execute and deliver to Employer any
transfers, assignments, documents or other instruments Employer may deem
necessary or appropriate to vest complete possession, title and ownership of all
or any portion of the Work Product, and all rights therein, in Employer.
EXHIBIT B
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<PAGE> 150
Exhibit C
Minimum Subagent Agreement Provisions
1. SUBAGENT'S RESPONSIBILITIES.
(a) Exclusive Dealing. During the term of this Agreement, Subagent
will not directly or indirectly: (i) market, sell, offer or otherwise provide
CRS in competition with that offered by Agent; or (ii) refer potential or actual
CRS Customers to any person or entity offering, providing or selling CRS other
than Agent (a "Competitor"); or (iii) in any manner assist or render services to
any Competitor.
(b) Non-Competition. During the term of this Agreement and for a
period of one (1) year after expiration or any termination hereof, neither
Subagent, nor any parent, subsidiary, affiliate or entity owned or controlled by
any individual or entity that owns or controls Subagent, will directly or
indirectly provide, market, sell, lease, rent or otherwise offer CRS or CRS
Equipment within the coverage area for the CRS offered by Agent (the "CRS
Coverage Area").
(c) Non-Solicitation. During the term of this Agreement and for a
period of two (2) years after expiration or any termination hereof, Subagent
will not, either directly or indirectly, request any present or future customers
of Agent whose identity became known to Subagent as a result of Subagent's
dealings for or on behalf of Agent or pursuant to this Agreement, to curtail or
cancel their business or CRS with Agent within the CRS Coverage Area, or to
switch their CRS within the CRS Coverage Area to a Competitor.
2. PACTEL'S PROPRIETARY PROPERTY.
(a) Defined Terms. As used herein, the following terms shall have the
following meanings:
(i) "Confidential Information". "Confidential Information"
means any and all confidential, proprietary or secret information of
PacTel Cellular Inc. of Georgia, other than "Trade Secrets" (as
hereinafter defined), which is of tangible or intangible value to PacTel
and is not public information or is not generally known or available to
PacTel's competitors but is known only to PacTel and those of its
employees, independent contractors, customers or agents to whom it must
be confided in order to apply it to the uses intended, including, without
limitation, any customer or lead lists and other customer information
regarding PacTel's CRS Customers or potential customers, including any
such information developed or recorded in any form by Subagent or any
"Sub-Subagent" (as defined in Section ___) or any of their respective
employees, representatives or agents (collectively, "Subagent's
Affiliates").
(ii) "Marks". "Marks" means PacTel's corporate name, service
marks, trademarks, trade names, insignias, symbols, decorative designs
and slogans, and the trademarks and service marks of PacTel's parent
corporations, subsidiaries and affiliates, or the like, both presently
existing or hereafter created or used, whether PacTel owns, uses or is
licensed or sublicensed to use the same.
(iii) "Proprietary Property". "Proprietary Property" means the
Marks, the "Work Product" (as hereinafter defined), the Confidential
Information and the Trade Secrets, whether or not all or any portion
thereof is or may be validly copyrighted, patented, or registered as a
trademark or service mark.
<PAGE> 151
(iv) "Trade Secrets". "Trade Secrets" means any and all
information of PacTel, including, without limitation, technical or
non-technical data, formulas, patterns, compilations, programs, devices,
methods, techniques, drawings, processes, financial data, financial
plans, products plans, or lists or actual or potential customers or
suppliers, which: (A) derives economic value, actual or potential, from
not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from their
disclosure or use; and (B) is the subject of efforts that are reasonable
under the circumstances to maintain their secrecy; including, without
limitation, confidential business, pricing and marketing plans, and
other customer information developed or recorded in any form.
(v) "Work Product". "Work Product" means any and all work
product, property, data, documentation or information of any kind,
whether tangible, intangible or intellectual, prepared, conceived,
discovered, developed or created by Subagent or any of Subagent's
Affiliates in connection with this Agreement, whether or not subject to
protection under the trade secret, patent or copyright laws of any
jurisdiction, including, without limitation, any customer or lead lists
and other customer or potential customer information developed or
recorded in any form.
(b) Acknowledgments. Subagent acknowledges and agrees that: (i)
Subagent and Subagent's Affiliates will become aware of Confidential Information
and Trade Secrets in the course of performing pursuant to this Agreement; (ii)
the Proprietary Property represents a substantial investment by PacTel; (iii)
the Proprietary Property is secret, confidential and unique; (iv) at least as
between PacTel and Subagent, PacTel is the sole owner of all right, title and
interest in and to the Proprietary Property; (v) any right Subagent has to use
the Proprietary Property is derived solely from this Agreement; (vi) this
Agreement does not confer upon Subagent any rights, goodwill or other interests
in any of the Proprietary Property; (vii) any usage by Subagent of the
Proprietary Property or any goodwill established thereby or associated therewith
is intended to inure to the exclusive benefit of PacTel and its affiliated
companies; (viii) Subagent's covenants and agreements contained in this Section
are special, unique and of an extraordinary character; (ix) any disclosure or
use of the Proprietary Property, except as otherwise authorized by PacTel in
writing, or any other violation of the provisions of this Section, would be
wrongful and cause immediate, significant, continuing and irreparable injury and
damage to PacTel that is not fully compensable by monetary damages; and (x)
should Subagent breach or threaten to breach any provision of this Section,
PacTel will be entitled to obtain immediate relief and remedies in a court of
competent jurisdiction (including but not limited to damages, preliminary or
permanent injunctive relief to require Subagent to honor its obligations under
this Agreement, and an accounting for all profits and benefits arising out of
Subagent's breach), cumulative of and in addition to any other rights or
remedies to which PacTel may be entitled by this Agreement, at law or in equity.
(c) Treatment of Proprietary Property. During the term of this
Agreement and thereafter as provided herein, and for all purposes, Subagent
will regard and treat the Proprietary Property as strictly confidential and
trade secret, wholly owned by PacTel. Subagent will exercise its best efforts
to ensure the continued confidentiality and ownership by PacTel of all
Proprietary Property known by or disclosed or made available to Subagent or
Subagent's Affiliates, whether in connection with this Agreement or any other
past or present relationship with PacTel. Subagent will cooperate with any
additional confidentiality and other similar requirements PacTel may establish
from time to time for the protection of
EXHIBIT C
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the Proprietary Property. Subagent will not, during the term of this Agreement
or thereafter, claim any interest in or attack the title or any rights of PacTel
in or to any or all of the Proprietary Property or take any action that would
adversely affect PacTel's rights therein, or remove, alter or obfuscate or
permit the removal, alteration or obfuscation of any product identification,
proprietary restriction, copyright, trademark, service mark or trade secret
notice or label on any Proprietary Property or other property owned by or
licensed to PacTel. Subagent will immediately notify PacTel of any unauthorized
disclosure or use of any Proprietary Property of which Subagent becomes aware;
provided, however, that PacTel will have the sole right to determine what, if
any, action should or will be taken on account of any such disclosure. Subagent
will assist PacTel, to the extent necessary, in the procurement of or any
protection of PacTel's rights to or in any of the Proprietary Property, and
PacTel will reimburse Subagent for all pre-approved costs incurred in connection
therewith.
(d) Use of Marks. Subagent will not use any of the Marks, or any
material portion thereof, as a part of Subagent's corporate or trade name or
with any prefix, suffix or other modifying words, terms, designs or symbols, or
in any modified form, nor will Subagent use the Marks in connection with the
sale or leasing of any unauthorized product or service or in any manner not
expressly authorized by this Agreement or separately in writing by PacTel. If
Agent notifies Subagent to modify or discontinue the use of any or all of the
Marks, Subagent will do so as soon as possible after such notice, at Subagent's
sole cost and expense. Subagent will immediately discontinue any use of the
Marks upon any expiration or termination of this Agreement.
(e) Confidentiality. At all times during the term of this Agreement
and: (i) with respect to any Confidential Information, for two (2) years after
any expiration or termination hereof; and (ii) with respect to each item of
Trade Secrets, for such time as such item shall constitute a trade secret under
applicable law, Subagent and Subagent's Affiliates will maintain the
Confidential Information and Trade Secrets in strict confidence, and neither
Subagent nor any of Subagent's Affiliates will, for any reason in any fashion,
form or manner, either directly or indirectly: (A) sell, lend, lease,
distribute, market, license, sublicense, give, transfer, assign, show, divulge,
disclose, disseminate or otherwise communicate any Confidential Information or
Trade Secrets to any third party; or (B) use any Confidential Information or
Trade Secrets for any purpose other than performing pursuant to this Agreement;
or (C) keep any Confidential Information or Trade Secrets in any form after the
expiration or any termination of this Agreement or the expiration or any
termination or such Subagent's Affiliates' association with Subagent; or (D)
duplicate, reproduce, copy, distribute, disclose or disseminate any Confidential
Information or Trade Secrets.
(f) Ownership of Work Product. To the greatest extent possible, all
Work Product will be deemed to be "work made for hire" (as defined in the
Copyright Act, 17 U.S.C.A. Section 101 et seq., as amended), owned exclusively
by PacTel. No Work Product will be or will be deemed to be "joint work" (as
defined in the Copyright Act). Subagent hereby unconditionally and irrevocably
transfers and assigns to PacTel all embodiments of and all worldwide right,
title and interest Subagent may have or obtain in or to any and all Work
Product, including, without limitation, all worldwide copyrights, trade secrets,
confidential information and other intellectual property, proprietary and other
rights constituting or associated with the Work Product. Subagent will execute
and deliver to PacTel, and cause any of Subagent's Affiliates to execute and
deliver to PacTel, any transfers, assignments, documents or other instruments
PacTel may deem necessary or appropriate to vest complete
EXHIBIT C
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possession, title and ownership of all or any portion of the Work Product, and
all rights therein, exclusively in PacTel (including, without limitation, the
sole and exclusive rights to use, license, market, sell, distribute, copy,
modify, enhance, create derivative works of and exercise complete and exclusive
dominion and control over the Work Product).
(g) Sub-Subagents and Employees. Subagent will allow only its formal,
salaried employees who are acting within the scope of their employment and who
have executed an employment agreement with Subagent in a form approved by Agent,
including at least the minimum provisions set forth in Agent's agreements with
its employees (an "Employment Agreement"), to perform any of Subagent's
obligations pursuant to this Agreement. Subagent may, however, following
approval by Agent, appoint one or more independent contractors (individually, a
"Sub-Subagent" and collectively, the "Sub-Subagents") for the limited purpose of
soliciting CRS Customers, by, in each case: (i) providing written notice to
Agent of Subagent's intent to appoint such Sub-Subagent, which notice must
include such information regarding the proposed Sub-Subagent as Agent may deem
pertinent; (ii) following receipt of approval of such prospective Sub-Subagent
by PacTel, entering into a sub-subagent agreement with such Sub-Subagent in a
form approved by Agent, including at least the minimum provisions contained in
this Agreement (a "Sub-Subagent Agreement"), and such additional instruments and
agreements as Agent may dictate; and (iii) requiring the Sub-Subagent to require
each of its employees to execute an Employment Agreement and such additional
instruments and agreements as Agent may dictate. As to issues other than those
addressed in the minimum provisions required pursuant hereto, Subagent is free
to reach any agreement Subagent desires with employees and Sub-Subagents as long
as such Employment Agreements and Sub-Subagent Agreements do not require or
authorize actions contrary to any of the terms and conditions of this Agreement.
Subagent will provide to Agent a copy of every executed Sub-Subagent Agreement
and Employment Agreement and Employment Agreement executed pursuant to each
Sub-Subagent Agreement, prior to permitting any Sub-Subagent or employee to
engage in any activities governed by this Agreement. Subagent shall promptly
pursue and enforce all remedies available against any of its employees or
Subagents in the case of a breach or default by same under any Employment
Agreement or Subagent Agreement executed pursuant to this Section, including,
without limitation, termination of the subject agreement.
(h) Effect of Termination. Immediately upon any termination of this
Agreement, Subagent will immediately: (i) cease using in any manner any
Proprietary Property; and (ii) return to Subagent all Proprietary Property and
all copies thereof in whatever form in the possession of Subagent of Subagent's
Affiliates or their employees, agents and affiliates (including but not limited
to an updated list containing names, addresses and all other relevant
information Subagent or Subagent's Affiliates then possess concerning CRS
Customers Subagent has enrolled in the CRS Coverage Area and prospective
customers, and all copies of such information in Subagent's or Subagent's
Affiliates' possession).
(i) Survival. Notwithstanding any termination or expiration of this
Agreement, the provisions of the entirety of this Section 2 will survive, as
will any other provision hereof that, by its terms or reasonable interpretation
thereof, sets forth obligations that extend beyond the termination or expiration
hereof.
3. LIABILITY MATTERS.
(a) Insurance. Subagent represents and warrants that it now has in
effect, and covenants that it will maintain in effect throughout the term of
this Agreement, the following
EXHIBIT C
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insurance policies with a reputable commercial carrier acceptable to Agent,
providing for not less than thirty (30) days' prior written notice to Agent of
any modification, cancellation or non-renewal thereof: (i) Comprehensive General
Liability insurance in the minimum amount of One Million Dollars
($1,000,000.00); and (ii) Workers' Compensation insurance in at least the
minimum amount and with at least the minimum scope of coverage required by any
applicable state or workers' compensation law. Subagent will provide Agent with
certificates of insurance evidencing such coverage prior to the commencement of
services hereunder.
(b) Indemnity. Subagent will indemnify and hold harmless Agent, PacTel
and their respective officers, directors, shareholders, parent corporations,
affiliates, subsidiaries, employees, representatives, assigns, agents and
succors, from and against any and all liabilities, fees, debts, damages, suits,
actions, judgments, injuries, losses, costs and expenses (including, without
limitation, all attorneys' fees and court costs) or claims of whatsoever nature
relating to or arising out of any of the following: (i) any acts or omissions of
Subagent or any of Subagent's Affiliates, including, without limitation, any
injuries to or death or persons or any damage to property or equipment; or (ii)
any breach or default of any provision hereof by Subagent or any of Subagent's
Affiliates; or (iii) any breach or inaccuracy of any representation or warranty
made by Subagent herein; or (iv) any violation by Subagent or any of Subagent's
Affiliates of any law, rule, regulation, statute, order or promulgation of any
court, agency or administrative body; or (v) any fraudulent or misleading act or
statement made by Subagent or any of Subagent's Affiliates; or (vi) any and all
taxes of any kind arising out of the performance of the services hereunder.
Subagent further agrees to defend any and all such actions in any court or in
arbitration.
EXHIBIT C
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CONFIDENTIAL
AMENDMENT TO SALES AGENT AGREEMENT
FOR CELLULAR RADIOTELEPHONE SERVICE
This Amendment, dated April 6, 1995, modifies the terms of the Sales Agent
Agreement dated October 19, 1993 (the "Sales Agent Agreement") by and between
AIRTOUCH CELLULAR OF GEORGIA (formerly know as PacTel Cellular Inc. of Georgia")
("AirTouch") and NORTH POINT CELLULAR, INC. d/b/a Peachtree Mobility ("Agent").
WITNESSETH:
WHEREAS, Agent and AirTouch believe it to be in their mutual best interest
to amend the Sales Agent Agreement in accordance with the terms hereof,
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and promises herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound, do hereby agree to amend the
Sales Agent Agreement as follows:
1. Effect of Amendment.
This Amendment is an amendment to the Sales Agent Agreement. It is intended
that the provisions of this Amendment are incorporated into the Sales Agent
Agreement and should be construed as if they were a part of the original
Agreement, except that, in the event of any conflict between the terms of this
Amendment and the terms of the original Agreement which cannot be reconciled,
the terms hereof shall apply. All terms and conditions of the Sales Agent
Agreement which are not specifically
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modified by this Amendment shall remain unchanged and in full force and effect.
All capitalized terms and other phrases defined in the Sales Agent Agreement
shall have the same meaning given to them in the Sales Agent Agreement. Further,
it is understood that references to "PacTel" in the Sales Agent Agreement and to
"AirTouch" in this Amendment refer to the same entity. This Amendment shall be
effective on April 6, 1995 (the "Effective Date").
2. Commissions.
a. Residual Commissions. Section 4(e) and Schedule 4 of the Sales
Agent Agreement, relating to residuals, shall be deleted in their entirety.
Notwithstanding any other provision of the Sales Agent Agreement, AirTouch shall
have no further obligation to make any payments of residual commissions to Agent
with respect to sales or activations occurring after the Effective Date of this
Amendment, and AirTouch is satisfying its obligation to pay residual commissions
with respect to sales or activations prior to the Effective Date of this
Amendment pursuant to a Settlement Agreement of even date herewith.
b. Up Front Commissions. Schedule 3, the Commission Schedule, is
hereby amended as follows: Paragraph 1 of the Agreement shall continue in full
force and effect. Paragraphs 2 through 5 of Schedule 3 shall be deleted in their
entirety and replaced with the following:
2. The following definitions shall apply to this Schedule 3:
"ARPU" means the average monthly billings by AirTouch for "Recent CRS
Customers" (as such term is hereinafter defined) during the "Measuring
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Period"-(as such term is hereafter defined). ARPU includes billings
generated by access, air time, features, discounts, and other charges and
credits, but excludes billings generated by service establishment,
installation, equipment, roaming, tolls, long distance and rental fees.
"Churn" means the average monthly number of permanent and
temporary-to-permanent deactivations during the Measuring Period for all
CRS Customers, divided by Agent's average monthly number of CRS Customers
during the Measuring Period.
"Measuring Period" shall mean any six-month period beginning with May
1, 1995, which commences on May 1 and ends on October 31 of any year, or
commences on November 1 of any year and ends on April 30 of the following
year.
"Recent CRS Customers" mean those active CRS Customers solicited by
Agent, accepted by AirTouch and activated within the twelve (12) month
period immediately preceding the beginning of the then-applicable Measuring
Period.
3. AirTouch agrees to pay Agent the following up front commissions
for the activation of each New Customer as follows:
a. For each New Customer with a Class Code of A or B who is not
on the Safety Plan:
for activations during 1995: $310.00
for activations from 1/1/96
through 3/31/96 $300.00
for activations during the
remainder of 1996: $290.00
for activations during 1997
and from 1/1/98 through 3/31/98: $280.00
In the event AirTouch pays any other agent or mass retailer within the
Coverage Area an up front commission with respect to sales to New Customers
which is more than $10.00 greater than the aforesaid commissions payable to
Agent during any period, then AirTouch will increase the up front
commissions to Agent to such higher amount during such period as such
higher commission rate to the other agent or retailer remains in effect. It
is expressly understood that this "most favored nations" provision applies
only to up front commissions.
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b. For each New Customer activated on the Safety Plan (or who
transfers to the safety plan within the billing period forty-five days after
activation) or who has a Class Code of Q:
for activations during 1995: $210.00
for activations during 1/1/96
through 3/31/96 $200.00
for activations during the
remainder of 1996: $190.00
for activations during 1997
and from 1/1/98 through 3/31/98: $180.00
c. If Agent's ARPU is 15% or more lower and/or Agent's Churn is
15% or more higher than the average ARPU or Churn for AirTouch's agents on the
Gold Plan during any Measuring Period, the up front commission payable to Agent
pursuant to subparagraphs a and b above (after any adjustment pursuant to the
most favored nations clause in subparagraph a) shall be reduced by 10% for the
immediately following six-month period. Notwithstanding the foregoing, AirTouch
shall give Agent notice of its poor ARPU and/or Churn figures during a Measuring
Period one time without imposing the 10% commission reduction and may only
impose such reduction following each subsequent Measuring Period with respect to
which such standard is not met.
d. No commissions shall be payable with respect to the
activation of New Customers on month-to-month service contracts or
customers with a Class Code of M.
3. Commissions are only payable after receipt by AirTouch of an
accurate, complete and fully executed standard-form customer contract for
CRS for a New Customer and shall not be paid by AirTouch until it has
received such contract. If Agent does not forward the then applicable
standard-form customer service contract signed by a New Customer to
AirTouch within 30 days after the activation of a CRS phone number for each
New Customer, then Agent shall not be entitled to receive any Commission
for such New Customer. Notwithstanding the foregoing, in the event that
AirTouch rejects any standard-form customer service
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contract submitted by Agent but fails to have such rejection
available to Agent within 72 hours after receipt of such contract by
AirTouch, then Agent shall have 30 days after such rejection in which
to cure any deficiency in the contract and resubmit same; and if
Agent resubmits such contract within such 30 day period and AirTouch
accepts such contract, then AirTouch will be obligated to pay the
Commission in accordance with this Agreement.
4. Once a customer has been activated, AirTouch shall have no
right to reduce Agent's commission by changing AirTouch's initial
customer class determination based on a downgrading in credit
evaluation.
3. Initial Term.
Section 9(a) of the Sales Agent Agreement, relating to the term shall be
deleted in its entirety and replaced with the following:
(a) Term. Unless sooner terminated in accordance with Section
9(b) hereof, the initial term of this Agreement (the "Initial Term")
will continue through March 31, 1998. This Agreement will continue
thereafter for additional one year renewal terms unless either party
gives at least thirty (30) days advance written notice of nonrenewal
prior to the end of the term then in effect. The up front commission
payable for each renewal term will be as agreed by the parties. On or
before December 31, 1997 and December 31, of each subsequent year,
AirTouch will provide a proposed revision to the up front commission
to apply during the next subsequent renewal term. If this rate is not
acceptable to North Point, the parties will negotiate in good faith to
reach a commission level which is acceptable to both parties. If the
parties are unable to negotiate such a commission rate prior to the
end of such year, then this Agreement shall expire as of the end of
the term then in effect.
4. Additional Provisions.
The Sales Agent Agreement is hereby amended by adding new Sections 12
through 17 to such Agreement as follows:
12. Retail Locations; Trade Name; Restriction on Transfer.
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(a) During the term of this Agreement, except as otherwise
provided herein, Agent agrees to maintain the following retail
locations for the purpose of selling AirTouch CRS and related
equipment under the trade name "Peachtree Mobility": (i) North Point
Mall; (ii) Gwinnett Place Mall; (iii) Town Center Mall; (iv) Perimeter
Mall; and (v) the Buckhead store at 2955 Peachtree Road. Such stores
shall be referred to herein as the "Primary Stores." Agent hereby
represents and warrants that Agent owns all right, title and interest
in the trade name "Peachtree Mobility" and that North Point or the
individuals and corporations identified in Exhibit A to this Amendment
(the "Additional Lessees") is the lessee under the leases for each of
the Primary Stores. The Additional Lessees have executed this
Agreement solely for purposes of stating their agreement to be bound
by this section 12.
(b) Agent and each of the Additional Lessees hereby covenant and
agree that none of them will sell, assign, distribute, devise,
sublease, surrender or otherwise transfer, either directly,
indirectly, by operation of law or in any other manner (any such
transaction being referred to herein as a "Transfer") any right, title
or interest in any lease for any of the Primary Stores or any right,
title or interest in the trade name "Peachtree Mobility" to any person
or entity other than: (i) a person or entity who will operate as an
AirTouch agent and assume North Point's rights and obligations under
the Sales Agent Agreement; or (ii) to a person or entity who will
operate the Primary Stores or use such trade name for a purpose
unrelated to the sale of CRS, personal communication system ("PCS")
service or other mobile telecommunications service in competition with
AirTouch; provided that if a Transfer is to be made pursuant to this
Clause (ii) for such an unrelated use, then AirTouch will have a right
of first refusal pursuant to subsection (c) of this section 12. Any
Transfer permitted under clause (i) of this section 12(b) may be
undertaken only with the prior written consent of AirTouch, but
AirTouch will not unreasonably withhold such consent.
(c) If Agent or any of the Additional Lessees receives from a
prospective purchaser and desires to accept a bona fide offer to
purchase and desires to accept a bona fide offer to purchase any right
title or interest in any or all leases of a Primary Store or in the
trade name "Peachtree Mobility" who
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desires to use the leasehold premises or such name for a noncompeting
purpose, as described in clause (ii) of section 12(b), then AirTouch
shall have a right of first refusal as follows: AirTouch or its
nominee shall have the right, exercisable within 10 business days
after it receives all of the information set forth below to elect to
purchase such right, title or interest from Agent or Additional Lessee
(as the case may be) on the same monetary terms and conditions as are
offered by such prospective purchaser. Agent will provide AirTouch
with a written notice of such intended sale, setting forth the name
and address of the prospective purchaser, the price and terms of such
offer, a copy of such offer (if such offer is in writing), a copy of
each relevant lease and all amendments and other documents affecting
the use of the premises or any agreement with the lessor, and the
following financial information: relevant payroll expense documents,
and documents reflecting all recurring legal and financial obligations
relating to operations at each such Primary Store location (or if
there are no such documents, then descriptions of such obligations).
If AirTouch does not exercise its option within such 10 business day
period after it receives all such information, then Agent or
Additional Lessee may, within sixty (60) days after expiration of
AirTouch's right of first refusal, sell, assign and transfer such
lease and name, subject to a covenant by the purchaser that such
Primary Store will be used only for a noncompeting purpose, as
described in clause (ii) of section 12(b) and the purchaser's
agreement that AirTouch is an intended third party beneficiary with a
right to enforce such covenant. If AirTouch does elect to exercise its
right of first refusal hereunder, the closing thereof shall take place
within ten (10) business days after the date of AirTouch's exercise.
(d) This Agreement shall not be construed to require North Point
to continue in the business of selling AirTouch cellular service;
provided that this sentence is not intended to obviate the covenants
of Agent and Additional Lessees in this section 12 or the other
covenants in this Agreement with respect to exclusive dealing,
noncompetition and assignment. In the event that North Point desires
to use any or all of the Primary Stores for a purpose unrelated to the
sale of cellular service, PCS or other telephone service in
competition with AirTouch, AirTouch will have the option to purchase
such Primary Store(s), including all improvements and fixtures therein
and to assume
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
the lease in exchange for a price of $*** per store (other than the
Perimeter Mall store) and for $*** for the kiosk/cart at Perimeter
mall, together with the assumption of all bona fide obligations under
the respective lease(s).
(e) Agent shall provide to AirTouch, within ten (10) days after
the Effective Date, evidence that it has notified the lessor of each
Primary Store of AirTouch's rights to approve or disapprove Transfers
and its rights of purchase under this Section 12.
(f) Agent acknowledges and agrees that, in the event of any
breach of this Section 12 by Agent, AirTouch will have no adequate
remedy at law. Upon any such breach, AirTouch shall be entitled to
equitable remedies, including temporary and permanent injunctive
relief and specific performance, in addition to damages and other
remedies.
13. Signage.
(a) To encourage further expansion of Agent's retail locations,
AirTouch will provide Agent with a signage allowance of up to $ 5,000
per store for each new retail store location added by Agent after the
Effective Date of this Amendment. In addition, AirTouch will reimburse
Agent for up to $ 7,500 of the cost of replacing the PacTel(R) sign
with an AirTouch(R) sign at North Point Mall, such cost to include
the cost of the sign, installation, facade modifications,
architectural fees, and related demolition.
(b) Agent agrees to prominently display authorized "AirTouch"(R)
signage at all Agent locations. Except as specified in subsection (a)
of this section, such signage shall be solely at Agent's expense.
Display or use by Agent of any "PacTel"(R) mark after June 1, 1995
will constitute a breach of this Agreement.
14. Activation Terminals. AirTouch agrees that it will use
reasonable best efforts to supply to Agent as promptly as feasible and
in any event within 12 weeks after the Effective Date of this
Amendment one activation terminal for each of its Primary Store retail
locations set forth above, other than the Perimeter Mall location.
AirTouch agrees that North Point may activate up to five phone lines
per telephone call to AirTouch's
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
activation department during the interim period until such activation
terminals are received.
15. Advertising Allowances.
(a) With respect to activations commencing on the date hereof and
continuing until March 31, 1996, AirTouch will provide a cooperative
advertising allowance to Agent in an amount of *** of the cost of
approved advertising up to a maximum contribution buy AirTouch of ***
plus *** per New Customer activation during such period. Such amount
will be expended by Agent on approved advertising on or before April
30, 1996.
(b) With respect to activations on or after April 1, 1996,
AirTouch will pay to Agent an advertising allowance of *** of the cost
of approved advertising up to a maximum amount *** per activation for
each New Customer activated on or after April 1, 1996. In addition,
commencing with the second quarter of 1996, AirTouch will also pay to
Agent an additional advertising allowance of *** for each calendar
quarter in which Agent activates at least *** New Customers; provided
that in determining whether Agent has met this standard in any calendar
quarter, Agent may include any excess activations over *** in any of
the three previous calendar quarters which have not already been used
to meet the *** obligation in any prior quarter.
(c) Payments under this paragraph 15 will be in lieu of any and
all other advertising allowances or any other payments for advertising
or marketing support. Such payments will be made no later than 20 days
after Agent provides proof of advertising for which an allowance is
payable hereunder or within 20 days after the end of the calendar
quarter with respect to which such payment is made, as the case may
be.
16. Definitions. The parties understand and agree that the term
"CRS Coverage Area," as used in this Sales Agent Agreement, refers to
the following Georgia counties: Cherokee, Forsyth, Paulding, Cobb,
Fulton, Gwinnett, Douglas, DeKalb, Walton, Newton, Rockdale, Henry,
Clayton, Fayette and Butts.
17. Complimentary Cellular Lines. Agent will be provided with at
least *** complimentary cellular lines and at least *** access lines
throughout the term of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Amendment, on the
date first above mentioned, by their representatives, who personally attest that
they are duly authorized to enter into this Agreement.
"AirTouch" "Agent"
- ---------- -------
AIRTOUCH CELLULAR OF GEORGIA NORTH POINT CELLULAR, INC.
d/b/a PEACHTREE MOBILITY
By:/s/ By:/s/Marc S. Greene, President
-------------------------------------- --------------------------
Title: Director of Marketing and _________ Title: President
---------------------------------- ------------------
[CORPORATE SEAL] [CORPORATE SEAL]
ADDITIONAL LESSEES:
The following Additional Lessees hereby execute this Agreement solely
to evidence their Agreement to be bound by the provisions of section 12 of the
Sales Agent Agreement, as added by this Amendment.
/s/Marc S. Greene
- --------------------------- TOWN CENTER CELLULAR, INC.
Marc S. Greene
by: /s/Marc S. Greene, President
-------------------------------
Marc S. Greene, President
GWINNETT PLACE CELLULAR, INC. BUCKHEAD CELLULAR, INC.
by:/s Marc S. Greene, President by:/s/Marc S. Greene, President
----------------------------- -------------------------------
Marc S. Greene, President Marc S. Greene, President
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EXHIBIT A
LESSEES OF PRIMARY STORES
STORE LOCATION LESSEE
- -------------- ------
North Point Mall North Point Cellular, Inc.
Town Center Marc Greene and/or Town Center
Cellular, Inc.
Perimeter Mall North Point Cellular, Inc.
Gwinnett Place Mall Marc Greene and/or Gwinnett Place
Cellular, Inc.
Buckhead (2955 Peachtree Rd.) Buckhead Cellular, Inc.
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AMENDMENT NUMBER TWO TO
SALES AGENT AGREEMENT
FOR CELLULAR RADIOTELEPHONE SERVICE
This Amendment is made and entered into on August 30, 1996, by and between
AirTouch Cellular of Georgia, a Nevada corporation ("AirTouch") and Let's Talk
Cellular of America, Inc., a Florida corporation ("Agent").
WHEREAS, AirTouch and North Point Cellular, Inc. d/b/a Peachtree Mobility
("NPC"), a Georgia corporation, were parties to a Sales Agent Agreement dated
October 19, 1993, as amended by an Amendment to Sales Agent Agreement for
Cellular Radiotelephone Service between such parties dated April 6, 1995 (as so
amended, the "Sales Agent Agreement");
WHEREAS, as of the Effective Date (as defined below), NPC shall have
assigned its rights under the Sales Agent Agreement, and Agent shall have
assumed NPC's obligations under the Sales Agent Agreement, pursuant to an
Assignment, Assumption and Consent Agreement between NPC, Agent and AirTouch
dated the date hereof;
WHEREAS, Agent and AirTouch have negotiated, and both parties desire, the
modifications set forth in this Amendment;
NOW THEREFORE, for and in consideration of the premises, the mutual
covenants and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged
AirTouch and Agent agree as follows:
1. Effective Date. This Amendment shall be effective on August 31,
1996 (the "Effective Date").
2. Certain Definitions. All capitalized terms and other phrases
defined in the Sales Agent Agreement shall have the same meaning given to them
in the Sales Agent Agreement. All references to North Point in the Sales Agent
Agreement shall be deemed references to Agent for purposes of this Amendment.
3. Amendment to Section 3(d). Subsection (d) of Section 3 of the
Sales Agent Agreement is hereby amended by deleting the words "and for a period
of one (1) year after expiration or any termination hereof" and adding for
clarity the words "for any competitor of AirTouch," so that as amended such
provision reads:
(d) Non-Competition. During the term of this Agreement, neither
Agent, nor any parent, subsidiary, affiliate or entity owned or controlled
by any individual or entity that own or controls Agent, will directly or
indirectly provide, market, sell, lease, rent or
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otherwise offer CRS or CRS Equipment for any competitor of AirTouch within
the CRS Coverage Area.
4. Amendment to Section 9(a). Section 9(a) of the Sales Agent Agreement
is amended to extend the "Initial Term" through December 31, 1998 and to
eliminate the provision for automatic renewals by deleting it in its entirety
and replacing it with the following:
(a) Term. Unless sooner terminated in accordance with Section 9(b)
hereof, the initial term of this Agreement (the "Initial Term" will
continue through December 31, 1998. AirTouch and Agent may, by mutual
agreement, renew or extend this Agreement on terms to be negotiated
between them; provided that neither party is obligated to enter into any
such renewal or extension.
5. Address for Agent. Pursuant to Section 10(h) of the Sales Agent
Agreement, Agent hereby designates its address for notices and legal process
delivered or deliverable pursuant to the Sales Agent Agreement (as hereby
amended) as follows until changed in accordance with Section 10(h):
Let's Talk Cellular of America, Inc.
5200 NW 77 Court
Miami, Florida 33166
Attn: Mr. Brett Beveridge
6. Amendment to Section 12. Section 12 of the Sales Agent Agreement is
amended by deleting it in its entirety and replacing it with the following:
12. Retail Locations: Trade Names; Restrictions on Transfer.
(a) During the term of this Agreement, except as otherwise provided
herein, Agent agrees to maintain the following retail locations for the
purpose of selling AirTouch CRS and related equipment under the trade name
"Peachtree Mobility" or "Let's Talk Cellular and Wireless": (i) North Point
Mall; (ii) Gwinnett Place Mall; (iii) Town Center Mall; (iv) Perimeter
Mall; (v) the Buckhead Store at 2955 Peachtree Road; (vi) Lenox Mall; and
(vii) Northlake Mall. Such stores shall be referred to herein as the
"Primary Stores." Agent hereby represents and warrants that Agent owns all
right, title and interest in and to the trade names "Peachtree Mobility"
and "Let's Talk Cellular and Wireless." Should any of the Primary Stores
become partially or totally damaged by casualty, so that it would be
impracticable for Agent to continue to operate such store while so damaged,
then Agent's failure, while the store is so damaged, to maintain the store
as otherwise required by this Section 12(a) shall not breach this Section
12(a), provided that Agent moves expeditiously to either (A) repair the
store and resume normal operations as soon as reasonably practical or (B)
open a substantially similar store in full compliance with Section 17 of
this Agreement,
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which store shall be added as a "Primary Store." In any event, the damaged
store shall remain a "Primary Store." Agent shall not proceed under the
foregoing clause (B) unless its proceeding under the foregoing clause (A)
either would not put the store back in operation within ten (10) days of
its closure or would cost in excess of $10,000 to make the necessary
repairs. Agent shall only be entitled to the signage allowance for the new
Primary Store as provided for in Section 13(a) of this Agreement if Agent
reopens the damaged Primary Store for the purpose of selling AirTouch CRS
and related equipment under the trade name "Peachtree Mobility" or "Let's
Talk Cellular and Wireless."
(b) Agent hereby covenants and agrees that it will not sell, assign,
distribute, devise, sublease, surrender or otherwise transfer, either
directly, indirectly, by operation of law or in any other manner (any such
transaction being referred to herein as a "Transfer") any right, title or
interest in any lease for any of the Primary Stores or any right, title or
interest in either of the trade names "Peachtree Mobility" or "Let's Talk
Cellular and Wireless" to any person or entity other than: (i) a person or
entity who will operate as an AirTouch agent and assume Agent's rights and
obligations under this Agreement; or (ii) to a person or entity who will
operate the Primary Stores or use such trade name for a purpose unrelated
to the sale of CRS, personal communication system ("PCS") service or
other mobile telecommunications service in competition with AirTouch;
provided that if a Transfer is to be made pursuant to this Clause (ii) for
such an unrelated use, then AirTouch will have a right of first refusal
pursuant to subsection (c) of this section 12. Any Transfer permitted
under clause (i) of this section 12(b) may be undertaken only with the
prior written consent of AirTouch, but AirTouch will not unreasonably
withhold such consent.
(c) If Agent receives from a prospective purchaser and desires to
accept a bona fide offer to purchase any right, title or interest in any or
all leases of any Primary Store or in either of the trade names "Peachtree
Mobility" or "Let's Talk Cellular and Wireless" who desires to use the
leasehold premises or such name for a noncompeting purpose, as described in
clause (ii) of section 12(b), then AirTouch shall have a right of first
refusal as follows: AirTouch or its nominee shall have the right,
exercisable within 10 business days after it receives all of the
information set forth below, to elect to purchase such right, title or
interest from Agent on the same monetary terms and conditions as are
offered by such prospective purchaser. Agent will provide AirTouch with a
written notice of such intended sale, setting forth the name and address of
the prospective purchaser, the price and terms of such offer, a copy of
such offer (if such offer is in writing), a copy of each relevant lease and
all amendments and other documents affecting the use of the premises or any
agreement with the lessor, and the following financial information:
relevant payroll expense documents, and documents reflecting all recurring
legal and financial obligations relating to operations at each such Primary
Store location (or if there are no such documents, then descriptions of
such
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
obligations). If AirTouch elects to purchase such right, title and interest
from Agent, then the parties shall use their best efforts to ensure that
the closing thereof shall take place within ten (10) business days after
the date of AirTouch's exercise. If AirTouch does not exercise its option
within the 10 business day period after it receives all such information,
then Agent may, within sixty (60) days after expiration of AirTouch's right
of first refusal, sell, assign and transfer such lease and name, at the
same price and terms contained in the written notice to AirTouch of such
intended sale, subject to a covenant by the purchaser that such Primary
Store will be used only for a noncompeting purpose (as described in clause
(ii) of section 12(b)) and to the purchaser's agreement that AirTouch is an
intended third party beneficiary with a right to enforce its right of first
refusal hereunder.
(d) This Agreement shall not be construed to require Agent to
continue in the business of selling AirTouch cellular service; provided
that this sentence is not intended to obviate the covenants of Agent in
this section 12 or the other covenants in this Agreement with respect to
exclusive dealing, noncompetition and assignment. In the event that Agent
desires to use any or all of the Primary Stores for a purpose unrelated to
the sale of cellular service, PCS or other telephone service in competition
with AirTouch, AirTouch will have the option to purchase such Primary
Store(s), including all improvements and fixtures therein and to assume the
lease in exchange for a price of $*** per store (other than the
Perimeter Mall store) and for $*** for the kiosk/cart at Perimeter Mall,
together with the assumption of all bona fide obligations under the
respective lease(s).
(e) Agent shall provide AirTouch, within ten (10) days after the
date of this Amendment, evidence that it has notified the lessor of each
Primary Store of AirTouch's rights to approve or disapprove Transfers and
its rights of purchase under this Section 12.
(f) Agent acknowledges and agrees that, in the event of any breach
of this Section 12 by Agent, AirTouch will have no adequate remedy at law.
Upon any such breach, AirTouch shall be entitled to equitable remedies,
including temporary and permanent injunctive relief and specific
performance, in addition to damages and other remedies.
7. Amendment to Section 15. The Sales Agent Agreement is amended to add a
new subsection (d) to Section 15 thereof as follows:
(d) AirTouch agrees that with respect to the cooperative advertising
allowance provided for in Section 15(b) of this Agreement, AirTouch will do
the following:
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
(i) For the period after the Effective Date and up to and
including December 31, 1996, Agent may request reimbursement for
approved advertising and be paid such amount up to a running deficit
in such allowance account of $***. On and after January 1, 1997,
Agent shall no longer be allowed to have a deficit in its
allowance account but must first make up such deficit and earn any
further allowance through activations before being reimbursed for
any approved amount.
(ii) Immediately after the Effective Date AirTouch shall credit
such advertising allowance an amount equal to $*** against which
credit Agent may apply for reimbursement of *** of the cost of
approved signage and advertising for the Northlake and Lenox stores
only. Agent acknowledges that this $*** advertising allowance
credit is in lieu of and not in addition to the signage allowance
provided under Section 13 of this Agreement.
(iii) In addition, pursuant to Section 15(b) of this
Agreement, AirTouch provides Agent with an additional advertising
allowance of $*** for each calendar quarter in which Agent
activates at least *** New Customers. This additional advertising
allowance is credited to Agent's allowance after the end of each
calendar quarter and in the case of the third calendar quarter of
1996 would generally be credited to the allowance in October of
1996. AirTouch agrees that it will immediately credit Agent's
advertising allowance $*** representing an early credit of the
third calendar quarter additional advertising allowance. If Agent
fails to activate at least *** New Customers during the third
quarter of 1996, then in the next calendar quarter in which Agent
does activate at least *** New Customers, Agent will not be
entitled to receive such additional advertising allowance. If Agent
has not activated at least *** New Customers in a calendar quarter
on or before June 30, 1997, then on such date, AirTouch will debit
$*** from Agent's allowance account, and Agent will have to make
up any deficit in such account before receiving any advertising
reimbursement.
8. New Section 17. The Sales Agent Agreement is amended to add a new
Section 17 thereof as follows:
17. Location of New Stores. AirTouch agrees, subject to the
requirements of AirTouch's Retail Location Policy (a copy of which has
been provided to Agent), as amended from time to time, that on or after
January 1, 1997, Agent may open any new retail location at any time during
the term of this
<PAGE> 171
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
Agreement and at any place within the CRS Coverage Area provided such
location is in an enclosed all of greater than 1,000,000 square feet.
9. Amendment to Section 3.a of Schedule 3. Section 3.a of Schedule 3
to the Sales Agent Agreement is amended to delete all language beginning with
"a" and up to and including "$***" and insert the following in lieu thereof:
a. For each New Customer with a Credit Class Code of A or B
who activates on a cellular price plan with a monthly access charge greater
than $*** per month:
<TABLE>
<S> <C>
for activations during 1995: ***
for activations from 1/1/96
through 3/31/96 ***
for activations during the
remainder of 1996: ***
for activations during 1997
and from 1/1/98 through 3/31/98: ***
for activations from 4/1/98
through 12/31/98: ***
</TABLE>
10. Amendment to Section 3.b of Schedule 3. Section 3.b of Schedule 3 to
the Sales Agent Agreement is amended to delete such section in its entirety and
substitute the following in lieu thereof:
b. For each New Customer activated on (or who transfer within
*** after activation to) a cellular price plan with a monthly access charge
of *** or less per month or who has a Credit Class Code of Q:
<TABLE>
<S> <C>
for activations during 1995: ***
for activations from 1/1/96
through 3/31/96: ***
for activations during the
remainder of 1996: ***
</TABLE>
<PAGE> 172
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C>
for activations during 1997
and from 1/1/98 through 3/31/98: ***
for activations from 4/1/98
through 12/31/98: ***
</TABLE>
11. No Residuals. Nothing in this Amendment affects the agreement set
forth in Section 2 of the April 16, 1995 amendment, and no residual commissions
shall be paid or payable under the Sales Agent Agreement.
12. Amendment Controlling. The Sales Agent Agreement is hereby deemed
modified to give effect to each and every provision of this Amendment, and any
and all provisions of the Sales Agent Agreement not consistent with any
provision of this Amendment are hereby deemed amended to conform herewith.
Except as amended by this Amendment, the Sales Agent Agreement remains in full
force and effect.
13. Miscellaneous.
(a) Captions. Titles and captions of or in this Amendment are
inserted only as a matter of convenience and for reference and in no way define,
limit, extend or describe the scope of this Amendment or the intent of any of
its provisions.
(b) Controlling Law. This Amendment is governed by, and shall be
construed and enforced in accordance with the laws of the State of Georgia.
(c) Counterparts. This Amendment may be signed by each party upon a
separate copy, and in such case one counterpart of this Amendment shall consist
of enough of such copies to reflect the signatures of each party to this
Amendment. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making proof
of this Amendment or its terms to produce or account for more than one of such
counterparts.
<PAGE> 173
DULY EXECUTED and delivered by the undersigned parties on the date first
set forth above, effective as of the Effective Date.
AirTouch: AIRTOUCH CELLULAR OF GEORGIA
By:/s/ K. Molinaro
------------------------------------
Name: Kenneth R. Molinaro
-------------------------------
Title: Director of Finance
-------------------------------
Agent: LET'S TALK CELLULAR OF AMERICA, INC.
By:/s/Brett Beveridge
------------------------------------
Brett Beveridge
Vice President
* * * * *
<PAGE> 174
AGREEMENT
BETWEEN
BELLSOUTH CELLULAR NATIONAL MARKETING, INC. ("BCN"),
AIRTOUCH CELLULAR OF GEORGIA ("AIRTOUCH"),
AND
LET'S TALK CELLULAR OF AMERICA, INC. ("LTC").
WHEREAS, BCN and LTC are parties to that certain Retail
Representative Agreement effective April 1, 1994 ("BCN Agreement");
WHEREAS, LTC wishes to purchase the assets of North Point
Cellular, Inc., and in connection therewith LTC expects to be substituted for
North Point Cellular, Inc., in an Agreement among LTC, North Point Cellular,
Inc., and AirTouch (the "Transaction");
WHEREAS, LTC would be in breach of the BCN Agreement were it to
consummate the Transaction and perform services for AirTouch in the Atlanta
Markets (as defined below):
WHEREAS, BCN and LTC have agreed to cancel LTC's obligations to
BCN in the Atlanta Markets by separate Agreement of even date herewith;
WHEREAS, the parties wish to alleviate any uncertainty as to
whether any of the above actions or other actions as described herein would
constitute tortious interference or any other cause of action by any party
against any other;
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is agreed as follows:
1. BCN does hereby unconditionally and irrevocably forever waive,
release and discharge AirTouch, its subsidiaries and affiliates, and the
officers, directors, employees or agents of each of them (collectively
"AirTouch"), from all obligations and liabilities of AirTouch to BCN, and all
claims and causes of action (whether at law or in equity) of BCN against
AirTouch, that arise out of, are a result of, involve or otherwise exist with
respect to (a) any purchase by LTC of all or any part of the business of North
Point Cellular, Inc., d/b/a Peachtree Mobility, a Georgia corporation, (b) any
modification of the BCN Agreement, (c) any modification of LTC's relationship
with BCN in Georgia, (d) LTC's becoming an AirTouch agent in Georgia, or (e) any
discussions and negotiations relating to any of the foregoing; and BCN
<PAGE> 175
further confirms for the benefit of AirTouch there are no agreements between BCN
(or any of its affiliates) and LTC that restrict LTC's right to become and
remain an agent of AirTouch in Georgia in the Atlanta Markets as follows:
Athens, GA MSA
Atlanta, GA MSA
GA 3 RSA
GA 4 RSA
GA 4 RSA
2. AirTouch and LTC hereby jointly and severally represent and
warrant to BCN that there are no agreements or commitments, formal or informal,
between AirTouch (or any of its affiliates) and LTC that would restrict LTC's
right to become an agent of BCN in the Atlanta Market effective on or after
January 1, 1999 (a "Restrictive Covenant"); provided that this shall not
prohibit AirTouch and LTC from negotiating and entering into a Restrictive
Covenant in the future; provided further that BCN acknowledges that discussions
regarding the possibility of Restrictive Covenant have taken place between
AirTouch and LTC prior to the date hereof and may take place after the date
hereof; provided further that the occurrence of those discussions have not and
will not breach the foregoing representation and warranty to the extent that
such discussions prior the date hereof have not resulted in any Restrictive
Covenant; and provided further that the parties acknowledge that the foregoing
representation and warranty is not breached by the following provision contained
in the sales agent agreement entered into or to be entered into between AirTouch
and LTC:
During the term of this [sales agent agreement] and for a period
of two (2) years after any expiration or termination thereof,
Agent [LTC] will not, either directly or indirectly, request any
present or future customers of AirTouch whose identity became
known to Agent as a result of Agent's dealings for or on behalf of
AirTouch or pursuant to this [sales agent agreement] to curtail or
cancel their business or CRS with AirTouch within the CRS Coverage
Area, or to switch their CRS within the CRS Coverage Area to [any
person or entity providing or selling CRS other than AirTouch];
where "CRS" means cellular radiotelephone service and "CRS Coverage Area" means
the following counties in Georgia: Cherokee, Forsyth, Pauling, Cobb, Fulton,
Gwinnett, Douglas, DeKalb, Walton, Newton, Rockdale, Henry, Clayton, Fayette and
Butts.
3. BCN and LTC jointly and severally represent and warrant to
AirTouch that there are no agreements or commitments, formal or informal,
between BCN (or any of its affiliates) and LTC for LTC to become an agent of BCN
(or any of its affiliates) in any of the Atlanta Markets at any time (an "Agency
Agreement"); provided that this shall not prohibit BCN and LTC from negotiating
and entering into an Agency Agreement for periods beginning on or after January
1, 1999; provided further that AirTouch acknowledges that discussions regarding
the possibility of an Agency Agreement covering periods beginning on or after
January 1, 1999 have taken place between BCN and LTC prior to the date hereof
and may take place after the
<PAGE> 176
date hereof; and provided further that the occurrence of those discussions have
not and will not breach the foregoing representation and warranty to the extent
that such discussions prior to the date hereof have not resulted in any Agency
Agreement.
4. LTC hereby represents and warrants to AirTouch and BCN that LTC
has not made at this time any decision that it will operate as an agent for
either AirTouch or BCN (or any of their respective affiliates) in the Atlanta
Market on or after January 1, 1999, and further represents that it intends to
give both AirTouch and BCN the opportunity to negotiate for its services for
that period.
5. LTC does hereby unconditionally and irrevocably forever waive,
release and discharge AirTouch and BCN from all obligations and liabilities of
BCN or AirTouch to LTC, in all claims and causes of action (whether at law or in
equity) of LTC against BCN or AirTouch, that arise out of, are a result of,
involve or otherwise exist with respect to any action by BCN or AirTouch through
the date of this Agreement.
<PAGE> 177
IN WITNESS WHEREOF, the parties hereto have executed, sealed and
delivered this Agreement in three counterparts.
BELLSOUTH CELLULAR
NATIONAL MARKETING, INC.
By:/s/ M.T. Walsh
--------------------------
Print: M.T. Walsh
-----------------------
Title: Vice President
-----------------------
Date: 8-29-96
------------------------
LET'S TALK CELLULAR OF AMERICA, INC.
By:/s/ Brett Beveridge
--------------------------
Print: Brett Beveridge
-----------------------
Title:Vice President
-----------------------
Date: 8-30-96
------------------------
AIRTOUCH CELLULAR OF GEORGIA
By:/s/ Kenneth R. Molinaro
--------------------------
Print: Kenneth R. Molinaro
-----------------------
Title: Director of Finance
-----------------------
Date: 8/30/96
------------------------
<PAGE> 1
EXHIBIT 10.21
DEALER AGREEMENT
This Dealer Agreement ("Agreement"), dated this 20th day of December,
1996 ("Effective Date"), is between Metroplex Telephone Company d/b/a AT&T
Wireless Services ("Company"), and Telephone Warehouse, Inc., a Texas
corporation, ("Dealer"). Dealer currently does business as Telephone Warehouse;
however, this Agent shall be binding on Dealer regardless of any assumed name
under which Dealer does business.
Company provides wireless radio telecommunications services ("Service")
in the Dallas/Ft. Worth, Texas metropolitan statistical area ("Area") directly
to individuals, corporations, associations, and other entities that purchase
such Service from Company ("Subscribers"). The Area is defined by the United
States Census Bureau and consists of the following counties: Collin, Dallas,
Denton, Ellis, Hood, Johnson, Kaufman, Parker, Rockwall, Somervell, Tarrant, and
Wise.
Company has offered to Dealer the opportunity to market Company's Service
in the Area and refer to Company potential Subscribers for the Service under the
terms and conditions of this Agreement, and Dealer has accepted.
Therefore, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which are expressly
acknowledged, Company and Dealer agree as follows:
1. APPOINTMENT OF DEALER.
a. Appointment Company hereby appoints Dealer as an authorized
dealer for Company within the Area to solicit, and submit for consideration,
potential Subscribers to Company's Service under Company rate plans as specified
by Company from time to time, and to provide assistance to Subscribers as may be
authorized by Company. Dealer accepts such appointment. For purposes of this
Agreement, Service does not include any wireless telecommunications services
purchased from a reseller of Company's Service, and Subscriber does not include
individuals, corporations, associations, or other entities that purchase
Company's Service from a reseller. Notwithstanding anything else in this
Agreement, Dealer acknowledges and agrees that Company may (i)sell Service
directly to Subscribers (through itself, through Affiliated entities, or both),
(ii) appoint or authorize other persons or entities to solicit Subscribers to
the Service, and (iii) sell, lease, or provide directly to Subscribers, or
appoint or authorize other persons or entities to sell, lease, or provide,
wireless telephones and related equipment (collectively, "Equipment") and/or
installation, repair, and warranty service for such Equipment
b. Term. This Agreement shall be for a five (5) year term,
commencing on the Effective Date and terminating five (5) years thereafter,
unless sooner terminated under the terms herein. Upon completion of the initial
term, this Agreement will automatically renew for one (1) additional five (5)
year term unless either party notifies the other party of its intention not
1
<PAGE> 2
to renew not less than nine (9) months prior to the expiration of the initial
term. Neither party shall be under any obligation to renew or extend.
c. Dealer Program Rules. This Agreement incorporates the
Dealer Program Rules attached as Exhibit A ("Dealer Program Rules"). Company
shall have the right to amend the Dealer Program Rules (by addition, deletion,
and/or modification of any terms) from time to time on thirty (30) days written
notice to Dealer, and any such amendment shall be automatically incorporated
into this Agreement.
d. "Independent Parties". In performance of this Agreement,
Dealer shall at all times act in its own capacity and right as an independent
contractor. Company and Dealer acknowledge that their relationship does not
create a general agency, joint venture, partnership, employment relationship, or
franchise between them. Dealer shall not pay, and Dealer acknowledges that it
has not paid, any franchise fee or other compensation for the right to enter
into this Agreement, solicit Subscribers for Company, or use any Marks (defined
herein). Except as expressly set forth herein, neither Company nor Dealer have
the authority to bind the other in any manner. Except as expressly set forth
herein or in the Dealer Program Rules, Dealer will provide all facilities,
equipment, and supplies required to perform its activity and meet its
obligations as contemplated hereunder. Company shall neither direct nor control
the work of Dealer nor assume any responsibility for Dealer's acts, errors, or
omissions. Dealer shall at all times identify Company as the Service provider.
Dealer shall identify itself as an "Authorized Dealer" of Company.
e. No Other Agreements. Dealer represents and warrants to
Company (i) that its execution and performance of this Agreement does not and
will not violate any other contract or obligation to which Dealer or any
Affiliate of Dealer is or was a party, including any covenant not to compete or
agreements concerning non-solicitation of customers or confidential information,
(ii) that it will not disclose to Company, or use or induce Company to use, any
proprietary or confidential information or trade secrets of any other person,
corporation, association, or entity, and (iii) that it has returned all property
and confidential information belonging to all prior employers or service
providers providing any type of product or service competitive with the Service
described herein for whom Dealer may have acted as an employee, agent, or
dealer.
2. COMPANY OBLIGATIONS
During the term of this Agreement, Company agrees (i) to provide
Service in the Area in accordance with the license granted to Company by the
Federal Communications Commission, (ii) to promote the Service in the Area in
such degree as Company in its sole discretion considers necessary, (iii) to
provide training and guidelines (in such amounts and in such frequency as is
provided by Company to other similarly situated dealers) to enable Dealer to
solicit, and submit for consideration, potential Subscribers to the Service, and
(iv) to provide promotional and other advertising materials containing Company's
trade name and other Marks (defined herein) in such types and amounts and under
such terms and conditions as determined
2
<PAGE> 3
public and to actual and potential Subscribers and to protect and promote the
Company's goodwill and business reputation.
d. Subdealers. Dealer may appoint agents or independent
contractors (collectively, "Subdealers") to perform certain services, duties, or
obligations of Dealer under this Agreement or the Dealer Program Rules
(including, without limitation, the solicitation of Subscribers to the Service)
only with the written consent of Company, which may be withdrawn, and under such
terms and conditions as may be required by Company from time to time. Such
consent shall not be unreasonably withheld or withdrawn. Such terms and
conditions may include, without limitation, a requirement that the Subdealer
enter into a separate agreement with Company pertaining to, among other things,
the non-disclosure of Confidential Information (defined herein), exclusivity,
and non-solicitation of Subscribers. Any such appointment will not relieve
Dealer of any of its duties or obligations under this Agreement.
e. Personnel. All obligations and responsibilities to Dealer's
owners, directors, officers, employees, Subdealers, and any other person or
entity that obtains through Dealer the right to solicit Subscribers to the
Service (collectively, "Personnel") shall be those of Dealer. Company shall have
no obligations or responsibilities to such Personnel. Dealer shall cause its
current and future Personnel (including partners and shareholders if such
partners or shareholders own a 10% or greater interest in Dealer) to execute a
Confidentiality, Exclusivity, and Non-solicitation Agreement in the form
attached as Exhibit B, the originals of which shall be delivered to Company upon
request by Company. Dealer shall be fully responsible for all acts and omissions
of its Personnel and shall be strictly and absolutely liable for full compliance
by its Personnel with this Agreement, the Dealer Program Rules, and the
aforementioned Confidentiality, Exclusivity, and Non-solicitation Agreement. A
breach by its Personnel of any of the terms of any such agreements shall be
considered a breach by Dealer and shall entitle Company to pursue all rights and
remedies it may have under this Agreement, at law or in equity. Dealer shall
ensure that all of its sales and service Personnel attend training courses
required by Company relating to the Service or Equipment. Such training shall be
provided by Company at no direct charge to Dealer or its Personnel; provided,
however, that any costs (including, but not limited to, travel and living
expenses) incurred by Dealer or its Personnel in connection with such training
will be the sole responsibility of Dealer or its Personnel. Dealer shall allow
only those Personnel certified by Company or the applicable Equipment
manufacturer(s) or vendor(s) to provide installation, repair, or warranty
services.
f. Locations. Dealer shall operate its business hereunder at
easily accessible retail store-front location(s) ("Locations") which shall be
maintained so as to promote and protect Company's business reputation and
goodwill and shall have ample display room for wireless telephone demonstration
models. Dealer's present Locations are identified on the attached Exhibit C.
Dealer shall notify Company in writing immediately prior to commencing business
operations at any new Location or ceasing business operations at any Location.
The term "Locations" shall also include (without the necessity of amending this
Agreement) any Location that Dealer or any Affiliate of Dealer acquires
subsequent to the execution of this Agreement, regardless of whether or not
Dealer has yet notifier Company of such Location. In addition to the foregoing:
4
<PAGE> 4
(i) Dealer shall in good faith carry on its business
diligently and continuously at the Locations during the term of
this Agreement, shall keep the Locations open for business during
normal business hours, shall operate each of the Locations in a
professional, first-class, and reputable manner, and shall
maintain adequate Personnel attendance during normal business
hours; and
(ii) During the term of this Agreement, Company shall
have, and Dealer hereby grants to Company, the right of first
refusal to acquire any interest of Dealer or any Affiliate of
Dealer in any of the Locations prior to any full or partial sale,
lease, sublease, assignment, transfer, or other disposition
(collectively, "Transfer") of such interest by Dealer or any
Affiliate of Dealer. Dealer shall notify Company in writing of the
proposed terms and conditions of the proposed Transfer, and
Company shall have thirty (30) days after receipt of such notice
within which to elect to exercise its right to acquire the
interest on terms substantially equivalent to those of the
proposed Transfer. Company shall have no obligation to exercise
its right of first refusal with respect to any particular
Transfer, and Company's failure to exercise its rights with
respect to any particular Transfer shall not impair Company's
rights with respect to any subsequent Transfer.
g. Records. Dealer shall maintain at its principal place of
business for four (4) years from the date of their preparation or for the period
required by law, whichever is longer, complete and accurate records of its
business conducted pursuant to this Agreement (including, without limitation,
records of actual or potential Subscribers with whom Dealer or its Personnel has
had contact, records of compensation and other amounts paid to Dealer in
connection with Dealer's performance under this Agreement, and records of
Dealer's Equipment sales, leases, installations, and repairs). Dealer shall make
these records available to Company during normal business hours upon seventy-two
(72) hours prior notice.
h. Service Centers. If Company appoints Dealer as an
authorized service center, Dealer shall comply with all requirements, rules, and
regulations of Company relating to authorized service centers, as those rules
may be established or amended by Company from time to time. In the event Dealer
installs or repairs Equipment, Dealer shall comply with all standards,
procedures, and manuals of the appropriate Equipment manufacturers. Dealer's
appointment as an authorized service center shall not constitute or be construed
as a franchise.
4. PROMOTION AND SALE OF SERVICE.
a. Marketing and Promotion. Dealer shall use only Company
authorized rate plans, subscription agreements and forms, and solicitation,
enrollment, and activation procedures in soliciting potential Subscribers to the
Service (as such rate plans, agreements, forms, and procedures may be amended
from time to time upon notice by Company) Dealer shall offer Service rate plans
only to those Subscribers that meet Company eligibility requirements for the
particular service rate plan offered. Dealer shall take all reasonable steps to
confirm the
5
<PAGE> 5
accuracy of information obtained from potential Subscribers pursuant to Company
authorized forms and procedures. Dealer shall have no right, power, or authority
to make any representations or warranties regarding the Service except as
expressly directed by Company. Company reserves the right to amend its rate
plans for Service, and to add, delete, suspend, or modify terms and conditions
of the Service at any time.
b. Acceptance of Orders. All orders taken by Dealer for the
Service are subject to acceptance or rejection by Company. If Company does not
accept a potential Subscriber, Dealer may not enter into a subscriber agreement
with or otherwise agree to provide Service to such potential Subscriber. With
respect to the Service, all Subscribers shall be customers of Company and shall
not be considered customers of Dealer.
c. Deposits, Collections, and Billings. Dealer shall, on
behalf of Company, collect deposits and advance payments required by Company
from new Subscribers prior to Service activation. Such deposits and advance
payments shall be made payable to Company only (not to Dealer), and shall be
delivered to Company in accordance with the activation procedures set forth in
the Dealer Program Rules. Company shall be solely responsible for all billings
of Subscribers for Service, and all remittances resulting from such billings
shall be made directly to Company or Company's designee and shall be the
property of Company.
d. Compensation. Subject to the terms of this Agreement and
the Dealer Program Rules, Dealer shall be eligible for compensation from Company
on accepted applications for Service activation procured solely by Dealer or its
Personnel for which Service is activated during the term of this Agreement.
Dealer shall have no right to compensation other than that earned in strict
compliance with this Agreement, the Dealer Program Rules, and Company authorized
procedures. Dealer shall have no right to receive any compensation after the
expiration or termination of this Agreement (whether voluntary or involuntary).
Dealer shall be obligated to reimburse Company for Subscriber deactivations as
set forth in the Dealer Program Rules. The nature, terms, and amount of
compensation shall be in accordance with the Dealer Program Rules, which may be
modified from time to time on thirty (30) days written notice to Dealer. In
addition to Company's right to modify compensation as set forth in this
Agreement and the Dealer Program Rules, Company may establish separate types,
terms, and amounts of compensation for Subscribers to new Service rate plans
introduced by Company after the Effective Date.
e. Offsets. Company shall have the right, at any time, to
offset any amounts owed to Dealer or its Affiliates against any amounts owed by
Dealer or its Affiliates to Company pursuant to this Agreement or otherwise,
including, but not limited to, any costs, claims, expenses, losses, attorney
fees, and damages incurred by Company.
f. Reserve. Upon termination of this Agreement for whatever
reason, Company shall be entitled to establish and withhold a reserve from any
compensation or any other amounts owed to Dealer, which may be used to satisfy
any obligations owed by Dealer to Company, including, but not limited to,
obligations based on Subscriber deactivations following any termination of this
Agreement. The reserve shall equal the average compensation amount
6
<PAGE> 6
paid to Dealer per Subscriber during the six (6) months preceding termination,
multiplied by the number of Subscribers whose deactivations resulted in
reimbursement due from Dealer during that period. Any balance remaining in the
reserve after deducting all allowable offer six (6) months after the date of
termination of this Agreement will be paid to Dealer, without interest. The
establishment of this reserve shall not relieve Dealer of its obligation to pay
to Company any amounts owed to Company and not offset against the reserve.
g. Exclusive Rate Plans or Subscribers. Dealer acknowledges
that (i) Company may, from time to time, authorize or restrict Dealer's
solicitation of Subscribers for Service under certain of Company's rate plans,
and (ii) Company may also, from time to time, authorize or restrict Dealer's
solicitation for Service of certain categories of Subscriber or potential
Subscribers as may be identified by Company.
5. THE EQUIPMENT.
a. Minimum Technical Standards. Dealer shall recommend, sell,
lease, or furnish to Subscribers only Equipment that meets minimum FCC and
Company technical standards for regulatory compliance, transmission,
authentication, and overall technical quality. Dealer acknowledges that Company
may refuse Service to any Subscriber or potential Subscriber using Equipment
that does not meet such standards. Dealer further acknowledges that any
Equipment programmed with or utilizing a non-factory installed ESN does not meet
minimum standards.
b. Equipment Sources. Dealer may obtain Equipment for sale or
lease from any supplier so long as the Equipment meets or exceeds the technical
standards described in section 5(a) above. All sales of Equipment by Dealer to
Subscribers and all leases of Equipment to Subscribers where Dealer is the
lessor shall be for Dealer's own account and not as an agent of Company. Dealer
shall be solely responsible for establishing the sales price or rent and other
terms for all such sales and leases of Equipment.
c. Equipment Sold by Company. Company, at its sole option, may
sell Equipment to Dealer for cash, or, if Company so elects, under such credit
terms as Company may extend from time to time. In the event Company elects to
sell Equipment to Dealer on credit, Dealer agrees to execute all documents
necessary to give Company a security interest in such Equipment and to perfect
such security interest, and acknowledges that Company may reduce or cease to
extend such credit at any time at its sole option. Dealer shall bear the risk of
loss for all Equipment in its possession. No agreement by Company to sell
Equipment to Dealer shall constitute or be construed as a franchise.
d. Demonstration Equipment and Service. Company, at its sole
option, may supply Equipment and/or Service to Dealer for purposes of
demonstration to potential Subscribers, under such terms as Company may extend
from time to time. In consideration for Company supplying Equipment to Dealer,
Dealer shall bear the entire risk of loss or damage to such Equipment from the
time Dealer obtains possession of such Equipment until it is delivered
7
<PAGE> 7
to a Subscriber or returned to Company. Dealer shall keep all such Equipment
continuously insured under such terms and in such amounts as Company may require
from time to time.
6. GOODWILL.
Dealer acknowledges and agrees that Company has acquired goodwill,
advantages, and benefits as a consequence of Company's substantial investment in
its name, its development and cultivation of a reputation in the Area as a high
quality provider of Service, and the patronage and loyalty of its customers.
Dealer wants to hold itself out to the public as an authorized dealer for
Company and to use Company's goodwill and business reputation to attract and
solicit potential Subscribers to the Service. Dealer acknowledges and agrees
that its use of Company's goodwill and business reputation to solicit customers
and its knowledge and use of Company's Confidential Information (defined herein)
constitute good and sufficient consideration for this Agreement, including the
provisions pertaining to exclusivity, nondisclosure of Confidential Information,
non-solicitation of Subscribers, and the covenant not to compete. Dealer further
acknowledges and agrees that, through its use of the Company's goodwill and
business reputation, it will acquire the names of, and other information
regarding, Subscribers that it solicits for the Service, and that such names and
other information constitute Confidential Information belonging to Company.
Dealer agrees to use its best efforts to protect and promote Company's goodwill
and business reputation and not to use such goodwill or business reputation
except in connection with the promotion and marketing of, and the solicitation
of potential Subscribers for, Company's Service.
7. SERVICE MARKS, TRADEMARKS, AND TRADE NAMES.
Dealer acknowledges and agrees that all service marks, trademarks,
and trade names used by Company (collectively, the "Marks") and the rights to
use such Marks are the exclusive property of Company or are licensed for use by
Company from the owner(s) thereof, and Dealer shall not use any of the Marks
without Company's specific prior written approval. Dealer shall comply with all
rules and procedures pertaining to the Marks prescribed by Company from time to
time (collectively, the "Mark Rules") and shall obtain advance approval from
Company of all advertising or other promotional material which contains any of
the Marks. Subdealers may not use any Marks unless specifically authorized by
Company to do so, and then only in a manner specifically authorized by Company.
This precludes, without limitation, any use of Marks on any collateral,
promotional material, advertising, business cards, or stationary of any
Subdealer. Any unauthorized use of the Marks, or any use not in compliance with
this Agreement or the Mark Rules, by Dealer or its Personnel, including
Subdealers, shall constitute infringement of Company's rights in the Marks, a
material breach of this Agreement, and cause for termination. Dealer
acknowledges that it has no rights in or to the Marks except as provided herein,
and shall not acquire any rights in the Marks or expectancy to their use as a
result of any use of the Marks by Dealer or otherwise. Following the termination
of this Agreement for whatever reason, Dealer shall immediately discontinue use
of all Marks. No authorization to use Company's Marks shall constitute or be
construed as a franchise.
8
<PAGE> 8
8. CONFIDENTIAL INFORMATION, NON-SOLICITATION, AND COVENANT NOT TO
COMPLETE.
As more fully set forth in sections 2, 6, and 7 above, in order to
facilitate Dealer's marketing of the Service and solicitation of Subscribers,
Company will permit Dealer to use Company's goodwill, business reputation, and
Marks to attract potential Subscribers, and Company will provide Dealer with
initial and on-going specialized training, education, materials, and/or
information concerning the Service, Subscribers, and Equipment. Through the use
of Company's goodwill, business reputation, Marks, training, materials, and
information, Dealer will acquire the names of, and other information concerning,
Subscribers, other Confidential Information (defined herein), and other
advantages and benefits associated with its business. Dealer specifically agrees
and acknowledge that Subscriber information is confidential, proprietary, and is
not known to the general public or Company's competitors. Dealer further agrees
and acknowledges that the protection it has provided to Company in this section
is a material consideration to Company in entering into this Agreement, and
significant damage would occur to Company if Confidential Information were to
come into the possession of another provider or reseller of Wireless Services or
any dealer, agent, salesperson, or employee thereof. Likewise, if Dealer or any
director, offerer, or Affiliate of Dealer were to work for another provider or
reseller of Wireless Services other than Company as a dealer, subdealer, or
salesperson, or in any other capacity that would allow Dealer to take advantage
of Confidential Information and/or Subscriber contact and/or other advantages or
benefits acquired in connection with Dealer's relationship with Company, Company
would be materially damaged. Because of these special concerns, and to the
fullest extent permitted by law, the following provisions shall apply to Dealer,
its Affiliates, and, as applicable, Dealer's Personnel:
a. Confidential Information. As used in this Agreement,
"Confidential Information" means all information, not generally known to the
public, that relates to the business, marketing, technology, Subscribers,
finances, plans, proposals, or practices of Company, and includes, without
limitation, the identities of all Subscribers and prospects, Subscriber
information, subscribe agreements, dealer agreements, Dealer Program Rules, all
business plans, proposals and practices, all marketing plans, proposals and
practices, all technical plans and proposals, all research and development, all
budgets and projections, all nonpublic financial information, and all
information Company designates as "confidential". All Confidential Information
shall be considered trade secrets of Company and, in addition to the protections
provided herein, shall be entitled to all protections given by law to trade
secrets. The term "Confidential Information" shall apply to information in every
form in which it may exist, whether recorded or not, and, if recorded, whether
recorded on paper, film, tape, computer disk, or any other form or media.
b. Non-Disclosure of Confidential Information. Dealer
covenants and agrees that, both during the term of this Agreement and at all
times thereafter, Dealer, its Affiliates, their respective Personnel, and any
successor entity to Dealer or any Affiliate of Dealer (i) shall not use any
Confidential Information except in connection with the promotion and marketing
of, and the solicitation of Subscribers for, Company's Service, (ii) shall not
disclose to any person, firm, corporation, or other entity any Confidential
Information, (iii) shall not in any other way
9
<PAGE> 9
publicly or privately disseminate any Confidential Information, and (iv) shall
not help anyone else do any of these things. Upon termination of this Agreement,
all Confidential Information (originals and copies) in the possession of Dealer,
any Affiliate of Dealer. their Personnel, or any successor entity to Dealer or
any Affiliate of Dealer shall be immediately returned to Company. Dealer shall
be responsible for ensuring compliance with this subsection by its Personnel and
Affiliates.
c. Non-Solicitation. During the time of this Agreement and for
a period of one (1) year after termination or expiration of this Agreement
(whether voluntary or involuntary), Dealer, its Affiliates, their respective
Personnel, and any successor entity to Dealer or any Affiliate of Dealer shall
not at any time (i) request any Subscriber in the Area that Dealer knows (or has
any reason to know) is a Subscriber of Company to curtail or cancel its Service
with Company, (ii) otherwise divert or attempt to divert any such Subscribers
from patronizing Company or the Service, or (iii) solicit such Subscribers to
purchase Wireless Service from any person or entity other than Company. During
the one (1) year period after termination or expiration of this Agreement, any
then current Subscribers of Company who contact Dealer regarding the Service
shall be referred directly to Company. Dealer shall be responsible for ensuring
compliance with this subsection by its Personnel and Affiliates.
d. Covenant Not to Compete. Dealer covenants and agrees that,
for a period of one (1) year after termination or expiration of this Agreement
(whether voluntary or involuntary), Dealer, its Affiliates, and any successor
entity to Dealer or to any Affiliate of Dealer will not (i) directly or
indirectly compete with Company or its Affiliates within the Area by offering,
providing, or marketing Wireless Services, or procuring, soliciting, or
referring customers for a provider or resellor of Wireless Service other than
Company or Company's Affiliates, or (ii) act or serve as a director, officer,
employee, agent, dealer, consultant, or formal or informal advisor of any person
or entity that directly or indirectly competes with Company or its Affiliates
within the Area, or act or serve as an owner (as a partner, shareholder, or
otherwise) controlling a 10% or greater interest in any such entity. Dealer
shall be responsible for compliance untie this subsection by its Affiliate. This
provision shall not apply if, upon the expiration of the term of this Agreement,
Company refuses, without cause, to continue a dealer relationship between Dealer
and Company on terms that are substantially similar to other contracts Company
is then offering to dealers in the Area.
e. Tolling. The time periods specified in this section shall
be tolled during any period of time during which Dealer is in breach of the
subsection in which the time period is specified.
9. DEFAULT AND TERMINATION.
a. Default. The following events and occurrences shall
constitute defaults of this Agreement: (i) any breach by Company of this
Agreement which Company does not cure or commence to cure within thirty (30)
days after receipt of written notice of such breach from Dealer, (ii) any breach
by Dealer of any of the provisions in sections 3(a), 3(b), 7, or 8 of this
Agreement, (iii) any other breach by Dealer of this Agreement or the Dealer
Program Rules
10
<PAGE> 10
which Dealer does not cure within thirty (30) days after sends Dealer written
notice of such breach, (iv) the insolvency of either party, the filing by either
party of a voluntary petition in bankruptcy, the filing of a petition in
bankruptcy against either party, the appointment of a receiver or other
representative for either party or its business or assets, and such situation is
not remedied or corrected within thirty (30) days, or the entry by either party
into any arrangement or assignment for the benefit of creditors, (v) the default
by either party under any other agreement between Dealer or any Affiliate of
Dealer, on the one hand, and Company or any Affiliate of Company, on the other
hand, (vi) the voluntary or involuntary sale, assignment, or other transfer of
Dealer's rights and/or obligations under this Agreement without the prior
written consent of Company, (vii) the voluntary or involuntary sale, assignment,
or other transfer of all or substantially all of Dealer's assets or the control
of Dealer not in the ordinary course of business without the prior written
consent of Company, and (viii) if applicable, the death or incapacity of Dealer.
b. Termination. This Agreement may be terminated for cause by
either party immediately upon the sending of a written notice of termination to
the other party. Termination for cause shall include (i) any termination for a
default as defined in section 9(a) above, and (ii) any termination pursuant to
any termination provision contained in the Dealer Program Rules. Company shall
also have the right to terminate this Agreement immediately upon written notice
to Dealer if Company ceases to provide Service in the Area. Dealer shall have
the right to terminate this Agreement upon written notice to Company within ten
(10) days following a material modification of the Dealer Program Rules. Such
termination will become effective thirty (30) days after Company's receipt of
such notice; provided, however, that if Company rescinds the change prior to the
expiration of such thirty (30) days, this Agreement will not terminate, but
shall continue in full force and effect. Unless sooner "mingled or extended
under the terms herein, this Agreement will terminate five (5) years after the
Effective Date.
1O. MISCELLANEOUS.
a. Limitation of Liability. Under no circumstances shall
Company or Dealer be liable to the other for any indirect, special,
consequential punitive, or exemplary damages as a result of any default or
breach of this Agreement or the termination or non-renewal of this Agreement or
any other event, conduct, act, or omission arising out of or related to the
dealer relationship between Company and Dealer whether based on contract, tort,
statute, or otherwise.
b. Injunction. In addition to any other remedies Company may
have at law, in equity, or pursuant to this Agreement, Company shall have the
option, in appropriate instances, to bring court proceedings to seek injunctive
or other equitable relief to enforce any right, duty, or obligation under this
Agreement. Dealer acknowledges that such injunctive or other equitable relief
will be an appropriate, but not an exclusive, remedy for Company to enforce its
rights under this Agreement, specifically including, but not limited to, its
rights under sections 3(b), 3(f)(ii), 7, and 8 above. Dealer specifically agrees
that, due to the nature of harm which Company would suffer if Dealer were to
breach any of the provisions of sections 3(b), 3(f)(ii), 7, or 8, Company shall
be entitled to, and Dealer hereby consents to, injunctive relief to enforce such
provisions. To obtain injunctive or other equitable relief, Company shall not be
11
<PAGE> 11
required to post a bond; or, if required by law or by the court, Dealer hereby
consents to a bond in the lowest amount permitted by law.
c. Indemnity. In the event of a breach of this Agreement
(including any representation or warranty stated herein), the breaching party
shall protect, defend, indemnify, and hold harmless the non-breaching party from
and against any and all liabilities, causes of action, claims, and demands of
every kind against the non-breaching party arising out of or redating to such
breach. In addition, Dealer shall protect, defend, indemnify, and hold harmless
Company (including Company's Affiliates and their directors, officers,
employees, agents, and contractors) from and against any and all costs and
expenses, losses, debts, damages, liabilities, causes of action, claims, and
demands of every kind arising out of or relating to Dealer's performance under
this Agreement, Dealer's operation of the Location(s), or the operation of
Dealer's business, including the business of any Subdealer. It is further agreed
that Dealer will maintain, at its sole cost and expense, any and an insurance
coverage necessary to protect its business and Company from all applicable
risks.
d. Governing Law, Forum, and Costs. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
any rules governing conflicts of laws. Sole and exclusive jurisdiction and venue
for the resolution of any dispute arising between Company and Dealer shall be in
the state or federal courts sitting in Dallas County, Texas. In any legal
proceedings between the parties concerning this Agreement (whether for damage,
equitable relief, or both), the substantially prevailing party shall be entitled
to recover its reasonable costs, including court costs and attorney fees;
provided, however, that this provision shall not entitle any party other than
Company or Dealer to recover than costs.
e. Notices. All notices and other communications hereunder
shall be given in writing and shall be deemed to have been duly given and
effective (i) upon receipt if delivered in person, by cable, telegram, telecopy,
or telex, (ii) one (1) day after deposit with a national overnight express
delivery service (postage prepaid), or (iii) three (3) days after deposit in the
United States mail (registered or certified mail, postage prepaid, return
receipt requested). All notices and other communications hereunder shall be sent
to the following addresses:
If to Dealer: Telephone Warehouse, Inc.
2436 E. Randol Mill Road
Arlington, Texas 76011
Attn: Ron Koonsman
If to Company: AT&T Wireless Services
17300 N. Dallas Parkway
Dallas, Texas 75248
Attn: Dealer Manager
12
<PAGE> 12
with copy to: AT&T Wireless Services
Southwest Region Legal Department
5757 Alpha Road, Suite 1000
Dallas Texas 75240
f. Entire Agreement. This Agreement represents the entire
Agreement between the parties hereto with respect to the matters addressed in
this Agreement and, except as expressly provided herein, shell not be affected
by any other documents. All prior agreements, understandings, covenants,
promises, warranties, and representations relating to the matters addressed in
this Agreement are superseded. Notwithstanding the foregoing, this Agreement is
subject to the terms and conditions of the Consent Agreement dated December 20,
1996 by and between Company, Dealer, National Cellular, Inc., HIG Cellular
Acquisition Corporation, and Ron Koonsman.
g. Survival of Obligations. Company's and Dealer's rights and
obligations under sections 7, 8, and 10(a),(b), and (c) of this Agreement (or
any other provision that by its terms reasonably survives termination) and
Dealer's deactivation reimbursement obligations as set forth in the Dealer
Program Rules shall survive the termination of this Agreement. Further, this
Agreement shall govern as to any obligation incurred prior to termination of
this Agreement.
h. Assignment. Dealer acknowledges that Company may assign its
rights and/or obligations hereunder at any time without Dealer's prior approval,
whereupon Company shall be relieved of its obligations hereunder. Dealer may
not, voluntarily or involuntarily, assign, delegate, or otherwise transfer its
rights or obligations hereunder without the prior written consent of Company,
which shall not be unreasonably withheld. This prohibition shall extend to any
disposition or transfer of a controlling interest in the ownership or control of
Dealer and to any disposition or transfer of the assets of Dealer not in the
ordinary course of business, including any transfer by will or operation of law.
To the extent not prohibited hereby, this Agreement shall be binding upon and
inure to the benefit of Company and Dealer and their respective successors and
assigns.
i. Severability and Reformation. If any provision of this
Agreement shall be held invalid under any applicable law, such invalidity shall
not affect any other provision of this Agreement that can be given an effect
without the invalid provision. Further, all terms and conditions of this
Agreement shall be deemed enforceable to the fullest extent permissible under
applicable law, and, when necessary, the court is requested to reform any terms
or conditions necessary to give them such effect.
j. Authority. Company and Dealer each represent and warrant to
the other diet it is duly organized and in good standing in its state of
original organization, it has the requisite approvals to enter into this
Agreement, it is qualified to do business in the State of Texas, and the person
executing this Agreement on its behalf has full authority to execute this
Agreement.
13
<PAGE> 13
k. Amendment. Any amendment to this Agreement, other than
amendments to the Dealer Program Rules, shall not be valid unless such amendment
is made in writing and signed by Company's general manager for the Area.
1. No Waiver. No failure by Company to take action on account
of any default or breach of this Agreement or the Dealer Program Rules by Dealer
shall constitute a waiver of any such default or breach, or of the performance
required of Dealer under this Agreement or the Dealer Program Rules.
11. INDEPENDENT INVESTIGATION.
COMPANY AND DEALER ACKNOWLEDGE THEY HAVE READ THIS
AGREEMENT AND UNDERSTAND AND ACCEPT THE TERMS, CONDITIONS, AND COVENANTS
CONTAINED HEREIN AS BEING REASONABLY NECESSARY TO MAINTAIN COMPANY'S HIGH
STANDARDS FOR SERVICE. DEALER ACKNOWLEDGES AND UNDERSTANDS THAT COMPANY OR OTHER
DEALERS MAY AT ANY TIME COMPETE DIRECTLY OR INDIRECTLY WITH DEALER IN SOLICITING
SUBSCRIBERS FOR THE SERVICE OR IN THE SALE, LEASE, INSTALLATION, REPAIR, OR
WARRANTY SERVICING OF EQUIPMENT. DEALER HAS INDEPENDENTLY INVESTIGATED THE
WIRELESS SERVICES AND EQUIPMENT SALE, LEASING, INSTALLATION, OR REPAIR
BUSINESSES AND THE PROFITABILITY (IF ANY) AND RISKS THEREOF. COMPANY HAS NOT
MADE ANY REPRESENTATION OR WARRANTY REGARDING THE PROFITABILITY OR VIABILITY OF
DEALER'S BUSINESS EFFORTS OR THE WIRELESS BUSINESS GENERALLY, AND DEALER IS NOT
RELYING ON ANY REPRESENTATION, GUARANTEE, WARRANTY, OR STATEMENT OF COMPANY
OTHER THAN AS SPECIFICALLY SET FORTH IN THIS AGREEMENT
In witness whereof, the parties have executed this Agreement as of
the Effective Date.
COMPANY: DEALER:
Metroplex Telephone Company Telephone Warehouse, Inc.
d/b/a AT&T Wireless Services
Signature:/s/Gary Fleming Signature:/s/R.L. Koonsman
-------------------- --------------------
Printed Name:Gary Fleming Printed Name: R.L. Koonsman
----------------- -----------------
Title: President Title: President
------------------------ ------------------------
14
<PAGE> 14
EXHIBIT A
AT&T WIRELESS SERVICES
DEALER PROGRAM RULES
EFFECTIVE DATE: OCTOBER 1, 1996
(REVISED)
DALLAS METROPOLITAN SERVICE AREA
1. Part of Agreement. These Dealer Program Rules ("Rules") are a part of the
Dealer Agreement (the "Agreement") that has been executed by Company and
Dealer and, except as noted in paragraph 2 below, are to be interpreted
and administered in a manner consistent with the Agreement. These Rules
supersede and replace all prior Dealer Program Rules. These Rules are
subject to amendment at any time by Company upon thirty (30) days written
notice to Dealer.
2. Inconsistencies in Terms. If any inconsistency or conflict exists between
these Rules and the Agreement as amended or any prior Dealer Program
Rules, these Rules control.
3. Definitions. In addition to the terms defined in the Agreement, for
purposes of these Rules, the following terms will have the meanings set
forth below:
Activation Date - The date on which Company commences to provide Service
to the cellular telephone number assigned to a Subscriber.
Subscriber - Each individual, corporation, association, or other entity
that places an order through Dealer for Service that is accepted by
Company and for whom Service is activated. For purposes of computing
commissions, where an individual or entity places more than one order and
each order is for a different cellular telephone number, each order will
be treated as a separate Subscriber if the order is accepted by Company
and if Service is activated on that order. However, if more than one
telephone number is assigned to an USN, all orders for telephone numbers
assigned to the same USN count as only one Subscriber. An individual or
entity for whom Service is activated shall NOT be considered a
"Subscriber" if such individual or entity (whether under the same or a
different name) was previously an active Subscriber during the
immediately preceding six-month period or if such activation is connected
with the deactivation of Company's Service on another (or other) cellular
telephone number(s), and Dealer shall not be eligible for compensation of
any kind with respect to such activation (unless the activation qualifies
as a "restore" under paragraph 11 or as otherwise provided in paragraph
). It is the Dealer's responsibility to determine whether an
individual or entity that places an order qualifies as a Subscriber at
the point of sale prior to activation. This is accomplished by
questioning the customer, looking for an account number on the AXES
system and/or calling Company's Customer Verification.
Dealer Subscribers - For each calendar month, this means the number of
new Subscribers that (i) were submitted by Dealer and accepted by Company
(ii) whose Activation Date was in that month, and (ii) whose Service has
not been terminated for any reason at end of the month.
Deactivated and Deactivation - Termination of Service to the cellular
telephone number assigned to a Subscriber for any reason. The Subscriber
may substitute phones or rate plans without being deactivated as long as
the same phone number is maintained.
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<PAGE> 15
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Vesting Period - The period of time after the Activation Date during
which commissions, bonuses, and other compensation and incentives are
subject to adjustment or reimbursement as provided in these Rules. After
the expiration of the Vesting Period, commissions, bonuses, and other
compensation and incentives not subject to adjustment or reimbursement
unless obtained in violation of these Rules, the Agreement, or Company
authorized procedures.
4. Commissions. Except as otherwise provided in these Rules, Dealer shall be
eligible to earn a commission for each new Subscriber activation during a
month, which shall be determined according to the number of Dealer
Subscribers as of the end of that month, and shall be calculated from the
following table:
<TABLE>
<CAPTION>
Dealer Subscribers/Month Commission/Subscriber
------------------------ ---------------------
<S> <C>
*** ***
</TABLE>
Commissions earned by Dealer shall first be used to offset payments due
to Company from Dealer. Any remainder shall be paid within thirty (30)
days after the end of the month during which the commission was earned.
5. Revenue Incentive Bonus. In addition to commissions as provided in
paragraph 4 above, Dealer shall be eligible to earn a Revenue Incentive
Bonus for each new Subscriber that activates on one of the following rate
plans, which shall be calculated from the following table:
<TABLE>
<CAPTION>
Rate Plan Bonus/Subscriber
--------- ----------------
<S> <C>
*** ***
</TABLE>
No other rate plans qualify to receive a Revenue Incentive Bonus.
6. *** Rate Plan Commission. The commission rate on all Subscriber
activations on the *** Rate Plan (***)(or any substitute
*** plan) will be $***. *** Rate Plan activations will
count toward the Dealer Subscriber monthly tier count, but will NOT
qualify for bonus payment or co-op accrual.
7. *** Rate Plan Commission. The commission rate on all Subscriber
activations on the *** Rate Plan (***)(or any substitute
*** plan) will be $***. *** Rate Plan activations will count
toward the Dealer Subscriber monthly tier count, but will NOT qualify for
bonus payment or co-op accrual.
8. *** Rate Plan Commission. The commission rate on all
Subscriber activations on the *** Rate Plan will be
$***. *** Rate Plan activations will count toward the
Dealer Subscriber monthly tier count, but will NOT qualify for bonus
payment or co-op accrual.
9. *** Rate Plan Commissions. Dealer shall have the choice of either the
commission rate specified in Option A or the commission rate specified
in Option B as described below for eligible Subscriber activations to
the *** Rate Plans (***) (or any
2
<PAGE> 16
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
substitute *** plans). Activations on such *** Rate Plans will count
toward the Dealer Subscriber monthly tier count, but will NOT qualify
for bonus payment or co-op accrual. Dealer must select one Option to be
applicable to all *** Rate Plan activations: Dealer may not select both
Options or a combination of Options; Dealer may not subsequently change
Options except upon Company's express written consent.
Option A; The commission rate on eligible Subscriber activations on the
*** Rate Plans under Option A will be ***. Option A *** Rate activations
will NOT qualify for continuing service payments.
Option B: The commission rate on eligible Subscriber activations on the
*** Rate Plans under Option B will be ***. In addition, Option B ***
Rate Plan activations will qualify for continuing service payments as
described in paragraph 13.b below.
NOTE: If Dealer has not already designed or been assigned to receive
compensation under Option A or Option B, Dealer will be assigned to
receive compensation under Option B unless Dealer designates in writing
its desire to be compensated under Option A, and returns such signed
designation to Company within thirty (30) days of Dealer's receipt of
these Rules
Dealer Designation: I elect to receive compensation under:
Option A or Option B X (Select one)
---------- ----------
/s/
---------------------------------------
Signature
10. Rate Plan Eligibility. Rate Plans *** will be available to eligible
Subscribers activating digital, dual mode, or analog equipment. Rate
Plans*** will be available only to eligible Subscribers activating
digital or dual mode equipment. All other rate plans will be available
only to eligible Subscribers activating analog equipment. Dealer shall
be subject to chargeback of all compensation paid for a Subscriber
(commission, bonus, and continuing service payments) and reversal of any
co-op accrual for Subscriber activations to inappropriate plans.
11. Subscriber Deactivation Reimbursement. For Subscriber activations to a
*** Rate Plan described in paragraph 9 (***), Dealer shall reimburse
Company for certain compensation paid to Dealer for a Subscriber whose
Service is Deactivated for any reason within *** after the Subscriber's
Activation Date (the "*** Vesting Period"). For Subscriber activations
to any other rate plan, Dealer shall reimburse Company for certain
compensation paid to Dealer for a Subscriber whose Service is
Deactivated for any reason within *** after the Subscriber's Activation
Date (the "Standard Vesting Period"). The applicable Vesting Period
shall be fixed for a Subscriber based on the rate plan originally
activated, irrespective of any migration. The amount of Deactivation
reimbursement, irrespective of the applicable Vesting Period, shall be
*** of all commissions and bonuses paid to Dealer for the Subscriber.
Company may offset this reimbursement against subsequent commissions
payable to Dealer. In any event, however, Dealer shall pay to Company
any reimbursement amount remaining due no later than sixty (60) days
from the end of the month in which the Subscriber's Service was
Deactivated.
If a Subscriber whose Service is Deactivated within the applicable
Vesting Period reactivates Service prior to the later of (i) the end of
that Vesting Period or (ii) thirty (30) days after the Service is
Deactivated, "restore" compensation equal to the amount reimbursed to
Company
3
<PAGE> 17
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
shall be repaid Dealer. Compensation shall NOT be restored if the
Subscriber reactivates Service after the later of (i) the end of the
applicable Vesting Period or (ii) thirty (30) days after the Service is
Deactivated. The original Vesting Period will apply to the "restore"
compensation.
12. Migration. If a Subscriber migrates within the applicable Vesting Period
to a rate plan for which a different commission or bonus paid, a monetary
adjustment will be made to the amount of commission and/or bonus paid for
that Subscriber. The amount of the adjustment shall be offset, paid to
Dealer, or reimbursed to Company in accordance with the offset, payment,
and reimbursement provisions in these Rules.
13. Continuing Service Payments:
a) In return for Dealer providing continuing service to Subscribers,
continuing service payments may be payable to Dealer for
Subscribers activated onto certain of Company's rate plans by
Dealer in the Area who remain on Service and current in their
bills for a certain period of time (the "Payment Period").
Continuing service payments will be based on *** collected from a
Subscriber (herein collectively referred to as "Local Revenue")
during the Payment Period. No continuing service payments will be
paid for any Subscribers activated outside the Area.
b) Continuing service payment for *** Rate Plan activations for
Dealers that elect the Option B commission rate in paragraph 9
will be earned based on a percentage of Local Revenue for each
month during which a Subscriber is a current and active
Subscriber to Company's Service, up to a maximum Payment Period
of *** beginning on the Activation Date. The applicable
percentage shall be ***.
c) For eligible rate plans other than *** Rate Plans, continuing
service payments will be earned based on a percentage of Local
Revenue for each month during which a Subscriber is a current and
active Subscriber to Company's Service on an eligible rate plan,
up to a maximum Payment Period of *** beginning on the Activation
Date. The applicable percentage shall be fixed in the month of
activation based on the following table:
<TABLE>
<CAPTION>
Dealer Subscribers/Month Continuing Service Payment Percentage
------------------------ -------------------------------------
<S> <C>
*** ***
</TABLE>
d) If a Subscriber migrates within the applicable Vesting Period to a
rate plan for which a different or no continuing service payments
is paid, an adjustment will be made to the rate and term of the
continuing service payments paid for that Subscriber.
4
<PAGE> 18
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
e) If a Subscriber's Service in the Area is Deactivated for any
reason, continuing service payments on that Subscriber will stop
as of the date of Deactivation. If, however, a Subscriber
reactivates Service under the same name, account number and
cellular number within the applicable Payment Period, the
continuing service payments will resume. For purposes of
determining the Payment Period, the original Activation Date will
apply to the reactivated Service.
f) Continuing service payments are intended to compensate Dealer for
continuing service provided to a Subscriber, and are not earned in
advance. Dealer shall have no future entitlement to such payments.
If the Agreement is canceled or terminated for any reason,
continuing service payments will stop permanently as of the date
of termination or cancellation.
g) Continuing service payments earned by Dealer shall first be used
to offset payments due to Company from Dealer. Any remainder shall
be paid to Dealer within thirty (30) days after the end of the
calendar quarter in which earned.
14. No Show. There is a *** NO SHOW charge against commission settlement
if Client Care is not notified of a Subscriber's failure to complete
their activation within seventy-two (72) hours of the request for
activation.
15. Co-Op Advertising. A co-op advertising account will be maintained for
Dealer. Funds will accrue to this account each month with respect to the
number of Net Dealer Subscribers for the month (qualifying Dealer
Subscribers for the month, minus the number of Deactivations for the
month which result in reimbursement to Company as provided in paragraph
11 above, plus the number of reactivations for the month which result inn
"restore" compensation to Dealer as provided in paragraph 11 above) at
the rate specified by Company, as modified from time to time. Such funds
may be paid to Dealer in accordance with the terms in the Company's
Co-op Advertising Guidelines or as otherwise specified, as modified from
time to time. Until paid to Dealer, such funds shall remain the property
of Company. Any funds credited to the co-op advertising account that have
not been paid or become payable to Dealer within the time specified in
the Co-op Advertising Guidelines or as otherwise specified shall be
forfeited and not paid to Dealer. No interest will be paid on funds
credited to the co-op advertising account, and any amount remaining in
the account upon termination of the Agreement shall remain the property
of Company.
16. Activation Procedures. Dealer shall not entitled to any compensation of
any type (commission, bonus, or continuing service payment) or to any
co-op advertising or to any other incentive with respect to any
Subscriber, unless the following activation procedures have been fully
performed:
a) Before making any commitment to a potential Subscriber regarding
the Service, Dealer shall telefax, physically deliver or
communicate via AXYS to Company all necessary Subscriber
information, and obtain a Subscriber Agreement, credit application
and other necessary paperwork signed by the potential Subscriber.
The original Subscriber Agreement and credit application shall be
physically delivered to Company within one (1) month of its
execution by the Subscriber.
b) Company will complete a credit check of the potential Subscriber
and advise Dealer if any deposit or advance payment will be
required and its amount.
c) Dealer will obtain from the potential Subscriber the required
deposit or advance payment made payable to Company (not Dealer).
If payment is made by check, Dealer
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CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
may telefax a copy of the check to Company, but shall then
physically deliver the check to Company within three (3) business
days of its receipt. If payment is by cash or credit card, Dealer
shall immediately deliver good funds for the full payment to
Company.
d) Upon full performance of the above steps and upon compliance with
all of Company's installation procedures for any new Equipment,
Company will activate the Service for the Subscriber.
17. Minimum Performance Standard. Dealer shall obtain a minimum of
*** Dealer Subscribers each month, provided, however, that
Dealer shall be required to obtain only *** Dealer Subscribers
each month with respect to any Location not in Dallas, Tarrant, Denton,
or Collin Counties. Dealer's failure to obtain these minimum numbers each
month for any three (3) consecutive months shall entitle Company to
terminate the Agreement for cause pursuant to the Agreement. If Dealer
fails to obtain an average of *** Dealer Subscribers per month for
any three (3) consecutive months, Company shall have no obligation to
provide individual training or other support to Dealer. This shall not
relieve Dealer of any of its obligations, including its obligation to
have its sales and service personnel attend training courses required by
Company.
18. Previous Subscribers. Compensation will be paid with respect to a
Subscriber whose Activation Date preceded the effective date of these
Rules based on the Dealer Program Rules which were in effect on the
Subscriber's Activation Date.
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DEALER PROGRAM RULES RECEIPT
I acknowledge that I have received a copy of the Dealer Program Rules with an
effective date of October 1, 1996.
12-31-96
- ------------------------------------
(Date)
/s/Telephone Warehouse
- ------------------------------------
(Dealer Name)
/s/R. Koonsman
- ------------------------------------
(Signature)
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<PAGE> 21
EXHIBIT "B"
CONFIDENTIALITY, EXCLUSIVITY, AND NON-SOLICITATION AGREEMENT
I, [EMPLOYEE/OFFICER NAME], AM A(N) [POSITION] OF [DEALER
NAME]("Dealer"), an authorized dealer of ________________________d/b/a AT&T
Wireless Services ("Company") to solicit and submit for consideration potential
Subscribers to the wireless telecommunications services ("Services") provided by
Company in the _____________________area ("Area"). The Area is defined by the
United States Census Bureau and consists of the following counties:
______________. Because of my relationship with Dealer and Dealer's relationship
with Company, I will receive knowledge, experience, and training concerning
wireless" telephone systems and equipment, including the Service and system of
Company, and will have contact with Company's Subscribers, and as a result I
will receive financial benefits through my relationship with Dealer. As used in
this Agreement, the term "Subscribers" means all subscribers to the Company's
Service who I learn about during or because of my relationship with Dealer, or
who have had any dealings or communication with Dealer at any time. As wed in
this Agreement, "Confidential Information" means all information, not generally
known to the public, that relates to the business, marketing, technology,
Subscribers, finances, plans, proposals or practices of Company, and it Dudes,
without limitation, the identities of all Subscribers and prospects, subscribe
agreements, dealer agreements, Dealer Program Rules, all business plans,
proposals and practices, all marketing plans, proposals and practical, all
technical plans and proposals, all research and development, All budgets and
projections, all nonpublic financial information, and all information Company
designates as "confidential." In return for such knowledge, experience,
training, and financial benefits, and in addition to other agreements of Dealer,
to the fullest extent permitted by law, I agree to do all of the following:
1. I agree that,while I am associated with Dealer and while
Dealer is an authorized dealer of Company, I will act according to the
highest standards of honesty, integrity, fair dealing, and ethical
conduct in all my dealings with Subscribers, potential Subscribers, and
Company. I Agree that a breach of this section includes, but is not
limited to, the making of misrepresentations or misleading statements to
Company or to any actual or potential Subscriber.
2. I agree to keep confidential all information defined as
"Confidential Information" above, and agree not to disclose to anyone Use
or to any other business such Confidential Information. I understand and
agree that all such Confidential Information constitutes trade secrets of
Company.
3. I agree that, while I am associated with Dealer and while
Dealer is an authorized dealer of Company, I will not solicit business
for any other Wireless Service Provider, and I will not help any other
Wireless Services Provider obtain business. As used herein, the term
"Wireless Service Provider" shall mean any provider, reseller, dealer,
subdealer, salesperson, or agent thereof of the following: (i) cellular
telephone
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service, (ii) personal communications services, (iii) enhanced
specialized mobile radio service, or (iv) any other functionally similar
or equivalent wireless voice or data service.
4. I agree that, for a period of one (1) year after the
termination of my association with Dealer or Dealer's association with
Company, whichever occurs first, I shall not request any Subscriber in
the Area whom I know to be a Subscriber to cancel his, her, or its
Service with Company, nor shall I solicit, divert, or try to divert any
Subscribers to another Wireless Services Providers, nor shall I help any
other Wireless Service Provider obtain or try to obtain any business from
any of these Subscribers. During this one-year period, if any
then-current Subscribers contact me about the Service, I will refer each
of them to Company.
5. I agree that Company is a third-party beneficiary of this
Agreement and shall be entitled to enforce this Agreement. If I break any
of my promises in this Agreement, I realize I can be used in court by
Company or by Dealer and be held liable for money damages or I can be
subject to injunctive or other equitable relief in favor of Company. I
also agree that, if any legal proceedings are bought concerning this
Agreement, the substantially prevailing party will be entitled to recover
all costs and reasonable attorney fees.
6. Each of the provisions of this Agreement is independent of
the other provisions of this Agreement. If a court of competent
jurisdiction decides that any part of this Agreement is unenforceable, I
agree to be bound by any lesser covenant that would impose the maximum
duty permitted by law, if such lesser covenant were separately stated in
this Agreement. This Agreement may be reformed to be enforceable to the
fullest extent permitted by law.
DATED: _____________________, 199___.
DEALER: OWNER, DIRECTOR, OFFICER,
EMPLOYEE, AGENT, OR
SUBDEALER OF DEALER:
- ------------------------------- ----------------------------------------
Signature: Signature:
--------------------- -------------------------------
Printed Name: Printed Name:
------------------ ----------------------------
Title: Title:
------------------------- ----------------------------------
2
<PAGE> 23
EXHIBIT C
<TABLE>
<S> <C> <C> <C>
1. Telephone Warehouse 8. Telephone Warehouse
4101 S. Cooper, #109 4343 W. Camp Wisdom Rd., #180
Arlington, Texas 76015 Duncanville, Texas 75237
2. Telephone Warehouse 9. Telephone Warehouse
1301 N. Collins #215 4750 S. Hulen
Arlington, Texas 76011 Ft. Worth, Texas 76132
3. Telephone Warehouse 10. Telephone Warehouse
11446 N. Central Expwy. 6521 Camp Bowie Blvd.
Dallas, Texas 75243 Ft. Worth, Texas 76116
4. Telephone Warehouse 11. Telephone Warehouse
2905 Forest Ln., #122 419 W. Airport Frwy.
Dallas, Texas 75234 Irving, Texas 75062
5. Telephone Warehouse 12. Telephone Warehouse
19310 Preston Rd. 1515 Town East Blvd., #11
Dallas, Texas 75252 Mesquite, Texas 75150
6. Telephone Warehouse 13. Telephone Warehouse
Valley View Mall #1211 7923 Grapevine Hwy.
Dallas, Texas 75240 N. Richland Hill, Texas 76180
7. Telephone Warehouse
5610 Lemmon Ave. #B
Dallas, Texas 75209
</TABLE>
5
<PAGE> 1
EXHIBIT 10.22
DEALER AGREEMENT
This Dealer Agreement ("Agreement"), dated this 20th day of December,
1996 ("Effective Date"), is between AT&T Wireless Services of San Antonio, Inc.
d/b/a AT&T Wireless Services ("Company"), and Telephone Warehouse - San Antonio,
Inc., a Texas corporation, ("Dealer"). Dealer currently does business as
Telephone Warehouse; however, this Agreement shall be binding on Dealer
regardless of any assumed name under which Dealer does business.
Company provides wireless radio telecommunications services ("Service")
in the San Antonio, Texas metropolitan statistical area ("Area") directly to
individuals, corporations, associations, and other entities that purchase such
Service from Company ("Subscribers"). The Area is defined by the United States
Census Bureau and consists of the following counties: Bexar, Comal, and
Guadalupe.
Company has offered to Dealer the opportunity to market Company's Service
in the Area and refer to Company potential Subscribers for the Service under the
terms and conditions of this Agreement, and Dealer has accepted.
Therefore, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which are expressly
acknowledged, Company and Dealer agree as follows:
1. APPOINTMENT OF DEALER.
a. Appointment. Company hereby appoints Dealer as an
authorized dealer for Company within the Area to solicit, and submit for
consideration, potential Subscribers to Company's Service under Company rate
plans as specified by Company from time to time, and to provide assistance to
Subscribers as may be authorized by Company. Dealer accepts such appointment.
For purposes of this Agreement, Service does not include any wireless
telecommunications services purchased from a reseller of Company's Service, and
Subscriber does not include individuals, corporations, associations, or other
entities that purchase Company's Service from a reseller. Notwithstanding
anything else in this Agreement, Dealer acknowledges and agrees that Company may
(i) sell Service directly to Subscribers (through itself, through Affiliated
entities, or both), (ii) appoint or authorize other persons or entities to
solicit Subscribers to the Service, and (iii) sell, lease, or provide directly
to Subscribers, or appoint or authorize other persons or entities to sell,
lease, or provide, wireless telephones and related equipment (collectively,
"Equipment") and/or installation, repair, and warranty service for such
Equipment.
b. Term. This Agreement shall be for a five (5) year term,
commencing on the Effective Date and terminating five (5) years thereafter,
unless sooner terminated under the terms herein. Upon completion of the initial
term, this Agreement will automatically renew for one (1) additional five (5)
year term unless either party notifies the other party of its intention not
1
<PAGE> 2
to renew not less than nine (9) months prior to the of the initial term. Neither
party shall be under any obligation to renew or extend.
c. Dealer Program Rules. This Agreement incorporates the
Dealer Program Rules attached as Exhibit A ("Dealer Program Rules"). Company
shall have the right to amend the Dealer Program Rules (by addition, deletion,
and/or modification of any terms) from time to time on thirty (30) days written
notice to Dealer, and any such amendment shall be automatically incorporated
into this Agreement.
d. Independent Parties. In performance of this Agreement,
Dealer shall at all times act in its own capacity and right as an independent
contractor. Company and Dealer acknowledge that their relationship does not
create a general agency, joint venture, partnership, employment relationship, or
franchise between them. Dealer shall not pay, and Dealer acknowledges that it
has not paid, any franchise fee or other compensation for the right to enter
into this Agreement, solicit Subscribers for Company, or use any Marks (defined
herein). Except as expressly set forth herein, neither Company nor Dealer shall
have the authority to bind the other in any manner. Except as expressly set
forth herein or in the Dealer Program Rules, Dealer will provide all facilities,
equipment, and supplies required to perform its activities and meet its
obligations as contemplated hereunder. Company shall neither direct nor control
the work of Dealer nor assume any responsibility for Dealer's acts, errors, or
omissions. Dealer shall at all times identify Company as the Service provider.
Dealer shall identify itself as an "Authorized Dealer" of Company.
e. No Other Agreements. Dealer represents and warrants to
Company (i) that its execution and performance of this Agreement does not and
will not violate any other contract or obligation to which Dealer or any
Affiliate of Dealer is or was a party, including any covenant not to compete
or agreements concerning non-solicitation of customers or confidential
information, (ii) that it will not disclose to Company, or use or induce Company
to use, any proprietary or confidential information or trade secrets of any
other person, corporation, association, or entity, and (iii) that it has
returned all property and confidential information belonging to all prior
employers or service providers providing any type of product or service
competitive with the Service described herein for whom Dealer may have acted as
an employee, agent, or dealer.
2. COMPANY OBLIGATIONS
During the term of this Agreement, Company agrees (i) to provide
Service in the Area in accordance with the license granted to Company by the
Federal Communications Commission, (ii) to promote the Service in the Area in
such degree as Company in its sole discretion considers necessary, (iii) to
provide training and guidelines (in such amounts and in such frequency as is
provided by Company to other similarly situated dealers) to enable Dealer to
solicit, and submit for consideration, potential Subscribers to the Service, and
(iv) to provide promotional and other advertising materials containing Company's
trade name and other Marks (defined herein) in such types and amounts and under
such terms and conditions as determined
2
<PAGE> 3
by Company in its sole discretion, so that Dealer can identify itself as an
authorized dealer of Company and use Company's goodwill to facilitate the
solicitation of Subscribers to the Service.
3. DEALER OBLIGATIONS
a. Ethical Conduct. In all dealings related to this Agreement,
Dealer shall be governed by the highest standards of honesty, integrity, fair
dealing, and ethical conduct. Conduct amounting to a breach hereof includes, but
is not limited to, (i) business practices, conduct, promotions, and advertising
which may be in violation of state or federal law or injurious to Company or its
Affiliates (defined herein), or the business reputation, goodwill, or Marks of
any such entities, or to the general public or any actual or potential
Subscriber, (ii) falsification of any business records, (iii) misrepresentations
to Company, the general public, or any actual or potential Subscriber, (iv)
modification or emulation of any electronic serial number ("ESN") in violation
of any law or regulation (whether state, federal, or otherwise), and (v) the
commission of any illegal act constituting a felony or involving a crime of
moral turpitude or the filing of a criminal indictment or information against
Dealer or any director, officer, or executive of Dealer or any owner controlling
a 10% or greatest interest in Dealer for any such alleged illegal act. Dealer
warrants and agrees that throughout the term of this Agreement it will: (i)
comply with all applicable laws, rules, and regulations, whether federal, state,
or local, (ii) comply with Company's written policies and procedures as
promulgated from time to time as Company deems reasonable for the administration
of its business, and (iii) pay all business, payroll, property, income, sales,
use, and other taxes due upon or in connection with the operation of its
business.
b. Exclusivity. Dealer agrees that, at all times during the
term of this Agreement, Dealer, its Affiliates, their respective Personnel
(defined herein), and any successor entity to Dealer or any Affiliate of Dealer
shall not directly or indirectly offer or sell Wireless Services or assist or
solicit individuals, corporations, associations, or other entities to obtain
Wireless Services in the Area from any person or entity (including any reseller
of Wireless Services) other than Company. Dealer agrees that, during the term of
this Agreement, Dealer, its Affiliates, their respective Personnel, and any
successor entity to Dealer or any Affiliate of Dealer shall not act, directly or
indirectly, as a reseller of Company's Service or of any other Wireless Services
in the Area. The term "Affiliate" shall mean, with respect to any person or
entity, any other person or entity, directly or indirectly, in whole or in part,
owning, controlling, owned by, controlled by, or under common ownership or
control with such person or entity, and specifically includes, without
limitation, National Cellular, Inc. As used in this Agreement, the term
"Wireless Services" means: (i) cellular telephone service, (ii) personal
communications services, (iii) enhanced specialized mobile radio service, and
(iv) any other functionally similar or equivalent wireless voice or data
service, irrespective of the radio frequency band on which the services are
offered.
c. Best Efforts. Dealer shall use its best efforts to promote
and market Company's Service and to identify and refer to Company potential
Subscribers for the Service. Dealer shall use its best efforts to give prompt,
courteous, and efficient service to the general
3
<PAGE> 4
public and to actual and potential Subscribers and to protect and promote the
Company's goodwill and business reputation.
d. Subdealers. Dealer may appoint agents or independent
contractors (collectively, "Subdealers") to perform certain services, duties, or
obligations of Dealer under this Agreement or the Dealer Program Rules
(including, without limitation, the solicitation of Subscribers to the Service)
only with the written consent of Company, which may be withdrawn, and under such
terms and conditions as may be required by Company from time to time. Such
consent shall be unreasonably withheld or withdrawn. Such terms and conditions
may include, without limitation, a requirement that the Subdealer enter into a
separate agreement with Company pertaining to, among other things, the
non-disclosure of Confidential Information (defined herein), exclusivity, and
non-solicitation of Subscribers. Any such appointment will not relieve Dealer of
any of its duties or obligations under this Agreement.
e. Personnel. All obligations and responsibilities to Dealer's
owners, directors, officers, employees, Subdealers, and any other person or
entity that obtains through Dealer the right to solicit Subscribers to the
Service (collectively, "Personnel") shall be those of Dealer. Company shall have
no obligations or responsibilities to such Personnel. Dealer shall cause its
current and future Personnel (including partners and shareholders if such
partners or shareholders own a 10% or greater interest in Dealer) to execute a
Confidentiality, Exclusivity, and Non-solicitation Agreement in the form
attached as Exhibit B, the originals of which shall be delivered to Company upon
request by Company. Dealer shall be fully responsible for all acts and omissions
of its Personnel and shall be strictly and absolutely liable for full compliance
by its Personnel with this Agreement, the Dealer Program Rules, and the
aforementioned Confidentiality, Exclusivity, and Non-solicitation Agreement. A
breach by its Personnel of any of the terms or any such agreements shall be
considered a breach by Dealer and shall entitle Company to pursue all rights and
remedies it may have under this Agreement, at law or in equity. Dealer shall
ensure that all of its sales and service Personal attend training courses
required by Company relating to the Service or Equipment. Such training shall be
provided by Company at no direct charge to Dealer or its Personnel; provided,
however, that any costs (including, but not limited to, travel and living
expenses) incurred by Dealer or its Personnel in connection with such training
will be the sole responsibility of Dealer or its Personnel. Dealer shall allow
only those Personnel certified by Company or the applicable Equipment
manufacturer(s) or vendor(s) to provide installation, repair, or warranty
services.
f. Locations. Dealer shall operate its business hereunder at
easily accessible retail store-front location(s) ("Locations") which shall be
maintained so as to promote and protect Company's business reputation and
goodwill and shall have ample display room for wireless telephone demonstration
models. Dealer's present Locations are identified on the attached Exhibit C.
Dealer shall notify Company in writing immediately prior to commencing business
operations at any new Location or ceasing business operations at any Location.
The term "Locations" shall also include (without the necessity of amending this
Agreement) any Location that Dealer or any Affiliate of Dealer acquires
subsequent to the execution of this Agreement, regardless of whether or not
Dealer has yet notified Company of such Location. In addition to the foregoing:
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<PAGE> 5
(i) Dealer shall in good faith carry on its business
diligently and continuously at the Locations during the term of
this Agreement, shall keep the Locations open for business during
normal business hours, shall operate each of the Locations in a
professional, first-class, and reputable manner, and shall
maintain adequate Personnel in attendance during normal business
hours; and
(ii) During the term of this Agreement, Company shall
have, and Dealer hereby grants to Company, the right of first
refusal to acquire any interest of Dealer or any Affiliate of
Dealer in any of the Locations prior to any full or partial sale,
lease, sublease, assignment, transfer, or other disposition
(collectively, "Transfer") of such interest by Dealer or any
Affiliate of Dealer. Dealer shall notify Company in writing of the
proposed terms and conditions of the proposed Transfer, and
Company shall have thirty (30) days after receipt of such notice
within which to elect to exercise its right to acquire the
interest on terms substantially equivalent to those of the
proposed Transfer. Company shall have no obligation to exercise
its right of first refusal with respect to any particular
Transfer, and Company's failure to exercise its rights with
respect to any particular Transfer shall not impair Company's
rights with respect to any subsequent Transfer.
g. Records. Dealer shall maintain at its principal place of
business for four (4) years from the date of their preparation or for the period
required by law, whichever is longer, complete and accurate records of its
business conducted pursuant to this Agreement (including, without limitation,
records of actual or potential Subscribers with whom Dealer or its Personnel
has had contact, records of compensation and other amounts paid to Dealer in
connection with Dealer's performance under this Agreement, and records of
Dealer's Equipment sales, leases, installations, and repairs). Dealer shall make
these records available to Company during normal business hours upon seventy-two
(72) hours prior notice.
h. Service Centers. If Company appoints Dealer as an
authorized service center, Dealer shall comply with all requirements, rules, and
regulations of Company relating to authorized service centers, as those rules
may be established or amended by Company from time to time. In the event Dealer
installs or repairs Equipment, Dealer shall comply with all standards,
procedures, and manuals of the appropriate Equipment manufacturers. Dealer's
appointment as an authorized service center shall not constitute or be construed
as a franchise.
4. PROMOTION AND SALE OF SERVICE.
a. Marketing and Promotion. Dealer shall use only Company
authorized rate plans, subscription agreements and forms, and solicitation,
enrollment, and activation procedures in soliciting potential Subscribers to the
Service (as such rate plans, agreements, forms, and procedures may be amended
from time to time upon notice by Company). Dealer shall offer Service rate plans
only to those Subscribers that meet Company eligibility requirements for the
particular Service rate plan offered. Dealer shall take all reasonable steps to
confirm the
5
<PAGE> 6
accuracy of information obtained from potential Subscribers pursuant to Company
authorized forms and procedures. Dealer shall have no right, power, or authority
to make any representations or warranties regarding the Service except as
expressly directed by Company. Company reserves the right to amend its rate
plans for Service, and to add, delete, suspend, or modify terms and conditions
of the Service at any time.
b. Acceptance of Orders. All orders taken by Dealer for the
Service are subject to acceptance or rejection by Company. If Company does not
accept a potential Subscriber, Dealer may not enter into a subscriber agreement
with or otherwise agree to provide Service to such potential Subscriber. With
respect to the Service, all Subscribers shall be customers of Company and shall
not be considered customers of Dealer.
c. Deposits, Collections, and Billings. Dealer shall, on
behalf of Company, collect deposits and advance payments required by Company
from new Subscribers prior to Service activation. Such deposits and advance
payments shall be made payable to Company only (not to Dealer), and shall be
delivered to Company in accordance with the activation procedures set forth in
the Dealer Program Rules. Company shall be solely responsible for all billings
of Subscribers for Service, and all remittances resulting from such billings
shall be made directly to Company or Company's designee and shall be the
property of Company.
d. Compensation. Subject to the terms of this Agreement and
the Dealer Program Rules, Dealer shall be eligible for compensation from Company
on accepted applications for Service activation procured solely by Dealer or its
Personnel for which Service is activated during the term of this Agreement.
Dealer shall have no right to compensation other than that earned in strict
compliance with this Agreement, the Dealer Program Rules, and Company authorized
procedures. Dealer shall have no right to receive any compensation after the
expiration or termination of this Agreement (whether voluntary or involuntary).
Dealer shall be obligated to reimburse Company for Subscriber deactivations as
set forth in the Dealer Program Rules. The nature, terms, and amount of
compensation shall be in accordance with the Dealer Program Rules, which may be
modified from time to time on thirty (30) days written notice to Dealer. In
addition to Company's right to modify compensation as set forth in this
Agreement and the Dealer Program Rules, Company may establish separate types,
terms, and amounts of compensation for Subscribers to new Service rate plans
introduced by Company after the Effective Date.
e. Offsets. Company shall have the right, at any time, to
offset any amounts owed to Dealer or its Affiliates against any amounts owed by
Dealer or its Affiliates to Company pursuant to this Agreement or otherwise,
including, but not limited to, any costs, claims, expenses, losses, attorney
fees, and damages incurred by Company.
f. Reserve. Upon termination of this Agreement for whatever
reason, Company shall be entitled to establish and withhold a reserve from any
compensation or any other amounts owed to Dealer, which may be used to satisfy
any obligations owed by Dealer to Company, including, but not limited to,
obligations based on Subscriber deactivations following any termination of this
Agreement. The reserve shall equal the average compensation amount
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<PAGE> 7
paid to Dealer per Subscriber during the six (6) months preceding termination,
multiplied by the number of Subscribers whose deactivations resulted in
reimbursement due from Dealer during that period. Any balance remaining in the
reserve after deducting all allowable offsets six (6) months after the date of
termination of this Agreement will be paid to Dealer, without interest. The
establishment of this reserve shall not relieve Dealer of its obligation to pay
to Company any amounts owed to Company and not offset against the reserve.
g. Exclusive Rate Plans or Subscribers. Dealer acknowledges
that (i) Company may, from time to time, authorize or restrict Dealer's
solicitation of Subscribers for Service under certain of Company's rate plans,
and (ii) Company may also, from time to time, authorize or restrict Dealer's
solicitation for Service of certain categories of Subscribers or potential
Subscribers as may be identified by Company.
5. THE EQUIPMENT.
a. Minimum Technical Standards. Dealer shall recommend, sell,
lease, or furnish to Subscribers only Equipment that meets minimum FCC and
Company technical standards for regulatory compliance, transmission,
authentication, and overall technical quality. Dealer acknowledges that Company
may refuse Service to any Subscriber or potential Subscriber using Equipment
that does not meet such standards. Dealer further acknowledges that any
Equipment programmed with or utilizing a non-factory installed ESN does not meet
minimum standards.
b. Equipment Sources. Dealer may obtain Equipment for sale or
lease from any supplier so long as the Equipment meets or exceeds the technical
standards described in section 5(a) above. All sales of Equipment by Dealer to
Subscribers and all leases of Equipment to Subscribers where Dealer is the
lessor shall be for Dealer's own account and not as an agent of Company. Dealer
shall be solely responsible for establishing the sales price or rent and other
terms for all such sales and leases of Equipment.
c. Equipment Sold by Company. Company, at its sole option, may
sell Equipment to Dealer for cash, or, if Company so elects, under such credit
terms as Company may extend from time to time. In the event Company elects to
sell Equipment to Dealer on credit, Dealer agrees to execute all documents
necessary to give Company a security interest in such Equipment and to perfect
such security interest, and acknowledges that Company may reduce or cease to
extend such credit at any time at its sole option. Dealer shall bear the risk of
loss for all Equipment in its possession. No agreement by Company to sell
Equipment to Dealer shall constitute or be construed as a franchise.
d. Demonstration Equipment and Service. Company, at its sole
option, may supply Equipment and/or Service to Dealer for purposes of
demonstration to potential Subscribers, under such terms as Company may extend
from time to time. In consideration for Company supplying Equipment to Dealer,
Dealer shall bear the entire risk of loss or damage to such Equipment from the
time Dealer obtains possession of such Equipment until it is delivered
7
<PAGE> 8
to a Subscriber or returned to Company. Dealer shall keep all such Equipment
continuously insured under such terms and in such amounts as Company may require
from time to time.
6. GOODWILL.
Dealer acknowledges and agrees that Company has acquired goodwill,
advantages, and benefits as a consequence of Company's substantial investment in
its name, its development and cultivation of a reputation in the Area as high
quality provider of Service, and the patronage and loyalty of its customers.
Dealer wants to hold itself out to the public as an authorized dealer for
Company and to use Company's goodwill and business reputation to attract and
solicit potential Subscribers to the Service. Dealer acknowledges and agrees
that its use of Company's goodwill and business reputation to solicit customers
and its knowledge and use of Company's Confidential Information (defined herein)
constitute good and sufficient consideration for this Agreement, including the
provisions pertaining to exclusivity, nondisclosure of Confidential Information,
non-solicitation of Subscribers, and the covenant not to compete. Dealer further
acknowledges and agrees that, through its use of the Company's goodwill and
business reputation, it will acquire the names of, and other information
regarding, Subscribers that it solicits for the Service, and that such names and
other information constitute Confidential Information belonging to Company.
Dealer agrees to use its best efforts to protect and promote Company's goodwill
and business reputation and not to use such goodwill or business reputation
except in connection with the promotion and marketing of, and the solicitation
of Potential Subscribers for, Company's Service.
7. SERVICE MARKS, TRADEMARKS, AND TRADE NAMES.
Dealer acknowledges and agrees that all service marks, trademarks,
and trade names used by Company (collectively, the "Marks") and the rights to
use such Marks are the exclusive property of Company or are licensed for use by
Company from the owner(s) thereof, and Dealer shall not use any of the Marks
without Company's specific prior written approval. Dealer shall comply with all
rules and procedures pertaining to the Marks prescribed by Company from time to
time (collectively, the "Mark Rules") and shall obtain advance approval from
Company of all advertising or other promotional material which contains any of
the Marks. Subdealers may not use any Marks unless specifically authorized by
Company to do so, and then only in a manner specifically authorized by Company.
This precludes, without limitation, any use of Marks on any collateral,
promotional material, advertising, business cards, or stationery of any
Subdealer. Any unauthorized use of the Marks, or any use not in compliance with
this Agreement or the Mark Rules, by Dealer or its Personnel, including
Subdealers, shall constitute infringement of Company's rights in the Marks, a
material breach of this Agreement, and cause for termination. Dealer
acknowledges that it has no rights in or to the Marks except as provided herein,
and shall not acquire any rights in the Marks or expectancy to their use as a
result of any use of the Marks by Dealer or otherwise. Following the termination
of this Agreement for whatever reason, Dealer shall immediately discontinue use
of all Marks. No authorization to use Company's Marks shall constitute or be
construed as a franchise.
8
<PAGE> 9
8. CONFIDENTIAL INFORMATION, NON-SOLICITATION, AND COVENANT NOT TO
COMPETE.
As more fully set forth in sections 2, 6, and 7 above,
in order to facilitate Dealer's marketing of the Service and solicitation of
Subscribers, Company will permit Dealer to use Company's goodwill, business
reputation, and Marks to attract potential Subscribers, and Company will provide
Dealer with initial and on-going specialized training, education, materials,
ardor information concerning the Service, Subscribers, and Equipment. Through
the use of Company's goodwill, business reputation, Marks, training, materials,
and information, Dealer will acquire the names of, and other information
concerning, Subscribers, other Confidential Information (defined herein), and
other advantages and benefits associated with its business. Dealer specifically
agrees and acknowledges that Subscriber information is confidential,
proprietary, and is not known to the general public or Company's competitors.
Dealer further agrees and acknowledges that the protection it has provided to
Company in this section is a material consideration to Company in entering into
this Agreement, and significant damage would occur to Company if Confidential
Information were to come into the possession of another provider or reseller of
Wireless Services or any dealer, agent, salesperson, or employee thereof.
Likewise, if Dealer or any director, of officer, or Affiliate of Dealer ware to
work for another provider or reseller of Wireless Services other than Company as
a dealer, subdealer, or salesperson, or in any other capacity that would allow
Dealer to take advantage of Confidential Information and/or Subscriber contact
and/or other advantages or benefits acquired in connection with Dealer's
relationship with Company, Company would be materially damaged. Because of these
special concerns, and to the fullest extent permitted by law, the following
provisions shall apply to Dealer, its Affiliates, and, as applicable, Dealer's
Personnel:
a. Confidential Information. As used in this Agreement,
"Confidential Information" means all information, not generally known to the
public, that relates to the business, marketing, technology, Subscribers,
finances, plans, proposals, or practices of Company, and includes, without
limitation, the identities of all Subscribers and prospects, Subscriber
information, subscriber agreements, dealer agreements, Dealer Program Rules, all
business plans, proposals and practices, all marketing plans, proposals and
practices, all technical plans and proposals, all research and development, all
budgets and projections, all nonpublic financial information, and all
information Company designate as "confidential." All Confidential Information
shell be considered trade secrets of Company and, in addition to the protections
provided herein, shall be entitled to all protections given by law to trade
secrets. The teen "Confidential Information" shall apply to information in every
form in which it may exist, whether recorded or not, and, if recorded, whether
recorded on paper, film, tape, computer disk, or any other form or media.
b. Non-Disclosure of Confidential Information. Dealer
covenants and agreement, both during the term of this Agreement and at all times
thereafter, Dealer, its Affiliates, their respective Personnel, and any
successor entity to Dealer or any Affiliate of Dealer (i) shall not use any
Confidential Information except in connection with the promotion and marketing
of, and the solicitation of Subscribers for, Company's Service, (ii) shall not
disclose to any person, firm, corporation, or other entity any Confidential
Information, (iii) shall not in any other way
9
<PAGE> 10
publicly or privately disseminate any Confidential Information, and (iv) shall
not help anyone else do any of these things. Upon termination of this
Agreement, all confidential Information (originals and copies) in the possession
of Dealer, any Affiliate of Dealer, their Personnel, or any successor entity to
Dealer or any Affiliate of Dealer shall be immediately resumed to Company.
Dealer shall be responsible for ensuring compliance with this subsection by its
Personnel and Affiliates.
c. Non-Solicitation. During the term of this Agreement
and for a period of one (1) year after termination or expiration of this
Agreement (whether voluntary or involuntary), Dealer, its Affiliates, their
respective Personnel, and any successor entity to Dealer or any Affiliate of
Dealer shall not at any time (i) request any Subscriber in the Area that Dealer
knows (or has any reason to know) is a Subscriber of Company to curtail or
cancel its Service with Company, (ii) otherwise divert or attempt to divert any
such Subscribers from patronizing Company or the Service, or (iii) solicit such
Subscribers to purchase Wireless Services from any person or entity other than
Company. During the one (1) year period after termination or expiration of this
Agreement, any then current Subscribers of Company who contact Dealer regarding
the Service shall be referred directly to Company. Dealer shall be responsible
for ensuring compliance with this subsection by its Personnel and Affiliates.
d. Covenant Not to Compete. Dealer covenants and agrees
that, for a period of one (1) year after termination or expiration of this
Agreement (whether voluntary or involuntary), Dealer, its Affiliates, and any
successor entity to Dealer or to any Affiliate of Dealer will not (i) directly
or indirectly compete with Company or its Affiliates within the Area by
offering, providing, or marketing Wireless Services, or procuring, soliciting,
or referring customers for a provider or reseller of Wireless Services other
than Company or Company's Affiliates, or (ii) act or serve as a director,
officer, employee, agent, dealer, consultant, or formal or informal advisor of
any person or entity that directly or indirectly compete with Company or its
Affiliate within the Area, or act or serve as an owner (as a partner,
shareholder, or otherwise) controlling a 10% or greater interest in any such
entity. Dealer shall be responsible for compliance with this subsection by its
Affiliates. This provision shall not apply if, upon the expiration of the term
of this Agreement, Company refusal, without cause, to continue a dealer
relationship between Dealer and Company on terms that are substantially similar
to other contracts Company is then offering to dealers in the Area.
e. Tolling. The time periods specified in this section
shall be tolled during any period of time during which Dealer is in breach of
the subsection in which the time period is specified.
9. DEFAULT AND TERMINATION.
a. Default. The following events and occurrences shall
constitute defaults of this Agreement: (i) any breach by Company of this
Agreement which Company does not cure or commence to cure within thirty (30)
days after receipt of written notice of such breach from Dealer, (ii) any breach
by Dealer of any of the provisions in sections 3(a), 3(b), 7, or 8 of this
Agreement, (iii) any other breach by Dealer of this Agreement or the Dealer
Program Rules
10
<PAGE> 11
which Dealer does not cure within thirty (30) days after Company sends Dealer
written notice of such breach, (iv) the insolvency of either party, the filing
by either party of a voluntary petition in bankruptcy, the filing of a petition
in bankruptcy against either party, the appointment of a receiver or other
representative for either party or its business or assets, and such situation is
wit remedied or corrected within thirty (30) days, or the entry by either party
into any arrangement or assignment for the benefit of creditors, (v) the default
by either party under any other agreement between Dealer or any Affiliate of
Dealer, on the one hand, and Company or any Affiliate of Company, on the other
hand, (vi) the voluntary or involuntary sale, assignment, or other transfer of
Dealer's rights and/or obligations under this Agreement without the prior
written consent of Company, (vii) the voluntary or involuntary sale, assignment,
or other transfer of all or substantially all of Dealer's assets or the control
of Dealer not in the ordinary course of business without the prior written
consent of Company, and (viii) if applicable, the death or incapacity of Dealer.
b. Termination. This Agreement may be for cause by either
party immediately upon the sending of a written notice of termination to the
other party. Termination for cause shall include (i) any termination for a
default as defined in section 9(a) above, and (ii) any termination pursuant to
any termination provision contained in the Dealer Program Rules. Company shall
also have the right to terminate this Agreement immediately upon written notice
to Dealer if Company ceases to provide Service in the Area. Dealer shall have
the right to terminate this Agreement upon written notice to Company within ten
(10) days following a material modification of the Dealer Program Rules. Such
termination will become effective thirty (30) days after Company's receipt of
such notice; provide, however, that if Company rescinds the change prior to the
expiration of such thirty (30) days, this Agreement will not terminate, but
shall continue in full force and effect. Unless sooner terminated or extended
under the teens herein, this Agreement will terminate five (5) years after the
Effective Date
10. MISCELLANEOUS.
a. Limitation of Liability. Under no circumstances shall
Company or Dealer be liable to the other for any indirect, special,
consequential, punitive, or exemplary damages as a result of any default or
breach of this Agreement or the termination or non-renewal of this Agreement or
any other event, conduct, act, or omission arising out of or related to the
dealer relationship between Company and Dealer whether based on contract, tort,
statute, or otherwise.
b. Injunction. In addition to any other remedies Company may
have at law, in equity, or pursuant to this Agreement, Company shall have the
option. in appropriate instances, to bring court proceedings to seek injunctive
or other equitable relief to enforce any right, duty, or obligation under this
Agreement. Dealer acknowledges that such injunctive or other equitable relief
will be an appropriate, but not an exclusive, remedy for Company to enforce its
rights under this Agreement, specifically including, but not limited to, its
rights under sections 3(b), 3(f)(ii), 7, and 8 above. Dealer specifically agrees
that, due to the nature of harm which Company would suffer if Dealer were to
breach any of the provisions of sections 3(b), 3(f)(ii), 7, or 8, Company shall
be entitled to, and Dealer hereby consents to. injunctive relief to enforce such
provisions. To obtain injunctive or other equitable relief, Company shall not be
11
<PAGE> 12
required to post a bond; or, if required by law or by the court, Dealer hereby
consents to a bond in the lowest amount permitted by law.
c. Indemnity. In the event of a breach of this Agreement
(including any representation or warranty stated herein), the breaching party
shall protect, defend, indemnify, and hold harmless the non-breaching party from
and against any and all liabilities, cam of action, claims, and demands of every
kind against the non-breaching party arising out of or relating to such breach.
In addition, Dealer shall protect, defend, indemnify, and bolt harmless Company
(including Company's Affiliates and their directors, officers, employees,
agents, and contractors) from and against any and all costs and exposes, losses,
debts, damages, liabilities, causes of action, claims, and demands of every kind
arising out of or relating to Dealer's performance under this Agreement,
Dealer's operation of the Location(s), or the operation of Dealer's business,
including the business of any Subdealer. It is further agreed that Dealer will
maintain, at its sole cost and expense, any and all insurance coverage necessary
to protect its business and Company from all applicable risks.
d. Governing Law, Forum and Costs. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
any rules governing conflicts of laws. Sole and exclusive jurisdiction and venue
for the resolution of any disputes arising between Company and Dealer shall be
in the state or federal courts sitting in Dallas County, Texas. In any legal
proceedings between the parties concerning this Agreement (whether for damages,
equitable relief, or both), the substantially prevailing party shall be entitled
to recover its reasonable costs, including court costs and attorney fees;
provided, however, that this provision shall not entitle any party other than
Company or Dealer to recover their costs.
e. Notices. All notices and other communications hereunder
shall be given in writing and shall be deemed to have been duly given and
effective (i) upon receipt if delivered in person, by cable, telegram, telecopy,
or telex, (ii) one (1) day after deposit with a national overnight express
delivery service (postage prepaid), or (iii) three (3) days after deposit in the
United States mail (registered or certified mail, postage prepaid, return
receipt requested). All entices and other communications hereunder shall be sent
to the following addresses:
If to Dealer: Telephone Warehouse - San Antonio, Inc.
2436 E. Randol Mill Road
Arlington, Texas 76011
Attn: Ron Koonsman
If to Company: AT&T Wireless Services
2727 N.W. Loop 410
San Antonio, Texas 78230
Attn: Dealer Manager
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<PAGE> 13
with copy to: AT&T Wireless Services
Southwest Region Legal Department
5757 Alpha Road, Suite 1000
Dallas, Texas 75240
f. Entire Agreement. This Agreement represents the entire
Agreement between the parties hereto with respect to the matters addressed in
this Agreement and, except as expressly provided herein, shall not be affected
by any other documents. All prior agreements, understandings, covenants,
promises, warranties, and representations relating to the matters addressed in
this Agreement are superseded. Notwithstanding the foregoing, this Agreement is
subject to the terms and conditions of the Consent Agreement dated December 20,
1996 by and between Company, Dealer, National Cellular, Inc., HIG Cellular
Acquisition Corporation, and Ron Koonsman.
g. Survival of Obligations. Company's and Dealer's rights and
obligations under sections 7, 8, and 10(a), (b), and (c) of this Agreement (or
any other provision that by its terms reasonably survives termination) and
Dealer's deactivation reimbursement obligations as set forth in the Dealer
Program Rules shall survive the termination of this Agreement. Further, this
Agreement shall govern as to any obligation incurred prior to termination of
this Agreement.
h. Assignment. Dealer acknowledges that Company may assign its
rights and/or obligations hereunder at any time without Dealer's prior approval,
whereupon Company shall be relieved of its obligations hereunder. Dealer may
not, voluntarily or involuntarily, assign, delegate, or otherwise transfer its
rights or obligations hereunder without the prior written consent of Company,
which shall not be unreasonably withheld. This prohibition shall extend to any
disposition or transfer of a controlling interest in the ownership or control of
Dealer and to any disposition or transfer of the assets of Dealer not in the
ordinary course of business, including any transfer by will or operation of law.
To the extent not prohibited hereby, this Agreement shall be binding upon and
inure to the benefit of Company and Dealer and their respective successors and
assigns.
i. Severability and Reformation. If any provision of this
Agreement shall be held invalid under any applicable law, such invalidity shall
not affect any other provision of this Agreement that can be given an effect
without the invalid provision. Further, all terms and conditions of this
Agreement shall be deemed enforceable to the fullest extent permissible under
applicable law, and, when necessary, the court is requested to reform any terms
or conditions necessary to give them such effect.
j. Authority. Company and Dealer each represent and warrant to
the other that it is duly organized and in good standing in its state of
original organization, it has the requisite approvals to enter into this
Agreement, it is qualified to do business in the State of Texas, and the person
executing this Agreement on its behalf has full authority to execute this
Agreement.
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<PAGE> 14
k. Amendment. Any amendment to this Agreement, other than
amendments to the Dealer Program Rules, shall not be valid unless such amendment
is made in writing and signed by Company's general manager for the Area.
l. No Waiver. No failure by Company to take action on account
of any default or breach of this Agreement or the Dealer Program Rules by Dealer
shall constitute a waiver of any such default or breach, or of the performance
required of Dealer under this Agreement or the Dealer Program Rules.
11. INDEPENDENT INVESTIGATION.
COMPANY AND DEALER ACKNOWLEDGE THEY HAVE READ THIS AGREEMENT AND
UNDERSTAND AND ACCEPT THE TERMS, CONDITIONS, AND COVENANTS CONTAINED HEREIN AS
BEING REASONABLY NECESSARY TO MAINTAIN COMPANY'S HIGH STANDARDS FOR SERVICE.
DEALER ACKNOWLEDGES AND UNDERSTANDS THAT COMPANY OR OTHER DEALERS MAY AT ANY
TIME COMPETE DIRECTLY OR INDIRECTLY WITH DEALER IN SOLICITING SUBSCRIBERS FOR
THE SERVICE OR IN THE SALE, LEASE, INSTALLATION, REPAIR, OR WARRANTY SERVICING
OF EQUIPMENT. DEALER HAS INDEPENDENTLY INVESTIGATED THE WIRELESS SERVICES AND
EQUIPMENT SALE, LEASING, INSTALLATION, OR REPAIR BUSINESSES AND THE
PROFITABILITY (IF ANY) AND RISKS THEREOF. COMPANY HAS NOT MADE ANY
REPRESENTATION OR WARRANTY REGARDING THE PROFITABILITY OR VIABILITY OF DEALER'S
BUSINESS EFFORTS OR THE WIRELESS BUSINESS GENERALLY, AND DEALER IS NOT RELYING
ON ANY REPRESENTATION, GUARANTEE, WARRANTY, OR STATEMENT OF COMPANY OTHER THAN
AS SPECIFICALLY SET FORTH IN THIS AGREEMENT.
In witness whereof, the parties have executed this Agreement as of the
Effective Date.
<TABLE>
<CAPTION>
COMPANY: DEALER:
<S> <C>
AT&T Wireless Services of San Antonio, Inc. Telephone Warehouse - San Antonio, Inc.
d/b/a AT&T Wireless Services
Signature:/s/ Gary Fleming Signature:/s/ R.L. Koonsman
----------------------------- -----------------------------
Printed Name: Gary Fleming Printed Name: R.L. Koonsman
Title: Vice President Title: President
</TABLE>
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<PAGE> 15
EXHIBIT A
AT&T WIRELESS SERVICES
DEALER PROGRAM RULES
Effective Date: October 1, 1996
San Antonio Metropolitan Service Area
1. Part of Agreement. These Dealer Program Rules ("Rules") are a part of the
Dealer Agreement (the "Agreement") that has been executed by Company and
Dealer and, except as noted in paragraph 2 below, are to be interpreted
and administered in a manner consistent with the Agreement. These Rules
supersede and replace all prior Dealer Program Rules. These Rules are
subject to amendment at any time by Company upon thirty (30) days written
notice to Dealer.
2. Inconsistencies in Terms. If any inconsistency or conflict exists between
these Rules and the Agreement as amended or any prior Dealer Program
Rules, these Rules control.
3. Definitions. In addition to the terms defined in the Agreement, for
purposes of these Rules, the following terms will have the meanings set
forth below:
Activation Date - The date on which Company commences to provide Service
to the cellular telephone number assigned to a Subscriber.
Subscriber - Each individual, corporation, association, or other entity
that places an order through Dealer for Service that is accepted by
Company and for whom Service is activated. For purposes of computing
commissions, where an individual or entity places more than one order and
each order is for a different cellular telephone number, each order will
be treated as a separate Subscriber if the order is accepted by Company
and if Service is activated on that order. However, if more than one
telephone number is assigned to an ESN, all orders for telephone numbers
assigned to the same ESN count as only one Subscriber. An individual or
entity for whom Service is activated shall NOT be considered a
"Subscriber" if such individual or entity (whether under the same or a
different name) was previously an active Subscriber during the
immediately preceding six-month period or if such activation is connected
with the Deactivation of Company's Service on another (or other) cellular
telephone number(s), and Dealer shall not be eligible for compensation of
any kind with respect to such activation (unless the activation
qualifies as a "restore" under paragraph 9, or as otherwise provided in
paragraph 11.e). It is the Dealer's responsibility to determine whether
an individual or entity that places an order qualifies as a Subscriber at
the point of sale prior to activation. This is accomplished by
questioning the customer, looking for an account number on the AXYS
system and/or calling Company's Customer Verification.
Dealer Subscribers - For each calendar month, this means the number of
new Subscribers that (I) were submitted by Dealer and accepted by
Company, (ii) whose Activation Date was in that month, and (iii) whose
Service has not been terminated for any reason at the end of the month.
Deactivated and Deactivation - Termination of Service to the cellular
telephone number assigned to a Subscriber for any reason. The Subscriber
may substitute phones or rate plans without being considered deactivated
as long as the same phone number is maintained.
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<PAGE> 16
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Vesting Period - The period of time after the Activation Date during
which commissions, bonuses, and other compensation and incentives are
subject to adjustments or reimbursement as provided in these Rules. After
the expiration of the Vesting Period, commissions, bonuses, and other
compensation and incentives are not subject to adjustment or
reimbursement, unless obtained in violation of these Rules, the
Agreement, or Company authorized procedures.
4. Commissions. Except as otherwise provided in these Rules, Dealer shall be
eligible to earn a commission for each new Subscriber activation during a
month, which shall be determined according to the Compensation Category
to which the activated rate plan has been assigned, and shall be
calculated from the following table:
<TABLE>
<CAPTION>
Compensation Category Commission/Subscriber
--------------------- ---------------------
<S> <C>
A ***
B ***
C ***
D ***
E ***
F ***
G ***
</TABLE>
Company shall designate which rate plans are assigned to each
Compensation Category. Such Category designations may be changed by
Company from time to time upon thirty (30) days written notice.
Commissions earned by Dealer shall first be used to offset payments due
to Company from Dealer. Any remainder shall be paid within thirty (30)
days after the end of the month during which the commission was earned.
5. Volume Bonus. In addition to commissions as provided in paragraph 4
above, Dealer shall be eligible to earn a Volume Bonus. Such eligibility
will be determined each month based on the number of Dealer Subscribers
for the month, minus the number of Deactivations for the month which
result in reimbursement to Company as provided in paragraph 9 below, plus
the number of reactivations for the month which result in "restore"
compensation to Dealer as provided in paragraph 9 below ("Net Dealer
Subscribers"). If earned, the amount of the Volume Bonus shall be
calculated as follows:
<TABLE>
<CAPTION>
Net Dealer Subscribers/Month Volume Bonus/Subscriber
---------------------------- -----------------------
<S> <C>
*** ***
</TABLE>
The Volume Bonus is retroactive, and applies to all qualifying Net Dealer
Subscribers for the month. For example, if Dealer has 75 Net Dealer
Subscribers in a month, Dealer will earn *** for each such qualifying
New Dealer Subscriber. *** activation do not qualify for the Volume
Bonus, but do count toward the New Dealer Subscriber monthly tier count
for the Volume Bonus. Volume Bonus earned by Dealer shall first be used
to offset payment due to Company from Dealer. Any remainder shall be paid
within thirty (30) days after the end of the month during which the
commission was earned.
6. *** Rate Plan Commissions. Dealer shall have the choice of either the
commission rate specified in Option A or the commission rate specified in
Option B as described below for eligible Subscriber activations to the
*** Rate Plans. Activations on such *** Rate Plans will count
toward the Dealer Subscriber monthly tier count, but will NOT qualify for
bonus
2
<PAGE> 17
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
payment. Dealer must select one Option to be applicable to all ***
Rate Plan activations; Dealer may not select both Options or a
combination of Options; Dealer may not subsequently change Options except
upon Company's express written consent.
Option A: The commission rate on eligible Subscriber activations on the
*** Rate Plans under Option A will be ***. Option A *** Rate
Plan activations will NOT qualify for continuing service payments.
Option B: The commission rate on eligible Subscriber activations on the
*** Rate Plans under Option B will be ***. In addition, Option B
*** Rate Plan activations will qualify for continuing service
payments as described in paragraph 11.b below.
NOTE: If Dealer has not already designated or been assigned to receive
compensation under Option A or Option B, Dealer will be assigned to
receive compensation under Option B unless Dealer designates in writing
its desire to be compensated under Option A, and returns such signed
designation to Company within thirty (30) days of Dealer's receipt of
these Rules.
Dealer Designation: I elect to receive compensation under:
Option A or Option B X (Select one)
--------- ---------
/s/
-------------------------
Signature
7. Feature Commissions. Dealer shall also be eligible to earn a feature
commission for each Dealer Subscriber that subscribes to one or more of
the following feature (on a rate plan where the features are charged
separately) at the time of initial activation. No feature commission will
be paid for any feature which is included in the rate plan subscribed to.
If earned, the following features will earn the following amounts:
<TABLE>
<CAPTION>
Feature Commission
------- ----------
<S> <C>
*** ***
</TABLE>
Feature commissions earned by Dealer shall first be used to offset
payments due to Company from Dealer. Any remainder shall be paid within
thirty (30) days after the end of the month during which the commission
is earned.
8. Rate Plan Eligibility. The *** Rate Plans will be available only to
eligible Subscribers activating digital or dual mode equipment. All other
rate plans will be available only to eligible Subscribers activating
analog equipment. Dealer shall be subject to chargeback of all
compensation paid for a Subscriber (commission, bonus, and continuing
service payments) and reversal of any co-op accrual for Subscriber
activations to inappropriate plans.
9. Subscriber Deactivation Reimbursement. For Subscriber activations to a
*** Rate Plan described in paragraph ***, Dealer shall reimburse
Company for certain compensation paid to Dealer for a Subscriber whose
Service is Deactivated for any reason within *** after the
Subscriber's Activation Date (the "*** Vesting Period"). For
Subscriber activations to any other rate plan, Dealer shall reimburse
Company for certain compensation paid to Dealer for a Subscriber whose
Service is Deactivated for any reason within ***
after the Subscriber's Activation Date (the "Standard Vesting
Period"). The applicable
3
<PAGE> 18
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Vesting Period shall be fixed for a Subscriber based on the rate plan
originally activated, irrespective of any migrations. The amount of
Deactivation reimbursement, irrespective of the applicable Vesting
Period, shall be *** of all commissions and bonuses (except Volume Bonus
as provided in paragraph 5 above) paid to Dealer for the Subscriber.
Company may offset this reimbursement against subsequent commissions
payable to Dealer. In any event, however, Dealer shall pay to Company any
reimbursement amount remaining due no later than sixty (60) days from the
end of the month in which the Subscriber's Service was Deactivated.
If a Subscriber whose Service is Deactivated within the applicable
Vesting Period reactivates Service prior to the later of (i) the end of
that Vesting Period or (ii) thirty (30) days after the Service is
Deactivated, "restore" compensation equal to the amount reimbursed to
Company shall be repaid to Dealer. Compensation shall NOT be restored if
the Subscriber reactivates Services after the later of (i) the end of the
applicable Vesting Period or (ii) thirty (30) days after the Service is
Deactivated. A new Vesting Period will apply to the Subscriber,
commencing on the date Service is reactivated.
10. Migration. If a Subscriber migrates within the applicable Vesting Period
to a rate plan for which a different commission or bonus is paid, or adds
or deletes one of the separately charged features listed in paragraph 7
above, a monetary adjustment will be made to the amount of commission
and/or bonus paid for that Subscriber. The amount of the adjustment shall
be offset, paid to Dealer, or reimbursed to Company in accordance with
the offset payment, and reimbursement provisions in these Rules.
11. Continuing Service Payments:
a) In return for Dealer providing continuing service to Subscribers,
continuing service payments may be payable to Dealer for
Subscribers activated onto certain of Company's rate plans by
Dealer in the Area who remain on Service and current in their
bills for a certain period of time (the "Payment Period").
Continuing service payments will be based on *** collected
from a Subscriber (herein collectively referred to as "Local
Revenue") during the Payment Period. No continuing service
payments will be paid for any subscriber activated outside the
Area.
b) Continuing service payments for *** Rate Plan activations for
Dealers that elect the Option B commission rate in paragraph 6
will be earned based on a percentage of Local Revenue for each
month during which a Subscriber is a current and active
Subscriber to Company's Service, up to a maximum Payment Period
of *** beginning on the Activation Date. The applicable
percentage shall be ***.
c) For eligible rate plans other than *** Rate Plans, continuing
service payments will be earned based on a percentage of Local
Revenue for each month during which a Subscriber is a current and
active Subscriber to Company's Service on an eligible rate plan
up to a maximum Payment Period of *** beginning on the Activation
Date. The applicable percentage shall be fixed in the month of
activation based on the following table:
<TABLE>
<CAPTION>
Net Dealer Subscribers/Month Continuing Service Payment Percentage
---------------------------- -------------------------------------
<S> <C>
*** ***
</TABLE>
4
<PAGE> 19
d) If a Subscriber migrates within the applicable Vesting Period to a
rate plan for which a different or no continuing service payment
is paid, an adjustment will be made to the rate and term of the
continuing service payments paid for that Subscriber.
e) If a Subscriber's Service in the Area is Deactivated for any
reason, continuing service payments on that Subscriber will stop
as of the date of Deactivation. If, however, a Subscriber
reactivates Service under the same name, account number and
cellular number within the applicable Vesting Period, the
continuing service payments will resume. For purposes of
determining the Payment Period, the original Activation Date will
apply to the reactivated Service.
f) Continuing service payments are intended to compensate Dealer for
continuing service provided to a Subscriber, and are not earned in
advance. Dealer shall have no future entitlement to such payments.
If the Agreement is cancelled or terminated for any reason,
continuing service payments will stop permanently as of the date
of termination or cancellation.
g) Continuing service payments earned by Dealer shall first be used
to offset payments due to Company from Dealer. Any remainder shall
be paid to Dealer within thirty (30) days after the end of the
calendar quarter in which earned.
12. Co-Op Advertising. A co-op advertising account will be maintained for
Dealer. Funds will accrue to this account each month with respect to the
number of Net Dealer Subscribers for the month (Dealer Subscribers for
the Month, minus the number of Deactivations for the month which result
in reimbursement to Company as provided in paragraph 9 above, plus the
number of reactivations for the month which result in "restore"
compensation to Dealer as provided in paragraph 9 above) at the rate
specified by Company, as modified at any time upon thirty (30) days
written notice to Dealer. Such funds may be paid to Dealer in accordance
with the terms in the Company's Co-op Advertising Guidelines or as
otherwise specified, as modified from time to time. Until paid to Dealer,
such funds shall remain the property of the Company. Any funds credited
to the co-op advertising account that have not been paid or become
payable to Dealer within the time specified in the Co-op Advertising
Guidelines or as otherwise specified shall be forfeited and not paid to
Dealer. No interest will be paid on funds credited to the co-op
advertising account, and any amount remaining in the account upon
termination of the Agreement shall remain the property of the Company.
13. Activation Procedures. Dealer shall not be entitled to any compensation
of any type (commission, bonus, or continuing service payment) or to any
co-op advertising or to any other incentive with respect to any
Subscriber, unless obtained in compliance with the Rules, the Agreement,
and Company authorized procedures and the following activation procedures
have bee fully performed.
a) Before making any commitment to a potential Subscriber regarding
the Service, Dealer shall telefax, physically deliver or
communicate via AXYS to Company all necessary Subscriber
information, and obtain a Subscriber Agreement, credit application
and other necessary paperwork signed by the potential Subscriber.
The original Subscriber Agreement and credit application shall be
physically delivered to Company within three (3) business days of
its execution by the Subscriber.
b) Company will complete credit check of the potential Subscriber and
advise Dealer if any deposit or advance payment will be required
and its amount.
c) Dealer will obtain from the potential Subscriber the required
deposit or advance
5
<PAGE> 20
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Payment made payable to Company (not Dealer). If payment is made
by check, Dealer may telefax a copy of the check to Company, but
shall then physically deliver the check to Company within three
(3) business days of its receipt. If payment is by cash or credit
card, Dealer shall immediately deliver good funds for the full
payment to Company.
d) Upon full performance of the above steps and upon compliance with
all of Company's installation procedures for any new Equipment,
Company will activate the Service for the Subscriber.
14. Minimum Performance Standard. Dealer shall obtain a minimum of ***
Dealer Subscribers each month, provided, however, that Dealer shall be
required to obtain only *** Dealer Subscribers each month with
respect to any Location not in Bexar County. Dealer's failure to obtain
these minimum numbers each month for any three (3) consecutive months
shall entitle Company to terminate the Agreement for cause pursuant to
the Agreement. If Dealer fails to obtain an average of *** Dealer
Subscribers per month for any three (3) consecutive months, Company shall
have no obligation to provide individual training or other support to
Dealer. This shall not relieve Dealer of any of its obligations,
including its obligation to have its sales and service personnel attend
training courses required by the Company.
15. Previous Subscribers. Compensation will be paid with respect to a
Subscriber whose Activation Date preceded the effective date of these
Rules based on the Dealer Program Rules which were in effect on the
Subscriber's Activation Date.
6
<PAGE> 21
DEALER PROGRAM RULES RECEIPT
I acknowledge that I have received a copy of the Dealer Program Rules with an
effective date of October 1, 1996.
12/31/96
- --------------------------------------
(Date)
/s/Telephone Warehouse
- --------------------------------------
(Dealer Name)
/s/
- --------------------------------------
(Signature)
7
<PAGE> 22
EXHIBIT "B"
CONFIDENTIALITY, EXCLUSIVITY, AND NON-SOLICITATION AGREEMENT
I, [EMPLOYEE/OFFICER NAME], am a(n) [POSITION] of [Dealer Name]
("Dealer"), an authorized dealer of ___________________ d/b/a AT&T Wireless
Services ("Company") to solicit and submit for consideration potential
Subscribers to the wireless telecommunications services ("Services") provided by
Company in the _________________ area ("Area"). The Area is defined by the
United States Census Bureau and consists of the following counties:
___________________________. Because of my relationship with Dealer and Dealer's
relationship with Company, I will receive knowledge, experience, and training
concerning wireless telephone systems and equipment, including the Service and
system the Company, and will have contact with Company's Subscriber, and as a
result I will receive financial benefits through my relationship with Dealer, or
who have had any dealings or communication with Dealer at any time. As used in
this Agreement, "Confidential Information" means all information , not generally
known to the public, that relates to the business, marketing, technology,
Subscribers, finances, plans, proposals or practices of Company, and it
includes, without limitation, the identities of all Subscribers and prospects,
subscriber agreements, dealer agreements, Dealer Program Rules, all business
plans, proposals and practices, all marketing plans, proposals and practices,
all technical plans and proposals, all research and development, all budgets and
projections, all nonpublic financial information, and all information Company
designates as "confidential." In return for such knowledge, experience,
training, and financial benefits, and in addition to other agreements of Dealer,
to the fullest extend permitted by law, I agree to do all of the following:
1. I agree that, while I am associated with Dealer and while
Dealer is an authorized dealer of Company, I will act according to the
highest standards of honesty, integrity, fair dealing, and ethical
conduct in all my dealings with Subscribers, potential Subscribers, and
Company. I agree that a breach of this section includes, but is not
limited to, the making of misrepresentations or misleading statements to
Company or to any actual or potential Subscriber.
2. I agree to keep confidential all information defined as
"Confidential Information" above, and agree not to disclose to anyone
else or to any other business such Confidential Information. I understand
that all such Confidential Information constitutes trade secrets of
Company.
3. I agree that, while I am associated with Dealer and while
Dealer is an authorized dealer of Company, I will not solicit business
for any other Wireless Services Provider, and I will not help any other
Wireless Services Provider obtain business. As used herein, the term
"Wireless Services Provider" shall mean any provider, reseller, dealer,
subdealer, salesperson, or agency thereof of the following: (i) cellular
telephone
1
<PAGE> 23
service, (ii) personal communications services, (iii) enhanced
specialized mobile radio service, or (iv) any other functionally similar
or equivalent wireless voice or data service.
4. I agree that, for a period of one (1) year after the
termination of my association with Dealer or Dealer's association with
Company, whichever occurs first, I shall not request any Subscriber in
the Area whom I know to be a Subscriber to cancel his, her, or its
Service with Company, nor shall I solicit, divert, or try to divert any
Subscribers to another Wireless Services Provider, nor shall I help any
other Wireless Services Provider obtain or try to obtain any business
from any of these Subscribers. During this one-year period, if any
then-current Subscribers contact me about the Service, I will refer each
of them to Company.
5. I agree that Company is a third-party beneficiary of this
Agreement and shall be entitled to enforce this Agreement. If I break any
of my promises in this Agreement, I realize I can be sued in court by
Company or by Dealer and be held liable for money damages or I can be
subject to injunctive or other equitable relief in favor of Company. I
also agree that, if any legal proceedings are brought concerning this
Agreement, the substantially prevailing party will be entitled to recover
all costs and reasonable attorney fees.
6. Each of the provisions of this Agreement is independent of
the other provisions of this Agreement. If a court of competent
jurisdiction decides that any part of this Agreement is unenforceable, I
agree to be bound by any lesser covenant that would impose the maximum
duty permitted by law, as is such lesser covenant were separately stated
in this Agreement. This Agreement may be reformed to be enforceable to
the fullest extent permitted by law.
DATED:_________________, 199___.
DEALER: OWNER, DIRECTOR, OFFICER,
EMPLOYEE, AGENT OR
SUBDEALER OR DEALER:
- ------------------------------------ -----------------------------------
Signature: Signature:
-------------------------- --------------------------
Printed Name: Printed Name:
------------------------ -----------------------
Title: Title:
----------------------------- ------------------------------
2
<PAGE> 24
EXHIBIT C
1. Telephone Warehouse
4917 Walzem Rd.
San Antonio, Texas 78217
2. Telephone Warehouse
8507 Broadway
San Antonio, Texas 78209
3. Telephone Warehouse
6121 Callaghan Rd.
San Antonio, Texas 78228
<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 the third paragraph of Note 18, as to which the
date is October 20, 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. 5 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
Miami, Florida
November 17, 1997
<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. 5
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
November 17, 1997
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 5 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 (October 20,
1997 as to the effects of the stock split discussed in Note 18) 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.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
November 17, 1997
