<PAGE> 1
As filed with the Securities and Exchange Commission on August 29, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LET'S TALK CELLULAR & WIRELESS, INC.
(Exact name of registrant as specified in its charter)
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<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>
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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)
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NICOLAS MOLINA
BRETT BEVERIDGE
LET'S TALK CELLULAR & WIRELESS, INC.
5200 N.W. 77TH COURT
MIAMI, FLORIDA 33166
(305) 477-8255
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
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WITH COPIES TO:
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
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [X]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1)(2) REGISTRATION FEE
==================================================================================================================
<S> <C> <C>
Common Stock, $.001 par value(1).......... $50,000,000 $15,152
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933.
(2) Includes shares of Common Stock which may be purchased by the
Underwriters pursuant to an over-allotment option.
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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.
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<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.
<PAGE> 3
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 29, 1997
PROSPECTUS
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SHARES
[LOGO]
COMMON STOCK
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Of the shares of Common Stock offered hereby shares are being
offered by Let's Talk Cellular & Wireless, Inc. (the "Company") and shares
are being offered by certain shareholders of the Company (the "Selling
Shareholders"). The Company will not receive any of the proceeds from the sale
of shares by the Selling Shareholders. See "Principal and Selling Shareholders."
Prior to the offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price.
Application has been made for quotation of the Company's Common Stock
on The Nasdaq National Market System under the symbol "LTCW."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
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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>
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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
$ .
(3) The Selling Shareholders have granted the Underwriters an option to
purchase up to an additional 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 and Proceeds to Selling Shareholders will be
$ , $ and $ , respectively. See "Underwriting."
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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.
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MERRILL LYNCH & CO.
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The date of this Prospectus is , 1997.
<PAGE> 4
[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> 5
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION HAS NOT BEEN EXERCISED, AND GIVES EFFECT TO A STOCK SPLIT TO BE
EFFECTED IMMEDIATELY PRIOR TO THE OFFERING. FISCAL YEAR REFERENCES ARE TO THE
RESPECTIVE FISCAL YEAR ENDED JULY 31. REFERENCES TO PRO FORMA FINANCIAL
INFORMATION ARE TO THE INFORMATION SET FORTH HEREIN UNDER "UNAUDITED PRO FORMA
FINANCIAL DATA," GIVING EFFECT TO THE ACQUISITION BY THE COMPANY OF TELEPHONE
WAREHOUSE, INC. AND NATIONAL CELLULAR, INCORPORATED (COLLECTIVELY, "TELEPHONE
WAREHOUSE") AS IF SUCH ACQUISITION (THE "TELEPHONE WAREHOUSE ACQUISITION") TOOK
PLACE AS OF THE BEGINNING OF THE PERIODS PRESENTED. UNLESS OTHERWISE INDICATED,
CELLULAR AND PCS INDUSTRY STATISTICS ARE OBTAINED FROM THE CELLULAR
TELECOMMUNICATIONS INDUSTRY ASSOCIATION ("CTIA") AND PAUL KAGAN ASSOCIATES, INC.
AND PAGING INDUSTRY STATISTICS ARE OBTAINED FROM THE STRATEGIS GROUP.
THE COMPANY
Let's Talk Cellular & Wireless, Inc. (together with its subsidiaries,
the "Company") is the largest independent specialty retailer of cellular and
wireless products, services and accessories in the United States, with 93 stores
located in 12 states, the District of Columbia and Puerto Rico as of July 31,
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 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, the 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
$62,000 and $136,000, 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 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,
3
<PAGE> 6
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 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.
4
<PAGE> 7
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 July 31, 1997, the Company had 7
store locations under construction and had signed leases or
reached an agreement in principle for an additional 16 store
locations. The Company's stores are located in only 55 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 Atlanta agents, acquired in August 1996 and (ii)
Telephone Warehouse, one of the largest AT&T agents in the
southwestern U.S., acquired in June 1997. 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 an infrastructure, including a management team and
information systems, to manage a rapidly growing chain of
stores. As a result, the Company may experience reduced
operating margins in the near term. As the Company continues
to expand internally and through acquisitions, it expects to
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 U.S. 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.
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<PAGE> 8
See "Certain Transactions." Since that time, the Company has opened 45 stores
and acquired 24 stores and now operates 93 stores with total net revenues of
$54.7 million on a pro forma basis for the nine months ended April 30, 1997.
RECENT ACQUISITIONS
TELEPHONE WAREHOUSE ACQUISITION. In June 1997, the Company acquired
Telephone Warehouse in exchange for 552,590 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 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 Atlanta agents, which operates five
retail stores (the "Peachtree Acquisition"). Since the date of the acquisition,
the Company has changed the stores' names to "Let's Talk Cellular & Wireless,"
increased the stores' in-stock merchandise availability and integrated the
accounting, sales and administrative functions into the Company's corporate
offices. The Company has also added two additional stores and is constructing a
third for the Atlanta market.
The Company's executive offices are located at 5200 N.W. 77th Court,
Miami, Florida 33166, and its telephone number is (305) 477-8255.
THE OFFERING
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<S> <C>
Common Stock offered by the Company ..................................... shares
Common Stock offered by the Selling Shareholders......................... shares
Common Stock to be outstanding after the offering........................ 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 opening of new stores and
possible acquisitions, and for other general
corporate purposes.
Proposed Nasdaq National Market symbol................................... "LTCW"
</TABLE>
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(1) Does not include shares of Common Stock issuable upon the
exercise of outstanding stock options, at a weighted average exercise
price of $ per share.
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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, NINE MONTHS ENDED APRIL 30,
------------------------------------------------- -------------------------------
PRO PRO
FORMA(1) FORMA(1)
1994 1995 1996 1996 1996 1997 1997
--------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Retail sales and
activation income ..... $ 4,033 $ 7,771 $ 12,518 $ 26,995 $ 9,175 $17,007 $27,451
Residual income ......... 228 533 1,075 8,780 753 930 7,539
Wholesale sales ......... -- -- -- 24,893 -- -- 19,669
--------- -------- -------- -------- -------- ------- -------
Total net revenues .... 4,261 8,304 13,593 60,668 9,928 17,937 54,659
Gross profit ............ 2,133 4,044 7,084 22,295 5,214 9,898 21,881
Selling, general and
administrative expenses 1,918 3,896 6,601 16,505 4,841 8,789 16,581
Income from operations
before amortization of
intangibles ........... 172 48 258 4,341 218 824 4,112
Income from operations .. 172 48 258 2,399 218 664 2,407
Income before provision
for income taxes ...... 159 8 105 2,326 100 535 2,374
Income tax provision .... 70 -- 39 1,037 33 230 946
--------- -------- -------- -------- -------- ------- -------
Net income .............. $ 89 $ 8 $ 66 $ 1,289 $ 67 $ 305 $ 1,428
========= ======== ======== ======== ======== ======= =======
Net income per share
applicable to Common
Shareholders .......... $ .11 $ .01 $ .07 $ .54(2) $ .08 $ .22 $ .61(2)
========= ======== ======== ======== ======== ======= =======
Weighted average shares
outstanding ........... 824 824 876 1,940(2) 824 1,355 1,940(2)
========= ======== ======== ======== ======== ======= =======
SELECTED OPERATING DATA:
Stores open at end of
period:(3)
Kiosk ................. 5 13 14 14 14 30 30
In-line ............... 3 9 11 31 12 31 50
--------- -------- -------- -------- -------- ------- -------
Total ................ 8 22 25 45 26 61 80
Percentage change in
comparable store ...... (2.2%) 10.5% 11.5% 4.9% 7.9%
sales(4)
Average comparable
store
sales (5) ............. $ 442,000 $450,000 $462,000 $305,000 $337,000
Number of activations
during period ......... 1,661 5,205 14,803 11,395 28,890
Total gross square feet
at end of period....... 2,447 7,006 9,529 9,529 33,231
</TABLE>
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AS OF APRIL 30, 1997
----------------------
ACTUAL PRO FORMA(6)
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BALANCE SHEET DATA:
Working capital ................ $ 709 $17,225
Total assets ................... 9,397 43,205
Long-term debt ................. 712 2,026
Preferred stock ................ 2,947 --
Shareholders' equity ........... 1,018 32,552
- ----------
(1) In June 1997 the Company acquired Telephone Warehouse in exchange for
552,590 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) Pro forma net income per share applicable to Common Shareholders is
based on pro forma net income (see note (1) above) less $242,000
representing 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. See
"Unaudited Pro Forma Financial Data."
(3) For the nine months ended April 30, 1997 on a pro forma basis, includes
19 stores acquired in June 1997 pursuant to the Telephone Warehouse
Acquisition.
(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) 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.
(6) Adjusted to give effect to (i) the Telephone Warehouse Acquisition and
related transactions, (ii) 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 April 30, 1997, and (iii) a non-recurring charge of
approximately $753,000, 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."
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RISK FACTORS
PROSPECTIVE INVESTORS OF THE SHARES OF COMMON STOCK OFFERED HEREBY
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 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 $54.7
million on a pro forma basis for the nine months ended April 30, 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."
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-
9
<PAGE> 12
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 also provide the Company with significant revenue
(38% of total net revenue in fiscal 1996) 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 three of the Company's carriers constituted
approximately 45.0% of its total net revenues for the nine months ended April
30, 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 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
10
<PAGE> 13
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.
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
11
<PAGE> 14
have a material adverse effect on the wireless communications industry and the
Company. As a distributor of wireless telephones, the Company may be subject to
product liability and other lawsuits alleging health risks. The costs associated
with the defense of such lawsuits or a successful claim against the Company
could have a material adverse effect on the Company's results of operations and
financial condition.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is substantially dependent upon its senior
management team, in particular the Company's Chief Executive Officer and
Chairman, Messrs. Molina and Beveridge, respectively. The loss of the services
of one or more of these persons could have a material adverse effect on the
Company. The Company has entered into five year employment agreements with
Messrs. Molina and Beveridge that limit the ability of the executives to compete
with the Company after their departure. See "Management--Employment Agreements."
The Company's business will also be dependent upon its ability to attract and
retain additional qualified personnel. The loss of Mr. Molina, Mr. Beveridge or
other key personnel could have a material adverse effect on the Company's
results of operations and financial condition. See "Management."
CONTROLLING SHAREHOLDER
Upon completion of this offering, HIG will beneficially own
approximately % of the outstanding Common Stock (approximately % if the
Underwriters' over-allotment option is exercised in full). Accordingly, HIG will
have sufficient voting power to control all matters requiring shareholder
approval, including the election of directors and the approval of fundamental
corporate transactions. See "Principal and Selling Shareholders."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BYLAW AND OTHER PROVISIONS
Certain provisions of the Company's Amended and Restated Articles of
Incorporation (the "Articles") and Amended and Restated Bylaws ("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 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."
FORWARD-LOOKING INFORMATION
Certain statements and information in this Prospectus constitute
forward-looking statements within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. Such forward-looking statements typically include
words or phrases such as "anticipate," "estimate," "project," "believe" and
words or phrases of similar import. Such statements are subject to certain
risks, uncertainties and assumptions, including, without limitation, those set
forth in this section. Should one or more of these risks or uncertainties
materialize, or should these underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, estimated or projected.
DILUTION
Investors purchasing shares of Common Stock in this offering will
experience immediate and substantial dilution in net tangible book value of
$ per share. See "Dilution."
12
<PAGE> 15
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding an
aggregate of shares of Common Stock. All of the shares sold in this offering
(plus an additional 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")), 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. The remaining shares of
Common Stock will become eligible for sale subject to Rule 144 without further
restriction or registration under the Securities Act beginning in June 1998. In
addition, 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 of such shares have been granted to
certain key employees and directors of the Company, and 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.
Certain shareholders of the Company holding shares of Common Stock have the
right to require the Company to register their shares of Common Stock under the
Securities Act. All of the existing shareholders have the right to include
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.
13
<PAGE> 16
USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock
offered by the Company hereby (at an assumed initial public offering price of
$ 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 opening of new stores and possible
acquisitions, and for other general corporate purposes. 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, and (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. 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. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" regarding the
Company's proposed new credit facilities. 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.
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<PAGE> 17
CAPITALIZATION
The following table sets forth the current portion of long-term debt
and capitalization of the Company as of April 30, 1997 (i) on a historical basis
and (ii) on a pro forma basis, giving effect to the Telephone Warehouse
Acquisition and related transactions and reflecting the sale of the shares
of Common Stock offered by the Company hereby (at an assumed initial public
offering price of $ 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 Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
AS OF APRIL 30, 1997
----------------------
ACTUAL PRO FORMA(1)
------ ------------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt and capital lease obligations .... $1,400 $ 11
====== ========
Long-term debt, less current maturities:
Term notes ..................................................... $ 428 $
8.0% subordinated note ......................................... -- 2,000
Indebtedness to shareholders ................................... 258 --
Capital lease obligations ...................................... 26 26
------ --------
Total long-term debt ........................................ 712 2,026
------ --------
Series A Preferred Stock, $30 par value; 150,000 shares
authorized; 100,000 shares issued and outstanding;
none issued and outstanding pro forma .......................... 2,947 --
Common shareholders' equity:
Common Stock, $.001 par value; 50,000,000 shares
authorized; shares issued and outstanding;
shares issued and outstanding pro forma(1)(2) ............... 1 2
Additional paid-in capital ..................................... 284 32,569
Retained earnings (deficit) .................................... 733 (19)
------ --------
Total common shareholders' equity .......................... 1,018 32,552
------ --------
Total capitalization ................................. $4,677 $ 34,578
====== ========
</TABLE>
- ----------
(1) See "Pro Forma Condensed Consolidated Balance Sheet."
(2) Does not include shares of Common Stock issuable upon the exercise of
outstanding stock options, at a weighted average exercise price of
$ per share.
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<PAGE> 18
DILUTION
At April 30, 1997, the Company had a net tangible book value of
$578,000, or $ per share of Common Stock. Net tangible book value 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 to be outstanding. Without taking into account any changes in net tangible
book value after April 30, 1997, other than to give effect to the Telephone
Warehouse Acquisition and to the issuance and sale of the shares of Common
Stock offered by the Company hereby (at an assumed initial public offering price
of $ 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 indebtedness as
described in "Pro Forma Condensed Consolidated Balance Sheet," the pro forma net
tangible book value of the Company at April 30, 1997 would have been $18.8
million, or $ per share. This represents an immediate increase in net
tangible book value of $ per share to existing shareholders and an
immediate dilution of $ per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ................................... $
Net tangible book value per share as of April 30, 1997 .........................
Increase in net tangible book value per share attributable to new investors ....
--------
Pro forma net tangible book value per share after the offering ....................
--------
Dilution per share to new investors ............................................... $
========
</TABLE>
The following table summarizes, on a pro forma basis as of April 30,
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 PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------ -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)(2) % $ % $
New investors(1)...........
----- ----- ----- ------
Total ............ 100.0% $ 100.0%
===== ===== ===== ======
</TABLE>
- ---------------
(1) Sales by the Selling Shareholders in this offering will reduce the
number of shares held by the existing shareholders to , or %
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 , or % 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 or % 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 , or %
of the total shares of Common Stock to be outstanding. See "Principal
and Selling Shareholders."
(2) Includes shares of Common Stock that will be issued immediately
prior to the sale of the Common Stock offered hereby, for a per share
price of $.0001, upon exercise of warrants that are held by the bank
lender to the Company. See "Certain Transactions" and "Principal and
Selling Shareholders."
The foregoing table assumes no exercise of outstanding stock options
after the date hereof. As of the date of this Prospectus, there were options
outstanding to purchase a total of shares of Common Stock, at a weighted
average exercise price of $ per share. See "Management--Executive
Incentive Compensation Plan" and Note 14 of Notes to Consolidated Financial
Statements.
16
<PAGE> 19
UNAUDITED PRO FORMA FINANCIAL DATA
The accompanying unaudited pro forma condensed consolidated statements
of income for the nine months ended April 30, 1997 and the year ended July 31,
1996, reflect the historical statements of income 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 periods presented. The accompanying unaudited pro
forma condensed consolidated balance sheet of the Company consolidates the
historical balance sheets of the Company and Telephone Warehouse as if the
Telephone Warehouse Acquisition and related transactions, the sale of the Common
Stock offered hereby and the application of the net proceeds from this offering
had occurred on April 30, 1997. Share and per share amounts included herein do
not give effect to a stock split anticipated to be effected immediately
prior to this offering.
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 552,590
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 $2.5 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 $4.8 million. The purchase price
exceeded the fair value of the net assets acquired by approximately $10.8
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 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.
The acquisition will be 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 32,410
shares of the Company's Common Stock at an exercise price of $.0001 per share.
In a previous transaction, on January 1, 1997, TCP had purchased from
the President and sole shareholder of Telephone Warehouse, Ronald Koonsman, all
of the outstanding stock of Telephone Warehouse for a purchase price of $15.1
million including acquisition costs of approximately $200,000.
Simultaneous with the acquisition of Telephone Warehouse, the Company
induced the holder of the Company's outstanding Series A Preferred Stock to
convert all outstanding shares of the Series A Preferred Stock to Common Stock
by increasing the conversion ratio of the Series A Preferred Stock from 5.32 to
1 to 6.5 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 650,000 shares
of Common Stock (118,182 in addition to the original conversion ratio).
Management determined that the fair value of the 118,182 shares at the date of
issuance was approximately $242,000.
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 and the fair value of the shares
issued in connection with the Telephone Warehouse Acquisition and the conversion
of the Series A Preferred Stock into Common Stock are based on preliminary data
and may be subject to change. 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.
17
<PAGE> 20
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
The Telephone Pro Forma
Company Warehouse Adjustments Pro Forma
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net revenues:
Retail sales and activation income $ 17,007,396 $ 10,443,722 $27,451,118
Residual income 929,638 6,609,551 7,539,189
Wholesale sales -- 19,668,748 19,668,748
------------ ------------ ------------ -----------
Total net revenues 17,937,034 36,722,021 -- 54,659,055
Cost of sales 8,039,363 24,738,886 32,778,249
------------ ------------ ------------ -----------
Gross profit 9,897,671 11,983,135 -- 21,880,806
Operating expenses:
Selling, general and administrative 8,788,905 7,863,826 $ (72,000)(1) 16,580,731
Former shareholder compensation
expense -- 920,000 (170,000)(1) 750,000
Depreciation and amortization 285,120 153,338 438,458
------------ ------------ ------------ -----------
Operating expenses before amortization
of intangibles 9,074,025 8,937,164 (242,000) 17,769,189
------------ ------------ ------------ -----------
Income from operations before
amortization of intangibles 823,646 3,045,971 242,000 4,111,617
Amortization of intangibles 160,000 773,356 771,168 (2) 1,704,524
------------ ------------ ------------ -----------
Income from operations 663,646 2,272,615 (529,168) 2,407,093
Interest expense, net (128,604) (459,803) (716,874)(3) (35,636)
1,269,645 (4)
Other income -- 2,784 2,784
------------ ------------ ------------ -----------
Income before provision for
income taxes 535,042 1,815,596 23,603 2,374,241
Income tax provision 230,241 488,999 226,434 (5) 945,674
------------ ------------ ------------ -----------
Net income 304,801 1,326,597 (202,831)(8) 1,428,567
Fair value of Common Stock distributed
to preferred shareholder to induce
conversion of Series A Preferred
Stock -- -- 242,000 (6) 242,000
------------ ------------ ------------ -----------
Net income applicable to common
shareholders $ 304,801 $ 1,326,597 $ (444,831)(8) 1,186,567
============ ============ ============ ===========
Net income applicable to common
shareholders per share $ 0.22 (7)(8) $ 0.61
============ ===========
Weighted average shares outstanding 1,355,442 (7) 1,940,442
============ ===========
</TABLE>
18
<PAGE> 21
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JULY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
The Telephone Pro Forma
Company Warehouse Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues:
Retail sales and activation income $ 12,518,247 $ 14,476,886 $ 26,995,133
Residual income 1,075,035 7,705,343 8,780,378
Wholesale sales -- 24,893,187 24,893,187
------------ ------------ ------------ ------------
Total net revenues 13,593,282 47,075,416 -- 60,668,698
Cost of sales 6,509,282 31,864,814 38,374,096
------------ ------------ ------------ ------------
Gross profit 7,084,000 15,210,602 22,294,602
Operating expenses:
Selling, general and administrative 6,601,077 10,076,122 (172,000)(1) 16,505,199
Former shareholder compensation
expense -- 2,169,288 (1,169,288)(1) 1,000,000
Depreciation and amortization 225,159 223,077 448,236
------------ ------------ ------------ ------------
Operating expenses before amortization
of intangibles 6,826,236 12,468,487 (1,341,288) 17,953,435
------------ ------------ ------------ ------------
Income from operations before
amortization of intangibles 257,764 2,742,115 1,341,288 4,341,167
Amortization of intangibles -- -- 1,942,631 (2) 1,942,631
------------ ------------ ------------ ------------
Income from operations 257,764 2,742,115 (601,343) 2,398,536
Interest expense, net (152,827) (15,435) (1,646,489)(3) (76,987)
1,737,764 (4)
Other income 3,959 3,959
------------ ------------ ------------ ------------
Income before provision for
income taxes 104,937 2,730,639 (510,068) 2,325,508
Income tax provision 38,939 504,546 493,068 (5) 1,036,553
------------ ------------ ------------ ------------
Net income 65,998 2,226,093 (1,003,136)(8) 1,288,955
Fair value of common stock distributed to
preferred shareholder to induce
conversion of Series A Preferred Stock -- -- 242,000 (6) 242,000
------------ ------------ ------------ ------------
Net income applicable to common
shareholders $ 65,998 $ 2,226,093 $ (1,245,136)(8) $ 1,046,955
============ ============ ============ ============
Net income applicable to common
shareholders per share $ 0.07 (7)(8) $ 0.54
============ ============
Weighted average shares outstanding 876,077 1,940,442
============ (7) ============
</TABLE>
19
<PAGE> 22
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - NINE MONTHS ENDED APRIL 30, 1997
AND YEAR ENDED JULY 31, 1996
(1) Reflects reduction of compensation expense to $1 million 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, (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 ($170,000
reduction for the nine months ended April 30, 1997 and $1.2 million
reduction for the year ended July 31, 1996). Also reflects a new
employment agreement 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 ($72,000 reduction for the nine months ended April 30,
1997 and $172,000 reduction for the year ended July 31, 1996).
(2) Reflects increase to amortization of intangible assets. Goodwill
totaling approximately $10.8 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>
<CAPTION>
Nine months
ended Year ended
April 30, 1997 July 31, 1996
-------------- -------------
<S> <C> <C>
Incremental amortization of goodwill $149,804 $ 359,530
Incremental amortization of acquired residual income 621,364 1,583,101
-------- ----------
Pro forma adjustments $771,168 $1,942,631
</TABLE>
The amortization of the allocated cost of acquired residual income is expected
to be approximately as follows:
Amortization of
acquired
residual income
---------------
July 1 to July 30, 1997 $ 168,000
Fiscal 1998 1,507,000
Fiscal 1999 676,000
Fiscal 2000 189,000
Fiscal 2001 5,000
----------
$2,545,000
(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 periods presented, as follows:
<TABLE>
<CAPTION>
Nine months
ended Year ended
April 30, 1997 July 31, 1996
-------------- -------------
<S> <C> <C>
Incremental interest expense on assumed debt $585,761 $1,393,500
Incremental interest expense on new borrowings 43,534 67,497
Incremental amortization of deferred financing costs on assumed debt 47,782 132,429
Incremental amortization of deferred financing costs on new debt 39,797 53,063
-------- ----------
Pro forma adjustments $716,874 $1,646,489
</TABLE>
20
<PAGE> 23
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(4) Reflects a reduction in interest expense assuming the repayment of bank
indebtedness of $13.5 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>
<CAPTION>
Nine months
ended Year ended
April 30, 1997 July 31, 1996
-------------- -------------
<S> <C> <C>
Income tax provision as if all Telephone Warehouse entities were
C-Corporations as of the beginning of the periods presented $ 138,430 $ 505,790
Tax effect of the pro forma adjustments at statutory rates 317,908 573,025
Tax benefit associated with the amortization of the acquired residual
income (229,904) (585,747)
--------- ---------
Pro forma adjustments $ 226,434 $ 493,068
</TABLE>
(6) Reflects management's estimate of the fair value of 118,182 shares of
Common Stock distributed to induce conversion of Series A Preferred
Stock into a total of 650,000 shares of Common Stock.
(7) Net income applicable to common shareholders per share is calculated by
deducting from net income the estimated fair value of Common Stock
issued to induce conversion of the Series A Preferred Stock and using
the weighted average number of shares of Common Stock outstanding
during the respective periods, assuming that the conversion of the
Series A Preferred Stock into 650,000 shares of Common Stock, the
issuance of 552,590 shares of Common Stock to purchase Telephone
Warehouse, the issuance of 32,410 warrants in connection with the
Company's debt refinancing, and the issuance of 55,442 stock options to
certain officers, had all occurred as of the beginning of the periods
presented, resulting in 1,940,442 weighted shares outstanding for the
periods presented.
(8) Does not include a non-recurring charge of approximately $753,000, net
of tax, relating to the write-off of deferred financing costs in
connection with the repayment of the bank indebtedness of $13.5 million
with a portion of the net proceeds of this offering.
21
<PAGE> 24
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
The Telephone Pro Forma
Company Warehouse Adjustments Pro Forma
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 228,318 $ 573,872 $ (112,676)(3) $ 13,550,681
12,861,167 (6)
Accounts receivable, net 1,397,527 2,483,069 3,880,596
Inventory 3,508,030 3,201,119 6,709,149
Prepaid expenses 38,279 287,702 325,981
Other current assets 115,231 -- 115,231
Deferred tax asset 76,675 353,176 66,993 (6) 496,844
---------- ------------ ------------ ------------
Total current assets 5,364,060 6,898,938 12,815,484 25,078,482
Property and equipment, net 3,514,670 694,015 4,208,685
Other assets, net 78,072 951,565 223,000 (1) 146,780
148,438 (5)
(1,254,295)(6)
Investment in Telephone Warehouse 2,530,862 (2) --
(2,530,862)(3)
Intangible assets, net 440,000 12,684,181 646,832 (3) 13,771,013
---------- ------------ ------------ ------------
Total assets $9,396,802 $ 21,228,699 $ 12,579,459 $ 43,204,960
---------- ------------ ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $1,777,208 2,755,370 $ 4,532,578
Bank lines of credit 1,129,400 -- (1,129,400)(1) --
Accrued expenses 1,073,701 1,304,836 2,378,537
Current portion of bank term loan
and obligations under capital
leases 270,907 500,000 (260,000)(1) 10,907
75,000 (1)
(575,000)(6)
Income taxes payable 277,152 157,573 (434,725)(6) --
Deferred revenues 85,797 716,237 802,034
Customer deposits 40,421 89,039 129,460
---------- ------------ ------------ ------------
Total current liabilities 4,654,586 5,523,055 (2,324,125) 7,853,516
Bank term loan, less current portion 428,333 10,700,000 (428,333)(1) --
1,925,000 (1)
(12,625,000)(6)
Loans from shareholders 258,100 -- (258,100)(6) --
Note payable to former shareholder -- 2,000,000 2,000,000
Line of credit 300,000 40,733 (1) --
(340,733)(6)
Obligations under capital leases, less
current portion 26,226 -- 26,226
Other liabilities 40,778 -- 40,778
Deferred tax liability 24,134 708,938 733,072
Redeemable, convertible preferred stock,
$30 par value, 150,000 shares
authorized, 100,000 shares issued and
outstanding, none issued
and outstanding, pro forma 2,946,915 -- (2,946,915)(4) --
Common shareholders' equity
Common stock, $.001 par value; 50,000,000
shares authorized; 650,000 shares
issued and outstanding, 1,852,590 shares
issued and outstanding, pro forma 650 20 553 (2) 1,853
(20)(3)
650 (4)
Additional paid-in capital 283,902 1,999,980 2,530,309 (2) 32,568,914
(1,999,980)(3)
2,946,265 (4)
148,438 (5)
26,660,000 (6)
Retained earnings (deficit) 733,178 (3,294) 3,294 (3) (19,399)
(752,577)(6)
---------- ------------ ------------ ------------
Total common shareholders' equity 1,017,730 1,996,706 29,536,932 32,551,368
---------- ------------ ------------ ------------
Total liabilities and common
shareholders' equity $9,396,802 $ 21,228,699 $ 12,579,459 $ 43,204,960
========== ============ ============ ============
</TABLE>
22
<PAGE> 25
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF APRIL 30, 1997
(1) Reflects the refinancing of debt in connection with the Telephone
Warehouse Acquisition resulting in increased borrowings of $2 million
which was used to repay $1.8 million of debt and to pay financing costs
of $223,000, as follows:
New debt:
NationsCredit term loan $ 2,000,000
NationsCredit line of credit 40,733
Debt repaid:
Bank term loan (688,333)
Bank line of credit (1,129,400)
Financing costs (223,000)
(2) Reflects the Company's issuance of 552,590 shares of Common Stock
valued by management at $2.5 million to acquire Telephone Warehouse.
(3) Reflects the elimination of the Company's investment in Telephone
Warehouse and a preliminary allocation of cost in excess of purchase
price over the fair value of the net assets acquired in connection with
the Telephone Warehouse Acquisition of approximately $10.8 million and
acquired residual income of approximately $1.6 million (net of deferred
tax liability of $942,000).
(4) Reflects the conversion of all outstanding shares of Series A Preferred
Stock into 650,000 shares of Common Stock.
(5) Reflects the fair value of warrants, as determined by management,
issued to purchase 32,410 shares of Common Stock in connection with the
Telephone Warehouse Acquisition, the conversion of Series A Preferred
Stock and refinancing of debt. Deferred interest expense of $148,438
was recorded at June 27, 1997, representing the estimated value of the
warrants, as determined by management, which is being recognized as
interest expense over the seven year term of the NationsCredit loans.
The warrants expire on December 31, 2006 and may be exercised at any
time.
(6) Reflects (i) the sale of Common Stock offered hereby and the
application of the estimated net proceeds of $26.7 million to the
repayment of bank indebtedness of $13.5 million and certain shareholder
notes of $258,100 resulting in an increase to cash of approximately
$12.9 million and (ii) the write-off of deferred financing costs of
approximately $753,000, net of tax, related to the repayment of the
bank indebtedness.
23
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for income
statement and balance sheet data has been derived from the financial statements
of the Company contained elsewhere herein. The consolidated financial statements
as of and for the year ended July 31, 1996 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 years ended July 31, 1992 and 1993 have been derived from unaudited
consolidated financial statements. The income statement data for the nine months
ended April 30, 1996 and 1997 and the balance sheet data as of April 30, 1997
have been derived from unaudited interim consolidated financial statements
contained elsewhere herein, which in the opinion of management, include all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of the information set forth therein. The 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>
NINE MONTHS ENDED
FISCAL YEAR ENDED JULY 31, APRIL 30,
------------------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- --------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Retail sales and
activation income ........ $ $ 3,205 $ 4,033 $ 7,771 $ 12,518 $ 9,175 $ 17,007
Residual income ............ 75 228 533 1,075 753 930
Wholesale sales ............ -- -- -- -- -- -- --
------- ------- --------- -------- -------- -------- --------
Total net revenues ....... 1,597(1) 3,280 4,261 8,304 13,593 9,928 17,937
Cost of sales .............. 870 1,596 2,128 4,260 6,509 4,714 8,039
------- ------- --------- -------- -------- -------- --------
Gross profit ............... 727 1,684 2,133 4,044 7,084 5,214 9,898
Selling, general and
administrative expenses .. 722 1,203 1,918 3,896 6,601 4,841 8,789
Depreciation and
amortization ............. -- -- 43 100 225 155 285
Amortization of intangibles -- -- -- -- -- -- 160
------- ------- --------- -------- -------- -------- --------
Income from operations ..... 5 481 172 48 258 218 664
Interest expense, net ...... 3 1 13 40 153 118 129
Other expense (income) ..... -- -- -- -- -- -- --
Income before provision
for income taxes ......... 2 480 159 8 105 100 535
Income tax provision ....... -- 194 70 -- 39 33 230
------- ------- --------- -------- -------- -------- --------
Net income ................. $ 2 $ 286 $ 89 $ 8 $ 66 $ 67 $ 305
======= ======= ========= ======== ======== ======== ========
Net income per share ....... $ -- $ .35 $ .11 $ .01 $ .07 $ .08 $ .22
======= ======= ========= ======== ======== ======== ========
Weighted average shares
outstanding .............. 824 824 824 824 876 824 1,355
======= ======= ========= ======== ======== ======== ========
SELECTED OPERATING DATA:
Stores open at end of
period:(2)
Kiosk .................... 2 3 5 13 14 14 30
In-Line .................. 1 1 3 9 11 12 31
------- ------- --------- -------- -------- -------- --------
Total ................... 3 4 8 22 25 26 61
Percentage change in
comparable store sales(3) (4) (4) (2.2%) 10.5% 11.5% 4.9% 7.9%
Average comparable store
sales(5) ................. (4) (4) $ 442,000 $450,000 $462,000 $305,000 $337,000
Number of activations
during period ............ (4) (4) 1,661 5,205 14,803 11,395 28,890
Total gross square
feet at end of
period .............. 677 821 2,447 7,006 9,529 9,529 33,231
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
AS OF JULY 31, AS OF APRIL 30,
----------------------------------------------- ---------------
1992 1993 1994 1995 1996 1997
------ ----- ---- ----- ----- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency) .... $ (68) $165 $144 $ (110) $ 779 $ 709
Total assets ..................... 187 561 947 3,324 6,646 9,397
Long-term debt ................... 3 -- 26 328 474 712
Preferred stock .................. -- -- -- -- 2,937 2,947
Shareholders' equity
(deficiency) ..................... (10) 276 362 621 693 1,018
</TABLE>
- ---------------
(1) Information not available to differentiate retail sales and activation
income from residual income.
(2) Includes five stores acquired in August 1996, but does not include 19
stores acquired in June 1997 pursuant to the Telephone Warehouse
Acquisition.
(3) 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.
(4) Information not available.
(5) 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.
25
<PAGE> 28
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
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 and accelerated its store
expansion. Since June 1996, the Company has added a net total of 68 stores,
including 5 stores acquired from Peachtree Mobility in the Atlanta metropolitan
area and 19 stores acquired from Telephone Warehouse.
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 during fiscal 1998
and, as a result, may experience reduced operating margins in the near term. As
the Company continues to expand through new store openings and acquisitions, it
expects to leverage these investments and improve margins through economies of
scale.
The Company's revenues are generated principally from four sources:
(i) RETAIL SALES. The Company sells cellular and wireless
products, such as phones, pagers and related accessories in the
Company's retail outlets.
(ii) ACTIVATION INCOME. The Company receives an activation
commission from the applicable cellular carrier when a customer
initially subscribes for the cellular carrier's service. The amount of
the activation commission paid by cellular carriers is based upon
various service plans offered by the carriers and is recognized by the
Company at the time of sale. New subscription activation commissions
are fully refundable if the subscriber cancels its subscription prior
to completion of a minimum period of continuous active service
(generally 180 days). Customers generally sign a service agreement with
the Company that requires a customer deposit that is forfeited in the
event of early cancellation. The Company then applies the customer's
deposit to reduce or offset its resulting deactivation loss owed to the
carrier. The Company accrues for estimated deactivation losses, net of
cancellation fees, by creating a reserve against carrier accounts
receivable.
(iii) RESIDUAL INCOME. The Company receives monthly payments
made by certain cellular carriers and pager customers. Cellular
residual payments are based upon a percentage (usually 4-6%) of the
customers' monthly service charges and are recognized as income when
received. Pager residual payments are received on a monthly basis
directly from pager customers for the pager airtime that the Company
buys wholesale from paging carriers and then resells to individuals and
small businesses.
(iv) WHOLESALE SALES. The Company recently 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.
26
<PAGE> 29
Comparable stores sales include only stores owned and operated by the
Company for at least 12 full months and are comprised of retail sales and
activation income, as residual income is not allocated among stores.
Historically, retail sales have accounted for most of the Company's net
revenues. As sales of discounted and "free" cellular phones designed to attract
new subscribers have increased significantly, the number of activations has
increased and activation income has become increasingly significant to the
Company's net revenues. The Company has recently made a strategic decision to
accept increased activation income in connection with certain new carrier
agreements in lieu of monthly residual payments to optimize cash flow and to
facilitate the Company's growth strategy. As a result, management believes that
activation income may account for an increased share of the Company's future net
revenues relative to residual income.
To date, the cost of wireless products has gradually decreased over
time. With such lower costs, the Company typically has offered lower prices to
attract more subscribers, which has increased its total activation income and
contributed to gross profit improvements. Consequently, the Company believes
that as prices of wireless products decrease they become more affordable to
consumers, expanding the wireless communications market and creating an
opportunity to attract new subscribers and increase activation income.
The Company has developed two distinct mall-based store formats,
free-standing kiosks and traditional "in-line" stores. The average capital
expenditures for new kiosk and in-line locations approximate $30,000 and
$90,000, respectively. The initial inventory for a new store approximates
$32,000 for a kiosk and $46,000 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 $753,000, 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
$60.7 million in total net revenues, $22.3 million in gross profit and $2.4
million in income from operations for the year ended July 31, 1996 and had $54.7
million in total net revenues, $21.9 million in gross profit and $2.4 million in
income from operations for the nine months ended April 30, 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, activation and residual income and the
remaining were from wholesale operations) and income from operations of $4.0
million for its fiscal year ended December 31, 1996.
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."
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
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<PAGE> 30
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 acquisition, the Company issued 552,590 shares
of Common Stock and assumed $13.1 million of indebtedness. The Company recorded
intangibles of approximately $13.3 million, of which $10.8 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, NINE MONTHS ENDED APRIL 30,
------------------------------ ---------------------------
1994 1995 1996 1996 1997
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Total net revenues................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 49.9 51.3 47.9 47.5 44.8
------ ------ ------ ------ ------
Gross profit......................... 50.1 48.7 52.1 52.5 55.2
Selling, general and
administrative expenses........... 45.0 46.9 48.6 48.8 49.0
Depreciation and amortization........ 1.0 1.2 1.7 1.6 1.6
Amortization of intangibles.......... - - - - 0.9
Income from operations............... 4.0 0.6 1.9 2.2 3.7
Interest expense, net................ 0.3 0.5 1.1 1.2 0.7
Income tax provision................. 1.6 - 0.3 0.3 1.3
------ ------ ------ ------ ------
Net income........................... 2.1% 0.1% 0.5% 0.7% 1.7%
====== ====== ====== ====== ======
Number of stores at end of period.... 8 22 25 26 61
</TABLE>
28
<PAGE> 31
THE COMPANY
NINE MONTHS ENDED APRIL 30, 1997 COMPARED TO NINE MONTHS ENDED APRIL 30, 1996
TOTAL NET REVENUES increased $8.0 million, or 80.7%, to $17.9 million
for the nine months ended April 30, 1997 from $9.9 million for the nine months
ended April 30, 1996 due to increases in retail sales, activation income and
residual income. Retail sales and activation income increased 85.4% to $17.0
million from $9.2 million and residual income increased 23.5% to $930,000 from
$753,000. Comparable store sales increased 7.9% and accounted for $693,000 or
8.7% of the increase in total net revenues. Sales relating to 31 new stores
opened, five stores acquired since July 31, 1996 and the four stores that were
not yet open for 12 full months accounted for $7.3 million or 91.1% 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 subscribers in the wireless industry
overall. The increase in residual income was due to the increase in the number
of cellular activations (28,890 activations during the nine months ended April
30, 1997 as compared to 11,395 activations during the nine months ended April
30, 1996) and the addition of new pager subscribers resulting from the Peachtree
Acquisition. The Company had 61 stores open at April 30, 1997 as compared to 25
at July 31, 1996.
GROSS PROFIT increased $4.7 million, or 89.8%, to $9.9 million for the
nine months ended April 30, 1997 from $5.2 million for the nine months ended
April 30, 1996. As a percentage of total net revenues, gross profit increased to
55.2% from 52.5% primarily due to activation income increasing at a faster rate
than the cost of merchandise sold. Management expects that, following the
acquisition of Telephone Warehouse, gross profit as a percentage of total net
revenues will decrease since wholesale sales generally have lower margins than
retail sales.
SELLING, GENERAL AND ADMINISTRATIVE expenses increased $3.9 million, or
81.5%, to $8.8 million for the nine months ended April 30, 1997 from $4.8
million for the nine months ended April 30, 1996, primarily as a result of
higher personnel, rent and related costs associated with the opening of 31 new
stores and the acquisition of 5 Peachtree stores. 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 $129,000
was recorded in April 1997 to cover the closing of one underperforming store and
the write-off of the related assets. As a percentage of total net revenues,
selling, general and administrative expenses increased to 49.0% during the nine
months ended April 30, 1997 from 48.8% during the nine months ended April 30,
1996.
AMORTIZATION OF INTANGIBLES consisted of $160,000 for the nine months
ended April 30, 1997 associated with the thirty month noncompete agreement
entered into in August 1996 in connection with the Peachtree Acquisition.
INCOME FROM OPERATIONS increased $446,000 to $663,000 for the nine
months ended April 30, 1997 from $217,000 for the nine months ended April 30,
1996 and increased as a percentage of total net revenues to 3.7% from 2.2%.
INTEREST EXPENSE, NET increased $11,000 to $129,000 for the nine months
ended April 30, 1997 from $118,000 for the nine months ended April 30, 1996
primarily due to increased bank borrowings. The increase in gross interest
expense was partially offset by interest income earned primarily on the cash
relating to HIG's preferred stock investment in the Company.
INCOME TAX PROVISION was $230,000 for the nine months ended April 30,
1997 as compared to $33,000 for the nine months ended April 30, 1996 primarily
as a result of a $435,000 increase in income before provision for income taxes.
In addition, the effective tax rate in 1997 was 43% as compared to 33% in 1996.
The higher effective tax rate in 1997 resulted primarily from adjustments made
to deferred tax balances related to depreciation.
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<PAGE> 32
NET INCOME increased to $305,000 for the nine months ended April 30,
1997 from $67,000 for the nine months ended April 30, 1996.
YEAR ENDED JULY 31, 1996 COMPARED TO YEAR ENDED JULY 31, 1995
TOTAL NET REVENUES increased $5.3 million, or 63.7%, to $13.6 million
in fiscal 1996 from $8.3 million in fiscal 1995. Retail sales and activation
income increased 61.1% to $12.5 million from $7.8 million, and residual income
increased 101.6% to $1.1 million from $533,000. Comparable store sales increased
11.5% and accounted for $855,000, or 16.2%, of the increase in total net
revenues. Net revenues from the three stores opened during fiscal 1996 and the
14 stores that were not yet open for 12 full months accounted for $4.4 million,
or 83.2%, of the increase in total net revenues. The comparable store sales
increase was primarily attributable to the introduction of a new model of
cellular phone to the market during the fourth quarter of fiscal 1996, increased
number of activations relating to corporate accounts, increased carrier
promotions conducted in certain of the Company's significant cellular markets
and the growth of cellular subscribers in the wireless industry overall. The
increase in residual income was due to the growth in the number of the Company's
cellular subscribers corresponding to the increase in cellular activations (to
14,803 in fiscal 1996 from 5,205 in fiscal 1995). The Company had 25 stores open
at July 31, 1996 as compared to 22 at July 31, 1995.
GROSS PROFIT increased $3.0 million, or 75.2%, to $7.0 million in
fiscal 1996 from $4.0 million in fiscal 1995. As a percentage of total net
revenues, gross profit increased to 52.1% in fiscal 1996 from 48.7% in fiscal
1995, primarily due to activation income increasing at a faster rate than the
cost of merchandise sold.
SELLING GENERAL AND ADMINISTRATIVE expense increased $2.7 million, or
69.4%, to $6.6 million in fiscal 1996 from $3.9 million in fiscal 1995 primarily
as a result of higher personnel, rent and related costs associated with the
opening of new stores. As a percentage of total net revenues, selling, general
and administrative expense increased to 48.6% in fiscal 1996 from 46.9% in
fiscal 1995. This increase resulted from higher expenses associated with new
stores with lower initial sales volumes compared to established stores and
increased general and administrative expenses related to adding field management
and increasing advertising to support expansion into new markets.
INCOME FROM OPERATIONS increased $210,000 to $258,000 in fiscal 1996
from $48,000 in fiscal 1995 and increased as a percentage of total net revenues
to 1.9% from 0.6%.
INTEREST EXPENSE, NET increased $113,000 to $153,000 in fiscal 1996
from $40,000 in fiscal 1995 primarily as a result of higher bank borrowings to
finance the increase in the Company's working capital requirements and
additional store openings.
INCOME TAX provision was $39,000 in fiscal 1996 as a result of $97,000
increase in income before provision for income taxes.
NET INCOME was $66,000 in fiscal 1996 from $8,000 in fiscal 1995.
YEAR ENDED JULY 31, 1995 COMPARED TO YEAR ENDED JULY 31, 1994
TOTAL NET REVENUES increased $4.0 million, or 94.9%, to $8.3 million in
fiscal 1995 from $4.3 million in fiscal 1994. Retail sales and activation income
increased 92.7% to $7.8 million in fiscal 1995 from $4.0 million in fiscal 1994
and residual income increased 133.5% to $533,000 in fiscal 1995 from $228,000 in
fiscal 1994. Comparable store sales increased 10.5% and accounted for $424,000,
or 10.5%, of total net revenues. Net revenues from the 14 stores opened during
fiscal 1995 and the four stores that were not yet open for 12 full months
accounted for $3.6 million, or 89.1%, of the increase in total net revenues. The
comparable store sales growth was primarily attributed to improved merchandise
assortments, higher focus on activations and retention of more qualified sales
associates through an improved store payroll structure. The increase in residual
income was due to the growth in the number of the Company's cellular subscribers
corresponding to the increase in cellular
30
<PAGE> 33
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.
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 $90,000 in fiscal
1994.
TELEPHONE WAREHOUSE
FOUR MONTHS ENDED APRIL 30, 1997 COMPARED TO FOUR MONTHS ENDED APRIL 30, 1996
TOTAL NET REVENUES decreased $565,000, or 3.8%, to $14.5 million for
the four months ended April 30, 1997 from $15.0 million for the four months
ended April 30, 1996. Retail sales and activation income decreased 4.3% to $4.2
million and wholesale sales decreased 8.5% to $7.4 million. These decreases were
partially offset by an increase in residual income of 11.5% to $2.9 million from
$2.6 million. Comparable store sales, based on retail sales and activation
income, were flat. The decrease in retail sales, activation income and wholesale
sales was primarily due to the diversion of management's attention during the
period preceding the acquisition of Telephone Warehouse. In addition, Telephone
Warehouse closed two stores during the four months ended April 30, 1997. The
decrease in wholesale sales resulted from high levels of Ericsson digital phone
sales during the four months ended April 30, 1996. Due to lower cost sourcing,
special discounted prices on the Ericsson phones were offered during the four
months ended April 30, 1996, which were not repeated in the comparable period in
1997. The increase in residual income is primarily attributable to the increase
in the number of pager activations.
GROSS PROFIT decreased $284,000, or 5.5%, to $4.9 million during the
four months ended April 30, 1997 from $5.2 million during the four months ended
April 30, 1996. As a percentage of total net revenues, gross profit decreased to
33.8% in the four months ended April 30, 1997 from 34.4% in the four months
ended April 30, 1996 primarily due to increased promotions offering free
accessories to promote cellular activations in the retail stores. In addition,
the four month period ended April 30, 1996 had higher wholesale margins due to
lower cost sourcing associated with the high levels of Ericsson digital phone
sales, and such higher wholesale margins were not repeated in the comparable
period in 1997.
SELLING, GENERAL AND ADMINISTRATIVE expenses remained constant at $3.2
million for the four months ended April 30, 1997 and, as a percentage of total
net revenues, increased to 22.3% from 21.6% for the comparable period in 1996
due to the decrease in total net revenues.
31
<PAGE> 34
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%.
INTEREST EXPENSE, NET was $437,000 for the four months ended April 30,
1997 compared to a net interest income of $26,000 for the four months ended
April 30, 1996, primarily due to the indebtedness incurred in connection with
the acquisition of Telephone Warehouse.
NET INCOME. As a result of the foregoing, Telephone Warehouse incurred
a net loss of $3,000 during the four months ended April 30, 1997 compared to a
net income of $1,102,000 during the four months ended April 30, 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
TOTAL NET REVENUES increased $4.8 million, or 10.7%, to $49.6 million
in 1996 from $44.8 million in 1995. Wholesale sales increased $7.0 million, or
34.4%, to $27.3 million in 1996 from $20.3 million in 1995 primarily due to high
levels of Ericsson digital phones sales. Due to lower cost sourcing, special
discounted prices on Ericsson digital phones were offered during the first half
of the year. Residual income increased $1.1 million, or 14.6%, to $8.3 million
in 1996 from $7.3 million in 1995 due to an increase in cellular and pager
subscribers. Retail sales and activation income decreased $3.2 million, or
18.8%, to $14.0 million in 1996 from $17.3 million in 1995 due to a decline in
carrier promotions, which resulted in fewer activations and equipment sales. In
addition, the Company increased promotions of free pagers, which resulted in a
corresponding decline in retail product sales.
GROSS PROFIT increased $1.8 million, or 12.4%, to $16.2 million in 1996
from $14.4 million in 1995. Gross profit as a percentage of total net revenues
increased to 32.7% in 1996 from 32.3% in 1995 primarily due to an increase in
residual income and higher wholesale margins associated with the Ericsson
digital phone sales.
SELLING, GENERAL AND ADMINISTRATIVE expense increased $178,000, or
1.7%, to $10.4 million in 1996 from $10.2 million in 1995. As a percentage of
total net revenues, selling, general and administrative expense decreased to
20.9% in 1996 from 22.7% in 1995 because sales increased more rapidly than
selling, general and administrative expense.
INCOME FROM OPERATIONS increased $2.1 million to $4.0 million in 1996
from $1.9 million in 1995 and increased as a percentage of total net revenues to
8.1% from 4.1%.
INTEREST INCOME, NET increased $19,000 to $30,000 in 1996 from $11,000
in 1995.
NET INCOME increased to $3.4 million in 1996 from $1.7 million in 1995
for the above reasons and due to the decrease in former shareholder compensation
expense of $529,000.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
TOTAL NET REVENUES increased $2.4 million, or 5.5%, to $44.8 million in
1995 from $42.4 million in 1994. Wholesale sales increased 8.0% to $20.3 million
in 1995 from $18.8 million in 1994 primarily due to the addition of sales
personnel in the wholesale operations. Residual income increased 30.2% to $7.3
million in 1995 from $5.6 million in 1994 due to the increase in cellular and
pager subscribers. Retail sales and activation income decreased 4.7% to $17.3
million in 1995 from $18.1 million in 1994, due to increased product
discounting.
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<PAGE> 35
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%
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 decreased $69,356 to $709,474 at April
30, 1997 from $778,830 at July 31, 1996. The Company's cash requirements during
the nine months ended April 30, 1997 were affected by the need for increased
working capital to fund the Company's growth. Accounts receivable and inventory
increased $3.1 million, or 168.0% to $4.9 million at April 30, 1997 from $1.8
million at July 31, 1996. This increase was partially offset by an increase in
accounts payable of $935,718, or 111.2% to $1.8 million at April 30, 1997 from
$841,490 at July 31, 1996.
The Company's net cash used in operating activities increased to
$630,829 for the nine months ended April 30, 1997 from $116,663 for the nine
months ended April 30, 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. During fiscal 1996, net cash
provided by operating activities was $252,184 primarily attributable to net
income before a non-cash charge of $225,159 for depreciation and amortization.
Telephone Warehouse's net cash provided by operating activities
decreased to $893,613 for the four months ended April 30, 1997 from $985,023 for
the four months ended April 30, 1996. The decrease in cash provided for the four
months ended April 30, 1997 as compared to the comparable period in 1996 is
primarily due to lower net earnings before a non-cash charge of $773,356 for
amortization of intangibles in connection with the Telephone Warehouse
Acquisition. During fiscal 1996, net cash provided by operating activities was
$4.0 million primarily due to net income of $3.4 million.
The Company's net cash used in investing activities increased to $1.2
million for the nine months ended April 30, 1997 from $476,959 for the nine
months ended April 30, 1996. The increase in cash used by investing activities
was primarily attributable to capital expenditures of $2.4 million and the
Company's acquisition of Northpoint Cellular (more commonly known as Peachtree
Mobility) for $850,000, partially offset by the release of $2.0 million of
escrowed cash relating to HIG's preferred stock investment in the Company. Net
cash used in
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<PAGE> 36
investing activities in fiscal 1996 was $2.5 million which 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.
Telephone Warehouse's net cash used in investing activities increased
to $11.8 million for the four months ended April 30, 1997 from $2,359 for the
four months ended April 30, 1996 due to TCP's acquisition of Telephone Warehouse
effective January 1, 1997. See Note 1 to the Combined Financial Statements of
Telephone Warehouse.
The Company's net cash provided by financing activities increased to
$696,404 for the nine months ended April 30, 1997 from $527,414 for the nine
months ended April 30, 1996 primarily due to increased borrowings. During fiscal
1996, net cash provided by financing activities was $3.4 million, primarily
reflecting $2.9 million of proceeds from the Company's sale of Series A
Preferred Stock to HIG in June 1996.
Telephone Warehouse's net cash provided by financing activities
increased to $11.5 million for the four months ended April 30, 1997 as compared
to net cash used by financing activities of $1.3 million for the four months
ended April 30, 1996. The increase in net cash used by financing activities is
due to increased borrowings relating to TCP's acquisition of Telephone
Warehouse. See Note 1 to the Combined Financial Statements of Telephone
Warehouse. During fiscal 1996, net cash used in financing activities was $4.8
million reflecting a dividend distribution taken by its former shareholder.
At April 30, 1997, the Company's capital expenditure commitments
through fiscal 1998 were approximately $3.9 million and relate primarily to new
store openings, enhancements to the Company's management information system and,
to a lesser extent, renovation of existing stores. The average capital
expenditures for new kiosk and in-line locations approximate $30,000 and
$90,000, respectively. Initial inventory for a new store approximates $32,000
for a kiosk and $46,000 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. No assurance can be given that the
amount of capital expenditures anticipated to be made by the Company during
fiscal 1998 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.
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 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 $6.0 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, as well as other factors.
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<PAGE> 37
BUSINESS
GENERAL
The Company is the largest independent specialty retailer of cellular
and wireless products, services and accessories in the United States, with 93
stores located in 12 states, the District of Columbia and Puerto Rico as of July
31, 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 $24 billion was spent on cellular service in
1996.
35
<PAGE> 38
The following table sets forth certain information with respect to the
cellular telephone market for the last five years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------- 1992-96
1992 1993 1994 1995 1996 CAGR(1)
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Cellular subscribers
(millions) 11.0 16.0 24.1 33.8 44.0 41.4%
% GROWTH 46.0% 45.1% 50.8% 40.0% 30.4% --
Cellular penetration 4.3% 6.2% 9.1% 12.9% 16.6% --
Cellular service revenue
($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.
36
<PAGE> 39
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 15.3 19.3 26.3 34.5 42.3 28.9%
(millions)
% 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
37
<PAGE> 40
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 initial inventory for new kiosks and in-line
stores averaged approximately $62,000 and $136,000,
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, 7-day
return policy and 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
38
<PAGE> 41
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 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 now operates 93 stores. 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, which is dependent on a number of factors, 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. As of July 31, 1997, the
Company had 7 store locations under construction and has signed leases
or reached an agreement in principle for an additional 16 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 55 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
39
<PAGE> 42
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 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 stores'
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 two
additional stores and is constructing a third for the Atlanta market.
In June 1997, the Company acquired 19 stores located in Texas, Kansas
and Missouri through the Telephone Warehouse Acquisition. 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. As a result, the Company may
experience reduced operating margins in the near term. 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.
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
reflect 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
40
<PAGE> 43
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 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.
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<PAGE> 44
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 coop advertising payments. In
some cases, the carrier pays the Company 4-6% of the customer's on-going 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.
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 the nine months ended April 30, 1997, the
Company received an aggregate of $1.2 million of such funds. Cooperative
advertising allowances are provided for store advertising that features their
services or products. Market development funds
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<PAGE> 45
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 offers 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. 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 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 in several geographic markets
the Company is precluded from selling PCS services due to restrictions in the
relevant cellular carriers agreements. The Company's PCS carrier agreements are
typically for a term of one year. Management believes that in most instances,
the cancellation or non-renewal of any of its carrier agreements would not have
a material adverse effect on the Company's financial condition or results of
operations, as it believes that a canceled agreement could likely be replaced
with an agreement with one of the carrier's competitors. However, in certain
markets where the Company receives substantial residual payments from the
carrier, the cancellation or non-renewal could have a significant effect 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:
43
<PAGE> 46
<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 area December 1998
AT&T Wireless Cellular San Antonio December 2001
Bell Atlantic/NyNex Cellular District of Columbia, Maryland, Philadelphia,
New Jersey February 1998
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, Arkansas, Kansas,
Missouri February 2006
Omnipoint PCS New York City metropolitan area (3)
PrimeCo PCS South Florida, Tampa, Orlando October 2001
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.
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
44
<PAGE> 47
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 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."
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<PAGE> 48
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 corporate
headquarters and distribution facility. Management believes that the portion of
such building used for its corporate headquarters is not adequate for the
Company's anticipated growth and has entered into a new lease for 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 July 31, 1997, the Company had approximately 470 employees, of
whom approximately 354 are involved in retail operations, 14 are involved in
wholesale operations and 102 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 July
31, 1997, 76% of the Company's 93 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.
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> 49
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and key employees of the Company are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------- --- -----------------------------------------
<S> <C> <C>
Nicolas Molina 29 Chief Executive Officer and Director
Brett Beveridge 32 President and Chairman of the Board
Anne Gozlan 35 Chief Financial Officer
Ronald Koonsman 54 President-Telephone Warehouse
Anthony Tamer 39 Director
Sami Mnaymneh 36 Director
John Bolduc 33 Director
Douglas Berman 31 Director
Allan Sorensen 59 Director
KEY EMPLOYEES
Richard Berglund 50 Vice President-Sales
Fernando Perez 37 Director of Information Systems
Chris Howard 31 Director of Construction and Design
Nelson Roberts 43 Vice President and General Manager - Telephone
Warehouse, Inc.
Michael Starcher 30 Vice President and General Manager - National
Cellular Incorporated
Sheril Miller 41 Director of Real Estate
Lazarus Rothstein 39 General Counsel and Secretary
</TABLE>
NICOLAS MOLINA is a co-founder of the Company and serves as Chief
Executive Officer and a director of the Company. Since the inception of the
Company in 1989, Mr. Molina has been a director and an executive officer of the
Company and has been primarily responsible for the Company's finance,
administration and expansion, including real estate site selection, leasing and
construction of the Company's retail operations, human resources, MIS and 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 an executive officer
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.
47
<PAGE> 50
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 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 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 degree in Electrical Engineering from
Rutgers University.
SAMI MNAYMNEH has been a Managing Director of HIG Capital Management,
Inc., an affiliate of HIG Investment Group, L.P. 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 Managing Director of HIG Capital Management,
Inc., an affiliate of HIG Investment Group, L.P. since 1993. Prior to joining
HIG, Mr. Bolduc was with Bain from 1990 to 1993. Mr. Bolduc has 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 Vice President of HIG Capital Management,
Inc., an affiliate of HIG Investment Group, L.P., since 1996. Prior to joining
HIG Capital Management, 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 B.A. in Economics
from the University of Virginia, where he was elected to Phi Beta Kappa.
ALLAN SORENSEN has served as Vice Chairman of the Board and a Director
of the Company since 1994. Mr. Sorensen is also Chairman of the Board of Interim
Services, Inc., a New York Stock Exchange company, where he has served on the
Board of Directors since 1967. He has also served as Temporary Chairman of The
Appletree Companies since August 1996 and Director since February 1996. He was a
member of the Board of Directors of H&R Block, Inc. from 1979 until September
1993 when Interim Services was spun off in an initial public offering. He is the
past five-term Chairman of the Board and a director of the Home Health Services
and Staffing Association (HHSSA). He is a past president and member of the Board
of Directors of the National Association of Temporary & Staffing Services
(NATSS) and recipient of their 1992 Leadership Award.
RICHARD BERGLUND has served as Vice President - Sales of the Company
since October 1996. From 1992 to 1996, Mr. Berglund served as Director of Stores
at Herman's World of Sporting Good's, Inc.
FERNANDO PEREZ has served as the Director of Information Systems for
the Company since August 1996. Prior to such time, Mr. Perez was employed by
Sunglass Hut International, Inc., where he served as Manager of Systems and
Programming for over 5 years. Before joining Sunglass Hut, he served as the
Manager of Operations for Savin Florida, a retailer of office products, from
1988 to 1991 after serving as its Manager of Information Systems from 1984 to
1987.
CHRIS HOWARD has served as the Company's Director of Construction and
Design since July 1996. From 1992 to 1996, Mr. Howard served as a Director of
Construction for Spec's Music Co. Prior to joining Spec's Music Co., Mr. Howard
served as a senior project manager for Scherer Construction & Engineering from
1989 to 1992.
NELSON ROBERTS has served as Vice President and General Manager of
Telephone Warehouse, Inc. since January 1992. Mr. Roberts has over 27 years of
retail experience in the consumer electronics industry, including
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<PAGE> 51
12 years in sales and marketing in the wireless communications industry. Mr.
Roberts served as the president of a Dallas-based chain of mobile electronics
retail stores from 1981 to 1992.
MICHAEL STARCHER has served as Vice President and General Manager of
National Cellular, Incorporated since May 1993. From March 1992 until such time,
Mr. Starcher served as Controller of Telephone Warehouse, Inc. Mr. Starcher was
employed by Fisk & Robinson P.L.C., a public accounting firm from 1990 to such
time. Mr. Starcher is a graduate of Texas A&M University, where he received a
Bachelor of Arts degree in Accounting and Finance.
SHERIL MILLER has served as Director of Real Estate of the Company
since August 1997. From July 1994 until such time, Ms. Miller was employed by
Land Associates, a leasing, marketing and real estate development firm, as a
leasing executive. From February 1993, Ms. Miller was employed by General
Growth, a real estate development firm, and prior to such time 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 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 for 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.
49
<PAGE> 52
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
$100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------------- -------------
SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- --------------------------- ------ -------- ------- ------------ -------------
($) ($) ($) (#)
<S> <C> <C> <C> <C> <C>
Nicolas Molina 1997 $198,000 $25,000 $33,960(2) (3)
Chief Executive Officer
Brett Beveridge 1997 $198,000 $25,000 34,800(2) (3)
President and Chairman
of the Board
Anne Gozlan 1997 $100,000 -- -- $40,000(4)
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
$20,199 for Messrs. Molina and Beveridge, respectively.
(3) See "Option Grants Table" below for additional information about these
options.
(4) Represents a stock bonus consisting of an aggregate of 13,000 shares of
Common Stock, 6,500 shares of which vested in May 1997 and 6,500 shares
of which vested in June 1997.
OPTION GRANTS, EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to grants of
options to purchase shares of Common Stock during the fiscal year ended July 31,
1997 to the Named Officers. The amounts shown as potential realizable values on
the options are based on assumed annualized rates of appreciation in the price
of the Common Stock of 0%, 5% and 10% over the term of the options, as set forth
in rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent on future performance of the Common Stock.
There can be no assurance that the potential realizable values reflected in this
table will be achieved.
50
<PAGE> 53
STOCK OPTION GRANTS IN THE FISCAL YEAR ENDED JULY 31, 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
----------------------------------------------------------------- --------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ------------------ ------------------- ---------------- ----------- ----------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Nicolas Molina.... 50% 7/27/07
Brett Beveridge... 50% 7/27/07
</TABLE>
- --------------
(1) The Company determined that the Common Stock had a fair market value of
$ 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 VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
- ------------------------------------- -------------------------- ----------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
-------------------------- ----------------------------
<S> <C> <C>
Nicolas Molina......................
Brett Beveridge.....................
</TABLE>
- ---------------
(1) The Company determined that the Common Stock had a fair market value of
$ 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.
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 shares, plus the number of shares with respect
to Awards previously granted under the Incentive Plan that terminate without
being exercised and the
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<PAGE> 54
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 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
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<PAGE> 55
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In June 1996, the Company's Board of Directors established a
Compensation Committee, consisting of Messrs. Tamer and Molina, to set executive
compensation levels. All compensation decisions affecting Mr. Molina were
approved by the Company's directors, exclusive of Mr. Molina. Upon consummation
of this offering, the Compensation Committee will consist of Mr. Sorensen.
EMPLOYMENT AGREEMENTS
Effective June 27, 1997, the Company amended and restated employment
agreements with each of Messrs. Molina and Beveridge. Mr. Molina's agreement
provides for his employment as the Chief Executive Officer of the Company, and
Mr. Beveridge's agreement provides for his employment as the President of the
Company. Both agreements provide for five year terms with base salaries of
$210,000 per year, to be increased annually by the greater of the annual
increase in the consumer price index or 5%, as well as annual bonuses of not
less than $50,000, subject to the achievement of reasonable performance targets
set by the Board. Upon termination of their 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> 56
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 5.32 to 1
to 6.5 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 650,000 shares of Common Stock, of
which 118,182 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 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 552,590 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 32,410 shares of
Common Stock at an exercise price of $.0001 per share. NationsCredit will
exercise such warrants in full prior to this offering and sell the 32,410
underlying shares to the Underwriters as part of this offering. See "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, 6,500
shares of the Common Stock granted to her vested in May 1997, and 6,500 shares
vested upon the consummation of the Telephone Warehouse Acquisition.
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<PAGE> 57
Concurrently with the Telephone Warehouse Acquisition, the Company
issued stock options to purchase 27,721 shares of Common Stock, with an exercise
price of $65.92 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 $240,000, and (ii) management and consulting
services from July 1997 through the date hereof, for a fee of $29,200 per month.
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<PAGE> 58
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 OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING(2) NUMBER OF SHARES AFTER THE OFFERING(2)
-------------------------- TO BE SOLD --------------------------
NAME AND ADDRESS(1) NUMBER PERCENTAGE IN THE OFFERING NUMBER PERCENTAGE
- ------------------- ----------- ---------- ---------------- -------- ----------
<S> <C> <C> <C> <C> <C>
HIG Investment Group, L.P.(3)..... % (4) %
Nicolas Molina(5).................
Brett Beveridge(5)................
NationsCredit Commercial
Corporation(6)................
Anne Gozlan(7)....................
Ronald Koonsman...................
Anthony Tamer(8).................. (4)
Sami Mnaymneh(8).................. (4)
John Bolduc.......................
Douglas Berman....................
Allan Sorensen.................... (4)
All directors and executive
officers of the Company as
a group (9 persons)(9)........ (4)
</TABLE>
- ----------
* Less than 1%
(1) Unless otherwise indicated, the address of each of the beneficial
owners is c/o the Company, 5200 N.W. 77th Court, Miami, Florida 33166.
(2) Based on shares outstanding at August , 1997 and as
adjusted after the offering. Pursuant to the rules of the Commission,
certain shares which a person has the right to acquire within 60 days
of the date hereof pursuant to the exercise of stock options are deemed
to be outstanding for the purpose of computing the percentage ownership
of such person but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Includes shares held of record by Fund V and shares held
of record by TCP. 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. Messrs. Tamer and Mnaymneh 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 and HIG Investment Group, L.P., and to share voting and
investment power with respect to such securities. Messrs. Tamer and
Mnaymneh both disclaim beneficial ownership of the securities, except
to the extent of their respective investment interests in Fund V, TCP
and HIG Investment Group, L.P. The address of Fund V, TCP and HIG
Investment Group, L.P. and Messrs. Tamer and Mnaymneh is c/o HIG
Capital Management, Inc., 1001 South Bayshore Drive, Suite 2708, Miami,
Florida 33131. Mr. Tamer and Mr. Mnaymneh each disclaim beneficial
ownership of the securities.
(4) Does not reflect the possible sale of shares upon exercise of the
Underwriters' over-allotment option. See "Underwriting."
(5) Includes (i) shares directly owned, and (ii) shares
subject to presently exercisable options.
(6) Includes shares issuable upon the exercise of outstanding warrants
issued to NationsCredit as the Company's lender. Does not include
shares owned of record by TCP, of which NationsCredit is a
limited partner. The address of NationsCredit is One Canterbury Green,
Stamford, CT 06912. See "Certain Transactions."
(7) Includes shares directly owned.
(8) Reflects shares held of record by Fund V and TCP. See footnote (3).
(9) Includes shares subject to presently exercisable options held by
each of Messrs. Molina and Beveridge. Excludes shares owned of
record by HIG Investment Group, L.P.
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<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, par value $.001 per share, shares of which are
outstanding and (ii) shares of preferred stock, par value $ per share,
none of which are 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
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<PAGE> 60
preclude a shareholder from removing incumbent directors without cause and
simultaneously 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.
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<PAGE> 61
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, the Company will have shares
of Common Stock issued and outstanding. Of the Common Stock outstanding upon
completion of this offering, the shares of Common Stock sold in this
offering ( 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),
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 the
remaining shares of Common Stock will not be able to sell their shares in
reliance on Rule 144 under the Securities Act prior to 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 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 shares of Common
Stock for issuance under the Incentive Plan. 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, the existing shareholders of
the Company will be entitled, subject to the lock-up agreements, to require the
Company to register under the Securities Act a total of approximately shares of
outstanding Common Stock (the "Registrable Shares") 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. Pursuant to agreements entered into between the Company and each of
Fund V, Mr. Molina, Mr. Beveridge, Mr. Sorensen and Ms. Gozlan, under certain
circumstances and subject to certain limitations, each such shareholder may
require the Company to file a registration statement under the Securities Act
with respect to its, his or her , , and shares of
Common Stock, respectively, and the Company must use all commercially reasonable
efforts to effect such registration.
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<PAGE> 62
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement
(the "Purchase Agreement"), the Company and the Selling Shareholders have agreed
to sell to each of the underwriters named below (the "Underwriters") and each of
the Underwriters, for whom Merrill Lynch is acting as representative (the
"Representative"), severally has agreed to purchase, the number of shares of
Common Stock set forth opposite its name below:
NUMBER OF
UNDERWRITER SHARES
----------- -----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................
Total...............................
===========
The Representative has advised the Company and the Selling Shareholders
that the Underwriters propose to offer the Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $ per
share and that the Underwriters may allow, and such dealers may reallow,
discounts not in excess of $ per share to certain other dealers. After the
initial public offering, the offering price, concession and discount may be
changed.
NationsCredit has informed the Company that it intends to exercise its
warrants to purchase shares of Common Stock in full prior to this offering and
sell the aggregate of such underlying shares to the Underwriters. See "Principal
and Selling Shareholders."
The Selling Shareholders (other than NationsCredit) have granted an
option to the Underwriters, exercisable for 30 days after the date of this
Prospectus, to purchase up to an aggregate of additional shares of
Common Stock at the initial public offering price set forth on the cover page of
this Prospectus, less the underwriting discount. 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 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
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<PAGE> 63
swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, without the prior written consent of Merrill
Lynch for a period of 180 days after the date of this Prospectus. See "Shares
Eligible for Future Sale."
Prior to the offering, there has been no public market for the Common
Stock of the Company. The initial public offering price has been determined
through negotiations among the Company, the Selling Shareholders and the
Representative. The factors considered in determining the initial public
offering price, in addition to prevailing market conditions, are price-earnings
ratios of publicly traded companies that the Representative believes to be
comparable to the Company, certain financial information of the Company, the
history of, and the prospects for, the Company and the industry in which it
competes, and the Company's past and present operations, the prospects for, and
timing of, future revenues of the Company, the present state of the Company's
development, and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to those of
the Company. There can be no assurance that an active trading market will
develop for the Common Stock or that the Common Stock will trade at or above the
initial public offering price. The initial public offering price set forth on
the cover page of this Prospectus should not be considered an indication of the
actual value of the Common Stock. Such price is subject to change as a result of
market conditions and other factors. Application has been made for quotation of
the Common Stock on the Nasdaq National Market under the symbol "LTCW."
The Underwriters do not intend to confirm sales of the Common Stock
offered hereby to any accounts over which they exercise discretionary authority.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act or to contribute to payments Underwriters may be required to
make in respect thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Common Stock. As an
exception in these rules, the Representative 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) the Representative may
reduce that short position by purchasing Common Stock in the open market. The
Representative may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The Representative may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the Representative
purchases shares of Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Common Stock, it 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 the Representative will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
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<PAGE> 64
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 for the year then ended 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 ended July 31, 1995, 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 has 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.
62
<PAGE> 65
Index to Financial Statements
Let's Talk Cellular & Wireless, Inc. and Subsidiaries:
Report of Independent Certified Public Accountants..................... F-2
Report of Independent Certified Public Accountants..................... F-3
Consolidated Balance Sheets............................................ F-4
Consolidated Statements of Income...................................... F-6
Consolidated Statements of Changes in Redeemable,
Convertible Preferred Stock and Common Shareholders' Equity......... F-7
Consolidated Statements of Cash Flows.................................. F-8
Notes to Consolidated Financial Statements............................. F-10
Telephone Warehouse:
Report of Independent Auditors......................................... F-26
Combined Balance Sheets ............................................... F-27
Combined Statements of Operations...................................... F-29
Combined Statements of Changes in Shareholders' Equity................. F-30
Combined Statements of Cash Flows...................................... F-32
Notes to Combined Financial Statements................................. F-34
F-1
<PAGE> 66
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 sheet of Let's Talk
Cellular & Wireless, Inc. and subsidiaries as of July 31, 1996, and the related
consolidated statements of income, changes in redeemable, convertible preferred
stock and common shareholders' equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 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 the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the accompanying
consolidated financial statements as of July 31, 1996 and for the year then
ended have been restated for a change in the method of recording preopening
expenses.
/s/ ERNST & YOUNG LLP
Miami, Florida
September 26, 1996
F-2
<PAGE> 67
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 sheet of Let's Talk
Cellular & Wireless, Inc. (formerly Let's Talk Cellular of America, Inc.) and
subsidiaries as of July 31, 1995, and the related consolidated statements of
income, shareholders' equity and cash flows for the two years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Let's Talk Cellular & Wireless,
Inc. and subsidiaries at July 31, 1995, and the results of its operations and
its cash flows for the two years then ended in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the financial statements, the accompanying
consolidated financial statements as of July 31, 1995 and for the year then
ended have been restated for a change in the method of recording preopening
expenses.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
October 31, 1995, except for the seventh
paragraph of Note 2 as to which the date
is September 26, 1996.
F-3
<PAGE> 68
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
JULY 31 APRIL 30
-------------------------- ----------
1995 1996 1997
-------------------------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 241,820 $1,357,172 $ 228,318
Accounts receivable, net 510,643 620,521 1,397,527
Inventory 1,191,352 1,210,159 3,508,030
Prepaid expenses 170,454 31,224 38,279
Other current assets 128,251 42,511 115,231
Deferred tax asset (Note 9) -- 17,174 76,675
---------- ---------- ----------
Total current assets 2,242,520 3,278,761 5,364,060
Cash held in escrow (Note 10) -- 2,009,194 --
Property and equipment, net (Note 3) 1,058,430 1,324,852 3,514,670
Other assets, net 23,062 32,780 78,072
Intangible assets, net (Note 12) -- -- 440,000
---------- ---------- ----------
Total assets $3,324,012 $6,645,587 $9,396,802
========== ========== ==========
</TABLE>
(CONTINUED ON THE FOLLOWING PAGE)
F-4
<PAGE> 69
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
JULY 31 APRIL 30
-------------------------- -----------
1995 1996 1997
---------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED)
<S> <C> <C> <C>
Current liabilities:
Trade accounts payable $1,231,606 $ 841,490 $1,777,208
Bank lines of credit (Note 4) 462,493 827,000 1,129,400
Accrued expenses 365,845 512,486 1,073,701
Current portion of loans from shareholders 100,000 -- --
Current portion of bank term loans and obligations under
capital leases (Notes 4 and 6) 47,880 115,236 270,907
Income taxes payable (Note 9) -- 59,217 277,152
Deferred revenues 97,903 79,886 85,797
Customer deposits 46,878 64,616 40,421
---------- ---------- ----------
Total current liabilities 2,352,605 2,499,931 4,654,586
Bank term loans, less current portion (Note 4) -- 190,000 428,333
Loans from shareholders, less current
portion (Note 5) 258,997 258,100 258,100
Obligations under capital leases, less
current portion (Note 6) 69,071 26,226 26,226
Other liabilities 2,711 35,565 40,778
Deferred tax liability (Note 9) 19,999 5,572 24,134
Commitments and contingencies (Note 7)
Redeemable, convertible preferred stock,
$30 par value, 150,000 shares authorized,
100,000 issued and outstanding (Note 10) -- 2,937,360 2,946,915
Common shareholders' equity (Note 11):
Common stock, $.001 par value, 50,000,000 shares
authorized, 650,000 shares issued and outstanding
650 650 650
Additional paid-in capital 257,600 263,806 283,902
Retained earnings 362,379 428,377 733,178
---------- ---------- ----------
Total common shareholders' equity 620,629 692,833 1,017,730
---------- ---------- ----------
Total liabilities and shareholders' equity $3,324,012 $6,645,587 $9,396,802
========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE> 70
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JULY 31 APRIL 30
----------------------------------------------- -----------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net revenues:
Retail sales and activation income $ 4,032,861 $ 7,770,308 $ 12,518,247 $ 9,175,457 $ 17,007,396
Residual income 228,341 533,273 1,075,035 752,871 929,638
------------ ------------ ------------ ------------ ------------
Total net revenues 4,261,202 8,303,581 13,593,282 9,928,328 17,937,034
Cost of sales 2,127,718 4,259,814 6,509,282 4,714,601 8,039,363
------------ ------------ ------------ ------------ ------------
Gross profit 2,133,484 4,043,767 7,084,000 5,213,727 9,897,671
Operating expenses:
Selling, general and administrative 1,918,038 3,896,453 6,601,077 4,841,389 8,788,905
Depreciation and amortization 43,082 99,732 225,159 155,034 285,120
Amortization of intangible assets -- -- -- -- 160,000
------------ ------------ ------------ ------------ ------------
Total operating expenses 1,961,120 3,996,185 6,826,236 4,996,423 9,234,025
------------ ------------ ------------ ------------ ------------
Income from operations 172,364 47,582 257,764 217,304 663,646
Interest expense, net (12,690) (39,898) (152,827) (117,737) (128,604)
------------ ------------ ------------ ------------ ------------
Income before provision (benefit)
for income taxes 159,674 7,684 104,937 99,567 535,042
Provision (benefit) for income taxes 70,045 (455) 38,939 33,060 230,241
============ ============ ============ ============ ============
Net income $ 89,629 $ 8,139 $ 65,998 $ 66,507 $ 304,801
============ ============ ============ ============ ============
Net income per share $ .11 $ .01 $ .07 $ .08 $ .22
============ ============ ============ ============ ============
Weighted average shares outstanding 823,624 823,624 876,077 823,624 1,355,442
============ ============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE> 71
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Consolidated Statements of Changes in Redeemable,
Convertible Preferred Stock and Common Shareholders' Equity
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE COMMON SHAREHOLDERS' EQUITY
PREFERRED STOCK COMMON STOCK
----------------------------------------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
------- ----------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1993 -- $ -- 650,000 $ 650 $ 7,600 $264,611
Net income -- -- -- -- -- 89,629
------- ----------- --------- --------- -------- ---------
Balance at July 31, 1994 -- -- 650,000 650 7,600 354,240
Capital contributions -- -- -- -- 250,000 --
Net income -- -- -- -- -- 8,139
------- ----------- --------- --------- -------- ---------
Balance at July 31, 1995 -- -- 650,000 650 257,600 362,379
Issuance of redeemable convertible
preferred stock for cash 100,000 3,295,000 -- -- -- --
Issuance costs associated with
redeemable convertible
preferred stock -- (358,702) -- -- -- --
Accretion of 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 2,937,360 650,000 650 263,806 428,377
Accretion of preferred stock to
redemption value (Unaudited) -- 9,555 -- -- (9,555) --
Issuance of stock under stock
bonus plan (Unaudited) -- -- -- -- 29,651 --
Net income (Unaudited) -- -- -- -- -- 304,801
------- ----------- --------- --------- -------- ---------
Balance at April 30, 1997
(Unaudited) 100,000 $ 2,946,915 650,000 $ 650 $283,902 $ 733,178
======= =========== ========= ========= ======== =========
</TABLE>
SEE ACCOMPANYING NOTES.
F-7
<PAGE> 72
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JULY 31 APRIL 30
------------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 89,629 $ 8,139 $ 65,998 $ 66,507 $ 304,801
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 43,082 99,732 225,159 155,034 285,120
Amortization of intangible assets -- -- -- -- 160,000
Provision for activation adjustments and
cancellation losses -- -- 65,638 -- 65,969
Deferred income taxes -- 19,999 (31,601) (15,141) (40,939)
Loss on disposal of property and equipment -- -- 50,476 22,065 128,685
Issuance of stock under stock bonus plan -- -- 7,268 -- 29,651
Changes in operating assets and liabilities:
Accounts receivable (96,918) (387,717) (175,516) (199,109) (842,975)
Inventory (149,387) (719,560) (18,807) (6,335) (2,297,871)
Prepaid expenses (21,986) (133,886) 139,230 125,208 (7,055)
Other current assets (1,942) (120,748) 85,740 93,284 (72,720)
Other assets (12,399) (10,663) (9,718) (14,728) (45,292)
Trade accounts payable 193,682 1,014,614 (390,116) (402,658) 935,718
Accrued expenses (57,246) 216,619 146,641 (81,165) 561,215
Other liabilities -- 2,711 32,854 33,941 5,213
Income taxes payable -- -- 59,217 58,137 217,935
Customer deposits 30,169 4,659 17,738 41,144 (24,195)
Deferred revenues -- 97,903 (18,017) 7,153 5,911
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities 16,684 91,802 252,184 (116,663) (630,829)
INVESTING ACTIVITIES
Acquisition of Northpoint Cellular -- -- -- -- (850,000)
Proceeds from disposals of property and
equipment -- -- 73,680 63,750 --
Purchases of property and equipment (181,976) (809,182) (594,185) (540,709) (2,353,623)
Increase in cash held in escrow -- -- (2,009,194) -- 2,009,194
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities (181,976) (809,182) (2,529,699) (476,959) (1,194,429)
</TABLE>
(CONTINUED ON THE FOLLOWING PAGE)
F-8
<PAGE> 73
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JULY 31 APRIL 30
------------------------------------------ --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES
Borrowings under bank lines of credit $ 147,785 $ 312,493 $ 364,507 $ 403,307 $ 302,400
Increase (decrease) in loans from shareholders -- 332,792 (100,897) (100,897) --
Proceeds from capital contributions -- 250,000 -- -- --
Proceeds from bank term loan -- -- 300,000 300,000 600,000
Payments on bank term loan and capital leases -- -- (107,041) (74,996) (205,996)
Proceeds from sale of preferred stock, net of
issuance costs -- -- 2,936,298 -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities 147,785 895,285 3,392,867 527,414 696,404
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (17,507) 177,905 1,115,352 (66,208) (1,128,854)
Cash and cash equivalents at
beginning of period 81,422 63,915 241,820 241,820 1,357,172
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 63,915 $ 241,820 $ 1,357,172 $ 175,612 $ 228,318
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 11,432 $ 31,269 $ 152,358 $ 110,235 $ 154,656
=========== =========== =========== =========== ===========
Cash paid for income taxes $ 209,615 $ 9,812 $ -- $ 30,941 $ 87,700
=========== =========== =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Acquisition of property and equipment under
capital leases $ -- $ 135,683 $ 21,552 $ 14,703 $ --
=========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-9
<PAGE> 74
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
July 31, 1996
(Information pertaining to the nine months ended
April 30, 1996 and 1997 is unaudited)
1. NATURE OF OPERATIONS
Let's Talk Cellular & Wireless, Inc. 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 of cellular and
wireless products, services and accessories. As of July 31, 1995 and 1996 and
April 30, 1997, the Company operated 22 and 25 and 61 stores, respectively,
located throughout the United States and Puerto Rico.
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.
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 and Let's Talk Cellular of Bayside, Inc. 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
Substantially all of the Company's accounts receivable are due from carriers of
wireless communication services. Collateral is not required and terms are
generally between 30 and 60 days. Accounts receivable are net of allowances of
$-0-, $65,638 and $131,607 as of July 31, 1995 and 1996 and April 30, 1997,
respectively, which are primarily reserves for deactivations.
F-10
<PAGE> 75
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 3).
INTANGIBLE ASSETS
The noncompete arrangement entered into in connection with the Northpoint
Cellular, Inc. acquisition (see Note 12) is amortized over the life of the
arrangement, which is thirty months.
PREOPENING EXPENSES
Effective August 1, 1996, the Company changed its method of accounting for
preopening expenses from capitalizing these costs and amortizing them over 18
months to expensing them as incurred. The Company believes this new method is
preferable because it is more consistent with industry standards. This change
has been applied retroactively and the financial statements of prior periods
have been restated in accordance with provisions of Accounting Principles Board
Opinion No. 20, ACCOUNTING CHANGES. As a result of the change, previously
reported net income for the year ended July 31, 1996 increased approximately
$14,000 ($.02 per share) and decreased by approximately $36,000 ($.04 per share)
for the year ended July 31, 1995.
F-11
<PAGE> 76
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In fiscal 1997, the Company will adopt 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. Based on current circumstances, the Company does not believe the effect
upon adoption of SFAS No. 121 will be material.
REVENUE RECOGNITION
Product Sales
Revenue from retail product sales is recorded upon customer purchase.
Activation Income
The Company receives activation income from cellular carriers for each new
cellular phone subscription sold by the Company. Revenue from such commissions
is recorded upon customer subscription. New subscription activation commissions
are fully refundable if the subscriber cancels service within a certain minimum
period of continuous active service (generally 180 days). Customers generally
sign a service agreement that requires a customer deposit which is forfeited in
case of early cancellation. The allowance for 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 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.
F-12
<PAGE> 77
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 $27,932,
$130,277 and $77,168 for the years ended July 31, 1994, 1995 and 1996,
respectively and $16,219 and $268,806 for the nine months ended April 30, 1996
and 1997, respectively. These amounts are net of $18,995, $181,550 and $654,687
of cooperative advertising payments received for the years ended July 31, 1994,
1995 and 1996, respectively, and $507,232 and $1,170,739 for the nine months
ended April 30, 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 PER SHARE
Net income per share is calculated using the weighted average number of common
and common equivalent shares outstanding during the respective periods. Common
equivalent shares consist of common stock that would be issued upon conversion
of the redeemable, convertible preferred stock (described in Note 10). Common
shares and common equivalent shares issued at prices below the Company estimated
public offering price during the 12 months immediately preceding the date of the
initial filing of the registration statement are anticipated to be included in
the calculation of common shares, using the treasury stock method, as if they
were outstanding for all periods presented. As such, 118,182 shares of common
stock issued to induce conversion of the redeemable convertible preferred stock
(see Note 14) and 55,442 shares of common stock issuable upon the exercise of
stock options (see Note 14) are included in the calculation of the weighted
average number of common and common equivalent shares. For the year ended July
31, 1996 and for the nine month period ended April 30, 1997, accretion to
redemption value of the redeemable convertible preferred stock of $1,062 and
$9,555, respectively, has been deducted from net income for purposes of
calculating net income per share.
F-13
<PAGE> 78
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
nine months ended April 30, 1996 and 1997 and the changes in redeemable,
convertible preferred stock and common shareholders' equity for the nine 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 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 April 30, 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.
F-14
<PAGE> 79
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
USEFUL LIVES JULY 31 APRIL 30
(YEARS) 1995 1996 1997
------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Computer equipment 5 $ 287,755 $ 239,185 $ 587,277
Furniture and equipment 7 363,848 716,724 1,210,889
Office equipment 5 29,660 33,216 61,392
Leasehold improvements 7-10 517,891 734,012 2,247,486
Construction in progress 53,520 3,850 60,223
----------- ----------- --------------
1,252,674 1,726,987 4,167,267
Less accumulated depreciation
and amortization (194,244) (402,135) (652,597)
=========== =========== ==============
$ 1,058,430 $ 1,324,852 $ 3,514,670
=========== =========== ==============
</TABLE>
Office equipment under capital leases totaled $135,683 , $157,235 and $ 143,070
at July 31, 1995 and 1996, and April 30, 1997, respectively. Accumulated
amortization for assets under capital leases was $13,397, $44,121, and $ 54,671
at July 31, 1995 and 1996 and April 30, 1997, respectively.
4. BANK LINES OF CREDIT AND BANK TERM LOAN
Through September 5, 1995, the Company had a bank line of credit secured by
substantially all of the Company's assets, personally guaranteed by the
Company's shareholders and bearing interest at the bank's prime rate plus 1.5%
(8.75% at July 31, 1995). This line of credit was repaid in full on September 5,
1995.
On September 5, 1995, the Company entered into a new line of credit and a term
loan agreement with a bank. Under the line of credit, the Company can borrow up
to $1,300,000 (as amended on December 4, 1995) based on a formula of eligible
receivables and inventories. Advances under the line of credit are payable on
demand and bear interest at 2% above the bank's prime rate (10.25% at July 31,
1996). The line of credit is secured by a pledge of substantially all of the
Company's assets and is personally guaranteed by the Company's majority
shareholders. The line of credit was repaid on June 27, 1997 in connection with
the Company's acquisition of Telephone Warehouse (see Note 14).
F-15
<PAGE> 80
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. BANK LINES OF CREDIT AND BANK TERM LOAN (CONTINUED)
Under the bank term loan, the Company borrowed $300,000. The term loan is
payable in 35 monthly principal installments of $5,000 with the remaining
principal balance due in September 1998, and bears interest at 2.5% above the
bank's prime rate (10.75% at July 31, 1996). The term loan is secured by a
pledge of substantially all of the Company's assets and is personally guaranteed
by the Company's majority shareholders. The bank term loan was repaid on June
27, 1997 in connection with the Company's acquisition of Telephone Warehouse
(see Note 14).
The Company's line of credit and bank term loan agreement contains certain
restrictive covenants which, among other things, restricts the payment of
dividends, restricts additional indebtedness and obligations, limits capital
expenditures, and requires maintenance of certain financial ratios.
Maturities of the bank term loan as of April 30, 1997, are as follows:
1998 $ 260,000
1999 395,000
2000 33,333
----------
Total $ 688,333
==========
On August 27, 1996, the Company entered into a $600,000 term loan agreement with
a bank. The term loan is payable in 36 monthly principal installments of $16,667
commencing on October 1, 1996 and bears interest at 1.5% above the bank's prime
rate. The term loan is secured by a pledge of substantially all of the Company's
assets and is personally guaranteed by the Company's majority shareholders. This
term loan was repaid on June 27, 1997 in connection with the Company's
acquisition of Telephone Warehouse (see Note 14).
F-16
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Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. LOANS FROM SHAREHOLDERS
Loans from shareholders consist of the following:
<TABLE>
<CAPTION>
JULY 31 APRIL 30
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Note payable to shareholder, unsecured,
bearing interest at 16%, repaid in
September 1995 $ 100,000 $ -- $ --
Notes payable to shareholders, unsecured,
bearing interest at 8%, payable on
October 1, 2001 (see Note 14) 258,997 258,100 258,100
--------- --------- ---------
358,997 258,100 258,100
Less current portion (100,000) -- --
--------- --------- ---------
Long-term portion $ 258,997 $ 258,100 $ 258,100
========= ========= =========
</TABLE>
6. 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 $57,041. The future minimum lease payments at July
31, 1997 relating to these capital leases are as follows:
Year ending July 31, 1997:
1997 $ 67,466
1998 34,122
1999 4,960
---------
Total payments remaining under capital leases 106,548
Less amount representing interest at 13% (25,086)
---------
Present value of capital lease obligations 81,462
Less current portion (55,236)
---------
Capital lease obligations, net of current portion $ 26,226
=========
F-17
<PAGE> 82
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. CAPITAL LEASE OBLIGATIONS (CONTINUED)
The present value of capital lease obligations at April 30, 1997 amounted to
$37,133, of which $10,907 represents the current portion of the capital lease
obligations.
7. COMMITMENTS AND CONTINGENCIES
The Company leases retail, offices 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, 1996 are
approximately as follows:
1997 $1,354,546
1998 1,184,565
1999 960,348
2000 685,207
2001 236,618
Thereafter 27,600
----------
Total $4,448,884
==========
Total rent expense for the years ended July 31, 1994, 1995 and 1996 and the nine
month periods ended April 30, 1996 and April 30, 1997 was approximately
$330,000, $874,500, $1,566,600, $1,174,154 and $1,961,220, respectively, of
which approximately $18,000, $21,100, $10,600, $10,590 and $25,000,
respectively, was paid for rentals based on a percentage of sales.
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.
F-18
<PAGE> 83
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. 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).
9. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JULY 31 APRIL 30
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current $ 70,045 $ (20,454) $ 70,540 $ 48,201 $ 271,180
Deferred -- 19,999 (31,601) (15,141) (40,939)
--------- --------- --------- --------- ---------
Total $ 70,045 $ (455) $ 38,939 $ 33,060 $ 230,241
========= ========= ========= ========= =========
</TABLE>
The differences between the federal statutory income tax rate and the effective
income tax rate are summarized below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JULY 31 APRIL 30,
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Tax at federal statutory rate $ 54,289 $ 2,613 $ 35,679 $ 33,853 $ 181,914
State income taxes, net of
federal benefit 5,796 279 3,809 3,614 19,422
Permanent differences 16 3,950 6,023 5,307 6,046
Other 9,944 (7,297) (6,572) (9,714) 22,859
--------- --------- --------- --------- ---------
$ 70,045 $ (455) $ 38,939 $ 33,060 $ 230,241
========= ========= ========= ========= =========
</TABLE>
F-19
<PAGE> 84
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. INCOME TAXES (CONTINUED)
Significant components of the Company's net deferred income taxes are as
follows:
<TABLE>
<CAPTION>
JULY 31 APRIL 30
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Allowances $ -- $ 5,885 $ 49,524
Miscellaneous accruals -- 11,289 15,993
Stock compensation -- -- 11,158
-------- -------- --------
Total current deferred tax asset -- 17,174 76,675
Deferred tax liabilities:
Depreciation (19,999) (5,572) (17,862)
Other -- -- (6,272)
-------- -------- --------
Total deferred tax liabilities (19,999) (5,572) (24,134)
-------- -------- --------
Net deferred tax (liability) asset $(19,999) $ 11,602 $ 52,541
======== ======== ========
</TABLE>
10. CASH 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 a third party investor (HIG Fund V) and issued
100,000 shares of the Company's Series A Preferred Stock (the 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 has
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.
F-20
<PAGE> 85
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. CASH IN ESCROW AND REDEEMABLE PREFERRED STOCK (CONTINUED)
Each holder of the Preferred Stock shall be entitled to vote on all matters and
shall be entitled to that number of votes equal to the largest number of whole
shares of Common Stock into which such holders shares of Preferred Stock could
be converted. Any share of Preferred Stock may, at the option of the holder, be
converted at any time into 3.5 shares of Common Stock, subject to certain
adjustments to prevent dilution. The conversion rate increases to 5.32 shares of
Common Stock if certain performance thresholds are not met, as defined in the
agreement. As of April 30, 1997, such thresholds were not met. The Preferred
Stock is redeemable at $30 per share at the option of the Investor, on the
earlier of June 25, 2001, or upon the occurrence of certain events as set forth
in the Agreement.
In connection with the issuance of the 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. The Company
requested the conversion of the Preferred Stock prior to the lapse of the
Investor's option to convert, as described above and, in connection with such
conversion, the conversion rate was amended and the Preferred Stockholder rights
were terminated (see Note 14).
Holders of Preferred Stock have priority over holders of common stock or any
other series of capital stock in the event of liquidation, dissolution, or
winding up of the Company.
11. COMMON STOCK
On June 25, 1996, the Company amended and restated its Articles of Incorporation
such that the par value of the Common Stock was decreased to $0.001 per share
and the number of authorized shares of common stock was increased to 50,000,000
shares. The 1995 financial statements have been restated to reflect the change
in par value and the newly authorized shares.
During 1996 and 1997, the Company issued 6,500 shares of the Company's Common
Stock under a stock bonus plan and recognized $7,268 and $29,651 in compensation
expense associated with such issuance for the year ended July 31, 1996 and the
nine months ended April 30, 1997. The Common Stock issued under the stock bonus
plan can be redeemed by the Company at book value, upon termination of
employment.
F-21
<PAGE> 86
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. COMMON STOCK (CONTINUED)
Common Stock reserved for issuance at April 30, 1997 was 531,818 shares.
12. 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 February, 1999.
13. SIGNIFICANT CUSTOMERS
One customer accounted for, 11%, and 23%, of the Company's net revenues for the
years ended July 31, 1995 and 1996 and 21% and 16% for the nine months ended
April 30, 1996 and 1997, respectively. Accounts receivable from this customer
accounted for 30%, 51% and 18% of the total net accounts receivable at July 31,
1995, 1996 and April 30, 1997, respectively.
A second customer accounted for 13% of net revenues for the nine months ended
April 30, 1997 and 12% of the net accounts receivable at April 30, 1997.
A third customer accounted for 11% of net revenues for the year ended July 31,
1996 and 11% and 16% for the nine months ended April 30, 1996 and 1997,
respectively. This customer accounted for 25% and 27% of the net accounts
receivable at July 31, 1996 and April 30, 1997, respectively.
14. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
On June 5, 1997, the Company's line of credit facility was increased to
$2,300,000.
On June 27, 1997 (effective June 30, 1997), the Company purchased 100% of the
outstanding shares of common stock of National Cellular, Inc., and Telephone
Warehouse, Inc. (collectively Telephone Warehouse), from Texas Cellular
Partners, L.P. (TCP), an affiliate of HIG Fund V, in
F-22
<PAGE> 87
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF CERTIFIED
PUBLIC ACCOUNTANTS (CONTINUED)
exchange for 552,590 shares of the Company's common stock and assumption of
approximately $13,100,00 million of indebtedness. The fair value of the shares
issued to TCP were determined by management to be approximately $2,530,000. The
fair value of net assets acquired, including approximately $2,545,000 allocated
to acquired residual income was approximately $4,844,000. 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 $10,786,000. The acquisition will be accounted for as a purchase,
and accordingly, the Company's financial statements will include the net assets
and results of operations of Telephone Warehouse beginning July 1, 1997. The
purchase price allocation is based on preliminary data. 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.
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 totaling $1,000,000, will be treated as compensation
expense for such period. In addition, a note payable to the Former Shareholder
included in assumed indebtedness of $13,100,000, 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.
As a condition precedent to the Telephone Warehouse acquisition (see above), on
June 27, 1997, the Company issued 650,000 shares of Common Stock to HIG Fund V
in exchange for the conversion of all the outstanding Preferred Stock. Of the
650,000 shares issued, 118,182 were in addition to the original conversion
feature of the Preferred Stock in order to induce HIG Fund V to convert the
Preferred stock and in exchange for relief from the limitations placed on the
F-23
<PAGE> 88
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF CERTIFIED PUBLIC
ACCOUNTANTS (CONTINUED)
Company by the HIG Fund V, as described in Note 10. Management determined that
the fair value of the 118,182 shares at the date of issuance was approximately
$242,000.
On June 27, 1997, in connection with the purchase of Telephone Warehouse from
TCP, the Company assumed the debt of Telephone Warehouse, which was owed to
Nations Credit Commercial Corporation (NCCC), a limited partner of TCP, and
simultaneously refinanced the Company's debt with NCCC. The Company's new credit
facility provides for borrowings of up to $22.1 million of which $14.1 million
was outstanding as of July 31, 1997. Such credit facility is secured by
substantially all of the Company's assets and is comprised of a $9 million
revolving credit facility 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 with sublimits of $4 million to the Company and $5
million to Telephone Warehouse. The $4 million and $5 million sublimits bear
interest at 3.75% above the commercial paper rate. The term loans are payable
quarterly over seven years and bear interest at 4.5% over the commercial paper
rate.
On June 27, 1997, the Company borrowed $2 million on the term loans and $1
million on the revolving credit facility. The proceeds were used to repay the
Company's existing debt at that time and pay loan origination fees and related
expenses of $223,000.
In connection with the Company's debt refinancing, the Company issued stock
purchase warrants to NCCC to purchase a total of 32,410 shares of the Company's
common stock at an exercise price of $.0001 per share. Deferred interest expense
of $148,438 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.
On June 27, 1997, the Company entered into amended and restated employment
agreement with two of its officers to provide for five year terms with base
salaries subject to annual increases and annual bonuses subject to achievement
of defined performance targets.
F-24
<PAGE> 89
Let's Talk Cellular & Wireless, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF CERTIFIED PUBLIC
ACCOUNTANTS (CONTINUED)
On June 27, 1997, the Company entered into amended and restated promissory notes
(Amended Shareholder Notes) with two of its shareholders in the amount of
$258,100. 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 bear interest at 8%.
Also, On June 27, 1997, the Company issued stock options to purchase 55,442
shares of Common Stock, with an exercise price of $65.92 per share, to two
officers of the Company.
F-25
<PAGE> 90
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-26
<PAGE> 91
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
=========== =========== | ===========
</TABLE>
(CONTINUED ON FOLLOWING PAGE)
F-27
<PAGE> 92
Telephone Warehouse
Combined Balance Sheets (continued)
<TABLE>
<CAPTION>
DECEMBER 31 | APRIL 30
------------------------------ | 1997
1995 1996 | (UNAUDITED)
------------ ------------ | ------------
(PREDECESSOR) |
<S> <C> <C> | <C>
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-28
<PAGE> 93
Telephone Warehouse
Combined Statements of Operations
<TABLE>
<CAPTION>
FOUR MONTHS ENDED APRIL 30
YEAR ENDED DECEMBER 31 ------------------------------
------------------------------------------------- 1996 | 1997
1994 1995 1996 (UNAUDITED) | (UNAUDITED)
------------ ------------ ------------ ------------ | ------------
(PREDECESSOR) |
<S> <C> <C> <C> <C> | <C>
Net revenues: |
Retail sales and activation income $ 18,103,704 $ 17,261,537 $ 14,023,500 $ 4,339,690 | $ 4,153,753
Residual income 5,586,406 7,275,971 8,337,688 2,643,661 | 2,947,009
Wholesale sales 18,768,104 20,273,747 27,253,550 8,055,859 | 7,373,530
------------ ------------ ------------ ------------ | ------------
Total net revenues 42,458,214 44,811,255 49,614,738 15,039,210 | 14,474,292
|
Cost of sales 30,321,312 30,360,447 33,368,653 9,868,826 | 9,587,580
------------ ------------ ------------ ------------ | ------------
Gross profit 12,136,902 14,450,808 16,246,085 5,170,384 | 4,886,712
|
Operating expenses: |
Selling, general and |
administrative 8,802,304 10,193,631 10,371,732 3,251,874 | 3,234,527
Former shareholder |
compensation expense 3,256,000 2,169,000 1,640,000 553,075 | 320,000
Depreciation and amortization 164,026 231,966 225,109 65,934 | 64,163
Amortization of intangible assets -- -- -- -- | 773,356
------------ ------------ ------------ ------------ | ------------
Total operating expenses 12,222,330 12,594,597 12,236,841 3,870,883 | 4,392,046
------------ ------------ ------------ ------------ | ------------
Income (loss) from operations (85,428) 1,856,211 4,009,244 1,299,501 | 494,666
Other income (expense): |
Interest income (expense), net 19,651 10,754 29,542 26,004 | (436,758)
Other 12,928 12,203 2,639 55 | --
------------ ------------ ------------ ------------ | ------------
Total other income (expense) 32,579 22,957 32,181 26,059 | (436,758)
------------ ------------ ------------ ------------ | ------------
Income (loss) before provision for |
income taxes (52,849) 1,879,168 4,041,425 1,325,560 | 57,908
Provision for income taxes 33,042 174,702 678,322 223,370 | 61,202
------------ ------------ ------------ ------------ | ------------
Net (loss) income $ (85,891) $ 1,704,466 $ 3,363,103 $ 1,102,190 | $ (3,294)
============ ============ ============ ============ | ============
|
Unaudited pro forma information |
|
Historical (loss) income before |
provision for income taxes $ (52,849) $ 1,879,168 $ 4,041,425 $ 1,325,560 |
Pro forma provision (benefit) for |
income taxes (7,368) 712,240 1,462,710 491,306 |
------------ ------------ ------------ ------------ |
Pro forma net (loss) income $ (45,481) $ 1,166,928 $ 2,578,715 $ 834,254 |
============ ============ ============ ============ |
</TABLE>
SEE ACCOMPANYING NOTES.
F-29
<PAGE> 94
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 (20,000) (20,000) (2,000) -- (1,000)
shares (Unaudited)
Net loss (Unaudited) -- -- -- -- -- --
------- --------- --------- ----- --------- ---------
Balance at April 30, 1997 (Unaudited) 1,000 $ 10 $ 999,990 1,000 $ 10 $ 999,990
======= ========= ========= ===== ========= =========
</TABLE>
(CONTINUED ON FOLLOWING PAGE)
F-30
<PAGE> 95
Telephone Warehouse
Combined Statements of Changes in Shareholder's Equity (continued)
<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 (1,000) -- (1,000) (1,000) -- (1,000) (2,294,280) (2,317,280)
shares (Unaudited)
Net loss (Unaudited) -- -- -- -- (3,294) (3,294)
------- ------- -------- ------ ------- ------- ------------ -----------
Balance at April 30, 1997 (Unaudited) -- $ -- $ -- -- $ -- $ -- $ (3,294) $ 1,996,706
======= ======= ======== ====== ======= ======= =========== ===========
</TABLE>
F-31
SEE ACCOMPANYING NOTES
<PAGE> 96
Telephone Warehouse
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
FOUR MONTHS ENDED APRIL 30
YEAR ENDED DECEMBER 31 -------------------------------
-------------------------------------------------- 1996 | 1997
1994 1995 1996 (UNAUDITED) | (UNAUDITED)
------------ ------------ ------------ ----------- | ------------
(PREDECESSOR) |
<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)
</TABLE>
(CONTINUED ON FOLLOWING PAGE).
F-32
<PAGE> 97
Telephone Warehouse
Combined Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
FOUR MONTHS ENDED APRIL 30
YEAR ENDED DECEMBER 31 -------------------------------
-------------------------------------------------- 1996 | 1997
1994 1995 1996 (UNAUDITED) | (UNAUDITED)
------------ ------------ ------------ ------------ | ------------
(PREDECESSOR) |
<S> <C> <C> <C> <C> | <C>
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-33
<PAGE> 98
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
F-34
<PAGE> 99
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(Information pertaining to the four months
ended April 30, 1996 and 1997 is unaudited)
1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS (CONTINUED)
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 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.
F-35
<PAGE> 100
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(Information pertaining to the four months
ended April 30, 1996 and 1997 is unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
F-36
<PAGE> 101
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(Information pertaining to the four months
ended April 30, 1996 and 1997 is unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS. SFAS No. 121 which requires impairment losses to be recorded on
long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The adoption of SFAS No. 121 had no effect on the Company's
combined financial statements.
REVENUE RECOGNITION
Product Sales
Revenue from retail product sales is recorded upon customer purchase. Revenue
from wholesale product sales is recognized upon shipment of goods.
Activation Income
The Company receives activation income from cellular service providers for each
new cellular phone subscription sold by the Company. Revenue from such
activations is recorded upon customer subscription. New subscription activation
commissions are fully refundable if the subscriber cancels service within a
certain minimum period of continuous active service (generally 180 days).
Customers generally sign a service agreement that requires a customer deposit
which is forfeited in case of early cancellation. The allowance for doubtful
accounts includes an amount for estimated cancellation losses, net of deposit
forfeitures.
F-37
<PAGE> 102
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(Information pertaining to the four months
ended April 30, 1996 and 1997 is unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 ($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.
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
F-38
<PAGE> 103
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(Information pertaining to the four months
ended April 30, 1996 and 1997 is unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
F-39
<PAGE> 104
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
USEFUL LIVES DECEMBER 31 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>
4. INTANGIBLE ASSETS
Intangible assets consist of the following at April 30, 1997:
Goodwill $10,785,888
Acquired residual income 2,671,649
-----------
13,457,537
Accumulated amortization (773,356)
-----------
$12,684,181
===========
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
F-40
<PAGE> 105
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
5. REVOLVING LINE OF CREDIT, LOANS FROM FORMER SHAREHOLDER AND TERM NOTE
(CONTINUED)
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.
F-41
<PAGE> 106
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
5. REVOLVING LINE OF CREDIT, LOANS FROM FORMER SHAREHOLDER AND TERM NOTE
(CONTINUED)
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 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:
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
=============
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.
F-42
<PAGE> 107
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
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.
Future minimum payments under operating leases at December 31, 1996 are
approximately as follows:
1997 $ 645,421
1998 384,588
1999 160,516
2000 22,960
----------
Total $1,213,485
==========
F-43
<PAGE> 108
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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>
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>
F-44
<PAGE> 109
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
9. INCOME TAXES (CONTINUED)
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>
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>
F-45
<PAGE> 110
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
9. INCOME TAXES (CONTINUED)
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 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-46
<PAGE> 111
Telephone Warehouse
Notes to Combined Financial Statements (continued)
(INFORMATION PERTAINING TO THE FOUR MONTHS
ENDED APRIL 30, 1996 AND 1997 IS UNAUDITED)
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-47
<PAGE> 112
================================================================================
DEALER, SALESPERSON OR ANY 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
PAGE
Prospectus Summary.................................. 3
Risk Factors........................................ 9
Use of Proceeds..................................... 14
Dividend Policy..................................... 14
Capitalization...................................... 15
Dilution............................................ 16
Unaudited Pro Forma Financial Data.................. 17
Selected Consolidated Financial Data................ 24
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 26
Business............................................ 35
Management.......................................... 47
Certain Transactions................................ 54
Principal and Selling Shareholders.................. 56
Description of Capital Stock........................ 57
Shares Eligible for Future Sale..................... 59
Underwriting........................................ 60
Legal Matters....................................... 62
Experts............................................. 62
Additional Information.............................. 62
Index to Financial Statements....................... F-1
----------
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.
================================================================================
================================================================================
SHARES
[LOGO]
COMMON STOCK
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
, 1997
================================================================================
<PAGE> 113
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:
Securities and Exchange Commission registration fee .... $ 15,152
NASD filing fee ........................................ 5,500
Nasdaq National Market listing fee .....................
Printing and engraving expenses ........................ *
Accounting fees and expenses ........................... *
Legal fees and expenses ................................ *
Fees and expenses (including legal fees) for
qualifications under state securities laws ........... 10,000
Registrar and Transfer Agent's fees and expenses ....... *
Miscellaneous .......................................... *
--------
Total ............................................ $ 30,652
========
- ---------------
* To be provided by amendment.
All amounts except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq listing fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the Florida Business Corporation Act
to indemnify its directors and officers to the extent provided in such statute.
The Registrant's Articles of Incorporation provide that the Registrant shall
indemnify its executive officers and directors to the fullest extent permitted
by law either now or hereafter. The Registrant is also entering into an
agreement with each of its directors and certain of its officers wherein it is
agreeing to indemnify each of them to the fullest extent permitted by law. In
general, Florida law permits a Florida corporation to indemnify its directors,
officers, employees and agents, and persons serving at the corporation's request
in such capacities for another enterprise against liabilities arising from
conduct that such persons reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
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.
II-1
<PAGE> 114
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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
All numbers of shares set forth in this Item 15 do not reflect the
anticipated stock split described below.
In October 1994, the Registrant issued to Allan Sorensen, an aggregate
of 65,000 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 650,000 shares of Common Stock in connection with a
650-for-one forward 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
650,000 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 552,590
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. 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 32,410 shares of Common Stock in connection with the
Telephone Warehouse Acquisition. See "Certain Transactions - Telephone Warehouse
Acquisition." Such warrants were issued pursuant to the exemption set forth in
Section 4(2) of the Securities Act.
Immediately prior to this offering, the Company will issue to
NationsCredit for nominal consideration an aggregate of 32,410 shares of Common
Stock upon exercise of outstanding warrants. See "Certain Transactions -
Telephone Warehouse Acquisition." Such shares will be issued pursuant to the
exemption set forth in Section 4(2) of the Securities Act.
Immediately prior to this offering, the Registrant expects to issue to
its current shareholders for no additional consideration shares of
Common Stock in connection with a for-one forward stock split. Such
shares will be issued pursuant to the exemption set forth in Section 3(a)(9) of
the Securities Act.
II-2
<PAGE> 115
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<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 **
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 August 18, 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
</TABLE>
II-3
<PAGE> 116
<TABLE>
<S> <C>
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.**
10.20 Asset Purchase Agreement, dated as of August 31, 1996, by and among the Registrant, North Point Cellular,
Inc., Michael Weinstock and Marc Greene.**
10.21+ Dealer Agreement, dated December 20, 1996, by and between Telephone Warehouse, Inc. and Metroplex
Telephone Company d/b/a AT&T Wireless Services.*
10.22+ Dealer Agreement, dated December 20, 1996, by and between Telephone Warehouse - San Antonio, Inc. and
AT&T Wireless Services of San Antonio, Inc. d/b/a AT&T Wireless Services.*
11.1 Statement regarding computation of per share earnings**
16.1 Deloitte & Touche LLP letter**
21.1 Subsidiaries of the Registrant**
23.1 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (to be 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**
27.2 Financial Data Schedule**
</TABLE>
- ----------
* To be filed by amendment.
** 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
II-4
<PAGE> 117
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(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> 118
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 August 29, 1997.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ Nicolas Molina
---------------------------------------
Nicolas Molina, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Nicholas Molina, Brett Beveridge
and Anthony Tamer his true and lawful attorneys-in-fact, each acting alone, with
full powers of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments, including
any post-effective amendments, to this registration statement and any filings
made pursuant to Rule 462 under the Securities Act, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
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
--------- ----- ----
<S> <C> <C>
/s/ Nicolas Molina
- -------------------------------- Chief Executive Officer and Director August 29, 1997
Nicolas Molina (principal executive officer)
/s/ Anne Gozlan
- -------------------------------- Chief Financial Officer August 29, 1997
Anne Gozlan (principal accounting officer)
/s/ Brett Beveridge
- -------------------------------- President and Chairman of the Board August 29, 1997
Brett Beveridge
/s/ Anthony Tamer
- -------------------------------- Director August 29, 1997
Anthony Tamer
/s/ Douglas Berman
- -------------------------------- Director August 29, 1997
Douglas Berman
/s/ Sami Mnaymneh
- -------------------------------- Director August 29, 1997
Sami Mnaymneh
/s/ John Bolduc
- -------------------------------- Director August 29, 1997
John Bolduc
/s/ Allan Sorensen
- -------------------------------- Director August 29, 1997
Allan Sorensen
</TABLE>
II-6
<PAGE> 119
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 for the year then ended, and have issued our report
thereon dated September 26, 1996 (included elsewhere in this Registration
Statement). Our audit 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 26, 1996
S-1
<PAGE> 120
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
LET'S TALK CELLULAR & WIRELESS, INC.
JULY 31, 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF YEAR EXPENSES DEDUCTIONS YEAR
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended July 31, 1996
Deducted from asset accounts:
Allowances ..................... $ -- $65,638 $ -- $ 65,638
======= ======= ========= ========
Nine months ended April 30, 1997
Deducted from asset accounts:
Allowances (Unaudited) ......... $65,638 $65,969 $ -- $131,607
======= ======= ========= ========
</TABLE>
Note: At July 31, 1995 and 1994 and for the years then ended, there
were no allowance deductions from asset accounts.
S-2
<PAGE> 121
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<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 **
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 August 18, 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.**
</TABLE>
<PAGE> 122
<TABLE>
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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.**
10.20 Asset Purchase Agreement, dated as of August 31, 1996, by and among the Registrant, North Point
Cellular, Inc., Michael Weinstock and Marc Greene.**
10.21+ Dealer Agreement, dated December 20, 1996, by and between Telephone Warehouse, Inc. and Metroplex
Telephone Company d/b/a AT&T Wireless Services.*
10.22+ Dealer Agreement, dated December 20, 1996, by and between Telephone Warehouse - San Antonio, Inc. and
AT&T Wireless Services of San Antonio, Inc d/b/a AT&T Wireless Services.*
11.1 Statement regarding computation of per share earnings**
16.1 Deloitte & Touche LLP letter**
21.1 Subsidiaries of the Registrant**
23.1 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (to be 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**
27.2 Financial Data Schedule**
</TABLE>
- ----------
* To be filed by amendment.
** 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 1.1
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Let's Talk Cellular & Wireless, Inc.
(a Florida corporation)
[##] Shares of Common Stock
PURCHASE AGREEMENT
Dated: [ ], 1997
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PURCHASE AGREEMENT.............................................................................................. 1
SECTION 1. Representations and Warranties.................................................... 3
(a) Representations and Warranties by the Company..................................... 3
(i) Compliance with Registration Requirements..................................... 3
(ii) Independent Accountants...................................................... 4
(iii) Financial Statements........................................................ 4
(iv) No Material Adverse Change in Business....................................... 4
(v) Good Standing of the Company.................................................. 4
(vi) Good Standing of Subsidiaries................................................ 5
(vii) Capitalization.............................................................. 5
(viii) Authorization of Agreement................................................. 5
(ix) Authorization and Description of Securities.................................. 5
(x) Absence of Defaults and Conflicts............................................. 6
(xi) Absence of Labor Dispute..................................................... 6
(xii) Absence of Proceedings...................................................... 6
(xiii) Accuracy of Exhibits....................................................... 7
(xiv) Possession of Intellectual Property........................................ 7
(xv) Absence of Further Requirements............................................. 7
(xvi) Possession of Licenses and Permits......................................... 7
(xvii) Title to Property......................................................... 7
(xviii) Compliance with Cuba Act................................................. 8
(xix) Investment Company Act..................................................... 8
(xx) Environmental Laws.......................................................... 8
(b) Representations and Warranties by the Selling Shareholders........................ 9
(i) Accurate Disclosure........................................................... 9
(ii) Authorization of Agreements.................................................. 9
(iii) Good and Marketable Title................................................... 9
(iv) Due Execution of Power of Attorney and Custody
Agreement................................................................ 10
(v) Absence of Manipulation...................................................... 10
(vi) Absence of Further Requirements............................................. 10
(vii) Restriction on Sale of Securities.......................................... 10
(viii) Certificates Suitable for Transfer........................................ 11
(ix) No Association with NASD.................................................... 11
(c) Officer's Certificates............................................................ 11
SECTION 2. Sale and Delivery to Underwriters; Closing........................................ 11
(a) Initial Securities................................................................ 11
(b) Option Securities................................................................. 11
(c) Payment........................................................................... 12
(d) Denominations; Registration....................................................... 13
SECTION 3. Covenants of the Company.......................................................... 13
(a) Compliance with Securities Regulations and Commission
Requests.......................................................................... 13
(b) Filing of Amendments.............................................................. 13
</TABLE>
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<TABLE>
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(c) Delivery of Registration Statements............................................... 13
(d) Delivery of Prospectuses.......................................................... 14
(e) Continued Compliance with Securities Laws......................................... 14
(f) Blue Sky Qualifications........................................................... 14
(g) Rule 158.......................................................................... 15
(h) Use of Proceeds................................................................... 15
(i) Listing........................................................................... 15
(j) Restriction on Sale of Securities................................................. 15
(k) Reporting Requirements............................................................ 15
(l) Compliance with NASD Rules........................................................ 16
(m) Compliance with Rule 463.......................................................... 16
(n) Good Standing..................................................................... 16
SECTION 4. Payment of Expenses............................................................... 16
(a) Expenses.......................................................................... 16
(b) Expenses of the Selling Shareholders.............................................. 17
(c) Termination of Agreement.......................................................... 17
(d) Allocation of Expenses............................................................ 17
SECTION 5. Conditions of Underwriters' Obligations........................................... 17
(a) Effectiveness of Registration Statement........................................... 17
(b) Opinion of Counsel for Company.................................................... 17
(c) Opinion of Counsel for the Selling Shareholders................................... 17
(d) Opinion of Counsel for Underwriters............................................... 18
(e) Officers' Certificate............................................................. 18
(f) Certificate of Selling Shareholders............................................... 18
(g) Accountant's Comfort Letter....................................................... 18
(h) Bring-down Comfort Letter......................................................... 19
(i) Approval of Listing............................................................... 19
(j) No Objection...................................................................... 19
(k) Lock-up Agreements................................................................ 19
(l) Conditions to Purchase of Option Securities....................................... 19
(m) Additional Documents.............................................................. 20
(n) Termination of Agreement.......................................................... 20
SECTION 6. Indemnification................................................................... 20
(a) Indemnification of Underwriters................................................... 20
(b) Indemnification of Company, Directors and Officers and Selling
Shareholders...................................................................... 21
(c) Actions against Parties; Notification............................................. 22
(d) Settlement without Consent if Failure to Reimburse................................ 22
(e) Indemnification for Reserved Securities........................................... 22
(f) Other Agreements with Respect to Indemnification.................................. 23
SECTION 7. Contribution...................................................................... 24
SECTION 8. Representations, Warranties and Agreements
to Survive Delivery............................................................. 24
</TABLE>
ii
<PAGE> 4
<TABLE>
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SECTION 9. Termination of Agreement................................................................ 24
(a) Termination; General.................................................................... 24
(b) Liabilities............................................................................. 25
SECTION 10. Default by One or More of the Underwriters................................................. 25
SECTION 11. Default by one or more of the Selling Shareholders
or the Company.................................................................. 25
SECTION 12. Notices.................................................................................... 26
SECTION 13. Parties.................................................................................... 26
SECTION 14. GOVERNING LAW AND TIME..................................................................... 27
SECTION 15. Effect of Headings......................................................................... 27
</TABLE>
iii
<PAGE> 5
Let's Talk Cellular & Wireless, Inc.
(a Florida corporation)
[ ] Shares of Common Stock
(Par Value $[ ] Per Share)
PURCHASE AGREEMENT
[ ], 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
as Representative of the several Underwriters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Let's Talk Cellular & Wireless, Inc., a Florida corporation (together
with its subsidiaries, the "Company"), and the persons listed in Schedule B
hereto (the "Selling Shareholders"), confirm their respective agreements with
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch is acting as representative (in such capacity, the "Representative"), with
respect to (i) the sale by the Company and the Selling Shareholders, acting
severally and not jointly, and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of Common Stock,
par value $[ ] per share, of the Company ("Common Stock") set forth in Schedules
A and B hereto and (ii) the grant by Selling Shareholders to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of _____ additional shares of Common Stock to cover
over-allotments, if any. The aforesaid _______ shares of Common Stock (the
"Initial Securities") to be purchased by the Underwriters and all or any part of
the ______ shares of Common Stock subject to the option described in Section
2(b) hereof (the "Option Securities") are hereinafter called, collectively, the
"Securities".
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<PAGE> 6
The Company and the Selling Shareholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representative deems advisable after this Agreement has been executed and
delivered.
The Company, the Selling Shareholders and the Underwriters agree that
up to ___________ shares of the Securities to be purchased by the Underwrites
(the "Reserved Securities") shall be reserved for sale by the Underwriters to
certain eligible employees [and persons having business relationships with the
Company], as part of the distribution of the Securities by the Underwriters,
subject to the terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers, Inc. and all
other applicable laws, rules and regulations. To the extent that such Reserved
Securities are not orally confirmed for purchase by such eligible employees and
persons having business relationships with the Company by the end of the first
business day after the date of this Agreement, such Reserved Securities may be
offered to the public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-o) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
is herein referred to as the "Rule 462(b) Registration Statement," and after
such filing the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The final prospectus in the form first furnished to the
Underwriters for use in connection with the offering of the Securities is herein
called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall
refer to the preliminary prospectus dated _____, 1997 together with the Term
Sheet and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet. For purposes of this Agreement, all references
to the Registration Statement, any preliminary prospectus, the Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
2
<PAGE> 7
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement,
the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto (including any
prospectus wrapper), at the time the Prospectus or any such amendment
or supplement was issued and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectus shall not be "materially
different", as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
The representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
3
<PAGE> 8
(ii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements of the
Company, and of Telephone Warehouse Inc. ("TWI") and national Cellular
Inc. ("NCI" and, together with TWI, being herein collectively referred
to as "Telephone Warehouse"), included in the Registration Statement
and the Prospectus, together with the related schedules and notes,
present fairly the financial position of the Company and its
consolidated subsidiaries and Telephone Warehouse and its consolidated
subsidiaries, respectively, at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Company and
Telephone Warehouse and its or their consolidated subsidiaries for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Registration
Statement. The pro forma financial statements and the related notes
thereto included in the Registration Statement and the Prospectus
present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate
to give effect to the transactions and circumstances referred to
therein.
(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on its capital stock.
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Florida and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
4
<PAGE> 9
(vi) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock
of each such Subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. The only subsidiaries of the Company are (a) the
subsidiaries listed on Exhibit 21 to the Registration Statement and (b)
certain other subsidiaries which, considered in the aggregate as a
single Subsidiary, do not constitute a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock, including the Securities to be purchased by
the Underwriters from the Selling Shareholder(s), have been duly
authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock, including the
Securities to be purchased by the Underwriters from the Selling
Shareholder(s), was issued in violation of the preemptive or other
similar rights of any securityholder of the Company.
(viii) Authorization of Agreement. This Agreement has been
duly authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The
Securities to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued and fully paid and non-assessable;
the Common Stock conforms to all statements relating thereto contained
in the Prospectus and such description conforms to the rights set forth
in the instruments defining the same; no holder of the Securities will
be subject to personal liability by reason of being such a holder; and
the issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.
5
<PAGE> 10
(x) Absence of Defaults and Conflicts. Neither the Company nor
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectus
under the caption "Use of Proceeds") and compliance by the Company with
its obligations hereunder have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement,
6
<PAGE> 11
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except
7
<PAGE> 12
such as (a) are described in the Prospectus or (b) do not, singly or in
the aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and all of the leases and
subleases that are, individually or in the aggregate, material to the
business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its subsidiaries
holds properties described in the Prospectus, are in full force and
effect, and neither the Company nor any subsidiary has any notice of
any material claim of any sort that has been asserted by anyone adverse
to the rights of the Company or any subsidiary under any of the leases
or subleases mentioned above, or affecting or questioning the rights of
the Company or such subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.
(xviii) Compliance with Cuba Act. The Company has complied
with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of
its subsidiaries relating to Hazardous Materials or any Environmental
Laws.
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(xxi) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act.
(b) Representations and Warranties by the Selling Shareholders. Each
Selling Shareholder severally represents and warrants to each Underwriter as of
the date hereof, as of the Closing Time, and, if the Selling Shareholder is
selling Option Securities on a Date of Delivery, as of each such Date of
Delivery, and agrees with each Underwriter, as follows:
(i) Accurate Disclosure. To the best knowledge of such Selling
Shareholder, the representations and warranties of the Company
contained in Section 1(a) hereof are true and correct; such Selling
Shareholder has reviewed and is familiar with the Registration
Statement and the Prospectus and neither the Prospectus nor any
amendments or supplements thereto includes any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; such Selling Shareholder is not
prompted to sell the Securities to be sold by such Selling Shareholder
hereunder by any information concerning the Company or any subsidiary
of the Company which is not set forth in the Prospectus.
(ii) Authorization of Agreements. Each Selling Shareholder has
the full right, power and authority to enter into this Agreement and a
Power of Attorney and Custody Agreement (the "Power of Attorney and
Custody Agreement") and to sell, transfer and deliver the Securities to
be sold by such Selling Shareholder hereunder. The execution and
delivery of this Agreement and the Power of Attorney and Custody
Agreement and the sale and delivery of the Securities to be sold by
such Selling Shareholder and the consummation of the transactions
contemplated herein and compliance by such Selling Shareholder with its
obligations hereunder have been duly authorized by such Selling
Shareholder and do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with or constitute a
breach of, or default under, or result in the creation or imposition of
any tax, lien, charge or encumbrance upon the Securities to be sold by
such Selling Shareholder or any property or assets of such Selling
Shareholder pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which such Selling Shareholder is a party or
by which such Selling Shareholder may be bound, or to which any of the
property or assets of such Selling Shareholder is subject, nor will
such action result in any violation of the provisions of the charter or
by-laws or partnership agreement or other organizational instrument of
such Selling Shareholder, if applicable, or any applicable treaty, law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over such Selling Shareholder or any of its
properties.
(iii) Good and Marketable Title. Such Selling Shareholder has
and will at the Closing Time and, if any Option Securities are
purchased, on each Date of Delivery have good and marketable title to
the Securities to be sold by such Selling Shareholder hereunder, free
and clear of any security interest, mortgage, pledge, lien, charge,
claim, equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery
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<PAGE> 14
of such Securities and payment of the purchase price therefor as herein
contemplated, assuming each such Underwriter has no notice of any
adverse claim, each of the Underwriters will receive good and
marketable title to the Securities purchased by it from such Selling
Shareholder, free and clear of any security interest, mortgage, pledge,
lien, charge, claim, equity or encumbrance of any kind.
(iv) Due Execution of Power of Attorney and Custody Agreement.
Such Selling Shareholder has duly executed and delivered, in the form
heretofore furnished to the Representative, the Power of Attorney and
Custody Agreement with _______ and ________, or any of them, as
attorney(s)-in-fact (the "Attorney(s)-in-Fact") and _________, as
custodian (the "Custodian"); the Custodian is authorized to deliver the
Securities to be sold by such Selling Shareholder hereunder and to
accept payment therefor; and each Attorney-in-Fact is authorized to
execute and deliver this Agreement and the certificate referred to in
Section 5(f) or that may be required pursuant to Section(s) 5(l) and
5(m) on behalf of such Selling Shareholder, to sell, assign and
transfer to the Underwriters the Securities to be sold by such Selling
Shareholder hereunder, to determine the purchase price to be paid by
the Underwriters to such Selling Shareholder, as provided in Section
2(a) hereof, to authorize the delivery of the Securities to be sold by
such Selling Shareholder hereunder, to accept payment therefor, and
otherwise to act on behalf of such Selling Shareholder in connection
with this Agreement.
(v) Absence of Manipulation. Such Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by each Selling
Shareholder of its obligations hereunder or in the Power of Attorney
and Custody Agreement, or in connection with the sale and delivery of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as may have previously
been made or obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws and (ii) such as have
been obtained under the laws and regulations of jurisdictions in which
the Reserved Securities are offered.
(vii) Restriction on Sale of Securities. During a period of
180 days from the date of the Prospectus, such Selling Shareholder will
not, without the prior written consent of Merrill Lynch, (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 to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the
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Common Stock, whether any such swap or transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall
not apply to the Securities to be sold hereunder.
(viii) Certificates Suitable for Transfer. Certificates for
all of the Securities to be sold by such Selling Shareholder pursuant
to this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.
(ix) No Association with NASD. Neither such Selling
Stockholder nor any of such Selling Stockholder's affiliates directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other
association with (within the meaning of Article I, Section 1(m) of the
By-laws of the National Association of Securities Dealers, Inc.), any
member firm of the National Association of Securities Dealers, Inc.
(c) Officer's Certificates. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the Representative or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Shareholders as such and
delivered to the Representative or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by
such Selling Shareholder to the Underwriters as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and each Selling Shareholder, severally and not jointly,
agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company and
each Selling Shareholder, at the price per share set forth in Schedule C, that
proportion of the number of Initial Securities set forth in Schedule B opposite
the name of the Company or such Selling Shareholder, as the case may be, which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial Securities, subject, in
each case, to such adjustments among the Underwriters as the Representative in
its sole discretion shall make to eliminate any sales or purchases of
fractional securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Selling Shareholders, acting severally and not jointly, hereby
grant an option to the Underwriters, severally and not jointly, to purchase up
to an additional _______ shares of Common Stock, as set forth in Schedule B, at
the price per share set forth in Schedule C, less an amount per share equal to
any dividends or distributions declared by the Company and payable on the
Initial Securities but not
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payable on the Option Securities. The option hereby granted will expire 30 days
after the date hereof and may be exercised in whole or in part from time to time
only for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial Securities upon notice by the
Representative to the Selling Shareholders setting forth the number of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for such Option Securities. Any
such time and date of delivery (a "Date of Delivery") shall be determined by the
Representative, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of the
Option Securities, each of the Underwriters, acting severally and not jointly,
will purchase that proportion of the total number of Option Securities then
being purchased which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter bears to the total number of Initial
Securities, subject in each case to such adjustments as the Representative in
its discretion shall make to eliminate any sales or purchases of fractional
shares. Each Selling Shareholder shall sell Option Securities in the proportion
that the number of shares of Common Stock held by such Selling Shareholder which
are subject to the option bears to the total number of shares subject to options
granted by the Selling Shareholders.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Brown &
Wood LLP, One World Trade Center, New York, New York 10048, or at such other
place as shall be agreed upon by the Representative and the Company and the
Selling Shareholders, at 9:00 A.M. (Eastern time) on the third (fourth, if the
pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Representative and the Company and the Selling
Shareholders (such time and date of payment and delivery being herein called
"Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representative
and the Company and the Selling Shareholders, on each Date of Delivery as
specified in the notice from the Representative to the Company and Selling
Shareholders.
Payment shall be made to the Company and the Selling Shareholders by
wire transfer of immediately available funds to bank account(s) designated by
the Company and the Custodian pursuant to each Selling Shareholder's Power of
Attorney and Custody Agreement, as the case may be, against delivery to the
Representative for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representative, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
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(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representative may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representative in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify
the Representative immediately, and confirm the notice in writing, (i)
when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale
in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect
the filings necessary pursuant to Rule 424(b) and will take such steps
as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order
is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) Filing of Amendments. The Company will give the
Representative notice of its intention to file or prepare any
amendment to the Registration Statement (including any filing under
Rule 462(b)), any Term Sheet or any amendment, supplement or revision
to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, will furnish the
Representative with copies of any such documents a reasonable amount
of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representative or
counsel for the Underwriters shall object.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representative and counsel for the
Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will
also deliver to the Representative, without charge, a conformed copy
of the Registration Statement as originally filed and of
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<PAGE> 18
each amendment thereto (without exhibits) for each of the Underwriters.
The copies of the Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to
each Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"),
such number of copies of the Prospectus (as amended or supplemented) as
such Underwriter may reasonably request. The Prospectus and any
amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company
will comply with the 1933 Act and the 1933 Act Regulations so as to
permit the completion of the distribution of the Securities as
contemplated in this Agreement and in the Prospectus. If at any time
when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the
opinion of counsel for the Underwriters or for the Company, to amend
the Registration Statement or amend or supplement the Prospectus in
order that the Prospectus will not include any untrue statements of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in light of the
circumstances existing at the time it is delivered to a purchaser, or
if it shall be necessary, in the opinion of such counsel, at any such
time to amend the Registration Statement or amend or supplement the
Prospectus in order to comply with the requirements of the 1933 Act or
the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or
to make the Registration Statement or the Prospectus comply with such
requirements, and the Company will furnish to the Underwriters such
number of copies of such amendment or supplement as the Underwriters
may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws
of such states and other jurisdictions (domestic or foreign) as the
Representative may designate and to maintain such qualifications in
effect for a period of not less than one year from the later of the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such
statements and reports as
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may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(g) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated
by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified
in the Prospectus under "Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect
and maintain the quotation of the Securities on the Nasdaq National
Market and will file with the Nasdaq National Market all documents and
notices required by the Nasdaq National Market of companies that have
securities that are traded in the over-the-counter market and
quotations for which are reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180
days from the date of the Prospectus, the Company will not, without the
prior written consent of Merrill Lynch, (i) directly or indirectly,
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 to purchase or otherwise transfer or dispose of any
share of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence
of ownership of the Common Stock, whether any such swap or transaction
described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold
hereunder, (B) any shares of Common Stock issued by the Company upon
the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof and referred to in the Prospectus, (C)
any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company
referred to in the Prospectus or (D) any shares of Common Stock issued
pursuant to any non-employee director stock plan or dividend
reinvestment plan, provided, however, that notwithstanding the
preceding clauses (B) (C) or (D) the Company agrees that it will not
issue shares of Common Stock for 180 days after the date of the
Prospectus upon the exercise of any options to acquire Common Stock if
the vesting of such options has been accelerated during such period
pursuant to the terms of the employee benefit plans under which such
options were issued.
(k) Reporting Requirements. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the
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time periods required by the 1934 Act and the rules and regulations of
the Commission thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that
it will ensure that the Reserved Securities will be restricted as
required by the National Association of Securities Dealers, Inc. (the
"NASD") or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of this
Agreement. The Underwriters will notify the Company as to which persons
will need to be so restricted. At the request of the Underwriters, the
Company will direct the transfer agent to place a stop transfer
restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the
Reserved Securities the Company agrees to reimburse the Underwriters
for any reasonable expenses (including, without limitation, legal
expenses) they incur in connection with such release.
(m) Compliance with Rule 463. The Company will file with the
Commission such reports on Form SR as may be required pursuant to Rule
463 of the 1933 Act Regulations.]
SECTION 4. Payment of Expenses. (a) Expenses. The Company and the
Selling Shareholders will pay or cause to be paid all expenses incident to the
performance of their obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of any transfer agent or registrar for the Securities,
(ix) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Securities, (x) the fees and expenses incurred in connection with the
inclusion of the Securities in the Nasdaq National Market, and (xi) all costs
and expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, in connection with matters related to the Reserved
Securities which are designated by the Company for sale to employees and others
having a business relationship with the Company.
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(b) Expenses of the Selling Shareholders. The Selling Shareholders,
jointly and severally, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by this Agreement, including (i) any stamp duties, capital duties
and stock transfer taxes, if any, payable upon the sale of the Securities to the
Underwriters, and their transfer between the Underwriters pursuant to an
agreement between such Underwriters, and (ii) the fees and disbursements of its
counsel and accountants.
(c) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Shareholders may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary of the Company or on behalf of any Selling Shareholder
delivered pursuant to the provisions hereof, to the performance by the Company
and the Selling Shareholders of its and their covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or proceedings therefor initiated or threatened by
the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of counsel to the Underwriters. A prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing
such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has
elected to rely upon Rule 434, a Term Sheet shall have been filed with
the Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Representative(s) shall have received the favorable opinion, dated as
of Closing Time, of Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P.A., counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies
of such letter for each of the other Underwriters to the effect set
forth in Exhibit A hereto and to such further effect as counsel to the
Underwriters may reasonably request.
(c) Opinion of Counsel for the Selling Shareholders. At
Closing Time, the Representative shall have received the favorable
opinion, dated as of Closing Time, of Greenberg Traurig Hoffman Lipoff
Rosen & Quentel, P.A., counsel for the Selling Shareholders, in form
and substance satisfactory to counsel for the Underwriters, together
17
<PAGE> 22
with signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit B hereto and to such
further effect as counsel to the Underwriters may reasonably request.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representative shall have received the favorable opinion, dated as of
Closing Time, of Brown & Wood LLP, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of
the other Underwriters with respect to the matters set forth in clauses
(i), (ii), (v), (vi) (solely as to preemptive or other similar rights
arising by operation of law or under the charter or by-laws of the
Company), (viii) through (x), inclusive, (xii), (xiv) (solely as to the
information in the Prospectus under "Description of Capital
Stock--Common Stock") and the penultimate paragraph of Exhibit A
hereto. In giving such opinion such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State
of New York and the federal law of the United States, upon the opinions
of counsel satisfactory to the Representative. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers
of the Company and its subsidiaries and certificates of public
officials.
(e) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the Representative shall have
received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the
Company, dated as of Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same
force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(f) Certificate of Selling Shareholders. At Closing Time, the
Representative shall have received a certificate of an
Attorney-in-Fact on behalf of each Selling Shareholder, dated as of
Closing Time, to the effect that (i) the representations and warranties
of each Selling Shareholder contained in Section 1(b) hereof are true
and correct in all respects with the same force and effect as though
expressly made at and as of Closing Time and (ii) each Selling
Shareholder has complied in all material respects with all agreements
and all conditions on its part to be performed under this Agreement at
or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution
of this Agreement, the Representative shall have received from Ernst
& Young LLP and Deloitte & Touche, LLP letters dated such date, in
form and substance satisfactory to the
18
<PAGE> 23
Representative, together with signed or reproduced copies of such
letters for each of the other Underwriters containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement
and the Prospectus.
(h) Bring-down Comfort Letter. At Closing Time, the
Representative shall have received from Ernst & Young LLP and Deloitte
& Touche, LLP letters, dated as of Closing Time, to the effect that
they reaffirm the statements made in the letters furnished pursuant to
subsection (g) of this Section, except that the specified date referred
to shall be a date not more than three business days prior to Closing
Time.
(i) Approval of Listing. At Closing Time, the Securities shall
have been approved for inclusion in the Nasdaq National Market, subject
only to official notice of issuance.
(j) No Objection. The NASD has confirmed that it has not
raised any objection with respect to the fairness and reasonableness of
the underwriting terms and arrangements.
(k) Lock-up Agreements. At the date of this Agreement, the
Representative shall have received an agreement substantially in the
form of Exhibit C hereto signed by the persons listed on Schedule D
hereto.
(l) Conditions to Purchase of Option Securities. In the event
that the Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the Option Securities, the
representations and warranties of the Company and the Selling
Shareholders contained herein and the statements in any certificates
furnished by the Company, any subsidiary of the Company and the Selling
Shareholders hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representative
shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the
Closing Time pursuant to Section 5(e) hereof remains true and
correct as of such Date of Delivery.
(ii) Certificate of Selling Shareholder(s). A certificate,
dated such Date of Delivery, of an Attorney-in-Fact on behalf
of each Selling Shareholder confirming that the certificate
delivered at Closing Time pursuant to Section 5(f) remains
true and correct as of such Date of Delivery.
(iii) Opinion of Counsel for Company. The favorable opinion of
Greenberg Traurig Hoffman Lipoff & Quentel, P.A., counsel for
the Company, in form and substance satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of
19
<PAGE> 24
Delivery and otherwise to the same effect as the opinion
required by Section 5(b) hereof.
(iv) Opinion of Counsel for the Selling Shareholders. The
favorable opinion of Greenberg Traurig Hoffman Lipoff &
Quentel, P.A., counsel for the Selling Shareholders, in form
and substance satisfactory to counsel for the Underwriters,
dated such Date of Delivery, relating to the Option Securities
to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(c) hereof.
(v) Opinion of Counsel for Underwriters. The favorable opinion
of Brown & Wood LLP, counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(d) hereof.
(vi) Bring-down Comfort Letter. Letters from Ernst & Young LLP
and Deloitte & Touche, LLP, in form and substance satisfactory
to the Representative and dated such Date of Delivery,
substantially in the same form and substance as the letters
furnished to the Representative pursuant to Section 5(g)
hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more
than five days prior to such Date of Delivery.
(m) Additional Documents. At Closing Time and at each Date of
Delivery counsel for the Underwriters shall have been furnished with
such documents and opinions as they may require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and the Selling Shareholders in connection with the issuance and sale
of the Securities as herein contemplated shall be satisfactory in form
and substance to the Representative and counsel for the Underwriters.
(n) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the
Representative by notice to the Company at any time at or prior to
Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company and the Selling
Shareholders, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
20
<PAGE> 25
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Company and the Selling Shareholders;
and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(b) Indemnification of Company, Directors and Officers and Selling
Shareholders. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each Selling
Shareholder and each person, if any, who controls any Selling Shareholder within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through Merrill Lynch expressly for use in
the Registration Statement (or
21
<PAGE> 26
any amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of employees of the Company to pay for and
accept delivery of Reserved Securities which, by the end of the first business
day following the date of this Agreement, were subject to a properly confirmed
agreement to purchase.
22
<PAGE> 27
(f) Other Agreements with Respect to Indemnification. The provisions
of this Section shall not affect any agreement among the Company and the Selling
Shareholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Shareholders on the one hand and of the Underwriters on the other hand
in connection with the statements or omissions, which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Shareholders and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, or, if Rule 434 is used, the corresponding location
on the Term Sheet bear to the aggregate initial public offering price of the
Securities as set forth on such cover.
The relative fault of the Company and the Selling Shareholders on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Shareholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities
23
<PAGE> 28
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company or
such Selling Shareholder, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial Securities set forth opposite their respective names in
Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Shareholders with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Shareholders submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or on behalf of the
Company or the Selling Shareholders, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate this
Agreement, by notice to the Company and the Selling Shareholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representative, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the Nasdaq National Market, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
24
<PAGE> 29
National Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal,
New York or Florida authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representative shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representative shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the Underwriters to purchase and of the Company
to sell the Option Securities to be purchased and sold on such Date of
Delivery, shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the (i) Representative or (ii) the Company and any
Selling Shareholder shall have the right to postpone Closing Time or the
relevant Date of Delivery, as the case may be, for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
SECTION 11. Default by one or more of the Selling Shareholders or the
Company. (a) If a Selling Shareholder shall fail at Closing Time or at a Date of
Delivery to sell and deliver the number of Securities which such Selling
Shareholder or Selling Shareholders are obligated to sell hereunder, and the
remaining Selling Shareholders do not exercise the right hereby granted to
25
<PAGE> 30
increase, pro rata or otherwise, the number of Securities to be sold by them
hereunder to the total number to be sold by all Selling Shareholders as set
forth in Schedule B hereto, then the Underwriters may, at option of the
Representative, by notice from the Representative to the Company and the
non-defaulting Selling Shareholders, either (a) terminate this Agreement without
any liability on the fault of any non-defaulting party, except that the
provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect,
or (b) elect to purchase the Securities which the non-defaulting Selling
Shareholders and the Company have agreed to sell hereunder. No action taken
pursuant to this Section 11 shall relieve any Selling Shareholder so defaulting
from liability, if any, in respect of such default.
In the event of a default by any Selling Shareholder as referred to in
this Section 11, the Representative, the Company and the non-defaulting
Selling Shareholders shall have the right to postpone Closing Time or Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectus or in any other documents or
arrangements.
(b) If the Company shall fail at Closing Time or at the Date of
Delivery to sell the number of Securities that it is obligated to sell
hereunder, then this Agreement shall terminate without any liability on the part
of any nondefaulting party; provided, however, that the provisions of Sections
1, 4, 6, 7 and 8 shall remain in full force and effect. No action taken pursuant
to this Section shall relieve the Company from liability, if any, in respect of
such default.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representative at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Donato de Donato;
with a copy to Brown & Wood LLP, One World Trade Center, New York, New York
10048, attention of Michael L. Fitzgerald; notices to the Company shall be
directed to it at 5200 N.W. 77th Court, Miami, Florida 33166, attention of
Nicolas Molina or Brett Beveridge; and notices to the Selling Shareholders shall
be directed to c/o the Company, 5200 N.W. 77th Court, Miami, Florida 33166,
attention of Nicolas Molina or Brett Beveridge.
SECTION 13. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters, the Company and the Selling Shareholders
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Shareholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Shareholders
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
26
<PAGE> 31
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
27
<PAGE> 32
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Shareholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Underwriters,
the Company and the Selling Shareholders in accordance with its terms.
Very truly yours,
LET'S TALK CELLULAR &
WIRELESS, INC.
By
-----------------------------------------
Title:
By
----------------------------------------
As Attorney-in-Fact acting on behalf of
the Selling Shareholders named in
Schedule B hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
-----------------------------------------
Authorized Signatory
For itself and as Representative of the other Underwriters named in
Schedule A hereto.
28
<PAGE> 33
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
Name of Underwriter Securities
------------------- -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................
------
Total............................................................[Number]
========
</TABLE>
Sch A - 1
<PAGE> 34
SCHEDULE B
Number of Initial Maximum Number of
Securities Option Securities
to be Sold to Be Sold
Let's Talk Cellular & Wireless, Inc.
HIG Investment Group, L.P.
NationsCredit Commercial Corporation
Allan Sorensen
Total...........................
Sch B - 1
<PAGE> 35
SCHEDULE C
Let's Talk Cellular & Wireless, Inc.
[ ] Shares of Common Stock
(Par Value $[ ] Per Share)
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $o.
2. The purchase price per share for the Securities to be paid by
the several Underwriters shall be $o, being an amount equal to the initial
public offering price set forth above less $o per share; provided that the
purchase price per share for any Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be
reduced by an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not
payable on the Option Securities.
Sch C - 1
<PAGE> 36
[SCHEDULE D]
[List of persons and entities
subject to lock-up]
Sch D - 1
<PAGE> 37
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Florida.
(ii) The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if
any, pursuant to the Purchase Agreement or pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of convertible securities or options referred to
in the Prospectus); after giving effect to the offerings and the
acquisition of Telephone Warehouse, Inc. and National Cellular, Inc. the
authorized, issued and outstanding capital stock of the Company is as set
forth in the Prospectuses in the column entitled "Pro Forma As Adjusted"
under the caption "Capitalization"; the shares of issued and outstanding
capital stock of the Company, including the Securities to be purchased by
the Underwriters from the Selling Shareholders, have been duly authorized
and validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the
Company.
(v) The Securities to be purchased by the Underwriters from the
Company have been duly authorized for issuance and sale to the Underwriters
pursuant to the Purchase Agreement and, when issued and delivered by the
Company pursuant to the Purchase Agreement against payment of the
consideration set forth in the Purchase Agreement, will be validly issued
and fully paid and non-assessable and no holder of the Securities is or
will be subject to personal liability by reason of being such a holder.
(vi) The issuance and sale of the Securities by the Company and
the sale of the Securities by the Selling Shareholders is not subject to
the preemptive or other similar rights of any securityholder of the
Company.
(vii) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and
A-1
<PAGE> 38
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of
each Subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable and, to the best of my knowledge, is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of such
Subsidiary.
(viii) The Purchase Agreement has been duly authorized, executed
and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); and, to the
best of my knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectus, and each amendment or
supplement to the Registration Statement and Prospectus, as of their
respective effective or issue dates (other than the financial statements
and supporting schedules included therein or omitted therefrom, as to which
no opinion need be expressed) complied as to form in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectus was not
"materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time it became
effective.
(xii) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the charter and by-laws
of the Company and the requirements of the Nasdaq National Market System.
(xiii) To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which
the Company or any subsidiary is a party, or to which the property of the
Company or any subsidiary is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably
be expected to materially and adversely affect the properties or assets
thereof or the consummation of the transactions contemplated in the
Purchase Agreement or the performance by the Company of its obligations
thereunder.
(xiv) The information in the Prospectus under "Description of
Capital Stock", "Business Servicemarks", "Certain Transactions" and
"Business--Litigation", and in the Registration Statement
A-2
<PAGE> 39
under Item 14, to the extent that it constitutes matters of law, summaries
of legal matters, the Company's charter and bylaws or legal proceedings, or
legal conclusions, has been reviewed by us and is correct in all material
respects.
(xv) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectus that are
not described as required.
(xvi) All descriptions in the Registration Statement of contracts
and other documents to which the Company or its subsidiaries are a party
are accurate in all material respects; to the best of our knowledge, there
are no franchises, contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be described or referred to
in the Registration Statement or to be filed as exhibits thereto other than
those described or referred to therein or filed or incorporated by
reference as exhibits thereto, and the descriptions thereof or references
thereto are correct in all material respects.
(xvii) To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of
any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by
reference as an exhibit to the Registration Statement.
(xviii) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than under the
1933 Act and the 1933 Act Regulations, which have been obtained, or as may
be required under the securities or blue sky laws of the various states, as
to which we need express no opinion) is necessary or required in connection
with the due authorization, execution and delivery of the Purchase
Agreement or for the offering, issuance, sale or delivery of the
Securities.
(xix) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the
Purchase Agreement and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption
"Use of Proceeds") and compliance by the Company with its obligations under
the Purchase Agreement do not and will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(x) of
the Purchase Agreement) under or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to us, to which the Company or any subsidiary is a party
or by which it or any of them may be bound, or to which any of the property
or assets of the Company or any subsidiary is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not have a Material Adverse Effect), nor will such action result in
any violation of the provisions of the charter or by-laws of the Company or
any subsidiary, or any applicable law, statute, rule, regulation, judgment,
order, writ or decree, known to me, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their respective properties, assets or
operations.
A-3
<PAGE> 40
(xx) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered
by the Company under the 1933 Act.
(xxi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
1940 Act.
(xxii) Assuming (i) that each Selling Shareholder has the
requisite power and authority to accept, execute, deliver and perform the
Custody Agreement, (ii) that the Custody Agreement of each Selling
Shareholder has been duly authorized, executed and delivered by the Selling
shareholder, and (ii) each Custody Agreement constitutes the legal, valid
and binding agreement of the Custodian thereunder, the Custody Agreement
constitutes the legal, valid and binding agreement of each such Selling
Shareholder.
(xxiii) By delivery pursuant to the terms of the Custody Agreement
of a certificate or certificates representing the Securities to be sold by
the Selling Shareholder to the Underwriters, such Selling Shareholders will
transfer to the Underwrites who have purchased such Securities (in good
faith without notice of any adverse claim or defect in the title of such
Selling Shareholder and who are otherwise bona fide purchasers for purposes
of the Uniform Commercial Code) pursuant to the Purchase Agreements title
to such Securities, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind.
Nothing has come to our attention that would lead us to believe
that the Registration Statement or any amendment thereto, including the
Rule 430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included
therein or omitted therefrom, as to which we need make no statement), at
the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included therein or omitted therefrom,
as to which we need make no statement), at the time the Prospectus was
issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
A-4
<PAGE> 41
EXHIBIT B
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No filing with, or consent, approval, authorization,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, (other than the
issuance of the order of the Commission declaring the Registration
Statement effective and such authorizations, approvals or consents as may
be necessary under state securities laws, as to which we need express no
opinion) is necessary or required to be obtained by the Selling
Shareholders for the performance by each Selling Shareholder of its
obligations under the Purchase Agreement or in the Power of Attorney and
Custody Agreement, or in connection with the offer, sale or delivery of the
Securities.
(ii) Each Power of Attorney and Custody Agreement has been duly
executed and delivered by the respective Selling Shareholders named therein
and constitutes the legal, valid and binding agreement of such Selling
Shareholder.
(iii) The Purchase Agreement has been duly authorized, executed
and delivered by or on behalf of each Selling Shareholder.
(iv) Each Attorney-in-Fact has been duly authorized by the
Selling Shareholders to deliver the Securities on behalf of the Selling
Shareholders in accordance with the terms of the Purchase Agreement.
(v) The execution, delivery and performance of the Purchase
Agreement and the Power of Attorney and Custody Agreement and the sale and
delivery of the Securities and the consummation of the transactions
contemplated in the Purchase Agreement and in the Registration Statement
and compliance by the Selling Shareholders with its obligations under the
Purchase Agreement have been duly authorized by all necessary action on the
part of the Selling Shareholders and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default under or result in the creation or
imposition of any tax, lien, charge or encumbrance upon the Securities or
any property or assets of the Selling Shareholders pursuant to, any
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, license, lease or other instrument or agreement to which any Selling
Shareholder is a party or by which they may be bound, or to which any of
the property or assets of the Selling Shareholders may be subject nor will
such action result in any violation of the provisions of the charter or
by-laws of the Selling Shareholders, if applicable, or any law,
administrative regulation, judgment or order of any governmental agency or
body or any administrative or court decree having jurisdiction over such
Selling Shareholder or any of its properties.
(vi) To the best of our knowledge, each Selling Shareholder has
valid and marketable title to the Securities to be sold by such Selling
Shareholder pursuant to the Purchase Agreement, free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind, and has full right, power and authority to sell, transfer and
deliver such Securities pursuant to the Purchase
B-1
<PAGE> 42
Agreement. By delivery of a certificate or certificates therefor such
Selling Shareholder will transfer to the Underwriters who have purchased
such Securities pursuant to the Purchase Agreement (without notice of any
defect in the title of such Selling Shareholder and who are otherwise bona
fide purchasers for purposes of the Uniform Commercial Code) valid and
marketable title to such Securities, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind.
Nothing has come to our attention that would lead us to believe
that the Registration Statement or any amendment thereto, including the
Rule 430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included
therein or omitted therefrom, as to which we need make no statement), at
the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included therein or omitted therefrom,
as to which we need make no statement), at the time the Prospectus was
issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
B-2
<PAGE> 43
Exhibit C
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(K)]
, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
as Representative of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by Let's Talk Cellular & Wireless, Inc.
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of Let's
Talk Cellular & Wireless, Inc., a Florida corporation (the "Company"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") proposes to enter into a Purchase Agreement
(the "Purchase Agreement") with the Company and the Selling Shareholders
providing for the public offering of shares (the "Securities") of the Company's
common stock, par value $[ ] per share (the "Common Stock"). In recognition of
the benefit that such an offering will confer upon the undersigned as a
stockholder [and an officer and/or director]2 of the Company, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
Purchase Agreement that, during a period of 180 days from the date of the
Purchase Agreement, the undersigned will not, without the prior written consent
of Merrill Lynch, 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 the Company's Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction
- --------
1 Delete or revise bracketed language as appropriate.
C-1
<PAGE> 44
that transfers, in whole or in part, directly or indirectly, 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.
Very truly yours,
Signature:
-------------------------
Print Name:
-------------------------
C-2
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
LET'S TALK CELLULAR & WIRELESS, INC.
Pursuant to Sections 607.0704, 607.1003 and 607.1007 of the Florida
Business Corporation Act, the Articles of Incorporation of Let's Talk Cellular &
Wireless, Inc. are hereby amended and restated in their entirety as follows:
ARTICLE I
The name of the corporation is Let's Talk Cellular & Wireless, Inc.
(hereinafter called the "Corporation").
ARTICLE II
The purpose for which the Corporation is organized is to engage in the
transaction of any lawful business for which corporations may be incorporated
under the laws of the State of Florida.
ARTICLE III
A. Authorized Capital Stock. The aggregate number of shares of
all classes of stock which the Corporation shall have authority to issue is
51,000,000 (Fifty One Million) shares, consisting of:
(i) 50,000,000 (Fifty Million) shares of common stock,
par value $0.01 per share (the "Common Stock"), and
(ii) 1,000,000 (One Million) shares of preferred stock,
par value $0.01 per share (the "Preferred Stock").
B. Provisions relating to the Preferred Stock.
1. General. The Preferred Stock may be issued from time
to time in one or more classes or series, the shares of each class or series to
have such designations and powers, preferences and rights, and qualifications,
limitations and restrictions thereof as are stated and expressed herein and in
the resolution or resolutions providing for the issue of such class or series
adopted by the Board of Directors (the "Board") as hereinafter prescribed.
<PAGE> 2
2. Preferences. Authority hereby is expressly granted to
and vested in the Board to authorize the issuance of the Preferred Stock from
time to time in one or more classes or series, to determine and take necessary
proceedings to fully effect the issuance and redemption of any such Preferred
Stock and, with respect to each class or series of the Preferred Stock, to fix
and state, by resolution or resolutions from time to time adopted providing for
the issuance thereof, the following:
(a) whether the class or series is to have
voting rights, full or limited, or is to be without voting rights;
(b) the number of shares to constitute the class
or series and the designations thereof;
(c) the preferences and relative, participating,
optional or other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, with respect to any class or series;
(d) whether the shares of any class or series
shall or shall not be redeemable and, if redeemable, the redemption price or
prices, and the time or times at which and the terms and conditions upon which,
such shares shall be redeemable and the manner of redemption;
(e) whether the shares of a class or series
shall or shall not be subject to the operation of retirement or sinking funds to
be applied to the purchase or redemption of such shares for retirement, and, if
such retirement or sinking fund or funds be established, the annual amount
thereof and the terms and provisions relative to the operation thereof;
(f) the dividend rate, whether dividends are
payable in cash, stock of the Corporation or other property, the conditions upon
which and the times when such dividends are payable, the preference to or the
relation to the payment of the dividends payable on any other class or classes
or series of stock, whether such dividend shall or shall not be cumulative or
noncumulative, and, if cumulative, the date or dates from which such dividends
shall accumulate;
(g) the preferences, if any, and the amounts
thereof that the holders of any class or series thereof shall be entitled to
receive upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;
(h) whether the shares of any class or series
shall or shall not be convertible into, or exchangeable for, the shares of any
other class or classes or of any other series of the same or any other class or
classes of the Corporation and the conversion price or prices or ratio or ratios
or the rate or rates at which such conversion or exchange may be made, with such
adjustments, if any, as shall be stated and expressed or provided for in such
resolution or resolutions; and
(i) such other special rights and protective
provisions with respect to any class or series as the Board may deem advisable.
The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board may increase the
2
<PAGE> 3
number of shares of Preferred Stock designated for any existing class or series
by a resolution adding to such class or series authorized and unissued shares of
the Preferred Stock not designated for any other class or series. The Board may
decrease the number of shares of the Preferred Stock designated for any existing
class or series by a resolution, subtracting from such series unissued shares of
the Preferred Stock designated for such class or series, and the shares so
subtracted shall become authorized, unissued and undesignated shares of the
Preferred Stock.
C. Provisions Relating to the Common Stock. The Common Stock
shall be subject to the express terms of the Preferred Stock and any class or
series thereof.
1. Voting Rights. Except as otherwise required by law or
as may be provided by the resolutions of the Board authorizing the issuance of
any class or series of the Preferred Stock, as hereinabove provided, all rights
to vote and all voting power shall be vested exclusively in the holders of the
Common Stock.
2. Dividends. Subject to the rights of the holders of
the Preferred Stock, the holders of the Common Stock shall be entitled to
receive when, as and if declared by the Board, out of funds legally available
therefor, dividends and other distributions payable in cash, property, stock
(including shares of any class or series of the Corporation, whether or not
shares of such class or series are already outstanding) or otherwise.
3. Liquidating Distributions. Upon any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary,
and after the holders of the Preferred Stock shall have been paid in full the
amounts to which they shall be entitled, if any, or a sum sufficient for such
payment in full shall have been set aside, the remaining net assets of the
Corporation, if any, shall be divided among and paid ratably to the holders of
the Common Stock in accordance with their respective rights and interests, to
the exclusion of the holders of the Preferred Stock.
ARTICLE IV
The Corporation shall exist perpetually unless sooner dissolved
according to law.
ARTICLE V
The Corporation's mailing address and the address of the Corporation's
principal and registered office is _____________________, Miami, Florida _____,
and the Corporation's registered agent at such office is Lazarus Rothstein.
ARTICLE VI
A. Number and Term of Directors. The Corporation's Board shall
consist of not less than one (1) member, with the exact number to be fixed from
time to time by resolution of the Board. No decrease in the number of directors
shall have the effect of shortening the term of any incumbent director. The
Board shall be divided into three classes, Class I, Class II and Class III with
the directors of each class to be elected for a staggered term of three years
and to serve until their successors are duly elected and qualified or until
their earlier resignation, death or removal from office. The number of directors
elected to each class shall be as nearly equal in number as possible. The Board
shall apportion any increase or decrease in the number of directorships among
the classes so as to make the number of directors in each class as nearly equal
as possible.
3
<PAGE> 4
B. Director Vacancies; Removal. Whenever any vacancy on the Board
shall occur due to death, resignation, retirement, disqualification, removal,
increase in the number of directors or otherwise, a majority of directors in
office, although less than a quorum of the entire Board, may fill the vacancy or
vacancies for the balance of the unexpired term or terms, at which time a
successor or successors shall be duly elected by the shareholders and qualified.
Notwithstanding the provisions of any other Article herein, only the remaining
directors of the Corporation shall have the authority, in accordance with the
procedure stated above, to fill any vacancy that exists on the Board for the
balance of the unexpired term or terms. The Company's shareholders shall not,
and shall have no power to, fill any vacancy on the Board. Shareholders may
remove a director from office prior to the expiration of his or her term, with
or without "cause," by an affirmative vote of two-thirds of all votes entitled
to be cast for the election of directors.
C. Amendments. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, Paragraphs A and B of this Article VI
shall not be altered, amended or repealed except by an affirmative vote of at
least two-thirds of all votes entitled to be cast for the election of directors.
D. Shareholder Nominations of Director Candidates. Only persons
who are nominated in accordance with the following procedures shall be eligible
for election as directors of the Corporation. Nominations of persons for
election to the Board at an annual or special meeting of shareholders may be
made by or at the direction of the Board by any nominating committee or person
appointed by the Board or by any shareholder of the Corporation entitled to vote
for the election of directors at such meeting who complies with the procedures
set forth in this Section D; provided, however, that nominations of persons for
election to the Board at a special meeting may be made only if the election of
directors is one of the purposes described in the special meeting notice
required by Section 607.0705 of the Florida Business Corporation Act.
Nominations of persons for election at a special meeting, other than nominations
made by or at the direction of the Board, shall be made pursuant to notice in
writing delivered to or mailed and received by the Secretary of the Corporation
at its principal executive offices not later than the close of business on the
fifth day following the date on which notice of such meeting is given to
shareholders or made public, whichever first occurs. Nominations of persons for
election at an annual meeting, other than nominations made by or at the
direction of the Board, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than one hundred twenty (120) days nor more than one
hundred eighty (180) days prior to the first anniversary of the date of the
Corporation's notice of annual meeting provided with respect to the previous
year's annual meeting; provided, however, that if no annual meeting was held in
the previous year or the date of the annual meeting has been changed to be more
than thirty (30) calendar days earlier than the date contemplated by the
previous year's notice of annual meeting, such notice by the shareholder to be
timely must be so delivered or received not later than the close of business on
the fifth day following the date on which notice of the date of the annual
meeting is given to shareholders or made public, whichever first occurs. Such
shareholder's notice to the Secretary shall set forth the following information:
(a) as to each person whom the shareholder proposes to nominate for election or
re-election as a director at the annual or special meeting, (i) the name, age,
business address and residence address of the proposed nominee, (ii) the
principal occupation or employment of the proposed nominee, (iii) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by the proposed nominee, and (iv) any other information relating to the
proposed nominee that is required to be disclosed in solicitations for proxies
for election of directors pursuant to
4
<PAGE> 5
Rule 14a under the Securities Exchange Act of 1934, as amended; and (b) as to
the shareholder giving the notice of nominees for election at the annual or
special meeting, (i) the name and record address of the shareholder, and (ii)
the class and number of shares of capital stock of the Corporation which are
beneficially owned by the shareholder. The Corporation may require any proposed
nominee for election at an annual or special meeting of shareholders to furnish
such other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the
requirements of this Section D, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
ARTICLE VII
The Corporation shall indemnify and may advance expenses to its
officers and directors to the fullest extent permitted by law in existence
either now or hereafter.
ARTICLE VIII
A. Call of Special Shareholders Meeting. Except as otherwise
required by law, the Corporation shall not be required to hold a special meeting
of shareholders of the Corporation unless (in addition to any other requirements
of law) (i) the meeting is called by the Board pursuant to a resolution approved
by a majority of the entire Board; (ii) the meeting is called by the
Corporation's Chairman of the Board of Directors or (iii) the meeting is called
by the holders of not less than 50% of all votes entitled to be cast on any
issue proposed to be considered at the proposed special meeting by a writing
signed, dated and delivered to the Corporation's Secretary containing one or
more demands for the meeting and particularly describing the purpose of purposes
for which it is to be held. Only business within the purpose or purposes
described in the special meeting notice required by Section 607.0705 of the
Florida Business Corporation Act may be conducted at a special shareholders'
meeting.
B. Advance Notice of Shareholder-Proposed Business for Annual
Meeting. At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board, (b) otherwise properly brought before the meeting by or at the
direction of the Board, or (c) otherwise properly brought before the meeting by
a shareholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation, not less
than one hundred twenty (120) days nor more than one hundred eighty (180) days
prior to the first anniversary of the date of the Corporation's notice of annual
meeting provided with respect to the previous year's annual meeting; provided,
however, that if no annual meeting was held in the previous year or the date of
the annual meeting has been changed to be more than thirty (30) calendar days
earlier than the date contemplated by the previous year's notice of annual
meeting, such notice by the shareholder to be timely must be so delivered or
received not later than the close of business on the fifth (5th) day following
the date on which notice of the date of the annual meeting is given to
shareholders or made public, whichever first occurs. Such shareholder's notice
to the Secretary shall set forth
5
<PAGE> 6
as to each matter the shareholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of the shareholder proposing such business, (iii)
the class and number of shares of capital stock of the Corporation which are
beneficially owned by the shareholder, and (iv) any material interest of the
shareholder in such business. The Chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the requirements of this
Section B, and if he should so determine, he shall so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted.
IN WITNESS WHEREOF, the undersigned, for the purpose of amending and
restating the Corporation's Articles of Incorporation pursuant to the Florida
Business Corporation Act of the State of Florida, executed these Amended and
Restated Articles of Incorporation as of August __. 1997.
LET'S TALK CELLULAR & WIRELESS, INC
By:
-----------------------------------------
Lazarus Rothstein, Secretary
6
<PAGE> 7
ACCEPTANCE OF APPOINTMENT OF REGISTERED AGENT
The undersigned, having been named the Registered Agent of LET'S TALK
CELLULAR & WIRELESS, INC., accepts such designation and is familiar with, and
accepts, the obligations of such position, as provided in Section 607.0505 of
the Florida Statutes.
--------------------------------------------
Lazarus Rothstein
Dated: _________, 1997
7
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
LET'S TALK CELLULAR & WIRELESS, INC.
(A FLORIDA CORPORATION)
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
ARTICLE ONE - OFFICES.............................................................................................1
Section 1. Registered Office......................................................................1
Section 2. Other Offices..........................................................................1
ARTICLE TWO - MEETINGS OF SHAREHOLDERS............................................................................1
Section 1. Place..................................................................................1
Section 2. Time of Annual Meeting.................................................................1
Section 3. Call of Special Meetings...............................................................1
Section 4. Conduct of Meetings....................................................................1
Section 5. Notice and Waiver of Notice............................................................1
Section 6. Business and Nominations for Annual and Special Meetings...............................2
Section 7. Quorum.................................................................................2
Section 8. Voting Rights Per Share................................................................2
Section 9. Voting of Shares.......................................................................3
Section 10. Proxies................................................................................3
Section 11. Shareholder List.......................................................................4
Section 12. Action Without Meeting.................................................................4
Section 13. Fixing Record Date.....................................................................4
Section 14. Inspectors and Judges..................................................................4
Section 15. Voting for Directors...................................................................5
ARTICLE THREE - DIRECTORS.........................................................................................5
Section 1. Number; Term; Election; Qualification..................................................5
Section 2. Resignation; Vacancies; Removal........................................................5
Section 3. Powers.................................................................................5
Section 4. Place of Meetings......................................................................5
Section 5. Annual Meetings........................................................................6
Section 6. Regular Meetings.......................................................................6
Section 7. Special Meetings and Notice............................................................6
Section 8. Quorum and Required Vote...............................................................6
Section 9. Action Without Meeting.................................................................6
Section 10. Conference Telephone or Similar Communications Equipment Meetings......................7
Section 11. Committees.............................................................................7
Section 12. Compensation of Directors..............................................................7
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
ARTICLE FOUR - OFFICERS...........................................................................................7
Section 1. Positions..............................................................................7
Section 2. Election of Specified Officers by Board................................................7
Section 3. Election or Appointment of Other Officers..............................................8
Section 4. Compensation...........................................................................8
Section 5. Term; Resignation; Removal; Vacancies..................................................8
Section 6. Chairman of the Board..................................................................8
Section 7. Chief Executive Officer................................................................8
Section 8. President..............................................................................9
Section 9. Vice Presidents........................................................................9
Section 10. Secretary..............................................................................9
Section 11. Chief Financial Officer................................................................9
Section 12. Treasurer..............................................................................9
Section 13. Other Officers; Employees and Agents...................................................9
ARTICLE FIVE - CERTIFICATES FOR SHARES...........................................................................10
Section 1. Issue of Certificates.................................................................10
Section 2. Legends for Preferences and Restrictions on Transfer..................................10
Section 3. Facsimile Signatures..................................................................10
Section 4. Lost Certificates.....................................................................11
Section 5. Transfer of Shares....................................................................11
Section 6. Registered Shareholders...............................................................11
Section 7. Redemption of Control Shares..........................................................11
ARTICLE SIX - GENERAL PROVISIONS.................................................................................11
Section 1. Dividends.............................................................................11
Section 2. Reserves..............................................................................12
Section 3. Checks................................................................................12
Section 4. Fiscal Year...........................................................................12
Section 5. Seal..................................................................................12
Section 6. Gender................................................................................12
ARTICLE SEVEN - AMENDMENT OF BYLAWS..............................................................................12
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
LET'S TALK CELLULAR & WIRELESS, INC.
ARTICLE ONE
OFFICES
Section 1. Registered Office. The registered office of LET'S TALK
CELLULAR & WIRELESS, INC., a Florida corporation (the "Corporation"), shall be
located at _______________________________________, Miami, Florida ______,
unless otherwise determined by the Board of Directors of the Corporation (the
"Board of Directors") in accordance with applicable law.
Section 2. Other Offices. The Corporation may also have offices at such
other places, either within or without the State of Florida, as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
Section 1. Place. All annual meetings of shareholders shall be held at
such place, within or without the State of Florida, as may be designated by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of shareholders may be held at such
place, within or without the State of Florida, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Time of Annual Meeting. Annual meetings of shareholders
shall be held on such date and at such time fixed, from time to time, by the
Board of Directors, provided, that there shall be an annual meeting held every
calendar year at which the shareholders shall elect a board of directors and
transact such other business as may properly be brought before the meeting.
Section 3. Call of Special Meetings. Special meetings of the
shareholders shall be held if called in accordance with the procedures set forth
in the Corporation's Articles of Incorporation (the "Articles of Incorporation")
for the call of a special meeting of shareholders.
Section 4. Conduct of Meetings. The Chairman of the Board of Directors
(or in his absence, the President, or in his absence, such other designee of the
Chairman of the Board of Directors) shall preside at the annual and special
meetings of shareholders and shall be given full discretion in establishing the
rules and procedures to be followed in conducting the meetings, except as
otherwise provided by law or in these Bylaws.
Section 5. Notice and Waiver of Notice. Except as otherwise provided by
law, written or printed notice stating the place, date and time of the meeting
and, in the case of a
<PAGE> 5
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by first-class mail or other legally
sufficient means, by or at the direction of the Chairman of the Board,
President, or the persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If the notice is mailed at least thirty (30)
days before the date of the meeting, it may be done by a class of United States
mail other than first class. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the shareholder
at the address appearing on the stock transfer books of the Corporation, with
postage thereon prepaid. If a meeting is adjourned to another time and/or place,
and if an announcement of the adjourned time and/or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting
unless the Board of Directors, after adjournment, fixes a new record date for
the adjourned meeting. Whenever any notice is required to be given to any
shareholder, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether signed before, during or after the time of the
meeting stated therein, and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records, shall constitute an effective
waiver of such notice. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the shareholders need be specified in any
written waiver of notice. Attendance of a person at a meeting shall constitute a
waiver of (a) lack of or defective notice of such meeting, unless the person
objects at the beginning to the holding of the meeting or the transacting of any
business at the meeting, or (b) lack of or defective notice of a particular
matter at a meeting that is not within the purpose or purposes described in the
meeting notice, unless the person objects to considering such matter when it is
presented.
Section 6. Business and Nominations for Annual and Special Meetings.
Business transacted at any special meeting shall be confined to the purposes
stated in the notice thereof. At any annual meeting of shareholders, only such
business shall be conducted as shall have been properly brought before the
meeting in accordance with the requirements and procedures set forth in the
Articles of Incorporation. Only such persons who are nominated for election as
directors of the Corporation in accordance with the requirements and procedures
set forth in the Articles of Incorporation shall be eligible for election as
directors of the Corporation.
Section 7. Quorum. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Except as otherwise provided in the Articles of
Incorporation or applicable law, shares representing a majority of the votes
pertaining to outstanding shares which are entitled to be cast on the matter by
the voting group constitute a quorum of that voting group for action on that
matter. If less than a quorum of shares are represented at a meeting, the
holders of a majority of the shares so represented may adjourn the meeting from
time to time. After a quorum has been established at any shareholders' meeting,
the subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
Section 8. Voting Rights Per Share. Each outstanding share, regardless
of class, shall be entitled to vote on each matter submitted to a vote at a
meeting of shareholders, except to the
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<PAGE> 6
extent that the voting rights of the shares of any class are limited or denied
by or pursuant to the Articles of Incorporation or the Florida Business
Corporation Act.
Section 9. Voting of Shares. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy. Shares standing
in the name of another corporation, domestic or foreign, may be voted by the
officer, agent or proxy designated by the bylaws of such corporate shareholder
or, in the absence of any applicable bylaw, by such person or persons as the
board of directors of the corporate shareholder may designate. In the absence of
any such designation, or, in case of conflicting designation by the corporate
shareholder, the chairman of the board, the president, any vice president, the
secretary and the treasurer of the corporate shareholder, in that order, shall
be presumed to be fully authorized to vote such shares. Shares held by an
administrator, executor, guardian, personal representative, or conservator may
be voted by such person, either in person or by proxy, without a transfer of
such shares into his name. Shares standing in the name of a trustee may be voted
by such person, either in person or by proxy, but no trustee shall be entitled
to vote shares held by such person without a transfer of such shares into his
name or the name of his nominee. Shares held by or under the control of a
receiver, a trustee in bankruptcy proceedings, or an assignee for the benefit of
creditors may be voted by such person without the transfer thereof into his
name. If shares stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary of the Corporation
is given notice to the contrary and is furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so provided,
then acts with respect to voting shall have the following effect: (a) if only
one votes, in person or by proxy, his act binds all; (b) if more than one vote,
in person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum.
Section 10. Proxies. Any shareholder of the Corporation, other person
entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact
for such persons may vote the shareholder's shares in person or by proxy. Any
shareholder of the Corporation may appoint a proxy to vote or otherwise act for
such person by signing an appointment form, either personally or by his
attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form, shall be deemed a sufficient appointment
form. An appointment of a proxy is effective when received by the Secretary of
the Corporation (the "Secretary") or such other officer or agent which is
authorized to tabulate votes, and shall be valid for up to 11 months, unless a
longer period is expressly provided in the appointment form. The death or
incapacity of the shareholder appointing a proxy does not affect the right of
the Corporation to accept the proxy's authority unless notice of the death or
incapacity is received by the Secretary or other officer or agent authorized to
tabulate votes before the proxy authority under the appointment is exercised. An
appointment of a proxy is revocable by the shareholder unless the appointment
form conspicuously states that it is irrevocable and the appointment is coupled
with an interest.
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<PAGE> 7
Section 11. Shareholder List. After fixing a record date for a meeting
of shareholders, the Corporation shall prepare an alphabetical list of the names
of all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or such person's agent or attorney is entitled on written demand to
inspect the shareholders' list (subject to the requirements of law), during
regular business hours and at his expense, during the period it is available for
inspection. The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or agent or attorney of such
shareholder is entitled to inspect the list at any time during the meeting or
any adjournment. The shareholders' list is prima facie evidence of the identity
of shareholders entitled to examine the shareholders' list or to vote at a
meeting of shareholders.
Section 12. Action Without Meeting. Any action required or permitted by
law to be taken at a meeting of shareholders may be taken without a meeting or
notice if a consent, or consents, in writing, setting forth the action so taken,
shall be dated and signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all voting groups and shares entitled to vote
thereon were present and voted with respect to the subject matter thereof, and
such consent shall be delivered to the Corporation, within the period required
by Section 607.0704 of the Florida Business Corporation Act, by delivery to its
principal office in the State of Florida, its principal place of business, the
Secretary or another officer or agent of the Corporation having custody of the
book in which proceedings of meetings of shareholders are recorded. Within ten
(10) days after obtaining such authorization by written consent, notice must be
given to those shareholders who have not consented in writing or who are not
entitled to vote on the action, in accordance with the requirements of Section
607.0704 of the Florida Business Corporation Act.
Section 13. Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purposes, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
(70) days, and, in case of a meeting of shareholders, not less than ten (10)
days, before the meeting or action requiring such determination of shareholders.
If no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders or the determination of
shareholders entitled to receive payment of a dividend, the date before the day
on which the first notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof, except where the Board of Directors fixes a
new record date for the adjourned meeting.
Section 14. Inspectors and Judges. The Board of Directors in advance of
any meeting may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case
-4-
<PAGE> 8
may be, to act at the meeting or any adjournment thereof. If any inspector or
inspectors, or judge or judges, are not appointed, the person presiding at the
meeting may, but need not, appoint one or more inspectors or judges. In case any
person who may be appointed as an inspector or judge fails to appear or act, the
vacancy may be filled by the Board of Directors in advance of the meeting, or at
the meeting by the person presiding thereat. The inspectors or judges, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots and
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate votes, ballots and consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting, the inspector or inspectors or judge or judges, if any, shall make
a report in writing of any challenge, question or matter determined by him or
them, and execute a certificate of any fact found by him or them.
Section 15. Voting for Directors. Unless otherwise provided in the
Articles of Incorporation, directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
ARTICLE THREE
DIRECTORS
Section 1. Number; Term; Election; Qualification. The number of
directors of the Corporation shall be fixed from time to time, within the limits
specified by the Articles of Incorporation, by resolution of the Board of
Directors. Directors shall be elected in the manner and hold office for the term
as prescribed in the Articles of Incorporation. Directors must be natural
persons who are 18 years of age or older but need not be residents of the State
of Florida, shareholders of the Corporation or citizens of the United States.
Section 2. Resignation; Vacancies; Removal. A director may resign at
any time by giving written notice to the Board of Directors or the Chairman of
the Board. Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. In the event the notice of resignation specifies a later effective
date, the Board of Directors may fill the pending vacancy (subject to the
provisions of the Corporation's Articles of Incorporation) before the effective
date if they provide that the successor does not take office until the effective
date. Director vacancies shall be filled, and directors may be removed, in the
manner prescribed in the Corporation's Articles of Incorporation.
Section 3. Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised and done by the shareholders.
Section 4. Place of Meetings. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Florida.
-5-
<PAGE> 9
Section 5. Annual Meetings. Unless scheduled for another time by the
Board of Directors, the first meeting of each newly elected Board of Directors
shall be held, without call or notice, immediately following each annual meeting
of shareholders.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may also be held without notice at such time and at such place as shall from
time to time be determined by the Board of Directors.
Section 7. Special Meetings and Notice. Special meetings of the Board
of Directors may be called by the President or Chairman of the Board and shall
be called by the Secretary on the written request of any two directors. At least
forty-eight (48) hours' prior written notice of the date, time and place of
special meetings of the Board of Directors shall be given to each director.
Except as required by law, neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting. Notices to
directors shall be in writing and delivered to the directors at their addresses
appearing on the books of the Corporation by personal delivery, mail or other
legally sufficient means. Subject to the provisions of the preceding sentence,
notice to directors may also be given by telegram, teletype or other form of
electronic communication. Notice by mail shall be deemed to be given at the time
when the same shall be received. Whenever any notice is required to be given to
any director, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before, during or after the meeting, shall
constitute an effective waiver of such notice. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and a waiver of any
and all objections to the place of the meeting, the time of the meeting and the
manner in which it has been called or convened, except when a director states,
at the beginning of the meeting or promptly upon arrival at the meeting, any
objection to the transaction of business because the meeting is not lawfully
called or convened.
Section 8. Quorum and Required Vote. A majority of the prescribed
number of directors determined as provided in the Articles of Incorporation
shall constitute a quorum for the transaction of business and the act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors, unless a greater number is required
by the Articles of Incorporation. Whenever, for any reason, a vacancy occurs in
the Board of Directors, a quorum shall consist of a majority of the remaining
directors until the vacancy has been filled. If a quorum shall not be present at
any meeting of the Board of Directors, a majority of the directors present
thereat may adjourn the meeting to another time and place, without notice other
than announcement at the time of adjournment. At such adjourned meeting at which
a quorum shall be present, any business may be transacted that might have been
transacted at the meeting as originally notified and called.
Section 9. Action Without Meeting. Any action required or permitted to
be taken at a meeting of the Board of Directors or committee thereof may be
taken without a meeting if a consent in writing, setting forth the action taken,
is signed by all of the members of the Board of Directors or the committee, as
the case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting. Action taken under this Section 9 is effective when
the last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 9 shall have the effect of a
meeting vote and may be described as such in any document.
-6-
<PAGE> 10
Section 10. Conference Telephone or Similar Communications Equipment
Meetings. Directors and committee members may participate in and hold a meeting
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in such a meeting shall constitute presence in person at the
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground the
meeting is not lawfully called or convened.
Section 11. Committees. The Board of Directors, by resolution adopted
by a majority of the whole Board of Directors, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in such resolution, shall have and may exercise all of
the authority of the Board of Directors in the business and affairs of the
Corporation except where the action of the full Board of Directors is required
by applicable law. Each committee must have two or more members who serve at the
pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee may be filled only by the Board of
Directors at a regular or special meeting of the Board of Directors. The
executive committee shall keep regular minutes of its proceedings and report the
same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or such member by law.
Section 12. Compensation of Directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Similarly, members of special or standing committees may be allowed
compensation for attendance at committee meetings or a stated salary as a
committee member and payment of expenses for attending committee meetings.
Directors may receive such other compensation as may be approved by the Board of
Directors.
ARTICLE FOUR
OFFICERS
Section 1. Positions. The officers of the Corporation shall consist of
a Chairman of the Board, a Chief Executive Officer, a President, one or more
Vice Presidents (any one or more of whom may be given the additional designation
of rank of Executive Vice President or Senior Vice President), a Secretary, a
Chief Financial Officer and a Treasurer. Any two or more offices may be held by
the same person. Officers other than the Chairman of the Board need not be
members of the Board of Directors. The Chairman of the Board must be a member of
the Board of Directors.
Section 2. Election of Specified Officers by Board. The Board of
Directors at its first meeting after each annual meeting of shareholders shall
elect a Chairman of the Board, a Chief
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<PAGE> 11
Executive Officer, a President, one or more Vice Presidents (including any
Senior or Executive Vice Presidents), a Secretary, a Chief Financial Officer and
a Treasurer.
Section 3. Election or Appointment of Other Officers. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors, or, unless otherwise specified
herein, appointed by the Chairman of the Board. The Board of Directors shall be
advised of appointments by the Chairman of the Board at or before the next
scheduled Board of Directors meeting.
Section 4. Compensation. The salaries, bonuses and other compensation
of the Chairman of the Board and all officers of the Corporation to be elected
by the Board of Directors pursuant to Section 2 of this Article Four shall be
fixed from time to time by the Board of Directors or pursuant to its direction.
The salaries of all other elected or appointed officers of the Corporation shall
be fixed from time to time by the Chairman of the Board or pursuant to his
direction.
Section 5. Term; Resignation; Removal; Vacancies. The officers of the
Corporation shall hold office until their successors are chosen and qualified.
Any officer or agent elected or appointed by the Board of Directors or the
Chairman of the Board may be removed, with or without cause, by the Board of
Directors, but such removal shall be without prejudice to the contract rights,
if any, of the person so removed. Any officer or agent appointed by the Chairman
of the Board pursuant to Section 3 of this Article Four may also be removed from
such office or position by the Board of Directors or the Chairman of the Board,
with or without cause. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise shall be filled by the Board of
Directors, or, in the case of an officer appointed by the Chairman of the Board,
by the Chairman of the Board or the Board of Directors. Any officer of the
Corporation may resign from his respective office or position by delivering
notice to the Corporation, and such resignation shall be effective without
acceptance. Such resignation shall be effective when delivered unless the notice
specifies a later effective date. If a resignation is made effective at a later
date and the Corporation accepts the future effective date, the Board of
Directors may fill the pending vacancy before the effective date if the Board
provides that the successor does not take office until such effective date.
Section 6. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and the Board of Directors. The
Chairman of the Board shall also serve as the chairman of any executive
committee.
Section 7. Chief Executive Officer. Subject to the control of the Board
of Directors, the Chief Executive Officer, in conjunction with the President,
shall have general and active management of the business of the Corporation,
shall see that all orders and resolutions of the Board of Directors are carried
into effect and shall have such powers and perform such duties as may be
prescribed by the Board of Directors. In the absence of the Chairman of the
Board or in the event the Board of Directors shall not have designated a
Chairman of the Board, the Chief Executive Officer shall preside at meetings of
the shareholders and the Board of Directors. The Chief Executive Officer shall
also serve as the vice-chairman of any executive committee.
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<PAGE> 12
Section 8. President. Subject to the control of the Board of Directors,
the President, in conjunction with the Chief Executive Officer, shall have
general and active management of the business of the Corporation and shall have
such powers and perform such duties as may be prescribed by the Board of
Directors. In the absence of the Chairman of the Board and the Chief Executive
Officer or in the event the Board of Directors shall not have designated a
Chairman of the Board and a Chief Executive Officer shall not have been elected,
the President shall preside at meetings of the shareholders and the Board of
Directors. The President shall also serve as the vice-chairman of any executive
committee.
Section 9. Vice Presidents. The Vice Presidents, in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President and the Chief Executive Officer, perform
the duties and exercise the powers of the President. They shall perform such
other duties and have such other powers as the Board of Directors, the Chairman
of the Board or the Chief Executive Officer shall prescribe or as the President
may from time to time delegate. Executive Vice Presidents shall be senior to
Senior Vice Presidents, and Senior Vice Presidents shall be senior to all other
Vice Presidents.
Section 10. Secretary. The Secretary shall attend all meetings of the
shareholders and all meetings of the Board of Directors and record all the
proceedings of the meetings of the shareholders and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
Board of Directors and shall keep in safe custody the seal of the Corporation
and, when authorized by the Board of Directors, affix the same to any instrument
requiring it. The Secretary shall perform such other duties as may be prescribed
by the Board of Directors, the Chairman of the Board, the Chief Executive
Officer or the President.
Section 11. Chief Financial Officer. The Chief Financial Officer shall
be responsible for maintaining the financial integrity of the Corporation, shall
prepare the financial plans for the Corporation and shall monitor the financial
performance of the Corporation and its subsidiaries, as well as performing such
other duties as may be prescribed by the Board of Directors, the Chairman of the
Board, the Chief Executive Officer or the President.
Section 12. Treasurer. The Treasurer shall have the custody of
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman of the Board and the Board of
Directors at its regular meetings or when the Board of Directors so requires an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. The Treasurer shall perform such other duties as may be
prescribed by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer or the President.
Section 13. Other Officers; Employees and Agents. Each and every other
officer, employee and agent of the Corporation shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to such person by
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<PAGE> 13
the Board of Directors, the officer so appointing such person or such officer or
officers who may from time to time be designated by the Board of Directors to
exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. Issue of Certificates. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates (and upon request every holder of uncertificated shares) shall
be entitled to have a certificate signed by or in the name of the Corporation by
the Chairman of the Board or a Vice Chairman of the Board, or the Chief
Executive Officer, President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, representing the number of shares registered in certificate form.
Section 2. Legends for Preferences and Restrictions on Transfer. The
designations, relative rights, preferences and limitations applicable to each
class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on request and without charge.
Every certificate representing shares that are restricted as to the sale,
disposition, or transfer of such shares shall also indicate that such shares are
restricted as to transfer, and there shall be set forth or fairly summarized
upon the certificate, or the certificate shall indicate that the Corporation
will furnish to any shareholder upon request and without charge, a full
statement of such restrictions. If the Corporation issues any shares that are
not registered under the Securities Act of 1933, as amended, or not registered
or qualified under the applicable state securities laws, the transfer of any
such shares shall be restricted substantially in accordance with the following
legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1)
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION
(SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO
THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED"
Section 3. Facsimile Signatures. Any and all signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile
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<PAGE> 14
signature has been placed upon such certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 4. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Corporation may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed.
Section 5. Transfer of Shares. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. Registered Shareholders. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Florida.
Section 7. Redemption of Control Shares. As provided by the Florida
Business Corporation Act, if a person acquiring control shares of the
Corporation does not file an acquiring person statement with the Corporation,
the Corporation may, at the discretion of the Board of Directors, redeem the
control shares at the fair value thereof at any time during the 60-day period
after the last acquisition of such control shares. If a person acquiring control
shares of the Corporation files an acquiring person statement with the
Corporation, the control shares may be redeemed by the Corporation, at the
discretion of the Board of Directors, only if such shares are not accorded full
voting rights by the shareholders as provided by law.
ARTICLE SIX
GENERAL PROVISIONS
Section 1. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property, stock (including its own shares) or otherwise pursuant to law
and subject to the provisions of the Articles of Incorporation.
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<PAGE> 15
Section 2. Reserves. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
Section 3. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall end on
July 31st of each year, unless otherwise fixed by resolution of the Board of
Directors.
Section 5. Seal. The corporate seal shall have inscribed thereon the
name and state of incorporation of the Corporation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
Section 6. Gender. All words used in these Bylaws in the masculine
gender shall extend to and shall include the feminine and neuter genders.
ARTICLE SEVEN
AMENDMENT OF BYLAWS
Except as otherwise set forth herein, these Bylaws may be altered,
amended or repealed or new Bylaws may be adopted at any meeting of the Board of
Directors at which a quorum is present, by the affirmative vote of a majority of
the directors present at such meeting.
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<PAGE> 1
EXHIBIT 10.1
LET'S TALK CELLULAR & WIRELESS, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
<PAGE> 2
LET'S TALK CELLULAR AND WIRELESS, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
<TABLE>
<S> <C> <C>
1. Purpose ................................................................... 1
2. Definitions ............................................................... 1
3. Administration ............................................................ 4
(a) Authority of the Committee .......................................... 4
(b) Manner of Exercise of Committee Authority ........................... 4
(c) Limitation of Liability ............................................. 5
4. Stock Subject to Plan ..................................................... 5
(a) Limitation on Overall Number of Shares Subject to Awards ............ 5
(b) Application of Limitations .......................................... 5
5. Eligibility; Per-Person Award Limitations ................................. 5
6. Specific Terms of Awards .................................................. 6
(a) General ............................................................. 6
(b) Options ............................................................. 6
(c) Stock Appreciation Rights ........................................... 7
(d) Restricted Stock .................................................... 8
(e) Deferred Stock ...................................................... 9
(f) Bonus Stock and Awards in Lieu of Obligations .......................10
(g) Dividend Equivalents ................................................10
(h) Other Stock-Based Awards ............................................10
7. Certain Provisions Applicable to Awards ...................................11
(a) Stand-Alone, Additional, Tandem, and Substitute Awards ..............11
(b) Term of Awards ......................................................11
(c) Form and Timing of Payment Under Awards; Deferrals ..................11
(d) Exemptions from Section 16(b) Liability .............................12
8. Performance and Annual Incentive Awards ...................................12
(a) Performance Conditions ..............................................12
(b) Performance Awards Granted to Designated Covered Employees ..........12
(c) Annual Incentive Awards Granted to Designated Covered Employees .....14
(d) Written Determinations ..............................................15
(e) Status of Section 8(b) and Section 8(c) Awards Under
Code Section 162(m)..................................................15
9. Change in Control .........................................................16
(a) Effect of "Change in Control." ......................................16
(b) Definition of "Change in Control ....................................16
(c) Definition of "Change in Control Price." ............................17
10. General Provisions ........................................................17
(a) Compliance With Legal and Other Requirements ........................17
(b) Limits on Transferability; Beneficiaries ............................17
(c) Adjustments .........................................................18
(d) Taxes ...............................................................18
(e) Changes to the Plan and Awards ......................................19
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
(f) Limitation on Rights Conferred Under Plan ...........................19
(g) Unfunded Status of Awards; Creation of Trusts .......................19
(h) Nonexclusivity of the Plan ..........................................20
(i) Payments in the Event of Forfeitures; Fractional Shares .............20
(j) Governing Law .......................................................20
(k) Plan Effective Date and Stockholder Approval; Termination of Plan ...20
</TABLE>
(ii)
<PAGE> 4
LET'S TALK CELLULAR & WIRELESS, INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this 1997 Executive Incentive Compensation
Plan (the "Plan") is to assist Let's Talk Cellular & Wireless, Inc. (the
"Company") and its subsidiaries in attracting, motivating, retaining and
rewarding high-quality executives and other employees, officers, Directors and
independent contractors enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company's stockholders, and providing
such persons with annual and long term performance incentives to expend their
maximum efforts in the creation of shareholder value. The Plan is also intended
to qualify certain compensation awarded under the Plan for tax deductibility
under Section 162(m) of the Code (as hereafter defined) to the extent deemed
appropriate by the Committee (or any successor committee) of the Board of
Directors of the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Incentive Award" means a conditional right granted to
a Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means Change in Control as defined with
related terms in Section 9 of the Plan.
<PAGE> 5
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist solely
of at least two directors, each of whom shall be (i) a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, unless administration
of the Plan by "non-employee directors" is not then required in order for
exemptions under Rule 16b-3 to apply to transactions under the Plan, and (ii) an
"outside director" within the meaning of Section 162(m) of the Code, unless
administration of the Plan by "outside directors" is not then required in order
to qualify for tax deductibility under Section 162(m) of the Code.
(j) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i) of the Plan.
(k) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(l) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the end
of a specified deferral period.
(m) "Director" means a member of the Board.
(n) "Disability" means a permanent and total disability (within
the meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
(o) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Stock, other Awards or other
property equal in value to dividends paid with respect to a specified number of
shares of Stock, or other periodic payments.
(p) "Effective Date" means the effective date of the Plan, which
shall be [ ].
(q) "Eligible Person" means each Executive Officer of the Company
(as defined under the Exchange Act) and other officers, Directors and employees
of the Company or of any Subsidiary, and independent contractors with the
Company or any Subsidiary. The foregoing notwithstanding, only employees of the
Company or any Subsidiary shall be an Eligible Persons for purposes of receiving
any Incentive Stock Options. An employee on leave of absence may be considered
as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.
2
<PAGE> 6
(s) "Executive Officer" means an executive officer of the Company
as defined under the Exchange Act.
(t) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or market on
which Stock is traded on the date as of which such value is being determined or,
if there is no sale on that date, then on the last previous day on which a sale
was reported.
(u) "Incentive Stock Option" or "ISO" means any Option intended to
be designated as an incentive stock option within the meaning of Section 422 of
the Code or any successor provision thereto.
(v) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.
(w) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(x) "Option" means a right granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(y) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.
(z) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one of the
other corporations in the chain.
(aa) "Participant" means a person who has been granted an Award
under the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(bb) "Performance Award" means a right, granted to a Eligible
Person under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.
(cc) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(dd) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.
3
<PAGE> 7
(ee) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act
(ff) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(gg) "Stock Appreciation Rights" or "SAR" means a right granted to
a Participant under Section 6(c) hereof.
(hh) "Subsidiary" means any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or interests of
such corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by
the Committee; provided, however, that except as otherwise expressly provided in
this Plan or in order to comply with Code Section 162(m) or Rule 16b-3 under the
Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee or the Board may deem necessary or advisable
for the administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person in a manner
consistent with the treatment of other Eligible Persons.
(b) Manner of Exercise of Committee Authority. The Committee, and
not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and stockholders. The express grant of any
specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may delegate
to officers or managers of the Company or any subsidiary, or committees thereof,
the authority, subject to such terms as the Committee or the Board shall
determine, (i) to perform administrative
4
<PAGE> 8
functions, (ii) with respect to Participants not subject to Section 16 of the
Exchange Act, to perform such other functions as the Committee or the Board may
determine, and (iii) with respect to Participants subject to Section 16, to
perform such other functions of the Committee or the Board as the Committee or
the Board may determine to the extent performance of such functions will not
result in the loss of an exemption under Rule 16b-3 otherwise available for
transactions by such persons, in each case to the extent permitted under
applicable law and subject to the requirements set forth in Section 8(d). The
Committee or the Board may appoint agents to assist it in administering the
Plan.
(c) Limitation of Liability. The Committee and the Board, and each
member thereof, shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any executive officer, other
officer or employee of the Company or a Subsidiary, the Company's independent
auditors, consultants or any other agents assisting in the administration of the
Plan. Members of the Committee and the Board, and any officer or employee of the
Company or a subsidiary acting at the direction or on behalf of the Committee or
the Board, shall not be personally liable for any action or determination taken
or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the Company with respect
to any such action or determination.
4. Stock Subject to Plan.
(a) Limitation on Overall Number of Shares Subject to Awards.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) ______, plus (ii) the number of shares
with respect to Awards previously granted under the Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of shares of
Stock that are surrendered in payment of any Awards or any tax withholding with
regard thereto. Any shares of Stock delivered under the Plan may consist, in
whole or in part, of authorized and unissued shares or treasury shares. Subject
to adjustment as provided in Section 10(c) hereof, in no event shall the
aggregate number of shares of Stock which may be issued pursuant to ISOs exceed
______ shares.
(b) Application of Limitations. The limitation contained in
Section 4(a) shall apply not only to Awards that are settleable by the delivery
of shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee or the Board may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.
5. Eligibility; Per-Person Award Limitations. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than [ ] shares of Stock, subject to adjustment as provided in
Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h),
8(b) and 8(c). In addition, the maximum amount that may be earned as an
Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be [$ ],
5
<PAGE> 9
and the maximum amount that may be earned as a Performance Award or other cash
Award in respect of a performance period by any one Participant shall be [$ ].
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee or the Board may impose on
any Award or the exercise thereof, at the date of grant or thereafter (subject
to Section 10(e)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee or the Board shall determine,
including terms requiring forfeiture of Awards in the event of termination of
employment by the Participant and terms permitting a Participant to make
elections relating to his or her Award. The Committee or the Board (subject to
Section 10(e)) shall retain full power and discretion to accelerate, waive or
modify, at any time, any term or condition of an Award that is not mandatory
under the Plan. Except in cases in which the Committee or the Board is
authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must be paid to satisfy the requirements of
Florida law, no consideration other than services may be required for the grant
(but not the exercise) of any Award.
(b) Options. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee or
the Board, provided that such exercise price shall not, in the case
of Incentive Stock Options, be less than 100% of the Fair Market
Value of the Stock on the date of grant of the Option and shall not,
in any event, be less than the par value of a share of Stock on the
date of grant of such Option. If an employee owns or is deemed to
own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of
all classes of stock of the Company or any Parent Corporation and an
Incentive Stock Option is granted to such employee, the option price
of such Incentive Stock Option (to the extent required by the Code
at the time of grant) shall be no less than 110% of the Fair Market
Value of the Stock on the date such Incentive Stock Option is
granted.
(ii) Time and Method of Exercise. The Committee or the Board
shall determine the time or times at which or the circumstances
under which an Option may be exercised in whole or in part
(including based on achievement of performance goals and/or future
service requirements), the time or times at which Options shall
cease to be or become exercisable following termination of
employment or upon other conditions, the methods by which such
exercise price may be paid or deemed to be paid (including in the
discretion of the Committee or the Board a cashless exercise
procedure), the form of such payment, including, without limitation,
cash, Stock, other Awards or awards granted under other plans of the
Company or any subsidiary, or other property (including notes or
other contractual obligations of Participants to make payment on a
deferred basis), and
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<PAGE> 10
the methods by or forms in which Stock will be delivered or
deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Section 422 of the
Code. Anything in the Plan to the contrary notwithstanding, no term
of the Plan relating to ISOs (including any SAR in tandem therewith)
shall be interpreted, amended or altered, nor shall any discretion
or authority granted under the Plan be exercised, so as to
disqualify either the Plan or any ISO under Section 422 of the Code,
unless the Participant has first requested the change that will
result in such disqualification. Thus, if and to the extent required
to comply with Section 422 of the Code, Options granted as Incentive
Stock Options shall be subject to the following special terms and
conditions:
(A) the Option shall not be exercisable more than ten
years after the date such Incentive Stock Option is granted;
provided, however, that if a Participant owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock
of the Company or any Parent Corporation and the Incentive Stock
Option is granted to such Participant, the term of the Incentive
Stock Option shall be (to the extent required by the Code at the
time of the grant) for no more than five years from the date of
grant; and
(B) The aggregate Fair Market Value (determined as of
the date the Incentive Stock Option is granted) of the shares of
stock with respect to which Incentive Stock Options granted under
the Plan and all other option plans of the Company or its Parent
Corporation during any calendar year exercisable for the first time
by the Participant during any calendar year shall not (to the
extent required by the Code at the time of the grant) exceed
$100,000.
(c) Stock Appreciation Rights. The Committee and the Board each is
authorized to grant SAR's to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of stock on the
date of exercise (or, in the case of a "Limited SAR" that may be
exercised only in the event of a Change in Control, the Fair Market
Value determined by reference to the Change in Control Price, as
defined under Section 9(c) hereof), over (B) the grant price of the
SAR as determined by the Committee or the Board. The grant price of
an SAR shall not be less than the Fair Market Value of a share of
Stock on the date of grant except as provided under Section 7(a)
hereof.
(ii) Other Terms. The Committee or the Board shall determine
at the date of grant or thereafter, the time or times at which and
the circumstances under which a SAR may be exercised in whole or in
part (including based on
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<PAGE> 11
achievement of performance goals and/or future service
requirements), the time or times at which SARs shall cease to be or
become exercisable following termination of employment or upon other
conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which
Stock will be delivered or deemed to be delivered to Participants,
whether or not a SAR shall be in tandem or in combination with any
other Award, and any other terms and conditions of any SAR. Limited
SARs that may only be exercised in connection with a Change in
Control or other event as specified by the Committee or the Board,
may be granted on such terms, not inconsistent with this Section
6(c), as the Committee or the Board may determine. SARs and Limited
SARs may be either freestanding or in tandem with other Awards.
(d) Restricted Stock. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject
to such restrictions on transferability, risk of forfeiture and
other restrictions, if any, as the Committee or the Board may
impose, which restrictions may lapse separately or in combination at
such times, under such circumstances (including based on achievement
of performance goals and/or future service requirements), in such
installments or otherwise, as the Committee or the Board may
determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award agreement
relating to the Restricted Stock, a Participant granted Restricted
Stock shall have all of the rights of a stockholder, including the
right to vote the Restricted Stock and the right to receive
dividends thereon (subject to any mandatory reinvestment or other
requirement imposed by the Committee or the Board). During the
restricted period applicable to the Restricted Stock, subject to
Section 10(b) below, the Restricted Stock may not be sold,
transferred, pledged, hypothecated, margined or otherwise encumbered
by the Participant.
(ii) Forfeiture. Except as otherwise determined by the
Committee or the Board at the time of the Award, upon termination of
a Participant's employment during the applicable restriction period,
the Participant's Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided that the Committee or the Board may provide, by rule or
regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Restricted Stock shall be waived in whole or in part in the event
of terminations resulting from specified causes, and the Committee
or the Board may in other cases waive in whole or in part the
forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee or the
Board shall determine. If certificates representing Restricted Stock
are registered in the name of the Participant, the Committee or the
Board may require that such certificates bear an
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<PAGE> 12
appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, that the Company
retain physical possession of the certificates, and that the
Participant deliver a stock power to the Company, endorsed in blank,
relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an
Award of Restricted Stock, the Committee or the Board may require
that any cash dividends paid on a share of Restricted Stock be
automatically reinvested in additional shares of Restricted Stock or
applied to the purchase of additional Awards under the Plan. Unless
otherwise determined by the Committee or the Board, Stock
distributed in connection with a Stock split or Stock dividend, and
other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other property
has been distributed.
(e) Deferred Stock. The Committee and the Board each is authorized
to grant Deferred Stock to Participants, which are rights to receive Stock,
cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of
Deferred Stock shall occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee or the Board (or,
if permitted by the Committee or the Board, as elected by the
Participant). In addition, Deferred Stock shall be subject to such
restrictions (which may include a risk of forfeiture) as the
Committee or the Board may impose, if any, which restrictions may
lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance goals
and/or future service requirements), separately or in combination,
in installments or otherwise, as the Committee or the Board may
determine. Deferred Stock may be satisfied by delivery of Stock,
cash equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a combination
thereof, as determined by the Committee or the Board at the date of
grant or thereafter. Prior to satisfaction of an Award of Deferred
Stock, an Award of Deferred Stock carries no voting or dividend or
other rights associated with share ownership.
(ii) Forfeiture. Except as otherwise determined by the
Committee or the Board, upon termination of a Participant's
employment during the applicable deferral period thereof to which
forfeiture conditions apply (as provided in the Award agreement
evidencing the Deferred Stock), the Participant's Deferred Stock
that is at that time subject to deferral (other than a deferral at
the election of the Participant) shall be forfeited; provided that
the Committee or the Board may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock
shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee or the Board may
in other cases waive in whole or in part the forfeiture of Deferred
Stock.
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<PAGE> 13
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee or the Board at date of grant, Dividend Equivalents on the
specified number of shares of Stock covered by an Award of Deferred
Stock shall be either (A) paid with respect to such Deferred Stock
at the dividend payment date in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock and
the amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or permit
the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee
and the Board each is authorized to grant Stock as a bonus, or to grant Stock or
other Awards in lieu of Company obligations to pay cash or deliver other
property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Participants subject to Section 16 of the Exchange
Act, the amount of such grants remains within the discretion of the Committee to
the extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined by
the Committee or the Board.
(g) Dividend Equivalents. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.
(h) Other Stock-Based Awards. The Committee and the Board each is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the Board shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
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<PAGE> 14
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee or the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any subsidiary, or any business entity to be acquired by the Company or
a subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award or award, the Committee or the Board shall require
the surrender of such other Award or award in consideration for the grant of the
new Award. In addition, Awards may be granted in lieu of cash compensation,
including in lieu of cash amounts payable under other plans of the Company or
any subsidiary, in which the value of Stock subject to the Award is equivalent
in value to the cash compensation (for example, Deferred Stock or Restricted
Stock), or in which the exercise price, grant price or purchase price of the
Award in the nature of a right that may be exercised is equal to the Fair Market
Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price "discounted" by
the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee or the Board; provided that in no
event shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).
(c) Form and Timing of Payment Under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award agreement, payments to be made by
the Company or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee or the Board
shall determine, including, without limitation, cash, Stock, other Awards or
other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Committee or the Board or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or the Board (subject to
Section 10(e) of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee or the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent of
the Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither
the grant of any Awards to nor other transaction by a Participant who is subject
to Section 16 of the Exchange Act is subject to liability under Section 16(b)
thereof (except for transactions acknowledged in writing to be non-exempt by
such Participant). Accordingly, if any provision of this Plan or any Award
agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such
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<PAGE> 15
transaction, such provision will be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 or Rule
16a-1(c)(3) so that such Participant shall avoid liability under Section 16(b).
In addition, the purchase price of any Award conferring a right to purchase
Stock shall be not less than any specified percentage of the Fair Market Value
of Stock at the date of grant of the Award then required in order to comply with
Rule 16b-3.
8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to exercise
or receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee or
the Board. The Committee or the Board may use such business criteria and other
measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 8(b) and 8(c) hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m). If and to the
extent required under Code Section 162(m), any power or authority relating to a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.
(b) Performance Awards Granted to Designated Covered Employees. If
and to the extent that the Committee determines that a Performance Award to be
granted to an Eligible Person who is designated by the Committee as likely to be
a Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Performance Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria
and a targeted level or levels of performance with respect to each
of such criteria, as specified by the Committee consistent with this
Section 8(b). Performance goals shall be objective and shall
otherwise meet the requirements of Code Section 162(m) and
regulations thereunder including the requirement that the level or
levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain."
The Committee may determine that such Performance Awards shall be
granted, exercised and/or settled upon achievement of any one
performance goal or that two or more of the performance goals must
be achieved as a condition to grant, exercise and/or settlement of
such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to different
Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or specified
subsidiaries or business units of the Company (except with respect
to the total stockholder return and earnings per share criteria),
shall be used exclusively by the Committee in establishing
performance goals for such Performance Awards: (1) total stockholder
return; (2) such total stockholder return as compared to total
return (on a
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<PAGE> 16
comparable basis) of a publicly available index such as, but not
limited to, the Standard & Poor's 500 Stock Index or the S&P
Specialty Retailer Index; (3) net income; (4) pretax earnings; (5)
earnings before interest expense, taxes, depreciation and
amortization; (6) pretax operating earnings after interest expense
and before bonuses, service fees, and extraordinary or special
items; (7) operating margin; (8) earnings per share; (9) return on
equity; (10) return on capital; (11) return on investment; (12)
operating earnings; (13) working capital or inventory; and (14)
ratio of debt to stockholders' equity. One or more of the foregoing
business criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a Covered
Employee under Section 8(c) hereof that are intended to qualify as
"performanced-based compensation under Code Section 162(m).
(iii) Performance Period; Timing For Establishing Performance
Goals. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up
to ten years, as specified by the Committee. Performance goals shall
be established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such
other date as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with
Performance Awards. The amount of such Performance Award pool shall
be based upon the achievement of a performance goal or goals based
on one or more of the business criteria set forth in Section
8(b)(ii) hereof during the given performance period, as specified by
the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not
bear a strictly mathematical relationship to such business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement
of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee
may, in its discretion, reduce the amount of a settlement otherwise
to be made in connection with such Performance Awards. The Committee
shall specify the circumstances in which such Performance Awards
shall be paid or forfeited in the event of termination of
employment by the Participant prior to the end of a performance
period or settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated by the
Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
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<PAGE> 17
exercise and/or settlement of such Annual Incentive Award shall be contingent
upon achievement of preestablished performance goals and other terms set forth
in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool
shall be based upon the achievement of a performance goal or goals
based on one or more of the business criteria set forth in Section
8(b)(ii) hereof during the given performance period, as specified by
the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Annual Incentive Award pool
as a percentage of any such business criteria, a percentage thereof
in excess of a threshold amount, or as another amount which need not
bear a strictly mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the end
of the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or
as individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or more of
the business criteria set forth in Section 8(b)(ii) hereof in the
given performance year, as specified by the Committee; in other
cases, such amount shall be based on such criteria as shall be
established by the Committee. In all cases, the maximum Annual
Incentive Award of any Participant shall be subject to the
limitation set forth in Section 5 hereof.
(iii) Payout of Annual Incentive Awards. After the end of each
fiscal year, the Committee shall determine the amount, if any, of
(A) the Annual Incentive Award pool, and the maximum amount of
potential Annual Incentive Award payable to each Participant in the
Annual Incentive Award pool, or (B) the amount of potential Annual
Incentive Award otherwise payable to each Participant. The Committee
may, in its discretion, determine that the amount payable to any
Participant as a final Annual Incentive Award shall be reduced
from the amount of his or her potential Annual Incentive Award,
including a determination to make no final Award whatsoever. The
Committee shall specify the circumstances in which an Annual
Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a
fiscal year or settlement of such Annual Incentive Award.
(d) Written Determinations. All determinations by the Committee as
to the establishment of performance goals, the amount of any Performance Award
pool or potential
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<PAGE> 18
individual Performance Awards and as to the achievement of performance goals
relating to Performance Awards under Section 8(b), and the amount of any Annual
Incentive Award pool or potential individual Annual Incentive Awards and the
amount of final Annual Incentive Awards under Section 8(c), shall be made in
writing in the case of any Award intended to qualify under Code Section 162(m).
The Committee may not delegate any responsibility relating to such Performance
Awards or Annual Incentive Awards if and to the extent required to comply with
Code Section 162(m).
(e) Status of Section 8(b) and Section 8(c) Awards Under Code
Section 162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.
9. Change in Control.
(a) Effect of "Change in Control." If and to the extent provided
in the Award, in the event of a "Change in Control," as defined in Section 9(b),
the following provisions shall apply:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and
vested as of the time of the Change in Control, subject only to
applicable restrictions set forth in Section 10(a) hereof;
(ii) Limited SARs (and other SARs if so provided by their
terms) shall become exercisable for amounts, in cash, determined by
reference to the Change in Control Price;
(iii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan
shall lapse and such Awards shall be deemed fully vested as of the
time of the Change in Control, except to the extent of any waiver by
the Participant and subject to applicable restrictions set forth in
Section 10(a) hereof; and
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<PAGE> 19
(iv) With respect to any such outstanding Award subject to
achievement of performance goals and conditions under the Plan, such
performance goals and other conditions will be deemed to be met if
and to the extent so provided by the Committee in the Award
agreement relating to such Award.
(b) Definition of "Change in Control. A "Change in Control" shall
be deemed to have occurred upon:
(i) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or other form of corporate transaction or
series of transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own more than
50% of the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the Company or the sale of
all or substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale (any such event being referred to as a
"Corporate Transaction") is subsequently abandoned); or
(ii) Individuals who, as of the date hereof, constitute the
Board (as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Securities Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board.
(c) Definition of "Change in Control Price." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.
10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company may,
to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Stock or other Company securities are listed or
16
<PAGE> 20
quoted, or compliance with any other obligation of the Company, as the Committee
or the Board, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries. No Award or other
right or interest of a Participant under the Plan, including any Award or right
which constitutes a derivative security as generally defined in Rule 16a-1(c)
under the Exchange Act, shall be pledged, hypothecated or otherwise encumbered
or subject to any lien, obligation or liability of such Participant to any party
(other than the Company or a Subsidiary), or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution or to
a Beneficiary upon the death of a Participant, and such Awards or rights that
may be exercisable shall be exercised during the lifetime of the Participant
only by the Participant or his or her guardian or legal representative, except
that Awards and other rights (other than ISOs and SARs in tandem therewith) may
be transferred to one or more Beneficiaries or other transferees during the
lifetime of the Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent such
transfers and exercises are permitted by the Committee or the Board pursuant to
the express terms of an Award agreement (subject to any terms and conditions
which the Committee or the Board may impose thereon, and further subject to any
prohibitions or restrictions on such transfers pursuant to Rule 16b-3). A
Beneficiary, transferee, or other person claiming any rights under the Plan from
or through any Participant shall be subject to all terms and conditions of the
Plan and any Award agreement applicable to such Participant, except as otherwise
determined by the Committee or the Board, and to any additional terms and
conditions deemed necessary or appropriate by the Committee or the Board.
(c) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee or the
Board to be appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee or the Board shall, in
such manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if
17
<PAGE> 21
and only to the extent such authority is not required to be exercised by the
Committee to comply with Code Section 162(m)) is authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards (including
Performance Awards and performance goals, and Annual Incentive Awards and any
Annual Incentive Award pool or performance goals relating thereto) in
recognition of unusual or nonrecurring events (including, without limitation,
events described in the preceding sentence, as well as acquisitions and
dispositions of businesses and assets) affecting the Company, any Subsidiary or
any business unit, or the financial statements of the Company or any Subsidiary,
or in response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or in view of the
Committee's assessment of the business strategy of the Company, any Subsidiary
or business unit thereof, performance of comparable organizations, economic and
business conditions, personal performance of a Participant, and any other
circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that such authority or the making of
such adjustment would cause Options, SARs, Performance Awards granted under
Section 8(b) hereof or Annual Incentive Awards granted under Section 8(c) hereof
to Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and the
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and any Subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan, or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or Participants,
except that any amendment or alteration to the Plan shall be subject to the
approval of the Company's stockholders not later than the annual meeting next
following such Board action if such stockholder approval is required by any
federal or state law or regulation (including, without limitation, Rule 16b-3 or
Code Section 162(m)) or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other such changes to the Plan
to stockholders for approval; provided that, without the consent of an affected
Participant, no such Board action may materially and adversely affect the rights
of such Participant under any previously granted and outstanding Award. The
Committee or the Board may waive any conditions or rights under, or amend,
alter, suspend, discontinue or terminate any Award theretofore granted and any
Award agreement relating thereto, except as otherwise provided in the Plan;
provided that, without the consent of an affected Participant, no such Committee
or the Board action may materially and adversely affect the rights of such
Participant
18
<PAGE> 22
under such Award. Notwithstanding anything in the Plan to the contrary, if any
right under this Plan would cause a transaction to be ineligible for pooling of
interest accounting that would, but for the right hereunder, be eligible for
such accounting treatment, the Committee or the Board may modify or adjust the
right so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.
(f) Limitation on Rights Conferred Under Plan. Neither the Plan
nor any action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or Participant
or in the employ of the Company or a Subsidiary; (ii) interfering in any way
with the right of the Company or a Subsidiary to terminate any Eligible Person's
or Participant's employment at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan
by the Board nor its submission to the stockholders of the Company for approval
shall be construed as (i) creating any limitations on the power of the Board or
a committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify under
Code Section 162(m) or (ii) modifying, amending or in any way being in
substitution of any employment, stock option or other agreement to which the
Company is a party.
(i) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
19
<PAGE> 23
(j) Governing Law. The validity, construction and effect of the
Plan, any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the State of Florida without giving
effect to principles of conflicts of laws, and applicable federal law.
(k) Plan Effective Date and Stockholder Approval; Termination of
Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) and 422, Rule
16b-3 under the Exchange Act, applicable NASDAQ requirements, and other laws,
regulations, and obligations of the Company applicable to the Plan. Awards may
be granted subject to stockholder approval, but may not be exercised or
otherwise settled in the event stockholder approval is not obtained. The Plan
shall terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.
20
<PAGE> 1
EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the ____ day of _____________,
199_, between LET'S TALK CELLULAR & WIRELESS, INC., a Florida corporation (the
"Company"), and ________________________ (the "Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee as
_____________ of the Company.
B. As a condition to the Indemnitee's agreement to continue to serve as
_________________ of the Company, the Indemnitee requires that he be indemnified
from liability to the fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law in order to retain the services of the Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
1. MANDATORY INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the
Company shall indemnify and hold harmless the Indemnitee from and against any
and all claims, damages, expenses (including attorneys' fees), judgments, fines
(including excise taxes assessed with respect to an employee benefit plan),
amounts paid in settlement and all other liabilities actually and reasonably
incurred by him in connection with the investigation, defense, prosecution,
settlement or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Company) and to which the Indemnitee was or
is a party or is threatened to be made a party by reason of the fact that the
Indemnitee is or was an officer, director, shareholder, employee or agent of the
Company, or is or was serving at the request of the Company as an officer,
director, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
or by reason of anything done or not done by the Indemnitee in any such capacity
or capacities, provided that the Indemnitee acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
2. MANDATORY INDEMNIFICATION IN ACTIONS OR SUITS BY OR IN THE RIGHT OF THE
COMPANY. Subject to Section 4 hereof, the Company shall indemnify and hold
harmless the Indemnitee from and against any and all expenses (including
attorneys' fees) and amounts paid in settlement actually and reasonably incurred
by him in connection with the investigation, defense, settlement or appeal of
any threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor and to which the Indemnitee was or is
a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an officer, director, shareholder, employee or
agent of the Company, or is or was serving at
<PAGE> 2
the request of the Company as an officer, director, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of anything done or not done by
the Indemnitee in such capacity or capacities, provided that (i) the Indemnitee
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, (ii) indemnification for amounts
paid in settlement shall not exceed the estimated expense of litigating the
proceeding to conclusion, and (iii) no indemnification shall be made in respect
of any claim, issue or matter as to which the Indemnitee shall have been
adjudged to be liable for misconduct in the performance of his duty to the
Company unless and only to the extent that the court in which such action or
suit was brought (or any other court of competent jurisdiction) shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, the Indemnitee is fairly and reasonably entitled
to indemnity for such expenses which such court shall deem proper.
3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF NEGLIGENCE. The
Company shall reimburse the Indemnitee for any expenses (including attorney's
fees) and amounts paid in settlement actually and reasonably incurred by him in
connection with the investigation, defense, settlement or appeal of any action
or suit described in Section 2 hereof that results in an adjudication that the
Indemnitee was liable for negligence, gross negligence or recklessness (but not
willful misconduct) in the performance of his duty to the Company; provided,
however, that the Indemnitee acted in good faith and in a manner he believed to
be in the best interests of the Company.
4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under Sections l
and 2 hereof (unless ordered by a court) and any reimbursement made under
Section 3 hereof shall be made by the Company only as authorized in the specific
case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7, 5.8 and 8 of this
Agreement, the Determination shall be made in the following order of preference:
(1) first, by the Company's Board of Directors (the "Board") by
majority vote or consent of a quorum consisting of directors ("Disinterested
Directors") who are not, at the time of the Determination, named parties to such
action, suit or proceeding; or
(2) next, if such a quorum of Disinterested Directors cannot be
obtained, by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
(3) next, if such a committee cannot be designated, by any independent
legal counsel (who may be the outside counsel regularly employed by the
Company); or
(4) next, if such legal counsel determination cannot be obtained, by
vote or consent of the holders of a majority of the Company's common stock that
are represented in person or by proxy and entitled to vote at a meeting called
for such purpose.
4.1 No Presumptions. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall
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<PAGE> 3
not, of itself, create a presumption that the Indemnitee did not act in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the Company, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
4.2 Benefit Plan Conduct. The Indemnitee's conduct with respect to an
employee benefit plan for a purpose he reasonably believed to be in the
interests of the participants in and beneficiaries of the plan shall be deemed
to be conduct that the Indemnitee reasonably believed to be not opposed to the
best interests of the Company.
4.3 Reliance as Safe Harbor. For purposes of any Determination hereunder,
the Indemnitee shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his action is based on
(i) the records or books of account of the Company or another enterprise,
including financial statements, (ii) information supplied to him by the officers
of the Company or another enterprise in the course of their duties, (iii) the
advice of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.3 shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in Sections l, 2 or 3 hereof,
as the case may be.
4.4 Success on Merits or Otherwise. Notwithstanding any other provision of
this Agreement, to the extent that the Indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding described in
Section 1 or 2 hereof, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal thereof. For purposes of this Section 4.4, the term
"successful on the merits or otherwise" shall include, but not be limited to,
(i) any termination, withdrawal, or dismissal (with or without prejudice) of any
claim, action, suit or proceeding against the Indemnitee without any express
finding of liability or guilt against him, (ii) the expiration of 120 days after
the making of any claim or threat of an action, suit or proceeding without the
institution of the same and without any promise or payment made to induce a
settlement, or (iii) the settlement of any action, suit or proceeding under
Section 1, 2 or 3 hereof pursuant to which the Indemnitee pays less than
$25,000.
4.5 Partial Indemnification or Reimbursement. If the Indemnitee is entitled
under any provision of this Agreement to indemnification and/or reimbursement by
the Company for some or a portion of the claims, damages, expenses (including
attorneys' fees), judgments, fines or amounts paid in settlement by the
Indemnitee in connection with the investigation, defense, settlement or appeal
of any action specified in Section 1, 2 or 3 hereof, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify and/or reimburse
the Indemnitee for the portion thereof to which the Indemnitee is entitled. The
party or
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<PAGE> 4
parties making the Determination shall determine the portion (if less than all)
of such claims, damages, expenses (including attorneys' fees), judgments, fines
or amounts paid in settlement for which the Indemnitee is entitled to
indemnification and/or reimbursement under this Agreement.
4.6 Limitations on Indemnification. No indemnification pursuant to Sections
1 and 2 hereof shall be paid by the Company if a judgment (after exhaustion of
all appeals) or other final adjudication determines that the Indemnitee's
actions, or omissions to act, were material to the cause of action so
adjudicated and constitute:
(a) a violation of criminal law, unless the Indemnitee had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful;
(b) a transaction from which the Indemnitee received an improper
personal benefit within the meaning of Section 607.0850(7) of the Florida
Business Corporation Act;
(c) a circumstance under which the liability provisions of Section
607.0834 of the Florida Business Corporation Act are applicable; or
(d) willful misconduct or conscious disregard for the best interests of
the Company in a proceeding by or in the right of the Company to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder of
the Company.
5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN SATISFIED.
5.1 Costs. All costs of making the Determination required by Section 4
hereof shall be borne solely by the Company, including, but not limited to, the
costs of legal counsel, proxy solicitations and judicial determinations. The
Company shall also be solely responsible for paying (i) all reasonable expenses
incurred by the Indemnitee to enforce this Agreement, including, but not limited
to, the costs incurred by the Indemnitee to obtain court-ordered indemnification
pursuant to Section 8 hereof, regardless of the outcome of any such application
or proceeding, and (ii) all costs of defending any suits or proceedings
challenging payments to the Indemnitee under this Agreement.
5.2 Timing of the Determination. The Company shall use its best efforts
to make the Determination contemplated by Section 4 hereof promptly. In
addition, the Company agrees:
(a) if the Determination is to be made by the Board or a committee
thereof, such Determination shall be made not later than 15 days after a written
request for a Determination (a "Request") is delivered to the Company by the
Indemnitee;
(b) if the Determination is to be made by independent legal counsel,
such Determination shall be made not later than 30 days after a Request is
delivered to the Company by the Indemnitee; and
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<PAGE> 5
(c) if the Determination is to be made by the shareholders of the
Company, such Determination shall be made not later than 120 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or incurring) of
expenses with respect to which indemnification or reimbursement is sought,
and/or (ii) final disposition of the action, suit or proceeding with respect to
which indemnification or reimbursement is sought.
5.3 Reasonableness of Expenses. The evaluation and finding as to the
reasonableness of expenses incurred by the Indemnitee for purposes of this
Agreement shall be made (in the following order of preference) within 15 days of
the Indemnitee's delivery to the Company of a Request that includes a reasonable
accounting of expenses incurred:
(a) first, by the Board by a majority vote of a quorum consisting of
Disinterested Directors; or
(b) next, if a quorum cannot be obtained under subdivision (a), by
majority vote or consent of a committee duly designated by the Board (in which
designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
(c) next, if a finding cannot be obtained under either subdivision (a)
or (b), by vote or consent of the holders of a majority of the Company's Common
Stock that are represented in person or by proxy at a meeting called for such
purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 5.3 is not made within the prescribed
time. The finding required by this Section 5.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
5.4 Payment of Indemnified Amount. Immediately following a Determination
that the Indemnitee has met the applicable standard of conduct set forth in
Section l, 2 or 3 hereof, as the case may be, and the finding of reasonableness
of expenses contemplated by Section 5.3 hereof, or the passage of time
prescribed for making such determination(s), the Company shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
5.5 Shareholder Vote on Determination. The Indemnitee and any other
shareholder who is a party to the proceeding for which indemnification or
reimbursement is sought shall be entitled to vote on any Determination to be
made by the Company's shareholders, including a Determination made pursuant to
Section 5.7 hereof. In addition, in connection with each meeting at which a
shareholder Determination will be made, the Company shall solicit proxies that
expressly include a proposal to indemnify or reimburse the Indemnitee. The
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<PAGE> 6
Company proxy statement relating to the proposal to indemnify or reimburse the
Indemnitee shall not include a recommendation against indemnification or
reimbursement.
5.6 Selection of Independent Legal Counsel. If the Determination required
under Section 4 is to be made by independent legal counsel, such counsel shall
be selected by the Indemnitee with the approval of the Board, which approval
shall not be unreasonably withheld. The fees and expenses incurred by counsel in
making any Determination (including Determinations pursuant to Section 5.8
hereof) shall be borne solely by the Company regardless of the results of any
Determination and, if requested by counsel, the Company shall give such counsel
an appropriate written agreement with respect to the payment of their fees and
expenses and such other matters as may be reasonably requested by counsel.
5.7 Right of Director to Appeal an Adverse Determination by Board. If a
Determination is made by the Board or a committee thereof that the Indemnitee
did not meet the applicable standard of conduct set forth in Section l, 2 or 3
hereof, upon the written request of the Indemnitee and the Indemnitee's delivery
of $500 to the Company, the Company shall cause a new Determination to be made
by the Company's shareholders at the next regular or special meeting of
shareholders. Subject to Section 8 hereof, such Determination by the Company's
shareholders shall be binding and conclusive for all purposes of this Agreement.
5.8 Right of Director To Select Forum For Determination. If, at any time
subsequent to the date of this Agreement, "Continuing Directors" do not
constitute a majority of the members of the Board, or there is otherwise a
change in control of the Company (as contemplated by Item 403(c) of Regulation
S-K), then upon the request of the Indemnitee, the Company shall cause the
Determination required by Section 4 hereof to be made by independent legal
counsel selected by the Indemnitee and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of clause (3) of Section 4 hereof. If none of the legal counsel
selected by the Indemnitee are willing and/or able to make the Determination,
then the Company shall cause the Determination to be made by a majority vote or
consent of a Board committee consisting solely of Continuing Directors. For
purposes of this Agreement, a "Continuing Director" means either a member of the
Board at the date of this Agreement or a person nominated to serve as a member
of the Board by a majority of the then Continuing Directors.
5.9 Access by Indemnitee to Determination. The Company shall afford to the
Indemnitee and his representatives ample opportunity to present evidence of the
facts upon which the Indemnitee relies for indemnification or reimbursement,
together with other information relating to any requested Determination. The
Company shall also afford the Indemnitee the reasonable opportunity to include
such evidence and information in any Company proxy statement relating to a
shareholder Determination.
5.10 Judicial Determinations in Derivative Suits. In each action or suit
described in Section 2 hereof, the Company shall cause its counsel to use its
best efforts to obtain from the Court in which such action or suit was brought
(i) an express adjudication whether the Indemnitee is liable for negligence or
misconduct in the performance of his duty to the Company, and, if the Indemnitee
is so liable, (ii) a determination whether and to what extent, despite the
adjudication of liability but in view of all the circumstances of the case
(including this Agreement), the Indemnitee is fairly and reasonably entitled to
indemnification.
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<PAGE> 7
6. SCOPE OF INDEMNITY. The actions, suits and proceedings described in
Sections 1 and 2 hereof shall include, for purposes of this Agreement, any
actions that involve, directly or indirectly, activities of the Indemnitee both
in his official capacities as a Company director or officer and actions taken in
another capacity while serving as director or officer, including, but not
limited to, actions or proceedings involving (i) compensation paid to the
Indemnitee by the Company, (ii) activities by the Indemnitee on behalf of the
Company, including actions in which the Indemnitee is plaintiff, (iii) actions
alleging a misappropriation of a "corporate opportunity," (iv) responses to a
takeover attempt or threatened takeover attempt of the Company, (v) transactions
by the Indemnitee in Company securities, and (vi) the Indemnitee's preparation
for and appearance (or potential appearance) as a witness in any proceeding
relating, directly or indirectly, to the Company. In addition, the Company
agrees that, for purposes of this Agreement, all services performed by the
Indemnitee on behalf of, in connection with or related to any subsidiary of the
Company, any employee benefit plan established for the benefit of employees of
the Company or any subsidiary, any corporation or partnership or other entity in
which the Company or any subsidiary has a 5% ownership interest, or any other
affiliate of the Company, shall be deemed to be at the request of the Company.
7. ADVANCE FOR EXPENSES.
7.1 Mandatory Advance. Expenses (including attorneys' fees, court costs,
judgments, fines, amounts paid in settlement and other payments) incurred by the
Indemnitee in investigating, defending, settling or appealing any action, suit
or proceeding described in Section 1 or 2 hereof shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding. The Company
shall promptly pay the amount of such expenses to the Indemnitee, but in no
event later than 10 days following the Indemnitee's delivery to the Company of a
written request for an advance pursuant to this Section 7, together with a
reasonable accounting of such expenses.
7.2 Undertaking to Repay. The Indemnitee hereby undertakes and agrees to
repay to the Company any advances made pursuant to this Section 7 if and to the
extent that it shall ultimately be found that the Indemnitee is not entitled to
be indemnified by the Company for such amounts.
7.3 Miscellaneous. The Company shall make the advances contemplated by this
Section 7 regardless of the Indemnitee's financial ability to make repayment,
and regardless whether indemnification of the Indemnitee by the Company will
ultimately be required. Any advances and undertakings to repay pursuant to this
Section 7 shall be unsecured and interest-free.
8. COURT-ORDERED INDEMNIFICATION. Regardless whether the Indemnitee has met
the standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case may
be, and notwithstanding the presence or absence of any Determination whether
such standards have been satisfied, the Indemnitee may apply for indemnification
(and/or reimbursement pursuant to Section 3 or 12 hereof) to the court
conducting any proceeding to which the Indemnitee is a party or to any other
court of competent jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order indemnification
(and/or reimbursement) if it determines the Indemnitee is fairly and reasonably
entitled to indemnification (and/or reimbursement) in view of all the relevant
circumstances (including this Agreement).
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9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by Federal
securities laws, neither party shall disclose any payments under this Agreement
unless prior approval of the other party is obtained. Any payments to the
Indemnitee that must be disclosed shall, unless otherwise required by law, be
described only in Company proxy or information statements relating to special
and/or annual meetings of the Company's shareholders, and the Company shall
afford the Indemnitee the reasonable opportunity to review all such disclosures
and, if requested, to explain in such statement any mitigating circumstances
regarding the events reported.
10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No
legal action shall be brought and no cause of action shall be asserted by or on
behalf of the Company (or any of its subsidiaries) against the Indemnitee, his
spouse, heirs, executors, personal representatives or administrators after the
expiration of 2 years from the date the Indemnitee ceases (for any reason) to
serve as either director or an executive officer of the Company, and any claim
or cause of action of the Company (or any of its subsidiaries) shall be
extinguished and deemed released unless asserted by filing of a legal action
within such 2-year period.
11. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any other
provision of this Agreement, and regardless whether indemnification of the
Indemnitee would be permitted and/or required under this Agreement, if the
Indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives and
executors (collectively the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof.
Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be
mandatory and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
12. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any other
provision of this Agreement, and regardless of the presence or absence of any
Determination, the Company promptly (but not later than 30 days following the
Indemnitee's submission of a reasonable accounting) shall reimburse the
Indemnitee for all attorneys' fees and related court costs and other expenses
incurred by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
13. MISCELLANEOUS.
13.1 Notice Provision. Any notice, payment, demand or communication
required or permitted to be delivered or given by the provisions of this
Agreement shall be deemed to have been effectively delivered or given and
received on the date personally delivered to the respective party to whom it is
directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the addresses set forth above
their signatures to this Agreement.
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13.2 Entire Agreement. Except for the Company's Articles of Incorporation,
this Agreement constitutes the entire understanding of the parties and
supersedes all prior understandings, whether written or oral, between the
parties with respect to the subject matter of this Agreement.
13.3 Severability of Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid, and enforceable.
13.4 Applicable Law. This Agreement shall be governed by and construed
under the laws of the State of Florida.
13.5 Execution in Counterparts. This Agreement and any amendment may be
executed simultaneously or in two or more counterparts, each of which together
shall constitute one and the same instrument.
13.6 Cooperation and Intent. The Company shall cooperate in good faith
with the Indemnitee and use its best efforts to ensure that the Indemnitee is
indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
13.7 Amendment. No amendment, modification or alteration of the terms of
this Agreement shall be binding unless in writing, dated subsequent to the date
of this Agreement, and executed by the parties.
13.8 Binding Effect. The obligations of the Company to the Indemnitee
hereunder shall survive and continue as to the Indemnitee even if the Indemnitee
ceases to be a director, officer, employee and/or agent of the Company. Each and
all of the covenants, terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the successors to the Company and, upon the
death of the Indemnitee, to the benefit of the estate, heirs, executors,
administrators and personal representatives of the Indemnitee.
13.9 Gender and Number. Wherever the context shall so require, all words
herein in the male gender shall be deemed to include the female or neuter
gender, all singular words shall include the plural and all plural words shall
include the singular.
13.10 Nonexclusivity. The rights of indemnification and reimbursement
provided in this Agreement shall be in addition to any rights to which the
Indemnitee may otherwise be entitled by statute, bylaw, agreement, vote of
shareholders or otherwise.
13.11 Effective Date. The provisions of this Agreement shall cover claims,
actions, suits and proceedings whether now pending or hereafter commenced and
shall be
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retroactive to cover acts or omissions or alleged acts or omissions which
heretofore have taken place.
Executed as of the date first above written.
THE COMPANY:
-----------------------------------
By:
--------------------------------
Title:
THE INDEMNITEE:
-----------------------------------
Print address
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EXHIBIT 10.3
SHAREHOLDERS' AGREEMENT
AGREEMENT, made as of the 27 day of June, 1997, by and among Let's
Talk Cellular & Wireless, Inc., a Florida corporation f/k/a Let's Talk Cellular
of America, Inc. (the "Company"), those persons listed on the signature page
hereto under Current Shareholders (together with their permitted transferees,
the "Current Shareholders") and the persons listed on the signature page hereto
under Investors (together with their permitted transferees, the "Investors"
and, with the Current Shareholders, the "Shareholders").
WHEREAS, the parties hereto desire to execute this Shareholders'
Agreement and to be bound by the provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
shareholders, the parties hereby agree with each other as follows:
1. Definition of Shares. As used in this Agreement, "Shares" shall
mean and include all shares of the Company's Common Stock, now owned or
hereafter acquired by a Shareholder.
2. Prohibited Transfers. No Shareholder shall sell, assign, transfer,
pledge, hypothecate, mortgage, encumber or dispose of all or any of his Shares
except in compliance with the terms of this Agreement. Notwithstanding anything
to the contrary contained in this Agreement, (a) any Current Shareholder may
transfer without the necessity of prior approval all or any of his Shares by
way of gift to his spouse, to any of his lineal descendants or ancestors, or to
any trust for the benefit of any one or more of such Current Shareholder, his
spouse or his lineal descendants or ancestors, (b) any Current Shareholder may
transfer all or any of his Shares by will or the laws of descent and
distribution, (c) any Current Shareholder may transfer his Shares to an
Investor or to another Current Shareholder; and (d) any Investor may transfer
its Shares to an affiliate (as defined under the Securities Exchange Act of
1934) of such Investor; provided that in the event such transferee under this
Section 2 is not already a party to this Agreement, such transferee shall agree
in writing with the Company and the other Shareholders, as a condition to such
transfer, to be bound by all of the provisions of this Agreement to the same
extent as if such transferee were the Shareholder transferring such Shares.
3. Right of First Refusal on Dispositions.
(a) Except for the transfers permitted in Section 2, if at any time
a Current Shareholder (a "Selling Current Shareholder") desires to sell or
otherwise transfer all or any part of his Shares pursuant to a bona fide offer
from a third party (the "Proposed Transferee"), the Selling Current Shareholder
shall submit a written offer (the "Offer") by delivering the Offer to the
Company and the other Shareholders (the "Other Shareholders"), to sell such
Shares (the "Offered Shares") to the Other Shareholders on terms and
conditions, including price, not less favorable than those on which the Selling
Current Shareholder proposes to sell such Offered
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<PAGE> 2
Shares to the Proposed Transferee. The Offer shall disclose the identity of the
Proposed Transferee, the number of Offered Shares proposed to be sold, the
total number of Shares owned by the Selling Current Shareholder, the terms and
conditions, including price, of the proposed sale, and any other material facts
relating to the proposed sale. The Offer shall further state (i) that the Other
Shareholders may acquire, in accordance with the provisions of this Agreement,
any of the Offered Shares for the price and upon the other terms and conditions
set forth therein and (ii) that if all such Offered Shares are not purchased by
the Other Shareholders, the Other Shareholders may exercise their rights
provided pursuant to Section 5 hereof.
(b) Each Other Shareholder shall have the right to purchase that
number of Offered Shares as shall be equal to the number of Offered Shares
multiplied by a fraction, the numerator of which shall be the number of Shares
of Common Stock then owned by such Other Shareholder and the denominator of
which shall be the aggregate number of shares of Common Stock then owned by all
of the Other Shareholders who elect to purchase the Offered Shares. The amount
of such Offered Shares that each Other Shareholder is entitled to purchase
under this Section 3(b) shall be referred to as its "Pro Rata Fraction."
(c) The Other Shareholders shall have a right of oversubscription
such that if any Other Shareholder fails to accept the Offer as to its full Pro
Rata Fraction, the remaining Other Shareholders shall, among them, have the
right to purchase up to the balance of such Offered Shares not so purchased.
(d) Those Other Shareholders who desire to purchase all or any part
of the Offered Shares shall communicate in writing their election to purchase
to the Selling Current Shareholder, which communication shall state the number
of Offered Shares said Other Shareholders desire to purchase and shall be
provided to the Selling Current Shareholder within 20 days of the date the
Offer was made. Such communication shall, when taken in conjunction with the
Offer, be deemed to constitute a valid, legally binding and enforceable
agreement for the sale and purchase of such Offered Shares (subject to the
aforesaid limitations as to the right of the Other Shareholders to purchase
more than their Pro Rata Fraction). Sales of such Offered Shares to be sold to
the Other Shareholders pursuant to this Section 3 shall be made at the offices
of the Company within sixty (60) days following the date the Offer was made.
(e) If the Other Shareholders do not purchase all of the Offered
Shares, the remaining Offered Shares may be sold by the Selling Current
Shareholder at any time within ninety (90) days after the date the Offer was
made, subject to the provisions of Section 5. Any such sale shall be to the
Proposed Transferee, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. Any remaining Offered Shares not sold within such
ninety (90) day period shall continue to be subject to the requirements of a
prior offer pursuant to this Section 3. If Offered Shares are sold pursuant to
this Section 3 to any purchaser who is not a party to this Agreement, the
purchaser of such Offered Shares shall execute a counterpart of this Agreement
as a precondition of the purchase of such Offered Shares and any Offered Shares
sold to such purchaser shall continue to be subject to the provisions of this
Agreement.
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<PAGE> 3
4. Right of First Offer on Investor Dispositions.
(a) Except for the transfers permitted in Section 2, if at any time
an Investor (a "Selling Investor") desires to sell or otherwise transfer all or
part of its Shares to a third party, the Selling Investor shall notify the
Other Shareholders in writing (the "Investor Offer") of the number of Shares
proposed to be sold or transferred (the "Investor Offered Shares") and the name
of any third party who has made a written offer for such Shares, if applicable.
Each Other Shareholder shall have the right to offer to acquire the Investor
Offered Shares by submitting a proposal in writing to the Selling Investor
within twenty (20) days of delivery of the Investor Offer. The proposal shall
state the number of Investor Offered Shares proposed to be purchased, the terms
and conditions, including price, of the proposed purchase and any other
material facts relating to such proposed purchase.
(b) The Selling Investor may within twenty (20) days of delivery of
the proposals select the best proposal(s) from one or more Other Shareholders
or a portion of one or more proposals from several Other Shareholders (if
permitted by such proposals) and sell the Investor Offered Shares to the Other
Shareholders who have the highest and best offer(s) as determined by the
Selling Investor (collectively, the "Best Offer"). The Best Offer shall
constitute an irrevocable, valid, legally binding and enforceable offer for the
sale and purchase of the Investor Offered Shares which shall remain outstanding
for twenty (20) days after the delivery of the Best Offer (calculated using the
date the last proposal was submitted to the Selling Investor). Sales of
Investor Offered Shares to be sold to the Other Shareholders pursuant to this
Section 4(b) shall be made at the offices of the Company within sixty (60) days
following acceptance by the Selling Investor of the Best Offer.
(c) The Selling Investor may elect not to sell the Investor Offered
Shares to the Other Shareholders pursuant to the Best Offer and proceed to
offer to sell or transfer the Investor Offered Shares to a third party. In such
event, the Selling Investor may sell its shares to a third party provided that
(a) the aggregate cash consideration to be received at the closing of such sale
exceeds the aggregate cash consideration to be received pursuant to the Best
Offer, (b) the Selling Investor must sell the Investor Offered Shares to any
third party prior to the six month anniversary of the date of the Offer or the
Selling Investor must allow the Other Shareholders to propose new offers in
accordance with Section 4(a) hereof, (c) such third party agrees to be bound by
the terms hereof and (d) the Other Shareholders may exercise their rights
provided pursuant to Section 5 hereof with respect to any such sale of the
Investor Offered Shares to a third party.
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5. Right of Participation in Sales.
(a) If at any time a Shareholder (a "Selling Shareholder") desires
to sell all or any part of the Shares owned by such Shareholder to a Proposed
Transferee, (unless the entire transfer is pursuant to Section 2) and those
Shares to be transferred have not been purchased by another Shareholder under
Section 3 or Section 4 hereof, each Other Shareholder (unless it has elected to
purchase Shares pursuant to Section 3 or has had its offer to purchase Shares
accepted pursuant to Section 4 hereof) shall have the right to sell to the
Proposed Transferee, as a condition to such sale by the Selling Shareholder at
the same price per share and on the same terms and conditions as involved in
such sale by the Selling Shareholder a pro rata portion of the amount of Shares
proposed to be sold to the Proposed Transferee. The "pro rata portion" of
Shares which each Other Shareholder shall be entitled to sell to the Proposed
Transferee shall be that number of Shares as shall equal the number of Offered
Shares proposed to be sold to the Proposed Transferee multiplied by a fraction,
the numerator of which is the aggregate of all shares of Common Stock which are
then held by the Other Shareholder, and the denominator of which is the
aggregate of all shares of Common Stock which are then held by the Selling
Shareholder and all Other Shareholders wishing to participate in any sale under
this Section 5.
(b) Each Selling Shareholder who wishes to make a sale to a
Proposed Transferee which is subject to this Section 5 shall, after
complying with the provisions of Section 3 or Section 4, as applicable, give to
each Other Shareholder notice of such proposed sale, and stating that all
Offered Shares were not purchased pursuant to the Offer or the Investor Offer
as discussed in Section 3 or Section 4, as applicable. Such notice shall be
given at least 20 days prior to the date of the proposed sale to the Proposed
Transferee. Each Other Shareholder wishing to so participate in any sale under
this Section 5 shall notify the Selling Shareholder in writing of such
intention within 15 days after such Other Shareholder's receipt of the notice
described in the preceding sentence.
(c) The Selling Shareholder and each participating Other
Shareholder shall sell to the Proposed Transferee all, or at the option of the
Proposed Transferee, any part of the Shares proposed to be sold by them at not
less than the price and upon other terms and conditions, if any, not more
favorable to the Proposed Transferee than those in the notice provided by the
Selling Shareholder under subparagraph (b) above; provided, however, that any
purchase of less than all of such Shares by the Proposed Transferee shall be
made from the Selling Shareholder and each participating Other Shareholder pro
rata based upon the relative number of the Shares that the Selling Shareholder
and each participating Other Shareholder is otherwise entitled to sell pursuant
to Section 5(a).
(d) If any Shares are sold pursuant to this Section 5 to any
purchaser who is not a party to this Agreement, the purchaser of such Shares
shall execute a counterpart of this Agreement as a precondition to the purchase
of such Shares and such Shares shall continue to be subject to the provisions
of this Agreement.
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6. Requirement of Participation in Certain Sales.
(a) In the event of an Approved Sale (as defined below), the Company
shall deliver 20 days' prior written notice thereof to each Shareholder. Each
Shareholder shall vote for, consent to and raise no objections to, bring no
claim against or contest such Approved Sale. If the Approved Sale is structured
as (i) a merger or consolidation, each Shareholder shall waive any dissenters
rights, appraisal rights or similar rights in connection with such merger or
consolidation, or (ii) a sale of stock, each Shareholder shall (A) agree to
sell all of his or its Shares of Common Stock and rights to acquire Shares of
Common Stock on the terms and conditions approved by the Board of Directors and
the holders of a majority of the outstanding Shares of Common Stock and (B)
execute such purchase agreement and other documents as executed by the holders
of a majority of the outstanding shares of Common Stock. Each Shareholder shall
take such other necessary or desirable actions in connection with the
consummation of the Approved Sale as reasonably requested by the Company. For
purposes hereof, the term "Approved Sale" shall mean a sale of the Company to
an independent third party (unaffiliated with any Shareholder who owns in
excess of 5% of the Company's Common Stock on a fully-diluted basis) approved
by the Board of Directors of the Company and both Nicolas Molina and Brett
Beveridge and the holders of a majority of the outstanding shares of Common
Stock pursuant to which such third party or parties acquires (i) capital stock
of the Company possessing the voting power under normal circumstances to elect
a majority of the Company's Board of Directors (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
(b) The obligations of the Shareholders with respect to the Approved
Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Sale, each Shareholder
shall receive for his Shares of Common Stock the same form of consideration and
the same amount of consideration as each other Shareholder receives for each of
their Shares of Common Stock, (ii) if any holders of Common Stock are given an
option as to the form and amount of consideration to be received, each holder
of Common Stock shall be given the same option, and (iii) each holder of then
currently exercisable rights to acquire shares of Common Stock shall be given
an opportunity to either (A) exchange such rights prior to the consummation of
the Approved Sale or (B) receive in exchange for such rights consideration
equal to the amount determined by multiplying (1) the same amount of
consideration per Share of Common Stock received by holders of Common Stock in
connection with the Approved Sale less the exercise price per Share of Common
Stock of such rights to acquire such Common Stock by (2) the number of Shares
of Common Stock represented by such rights.
7. Board of Directors.
(a) At each annual meeting of the shareholders of the Company, and
at each special meeting of the shareholders of the Company called for the
purpose of electing directors of the Company, and at any time at which
shareholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Shareholders shall vote
all
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<PAGE> 6
Shares owned by them for the election of a Board of Directors as follows. The
Board of Directors shall consist of seven directors, designated as follows:
(i) four directors shall be designated by HIG Fund V,
Inc. and Texas Cellular Partners, L.P.; and
(ii) three directors shall be designated by a
majority of the Current Shareholders (which designees shall initially
be Nick Molina, Brett Beveridge and Allan Sorensen).
The board of directors of the Company's subsidiaries shall consist of
Nick Molina, Brett Beveridge and one additional director designated by HIG Fund
V, Inc. and Texas Cellular Partners, L.P. In the event the Company effects a
public offering of its common stock, then, as a condition precedent to such
public offering, the parties hereto shall cause the recomposition of the Board
of Directors of the Company to a Board with three year staggered terms. Messrs.
Molina and Beveridge shall be elected to the group which is elected for an
initial term of three years.
8. Term. This Agreement shall terminate immediately prior to (a) the
consummation of the first Qualified Public Offering or (b) the tenth
anniversary of the date of this Agreement, whichever occurs first. For purposes
hereof, the term "Qualified Public Offering" shall mean an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Company in which the aggregate net proceeds to the Company is
equal to at least $10,000,000.
9. Failure to Deliver Shares. If a Current Shareholder becomes
obligated to sell any Shares to another Shareholder under this Agreement and
fails to deliver such Shares in accordance with the terms of this Agreement,
the Other Shareholders may, at their option, in addition to all other remedies
they may have, send to the defaulting Current Shareholder the purchase price
for such Shares as is herein specified. Thereupon, the Company, upon written
notice to the defaulting Current Shareholder, (a) shall cancel on its books the
certificate or certificates representing the Shares to be sold and (b) shall
issue, in lieu thereof, in the name of such other Shareholder, a new
certificate or certificates representing such Shares, and thereupon all of the
defaulting Current Shareholder's rights in and to such Shares shall terminate.
10. Liquidity Option. If an underwritten public offering by the
Company has not been consummated on or before the second anniversary of the
date of this Agreement then Messrs. Molina and Beveridge shall have the option
(the "Liquidity Option") to cause all the Shareholders to each offer 20% of
their shares of Common Stock for sale to an independent third party.
Messrs. Molina and Beveridge shall exercise the Liquidity Option by
giving the Shareholders written notice thereof at any time after the second
anniversary of the date of this Agreement and on or before the date which is
sixty days thereafter.
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Upon receipt of the notice from Messrs. Molina and Beveridge, the
Company shall, with reasonable promptness, retain a nationally recognized
investment banking firm to actively market 20% of all the Shareholders' Shares
for a period of six months. If the investment banking firm finds an independent
third party buyer for the Shares and the proposed price per share reflects a
reasonable fair market value, then all of the Shareholders of the Company shall
be required to sell 20% of their respective Shares to such buyer. The Company
shall provide customary representations and warranties to such buyer and the
Shareholders shall only be obligated to represent their title to the Shares. If
the investment banking firm does not find such a suitable buyer within such
time frame then the Liquidity Option shall expire.
In the event that any potential buyer of Shares is not willing to buy
the full 20% of the outstanding Shares, then any reduction in Shares to be
purchased shall come from all the Shareholders on a pro rata basis.
11. Option to Cause Sale of the Company. If an underwritten public
offering by the Company has not occurred on or before the fifth anniversary of
the date of this Agreement, then Messrs. Molina and Beveridge
shall have the option (the "Sale Option") to cause the sale of the Company.
Messrs. Molina and Beveridge shall exercise the Sale Option by giving
the Company written notice thereof at any time after the fifth anniversary of
the date hereof and on or before the date which is sixty days thereafter. Upon
receipt of the notice from Messrs. Molina and Beveridge, the Company shall,
with reasonable promptness, retain a nationally recognized investment banking
firm to actively market the sale of the Company. If the investment banking firm
finds an independent third party buyer for the Shares and the proposed price
per share reflects a reasonable fair market value, then the Shareholders shall
be required to sell all of their Shares to such Buyer. The obligation to sell
the Company shall continue so long as Messrs. Molina and Beveridge continue to
hold Common Stock in the Company.
12. Shareholder Loans. The Company acknowledges that it has certain
loans outstanding from Messrs. Molina and Beveridge of $129,050.00 and
$129,050.00, respectively (the "Loans") as evidenced by those two (2) certain
Renewal Promissory Notes, each dated as of June 25, 1996 (the "Notes"). The
Company agrees that if not sooner repaid, then upon the earlier of (i) the
consummation of a Qualified Public Offering or (ii) June 1, 1998, the Company
will repay the Loans, including any and all accrued and unpaid interest, and
further agrees to immediately amend, restate and replace the Notes with
replacement notes of like tenor reflecting the above-provided payment dates.
13. Specific Enforcement. Each Shareholder and the Company
expressly agrees that the other Shareholders and the Company may be irreparably
damaged if this Agreement is not specifically enforced. Upon a breach or
threatened breach of the terms, covenants and/or conditions of this Agreement
by any Shareholder, the other Shareholders and the Company shall, in addition
to all other remedies, each be entitled to apply for a temporary or permanent
injunction, and/or a decree for specific performance, in accordance with the
provisions hereof.
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14. Legend. Each certificate evidencing any of the Shares now owned
or hereafter acquired by the Current Shareholders shall bear a legend in
addition to any other required legend, substantially as follows:
"ANY SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY, AND
SUBJECT TO, THE TERMS AND PROVISIONS OF A CERTAIN SHAREHOLDERS'
AGREEMENT DATED AS OF JUNE __, 1997. A COPY OF SAID AGREEMENT IS
ON FILE WITH THE SECRETARY OF THE CORPORATION."
15. Notices. Notices given hereunder shall be deemed to have been
duly given on the date of personal delivery or on the date of postmark if
mailed by certified or registered mail, return receipt requested, to the party
being notified at his or its address specified on the applicable schedule
hereto or such other address as the addressee may subsequently notify the other
parties of in writing.
16. Entire Agreement and Amendments. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified,
amended or terminated except by a written agreement signed by the parties
hereto; provided, however, that Investor owning at least a majority of the
Shares owned by all Investors may effect any such waiver, modification,
amendment or termination on behalf of all of the Investors and 80% of the
Shares owned by all Current Shareholders may effect any such waiver,
modification, amendment or termination on behalf of all of the Current
Shareholders. Each of the Shareholders represents that he or it is not a party
to any other agreement which would prevent him or it from performing his or its
obligations hereunder. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
17. Governing Law; Successors and Assigns. This Agreement shall be
governed by the internal laws of the State of Florida without giving effect to
the conflicts of laws principles thereof and, except as otherwise provided
herein, shall be binding upon the heirs, personal representatives, executors,
administrators, successors and assigns of the parties.
18. Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any
manner affect or render illegal, invalid or unenforceable any other provision
of this Agreement, and this Agreement shall be carried out as if any such
illegal, invalid or unenforceable provision were not contained herein. This
Agreement supersedes that certain Shareholders Agreement, dated as of June 25,
1996, which is hereby terminated, and any and all other agreements between (a)
the Company on the one hand and any Shareholder on the other
-8-
<PAGE> 9
hand (other than the Series A Preferred Stock Purchase Agreement dated as of
June 25, 1996, the agreements which are exhibits thereto, and any amendments
and modifications thereof) and (b) any two or more Shareholders. Each
Shareholder represents and warrants that he is not subject to any agreement
which may conflict with or violate the terms of this Agreement and covenants
that he will not enter into any such agreement.
19. Captions. Captions are for convenience only and are not deemed to
be part of this Agreement.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * * * *
-9-
<PAGE> 10
CURRENT SHAREHOLDERS: COMPANY:
LET'S TALK CELLULAR & WIRELESS,
INC.
/s/Nick Molina
- -----------------------
Nick Molina
By:/s/Nick Molina
-----------------------------
Name: Nick Molina
/s/Brett Beveridge Title: Chief Executive Officer
- -----------------------
Brett Beveridge
/s/Allan Sorensen INVESTORS:
- -----------------------
Allan Sorensen HIG FUND V, INC.
By:/s/Anthony Tamer
-----------------------------
Name: Anthony Tamer
Title: President
TEXAS CELLULAR PARTNERS, L.P.
By: HIG TEXAS CELLULAR
COMPANY, its General Partner
By:/s/Anthony Tamer
-----------------------------
Name: Anthony Tamer
Title: President
10
<PAGE> 1
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, made as of the 27 day of June, 1997,
(the "Agreement") by and among Let's Talk Cellular & Wireless, Inc., a Florida
corporation f/k/a Let's Talk Cellular of America, Inc. (the "Company"), Nicolas
Molina, Brett Beveridge and Allan Sorensen (each a "Holder" and collectively,
the "Holders").
WHEREAS, the Company desires to provide the Holders with certain
piggyback registration rights; and
WHEREAS, the parties hereto desire to evidence such registration
rights by entering into this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties hereby agree as follows:
1. Certain Definitions. As used in this Section 1, the following
terms shall have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means the person who is then the record owner of Registrable
Securities which have not been sold to the public.
"Registrable Securities" means (i) shares of Common Stock owned by a
Holder; and (ii) any Common Stock issued in respect of the shares described in
clause (i) upon any stock split, stock dividend, recapitalization or other
similar event.
The term "register" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public sale of
securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue sky fees and expenses,
reasonable fees and disbursements of one counsel for all the selling Holders
and other security holders, and the expense of any special audits incident to
or required by any such registration.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
2. "Piggy Back" Registrations.
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<PAGE> 2
(a) If at any time the Company shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders exercising their registration rights, other than a
registration relating solely to employee benefit plans, or a registration on
any registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
shall:
(i) Promptly give to each Holder of Registrable
Securities written notice thereof (which shall include the number of
shares the Company or other security holder proposes to register and,
if known, the name of the proposed underwriter); and
(ii) Use its best efforts to include in such registration
all the Registrable Securities specified in a written request or
requests, made by any Holder within ten (10) days after the date of
delivery of the written notice from the Company described in clause
(i) above. If the underwriter advises the Company (A) that marketing
considerations require a limitation on the number of shares offered
pursuant to any registration statement, then the Company may offer all
of the securities it proposes to register for its own account or the
maximum amount that the underwriter considers saleable and such
limitation on any remaining securities that may, in the opinion of the
underwriter, be sold will be imposed pro rata among all shareholders
who are entitled to include shares in such Registration Statement
according to the number of Registrable Securities each such
shareholder requested to be included in such registration statement,
or (B) that marketing considerations require a limitation on the
number of shares offered by the management of the Company pursuant to
any registration statement, then such limitation on any shares that
may, in the opinion of the underwriter, be sold by the management of
the Company will be imposed pro rata among all management
shareholders who are entitled to include such shares in such
registration statement according to the number of Registrable
Securities each such management shareholder requested to be included
in such registration statement.
(b) The Company shall select the underwriter for an
offering made pursuant to this Section 2.
3. Expenses of Registration. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Section 2 shall be paid by the Company. All Selling Expenses incurred in
connection with any such registration, qualification or compliance shall be
borne by the holders of the securities registered, pro rata on the basis of the
number of their shares so registered.
4. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company shall keep each
Holder of Registrable Securities included in such registration advised in
writing as to the initiation of each
2
<PAGE> 3
registration and as to the completion thereof. At its expense, the Company
shall do the following for the benefit of such Holders:
(a) Use its best efforts to keep such registration
effective for a period of one hundred twenty (120) days or until the Holder or
Holders have completed the distribution described in the registration statement
relating thereto, whichever first occurs, and amend or supplement such
registration statement and the prospectus contained therein from time to time
to the extent necessary to comply with the Securities Act and applicable state
securities laws;
(b) Use its best efforts to register or qualify the
Registrable Securities covered by such registration under the applicable
securities or "blue sky" laws of such jurisdictions as the selling shareholders
may reasonably request; provided, that the Company shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
otherwise required to be so qualified or to take any action which would subject
it to the service of process in suits other than those arising out of such
registration;
(c) Furnish such number of prospectuses and other
documents incident thereto as a Holder from time to time may reasonably
request;
(d) To the extent then permitted under applicable
professional guidelines and standards, obtain a comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters and an opinion from
the Company's counsel in customary form and covering such matters of the type
customarily covered in a public issuance of securities, in each case addressed
to the Holders, and provide copies thereof to the Holders; and
(e) Permit the counsel to the selling shareholders to
inspect and copy such corporate documents as he may reasonably request.
5. Indemnification.
(a) The Company shall, and hereby does, indemnify each
Holder, each of its officers and stockholders, and each person controlling such
Holder within the meaning of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls such
underwriter within the meaning of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or the Exchange Act or the
securities act of any state or any rule or regulation thereunder
3
<PAGE> 4
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and shall reimburse each such Holder, each of its officers, directors and
partners, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, whether or not resulting in any
liability, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement (or alleged untrue statement) or omission (or
alleged omission) based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder shall, if Registrable Securities held by
him are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify the Company, each of its directors
and officers and each underwriter, if any, of the Company's securities covered
by such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each other such Holder and each of their officers,
directors and partners, and each person controlling such Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the Company and
such Holder's directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, whether or not resulting in liability, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of each Holder hereunder shall be limited to an amount equal to the
net proceeds received by such Holder upon sale of his securities.
(c) Each party entitled to indemnification under this
Section 5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, but the failure of any Indemnifying Party to give such notice shall
not relieve the Indemnifying Party of its obligations under this Section 5
(except and to the extent the Indemnifying Party has been prejudiced as a
consequence thereof). The Indemnifying Party shall be entitled to participate
in, and to the extent that it may elect by written notice delivered to the
Indemnified Party promptly after receiving the aforesaid notice from such
Indemnified Party, at its expense to assume, the defense of any such claim or
any litigation resulting therefrom, with counsel reasonably satisfactory to
such Indemnified Party, provided that the Indemnified Party may participate
4
<PAGE> 5
in such defense at its expense, notwithstanding the assumption of such defense
by the Indemnifying Party, and provided, further, that if the defendants in any
such action shall include both the Indemnified Party and the Indemnifying Party
and the Indemnified Party shall have reasonably concluded that there may be
legal defenses available to it and/or other Indemnified parties which are
different from or additional to those available to the Indemnifying Party, the
Indemnified Party or parties shall have the right to select separate counsel to
assert such legal defenses and to otherwise participate in the defense of such
action on behalf of such Indemnified Party or parties and the fees and expenses
of such counsel shall be paid by the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified Party
shall (i) furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and litigation
resulting therefrom and (ii) shall reasonably assist the Indemnifying Party in
any such defense, provided that the Indemnified Party shall not be required to
expend its funds in connection with such assistance.
(d) No Holder shall be required to participate in a
registration pursuant to which it would be required to execute an underwriting
agreement in connection with a registration effected under Section 2 which
imposes indemnification or contribution obligations on such Holder more onerous
than those imposed hereunder; provided, however, that the Company shall not be
deemed to breach the provisions of Section 2 if a Holder is not permitted to
participate in a registration on account of his refusal to execute an
underwriting agreement on the basis of this subsection (d).
6. Limitations on Registration Rights. From and after the date
of this Agreement, the Company shall not enter into any agreement with any
holder or prospective holder of any securities of the Company giving such
holder or prospective holder (a) the right to require the Company, upon any
registration of any of its securities, to include, among the securities which
the Company is then registering, securities owned by such holder, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
its securities will not limit the number of Registrable Securities sought to be
included by the Holders of Registrable Securities or reduce the offering price
thereof; or (b) the right to require the Company to initiate any registration
of any securities of the Company.
7. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit
the sale of restricted securities (as that term is used in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to use
its best efforts to:
5
<PAGE> 6
(a) make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as a Holder owns any restricted securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its securities
to the general public), and of the Securities Act and Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
8. Listing Application. If shares of any class of stock of the
Company shall be listed on a national securities exchange, the Company shall,
at its expense, include in its listing application all of the shares of the
listed class then owned by any Holder.
9. Damages. The Company recognizes and agrees that the holder of
Registrable Shares shall not have an adequate remedy if the Company fails to
comply with the provisions of this Agreement, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Shares shall be entitled to seek
specific performance of the Company's obligations hereunder and that the
Company will not oppose an application seeking such specific performance.
10. Notices. All notices required or permitted to be given
pursuant to this Agreement shall be given in writing and shall be transmitted
by personal delivery, be registered or certified mail, return receipt
requested, postage prepaid, or by telecopier or other electronic means (with a
confirming copy by registered or certified mail, postage prepaid) and shall be
addressed as follows:
The Company:
Let's Talk Cellular & Wireless, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attention: President
With a copy to:
6
<PAGE> 7
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Jorge L. Freeland
The Holders:
Nicolas Molina
7545 S.W. 84th Court
Miami, Florida 33143
Brett Beveridge
9760 S.W. 148th Street
Miami, Florida 33176
Allan Sorensen
1500 South Ocean Drive
Ft. Lauderdale, Florida 33316
A party may designate a new address to which notices required or permitted to
be given pursuant to this Agreement shall thereafter be transmitted by given
written notice to that effect to the other parties. Each notice transmitted in
the manner described in this Section 2 shall be deemed to have been given,
received and become effective for all purposes at the time it shall have been
(i) delivered to the addresses as indicated by the return receipt (if
transmitted by mail), the affidavit of the messenger (if transmitted by
personal delivery) or the answer back or call back (if transmitted by
telecopier or other electronic means, but only if a confirmation copy of such
telecopied or electronically delivered notice is also delivered by registered
or certified mail, postage prepaid) or (ii) presented for delivery to the
addressee as so indicated during normal business hours, if such delivery shall
have been refused for any reason.
11. Governing Law. This Agreement shall be deemed a contract made
under the laws of the State of Florida and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such state.
12. Binding Effect; Assignment: Third party Beneficiaries. This
Agreement shall be binding upon the parties and their respective successors and
assigns and shall inure to the benefit of the parties and their respective
successors and permitted assigns. No party shall assign any of its rights or
delegate any of its duties under this Agreement (by operation of law or
otherwise) without the prior written consent of the other parties. Any
assignment of rights or delegation of duties under this Agreement by a party
without the prior written consent of the other parties, if such consent is
required hereby, shall be void.
7
<PAGE> 8
No person (including without limitation, any employee of a party) shall be, or
be deemed to be, a third party beneficiary of this Agreement.
13. Entire Agreement; Effective Date of Agreement. This Agreement
constitutes the entire contract among the parties with respect to the subject
matter hereof and cancels and supersedes all of the previous contracts,
commitments, representations, warranties and understandings (whether oral or
written) by, between or among the parties with respect to the subject matter
hereof, including, but not limited to the Purchase Agreement. This Agreement
shall not become effective until the consummation of the IPO.
14. Amendments. No addition to, and no cancellation, renewal,
extension, modification or amendment of, this Agreement shall be binding upon a
party unless such addition, cancellation, renewal, extension, modification or
amendment is set forth in a written instrument which states that it adds to,
amends, cancels, renews, extends or modifies this Agreement and has been
approved by all of the parties.
15. Waivers. No waiver of any provision of this Agreement shall
be binding upon a party unless such waiver is expressly set forth in a written
instrument which is executed and delivered on behalf of such party by an
officer of, or attorney-in-fact for, such party. Such waiver shall be
effective only to the extent specifically set forth in such written instrument.
Neither the exercise (from time to time and at any time) by a party of, nor the
delay or failure (at any time or for any period of time) to exercise, any
right, power or remedy shall constitute a waiver of the right to exercise, or
impair, limit or restrict the exercise of, such right, power or remedy or any
other right, power or remedy at any time and from time to time thereafter. No
waiver of any right, power of remedy of a party shall be deemed to be a waiver
of any other right, power or remedy of such party or shall, except to the
extent so waived, impair, limit or restrict the exercise of such right, power
or remedy.
16. Headings; Counterparts. The headings set forth in this
Agreement have been inserted for convenience of reference only, shall not be
considered a part of this Agreement and shall not limit, modify or affect in
any way the meaning or interpretation of this Agreement. This Agreement may be
signed in any number of counterparts, each of which (when executed and
delivered) shall constitute an original instrument, but all of which together
shall constitute one and the same instrument. It shall not be necessary when
making proof of this Agreement to account for any counterparts other than a
sufficient number of counterparts which, when taken together contain signatures
of all of the parties.
17. Severability. If any provision of this Agreement shall
hereafter be held to be invalid, unenforceable or illegal, in whole or in part,
in any jurisdiction under any circumstances for any reason, (i) such provision
shall be reformed to the minimum extent necessary to cause such provision to be
valid, enforceable and legal while preserving the intent of the parties as
expressed in, and the benefits to the parties provided by, this Agreement of
(ii) if such provision cannot be so reformed, such provision shall be severed
8
<PAGE> 9
from this Agreement and an equitable adjustment shall be made to this Agreement
(including, without limitation, addition of necessary further provisions to
this Agreement) so as to give effect to the intent as so expressed and the
benefits so provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or
severance shall effect or impair the legality, validity or enforceability of
any other provision of this Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.
Let's Talk Cellular & Wireless, Inc.
By:/s/Nicolas Molina
---------------------------------------
Name: Nicolas Molina
Title: Chief Executive Officer
/s/Nicolas Molina
---------------------------------------
Nicolas Molina
/s/Brett Beveridge
---------------------------------------
Brett Beveridge
/s/Allan Sorensen
---------------------------------------
Allan Sorensen
10
<PAGE> 1
EXHIBIT 10.5
AMENDED AND RESTATED
RENEWAL PROMISSORY NOTE
$129,050.00
Dated as of June 27, 1997
FOR VALUE RECEIVED, the undersigned, LET'S TALK CELLULAR & WIRELESS, INC.
a Florida corporation (the "Borrower"), hereby promises to pay to the order of
NICK MOLINA, a Florida resident ("Lender"), the principal sum of One Hundred
and Twenty-Nine Thousand Fifty and no/100 Dollars ($129,050.00), together with
interest on the unpaid principal balance hereof from time to time outstanding,
from the date hereof until the principal hereof shall have become due and
payable (whether by acceleration, maturity or otherwise) at a fixed rate equal
to eight percent (8%) per annum. Said principal and interest shall be payable
in lawful money of the United States of America and in immediately available
funds, computed on a daily basis, based upon a 360-day year. All payments
shall be made to the Lender at the Borrower's principal office at 5200 N.W.
77th Court, Miami, Florida 33166, or at such other place as the holder hereof
may, from time to time, designate in writing.
All outstanding principal shall be due and payable in full to the Lender
on the earlier to occur of (a) a Qualified Public Offering (as that term is
defined in that certain Shareholders' Agreement, dated as of the date hereof
(the "Shareholders' Agreement"), by and among the Borrower, the Lender, HIG
Fund V, Inc. ("HIG"), Texas Cellular Partners, L.P. ("TCP"), Brett Beveridge
and Allan Sorensen) or (b) June 1, 1998 (each a "Final Payment Date"). All
accrued and unpaid interest under this Note shall be due and payable monthly in
arrears on the first day of each month until this Note is paid in full, and at
maturity.
This Note replaces and renews that certain Renewal Promissory Note, dated
as of June 25, 1996, and evidences the outstanding balance of any and all prior
loans made by the Lender to the Borrower (the "Shareholder Loan"), the
outstanding principal balance of which Shareholder Loan as of the date hereof
equals the original principal balance of this Note. Accordingly, no Florida
documentary stamp taxes are due and payable on this Note. As of the date
hereof, no interest which has heretofore accrued with respect to the
Shareholder Loan remains unpaid. All principal outstanding pursuant to the
Shareholder Loan as of the date hereof shall, as of the date hereof and without
any action on the part of any party, be deemed to be outstanding under this
Note. Acceptance by the Lender of this Note shall not be deemed or construed
as payment or satisfaction of the Shareholder Loan, which shall continue to
remain outstanding although the indebtedness represented thereby is
consolidated herein. This Note represents any and all amounts that are
currently owed by the Borrower to the Lender.
If the principal of this Note or any portion hereof and, to the extent
permitted by law, interest hereon shall not be paid when due, whether by
acceleration or otherwise, the same shall, or in the event of the occurrence of
an Event of Default (as hereinafter defined), the outstanding principal balance
of this Note shall, at the option of the Lender, thereafter bear interest for
any period during which the same shall be overdue, or during the pendency of any
such Event of
<PAGE> 2
Default, at a rate per annum equal to the lower of (a) the maximum rate
permitted by applicable law, or (b) a rate of fourteen percent (14%) per annum,
and payable on demand.
Upon the happening of any of the following events each of which shall
constitute a default hereunder (herein referred to as an "Event of Default"),
all liabilities of the Borrower to the Lender, whether or not evident by this
Note, shall thereupon or thereafter, at the option of the Lender, without
notice or demand, become due and payable (the "Acceleration Rights"):
(a) failure of the Borrower to perform any agreement
hereunder or under any other instrument or agreement evidencing,
securing and/or guaranteeing the obligations and indebtedness of
the Borrower to the Lender evidenced by this Note, or to pay in
full, when due, any liability whatsoever or any principal
installment of this Note or interest installment hereon, when the
same shall become due and payable;
(b) the Borrower shall at the direction of the Board of
Directors (excluding the vote of the Lender):
(i) make an assignment for the benefit of creditors, petition
or apply to any court or other tribunal for the appointment of a
custodian, receiver or any trustee or shall commence any
proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction whether now or hereafter in effect; or if there
shall have been filed any such petition or application, or any
such proceeding shall have been commenced against the Borrower in
which an order for relief is entered or which remains undismissed
for a period of thirty (30) days or more; the Borrower, by any act
or omission shall indicate consent to, approval of or fail to
timely object to any such petition, application or proceeding or
order for relief or the appointment of a custodian, receiver or
any trustee or shall suffer any such custodianship, receivership
or trusteeship to continue undischarged for a period of thirty
(30) days or more;
(ii) generally not pay its debts as such debts become due or
admit in writing its inability to pay its debts as they mature; or
(iii) have concealed, removed or permitted to be concealed or
removed any part of its properties or assets, with intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made
any transfer of its property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid; or
(iv) be "insolvent", as such term is defined in the federal
bankruptcy code;
- 2 -
<PAGE> 3
(c) the taking of possession of any substantial part of the
property of the Borrower at the instance of any governmental
authority;
Notwithstanding the foregoing paragraph, the Lender's Acceleration Rights
shall not be exercisable prior to a Final Payment Date if at the time of the
Event of Default the Lender and Brett Beveridge are in control of the
Borrower's Board of Directors pursuant to the terms of the Shareholders'
Agreement. If HIG and TCP are in control of the Board of Directors pursuant to
the terms of the Shareholders' Agreement, then the Lender's Acceleration Rights
shall be exercisable immediately upon an Event of Default; provided, however,
that in the event that an Event of Default is due to a failure to make a
payment of interest when due hereunder and such missed payment is not cured
within fifteen (15) days after the failure to make such payment, then the
Lender shall stay the exercise of its Acceleration Rights for a period of six
months from the date that the Borrower failed to make a payment of interest
when due.
The Borrower agrees to pay all reasonable costs incurred by any holder
hereof, including reasonable attorneys' fees and costs (including those for
appellate proceedings), incurred in connection with any Event of Default, or in
connection with the collection or attempted collection or enforcement hereof
whether or not legal proceedings may have been instituted.
All parties to this Note, including the Borrower and any sureties,
endorsers or guarantors, hereby waive presentment for payment, demand, protest,
notice of dishonor, notice of acceleration of maturity, and all defenses on the
ground of extension of time for payment hereof, and agree to continue and
remain bound for the payment of principal, interest and all other sums payable
hereunder, notwithstanding any change or changes by way of release, surrender,
exchange or substitution of any security for this Note or by way of any
extension or extensions of time for payment of principal or interest; and all
such parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice to or consent of any of them.
The rights and remedies of the holder as provided herein shall be cumulative
and concurrent and may be pursued singularly, successively or together at the
sole discretion of the holder, and may be exercised as often as occasion
therefor shall occur, and the failure to exercise any such right or remedy
shall in no event be construed as a waiver or release of the same.
The Borrower does not intend or expect to pay, nor does the Lender intend
or expect to charge, accept or collect any interest which, when added to any
commitment fee or any other charge upon the principal, shall be in excess of
the highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited. Should
acceleration, prepayment or any other charges upon the principal or any portion
thereof result in the computation or earning of interest in excess of the
highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited, any and all such
excess is hereby waived and shall be credited to the outstanding principal
balance and/or, to the extent such excess exceeds such outstanding principal
balance, returned to the Borrower.
The unpaid balance of this Note may be prepaid at any time and from time
to time without premium or penalty. All prepayments made hereunder shall be
credited first to accrued interest and then to principal; however, in the
event of default hereunder, the Lender may, in its sole
- 3 -
<PAGE> 4
discretion, and in such order as it may choose, apply any payment(s) to
interest, principal and/or lawful charges and expenses then accrued.
No delay or omission on the part of the holder of this Note in exercising
any right hereunder shall operate as a waiver of such right or any other right
under this Note, nor shall any waiver on one occasion be construed as a bar to
or waiver of any such right on any future occasion. No waiver shall be
effective unless in writing and signed by the holder of this Note.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Florida. In the event the Lender
determines it necessary to institute suit to collect on this Note, the action
may be maintained in Miami, Florida and the Borrower does hereby consent to the
institution of action in that jurisdiction and waive any and all defenses it
may have to the maintenance of the suit in Miami, Florida. This Note is
binding upon the Borrower and its personal representatives, successors and
assigns.
THE BORROWER HEREBY, AND THE LENDER BY ITS ACCEPTANCE OF THIS NOTE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT, DOCUMENT OR INSTRUMENT
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO MAKE CERTAIN MODIFICATIONS
TO THE SHAREHOLDER LOAN AS EVIDENCED BY THIS NOTE.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed and delivered as of the day and year first written above.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ Brett Beveridge
-------------------------------------
Print Name: Brett Beveridge
-----------------------------
Its: President
------------------------------------
- 5 -
<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED
RENEWAL PROMISSORY NOTE
$129,050.00 Dated as of June 27, 1997
FOR VALUE RECEIVED, the undersigned, LET'S TALK CELLULAR & WIRELESS, INC.
a Florida corporation (the "Borrower"), hereby promises to pay to the order of
BRETT BEVERIDGE, a Florida resident ("Lender"), the principal sum of One
Hundred and Twenty-Nine Thousand Fifty and no/100 Dollars ($129,050.00),
together with interest on the unpaid principal balance hereof from time to time
outstanding, from the date hereof until the principal hereof shall have become
due and payable (whether by acceleration, maturity or otherwise) at a fixed
rate equal to eight percent (8%) per annum. Said principal and interest shall
be payable in lawful money of the United States of America and in immediately
available funds, computed on a daily basis, based upon a 360-day year. All
payments shall be made to the Lender at the Borrower's principal office at 5200
N.W. 77th Court, Miami, Florida 33166, or at such other place as the holder
hereof may, from time to time, designate in writing.
All outstanding principal shall be due and payable in full to the Lender
on the earlier to occur of (a) a Qualified Public Offering (as that term is
defined in that certain Shareholders' Agreement, dated as of the date hereof
(the "Shareholders' Agreement"), by and among the Borrower, the Lender, HIG
Fund V, Inc. ("HIG"), Texas Cellular Partners, L.P. ("TCP"), Nick Molina and
Allan Sorensen) or (b) June 1, 1998 (each a "Final Payment Date"). All accrued
and unpaid interest under this Note shall be due and payable monthly in arrears
on the first day of each month until this Note is paid in full, and at
maturity.
This Note replaces and renews that certain Renewal Promissory Note, dated
as of June 25, 1996, and evidences the outstanding balance of any and all prior
loans made by the Lender to the Borrower (the "Shareholder Loan"), the
outstanding principal balance of which Shareholder Loan as of the date hereof
equals the original principal balance of this Note. Accordingly, no Florida
documentary stamp taxes are due and payable on this Note. As of the date
hereof, no interest which has heretofore accrued with respect to the
Shareholder Loan remains unpaid. All principal outstanding pursuant to the
Shareholder Loan as of the date hereof shall, as of the date hereof and without
any action on the part of any party, be deemed to be outstanding under this
Note. Acceptance by the Lender of this Note shall not be deemed or construed as
payment or satisfaction of the Shareholder Loan, which shall continue to remain
outstanding although the indebtedness represented thereby is consolidated
herein. This Note represents any and all amounts that are currently owed by the
Borrower to the Lender.
If the principal of this Note or any portion hereof and, to the extent
permitted by law, interest hereon shall not be paid when due, whether by
acceleration or otherwise, the same shall, or in the event of the occurrence of
an Event of Default (as hereinafter defined), the outstanding principal balance
of this Note shall, at the option of the Lender, thereafter bear interest for
any period during which the same shall be overdue, or during the pendency of
any such Event of
<PAGE> 2
Default, at a rate per annum equal to the lower of (a) the maximum rate
permitted by applicable law, or (b) a rate of fourteen percent (14%) per annum,
and payable on demand.
Upon the happening of any of the following events, each of which shall
constitute a default hereunder (herein referred to as an "Event of Default"),
all liabilities of the Borrower to the Lender, whether or not evidenced by this
Note, shall thereupon or thereafter, at the option of the Lender, without
notice or demand, become due and payable (the "Acceleration Rights"):
(a) failure of the Borrower to perform any agreement
hereunder or under any other instrument or agreement evidencing,
securing and/or guaranteeing the obligations and indebtedness of
the Borrower to the Lender evidenced by this Note, or to pay in
full, when due, any liability whatsoever or any principal
installment of this Note or interest installment hereon, when the
same shall become due and payable;
(b) the Borrower shall at the direction of the Board of
Directors (excluding the vote of the Lender):
(i) make an assignment for the benefit of creditors, petition
or apply to any court or other tribunal for the appointment of a
custodian, receiver or any trustee or shall commence any
proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or if there
shall have beer filed any such petition or application, or any
such proceeding shall have been commenced against the Borrower in
which an order for relief is entered or which remains undismissed
for a period of thirty (30) days or more; the Borrower, by any act
or omission shall indicate consent to, approval of or fail to
timely object to any such petition, application or proceeding or
order for relief or the appointment of a custodian, receiver or
any trustee or shall suffer any such custodianship, receivership
or trusteeship to continue undischarged for a period of thirty
(30) days or more;
(ii) generally not pay its debts as such debts become due or
admit in writing its inability to pay its debts as they mature; or
(iii) have concealed, removed or permitted to be concealed or
removed any part of its properties or assets, with intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made any
transfer of its property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or
(iv) be "insolvent", as such term is defined in the federal
bankruptcy code;
2
<PAGE> 3
(c) the taking of possession of any substantial part of the
property of the Borrower at the instance of any governmental authority;
Notwithstanding the foregoing paragraph, the Lender's Acceleration Rights
shall not be exercisable prior to a Final Payment Date if at the time of the
Event of Default the Lender and Nick Molina are in control of the Borrower's
Board of Directors pursuant to the terms of the Shareholders' Agreement. If
HIG and TCP are in control of the Board of Directors pursuant to the terms of
the Shareholders' Agreement, then the Lender's Acceleration Rights shall be
exercisable immediately upon an Event of Default; provided, however, that in
the event that an Event of Default is due to a failure to make a payment of
interest when due hereunder and such missed payment is not cured within fifteen
(15) days after the failure to make such payment, then the Lender shall stay
the exercise of its Acceleration Rights for a period of six months from the
date that the Borrower failed to make a payment of interest when due.
The Borrower agrees to pay all reasonable costs incurred by any holder
hereof, including reasonable attorneys' fees and costs (including those for
appellate proceedings), incurred in connection with any Event of Default, or in
connection with the collection or attempted collection or enforcement hereof
whether or not legal proceedings may have been instituted.
All parties to this Note, including the Borrower and any sureties,
endorsers or guarantors, hereby waive presentment for payment, demand, protest,
notice of dishonor, notice of acceleration of maturity, and all defenses on the
ground of extension of time for payment hereof, and agree to continue and
remain bound for the payment of principal, interest and all other sums payable
hereunder, notwithstanding any change or changes by way of release, surrender,
exchange or substitution of any security for this Note or by way of any
extension or extensions of time for payment of principal or interest; and all
such parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice to or consent of any of them.
The rights and remedies of the holder as provided herein shall be cumulative
and concurrent and may be pursued singularly, successively or together at the
sole discretion of the holder, and may be exercised as often as occasion
therefor shall occur, and the failure to exercise any such right or remedy
shall in no event be construed as a waiver or release of the same.
The Borrower does not intend or expect to pay, nor doe the Lender intend
or expect to charge, accept or collect any interest which, when added to any
commitment fee or any other charge upon the principal, shall be in excess of
the highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited. Should
acceleration, prepayment or any other charges upon the principal or any portion
thereof result in the computation or earning of interest in excess of the
highest lawful rate allowable under the laws of the State of Florida or the
United States of America, whichever is higher or unlimited, any and all such
excess is hereby waived and shall be credited to the outstanding principal
balance and/or, to the extent such excess exceeds such outstanding principal
balance, returned to the Borrower.
The unpaid balance of this Note may be prepaid at any time and from time
to time without premium or penalty. All prepayments made hereunder shall be
credited first to accrued interest and then to principal; however, in the
event of default hereunder, the Lender may, in its sole
3
<PAGE> 4
discretion, and in such order as it may choose, apply any payments(s) to
interest, principal and/or lawful charges and expenses then accrued.
No delay or omission on the part of the holder of this Note in exercising
any right hereunder shall operate as a waiver of such right or any other right
under this Note, nor shall any waiver on one occasion be construed as a bar to
or waiver of any such right on any future occasion. No waiver shall be
effective unless in writing and signed by the holder of this Note.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Florida. In the event the Lender
determines it necessary to institute suit to collect on this Note, the action
may be maintained in Miami, Florida and the Borrower does hereby consent to the
institution of action in that jurisdiction and waive any and all defenses it
may have to the maintenance of the suit in Miami, Florida. This Note is binding
upon the Borrower and its personal representatives, successors and assigns.
THE BORROWER HEREBY, AND THE LENDER BY ITS ACCEPTANCE OF THIS NOTE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT, DOCUMENT OR INSTRUMENT
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO MAKE CERTAIN MODIFICATIONS
TO THE SHAREHOLDER LOAN AS EVIDENCED BY THIS NOTE.
4
<PAGE> 5
IN WITNESS WHEREOF. the undersigned Borrower has caused this Note to be
duly executed and delivered as of the day and year first written above.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/Nicolas Molina
-----------------------------------
Print Name: Nicolas Molina
---------------------------
Its: Chief Executive Officer
----------------------------------
5
<PAGE> 1
EXHIBIT 10.7
LET'S TALK CELLULAR & WIRELESS, INC.
STOCK OPTION AGREEMENT
FOR
NICOLAS MOLINA
AGREEMENT
1. Grant of Option. Let's Talk Cellular & Wireless, Inc. (the
"Company") hereby grants, as of June 27, 1997, to Nicolas Molina (the
"Optionee") an option (the "Option") to purchase up to 27,721 shares of the
Company's Common Stock, $.001 par value per share (the "Shares"), at an
exercise price per share equal to $65.92. The Option shall be subject to the
terms and conditions set forth herein.
2. Exercise Schedule. Except as otherwise provided in Section 5 of this
Agreement, the Option shall be exercisable in whole or in part on the date
hereof. The Option shall terminate on, and in no event shall the Option be
exercisable after June 27, 2007.
3. Method of Exercise. This Option shall be exercisable in whole or in
part in accordance with the exercise schedule set forth in Section 2 hereof by
written notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment intent with
respect to such Shares as may be reasonably required by the Company for
compliance with applicable state and federal securities laws and regulations.
Such written notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written notice
shall be accompanied by payment of the exercise price. This Option shall be
deemed to be exercised after both (a) receipt by the Company of such written
notice accompanied by the exercise price and (b) arrangements that are
satisfactory to the Board in its sole discretion have been made for Optionee's
payment to the Company of the amount that is necessary to be withheld in
accordance with applicable Federal or state withholding requirements. No Shares
will be issued pursuant to the Option unless and until such issuance and such
exercise shall comply with all relevant provisions of applicable law, including
the requirements of any stock exchange upon which the Shares then may be
traded.
4. Method of Payment. Payment of the exercise price shall be by
any of the following, or a combination thereof, at the election of the
Optionee: (a) cash; (b) check; or (c) such other consideration or in such other
manner as may be determined by the Board, which other method, in the discretion
of the Board may include, without limitation, payment of the exercise price in
whole or in part (i) with Shares, (ii) by a promissory note payable to the
order of the Company in a form acceptable to the Board, or (iii) by the Company
retaining from the Shares to be delivered upon exercise of the Option that
number of Shares having a Fair Market Value on the date of exercise equal to
the option price for the number of Shares with respect to which the Optionee
exercises the Option or by any other form of cashless exercise procedure
approved by the Board.
1
<PAGE> 2
5. Termination of Option. Any unexercised portion of the Option shall
automatically and without notice terminate and become null and void at the time
of the earliest to occur of:
(a) unless the Board otherwise determines in writing in its sole
discretion, three months after the date on which the Optionee's employment with
the Company is terminated for any reason other than by reason of (A) Cause,
which, solely for purposes of this Agreement, shall mean the termination of the
Optionee's employment by reason of the Optionee's willful misconduct or gross
negligence, (B) a mental or physical disability (within the meaning of Section
22(e) of the Internal Revenue Code) of the Optionee as determined by a medical
doctor satisfactory to the Board, or (C) death;
(b) immediately upon the termination of the Optionee's employment
with the Company for Cause;
(c) twelve months after the date on which the Optionee's employment
with the Company is terminated by reason of a mental or physical disability
(within the meaning of Section 22(e) of the Internal Revenue Code) as
determined by a medical doctor satisfactory to the Board;
(d) twelve months after the date of termination of the Optionee's
employment with the Company by reason of the death of the Optionee (or six
months after the date on which the Optionee shall die if such death shall occur
during the one year period specified in paragraph (c) of this Section 5).
6. Transferability. The Option is not transferable otherwise than by
will or the laws of descent and distribution, and during the lifetime of the
Optionee the Option shall be exercisable only by the Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. No Rights of Stockholders. Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the Company with respect to any shares of
Common Stock purchasable or issuable upon the exercise of the Option, in whole
or in part, prior to the date of exercise of the Option.
8. No Right to Continued Employment. Neither the Option nor this
Agreement shall confer upon the Optionee any right to continued employment or
service with the Company.
9. Law Governing. This Agreement shall be governed in accordance with
and governed by the internal laws of the State of Florida.
10. Interpretation. The Optionee accepts the Option subject to all
the terms and provisions of this Agreement. The undersigned Optionee hereby
accepts as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under this Agreement.
11. Notices. Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or when
deposited in the United States mail, registered, postage prepaid, and
addressed, in the case of the Company, to the Company's
2
<PAGE> 3
Secretary at 5200 N.W. 77th Court, Miami, Florida 33166, or if the Company
should move its principal office, to such principal office, and, in the case of
the Optionee, to the Optionee's last permanent address as shown on the
Company's records, subject to the right of either party to designate some other
address at any time hereafter in a notice satisfying the requirements of this
Section.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the 27 day of June, 1997.
COMPANY:
LET'S TALK CELLULAR & WIRELESS, INC.
By:/s/ Brett Beveridge
-----------------------------------
Name: Brett Beveridge
Title: President
Optionee has reviewed this Option in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option, and
fully understands all provisions of the Option.
OPTIONEE:
By:/s/ Nicolas Molina
----------------------------------
Nicolas Molina
4
<PAGE> 1
EXHIBIT 10.8
LET'S TALK CELLULAR & WIRELESS, INC.
STOCK OPTION AGREEMENT
FOR
BRETT BEVERIDGE
AGREEMENT
1. Grant of Option. Let's Talk Cellular & Wireless, Inc. (the "Company")
hereby grants, as of June 27, 1997, to Brett Beveridge (the "Optionee") an
option (the "Option") to purchase up to 27,721 shares of the Company's Common
Stock, $.001 par value per share (the "Shares"), at an exercise price per share
equal to $65.92. The Option shall be subject to the terms and conditions set
forth herein.
2. Exercise Schedule. Except as otherwise provided in Section 5 of this
Agreement, the Option shall be exercisable in whole or in part on the date
hereof. The Option shall terminate on, and in no event shall the Option be
exercisable after June 27, 2007.
3. Method of Exercise. This Option shall be exercisable in whole or in
part in accordance with the exercise schedule set forth in Section 2 hereof by
written notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment intent with
respect to such Shares as may be reasonably required by the Company for
compliance with applicable state and federal securities laws and regulations.
Such written notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the exercise price. This Option
shall be deemed to be exercised after both (a) receipt by the Company of such
written notice accompanied by the exercise price and (b) arrangements that are
satisfactory to the Board in its sole discretion have been made for Optionee's
payment to the Company of the amount that is necessary to be withheld in
accordance with applicable Federal or state withholding requirements. No
Shares will be issued pursuant to the Option unless and until such issuance and
such exercise shall comply with all relevant provisions of applicable law,
including the requirements of any stock exchange upon which the Shares then may
be traded.
4. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee: (a)
cash; (b) check; or (c) such other consideration or in such other manner as may
be determined by the Board, which other method, in the discretion of the Board
may include, without limitation, payment of the exercise price in whole or in
part (i) with Shares, (ii) by a promissory note payable to the order of the
Company in a form acceptable to the Board, or (iii) by the Company retaining
from the Shares to be delivered upon exercise of the Option that number of
Shares having a Fair Market Value on the date of exercise equal to the option
price for the number of Shares with respect to which the Optionee exercises the
Option or by any other form of cashless exercise procedure approved by the
Board.
1
<PAGE> 2
5. Termination of Option. Any unexercised portion of the Option shall
automatically and without notice terminate and become null and void at the time
of the earliest to occur of:
(a) unless the Board otherwise determines in writing in its sole
discretion, three months after the date on which the Optionee's employment with
the Company is terminated for any reason other than by reason of (A) Cause,
which, solely for purposes of this Agreement, shall mean the termination of the
Optionee's employment by reason of the Optionee's willful misconduct or gross
negligence, (B) a mental or physical disability (within the meaning of Section
22(e) of the Internal Revenue Code) of the Optionee as determined by a medical
doctor satisfactory to the Board, or (C) death;
(b) immediately upon the termination of the Optionee's employment with
the Company for Cause;
(c) twelve months after the date on which the Optionee's employment
with the Company is terminated by reason of a mental or physical disability
(within the meaning of Section 22(e) of the Internal Revenue Code) as
determined by a medical doctor satisfactory to the Board;
(d) twelve months after the date of termination of the Optionee's
employment with the Company by reason of the death of the Optionee (or six
months after the date on which the Optionee shall die if such death shall occur
during the one year period specified in paragraph (c) of this Section 5).
6. Transferability. The Option is not transferable otherwise than by will
or the laws of descent and distribution, and during the lifetime of the
Optionee the Option shall be exercisable only by the Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. No Rights of Stockholders. Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the Company with respect to any shares of
Common Stock purchasable or issuable upon the exercise of the Option, in whole
or in part, prior to the date of exercise of the Option.
8. No Right to Continued Employment. Neither the Option nor this
Agreement shall confer upon the Optionee any right to continued employment or
service with the Company.
9. Law Governing. This Agreement shall be governed in accordance with and
governed by the internal laws of the State of Florida.
10. Interpretation. The Optionee accepts the Option subject to all the
terms and provisions of this Agreement. The undersigned Optionee hereby
accepts as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under this Agreement.
11. Notices. Any notice under this Agreement shall be in writing and shall
be deemed to have been duly given when delivered personally or when deposited
in the United States mail, registered, postage prepaid, and addressed, in the
case of the Company, to the Company's
2
<PAGE> 3
Secretary at 5200 N.W. 77th Court, Miami, Florida 33166, or if the Company
should move its principal office, to such principal office, and, in the case of
the Optionee, to the Optionee's last permanent address as shown on the
Company's records, subject to the right of either party to designate some other
address at any time hereafter in a notice satisfying the requirements of this
Section.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
27 day of June, 1997.
COMPANY:
LET'S TALK CELLULAR & WIRELESS, INC.
By:/s/ Nicolas Molina
---------------------------------
Name: Nicolas Molina
Title: Chief Executive Officer
Optionee has reviewed this Option in its entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Option, and fully
understands all provisions of the Option.
OPTIONEE:
By:/s/ Brett Beveridge
---------------------------------
Brett Beveridge
4
<PAGE> 1
EXHIBIT 10.9
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 27 day of June, 1997,
by and between Let's Talk Cellular & Wireless, Inc., a Florida corporation
f/k/a Let's Talk Cellular of America, Inc. (the "Company"), and Nick Molina, an
individual residing at 7545 S.W. 84th Court, Miami, Florida 33143 (the
"Executive").
WITNESSETH THAT:
WHEREAS, the Company desires to employ the Executive in the capacity
hereinafter stated, and the Executive desires to enter into the employ of the
Company in such capacity for the period and on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth below, it is hereby covenanted and agreed by the Company
and the Executive as follows:
1. Employment Period. The Company hereby agrees to continue to employ
the Executive as its Chief Executive Officer and the Executive, in such
capacity, agrees to provide services to the Company for the period beginning on
the date first above written (the "Commencement Date") and ending on the fifth
anniversary of the Commencement Date (the "Employment Period").
2. Performance of Duties. During the Employment Period, the Executive
shall serve as the Chief Executive Officer of the Company. In such capacity,
the Executive, in conjunction with the President of the Company, shall have the
full authority to actively manage, control, administer and operate the business
and affairs of the Company, including but not limited to authority for choosing
markets and site locations, choosing wireless, paging, internet, long distance
and other providers, choosing product lines and merchandise, store designs and
personnel decisions, subject to the ultimate authority of the Board of
Directors of the Company. The Executive agrees that during the Employment
Period, while he is employed by the Company, he shall devote his full time,
energies and talents exclusively to serving in the capacity of Chief Executive
Officer of the Company in the best interests of the Company, and to perform the
duties described above faithfully, efficiently and in a professional manner;
provided that, without the Board's consent (which consent shall not be
unreasonably withheld), the Executive shall not:
(a) serve as or be a consultant to or employee, officer,
agent or director of any competing corporation,
partnership or other entity other than the Company
and its affiliates (other than civic, charitable, or
other public service organizations or as a
consultant or director for a company in an industry
outside the Business for up to fifteen hours in any
calendar month); or
(b) have more than a three percent (3%) ownership
interest in any enterprise other than the Company if
such ownership interest could reasonably be foreseen
to have a material adverse impact upon the ability
of the Executive to perform his duties hereunder.
<PAGE> 2
3. Compensation. Subject to the terms and conditions of this
Agreement, during the Employment Period, the Executive shall be compensated by
the Company for his services as follows:
(a) He shall receive, for each 12-consecutive month
period beginning on the Commencement Date and
each anniversary thereof, a rate of salary which
is not less than $210,000 per year (as adjusted
annually for the greater of (i) for the increase
in the Consumer Price Index, All Urban Wage
Earners as published by the U.S. Department of
Labor or (ii) five percent (5%)), payable in
substantially equal installments in accordance
with the regular payroll practices of the
Company, plus an annual bonus of not less than
$50,000 (payable semiannually within 30 days
after the delivery to the Board of Directors of
financial statements for the applicable August 1
- January 31 and February 1 - July 31 periods) as
approved by the Board of Directors and subject to
the achievement by the Company of reasonable
financial performance targets set by the Board of
Directors at the commencement of each fiscal year
for the ensuing 12-month period, except that for
the Company's fiscal year ending July 31, 1997,
the Executive shall be entitled to a bonus of
$25,000.
(b) He shall be entitled to receive the following
perquisites which shall not be less favorable to
the Executive during the Employment Period than
the perquisites provided by the Company to the
Executive immediately prior to the Employment
Period in addition to such other executive
benefit plans or perquisites which may be
established by the Company from time to time:
Auto Lease (1 car)
Auto Insurance
Health Insurance
Country Club-Dues
Life Insurance
Disability Insurance
401(K) Plan
(c) He shall be reimbursed by the Company for all
reasonable business, promotional, travel and
entertainment expenses incurred or paid by him
during the employment period in the performance
of his services under this Agreement provided
that the Executive furnishes to the Company
appropriate documentation in a timely fashion
required by the Internal Revenue Code in
connection with such expenses and shall furnish
such other documentation and accounting as the
Company may from time to time reasonably request.
(d) He shall be eligible to participate in any stock
option plans established by the Company from time
to time and approved by the Board of Directors.
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<PAGE> 3
4. Compensation Due Upon Termination. Except as otherwise provided
under the executive benefit plans maintained by the Company in which the
Executive participates in accordance with subparagraph 3(b), the Executive's
right to compensation for periods after the date his employment with the
Company terminates shall be determined in accordance with the following:
(a) Discharge Without Cause. In the event the Company
terminates the Executive's employment under this
Agreement without cause, the Executive shall be
entitled to receive the greater of (i) the
Executive's salary and bonus set forth in Section
3(a) hereof (less applicable taxes) for the
remainder of the Employment Period payable in
accordance with the Company's payroll procedures
and prorated for periods less than a full month,
or (ii) two years' salary and bonus (determined
as of the date of such termination), payable
monthly (less applicable taxes) for the twenty
four (24) months following the date of
termination in accordance with the Company's
payroll procedures and prorated for periods less
than a full month; provided however, that any
amounts due to the Executive under this Section
4(a) shall be reduced by the Company or refunded
by the Executive by 100% of any amounts of earned
income the Executive may be receiving from any
new employer if the Company has completed an
initial public offering of its common stock at
the time of such termination. In addition, (i)
any amounts payable to the Executive pursuant to
this Section 4(a) shall accrue interest, payable
quarterly, at the prime rate of NationsBank, N.A.
plus 1% per annum, (ii) in the event any payment
due to the Executive pursuant to this Section
4(a) remains unpaid for a period of 30 days, then
the entire amount owed to the Executive shall
become immediately due and payable, (iii) the
Executive shall be entitled to continue to
receive the benefits provided pursuant to Section
3(b) hereof for a period of one year from the
date of the Executive's termination by the
Company without cause, and (iv) any unvested
options to purchase the Company's Common Stock
held by the Executive shall automatically vest on
the date of such termination without cause.
(b) Voluntary Resignation. The Company shall have no
obligation to make payments to the Executive in
accordance with the provisions of paragraph 3 for
periods after the date on which the Executive's
employment with the Company terminates due to the
Executive's voluntary resignation; provided,
however, that the Company shall be obligated to
pay the amount and provide the benefits set forth
in Section 4(a) of this Agreement if the
Executive voluntarily resigns due to Constructive
Termination (as hereinafter defined).
For purposes of this Agreement, "Constructive Termination" shall mean any one
or more of the following: (i) a material change in the nature or scope of the
Executive's authority or duties as specified in Section 2 hereof or title
against the will of the Executive (other than discharge for
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<PAGE> 4
cause, disability or death) or (ii) the relocation of the Executive's office
outside Dade County or to a site other than the Company's headquarters against
the will of the Executive.
(c) Discharge for Cause. The Company shall have no obligation
to make payments to the Executive in accordance with the
provisions of paragraph 3 for periods after the Executive's
employment with the Company is terminated on account of the
Executive's discharge for cause. For purposes of this
subparagraph 4(c), in addition to the right to terminate
the Executive's employment for fraud, the Executive shall
be considered discharged for "cause" if he is discharged by
the Company on account of the occurrence of one or more of
the following events:
(i) the Executive discloses material confidential
information in violation of paragraph 5 which
could reasonably be foreseen to have a material
adverse effect on the Company;
(ii) the Executive engages in competition in violation
of paragraph 6 which could reasonably be foreseen
to have a material adverse effect on the Company;
(iii) the Company is directed by regulatory or
governmental authorities after exhaustion of all
avenues of appeal to terminate the employment of
the Executive or the Executive engages in
activities that cause actions to be taken by
regulatory or governmental authorities that have
a material adverse effect on the Company;
(iv) the Executive is convicted of a felony which has
or reasonably could have a material adverse
effect on the Company or the reputation of the
Company (other than a felony resulting from a
traffic violation or minor tax disputes); or
(v) The Executive intentionally disregards his duties
under this Agreement after (A) notice has been
given to the Executive by the Board of Directors
of the Company that it views the Executive to be
intentionally disregarding his duties under this
Agreement and (B) the Executive has been given a
period of 15 days after such notice to cure such
misconduct.
(d) Disability. The Company may terminate the Executive's
employment after the Executive has become totally disabled
as determined in accordance with the Company's long term
disability plan. The Company shall have no obligation to
make payments to the Executive in accordance with the
provisions of paragraph 3 at any time after the date the
Executive begins to
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<PAGE> 5
receive total disability payments under the Company's
disability insurance for its executives.
(e) Death. The Company shall have no obligation to
make payments to the Executive in accordance with
the provisions of paragraph 3 for periods after
the date of the Executive's death. Any sums or
amounts owed to the Executive on the date of
death shall be paid in full on the next regular
payroll date to his then spouse, or if not
married, then to the estate of the Executive.
5. Confidential Information. Except as may be required by legal
process or the lawful order of a court or agency of competent jurisdiction, the
Executive agrees to keep secret and confidential for a period of two (2) years
all non-public information concerning the Company and its affiliates which was
acquired by or disclosed to the Executive during the course of his employment
by the Company, any of its affiliates, including information relating to
customers (including, without limitation, credit history, repayment history,
financial information and financial statements), costs, and operations,
financial data and plans, whether past, current or planned and not to disclose
the same, either directly or indirectly, to any other person, firm or business
entity, or to use it in any way; provided, however, that the provisions of this
paragraph 6 shall not apply to information which is in the public domain or
that was disclosed to the Executive by independent third parties who were not
bound by an obligation of confidentiality; and provided further, that the
Company recognizes that the Executive shall, during the course of his
employment with the Company, acquire certain general information regarding the
financial condition, and borrowing trends of the Company's customers and agrees
that the provisions of this paragraph 6 shall not apply to the use of such
general information provided the use thereof does not violate applicable
Federal or state laws or the provisions of paragraph 7 hereof. The Executive
further agrees that he will not make any statement or disclosure which would be
prohibited by applicable Federal or state laws.
6. Non-competition. The Executive agrees that for the Non-competition
Period, the Executive agrees not to directly or indirectly serve as or be a
consultant to or employee, officer, agent, director or owner of more than three
percent (3%) of another corporation, partnership or other entity which engages
in the business of selling cellular or wireless communication services or
products (the "Business") in the Restricted Area, provided, however, that the
Executive may serve as or be a consultant to or employee, officer, agent or
director of another corporation, partnership or other entity in the Restricted
Area, if such entity's primary business is not the Business, and Executive
serves in such capacity only with respect to matters unrelated to any Business
conducted by such entity. The "Restricted Area" shall include any metropolitan
area or proposed metropolitan area (as reflected in the written business plans
of the Company in effect at such time) in which the Company is doing or will do
business within six months of the date of termination of the Executive's
employment (the "Termination Date"). The "Noncompetition Period" shall mean the
period commencing on the Commencement Date and terminating on (i) the second
anniversary of the Termination Date if the Company terminates the Executive's
employment for cause or the Executive resigns or otherwise leaves the Company's
employment on his own accord (excluding Construction Termination), or (ii) the
first anniversary of the Termination Date if the Executive's employment
terminates for any reason other than (i) above.
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<PAGE> 6
The Executive further agrees that for the Non-competition Period, he will not
solicit for employment or endeavor to entice away from employment with the
Company or its affiliates any employee of the Company or its affiliates who is
an officer or a manager of any department.
7. Successors. This Agreement shall be binding on, and inure to the
benefit of, the Company and its successors and assigns and any person
acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business.
8. Nonalienation. The interests of the Executive under this Agreement
are not subject to the claims of his creditors, other than the Company, and may
not otherwise be voluntarily or involuntarily assigned, alienated or
encumbered, except to the extent that payments are owed to the Executive's
spouse or estate under Section 4.
9. Remedies. The Executive acknowledges that the Company would be
irreparably injured by a violation of paragraphs 5 or 6, and agrees that the
Company shall be entitled to an injunction restraining the Executive from any
actual or threatened breach of paragraph 5 or 6, or to any other appropriate
equitable remedy.
10. Waiver of Breach. The waiver by either the Company or the
Executive of a breach of any provision of this Agreement shall not operate as
or be deemed a waiver of any subsequent breach by either the Company or the
Executive.
11. Notice. Any notice to be given hereunder by a party hereto shall
be in writing and shall be deemed to have been given when received or, when
deposited in the U.S. mail, certified or registered mail, postage prepaid:
(a) to the Executive addressed as follows:
7545 S.W. 84th Court
Miami, Florida 33143
(b) to the Company addressed as follows:
Let's Talk Cellular & Wireless, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attention: Board of Directors
12. Amendment. This Agreement may be amended or cancelled by mutual
agreement of the parties in writing without the consent of any other person
and, so long as the Executive lives, no person, other than the parties thereto,
shall have any rights under or interest in this Agreement or the subject matter
hereof.
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<PAGE> 7
13. Applicable Law and Venue. The provisions of this Agreement shall
be construed in accordance with the internal laws of the State of Florida.
Venue for all actions brought pursuant to this Agreement shall be in either the
Federal or state courts located within Dade County, Florida.
14. Termination. All of the provisions of this Agreement shall
terminate after the expiration of the Employment Period, except that paragraph
5 shall only terminate upon the expiration of the Confidentiality Period and
paragraph 6 shall terminate upon the expiration of the later of Non-competition
Period or the Nonsolicitation Period.
15. Attorneys' Fees. In the event any action at law or in equity or
other proceeding is brought to interpret or enforce this Agreement, or in
connection with any provision of this Agreement, the prevailing party shall be
entitled to its reasonable attorney's fees and other costs reasonably incurred
in such action or proceeding.
16. Arbitration. Any controversy, claim or dispute arising between
the parties hereto, including, but not limited to, those arising out of or
related to this Agreement or in any way connected to Executive's employment
hereunder shall be determined by binding arbitration applying the laws of
Florida as set forth in Section 13 above. Any arbitration pursuant to this
Agreement shall be conducted in metropolitan Dade County, Florida under the
employment arbitration rules of the American Arbitration Association. The
arbitration and any award rendered therein shall be final and binding upon the
parties and may be entered in any court of competent jurisdiction. Nothing in
this Section will prevent either party from resorting to judicial proceedings
of interim injunctive relief under the laws of the State of Florida from a
court of competent jurisdiction if it is necessary to prevent a serious and
irreparable injury to one of the parties.
* * *
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<PAGE> 8
IN WITNESS WHEREOF, the Executive and the Company have executed this
Employment Agreement as of the day and year first written above.
EXECUTIVE:
/s/ Nick Molina
------------------------------------
Nick Molina
Let's Talk Cellular & Wireless, Inc.
By:/s/ Brett Beveridge
---------------------------------
Name: Brett Beveridge
Its President
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<PAGE> 1
EXHIBIT 10.10
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 27 day of June, 1997,
by and between Let's Talk Cellular & Wireless, Inc., a Florida corporation f/k/a
Let's Talk Cellular of America, Inc. (the "Company"), and Brett Beveridge, an
individual residing at 9760 S.W. 148th Street, Miami, Florida 33176 (the
"Executive").
WITNESSETH THAT:
WHEREAS, the Company desires to employ the Executive in the capacity
hereinafter stated, and the Executive desires to enter into the employ of the
Company in such capacity for the period and on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the Company and the
Executive as follows:
1. Employment Period. The Company hereby agrees to continue to
employ the Executive as its President and the Executive, in such capacity,
agrees to provide services to the Company for the period beginning on the date
first above written (the "Commencement Date") and ending on the fifth
anniversary of the Commencement Date (the "Employment Period").
2. Performance of Duties. During the Employment Period, the
Executive shall serve as the President of the Company. In such capacity, the
Executive, in conjunction with the Chief Executive Officer, shall have the full
authority to actively manage, control, administer and operate the business and
affairs of the Company, including but not limited to authority for choosing
markets and site locations, choosing wireless, paging, internet, long distance
and other providers, choosing product lines and merchandise, store designs and
personnel decisions, subject to the ultimate authority of the Board of Directors
of the Company. The Executive agrees that during the Employment Period, while he
is employed by the Company, he shall devote his full time, energies and talents
exclusively to serving in the capacity of President of the Company in the best
interests of the Company, and to perform the duties described above faithfully,
efficiently and in a professional manner; provided that, without the Board's
consent (which consent shall not be unreasonably withheld), the Executive shall
not:
(a) serve as or be a consultant to or employee, officer,
agent or director of any competing corporation,
partnership or other entity other than the Company
and its affiliates (other than civic, charitable, or
other public service organizations or as a consultant
or director for a company in an industry outside the
Business for up to fifteen hours in any calendar
month); or
(b) have more than a three percent (3%) ownership
interest in any enterprise other than the Company if
such ownership interest could reasonably be foreseen
to have a material adverse impact upon the ability of
the Executive to perform his duties hereunder.
<PAGE> 2
3. Compensation. Subject to the terms and conditions of this
Agreement, during the Employment Period, the Executive shall be compensated by
the Company for his services as follows:
(a) He shall receive, for each 12-consecutive month
period beginning on the Commencement Date and each
anniversary thereof, a rate of salary which is not
less than $210,000 per year (as adjusted annually for
the greater of (i) for the increase in the Consumer
Price Index, All Urban Wage Earners as published by
the U.S. Department of Labor or (ii) five percent
(5%)), payable in substantially equal installments,
plus an annual bonus of not less than $50,000
(payable semiannually within 30 days after the
delivery to the Board of Directors of financial
statements for the applicable August 1 - January 31
and February 1 - July 31 periods) as approved by the
Board of Directors and subject to the achievement by
the Company of reasonable financial performance
targets set by the Board of Directors at the
commencement of each fiscal year for the ensuing
12-month period, except that for the Company's fiscal
year ending July 31, 1997, the Executive shall be
entitled to a bonus of $25,000.
(b) He shall be entitled to receive the following
perquisites which shall not be less favorable to the
Executive during the Employment Period than the
perquisites provided by the Company to the Executive
immediately prior to the Employment Period in
addition to such other executive benefit plans or
perquisites which may be established by the Company
from time to time:
Auto Lease (1 car)
Auto Insurance
Health Insurance
Country Club-Dues
Life Insurance
Disability Insurance
401(K) Plan
(c) He shall be reimbursed by the Company for all
reasonable business, promotional, travel and
entertainment expenses incurred or paid by him during
the employment period in the performance of his
services under this Agreement provided that the
Executive furnishes to the Company appropriate
documentation in a timely fashion required by the
Internal Revenue Code in connection with such
expenses and shall furnish such other documentation
and accounting as the Company may from time to time
reasonably request.
(d) He shall be eligible to participate in any stock
option plans established by the Company from time to
time and approved by the Board of Directors.
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<PAGE> 3
4. Compensation Due Upon Termination. Except as otherwise
provided under the executive benefit plans maintained by the Company in which
the Executive participates in accordance with subparagraph 3(b), the Executive's
right to compensation for periods after the date his employment with the Company
terminates shall be determined in accordance with the following:
(a) Discharge Without Cause. In the event the Company
terminates the Executive's employment under this
Agreement without cause, the Executive shall be
entitled to receive the greater of (i) the
Executive's salary and bonus set forth in Section
3(a) hereof (less applicable taxes) for the remainder
of the Employment Period payable in accordance with
the Company's payroll procedures and prorated for
periods less than a full month, or (ii) two years'
salary and bonus (determined as of the date of such
termination), payable monthly (less applicable taxes)
for the twenty four (24) months following the date of
termination in accordance with the Company's payroll
procedures and prorated for periods less than a full
month; provided however, that any amounts due to the
Executive under this Section 4(a) shall be reduced by
the Company or refunded by the Executive by 100% of
any amounts of earned income the Executive may be
receiving from any new employer if the Company has
completed an initial public offering of its common
stock at the time of such termination. In addition,
(i) any amounts payable to the Executive pursuant to
this Section 4(a) shall accrue interest, payable
quarterly, at the prime rate of NationsBank, N.A.
plus 1% per annum, (ii) in the event any payment due
to the Executive pursuant to this Section 4(a)
remains unpaid for a period of 30 days, then the
entire amount owed to the Executive shall become
immediately due and payable, (iii) the Executive
shall be entitled to continue to receive the benefits
provided pursuant to Section 3(b) hereof for a period
of one year from the date of the Executive's
termination by the Company without cause, and (iv)
any unvested options to purchase the Company's Common
Stock held by the Executive shall automatically vest
on the date of such termination without cause.
(b) Voluntary Resignation. The Company shall have no
obligation to make payments to the Executive in
accordance with the provisions of paragraph 3 for
periods after the date on which the Executive's
employment with the Company terminates due to the
Executive's voluntary resignation; provided, however,
that the Company shall be obligated to pay the amount
and provide the benefits set forth in Section 4(a) of
this Agreement if the Executive voluntarily resigns
due to Constructive Termination (as hereinafter
defined).
For purposes of this Agreement, "Constructive Termination" shall mean any one or
more of the following: (i) a material change in the nature or scope of the
Executive's authority or duties as specified in Section 2 hereof or title
against the will of the Executive (other than discharge for
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<PAGE> 4
cause, disability or death), (ii) the relocation of the Executive's office
outside Dade County or to a site other than the Company's headquarters against
the will of the Executive or (iii) if the Company has not completed an initial
public offering of its Common Stock, the removal of Executive from his position
as Chairman of the Board of the Company against his will.
(c) Discharge for Cause. The Company shall have no
obligation to make payments to the Executive in
accordance with the provisions of paragraph 3 for
periods after the Executive's employment with the
Company is terminated on account of the Executive's
discharge for cause. For purposes of this
subparagraph 4(c), in addition to the right to
terminate the Executive's employment for fraud, the
Executive shall be considered discharged for "cause"
if he is discharged by the Company on account of the
occurrence of one or more of the following events:
(i) the Executive discloses material
confidential information in violation of
paragraph 5 which could reasonably be
foreseen to have a material adverse effect
on the Company;
(ii) the Executive engages in competition in
violation of paragraph 6 which could
reasonably be foreseen to have a material
adverse effect on the Company;
(iii) the Company is directed by regulatory or
governmental authorities after exhaustion of
all avenues of appeal to terminate the
employment of the Executive or the Executive
engages in activities that cause actions to
be taken by regulatory or governmental
authorities that have a material adverse
effect on the Company;
(iv) the Executive is convicted of a felony which
has or reasonably could have a material
adverse effect on the Company or the
reputation of the Company (other than a
felony resulting from a traffic violation or
minor tax disputes); or
(v) The Executive intentionally disregards his
duties under this Agreement after (A) notice
has been given to the Executive by the Board
of Directors of the Company that it views
the Executive to be intentionally
disregarding his duties under this Agreement
and (B) the Executive has been given a
period of 15 days after such notice to cure
such misconduct.
(d) Disability. The Company may terminate the Executive's
employment after the Executive has become totally
disabled as determined in accordance with the
Company's long term disability plan. The Company
shall have no obligation to make payments to the
Executive in accordance with the
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<PAGE> 5
provisions of paragraph 3 at any time after the date
the Executive begins to receive total disability
payments under the Company's disability insurance for
its executives.
(e) Death. The Company shall have no obligation to make
payments to the Executive in accordance with the
provisions of paragraph 3 for periods after the date
of the Executive's death. Any sums or amounts owed to
the Executive on the date of death shall be paid in
full on the next regular payroll date to his then
spouse, or if not married, to the estate of the
Executive.
5. Confidential Information. Except as may be required by legal
process or the lawful order of a court or agency of competent jurisdiction, the
Executive agrees to keep secret and confidential for a period of two (2) years
all non-public information concerning the Company and its affiliates which was
acquired by or disclosed to the Executive during the course of his employment by
the Company, any of its affiliates, including information relating to customers
(including, without limitation, credit history, repayment history, financial
information and financial statements), costs, and operations, financial data and
plans, whether past, current or planned and not to disclose the same, either
directly or indirectly, to any other person, firm or business entity, or to use
it in any way; provided, however, that the provisions of this paragraph 6 shall
not apply to information which is in the public domain or that was disclosed to
the Executive by independent third parties who were not bound by an obligation
of confidentiality; and provided further, that the Company recognizes that the
Executive shall, during the course of his employment with the Company, acquire
certain general information regarding the financial condition, and borrowing
trends of the Company's customers and agrees that the provisions of this
paragraph 6 shall not apply to the use of such general information provided the
use thereof does not violate applicable Federal or state laws or the provisions
of paragraph 7 hereof. The Executive further agrees that he will not make any
statement or disclosure which would be prohibited by applicable Federal or state
laws.
6. Non-competition. The Executive agrees that for the
Non-competition Period, the Executive agrees not to directly or indirectly serve
as or be a consultant to or employee, officer, agent, director or owner of more
than three percent (3%) of another corporation, partnership or other entity
which engages in the business of selling cellular or wireless communication
services or products (the "Business") in the Restricted Area, provided, however,
that the Executive may serve as or be a consultant to or employee, officer,
agent, or director of another corporation, partnership or other entity in the
Restricted Area, if such entity's primary business is not the Business, and
Executive serves in such capacity only with respect to matters unrelated to any
Business conducted by such entity. The "Restricted Area" shall include any
metropolitan area or proposed metropolitan area (as reflected in the written
business plans of the Company in effect at such time) in which the Company is
doing or will do business within six months of the date of termination of the
Executive's employment (the "Termination Date"). The "Noncompetition Period"
shall mean the period commencing on the Commencement Date and terminating on (i)
the second anniversary of the Termination Date if the Company terminates the
Executive's employment for cause or the Executive resigns or otherwise leaves
the Company's employment on
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<PAGE> 6
his own accord (excluding Construction Termination), or (ii) the first
anniversary of the Termination Date if the Executive's employment terminates for
any reason other than (i) above. The Executive further agrees that for the
Non-competition Period, he will not solicit for employment or endeavor to entice
away from employment with the Company or its affiliates any employee of the
Company or its affiliates who is an officer or a manager of any department.
7. Successors. This Agreement shall be binding on, and inure to
the benefit of, the Company and its successors and assigns and any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company's assets and business.
8. Nonalienation. The interests of the Executive under this
Agreement are not subject to the claims of his creditors, other than the
Company, and may not otherwise be voluntarily or involuntarily assigned,
alienated or encumbered, except to the extent that payments are owed to the
Executive's spouse or estate under Section 4.
9. Remedies. The Executive acknowledges that the Company would be
irreparably injured by a violation of paragraphs 5 or 6, and agrees that the
Company shall be entitled to an injunction restraining the Executive from any
actual or threatened breach of paragraph 5 or 6, or to any other appropriate
equitable remedy.
10. Waiver of Breach. The waiver by either the Company or the
Executive of a breach of any provision of this Agreement shall not operate as or
be deemed a waiver of any subsequent breach by either the Company or the
Executive.
11. Notice. Any notice to be given hereunder by a party hereto
shall be in writing and shall be deemed to have been given when received or,
when deposited in the U.S. mail, certified or registered mail, postage prepaid:
(a) to the Executive addressed as follows:
9760 S.W. 148th Street
Miami, Florida 33176
(b) to the Company addressed as follows:
Let's Talk Cellular & Wireless, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attention: Board of Directors
12. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties thereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
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<PAGE> 7
13. Applicable Law and Venue. The provisions of this Agreement
shall be construed in accordance with the internal laws of the State of Florida.
Venue for all actions brought pursuant to this Agreement shall be in either the
federal or state courts located within Dade County, Florida.
14. Termination. All of the provisions of this Agreement shall
terminate after the expiration of the Employment Period, except that paragraph 5
shall only terminate upon the expiration of the Confidentiality Period and
paragraph 6 shall terminate upon the expiration of the later of Non-competition
Period or the Nonsolicitation Period.
15. Attorneys' Fees. In the event any action at law or in equity
or other proceeding is brought to interpret or enforce this Agreement, or in
connection with any provision of this Agreement, the prevailing party shall be
entitled to its reasonable attorney's fees and other costs reasonably incurred
in such action or proceeding.
16. Arbitration. Any controversy, claim or dispute arising between
the parties hereto, including, but not limited to, those arising out of or
related to this Agreement or in any way connected to Executive's employment
hereunder shall be determined by binding arbitration applying the laws of
Florida as set forth in Section 13 above. Any arbitration pursuant to this
Agreement shall be conducted in metropolitan Dade County, Florida under the
employment arbitration rules of the American Arbitration Association. The
arbitration and any award rendered therein shall be final and binding upon the
parties and may be entered in any court of competent jurisdiction. Nothing in
this Section will prevent either party from resorting to judicial proceedings of
interim injunctive relief under the laws of the State of Florida from a court of
competent jurisdiction if it is necessary to prevent a serious and irreparable
injury to one of the parties.
* * *
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<PAGE> 8
IN WITNESS WHEREOF, the Executive and the Company have executed this
Employment Agreement as of the day and year first written above.
EXECUTIVE:
/s/ Brett Beveridge
----------------------------------------
Brett Beveridge
Let's Talk Cellular & Wireless, Inc.
By:/s/ Nicolas Molina
-------------------------------------
Name: Nicolas Molina
Its: Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into effective the
22nd day of May, 1995, among LET'S TALK CELLULAR OF AMERICA, INC., a Florida
Corporation (the "Employer") and ANNE GOZLAN (the "Employee").
RECITALS
WHEREAS, the Employer is in the business of operating a retail business
selling cellular Telephones, pagers and related accessions, among other
electronic devices and products (the "Business");
WHEREAS, the Employer desires to obtain the services of the Employee in
connection With the operation of the Business;
WHEREAS, the Employee desires to be employed by the Employer, pursuant to
the Terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein Contained, the parties hereto agree as follows:
AGREEMENT
1. Term of Employment. The Employer hereby agrees to employ the
Employee and The Employee hereby agrees to be employed by the Employer as its
Chief Financial Officer. Subject to earlier termination pursuant to Section 4
hereof, the Employee's employment under this Agreement shall be for an initial
term of three (3) years from May 22, 1995 (the "Effective Date") and be
automatically renewed thereafter for additional one year periods, unless either
party notifies the other in writing not less than 90 days prior to the
expiration of the initial or any Renewal terms that it does not desire to renew
the term of Employee's employment.
2. Duties. The Employee shall serve as Chief Financial Officer of the
Employer and Shall perform such duties as are customarily performed by a chief
financial officer of a retail business of a similar size and character as the
Employer and such other reasonable duties as may be requested by or under the
authority of the Chief Executive Officer oft Employer. The Employee shall report
directly to the Chief Executive Officer oft Employer. The Employee shall devote
her full business time to the performance of her duties hereunder and shall not
render to others any service of any kind for compensation or engage in any
activity which Conflicts or interferes with the performance of her duties
hereunder
3. Compensation. For all services to be rendered by the Employee in
any capacity During the period of her employment under this Agreement, including
all services as an owner, employee or member of any committee of the Employer or
any subsidiary, affiliate, board or Division thereof, the Employee shall receive
the following compensation:
<PAGE> 2
3.1 Base Salary. Employee shall receive a minimum annual base
salary of $100,000 (less applicable taxes and deductions), which salary shall be
paid in equal installments in accordance with the Employer's regular payroll
practices, but not less frequently than monthly. The Board of Directors of the
Employer (the "Board") shall review Employee's base salary on an annual basis
and, in its sole discretion, may increase such salary commensurate with the
Employee's performance.
3.2 Stock Bonus Shares. Assuming the Employee is still in the
employ of the Employer, upon the first anniversary oft Effective Date, and upon
each of the second and third anniversaries of the Effective Date thereafter, the
Employee shall be entitled to receive such amount of common stock (the "Stock
Bonus Shares") as shall, on such anniversary date, constitute 1% oft Employer's
then outstanding common stock. Notwithstanding the preceding sentence, all 3% of
the Employer's outstanding Common Stock to be given to the Employee shall all be
given to the Employee upon a Chance in Control (as such term is defined in
Section 5.1 oaths Agreement) oft Employer. In addition to those contained in
Section 9 of this Agreement, the terms and conditions of such rights to the
Stock Bonus Shares are as follows:
(a) Redemption of Stock Bonus Shares. Within six (6) months of
the termination of employment of the Employee, for any reason
whatsoever, including without limitation the permanent disability
or death of the Employee, the Employer may, at its option and in
its sole discretion, redeem all or any portion of the Stock Bonus
Shares owned by the Employee, at a price equal to the Book Value
per share of each oft Stock Bonus Shares; provided, however, if
the Employee is terminated without cause (as determined in
accordance with Section 4.3 of this Agreement), such redemption
price shall be equal to the higher of book value per share of each
of the Stock Bonus Shares; or times (5x) the After-Tax Earnings
oft Employer. The Employer may exercise this redemption right
following the Employee's termination by delivering written notice
to the Employee specifying the number of such Stock Bonus Shares
to be redeemed. For purposes hereof, the term "Book Value" shall
mean, as of any date, the total shareholder's equity (including
capitol, additional paid in capital and retained earnings alter
deducting treasury stock) which would appear on the audited
balance sheet of the Employer as of such date in accordance with
generally accepted accounting principles, consistently applied.
For purposes hereof, the term "After-Tax Earnings" shall mean, as
of any date, the after-tax earnings which would appear on the
audited income statement of the Employer as of such date in
accordance with generally accepted accounting principle
consistently applied. The Book Value and the After-Tax Earnings of
the Stock Bonus Shares shall be determined by the then existing
independent certified public accountants oft Employer. The
determination by such independent certified public accountants of
the Book Value and the After Tax Earnings of the Stock Bonus
Shares shall be conclusive and binding on the Employee and the
Employer.
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<PAGE> 3
Any payment for the redemption of the Stock Bonus Shares made
pursuant to a termination cause, shall be payable quarterly over a
twenty-four (24) month period at an interest rate per annum equal
to the Prime Rate plus one percent (1%).
For the purposes hereof, the "Prime Rate. shall mean, as of the
date of any determination thereof, the Prime rate" as published in
the Wall Street Journal (Southeastern Edition). The Prime Rate
shall be determined monthly on the first day of each calendar
month after such termination, and the unpaid principal balance oft
purchase price for the Stock Bonus Shares shall bear interest
during each such month (or portion thereof) on the basis oft Prime
Rate calculated as of the first day of each such month or portion
thereof. In the event that the Wall Street Journal (Southeastern
Edition) has ceased publishing the Prime rates, then the "Prime
Rate" shall be determined with reference to the "Prime Rate" as
published in the New York Times (National edition).
(b) Expiration of Redemption Right. The Employer's right to
redeem the Stock Bonus Shares as set forth in this Section 3.2
shall terminate upon the completion of an initial public offering.
3.3. Bonus. The Employee shall be entitled to participate in any
bonus plan established from time to time for executives of the Employer at such
level as may be determined by the Board. . Bonuses, if any, shall be paid to the
Employee in accordance with a payment schedule as may be particularly approved
from time to time by the Board.
3.4 Stock Option Plan. After an Initial public offering of
equity securities of the Employer, the Employee shall be eligible to participate
in any stock option plan which may be established for the benefit of any
employees oft Employer on terms at least equal to seventy-five (75%) percent
of the participation rights in such stock option plan of the Chief Executive
Officer of the Employer.
3.5 Expense Reimbursement. The Employer shall reimburse the
Employee for reasonable and necessary business expenses incurred by the Employee
in the performance of her duties hereunder including, without limitation, travel
and entertainment expenses. Such expenses shall be reimbursed by the Employer,
from time to time, upon presentation of appropriate documentation therefore.
3.6 Health Insurance. During the term of Employee's employment
hereunder, the Employee shall be entitled to medical insurance comparable to
that provided to other employees of the Employer.
3.7 Vacation. The Employee shall be entitled to twenty (20)
business days vacation per year. The Employee shall be entitled to carry over up
to, but not more than, ten (10 days unused vacation time into any succeeding
year or years. The Employee shall not be
3
<PAGE> 4
compensated for any portion of unused vacation time. In no event shall the
Employee be entitled to more than thirty (30) days vacation in any given year.
3.8 Memberships. To facilitate the promotion oft Employer's
business interests, the Employer shall pay all initiation fees and periodic dues
for the Employee's membership in such clubs and business associations as shall
be reasonably selected by the Employee and approved in writing by the Chief
Executive Officer of the Employer.
4. Termination. The Employee's employment under this Agreement may be
terminated prior to the expiration of the term set forth in Section 1 under the
circumstances and on the terms and conditions described below.
4.1 Death or Disability. The Employee's employment under this
Agreement shall be terminated upon her death or Complete Disability. Complete
Disability means the inability of the Employee, due to illness, accident or any
other physical or mental incapacity, to perform her duties under this Agreement
for an aggregate of 120 days within any period of twelve consecutive months
during the term hereof, which Complete Disability shall be determined by the
Board with such professional advice as it may deem reasonably appropriate.
4.2 Termination for Cause. The Employee's employment pursuant
to this Agreement shall be terminated by the first to occur of the following
events. Upon any such termination, the Company shall be released from all
obligations hereunder, including without limitation, the obligation to
compensate the Employee pursuant to Section 5.1 hereof
(a) The death oft Employee.
(b) The Complete Disability oft Employee.
(c) The resignation of the Employee or the discharge of the
Employee by the Company for Cause. "Cause" as used herein shall mean:
(i) use of alcohol or a controlled substance which
materially impairs the Employee's ability to effectively perform her duties
hereunder,
(ii) conviction of the Employee of a felony or such other
crime as shall, in the reasonable opinion oft Board, result in a lack of
confidence in the honesty or moral character or integrity oft Employee
(iii) conviction of a felony or a crime involving moral
turpitude;
(iv) an act fraud by the Employee against the Employer or
any of its subsidiaries, or in connection with the performance of her duties
hereunder, as determined by the Board after investigation, notice of the charge
to the Employee and after allowing the Employee an opportunity to explain the
conduct in question;
4
<PAGE> 5
(v) the willful failure or refusal to comply with the
provisions of this Agreement or to perform the Employee's duties and obligations
under this Agreement, other than as a result of the Employee's death or Complete
Disability (a "Default"); provided, however, that in the case of this subsection
(v), termination for "Cause" shall occur only if the Employer has given written
notice of the Default to the Employee and an opportunity to cure the Default, if
curable, and the Employee has failed to cure the Default in question, during a
period of twenty (20) days after the date oft Employee's receipt of such notice.
Upon such termination, the Employer shall have no further obligations to
the Employee under this Agreement.
4.3 Termination Without Cause. If the Employer terminates the
Employee's employment at any time for any reason or under any circumstances
other than Cause, death or Complete Disability, the Employer shall pay the
Employee the Severance Payment, as defined in Section 5.1.
5. Payments on Termination of Employment.
5.1 Severance Payment. If the Employer terminates the
Employee's employment at any time pursuant to Section 4.3, the Employer shall
continue to pay the Employee her base salary then in effect and her medical
insurance costs for a period of twelve (12) months following the date of
termination of Employee's employment, subject to reduction or offset for the
amount of all loans made by the Employer to the Employee and all other
obligations of the Employee to the Employer, which upon offset shall be deemed
satisfied and paid in full (the Severance Payment"). If the Employee is
terminated for Cause within 180 days after a Change in Control (as such term is
defined below) of the Employer, then the Employee shall be entitled to receive
the Severance Payment.
For the purpose of this Agreement, a "Change in Control" of the Employer
shall mean the occurrence of (and shall be deemed to have occurred on the date
of the earliest to occur of) any of the following events:
1. The shareholders oft Employer approve a definitive
agreement or plan to merge, reorganize, exchange shares, or consolidate (a
"Business Combination?) or the issuance of voting securities oft Employer
pursuant to a Business Combination, provided, however, that the foregoing shall
not be applicable to a Business Combination which will result in the voting
securities of the Employer outstanding immediately prior to such Business
Combination continuing to represent (either by remaining outstanding or by being
converted into voting securities oft surviving or acquiring entity) more than
50% of the voting power oft voting securities of the Employer or such surviving
or acquiring entity outstanding immediately after such Business Combination: or
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<PAGE> 6
2. The shareholders of the Employer approve a definitive
agreement or plan to dissolve and/or liquidate the Employer or to sell, lease,
exchange, or otherwise dispose of, all or substantially all of the Employer's
property and assets (a "Transaction") to any other corporation or any other
legal person, provided, however, that the foregoing shall not be applicable to a
Transaction which will result in the voting securities of the Employer
outstanding immediately prior to such transaction continuing to represent more
than 50% of the Voting power oft voting securities of such other corporation or
other legal person outstanding immediately after such transaction or
3. Individuals who are Continuing Directors (as defined below)
of the Employer cease for any reason to constitute at least a majority of the
Board of the Employer.
Computations required by Subsection (a) and (b) shall be made on
and as of the date of shareholder approval and shall be based on reasonable
assumptions that will result in the lowest percentage obtainable. For purposes
of determining voting power pursuant to Subsections (a) and (b), all voting
securities of a corporation (whether the Employer or another entity) shall be
considered as a single class.
For purposes of Subsection (c), "Continuing Directors" means Nick Molina
,Brett Beveridge and Allan C. Sorensen For purposes of Subsections (a) through
(c), inclusive, so long as voting control of a majority of the Employer's
outstanding voting stock is held by Nick Molina and Brett Beveridge,
collectively or individually, or their respective trustees or beneficiaries, or
children, or other entities controlled by any one or more of such persons or of
which any one or more of them are the primary beneficiaries, a Change in Control
of the Employer shall be deemed not to have occurred. The Severance Payment
shall not be reduced by any earnings the Employee may receive from subsequent
employment or otherwise be subject to mitigation.
If the Employee's employment is terminated otherwise than pursuant
to Section 4.3 hereof, or if the Employee notifies the Employer pursuant to
Section 1 that she toes not desire to renew the term of her employment, the
Employer shall not be obligated to pay the Severance Payment.
5.2 Rights and Obligations upon Termination. Upon termination
of the Employee's employment, the Employer shall have no further obligation
under this Agreement to make any payments to, or bestow any benefits on, the
Employee after the date of termination, other than payments or benefits accrued
or due and payable to the Employee through the date of termination and other
than as specifically set forth in Sections 4 or 5 hereof Payment of any amounts
to which Employee is entitled under Sections 4 or 5 hereof shall constitute full
satisfaction of any and all financial obligations of the Employer to the
Employer under this Agreement except for any obligations the Employer may have
with respect to vested benefits of Employee. As a condition to the receipt of
such amounts, the Employee shall execute such releases, waivers and
satisfactions as may reasonably be required by the Employer.
6
<PAGE> 7
6. Confidentiality. Employee shall not, at any time during or after
her employment with the Employer, knowingly use, disclose, confirm, furnish, or
make accessible to anyone, other than as required by law or in the regular
course of the business of the Employer and consistent with the best interests
oft Employer, any knowledge or information of a confidential or secret nature
with respect to the business affairs, customers, vendors, assets, operations,
plans or know-how of the Employer. The Employee acknowledges and agrees that, in
the event of a breach or threatened breach oaths Section 6, the Employer will
suffer irreparable harm and that monetary damages would be inadequate.
Accordingly, in addition to such other remedies to which the Employer may be
entitled, the Employer shall be entitled to the remedies of injunction, specific
performance and other equitable relief.
7. Noncompetition.
(a) Except as the duties of Employee strictly necessitate,
Employee will not remove from Employer's premises (or cause or aid in the
removal therefrom), documents or papers of any type, (ii) photographs or films
(whether positive, negative or otherwise), (iii) computerized information
relating to Employers business function (whether stored or programmed as tapes,
punch-cards, print-outs or otherwise), or(iv) any other property containing or
reflecting information relating to the business of Employer including, but not
limited to, copies (regardless oft process by which made) and abstracts or
summaries, in whole or in part, of any of the foregoing. Employee agrees to
immediately return all of such items and all copies thereof to the premises of
Employer upon completion of his investigation or upon written demand by
Employer.
(b) By virtue of Employee's employment with Employer, Employee
will become possessed of confidential or proprietary information developed or to
be developed by Employer including, but not limited to, Employer's methods and
systems, the names and addresses of its customers and suppliers, prices charged
and paid by Employer, technical memoranda, research reports, designs and
specifications, supplies, new product and service developments, record cards,
patient applications, comparative analysis of competitive products, services and
operating procedures and other information, data and documents now existing or
hereafter acquired by Employer or Employee in connection with Employee's
employment, regardless of whether any of such information, data or documents
qualify as a Trade secret under applicable Federal or State laws (confidential
Information.). In consequence of this and in recognition that the secrecy of
Confidential Information gives Employer and its Affiliates (as defined in the
Securities Act of 1933, and amended (the "Security Act"), and the rules and
regulations promulgated thereunder) a significant competitive advantage in its
business and within the cellular telephone industry, Employee agrees not
disclose or cause or aid in the disclosure of any Confidential Information or
use or cause or aid in the use of any Confidential Information at any time for
whatever reason, during or after the Employment Term (as defined in Subsection
(c) below) without the specific prior written consent of Employer. Such consent
may be withheld at the sole and uncontrolled discretion of Employer.
7
<PAGE> 8
(c) Employee agrees and covenants that Employee will not during the
term of this Agreement and, thereafter for a period of two (2) years (the
"Employment Term") (i) engage in any business which competes with Employer's
business anywhere within the county or counties in which Employer or its
subsidiaries conducts business or any county contiguous thereto (the Area"),
(ii) become associated as manager, supervisor, employee, consultant, advisor,
stockholder, investor or otherwise with any person, corporation or entity which
engages in any business which competes with the Employer's business within the
Area, and (iii) call upon any employee, supplier, tenant, customer or customers
of Employer within the Area for the purpose of selling or soliciting for any
person, corporation or entity other than Employer, services offered by or being
developed by Employer within the Area, (iv) divert, solicit or take away any
such employee, supplier, tenant, customer or customers of Employer for the
purpose of selling or providing, within the Area, services offered by or being
developed by Employer other than that of Employer, and (v) service any contracts
or accounts within the Area offered or being developed by Employer within the
Area for any person, corporation or entity other than Employer.
(d) Employee agrees that any violation or breach of any provision
oaths Section 7 would cause irreparable harm to Employer and such violation or
breach cannot be adequately compensated in money damages. Accordingly, any such
violation or breach may be enjoined by any court of competent jurisdiction,
without waiving or affecting any claim for any damages incurred by Employer in
connection with such violation.
(e) The restrictions against competition set forth in this Section 7
are considered by the parties to be reasonable for the purpose of protecting the
business oft Employer. If any such restriction is found by any court of
competent jurisdiction to be unenforceable because it extends for too long a
period of time or over too broad a range of activities or in too large a
geographic area, however, such restriction shall be interpreted to extend only
over the maximum period of time, range of activities or geographic areas to
which it may be enforceable.
8. Arbitration.
8.1 General. If there is a dispute under this Agreement, either
party may submit such dispute to arbitration upon written notice to the other
party. Within 30 days alter delivery of such written notice, each party shall
appoint one arbitrator, and within 15 days thereafter the two appointed
arbitrators shall select a third arbitrator. If either party shall fail to make
such appointment within said 15-day period, the parties shall mutually select
the third arbitrator. If the parties me unable to agree within 15 days
thereafter as to appointment of the third arbitrator, then either party may,
upon at least five days prior written notice to the other party, request the
American Arbitration Association to choose such third arbitrator. All
arbitrators shall be impartial and unrelated, directly or indirectly, so far as
employment or services is concerned to either of the parties or to any affiliate
or to any person directly or indirectly related to the parties or to any
affiliate. The arbitration proceeding shall be governed by the Commercial
Arbitration Rules of the American Arbitration Association then in force. The
place of arbitration shall be Miami, Florida
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<PAGE> 9
8.2 Procedures. The three arbitrators shall investigate the
facts and shall hold a hearing at which the parties may present evidence and
arguments, be represented bar counsel and conduct cross-examination. In
determining any questions, matter or dispute before them, the arbitrators shall
apply the provisions of this Agreement, without varying therefrom in any
respect. They shall not have the power to add to, modify or change any of the
provisions of this Agreement. The three arbitrators shall render a written
decision upon the matter presented to them by a majority vote within 90 days
after the date upon which the last arbitrator is appointed, and that decision
shall be final and binding on both parties. Judgment upon the decision rendered
in such arbitration may be entered by any court having jurisdiction thereof
Neither party shall be considered in default hereunder during the pendency of
arbitration proceedings relating to a disputed default. If the three arbitrators
shall fail to render a decision within said 90-day period, then, to the extent
permitted by law, any party shall have the right to institute an action or
proceeding in such court as shall be appropriate in the circumstances, and upon
the institution of such action, the arbitration proceeding shall be terminated
and shad be of no further force and effect. The arbitrators shall determine in
what proportion the parties shall bear the fees and expenses oft arbitrators,
and each party shall bear the fees and expenses of its own counsel and other
consultants.
9. Stock Bonus Shares.
9.1 Adjustment of Number of Stock Bonus Shares.
(a) If, at any time after the date oaths Agreement, the number
of shares of common stock outstanding is increased by a stock dividend payable
in shares of common stock or by a subdivision or split-up of shares of common
stock, then, following the record date fixed for the determination of holders of
common stock entitled to receive such stock dividend, subdivision or split-up,
the number of Stock Bonus Shares shall be increased in proportion to such
increase in outstanding shares.
(b) If, at any time after the date of this Agreement, the
number of shares of common stock outstanding is decreased by a combination of
the outstanding shares of common stock, then, following the record date for such
combination, the number of Stock Bonus Shares shall be decreased in proportion
to such decrease in outstanding shares.
(c) If at any time after the date oaths Agreement, but prior to
any public offering of equity securities of the Employer, the Employer shall
issue additional shares of common stock to any of the Continuing Directors which
results in the Elation of the Employee's percentage ownership in the Employer (a
"Dilution"), the Employer shall, within thirty (30) days after such Dilution,
issue to the Employee, in exchange for the same consideration as was received
from the Continuing Directors for such additional shares of common stock, Such
number of additional shares of common stock to raise the Employee's percentage
ownership in the Employer to the level of percentage ownership that the Employee
had prior to the Dilution.
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<PAGE> 10
9.2 Representations, Warranties and Agreements of the Employee.
(a) The Employee hereby represents and warrants to the Employer
that the Stock Bonus Shares will be owned for the Employee's own account, for
investment purposes and not with a view to the distribution thereof The Employee
understands that the issuance to the Employee of Stock Bonus Shares has not been
registered under the Securities Act by reason of its proposed issuance in a
transaction exempt from the registration requirement oft Securities Act ant that
the Stock Bonus Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or the transaction is exempt from
registration. In connection with the foregoing, the Employee also agrees that
the issuance of all or any portion of the Stock Bonus Shares is subject to the
receipt by the Employer at the time of its issuance of an opinion of counsel
reasonably acceptable to the Employer that the issuance of such shares is exempt
from registration pursuant to an exemption provided for in the Securities Act.
The Employee agrees that the Employer will not be liable for any damages
incurred by the Employee in the event such an opinion cannot reasonably be
obtained.
(b) The Employee also agrees that, as a condition to the
Employer's obligation to issue Stock Bonus Shares, the Employee shalL if
requested by the Employer, enter into a shareholders agreement providing, among
other things, that the Employer and/or the other shareholders thereof shell have
a right of first refusal to purchase any Stock Bonus Shares issued to the
Employee prior to the sale, transfer or other disposition of any such Stock
Bonus Shares by the Employee to any third party.
9.3 Nontransferability Restock Bonus Shares. The Stock Bonus
Shares granted hereby may not be pledged, assigned, or otherwise transferred or
disposed of by the Employee, except by will or the laws of descent and
distribution.
Except for such restrictions on transfer, the Employee shall have
all of the rights of a stockholder with respect to the Stock Bonus Shares
awarded to her including, but not limited to the right to receive dividends on,
and the right to vote, the shares.
9.4 Legends. All stock certificates representing Stock Bonus
Shares issued to the Employee shall have affixed thereto a legend substantially
in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE BLUE SKY LAWS OF ANY STATE. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR SUCH LAWS. THESE
SECURITIES ARE ALSO SUBJECT TO COMPLIANCE WITH CONDITIONS OF AN
EMPLOYMENT AGREEMENT DATED AS OF JUNE ____, 1995 BETWEEN LET'S TALK
CELLULAR OF AMERICA, INC. AND ANNE GOLZAN. NO TRANSFER OF THESE
SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL
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<PAGE> 11
SUCH CONDITIONS HAVE BEEN FULFILLED. COPES OF SUCH AGREEMENT MAY BE
OBTAINED BY WRITTEN MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY.
9.5 Tax Liabilities. The Employee shall be responsible for and
shall pay any and all taxes resulting from the grant oft Stock Bonus Shares, and
the Employer shall have no liability for any such taxes. The Employee hereby
agrees to reimburse the Employer for any withholding taxes or other similar
items that may be required to by paid by the Employer with respect to the grant
oft Stock Bonus Shares to the Employee.
9.6 Piggyback Registration Rights. In case the Employer shall
at any time determine to register any of its equity securities under the
Securities Act, other than on Form S-4, Form S-8 or Form S-18(a "Registration
Statement"), or to qualify such securities under the securities laws of any
state, at its own initiative, the Employer shall give prompt written notice of
each such registration to the Employee. If so requested in writing by the
Employee, the Employer shall include among the securities which it endeavors to
register under) the Securities Act or to qualify undo the securities laws of any
state, all or any part (but at least So% oft Stock Bonus Shares) oft Stock Bonus
Shares as shall be specified in such request; and the Employer shall use its
best efforts to cause all such registrations, qualifications or compliances to
be effected and to be kept effective as provided in this Section 9.6.
In the event of a bona fide underwritten public offering of the
Employer's equity securities, the managing underwriter(s) shall have sole and
absolute discretion as to whether to include any Stock Bonus Shares requested to
be so included by the Employee; provided, however, that if such managing
underwriter(s) does not prohibit the registration oft Stock Bonus Shares, the
Employee shall be entitled to register, at a minimum, such percentage oft Stock
Bonus Shares which corresponds to her percentage ownership in the outstanding
common stock oft Employer. For example, if the Employee owns, as oft date any
determination thereof is to be made, one percent (1%) of the outstanding common
stock of the Employer, then the Employee shall be entitled to register a minimum
of one percent (1%) of the Stock Bonus Shares, assuming the managing
underwriter(s) has not denied such request for registration.
(a) Registration Procedures. In connection with the
registration, qualification or compliance effected by the Employer pursuant to
this Section 9.6, the Employer shall:
(i) keep the Employee advised in writing at the
initiation of proceedings of each registration, qualification or
compliance and as to the completion thereof;
(ii) furnish the Employee with such number of
prospectuses, including a preliminary prospectus, and such other
documents as may be reasonably requested; and
11
<PAGE> 12
(iii) keep such registration, qualification or compliance
effective until all sales or distributions contemplated in connection
therewith are completed; provided that the Employer shall not be
obligated to keep such registration, qualification or compliance in
effect for more than 90 days after the effective date thereof. In the
case of any registration effected by the Employer pursuant to an
underwritten public offering, the Employer, if requested by the Employee,
shall request the managing underwriter(s) of such offering to include the
Stock Bonus Shares among those to be distributed by the underwriter(s).
(b) Conditions to Registration. The Employee's right to have
the Stock Bonus Shares included in the Registration Statement shall be subject
to the following conditions:
(i) The Employee shall furnish the Employer in a timely
manner with all information required by the applicable rules and
regulations of the Securities and Exchange Commission (the "Commission"),
including without limitation the proposed method of sale or other
disposition of the Stock Bonus Shares, the identity of and compensation
to be paid to any person to be employed in connection therewith, and all
other information as the Employer may reasonably require; and
(ii) If the Employee desires to sell and distribute the
Stock Bonus Shares over a period of time, or from time to time, at then
prevailing market prices, then the Employee shall execute and deliver to
the Employer those written undertakings which the Employer and its
counsel may reasonably require in order to assure full compliance with
relevant provisions oft Securities Act and the Exchange Act; and
(iii) The Employee hereby agrees that upon the Employer's
written request, it shall not sell publicly or otherwise transfer or
dispose of any Stock Bonus Shares or other equity securities of the
Employer held by the Employee during the period starting up to 45 days
prior to the Employer's good faith estimate of the date of filing with
the Commission of, and ending on a date up to 180 days after the
effective date of, a registration statement involving the registration of
an underwritten offering of equity or debt securities convertible into
equity securities of the Employer, provided that the Employer is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective.
(iv) The Employer will pay all expenses of the
registration, including without limitation legal and accounting fees and
disbursements, blue sky fees and expenses, printing costs and related
expenses arising out of the preparation, filing, amending and
supplementing of the Registration Statement and any prospectus a part
thereof, other than fees and disbursements of counsel, accountants and
other advisors for the Employee, underwriting commissions and discounts,
brokerage commissions,
12
<PAGE> 13
agents' fees and transfer taxes relating to the offer and sale of the
Stock Bonus Shares that may held by the Employee.
(c) Indemnification.
(i) Indemnification by the Employer. The Employer
will, to the extent permitted by law, indemnify and hold the Employee harmless
against any losses, claims, demands, damages or liabilities, joint or several,
to which the Employee may become subject under the Securities Act or otherwise,
insofar as the losses, claims, demands, damages or liabilities (or actions or
proceedings in respect thereof arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any material fact contained or
incorporated by reference in the Registration Statement, the Prospectus or the
preliminary or summary prospectuses contained therein, any amendment or
supplement thereto, or any document (or part thereof) incorporated by reference
therein, or (b) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and the Employer will reimburse the Employee for all legal or
other expenses reasonably incurred by her in connection with investigating or
defending any such loss, claim, demand, damage, liability, action or proceeding,
except that the Employer will not be liable in any such case to the extent that
the loss, claim, demand, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made or incorporated by reference in the Registration Statement, the Prospectus
or preliminary, or summary prospectus, amendment or supplement in reliance upon
and in conformity with information relating to the Employee or her Shares
furnished to the Employer by the Employee stating in writing that it is for use
in the preparation thereof This indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Employer.
(ii) Indemnification by the Employee. The Employee
will, to the extent permitted by law, indemnify and hold harmless the Employer,
each director of the Employer, each officer of the Employer who signs the
Registration Statement, and each other person, if any, who controls the
Employer, against any losses, claims, demands, damages or liabilities, joint or
several, to which the Employer or such director, officer or controlling person
may become subject under the Securities Act or otherwise, insofar as the losses,
chime, demands, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (a) any untrue statement or alleged
untrue statement of any material fact contained or incorporated by reference in
the Registration Statement, the Prospectus or the preliminary or summary
prospectuses contained therein, any amendment or supplement thereto, or any
document (or part thereof) incorporated by reference therein, or Do) the
omission or alleged omission to state there in a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
untrue statement or alleged untrue statement or omission or alleged omission has
been made or incorporated therein in reliance upon and in conformity with
information relating to the Employee or her shares furnished to the Employer by
the Employee in writing stating that it is for use in preparation thereof and
will reimburse the Employer and each director, officer and controlling person
for all legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, demand, damage,
13
<PAGE> 14
liability, action or proceeding. This indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Employer or
such director, officer or controlling person.
(iii) Notices of Claims. Promptly alter receipt by
an indemnified party of a demand or notice of the commencement of any action or
proceeding losses, claims, demands, damages or liabilities referred to in
Subsections (i) or bud above, an Indemnified Claim.), the indemnified party
will, if a claim for indemnification is to be made against an indemnifying park,
give written notice to the latter of the Indemnified Claim, provided that the
failure of any indemnified party to give notice as provided herein soul not
relieve the indemnifying party of its obligations under Subsections (i) or (ii)
above, except to the extent that the indemnifying party is actually prejudiced
by the failure to give notice. Unless in the reasonable judgment of counsel for
an indemnifying party a conflict of interest exists between such indemnifying
party and the indemnified party or parties with respect to the Indemnified
Claim, each indemnified party agrees to permit the indemnifying party to assume
the defense of the Indemnified Claim with courted reasonably satisfactory to the
indemnified party or parties. If the indemnifying party is not entitled to, or
elects not to, assume the defense of an Indemnified Claim, it will not be
obligated to pay the fees and expenses of more than one counsel for such
indemnified party or parties with respect to the Indemnified Claim. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term the giving by the
claimant or plaintiff to the indemnified party of a release from all liability
in respect of the Indemnified Claim
10. Miscellaneous.
10.1 Modification and Waiver. Any term or condition of this
Agreement may be waived at any time by the party hereto that is entitled to the
benefit thereof, except that DO such waiver of any breach or default hereunder
is to be implied from the omission of the other party to take any action on
account thereof A waver on one occasion shall not be deemed to be a waiver of
the same or of any other breach or default on a subsequent occasion nor shall it
be deemed a continuing waiver. This Agreement may be modified or amended only by
a writing signed by the Employer and the Employee.
10.2 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Florida,
without regard to conflict of laws principles thereunder.
10.3 Section Captions. Section captions contorted in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope of this Agreement or any provision hereof
10.4 Severability. Every provision of this Agreement is intended
to be severable. If any term or provision is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity of the
remainder of this Agreement.
14
<PAGE> 15
10.5 Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and there are no agreements, understandings,
restrictions, representations, or warranties between the parties other than
those set forth or provided for herein
10.6 Attorneys Fees. If any litigation is instituted between the
parties to enforce the terms of this Agreement, the prevailing parer shall be
entitled to recover, from the other party, any and all reasonable attorneys'
fees and disbursements and court costs incurred in enforcing such terms.
10.7 Interpretation. No provision of this Agreement is to be
interpreted for or against any party because that party or that party's legal
representative drafted such provision.
10.8 Submission to Jurisdiction. The Employer and the Employee
hereby consent to the jurisdiction of any federal, state or municipal court
located within Dade County, State of Florida and waives any objection which
either of them may have based on improper venue or forum non convenient to the
conduct of any proceeding in any such court.
10.9 Notices. Any notices required to be given hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered or deposited in the United States mail, certified or registered,
retain receipt requested, postage prepaid, addressed to the parties and their
counsel at their respective addresses listed below:
If to the Employer
Let's Talk Cellular of America, Inc.
Attention: Nick Molina, Chief Executive Officer
5200 N.W. 77th Court
Miami, Florida 33166
With a copy to:
Steel Hector & Davis
4000 Southeast Financial Center
Miami, Florida 33131-2398
Attn: Harvey Goldman If to
If to the Employee:
Anne Gozlan
With a copy to:
1O.10 JURY TRIAL WAIVER. THE EMPLOYER AND THE EMPLOYEE HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
15
<PAGE> 16
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS EMPLOYMENT AGREEMENT
AND ANY AGREEMENTS CONTEMPLATED HEREBY TO BE EXECUTED IN CONJUNCTION THEREWITH,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EACH PARTY. IS PROVISION IS A MATERIAL INDUCEMENT FOR THE
EMPLOYER AND THE EMPLOYEE ENTERING INTO THIS EMPLOYMENT AGREEMENT.
IN WITNESS WHEREOF, THE PARTIES HAVE DULY EXCEPTED THIS AGREEMENT AS OF
THE DATE INDICATED ABOVE.
LET'S TALK CELLULAR OF AMERICA, INC.
/s/Nick Molina
--------------------------------------
By: Nick Molina
Its: Chief Executive Officer
/s/Anne Gozlan
--------------------------------------
Anne Gozlan
16
<PAGE> 17
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This AGREEMENT, dated of June 25, 1996 (this "Amendment") is entered into
by and between LET'S TALK CELLULAR OF AMERICA, INC., a Florida corporation (the
"Employer") and ANNE GOZLAN (the "Employee"), and amends that certain Employment
Agreement, dated as of May 22, 1995 (the "Agreement" and together with the
Amendment, the "Agreement"), by and between the Employee.
RECITALS
WHEREAS, the Employee is currently employed as the Chief Financial
Officer of the Employer;
WHEREAS, the Employee and the Employer desire to amend the Employment
Agreement in accordance with the term hereof;
NOW THEREFORE, for good and valuable consideration, the receipt, adequacy
and sufficiency whereof are hereby acknowledged, the parties hereto agree as
follows:
Agreement
1. The above recitals are true and correct and are incorporated herein by
this reference. All capitalized teens used but not otherwise defined
herein shall have the respective meanings provided for them in the
Agreement.
2. The following sections of the Agreement are hereby amended to read as
follows:
a) Section 3.1 Shall be amended to provide that the Employee's base
salary shall be increased yearly commencing on the second
anniversary of the Effective Date by an amount not less than the
greater of (i) five percent (5%) per annum or (ii) the increase in
the Consumer Price Index as published by the U.S. Department of
Labor.
b) The first two sentences of the first paragraph of Section 3.2 are
amended in their entirety to read as follows:
ASSUMING THE EMPLOYEE IS STILL IN THE EMPLOY OF THE EMPLOYER, UPON
THE BUST ANNIVERSARY OF THE EFFECTIVE DATE, AND UPON EACH OF THE
SECOND AND THIRD ANNIVERSARIES OF THE EFFECTIVE DATE THEREAFTER,
THE EMPLOYEE SHALL BE ENTITLED TO RECEIVE 6,500 SHARES OF THE
EMPLOYER'S COMMON STOCK (THE "STOCK BONUS SHARES").
NOTWITHSTANDING THE PRECEDING SENTENCE, ALL 19,500 SHARES OF THE
STOCK BONUS SHARES TO BE GIVEN TO THE EMPLOYEE UNDER THIS
AGREEMENT SHALL ALL BE GIVEN TO THE EMPLOYEE UPON A CHANGE IN
CONTROL (AS SUCH TERM IS DEFINED IN SECTION 5.1 OF THIS AGREEMENT)
OF THE EMPLOYER.
<PAGE> 18
c) Sections 9.6(a) and (b) the Agreement are deleted in their
entirety and replaced with the "Piggy-back Registration Rights"
set forth in Section 7.3 of that certain Series A Preferred Stock
Purchase Agreement dated as of the date hereof, by and among the
Employer, HIG Fund V, Inc., Nick Molina, and Brett Beveridge For
purposes of the Employee's Piggy-back Registration Rights, the
definition of "Registrable Securities" under the Purchase
Agreement shall be deemed to include the Employee's Stock Bonus
Shares. The Employee hereby agrees and acknowledges that his
shares shall be treated pro rata with the shares of the other
Holders of Registrable Securities.
d) Section 10.9 is amended to include 6810 S.W. 45 Lane, Apt. #3,
Miami, Florida as the Employee's address for purposes of providing
notice under the Agreement.
e) The Employee and the Employer each acknowledge that (i) the
Employee currently owns 6,500 shares of the Common Stock of the
Employer which shares are fully vested and not subject to
forfeiture as a result of the occurrence of the first anniversary
on May 22, 1996 of the Employee's employment with the Employer,
(ii) the Employee is entitled to an additional 6,500 shares of the
Company's Common Stock upon each of her second and third
anniversaries in the employ of the Employer; (iii) the total
aggregate number of shares of Common Stock that the Employee is
eligible to receive pursuant to the terms of the Agreement is
19,500 shares; and (v) upon the execution of this Amendment, the
Employer shall deliver a certificate to the Employee evidencing
her ownership of 6,500 shares of the Company's Common Stock
3. Except a modified by this Amendment, the parties hereto acknowledge that
the Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date and year first written above
EMPLOYER: LET'S TALK CELLULAR OF AMERICA, INC:
By: /s/ Nicolas Molina
-----------------------------------
Its: President
EMPLOYEE: /s/ Anne Gozlan
------------------------------------
Anne Gozlan
2
<PAGE> 1
EXHIBIT 10.12
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 27th day of June, 1997, by
and between Telephone Warehouse, Inc., a Delaware corporation f/k/a HIG
Cellular Acquisition Corporation (the "Corporation"), and Ronald L. Koonsman,
an individual residing at 1303 Rocky Canyon, Arlington, Texas 76012 (the
"Executive").
WITNESSETH THAT:
WHEREAS, the Corporation and the Executive have previously entered into
that certain Employment Agreement, dated as of December 31, 1996 (the "Original
Employment Agreement");
WHEREAS, the Corporation desires to amend and restate the Original
Employment Agreement to continue to employ the Executive in the capacity
hereinafter stated, and the Executive desires to continue in the employ of the
Corporation in such capacity for the period and on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the Corporation and the
Executive as follows:
1. Employment Period. The Corporation hereby agrees to employ the
Executive as its President and the Executive, in such capacities, agrees to
provide services to the Corporation for the period beginning on the date first
above written (the "Commencement Date") and ending on December 31, 1998 (the
"Employment Period).
2. Performance of Duties. The Executive agrees that during the Employment
Period, while he is employed by the Corporation, he shall devote his full time,
energies and talents exclusively to serving in the capacity of President of the
Corporation and to perform the duties assigned to him by the Board of Directors
in a professional manner.
3. Compensation. Subject to the terms and conditions of this Agreement,
during the Employment Period, the Executive shall be compensated by the
Corporation for his services as follows:
(a) He shall receive, (i) for the six-month period beginning 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, each payable in
substantially equal installments in accordance with the normal
payroll practices of the Corporation.
(b) He shall receive a bonus of $950,000, which shall be payable
on or before December 31, 1997; provided that the Adjusted EBIT (as
defined in that certain Amended and Restated Subordinated Note
dated as of the date hereof) for the 12 months ended December 31,
1997 equals or exceeds $4 million.
<PAGE> 2
(c) He shall be a participant in the standard executive benefit
plans maintained by the Corporation. The Corporation shall pay for
life insurance policies naming the Executive's designee as the
beneficiary in the amount of (i) $3 million for the year ended
December 31, 1997, and (ii) $2 million for the year ended December
31, 1998.
(d) He shall be reimbursed by the Corporation for all reasonable
business, promotional, travel and entertainment expenses incurred or
paid by him during the employment period in the performance of his
services under this Agreement provided that the Executive furnishes
to the Corporation appropriate documentation in a timely fashion
required by the Internal Revenue Code in connection with such
expenses and shall furnish such other documentation and accounting
as the Corporation may from time to time reasonably request.
4. Compensation Due Upon Termination. Except as otherwise provided under
the executive benefit plans maintained by the Corporation in which the
Executive participates in accordance with subparagraph 3(c), the Executive's
right to compensation for periods after the date his employment with the
Corporation terminates shall be determined in accordance with the following:
(a) Discharge Without Cause. The Corporation may terminate the
Executive's employment under this Agreement at any time after the
six month anniversary of the Commencement Date without cause for any
reason whatsoever. Upon such termination, the Executive shall be
entitled to receive all payments of his compensation in accordance
with the provisions of subparagraphs 3(a) and 3(b) for the remainder
of the Employment Period.
(b) Voluntary Resignation. The Corporation shall have no
obligation to make payments to the Executive in accordance with the
provisions of paragraph 3 for periods after the date on which the
Executive's employment with the Corporation terminates due to the
Executive's voluntary resignation. If the Executive resigns because
of (i) a change in his office location of more than fifty (50)
miles, (ii) the removal of him from senior management of the
Corporation or (iii) a requirement that he perform nonexecutive
duties, he shall be deemed to have been discharged without cause
under paragraph 4(a).
(c) Discharge for Cause. The Corporation shall have no obligation
to make payments to the Executive in accordance with the provisions
of paragraph 3 for periods after the Executive's employment with the
Corporation is terminated on account of the Executive's discharge
for cause. For purposes of this subparagraph 4(c), the Executive
shall be considered discharged for "cause" if he is discharged by
the Corporation on account of the Executive committing a material act
of fraud against the Corporation.
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<PAGE> 3
(d) Death. The Corporation shall have no obligation to make
payments to the Executive in accordance with the provisions of
paragraph 3 after the death of the Executive.
5. Confidentiality. All information, knowledge and data relating to or
concerned with the operations, business and affairs of either the Executive or
the Corporation, as the case may be, which are exchanged by the parties hereto
in connection with the performance by the Executive of his duties hereunder
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 Executive 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. Notwithstanding anything to the contrary
contained herein, the covenants contained herein shall not apply to information
which (a) is or becomes public knowledge without breach of this agreement, (b)
which is or becomes publicly available without a confidentiality restriction
and without breach of this agreement from a source other than the disclosing
party, (c) the recipient can demonstrate was known by the recipient without a
confidentiality restriction at the time of the receipt of such information or
(d) was independently developed by the recipient by persons who did not have
access to the disclosed information.
6. Non-competition. During the period commencing on the date hereof and
ending on December 31, 2000 (the "Restricted Period"), the Executive agrees not
to, directly or indirectly, alone or as a partner, officer, director, employee,
consultant, agent, independent contractor, member or stockholder of any company
or Person, engage in any business activity, including but not limited to any
business activity related to selling cellular or wireless communication
services or products, in any metropolitan area or proposed metropolitan area in
which the Corporation or its affiliates is doing or will do business within six
(6) months from the date of termination of this agreement (the "Restricted
Area"), which is directly or indirectly in competition with the products or
services being developed, manufactured, marketed, sold or otherwise provided by
the Corporation or its affiliates or which is directly or indirectly
detrimental to the business of the Corporation or its affiliates; provided,
however, that the record or beneficial ownership by the Executive of five
percent (5%) or less of the outstanding publicly traded capital stock of any
such company or Person for investment purposes shall not be deemed to be in
violation of this section so long as the Executive is not an officer, director,
employee or consultant of such company or Person. The Executive further agrees
that, during the Restricted Period, the Executive shall not in any capacity,
either separately, jointly or in association with others, directly or
indirectly employ or seek to employ any Person or agent who is then employed or
retained by the Corporation or its affiliates (or who was so employed or
retained at any time within the six month period prior to the date the
Executive employs or seeks to employ such person); and (c) solicit, induce, or
influence any proprietor, partner, stockholder, lender, director, joint
venturer, investor, lessor, supplier, customer or any other Person which has a
business relationship with the Corporation or any of its affiliates, at any
time during the Restricted Period, to discontinue or reduce or modify the
extent of such relationship with the Corporation.
7. Successors. This Agreement shall be binding on, and inure to the
benefit of, the Corporation and its successors and assigns and any person
acquiring, whether by merger,
-3-
<PAGE> 4
consolidation, purchase of assets or otherwise, all or substantially all of the
Corporation's assets and business.
8. Remedies. The Executive acknowledges that the Corporation would be
irreparably injured by a violation of paragraphs 5 or 6, and agrees that the
Corporation shall be entitled to an injunction restraining the Executive from
any actual or threatened breach of paragraph 5 or 6, or to any other
appropriate equitable remedy without bond or other security being required.
9. Waiver of Breach. The waiver by either the Corporation or the Executive
of a breach of any provision of this Agreement shall not operate as or be
deemed a waiver of any subsequent breach by either the Corporation or the
Executive.
10. Notice. Any notice to be given hereunder by a party hereto shall be in
writing and shall be deemed to have been given when received or, when deposited
in the U.S. mail, certified or registered mail, postage prepaid:
(a) to the Executive addressed as follows:
Mr. Ronald L. Koonsman
1303 Rocky Canyon
Arlington, Texas 76012
(b) to the Corporation addressed as follows:
Telephone Warehouse, Inc.
2400 East Randol Mill Road
Arlington, Texas 76012
11. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing.
12. Applicable Law. The provisions of this Agreement shall be construed in
accordance with the internal laws of the State of Texas.
13. Termination. All of the provisions of this Agreement shall terminate
after the expiration of the Employment Period, except that paragraph 5 shall
not terminate and paragraph 6 shall terminate upon the expiration of the
Restricted Period.
14. Conflict. To the extent a conflict exists between this Agreement and
the Stock Purchase Agreement, the terms and conditions of the Stock Purchase
Agreement shall govern.
* * *
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<PAGE> 5
IN WITNESS WHEREOF, the Executive and the Corporation have executed this
Employment Agreement as of the day and year first above written.
RONALD L. KOONSMAN
/s/ Ronald L. Koonsman
------------------------------
TELEPHONE WAREHOUSE, INC.
By: /s/ Anthony Tamer
---------------------------
Its: Vice President
--------------------------
-5-
<PAGE> 1
EXHIBIT 10.13
INTERCOMPANY NOTE
$3,585,000 June 27, 1997
FOR VALUE RECEIVED, Let's Talk Cellular & Wireless, Inc., a Florida
corporation ("Maker" or "LTC"), promises to pay to Texas Cellular Partners,
L.P., a Delaware limited partnership ("Payee" or "TCP"), the principal sum of
up to THREE MILLION FIVE HUNDRED EIGHTY-FIVE THOUSAND DOLLARS ($3,585,000),
together with interest thereon at the rates hereinafter provided.
Section 1. Interest. Interest shall accrue on the principal amount of
this Note from time to time outstanding at the rate of eight percent (8%) per
annum, provided, however, that if at the end of any calendar year, LTC has not
completed an initial public offering of its common stock, which yields proceeds
(net of all expenses, including underwriting fees and commissions, of at least
$20.0 million (a "Qualified IPO") and LTC's and TCP's combined Indebtedness
exceeds 3.5 times their combined EBITDA (as defined below), interest shall
accrue on the principal amount of this Note from time to time outstanding at
the rate of twelve percent (12%) per annum until LTC's Indebtedness is reduced
below such threshold (the "Interest Rate"). Interest shall be payable in
quarterly installments on the last day of each fiscal quarter following the
date of this Note commencing July 31, 1997, based on a three hundred sixty-five
(365) day year for actual number of days elapsed.
Section 2. Payment. The principal amount of this Note shall be due
and payable as follows: (i) $750,000 shall be payable on March 15, 1999 in the
event the Adjusted EBIT (as defined below) for the year ended December 31, 1998
for Telephone Warehouse, Inc., a Delaware corporation ("TWI"), and National
Cellular, Incorporated, a Texas corporation ("NCI" and collectively with TWI,
the "Companies"), equals or exceeds $5,000,000, (ii) $835,000 shall also be
payable on March 15, 1999 in the event the Adjusted EBIT for the year ended
December 31, 1998 for the Companies equals or exceeds $7,000,000, and (iii)
$2,000,000 shall be payable on the earlier of (i) the second anniversary of the
closing of a Qualified IPO, or (ii) March 15, 2002.
Section 3. Method of Payment. Payments of principal, interest and
other amounts due hereunder shall be made in lawful money of the United States
of America by (a) in the case of payments of principal, wire transfer of
immediately available funds to the account of Payee in the United States
designated in the records maintained by Maker, and (b) in the case of
interest and any and all other payments, company check to Payee at the address
set forth in Maker's records unless and until Payee provides written notice to
Maker to the contrary.
Section 4. Default Interest. If any installment of interest, or the
principal amount hereof, is not paid within fifteen (15) days after the due
date thereof, interest shall accrue on such unpaid amount at a default rate
equal to the lesser of (a) twelve percent (12%) per annum or
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<PAGE> 2
(b) the highest rate permitted under applicable law, until such amount is paid
in full, (the "Default Rate").
Section 5. Prepayment. Subject to the provisions of the Credit
Agreement (as defined below), this Note may be prepaid in whole or in part at
any time without prepayment premium or penalty.
Section 6. Defaults and Remedies.
6.1 Events of Default. Any one or more of the following shall
constitute an Event of Default hereunder: (a) default shall be made in the
payment of the principal of this Note when and as the same shall become due and
payable, whether at stated maturity, by acceleration, or otherwise after
five (5) days notice of such failure from Payee; (b) Maker shall fail to pay
within ten (10) days following the due date any installment of interest of the
principal amount hereof; (c) Maker shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or be generally unable to pay its debts as such debts
become due; (d) an involuntary case or other proceeding shall be commenced
against Maker seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property or an order for relief shall be entered against Maker under the
federal bankruptcy laws or the laws of the jurisdiction of organization of
Maker as now or hereafter in effect, and such involuntary case or other
proceeding or order shall remain undismissed or unstayed for a period of sixty
(60) days, and if stayed, such involuntary case or other proceeding or order
shall be dismissed upon termination of such stay; (e) default shall be made in
the performance or observance of any other covenant, agreement or condition
contained herein and such default shall have continued for a period of thirty
(30) days after such default shall first have become known to Maker; (f) any
representation or warranty made by Maker in this Note or pursuant hereto or in
connection with any provision hereof shall be false or incorrect in any
material respect on the date as of which made and shall not have been cured
within thirty (30) days of notice thereof; or (g) a Change in Control of Maker
shall occur.
6.2 Acceleration. If (a) an Event of Default shall occur
pursuant to Sections 6.1(c) or (d), the principal of, and accrued interest on,
and all other amounts due under this Note shall become immediately due and
payable, and (b) any other Event of Default shall occur, the principal of, and
accrued interest on, and all other amounts due under, this Note shall become
due and payable upon notice by Payee to Maker; provided that if the Credit
Agreement is in effect at such time, such notice shall not become effective
until at least ten (10) days' prior notice by Payee to the Agent under the
Credit Agreement.
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<PAGE> 3
6.3 Waiver of Presentment, Etc. Maker hereby waives
presentment, demand, protest or notice of any kind in connection with this Note.
Section 7. Subordination to Senior Debt. Maker and Payee agree for the
benefit of the Senior Debt (as defined in the Subordination Agreement) that all
indebtedness evidenced by this Note, including principal, premium, if any, and
interest, and all other amounts payable to Payee hereunder (including, for all
purposes of this Note, any payment in respect of redemption or purchase or
other acquisition hereof) (collectively, the "Subordinated Debt") shall, to the
extent set forth in the Amended and Restated Subordination Agreement dated as
of December 31, 1996 as amended and restated as of June , 1997 by and among
Maker, Payee and NationsCredit Commercial Corporation, as amended from time to
time (the "Subordination Agreement"), be subordinate and junior to all Senior
Debt.
Section 8. Definitions. The following terms, as used herein, have the
following respective meanings:
Adjusted EBIT means the combined net income of TWI and NCI
determined in accordance with generally accepted accounting principles
("GAAP"), applied consistently with past practices of the Companies
(collectively, "Net Income") plus or minus, as applicable, the following (to
the extent included in the calculation of Net Income):
(1) interest expense;
(2) income taxes;
(3) depreciation and amortization;
(4) any allocations of overhead or general and
administrative expenses or fees payable by the Companies to
any of their affiliates (excluding management fees payable by
TWI to an affiliate, not to exceed, in the aggregate, $350,000
in any calendar year);
(5) any extraordinary loss (and minus any extraordinary
gain);
(6) any loss or expense resulting from a change in
the accounting methods of the Companies or their subsidiaries,
principles or practices or a change in GAAP or any GAAP election or
treatment not made or utilized by the Companies in their audited
financial statements for fiscal year 1996 (and minus any gain or
income resulting from a change in the accounting methods of the
Companies or its subsidiaries, principles or practices or a change in
GAAP or any GAAP election or treatment not made or utilized by the
Companies in their audited financial statements for fiscal year 1996);
(7) any losses or expenses resulting from reserves or
adjustments to reserves not consistent with past practices of the
Companies (and minus any gains or income resulting from reserves or
adjustments to reserves not consistent with past practices of the
Companies); and
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<PAGE> 4
(8) any payment of principal pursuant to this Note.
Associate means any other person controlling or controlled by
or under common control with such specified person. For purposes of this
definition, "control" when used with respect to any specified person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" having meanings
correlative to the foregoing.
Agent means (i) so long as the Credit Agreement is in effect,
NationsCredit Commercial Corporation, in its capacity as agent for the Lenders
party to the Credit Agreement or any successor or other Agent appointed
pursuant to the Credit Agreement and (ii) if there is no Credit Agreement in
effect, thereafter any agent designated as representative of holders of all
other Senior Debt.
Change of Control shall occur if HIG Capital Management, Inc.,
together with its Affiliates, ceases to have the right or the ability to elect
a majority of the members of the governing body (i.e., the equivalent of the
board of directors of a corporation) of Maker.
Credit Agreement means the Credit Agreement dated as of December 30,
1996, as amended and restated as of June , 1997, among Maker, LTC, the
Companies, the Lenders listed on the signature pages thereof and NationsCredit
Commercial Corporation, as Agent, as the same may be amended, restated,
modified, extended or supplemented from time to time in accordance with its
terms and any successor financial institution credit agreement refinancing all
or a portion of the Credit Agreement and designated by Maker as the Credit
Agreement for purposes hereof.
EBITDA means the consolidated net income of LTC determined in
accordance with GAAP, applied consistently with past practices of LTC, plus or
minus, as applicable, interest expense, income taxes, depreciation or
amortization.
Indebtedness means (a) any obligation for borrowed money, (b)
any obligation owed for all or any part of the purchase price of property or
other assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary
course of business, (c) any obligations secured by any lien in respect of
property even though the person owning the property has not assumed or become
liable for the payment of such obligation, (d) any lease obligation capitalized
on Maker's books, (e) any guarantee with respect to Indebtedness (of the kind
otherwise described in this definition) of another person and (f) obligations
in respect of letters of credit, but Indebtedness shall not include the debt
represented by this Note.
Senior Debt means (a) the principal amount under the Credit Agreement
and premium, if any, and interest thereon (including, without limitation, any
interest (Post-Petition Interest) which accrues (or which would accrue but for
such case, proceeding or other action) after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of Maker (whether or not such interest is allowed as a claim in
such
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<PAGE> 5
case, proceeding or other action)), and all Notes issued pursuant to, the
Credit Agreement, (b) any renewals, refinancings or extensions of any of the
foregoing (or any portion thereof) (including Post-Petition Interest), and any
increases in the foregoing and (c) all fees, expenses, indemnities and all
other amounts payable by Maker thereunder or with respect thereto, including
under any other Financing Document. Terms used in this definition that are not
defined herein have the meaning specified in the Credit Agreement.
Section 9. Miscellaneous.
9.1 No Waiver. It is expressly agreed that any waiver by
Payee of any item or provision hereof or of any right, remedy or option under
this Note shall not be controlling, nor shall it prevent or estop Payee from
thereafter enforcing such term, provision, right, remedy or option in any other
instance, and neither the failure or refusal of Payee to insist in any one or
more instances upon the strict performance of this Note, nor the acceptance by
Payee of any payment less than the amount then due hereunder, shall be
construed as a waiver or relinquishment for the future of any such term or
provision or the amount remaining due, but the same shall continue in full
force and effect, it being understood and agreed that Payee's rights, remedies
and options under this Note are and shall be cumulative and are in addition to
all of the rights, remedies and options of Payee in law or in equity, or under
any other agreement.
9.2 Savings Clause. If at any time the Interest Rate or
Default Rate, together with all fees and charges, if any, contracted for,
charged, received, taken or reserved by Payee in connection with this Note that
may be treated as interest under applicable law (collectively, the "Charges"),
computed over the full term of this Note, exceeds the maximum lawful rate (the
"Maximum Rate") which may be contracted for, charged, taken, received or
reserved by Payee in accordance with the laws of the State of Texas from time
to time in effect, except to the extent federal law permits Payee to contract
for, charge or receive a greater amount of interest, due credit being given for
all charges made in connection with this Note that may be treated as interest
under applicable law, the rate of interest payable hereunder, together with all
Charges, shall be limited to the Maximum Rate; provided, however, that upon any
subsequent increase in the Maximum Rate from time to time, the interest charged
on the unpaid principal amount of this Note shall remain equal to the Maximum
Rate, and any subsequent reduction in the Interest Rate shall not reduce the
rate borne by this Note, until the total amount of interest earned hereunder,
together with all Charges, equals the total amount of interest which would have
accrued at the Interest Rate if the Interest Rate had at all times been in
effect; and provided, further, that if at maturity or final payment of this
Note the total amount of interest paid or accrued under the foregoing
provisions is less than the total amount of interest which would have accrued
if the Interest Rate had at all times been in effect, Maker agrees to pay
Payee, to the extent allowed by the then applicable law, an amount equal to the
difference between (a) the lesser of (i) the amount of interest which would
have been accrued on this Note if the Maximum Rate had at all times been in
effect, and (ii) the amount of interest which would have accrued if the
Interest Rate had at all times been in effect, and (b) the amount of interest
actually accrued in accordance with the provisions of this Note.
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<PAGE> 6
9.3 Amendments: Binding Effect. This Note may not be
changed or terminated orally. This Note shall be binding upon the successors,
permitted assigns and legal representatives of Maker.
9.4 Assignment. Neither Maker nor Payee may assign its
rights under this Note or any interest therein without the prior written
consent of the other party and, until all the Senior Debt (as defined below)
shall have been paid in full and all commitments to extend Senior Debt shall
have been terminated, the Agent (as defined below).
9.5 Notices. All notices hereunder shall be in writing
(including prepaid overnight courier, facsimile transmission or similar
writing) and shall be delivered to Payee or Maker at its address set forth in
the first paragraph of this Note (or at such other address as shall be
specified by like notice to Payee, Maker and the Agent) and, so long as any
Senior Debt shall remain outstanding, to:
NationsCredit Commercial Corporation
One Canterbury Green
Stamford, Connecticut 06912
Attn: Rebecca Carey
Telephone: 203-352-4000
Telecopy: 203-975-8267
All notices shall be deemed given as of the date when such notice is first
delivered by hand or sent by telecopier (receipt confirmed, with a copy
simultaneously mailed registered mail), one day after depositing for delivery,
fee prepaid, with a Federal Express or similar overnight deliver service and
five days after mailing, postage prepaid and properly addressed in the U.S.
mails.
9.6 Governing Law. This Note shall be governed by, and
the terms and provisions hereof and the rights and duties created hereby shall
be interpreted, construed and enforced in accordance with, the laws of the
State of Texas, without giving effect to conflicts of law provisions.
9.7 WAIVER OF JURY TRIAL. THE MAKER AND PAYEE HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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IN WITNESS WHEREOF, Maker has caused this Subordinated Note to be
executed and delivered by its duly authorized officer, as of the day and year
and at the place first above written.
LET'S TALK CELLULAR & WIRELESS, INC.
By:/s/ Nicolas Molina
---------------------------
Title: Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.14
WARRANTHOLDERS RIGHTS AGREEMENT
WARRANTHOLDERS RIGHTS AGREEMENT dated as of June 27, 1997 among Let's
Talk Cellular & Wireless, Inc., a Florida corporation (together with its
successors, "Holdings"), H.I.G. Fund V, Inc., a Cayman Islands corporation
(together with its successors, the "Fund"), Texas Cellular Partners, L.P., a
Delaware limited partnership (together with its successors, "TCP"), and
NationsCredit Commercial Corporation ("NationsCredit") (the Fund, TCP, together
with any holder of Conversion Shares (as defined herein) and such other
stockholders of Holdings as may, from time to time, become parties to this
Agreement in accordance with the provisions hereof, the "Stockholders"; and
NationsCredit and such other warrantholders of Holdings as may, from time to
time, become parties to this Agreement in accordance with the provisions hereof,
the "Warrantholders").
WHEREAS, as of the date hereof, the Fund is the beneficial owner of
650,000 shares of Common Stock (as defined herein), TCP is the beneficial owner
of 552,590 shares of Common Stock, and NationsCredit is the beneficial owner of
Warrants (as defined herein) to purchase 32,410 shares of Common Stock; and
WHEREAS, Holdings and each Stockholder (other than the holders of the
Conversion Shares) wish to provide to the Warrantholders and the holders of the
Conversion Shares the rights described herein;
NOW THEREFORE the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Unless otherwise defined herein, the following
terms used in this Agreement shall have the meanings specified below.
"Adjustment Event" has the meaning set forth in Section 2.10 thereof.
<PAGE> 2
"Affiliate" means, with respect to any Person, any of (i) a director or
executive officer of such Person, (ii) a spouse, parent, sibling or descendant
of such Person (or a spouse, parent, sibling or descendant of any director or
executive officer of such Person), (iii) any general or limited partner of such
Person, (iv) any holder of 10% or more of any class of equity securities of such
Person and (v) any other Person that, directly or indirectly, controls, or is
controlled by or is under common control with such Person. For the purpose of
this definition, "control" (including the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or agency or otherwise.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Closing Date" means December 31, 1996.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, par value $0.0001 per share,
of Holdings.
"Conversion Shares" means (i) any shares of Common Stock or other
securities issued upon the exercise of any Warrants and (ii) any securities
issued with respect to any of such shares or other securities referred to in
clause (i) upon the conversion thereof into other securities or by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise;
provided that any of such securities shall cease to be Conversion Shares when
such securities shall have (x) been disposed of pursuant to a Public Sale or (y)
ceased to be outstanding.
"Credit Agreement" means the Credit Agreement dated as of December 31,
1996, as amended and restated as of June 27, 1997, among Telephone Warehouse,
Inc., National Cellular, Incorporated, Holdings, TCP, the lenders named therein
and NationsCredit, as agent, as further amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
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<PAGE> 3
"Fund" has the meaning set forth in the introductory paragraph.
"Indemnified Party" has the meaning set forth in Section 3.5(a) hereof.
"Initial Public Offering" means the first registration of an offering
of shares of Common Stock under the Securities Act which becomes effective
(other than by a registration on Form S-4, S-8, S-14 or S-15 or any successor or
similar forms).
"Initiating Holders" has the meaning set forth in Section 3.1 hereof.
"Majority Holders" means Holders holding a majority in interest of the
outstanding Conversion Shares and Warrants (such majority determined, for
purposes of this definition, by calculating the number of Conversion Shares for
which such Warrants are then exercisable).
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Other Securities" has the meaning set forth in Section 3.1.
"Person" means a corporation, an association, a partnership, a trust, a
limited liability company, an organization, a business, an individual, a
government or a subdivision thereof or a governmental agency.
"Preferred Stock Purchase Agreement" means the Series A Preferred Stock
Purchase Agreement dated as of June 25, 1996 between the Fund and Holdings, as
amended by the Conversion Agreement dated as of June 27, 1997 by and between
Holdings, the Fund and TCP, as further amended from time to time.
"Public Sale" means any sale of Common Stock to the public pursuant to
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (or any
successor provision then in effect) adopted under the Securities Act.
"Registrable Securities" means any Conversion Shares until the earlier
of (i) the date (if any) on which such Conversion Shares shall have been
exchanged for new equity securities of Holdings not bearing a legend restricting
transfer, the subsequent disposition of which shall not require registration or
qualification under the Securities Act or any similar state law then in force
and (ii) the date on
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which such Conversion Shares may be sold pursuant to Rule 144(k) under the
Securities Act.
"Registration Expenses" means all expenses incident to Holdings'
performance of or compliance with Sections 3.1 through 3.5 hereof, including (i)
all registration, filing and NASD fees, (ii) all fees and expenses of complying
with securities or blue sky laws, (iii) all word processing, duplicating and
printing expenses, (iv) all messenger and delivery expenses, (v) the fees and
disbursements of counsel for Holdings and of its independent public accountants,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, (vi) the fees and
disbursements of any one counsel retained by the holder or holders of more than
50% of the Registrable Securities being registered (or, in the case of any
registration effected pursuant to Section 3.1, as the Initiating Holders shall
have selected to represent all holders of the Registrable Securities being
registered), (vii) premiums and other costs of policies of insurance (if any)
against liabilities arising out of the public offering of the Registrable
Securities being registered if Holdings desires such insurance and (viii) any
fees and disbursements of underwriters customarily paid by issuers or sellers of
securities, but not including underwriting discounts and commissions and
transfer taxes, if any; provided that, in any case where Registration Expenses
are not to be borne by Holdings, such expenses shall not include (i) salaries of
Holdings personnel or general overhead expenses of Holdings, (ii) auditing fees,
(iii) premiums or other expenses relating to liability insurance required by
underwriters of Holdings or (iv) other expenses for the preparation of financial
statements or other data, to the extent that any of the foregoing either is
normally prepared by Holdings in the ordinary course of its business or would
have been incurred by Holdings had no public offering taken place.
"Regulation Y Holder" means any Warrant Securityholder that is a bank
holding company within the meaning of the BHC Act, or a subsidiary thereof
subject to Regulation Y under the BHC Act.
"Regulatory Change" means, with respect to any Regulation Y Holder, (i)
any change on or after the date hereof in United States federal or state or
foreign laws or regulations (including the BHC Act and Regulation Y thereunder);
(ii) the adoption on or after the date hereof of any interpretation or ruling
applying to such Regulation Y Holder, individually or as a member of a class,
under any United States federal or state or foreign laws or regulations by any
court or governmental or regulatory authority charged with the interpretation or
administration thereof; or (iii) the modification on or after the date hereof of
any agreement with or commitment of any such governmental or regulatory
authority that is applicable to or binding upon such Regulation Y Holder.
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<PAGE> 5
"Restricted Securities" means the Warrants, the Conversion Shares and
any securities obtained upon exchange for or upon conversion or transfer of or
as a distribution on Warrants, the Conversion Shares or any such securities;
provided that particular securities shall cease to be Restricted Securities when
such securities shall have (x) been disposed of pursuant to a Public Sale, (y)
been otherwise transferred or exchanged and new certificates for them not
bearing a legend restricting further transfer shall have been delivered by
Holdings and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force or (z) ceased to be outstanding. Whenever any particular securities cease
to be Restricted Securities, the holder thereof shall be entitled to receive
from the issuer thereof or its transfer agent, without expense (other than
transfer taxes, if any), new securities of like tenor not bearing a legend of
the character set forth in Section 2.2.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"Stockholder" has the meaning set forth in the introductory paragraph.
"Shareholders' Agreement" means the Shareholders' Agreement dated as of
June 27, 1997 by and among Holdings and the shareholders listed on the signature
page thereof, as amended and in effect from time to time.
"Warrant Securityholder" means at any time any Warrantholder or any
holder of Conversion Shares.
"Warrantholders" has the meaning set forth in the introductory
paragraph.
"Warrants" means the Warrant or Warrants originally issued to
NationsCredit on June 27, 1997 to purchase 32,410 shares of Common Stock, as
such Warrants may be transferred or otherwise assigned, but only to the extent
not theretofore exercised, redeemed or expired in accordance with their
respective terms.
All references herein to "days" shall mean calendar days unless
otherwise specified.
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ARTICLE II
TRANSFER AND CONVERSION OF SHARES;
PAYMENTS TO WARRANT SECURITYHOLDERS
SECTION 2.1 General. Except as otherwise provided in this Agreement and
the Shareholders' Agreement or by law, each Stockholder may transfer its shares
of Common Stock at any time to any Person.
SECTION 2.2 Restrictions on Transfer and Conversion; Legend on
Certificates. (a) Except as otherwise provided in this Agreement, Restricted
Securities shall not be transferable except (i) pursuant to an effective
registration statement under the Securities Act, (ii) pursuant to Rule 144 or
144A (or any successor provisions) under the Securities Act or (iii) pursuant to
a transaction that is otherwise exempt from the registration requirements of the
Securities Act.
(b) Unless otherwise expressly provided herein, each certificate for
Restricted Securities and each certificate issued in exchange for or upon
transfer of any thereof shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO AND HAVE THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT
DATED AS OF JUNE 27, 1997, AMONG LET'S TALK CELLULAR & WIRELESS, INC.
AND THE STOCKHOLDERS AND WARRANTHOLDERS PARTIES THERETO, COPIES OF
WHICH ARE ON FILE WITH LET'S TALK CELLULAR & WIRELESS, INC."
(c) Any other provision of this Agreement to the contrary
notwithstanding, no transfer of any Restricted Securities other than pursuant to
a Public Sale may be made to any Person unless such Person shall have agreed in
writing that such Person, as a holder of Restricted Securities, and the
Restricted Securities it acquires shall be bound by and be entitled to the
benefits of all the provisions of this Agreement applicable to such Restricted
Securities (and upon
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<PAGE> 7
such agreement such Person shall be entitled to such benefits). Any purported
transfer of Restricted Securities without compliance with the applicable
provisions of this Agreement shall be void and of no effect, and the purported
transferee shall have no rights as a Warrantholder or Shareholder (as
applicable) or under this Agreement. In the event of such non-complying
transfer, Holdings shall not transfer any such Restricted Securities on its
books or recognize the purported transferee as a shareholder or warrantholder,
as the case may be, for any purpose, until all applicable provisions of this
Agreement have been complied with.
(d) Holdings and each Stockholder agree to cause each transferee from
them of any shares of Common Stock (other than pursuant to a Public Sale or sale
to employees of Holdings; provided that the aggregate amount of all such shares
of Common Stock transferred to employees who are not a party hereto does not
exceed 5% of all shares of Common Stock outstanding on the date hereof) to
execute and deliver an instrument in form and substance satisfactory to Holdings
and the Majority Holders pursuant to which such transferee agrees to be bound by
the provisions of this Agreement applicable to holders of shares of Common Stock
of the type transferred.
SECTION 2.3 Permitted Transfers. The restrictions on transfer provided
in Section 2.2(a) shall not be applicable to any transfer in compliance with
federal and all applicable state securities laws (i) to an Affiliate of the
holder of Restricted Securities, from an Affiliate of such holder to such holder
or between Affiliates of such holder (if any such Affiliate to whom shares of
Restricted Securities have been transferred by a holder thereof ceases to be an
Affiliate of such holder of Restricted Securities, such Restricted Securities
shall immediately be transferred back to the transferor thereof), (ii) upon the
death of any holder of Restricted Securities to such holder's executors,
administrators or testamentary trustees or (iii) to a trust the beneficiaries of
which include only the holder of such Restricted Securities or such holder's
spouse, parents, siblings or descendants (any transferee referred to in (i),
(ii) or (iii) above being referred to herein as a "Permitted Transferee");
provided that no such transfer shall be made to any Permitted Transferee unless
such Permitted Transferee shall have agreed in writing that such Permitted
Transferee, as a Stockholder or Warrantholder (as the case may be), and the
shares of Common Stock or Warrants it acquires shall be bound by and be entitled
to the benefits of all the provisions of this Agreement applicable to Common
Stock or Warrants (as the case may be), and upon such agreement such Permitted
Transferee shall be entitled to such benefits.
SECTION 2.4 Tag-Along Rights. (a) If any Stockholder (other than the
Warrant Securityholders) (any such Person for purposes of this Section 2.4, the
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<PAGE> 8
"Transferor") wishes to transfer at any time all or a portion of its shares of
Common Stock to any Person (the "Transferee"), the Transferor shall first give
to Holdings and each Warrant Securityholder (pursuant to a list provided by
Holdings) a written notice (a "Transfer Notice"), executed by it and the
Transferee and containing (i) the number of shares of Common Stock that the
Transferee proposes to acquire from the Transferor, (ii) the name and address of
the Transferee, (iii) the proposed purchase price, terms of payment and other
material terms and conditions of such proposed transfer, (iv) an estimate, in
the Transferor's reasonable judgment, of the fair market value of any non-cash
consideration offered by the Transferee and (v) an offer by the Transferee or
Transferor to purchase, upon the purchase by the Transferee of any shares of
Common Stock owned by the Transferor and for the same per share consideration,
that number of Conversion Shares (or if such number is not an integral number,
the next integral number which is greater than such number) of each Warrant
Securityholder which shall be the product of (x) the aggregate number of
Conversion Shares either then owned, or issuable upon exercise of Warrants then
owned, by such Warrant Securityholder and (y) a fraction, the numerator of which
shall be the number of shares of Common Stock indicated in the Transfer Notice
as subject to purchase by the Transferee and the denominator of which shall be
the sum of (A) the total number of shares of Common Stock then owned by the
Transferor and its Affiliates plus (B) the total number of Conversion Shares
either then owned, or issuable upon exercise of Warrants then owned, by each
Warrant Securityholder transferring shares to the Transferee. Each Warrant
Securityholder shall have the right, for a period of 15 days after the Transfer
Notice is given, to accept such offer in whole or in part, exercisable by
delivering a written notice to the Transferor and Holdings within such 15-day
period, stating therein the number of Conversion Shares such Warrant
Securityholder wishes to sell to the Transferor or Transferee, as the case may
be. Prior to the earlier of (x) the end of such 15-day period or (y) the
acceptance or rejection by each Warrant Securityholder of the Transferee's or
Transferor's offer, as the case may be, the Transferor will not complete any
sale of shares of Common Stock to the Transferee. Thereafter, for a period of 60
days after the prohibition under the preceding sentence shall have terminated,
the Transferor may sell to the Transferee for the consideration stated and on
terms set forth in the Transfer Notice the shares of Common Stock stated in the
Transfer Notice as subject to purchase by the Transferee; provided that the
Transferor or Transferee, as the case may be, shall simultaneously purchase from
those Warrant Securityholders who have accepted the Transferor's or Transferee's
offer, as the case may be, the number of Conversion Shares with respect to which
such offer was accepted (or, if such number exceeds the number of Conversion
Shares for which the offer was made, such number of Conversion Shares from each
Warrant Securityholder as shall result in a ratable allocation to all accepting
Warrant Securityholders based on the number of Conversion Shares with respect
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to which such offer was accepted by the Warrant Securityholders). The provisions
of this Section 2.4 shall not apply to transfers (i) between the Transferor and
any of its Affiliates or between Affiliates of the Transferor, (ii) to employees
of Holdings (provided that the aggregate amount of all shares of Common Stock so
transferred does not exceed 5% of all shares of Common Stock outstanding on the
date hereof) or (iii) transfers to any Current Shareholder (as defined therein)
existing on the date hereof pursuant to Section 3 of the Shareholders'
Agreement.
SECTION 2.5 Drag-Along Rights. If at any time prior to an Initial
Public Offering, any Stockholder (other than the Warrant Securityholders) (any
such Person for purposes of this Section 2.5, the "Transferor") wishes to
transfer all of the shares of Common Stock owned by it and its Affiliates
(provided that such shares of Common Stock constitute more than 50% of all
shares of Common Stock on a Fully Diluted Basis (as determined in the Warrants)
at such time) in a bona fide sale to any Person (the "Proposed Transferee")
pursuant to which the consideration to be paid by the Proposed Transferee
consists solely of cash, freely tradeable securities with an active public
market or securities of a company in the same or substantially similar business
of Holdings at such time and the Transferor and its Affiliates will not receive,
in connection with the transactions contemplated at the time of such transfer,
any other securities or options to acquire securities of Holdings unless also
received by the Warrant Securityholders, then the Transferor shall have the
right (the "Drag-Along Right") to require each Warrant Securityholder to sell to
the Proposed Transferee for the same per share consideration received by the
Transferor all of the Conversion Shares and Warrants (calculated, in the case of
the Warrants, on the number of Conversion Shares for which such Warrant is
exercisable at such time) held by such Warrant Securityholder; provided that (a)
such price per share is not less than the Fair Market Value (as defined in the
Warrants) of Holdings per share of outstanding Common Stock on a Fully Diluted
Basis and (b) each Warrant Securityholder shall not be obligated to make any
representation or warranty, or incur any liability in connection with any such
transfer, other than as to its ownership of the Conversion Shares or Warrants
being transferred by it. To exercise the Drag-Along Right, the Transferor shall
first give to Holdings and each other Warrant Securityholder (pursuant to a list
provided by Holdings) a written notice (a "Drag-Along Notice") executed by the
Transferor and the Proposed Transferee and containing (a) the name and address
of the Proposed Transferee, (b) the proposed purchase price of each share of
Common Stock (certifying that such price per share is not less than the Fair
Market Value of outstanding Common Stock on a Fully Diluted Basis), terms of
payment and other material terms and conditions of the Proposed Transferee's
offer, and (c) the aggregate number of Conversion Shares or Warrants owned by
each Warrant
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Securityholder with respect to which the Transferor wishes to exercise its
Drag-Along Right pursuant to this Section 2.5. Each Warrant Securityholder shall
thereafter be obligated to sell to the Proposed Transferee the Conversion Shares
and Warrants subject to such Drag-Along Notice; provided that the sale to the
Proposed Transferee is consummated within 180 days of delivery of the Drag-Along
Notice. If the sale is not consummated within such 180-day period, then each
affected Warrant Securityholder may sell, but shall no longer be obligated to
sell, such Warrant Securityholder's Conversion Shares or Warrants pursuant to
such Drag-Along Notice. The provisions of this Section 2.5 shall not apply to
transfers between the Transferor and any of its Affiliates or between Affiliates
of the Transferor.
SECTION 2.6 Shareholders' Agreement. In addition to any other
restrictions on transfer provided for herein, the transfer of shares of Common
Stock owned by the Stockholders shall be subject to the terms and provisions of
the Shareholders' Agreement.
SECTION 2.7 Restrictions on Transfer by Regulation Y Holders. (a) No
Regulation Y Holder may transfer any Warrant or any Conversion Shares; provided
that such Regulation Y Holder may transfer such Warrant or Conversion Shares (i)
to Holdings; (ii) to the public in an offering registered under the Securities
Act; (iii) in a transaction pursuant to Rule 144 or Rule 144A (or any successor
provisions) under the Securities Act or otherwise exempt from the registration
requirements of the Securities Act in which no single purchaser receives an
interest (treating any such Warrant as exercised) equivalent to more than two
percent of the outstanding Common Stock; or (iv) in a single transaction to a
third party who acquires at least a majority of the Common Stock without regard
to the transfer of such Warrant or Conversion Shares. In the event of a
Regulatory Change, the effect of which is to permit such Regulation Y Holder to
transfer such Warrant or Conversion Shares in any other manner, the foregoing
proviso shall be deemed modified to permit a transfer of such Warrant or
Conversion Shares in such other manner.
(b) Nothing in Sections 2.4, 2.5 or 2.6 of this Agreement shall require
any Regulation Y Holder to make a transfer of Warrants or Conversion Shares in a
manner not permitted by Section 2.7(a) (an "Impermissible Transfer"). If
Sections 2.4, 2.5 or 2.6 of this Agreement would otherwise require any
Regulation Y Holder to make an Impermissible Transfer as a condition precedent
to making a transfer of Warrants or Conversion Shares in a manner permitted by
Section 2.7(a) (a "Permissible Transfer"), then such Regulation Y Holder shall
not be required to make such Impermissible Transfer as a condition precedent to
making such Permissible Transfer.
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SECTION 2.8 Adjustment Event Fee. If on or prior to the first
anniversary of the date of any redemption of the Warrants pursuant to Section
5.3 of the Warrants, (i) Holdings completes an Initial Public Offering or (ii)
more than 25% of the Common Stock (on a Fully Diluted Basis) are sold to any
Person or Persons (other than a Person that is an Affiliate of Holdings prior to
the consummation of such sale or sales) as part of a single sale or series of
sales (each of the foregoing events being herein called an "Adjustment Event"),
then Holdings shall pay to each Warrantholder as additional compensation (such
compensation to be in cash or, to the extent and in the same proportion as the
proportion of non-cash consideration paid by Persons purchasing shares of Common
Stock in connection with such Adjustment Event, such non-cash consideration) an
amount equal to the product of (x) the difference between the highest price per
share paid or to be paid by Persons purchasing shares of Common Stock in
connection with such Adjustment Event (less underwriting commissions and other
appropriate costs and expenses) less the Optional Redemption Price (as defined
in the Warrants) (determined on a per share basis) paid to such Warrantholder
multiplied by (y) the number of shares of Common Stock issuable upon exercise of
the Warrants of such Warrantholder that were redeemed.
SECTION 2.9 No Inconsistent Agreements. Holdings has not entered into
and will not enter into any registration rights agreements or similar
arrangements the performance by Holdings of which would in any manner conflict
with, restrict or be inconsistent with the performance by Holdings of its
obligations under this Agreement.
ARTICLE III
REGISTRATION RIGHTS
SECTION 3.1 Registration on Request. (a) At any time or from time to
time beginning 180 days after the date of consummation of an Initial Public
Offering (or after such shorter period as the underwriter or underwriters, if
any, distributing Common Stock in such Initial Public Offering may permit), upon
the written request of the Majority Holders (the "Initiating Holders"),
requesting that Holdings effect the registration under the Securities Act of all
or part of (but not less than 50% of) such Initiating Holders' Registrable
Securities and specifying the intended method of disposition thereof, Holdings
will promptly give written notice of such requested registration to all holders
of Warrants and Registrable Securities, and thereupon Holdings will use its best
efforts to effect the registration under the Securities Act of:
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(i) the Registrable Securities which Holdings has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request;
(ii) all other Registrable Securities the holders of which
shall have made a written request to Holdings for registration thereof
within 30 days after the giving of such written notice by Holdings
(which request shall specify the intended method of disposition of such
Registrable Securities); and
(iii) all shares of Common Stock which Holdings may elect to
register in connection with the offering of Registrable Securities
pursuant to this Section 3.1, whether for its own account or for the
account of a holder of Common Stock,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any, to be so registered; provided that
(x) the Warrant Securityholders as a class shall be entitled to not more than
two registrations upon request pursuant to this Section 3.1 and (y) if at the
time of the Initiating Holders' request to effect a registration under this
Section 3.1, the Warrant Securityholders' shares of Registrable Securities are
subject to a lockup pursuant to Section 3.4(b), until such time as such shares
are no longer subject to such lockup, Holdings shall not be obligated to file
any registration statement pursuant to this Section 5.1.
(b) Registrations under this Section 3.1 shall be on such appropriate
registration form of the Commission (i) as shall be selected by Holdings and
(ii) as shall permit the disposition of such Registrable Securities in
accordance with the intended method or methods of disposition specified in their
request for such registration. Holdings agrees to include in any such
registration statement all information which holders of Registrable Securities
being registered shall reasonably request.
(c) Holdings will pay all Registration Expenses in connection with one
registration requested pursuant to this Section 3.1; provided that, in addition,
Holdings shall pay all Registration Expenses in connection with any registration
upon request pursuant to which less than 50% of the Registrable Securities
requested to be registered by such Initiating Holders are registered, but no
such registration shall be counted as a requested registration for purposes of
this Section 3.1. The underwriting discounts and commissions and transfer taxes,
if any, allocable to the Registrable Securities requested to be registered by
the
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Initiating Holders in connection with each registration requested under this
Section 3.1 shall be paid for by the Initiating Holders requesting such
registration.
(d) A registration requested pursuant to this Section 3.1 shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective; provided that a registration which does not become
effective after Holdings has filed a registration statement with respect thereto
solely by reason of the refusal to proceed by the Initiating Holders (other than
a refusal to proceed based upon the advice of counsel relating to a matter with
respect to Holdings) shall be deemed to have been effected by Holdings at the
request of the Initiating Holders unless the Initiating Holders shall have
elected to pay all Registration Expenses in connection with such registration,
(ii) if, after it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason, other than by reason of some
act or omission by the Initiating Holders, or (iii) the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied, other than by reason of
some act or omission by the Initiating Holders.
(e) If a requested registration pursuant to this Section 3.1 involves
an underwritten offering, the underwriter or underwriters thereof shall be
selected by the holders of at least a majority (by a number of shares) of the
Registrable Securities as to which registration has been requested and shall be
reasonably acceptable to Holdings; provided that, if Holdings is obligated to
pay Registration Expenses in connection with such registration, the holders
selecting such underwriter or underwriters shall not select any underwriter or
underwriters that will charge fees in connection with such registration without
Holdings' consent.
(f) If a requested registration pursuant to this Section 3.1 involves
an underwritten offering, and the managing underwriter shall advise Holdings
(with a copy of any such notice to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of securities
requested to be included in such registration (including securities proposed to
be sold for the account of Holdings) exceeds the number which can be sold in
such offering within a price range acceptable to the Initiating Holders,
Holdings will include in such registration, to the extent of the number which
Holdings is so advised can be sold in such offering, (i) first, Registrable
Securities requested to be included in such registration by the holder or
holders of Registrable Securities, (ii) second, all securities other than
Registrable Securities (any such shares with respect to any registration, "Other
Securities") requested to be included by the holder or holders thereof, and
(iii) third, all securities proposed to be included by Holdings in such
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registration, in each case if less than all such securities or shares, then pro
rata among such holders requesting such registration on the basis of the number
of such securities requested to be included by such holders.
SECTION 3.2 Incidental Registration. (a) If Holdings at any time
proposes to register any of its securities under the Securities Act (other than
(x) by a registration on Form S-4, S-8, S-14 or S-15 or any successor or similar
forms or (y) pursuant to Section 3.1) whether for its own account or for the
account of the holder or holders of any Other Securities, it will each such time
give prompt written notice to all Warrant Securityholders of its intention to do
so and of such holders' rights under this Section 3.2. Upon the written request
of any such holder made within 20 days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such holder and the intended method of disposition thereof), Holdings will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which Holdings has been so requested to register by the
holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities in
the registration statement which covers the securities which Holdings proposes
to register; provided that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, Holdings
shall determine for any reason either not to register or to delay registration
of such securities, Holdings may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any Warrant
Securityholder entitled to do so to request that such registration be effected
as a registration under Section 3.1, and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this Section 3.2 shall relieve
Holdings of its obligation to effect any registration upon request under Section
3.1, nor shall any such registration hereunder be deemed to have been effected
pursuant to Section 3.1. Holdings will pay all Registration Expenses in
connection with each registration of Registrable Securities pursuant to this
Section 3.2.
(b) If Holdings at any time proposes to register any of its securities
under the Securities Act as contemplated by Section 3.2(a) and such securities
are to be distributed by or through one or more underwriters, Holdings will, if
requested by
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any holder of Registrable Securities as provided in this Section 3.2, use its
best efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder among the securities to be
distributed by such underwriters; provided that if the managing underwriter of
such underwritten offering shall inform Holdings and holders of the Registrable
Securities requesting such registration and all other holders of any Other
Securities which shall have exercised, in respect of such underwritten offering,
registration rights comparable to the rights under this Section 3.2 by letter of
its belief that inclusion in such distribution of all or a specified number of
such securities proposed to be distributed by such underwriters would interfere
with the successful marketing of the securities being distributed by such
underwriters (such letter to state the basis of such belief and the approximate
number of such Registrable Securities and such Other Securities proposed so to
be registered which may be distributed without such effect), then Holdings may,
upon written notice to all holders of such Registrable Securities and holders of
such Other Securities, include in such registration, if and to the extent stated
by such managing underwriter to be necessary to eliminate such effect, (i)
first, securities requested to be included in such registration for the account
of Holdings ("Holdings Shares"), (ii) second, if such registration shall be in
connection with a request for registration by the Fund and/or TCP pursuant to
Section 7.2 of the Preferred Stock Purchase Agreement, securities requested to
be included in such registration by the Fund and TCP, (iii) third, Registrable
Securities and Other Securities (unless included pursuant to subsection (ii)
above) requested to be included in such registration by the holder or holders
thereof, pro rata among such holders requesting such registration on the basis
of the number of such securities or shares requested to be included by such
holders; provided that (x) if such registration shall be in connection with an
Initial Public Offering, Holdings shall include only Registrable Securities and
Other Securities requested to be included in such registration by the holders
thereof, pro rata among such holders on the basis of the number of such
securities requested to be included by such holders, such that the resultant
aggregate number of such Registrable Securities and Other Securities so included
in such registration, together with the number of securities to be included in
such registration for the account of Holdings, shall be equal to the number of
shares stated in such managing underwriter's letter, and (y) if the managing
underwriter indicates that the inclusion of a greater percentage of Registrable
Securities (and a lesser percentage of Other Securities) than the inclusion of
such shares on a pro rata basis would permit a greater number of shares of its
securities to be registered in a manner that would not interfere with the
successful marketing of the securities being distributed by such underwriters,
then Registrable Securities and Other Securities shall be included in such
registration in the proportions so determined by the managing underwriter to
permit inclusion of such greater number.
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SECTION 3.3 Registration Procedures. (a) If and whenever Holdings is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 3.1 and 3.2, Holdings shall, as
expeditiously as possible:
(i) prepare and (within 60 days after the end of the period
within which requests for registration may be given to Holdings or in
any event as soon thereafter as possible; provided that, in the case of
a registration pursuant to Section 3.1, such filing to be made within
60 days after the initial request of an Initiating Holder or in any
event as soon thereafter as possible) file with the Commission the
requisite registration statement to effect such registration (including
such audited financial statements as may be required by the Securities
Act) and thereafter use its best efforts to cause such registration
statement to become and remain effective as provided in clause (ii)
below; provided however that Holdings may discontinue any registration
of its securities which are not Registrable Securities at any time
prior to the effective date of the registration statement relating
thereto; provided further that before filing such registration
statement or any amendments thereto, Holdings will furnish to the
counsel selected by the holders of Registrable Securities which are to
be included in such registration copies of all such documents proposed
to be filed, which documents will be subject to the review of such
counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until the earlier of (x) in the case of a
registration pursuant to Section 3.1, the expiration of 120 days after
such registration statement becomes effective, or (y) in the case of a
registration pursuant to Section 3.2, the expiration of 90 days after
such registration statement becomes effective;
(iii) furnish to each seller of Registrable Securities covered
by such registration statement and each underwriter, if any, of the
securities being sold by such seller such number of conformed copies of
such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
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with the requirements of the Securities Act, and such other documents,
as such seller and underwriter, if any, may reasonably request in order
to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under blue sky or similar laws of such
jurisdictions as any seller thereof and any underwriter of the
securities being sold by such seller shall reasonably request, to keep
such registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable such seller
and underwriter to consummate the disposition in such jurisdictions of
the securities owned by such seller, except that Holdings shall not for
any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for
the requirements of this subdivision (iv) be obligated to be so
qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller and the underwriters, if
any, of
(x) an opinion of counsel for Holdings, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, an
opinion dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to
such seller, and
(y) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration
includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement), signed
by the independent public accountants who have certified
Holdings' financial statements included in such registration
statement,
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covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of securities;
(vii) notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm such
advice in writing promptly thereafter:
(A) when the registration statement, the prospectus
or any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed, and,
with respect to the registration statement or any
post-effective amendment thereto, when the same has become
effective;
(B) of any request by the Commission for amendments
or supplements to the registration statement or the prospectus
or for additional information;
(C) of the issuance by the Commission of any stop
order suspending the effectiveness of the registration or the
initiation of any proceedings by any Person for that purpose;
and
(D) of the receipt by Holdings of any notification
with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue
sky laws of any jurisdiction or the initiation or threat of
any proceeding for such purpose;
(viii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
Holdings' discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing, and at the request of any
such seller promptly prepare and furnish to such seller and each
underwriter, if any, a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be
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necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(ix) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar quarter
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(xi) make available for inspection by a representative of the
sellers of Registrable Securities participating in the offering, any
underwriter participating in any disposition pursuant to the
registration and any attorney or accountant retained by such sellers or
underwriter (each, an "Inspector"), all financial and other records,
pertinent corporate documents and properties of Holdings (the
"Records"), and cause Holdings' officers, directors and employees to
supply all information reasonably requested by any such Inspector in
connection with such registration; provided that Holdings shall not be
required to comply with this subdivision (xi) if there is a reasonable
likelihood, in the judgment of Holdings, that such delivery could
result in the loss of any attorney-client privilege related thereto;
and provided further that Records which Holdings determines, in good
faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors (other than to
any holder of Registrable Securities participating in the offering)
unless (x) such Records have become generally available to the public
or (y) the disclosure of such Records may be necessary or appropriate
(A) to comply with any law, rule, regulation or order applicable to any
such Inspectors or seller of Registrable Securities, (B) in response to
any subpoena or other legal process or (C) in connection with any
litigation to which such Inspectors or any seller of Registrable
Securities is a party (provided that Holdings is provided with
reasonable notice of such proposed disclosure and a reason able
opportunity to seek a protective order or other appropriate remedy with
respect to such Records);
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(xii) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such Registration Statement;
(xiii) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on
which any of the Common Stock is then listed and, if not so listed, to
be listed on the NASD automated quotation system and, if listed on the
NASD automated quotation system, use its best efforts to secure
designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security"
within the meaning of Rule 11Aa2-1 of the Securities and Exchange
Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as
such with respect to such Registrable Securities with the NASD; and
(xiv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration.
Holdings may require each seller of Registrable Securities as to which any
registration is being effected to furnish Holdings such information regarding
such seller and the distribution of such securities as Holdings may from time to
time reasonably request in writing for purposes of preparing the relevant
registration statement and amendments and supplements thereto.
(b) Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from Holdings of the
occurrence of any event of the kind described in subdivision (viii) of Section
3.3(a), such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of Section
3.3(a). In the event Holdings shall give any such notice, the periods specified
in subdivision (ii) of Section 3.3(a) shall be extended by the length of the
period from and including the date when each seller of any Registrable
Securities covered by such registration statement shall have received such
notice to the date on which each such seller has received the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of Section
3.3(a).
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(c) If any such registration or comparable statement refers to any
holder of Registrable Securities by name or otherwise as the holder of any
securities of Holdings, then such holder shall have the right to require, in the
event that such reference to such holder by name or otherwise is not required by
the Securities Act or any similar federal statute then in force, the deletion of
the reference to such holder.
SECTION 3.4 Underwritten Offerings. (a) If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 3.1, Holdings will enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to Holdings, each such holder
and the underwriters, and to contain such representations and warranties by
Holdings and such holders and such other terms as are generally prevailing in
agreements of such type, including, without limitation, indemnities to the
effect and to the extent provided in Section 3.5. The holders of the Registrable
Securities will cooperate with Holdings in the negotiation of the underwriting
agreement.
(b) Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities, and each of the Stockholders agrees, not to sell, make
any short sale of, loan, grant any option for the purchase of, effect any public
sale or distribution of or otherwise dispose of any equity securities of
Holdings, during the ten days prior to and the 180 days after the effective date
of any underwritten registration pursuant to Section 3.1 or 3.2, any
underwritten registration of securities requested by the Fund pursuant to
Section 7.2 or 7.3 of the Preferred Stock Purchase Agreement, as in effect on
the date hereof, or any underwritten registration of securities by TCP pursuant
to the Conversion Agreement dated as of June 27, 1997 by and between Holdings,
HIG Fund V, Inc. and TCP, as in effect on the date hereof, as the case may be,
has become effective (or such shorter period as the underwriter or underwriters
may permit), except as part of such underwritten registration, whether or not
such holder, the Fund or TCP participates in such registration, and except as
otherwise permitted by the managing underwriter of such underwriting (if any).
Each of the holders of Registrable Securities, the Fund and TCP agrees that
Holdings may instruct its transfer agent to place stop transfer notations in its
records to enforce this Section 3.4(b).
(c) Holdings agrees (x) not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or distribution of
or otherwise dispose of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the ten days prior
to and the 180 days after any registration pursuant to Section 3.1 or 3.2 has
become effective, except
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(i) as part of such registration, (ii) pursuant to registrations on Form S-4,
S-8, S-14 or S-15 or any successor or similar forms thereto or (iii) as
otherwise permitted by the managing underwriter of such offering (if any), and
(y) to use all reasonable efforts to cause each holder of 5% or more of its
equity securities or any securities convertible into or exchangeable or
exercisable for any of such securities, in each case purchased from Holdings at
any time after the date of this Agreement (other than in a public offering) to
agree not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of
such securities during such period except as part of such underwritten
registration.
(d) No Person may participate in any underwritten offering hereunder
unless such Person (i) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved, subject to the terms and
conditions hereof, by the Person or a majority of the Persons entitled to
approve such arrangements and (ii) completes and executes all agreements,
questionnaires, indemnities and other documents (other than powers of attorney,
except a power of attorney with respect to the price at which such Person's
shares of Common Stock shall be sold to the underwriters of such offering and
the transfer of such shares to such underwriters; provided that such power of
attorney may include, at the sole discretion of such Person, a minimum price
below which such Person shall not be obligated to sell such shares) required
under the terms of such underwriting arrangements.
SECTION 3.5 Indemnification. (a) Holdings agrees to indemnify and hold
harmless each holder of Registrable Securities whose Registrable Securities are
covered by any registration statement, its directors and officers and each other
Person, if any, who controls such holder within the meaning of the Securities
Act or Exchange Act (each an "Indemnified Party"), against any losses, claims,
damages or liabilities, joint or several, to which such Indemnified Party may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
Holdings will reimburse each such Indemnified Party for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
Holdings shall not be liable in any such case
22
<PAGE> 23
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to Holdings by or on behalf of
such holder specifically for use in the preparation thereof. In addition,
Holdings shall indemnify any underwriter of such offering and each other Person,
if any, who controls any such underwriter within the meaning of the Securities
Act or the Exchange Act in substantially the same manner and to substantially
the same extent as the indemnity herein provided to each Indemnified Party. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or any such director, officer, underwriter
or controlling person and shall survive the transfer of such securities by such
holder.
(b) Each prospective seller of Registrable Securities hereunder shall
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 3.5) Holdings, each director of
Holdings, each officer of Holdings and each other person, if any, who controls
Holdings within the meaning of the Securities Act or Exchange Act, with respect
to any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereof, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to Holdings
by or on behalf of such seller specifically for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of
Holdings or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller. The amount payable by any
prospective seller of a Registrable Security with respect to the indemnification
set forth in this subsection (b) in connection with any offering of securities
will not exceed the amount of net proceeds received by such prospective seller
pursuant to such offering.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding subdivisions of this Section 3.5, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the
23
<PAGE> 24
indemnifying party of its obligations under the preceding subdivisions of this
Section 3.5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that the indemnifying
party may wish, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party.
(d) If the indemnification provided for in the preceding subdivisions
of this Section 3.5 is unavailable to an indemnified party in respect of any
expense, loss, claim, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such expense, loss, claim, damage or liability (i) in such proportion as is
appropriate to reflect the relative benefits received by Holdings on the one
hand and the holder or underwriter, as the case may be, on the other from the
distribution of the Registrable Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of Holdings on the one hand and of the holder
or underwriter, as the case may be, on the other in connection with the
statements or omissions which resulted in such expense, loss, damage or
liability, as well as any other relevant equitable considerations. The relative
benefits received by Holdings on the one hand and the holder or underwriter, as
the case may be, on the other in connection with the distribution of the
Registrable Securities shall be deemed to be in the same proportion as the total
net proceeds received by Holdings from the initial sale of the Registrable
Securities by Holdings to the purchaser bear to the gain realized by the selling
holder or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of Holdings on the one hand
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<PAGE> 25
and of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by Holdings, by the holder or by the underwriter and
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission; provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such indemnified party by reason of
the proviso contained in the first sentence of subdivision (a) of this Section
3.5, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (d) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (a) or (b) of this Section 3.5
had been available under the circumstances.
Holdings and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (d) were
determined by pro rata allocation (even if the holders and any underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph and subdivision (c) of this Section 3.5. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 3.6 Rule 144; Rule 144A. (a) If Holdings shall have filed a
registration statement pursuant to Section 12 of the Exchange Act or a
registration statement pursuant to the Securities Act, Holdings will file the
reports required to
25
<PAGE> 26
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder and will take such further
action as any holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, Holdings will deliver to such holder a written statement
as to whether it has complied with such requirements.
(b) Holdings represents and warrants that the Common Stock is not, and
is not part of a class of securities that is, listed on a national securities
exchange registered under Section 6 of the Exchange Act or quoted in an
automated inter-dealer quotation system. For so long as any shares of
Registrable Securities are restricted securities within the meaning of Rule
144(a)(3) under the Securities Act, Holdings covenants and agrees that it shall,
during any period in which it is not subject to Section 13 or 15(d) of the
Exchange Act, make available to any holder of Registrable Securities in
connection with the sale of such holder Registrable Securities and any
prospective purchaser of Registrable Securities from such, in each case upon
request, the information specified in, and meeting the requirements of, Rule
144A(d)(4) under the Securities Act.
SECTION 3.7 Consent to Registration Rights. Each of the Stockholders
and Holdings hereby consents to the provisions set forth in this Article III.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 Notices. All notices and other communications provided for
hereunder shall be dated and in writing and shall be deemed to have been given
(i) if given by telecopy, when such telecopy is transmitted to the telecopy
number specified in this Section and telephonic confirmation of receipt thereof
is obtained or (ii) if given by mail, prepaid overnight courier or any other
means, when received at the address specified in this Section or when delivery
at such address is refused. Such notices shall be addressed to the appropriate
party to the attention of the person who executed this Agreement at the address
or telecopy number set forth under such party's signature below (or to the
attention of such
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<PAGE> 27
other person or to such other address or telecopy number as such party shall
have furnished to each other party in accordance with this Section 4.1).
SECTION 4.2 Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto or their successors in interest, except as expressly otherwise provided
herein.
SECTION 4.3 Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.
SECTION 4.4 Specific Performance. Without limiting the rights of each
party hereto to pursue all other legal and equitable rights available to such
party for the other parties' failure to perform their obligations under this
Agreement, the parties hereto acknowledge and agree that the remedy at law for
any failure to perform their obligations hereunder would be inadequate and that
each of them, respectively, shall be entitled to specific performance,
injunctive relief or other equitable remedies in the event of any such failure.
SECTION 4.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAW. EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION
4.1. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY
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<PAGE> 28
TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
SECTION 4.6 Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
SECTION 4.7 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
SECTION 4.8 Entire Agreement. This Agreement is intended by the parties
hereto as a final and complete expression of their agreement and understanding
in respect to the subject matter contained herein. This Agreement supersedes all
prior agreement and understandings, written or oral, between the parties with
respect to such subject matter.
SECTION 4.9 Amendment and Waiver. Any provision of this Agreement may
be amended if, but only if, such amendment is in writing and is signed by
Holdings and the Majority Holders; provided that no such amendment may adversely
affect the rights or obligations hereunder of any Warrant Securityholder unless
signed by such Warrant Securityholder. Any provision may be waived if, but only
if, such waiver is in writing and is signed by the party or parties waiving such
provision and for whose benefit such provision is intended.
SECTION 4.10 No Third Party Beneficiaries. Nothing in this Agreement
shall convey any rights upon any person or entity which is not a party or an
assignee of a party to this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
LET'S TALK CELLULAR & WIRELESS, INC.
By /s/ Brett Beveridge
--------------------------------
Title: President
Address: 5200 NW 77th Court
Miami, FL 33166
Telefax: (305) 477-4119
HIG FUND V, INC.
By /s/ Anthony Tamer
--------------------------------
Title: President
Address: c/o HIG Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, FL 33131
Telefax: (305) 379-2013
TEXAS CELLULAR PARTNERS, L.P.
By HIG Texas Cellular Company, as Managing
General Partner
By /s/ Anthony Tamer
--------------------------------
Title: President
Address: c/o HIG Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Telefax: (305) 379-2013
29
<PAGE> 30
NATIONSCREDIT COMMERCIAL
CORPORATION
By /s/ Edward Alt
--------------------------------
Title: Authorized Signatory
Address: One Canterbury Green
Stamford, CT 06912-0013
Telefax: 203-352-4171
30
<PAGE> 31
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED FOR
SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS WARRANT AND THE
SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE SUBJECT TO AND HAVE THE BENEFIT
OF A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF JUNE 27, 1997 AMONG LET'S TALK
CELLULAR & WIRELESS, INC. AND THE STOCKHOLDERS AND WARRANTHOLDERS LISTED ON THE
SIGNATURE PAGES THEREOF, A COPY OF WHICH IS ON FILE WITH LET'S TALK CELLULAR &
WIRELESS, INC.
June 27, 1997
Cert. No. W-1
WARRANT
TO PURCHASE 32,410 SHARES OF COMMON STOCK OF
LET'S TALK CELLULAR & WIRELESS, INC.
EXPIRING DECEMBER 31, 2006
THIS IS TO CERTIFY THAT, for value received, NATIONSCREDIT COMMERCIAL
CORPORATION or registered assigns ("Holder") is entitled to purchase from LET'S
TALK CELLULAR & WIRELESS, INC., a Florida corporation ("Holdings"), at any time
or from time to time after 9:00 a.m., New York City time, on the date hereof and
prior to 5:00 p.m., New York City time, on the earlier of December 31, 2006 and
the Business Day preceding the date of redemption of this Warrant, at the place
where the Warrant Agency is located, at the Exercise Price, the number of shares
of Common Stock, par value $0.0001 per share (the "Common Stock"), of Holdings
shown above, all subject to adjustment and upon the terms and conditions
hereinafter provided, and is entitled also to exercise the other appurtenant
rights, powers and privileges hereinafter described.
This Warrant is one of one or more warrants (the "Warrants") of the
same form and having the same terms as this Warrant, entitling the holders
initially to purchase up to an aggregate of 32,410 shares of Common Stock. The
Warrants have been issued pursuant to the Credit Agreement dated as of December
31,
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<PAGE> 32
1996, as amended and restated as of June 27, 1997 (as further amended from time
to time, the "Credit Agreement"), among Telephone Warehouse, Inc., a Delaware
corporation ("TWI"), National Cellular, Incorporated, a Texas corporation ("NCI"
and, together with TWI, the "Companies", Holdings, Texas Cellular Partners,
L.P., the Lenders listed on the signature pages thereof and NationsCredit
Commercial Corporation ("NationsCredit"), as Agent, and the Holder is entitled
to certain benefits and is subject to certain restrictions, including
restrictions on transfers, as set forth therein and to certain benefits
described in the Warrantholders Rights Agreement. Holdings shall keep a copy of
the Credit Agreement and the Warrantholders Rights Agreement, and any amendments
thereto, at the Warrant Agency and shall furnish, without charge, copies thereof
to the Holder upon request.
Certain terms used in this Warrant are defined in Article VI.
ARTICLE I
EXERCISE OF WARRANTS
1.1. Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver on any Business Day to Holdings, at the Warrant Agency,
(a) this Warrant, (b) a written notice of such Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased (which shall be a whole number of shares if for less than all the
shares then issuable hereunder), the denominations of the share certificate or
certificates desired and the name or names in which such certificates are to be
registered, and (c) payment of the Exercise Price with respect to such shares.
Such payment may be made, at the option of the Holder, either (a) by cash,
certified or bank cashier's check or wire transfer in an amount equal to the
product of (i) the Exercise Price times (ii) the number of Warrant Shares as to
which this Warrant is being exercised or (b) by receiving from Holdings the
number of Warrant Shares equal to (i) the number of Warrant Shares as to which
this Warrant is being exercised minus (ii) the number of Warrant Shares having a
value, based on the Closing Price on the trading day immediately prior to the
date of such exercise, equal to the product of (x) the Exercise Price times (y)
the number of Warrant Shares as to which this Warrant is being exercised.
Holdings shall, as promptly as practicable and in any event within
seven days after receipt of such notice and payment, execute and deliver or
cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number of shares of
Common Stock specified in said notice together with cash in lieu of any
fractions of a share as provided in Section 1.3. The share certificate or
certificates so delivered shall be in such
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<PAGE> 33
denominations as may be specified in such notice, and shall be issued in the
name of the Holder or such other name or names as shall be designated in such
notice. This Warrant shall be deemed to have been exercised and such certificate
or certificates shall be deemed to have been issued, and such Holder or any
other Person so designated to be named therein shall be deemed for all purposes
to have become a holder of record of shares, as of the date the aforementioned
notice and payment is received by Holdings. If this Warrant shall have been
exercised only in part, Holdings shall, at the time of delivery of such
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights to purchase the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant, or, at the request of the Holder and if Holdings so permits,
appropriate notation may be made on this Warrant which shall then be returned to
the Holder. Holdings shall pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of share certificates and
new Warrants, except that, if share certificates or new Warrants shall be
registered in a name or names other than the name of the Holder, funds
sufficient to pay all transfer taxes payable as a result of such transfer shall
be paid by the Holder at the time of delivery of the aforementioned notice of
exercise or promptly upon receipt of a written request of Holdings for payment.
1.2. Shares to be Fully Paid and Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and, if such class of Common Stock is then listed on any
national securities exchange (as defined in the Exchange Act) or quoted on
NASDAQ, shall be duly listed or quoted thereon, as the case may be, to the
extent such shares are permitted to be transferred by applicable law at such
time.
1.3. No Fractional Shares Required to be Issued. Holdings shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon final exercise of this Warrant, in lieu of such fractional share Holdings
shall pay to the Holder, in cash, an amount equal to the same fraction of the
Fair Market Value of Holdings per share of outstanding Common Stock on the
Business Day immediately prior to the date of such exercise.
1.4. Share Legend. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of 1933
and may not be sold or offered for sale unless registered under said Act and any
applicable state securities laws or unless an exemption from such registration
is available. This security is also subject to certain restrictions, including
restrictions
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<PAGE> 34
on transfer, contained in and has the benefit of a Warrantholders Rights
Agreement dated as of June 27, 1997 among Let's Talk Cellular & Wireless, Inc.
and the Stockholders and Warrantholders listed on the signature pages thereof,
copies of which are on file with Let's Talk Cellular & Wireless, Inc."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued in connection
with a public offering pursuant to a registration statement under the Securities
Act) shall also bear such legend unless, in the opinion of counsel selected by
the holder of such certificate (who may be an employee of such holder) and
reasonably acceptable to Holdings, the securities represented thereby need no
longer be subject to restrictions on resale under the Securities Act.
1.5. Reservation. Holdings has duly reserved and will keep available
for issuance upon exercise of the Warrants the total number of Warrant Shares
deliverable from time to time upon exercise of all Warrants from time to time
outstanding. Holdings will not change the Common Stock from par value $.0001 per
share to any higher par value which exceeds the Exercise Price then in effect,
and will reduce the par value of the Common Stock upon any event described in
Article IV that provides for an increase in the number of shares of Common Stock
subject to purchase upon exercise of this Warrant, in inverse proportion to and
effective at the same time as such number of shares is increased, but only to
the extent that such increase in the number of shares, together with all other
such increases after the date hereof, causes the aggregate Exercise Price of all
Warrants (without giving effect to any exercise or redemption thereof) to be
greater than $1,000.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS
2.1. Warrant Agency. As long as any of the Warrants remain outstanding,
Holdings shall perform the obligations of and be the warrant agency with respect
to the Warrants (the "Warrant Agency") at its address set forth in the Credit
Agreement or at such other address as Holdings shall specify by notice to all
Warrantholders.
2.2. Ownership of Warrant. Holdings may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than Holdings) for all purposes and shall not be affected by any notice to
the
4
<PAGE> 35
contrary, until due presentment of this Warrant for registration of transfer as
provided in this Article II.
2.3. Transfer of Warrant. Holdings agrees to maintain at the Warrant
Agency books for the registration of transfers of the Warrants, and transfer of
this Warrant and all rights hereunder shall be registered, in whole or in part,
on such books, upon surrender of this Warrant at the Warrant Agency, together
with a written assignment of this Warrant duly executed by the Holder or its
duly authorized agent or attorney, with (if the Holder is a natural person)
signatures guaranteed by a bank or trust company or a broker or dealer
registered with the NASD, and funds sufficient to pay any transfer taxes payable
upon such transfer. Upon surrender and, if required, such payment, Holdings
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denominations specified in the instrument of assignment
(which shall be whole numbers of shares only) and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be canceled.
2.4. Division or Combination of Warrants. This Warrant may be divided
or combined with other Warrants upon presentment hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations (which
shall be whole numbers of shares only) in which the new Warrant or Warrants are
to be issued, signed by the holders hereof and thereof or their respective duly
authorized agents or attorneys. Subject to compliance with Section 2.3 as to any
transfer or assignment which may be involved in the division or combination,
Holdings shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
2.5. Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
evidence satisfactory to Holdings of the ownership of and the loss, theft,
destruction or mutilation of any Warrant and, in the case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to
Holdings (it being understood and agreed that if the holder of such Warrant is
NationsCredit, then a written agreement of indemnity given by NationsCredit
alone shall be satisfactory to Holdings and no further security shall be
required) or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, Holdings will make and deliver, in lieu of such
lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same aggregate number of shares of Common
Stock.
2.6. Expenses of Delivery of Warrants. Holdings shall pay all expenses,
taxes (other than transfer taxes) and other charges payable in connection with
the preparation, issuance and delivery of Warrants hereunder.
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ARTICLE III
CERTAIN RIGHTS
3.1. Rights and Obligations under the Warrantholders Rights Agreement.
This Warrant is entitled to the benefits and subject to the terms of the
Warrantholders Rights Agreement dated as of June 27, 1997, among Holdings and
the Stockholders and Warrantholders listed on the signature pages thereof (as
amended from time to time, the "Warrantholders Rights Agreement"). Holdings
shall keep or cause to be kept a copy of the Warrantholders Rights Agreement,
and any amendments thereto, at the Warrant Agency and shall furnish, without
charge, copies thereof to the Holder upon request.
3.2. Determination of Fair Market Value. Subject to Section 3.3 hereof,
each determination of Fair Market Value hereunder shall be made in good faith by
Holdings. Upon each determination of Fair Market Value by Holdings hereunder,
Holdings shall promptly give notice thereof to all Warrantholders, setting forth
in reasonable detail the calculation of such Fair Market Value and the method
and basis of determination thereof (the "Holdings Determination").
3.3. Contest and Appraisal Rights. (a) If the holders of Warrants
entitling such holders to purchase a majority of the Common Stock subject to
purchase upon exercise of Warrants at the time outstanding (exclusive of
Warrants then owned by Holdings or any Subsidiary (as defined in the Credit
Agreement) or Affiliate (as defined in the Credit Agreement) thereof (the
"Required Interest") shall disagree with the Holdings Determination and shall by
notice to Holdings given within 30 days after Holdings' notice of the Holdings
Determination (an "Appraisal Notice") elect to dispute the Holdings
Determination, such dispute shall be resolved as set forth in subsection (b) of
this Section.
(b) Holdings shall within 30 days after an Appraisal Notice shall have
been given pursuant to subsection (a) of this Section engage an investment bank
or other qualified appraisal firm acceptable to the Required Interest (the
"Appraiser") to make an independent determination of Fair Market Value (the
"Appraiser Determination"). If the Holdings Determination and the Appraiser
Determination differ by an amount of 15% or less of the Holdings Determination,
then the costs of conducting the appraisal shall be borne equally by Holdings
and the Holders; if the Holdings Determination is greater than the Appraiser
Determination by more than 15% of the Holdings Determination, then the costs of
conducting the appraisal shall be borne entirely by the Holders; and if the
Appraiser Determination is greater than the Holdings Determination by more than
15% of the Holdings Determination, then the costs of conducting the appraisal
shall be borne entirely by
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Holdings; provided that in each case costs separately incurred by Holdings and
any Holders shall be separately borne by them.
3.4. Board Meetings. Holdings shall give to the Warrantholders notice
of all meetings and actions by written consent of its board of directors and
each committee thereof and of the board of directors and each committee thereof
of the Company, at the same time and in the same manner as notice of any
meetings of such board or committees is required to be given to directors who do
not waive such notice (or, if such action requires no notice, then two days
written notice thereof describing the matters upon which action is to be taken).
All meetings of the board of directors of the Company or each committee thereof
shall be held on the same day and in the same location as the analogous meeting
of the board of directors of Holdings or relevant committee thereof, as the case
may be. Warrantholders shall have the right at their cost to send two
representatives selected by them to each such meeting, who shall be permitted to
attend such meeting and any adjournments thereof (other than any portion of such
meeting devoted to discussion of the Warrantholders). The provisions of this
Section 3.4 shall be applicable only prior to the consummation of an IPO.
3.5. Financial Statements and Other Information. Holdings will, and
will cause each of its subsidiaries to, maintain a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in accordance with generally accepted
accounting principles ("GAAP"), and will deliver to each of the Warrantholders:
(a) as soon as practicable and in any event within 30 days
after the end of each fiscal quarter, a consolidated balance sheet of
Holdings and its subsidiaries as at the end of such fiscal quarter and
the related consolidated statements of operations and cash flows for
such fiscal quarter and for the portion of the fiscal year ended at the
end of such fiscal quarter, setting forth in each case in comparative
form the figures for the corresponding periods of the previous fiscal
year, all in reasonable detail and certified by the chief financial
officer of Holdings as fairly presenting the financial condition and
results of operations of Holdings and its subsidiaries and as having
been prepared in accordance with GAAP applied on a basis consistent
with the audited financial statements of Holdings, subject to changes
resulting from audit and normal year-end adjustments;
(b) as soon as available and in any event within 120 days
after the end of each fiscal year, a consolidated balance sheet of
Holdings and its subsidiaries as of the end of such fiscal year and the
related consolidated statements of operations, stockholders' equity and
cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the
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previous fiscal year;
(c) promptly following the filing thereof with the Secretary
of State of the State of Delaware, a copy of each amendment to, or
restatement of, the Certificate of Incorporation of Holdings, and
promptly following the adoption thereof by Holdings, a copy of each
amendment to, or restatement of, the By-laws of Holdings;
(d) as promptly as practicable following each meeting of the
board of directors of Holdings, a copy of the minutes of such meeting,
and promptly following the execution by all of the directors on the
board of directors of Holdings, a copy of each unanimous written
consent of directors in lieu of a meeting of the board of directors of
Holdings, in each case, including all exhibits and attachments, if any,
to such minutes or unanimous written consents; and
(e) with reasonable promptness, such other information and
data with respect to Holdings or any of its subsidiaries as from time
to time may be reasonably requested by any Warrantholder.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1. Adjustment Generally. The Exercise Price and the number of shares
of Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events as provided in this Article IV; provided that notwithstanding
anything to the contrary contained herein, the Exercise Price shall not be less
than the par value of the Common Stock, as such par value is reduced from time
to time in accordance with Section 1.5.
4.2. Common Stock Reorganization. If Holdings shall subdivide its
outstanding shares of Common Stock (or any class thereof) into a greater number
of shares or consolidate its outstanding shares of Common Stock (or any class
thereof) into a smaller number of shares (any such event being called a "Common
Stock Reorganization"), then (a) the Exercise Price shall be adjusted, effective
immediately after the effective date of such Common Stock Reorganization, to a
price determined by multiplying the Exercise Price in effect immediately prior
to such effective date by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding on such effective date before giving
effect to such Common Stock Reorganization and the denominator of which shall be
the
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number of shares of Common Stock outstanding after giving effect to such Common
Stock Reorganization, and (b) the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be adjusted, effective at such
time, to a number determined by multiplying the number of shares of Common Stock
subject to purchase immediately before such Common Stock Reorganization by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding after giving effect to such Common Stock Reorganization and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately before such Common Stock Reorganization.
4.3. Common Stock Distribution. (a) If Holdings shall issue, sell or
otherwise distribute any shares of Common Stock, other than pursuant to a Common
Stock Reorganization (which is governed by Section 4.2 hereof) (any such event,
including any event described in paragraphs (b) and (c) below, being herein
called a "Common Stock Distribution"), for a consideration per share less than
the Exercise Price then in effect or less than the Fair Market Value of Holdings
per share of outstanding Common Stock on a Fully Diluted Basis on the date of
such Common Stock Distribution (before giving effect to such Common Stock
Distribution), then, effective upon such Common Stock Distribution, the Exercise
Price shall be reduced to the lower of the prices (calculated to the nearest
one-thousandth of one cent) determined as provided in clauses (i) and (ii) below
or:
(i) by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
Common Stock Distribution multiplied by the then existing Exercise
Price, plus (2) the consideration, if any, received by Holdings upon
such Common Stock Distribution by (B) the total number of shares of
Common Stock outstanding immediately after such Common Stock
Distribution; and
(ii) by multiplying the Exercise Price in effect immediately
prior to such Common Stock Distribution by a fraction, the numerator of
which shall be the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such Common Stock Distribution
multiplied by such Fair Market Value per share on the date of such
Common Stock Distribution, plus (B) the consideration, if any, received
by Holdings upon such Common Stock Distribution, and the denominator of
which shall be the product of (1) the total number of shares of Common
Stock outstanding immediately after such Common Stock Distribution
multiplied by (2) such Fair Market Value per share on the date of such
Common Stock Distribution.
If any Common Stock Distribution shall require an adjustment to the
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Exercise Price pursuant to the foregoing provisions of this paragraph (a),
including by operation of paragraph (b) or (c) below, then, effective at the
time such adjustment is made, the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be increased to a number determined
by multiplying the number of shares of Common Stock subject to purchase
immediately before such Common Stock Distribution by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding immediately
after giving effect to such Common Stock Distribution and the denominator of
which shall be the sum of the number of shares outstanding immediately before
giving effect to such Common Stock Distribution (both calculated on a Fully
Diluted Basis) plus the number of shares of Common Stock which the aggregate
consideration received by Holdings with respect to such Common Stock
Distribution would purchase at the Fair Market Value of Holdings per share of
outstanding Common Stock on a Fully Diluted Basis on the date of such Common
Stock Distribution (before giving effect to such Common Stock Distribution). In
computing adjustments under this paragraph, fractional interests in Common Stock
shall be taken into account to the nearest one-thousandth of a share.
The provisions of this paragraph (a), including by operation of
paragraph (b) or (c) below, shall not operate to increase the Exercise Price or
reduce the number of shares of Common Stock subject to purchase upon exercise of
this Warrant.
(b) If Holdings shall issue, sell, distribute or otherwise grant in any
manner (including by assumption) any rights to subscribe for or to purchase, or
any warrants or options for the purchase of Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such rights,
warrants or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such Options or the rights to convert or exchange any such
Convertible Securities in respect of such Options are immediately exercisable,
and the price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities in
respect of such Options (determined by dividing (i) the aggregate amount, if
any, received or receivable by Holdings as consideration for the granting of
such Options, plus the minimum aggregate amount of additional consideration
payable to Holdings upon the exercise of all such Options, plus, in the case of
Options to acquire Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issuance or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Exercise Price then in effect or less than the Fair
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Market Value of Holdings per share of outstanding Common Stock on a Fully
Diluted Basis on the date of granting such Options (before giving effect to such
grant), then, for purposes of paragraph (a) above, the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued as of the date of granting of such Options and thereafter shall be
deemed to be outstanding and Holdings shall be deemed to have received as
consideration of such price per share, determined as provided above, therefor.
Except as otherwise provided in paragraph (d) below, no additional adjustment of
the Exercise Price shall be made upon the actual exercise of such Options or
upon conversion or exchange of such Convertible Securities.
(c) If Holdings shall issue, sell or otherwise distribute (including by
assumption) any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the aggregate amount received or receivable by Holdings as
consideration for the issuance, sale or distribution of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to Holdings upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Exercise
Price then in effect or less than the Fair Market Value of Holdings per share of
outstanding Common Stock on a Fully Diluted Basis on the date of such issuance,
sale or distribution (before giving effect to such issuance, sale or
distribution), then, for purposes of paragraph (a) above, the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued as of the date
of the issuance, sale or distribution of such Convertible Securities and
thereafter shall be deemed to be outstanding and Holdings shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor. Except as otherwise provided in paragraph (d) below, no
additional adjustment of the Exercise Price shall be made upon the actual
conversion or exchange of such Convertible Securities.
(d) If (i) the purchase price provided for in any Option referred to in
paragraph (b) above or the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in paragraph
(b) or (c) above or the rate at which any Convertible Securities referred to in
paragraph (b) or (c) above are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution upon an event which results in a related adjustment
pursuant to this Article IV), or (ii) any of such Options or Convertible
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Securities shall have terminated, lapsed or expired, the Exercise Price then in
effect shall forthwith be readjusted (effective only with respect to any
exercise of this Warrant after such readjustment) to the Exercise Price which
would then be in effect had the adjustment made upon the issuance, sale,
distribution or grant of such Options or Convertible Securities been made based
upon such changed purchase price, additional consideration or conversion rate,
as the case may be (in the case of any event referred to in clause (i) of this
paragraph (d)) or had such adjustment not been made (in the case of any event
referred to in clause (ii) of this paragraph (d)).
(e) If Holdings shall pay a dividend or make any other distribution
upon any capital stock of Holdings payable in Common Stock Options or
Convertible Securities, then, for purposes of paragraph (a) above, such Common
Stock, Options or Convertible Securities shall be deemed to have been issued or
sold without consideration.
(f) If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the amount received by Holdings therefor. If any
shares of Common Stock, Options or Convertible Securities shall be issued sold
or distributed for a consideration other than cash, the amount of the
consideration other than cash received by Holdings shall be deemed to be the
Fair Market Value of such consideration, after deduction of any expenses
incurred in connection therewith. If any shares of Common Stock, Options or
Convertible Securities shall be issued in connection with any merger in which
Holdings is the surviving corporation, the amount of consideration therefor
shall be deemed to be the Fair Market Value of such portion of the assets and
business of the non-surviving corporation as shall be attributable to such
Common Stock, Options or Convertible Securities, as the case may be. If any
Options shall be issued in connection with the issuance and sale of other
securities of Holdings' together comprising one integral transaction in which no
specific consideration is allocated to such Options by the parties thereto, such
Options shall be deemed to have been issued without consideration.
4.4. Special Dividends. If Holdings shall issue or distribute to any
holder or holders of shares of Common Stock evidences of indebtedness, any other
securities of Holdings or any cash, property or other assets (excluding a Common
Stock Reorganization or a Common Stock Distribution), whether or not accompanied
by a purchase, redemption or other acquisition of shares of Common Stock (any
such nonexcluded event being herein called a "Special Dividend"), (a) the
Exercise Price shall be decreased, effective immediately after the effective
date of such Special Dividend, to a price determined by multiplying the Exercise
Price then in effect by a fraction, the numerator of which shall be the Fair
Market Value of Holdings per share of outstanding Common Stock as of such
effective date less any cash and the then Fair Market Value of any evidences of
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indebtedness, securities or property or other assets issued or distributed in
such Special Dividend with respect to one share of Common Stock, and the
denominator of which shall be such Fair Market Value per share and (b) the
number of shares of Common Stock subject to purchase upon exercise of this
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock subject to purchase immediately before such Special
Dividend by a fraction, the numerator of which shall be the Exercise Price in
effect immediately before such Special Dividend and the denominator of which
shall be the Exercise Price in effect immediately after such Special Dividend. A
reclassification of Common Stock (other than a change in par value, or from par
value to no par value or from no par value to par value) into shares of Common
Stock and shares of any other class of stock shall be deemed a distribution by
Holdings to the holders of such Common Stock of such shares of such other class
of stock and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as part of such
reclassification, a Common Stock Reorganization.
4.5. Capital Reorganizations. If there shall be any consolidation or
merger to which Holdings is a party, other than a consolidation or a merger of
which Holdings is the continuing corporation and which does not result in any
reclassification of, or change (other than a Common Stock Reorganization) in,
outstanding shares of Common Stock, or any sale or conveyance of the property of
Holdings as an entirety or substantially as an entirety, or any recapitalization
of Holdings (any such event being called a "Capital Reorganization"), then,
effective upon the effective date of such Capital Reorganization, the Holder
shall no longer have the right to purchase Common Stock, but shall have instead
the right to purchase, upon exercise of this Warrant, the kind and amount of
shares of stock and other securities and property (including cash) which the
Holder would have owned or have been entitled to receive pursuant to such
Capital Reorganization if this Warrant had been exercised immediately prior to
the effective date of such Capital Reorganization. As a condition to effecting
any Capital Reorganization, Holdings or the successor or surviving corporation,
as the case may be, shall (a) execute and deliver to each Warrantholder and to
the Warrant Agency an agreement as to the Warrantholders' rights in accordance
with this Section 4.5, providing, to the extent of any right to purchase equity
securities hereunder, for subsequent adjustments as nearly equivalent as may be
practicable to the adjustments provided for in this Article IV and (b) provide
each Regulation Y Holder with an opinion of counsel reasonably satisfactory to
such Regulation Y Holder and such other assurances as any Regulation Y Holder
may reasonably request to the effect that the ownership and exercise by any
Regulation Y Holder of this Warrant after giving effect to such Capital
Reorganization shall not be prohibited by the BHC Act or the regulations
thereunder. The provisions of this Section 4.5 shall similarly apply to
successive Capital Reorganizations.
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4.6. Adjustment Rules. (a) Any adjustments pursuant to this Article IV
shall be made successively whenever an event referred to herein shall occur,
except that, notwithstanding any other provision of this Article IV, no
adjustment shall be made to the number of shares of Common Stock to be delivered
to each Holder (or to the Exercise Price) if such adjustment represents less
than 1% of the number of shares previously required to be so delivered, but any
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to 1% or more of the number of shares to be so
delivered. No adjustment shall be made pursuant to this Article IV in respect of
the issuance from time to time of shares of Common Stock upon the exercise of
any of the Warrants. If Holdings shall take a record of the holders of its
Common Stock for any purpose referred to in this Article IV, then (i) such
record date shall be deemed to be the date of the issuance, sale, distribution
or grant in question and (ii) if Holdings shall legally abandon such action
prior to effecting such action, no adjustment shall be made pursuant to this
Article IV in respect of such action.
4.7. Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article IV, Holdings shall take any action which may
be necessary, including obtaining regulatory approvals or exemptions, in order
that (a) Holdings may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock which the holders of Warrants are
entitled to receive upon exercise thereof and (b) the ownership and exercise of
any Warrant by any Regulation Y Holder shall not be prohibited by the BHC Act or
the regulations thereunder.
4.8. Notice of Adjustment. Not less than 10 nor more than 30 days prior
to the record date or effective date, as the case may be, of any action which
requires or might require an adjustment or readjustment pursuant to this Article
IV, Holdings shall give notice to each Warrantholder of such event, describing
such event in reasonable detail and specifying the record date or effective
date, as the case may be, and, if determinable, the required adjustment and the
computation thereof. If the required adjustment is not determinable at the time
of such notice, Holdings shall give notice to each Warrantholder of such
adjustment and computation promptly after such adjustment becomes determinable.
ARTICLE V
PURCHASE, REDEMPTION AND CANCELLATION OF WARRANTS
5.1. Purchase of Warrants by Holdings. Holdings shall have the right or
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obligation to purchase or otherwise acquire Warrants at such times, in such
manner and for such consideration as set forth below.
5.2. Mandatory Redemption of Warrants. The Holder may (a) at any time
and from time to time on or after the earlier of (i) the fourth anniversary of
the Closing Date and (ii) the repayment in full of all principal of and premium
and interest on the Notes (as defined in the Credit Agreement) and the
termination of the Commitments under the Credit Agreement and (b) on or within
30 days after the date on which Holdings shall have delivered a Refinancing
Notice, by notice to Holdings (any such redemption pursuant to this clause (b),
a "Refinancing Redemption"), demand a determination of the Redemption Price (a
"Determination Notice") for purposes of this Section 5.2. Within 30 days (or, in
the case of a Refinancing Redemption, 5 days) after the receipt of any
Determination Notice from the Holder, Holdings shall give to the Holder notice
of the Redemption Price, including a reasonably detailed description of the
method of calculation thereof, determined as of the day preceding such notice of
the Redemption Price. At any time within 30 days (or, in the case of a
Refinancing Redemption, 15 days) after receipt of notice of the Redemption Price
the Holder may demand redemption of this Warrant, in whole or in part, at the
Redemption Price by notice to Holdings, payable on the third Business Day after
receipt of notice of such demand (or, in the case of a Refinancing Redemption,
on the closing date of such refinancing) (any such date, the "Redemption Due
Date") in immediately available funds to the Holder upon surrender of this
Warrant at the Warrant Agency or, if requested by the Holder, without surrender
of this Warrant, by wire transfer to any account in New York City specified by
notice to Holdings. Thereupon, the right to purchase shares of Common Stock
theretofore represented by this Warrant as to which the Holder has demanded (and
Holdings may effect) redemption shall terminate, and this Warrant shall
represent the right of the Holder to receive the full Redemption Price from
Holdings in accordance with this Section. The Holder's right to demand
redemption of this Warrant pursuant to this Section 5.2 shall be referred to
hereinafter as the Holder's "Mandatory Redemption Right".
5.3. Optional Redemption. At any time and from time to time after the
fifth anniversary of the Closing Date, Holdings shall have the right to redeem
all, but not less than all, of the outstanding Warrants at the Optional
Redemption Price, determined as of the day preceding the notice of redemption.
Irrevocable notice of such right of redemption shall be given by Holdings to all
Warrantholders not more than 30 days nor less than 15 days prior to the date
scheduled for redemption, stating the date and price, including a reasonably
detailed description of the method of calculation thereof, of redemption.
Warrantholders may exercise Warrants until 5:00 p.m., New York City time, on the
Business Day preceding the date of redemption set forth in a valid notice of
redemption, at which time the right to purchase shares of Common Stock
theretofore represented by this Warrant shall
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terminate, and this Warrant shall represent the right of the Holder to receive
the Optional Redemption Price from Holdings in immediately available funds upon
surrender of this Warrant at the Warrant Agency. If the Optional Redemption
Price shall be disputed pursuant to Section 3.3, Holdings shall pay to the
affected Warrantholders on the redemption date the Optional Redemption Price
initially determined by it and shall thereafter make supplemental payment of any
increase (and the affected Warrantholder shall remit to Holdings any decrease)
in the Optional Redemption Price upon resolution of such dispute.
5.4. Cancellation of Warrants. All Warrants purchased, redeemed or
otherwise acquired by Holdings shall thereupon be canceled and retired. The
Warrant Agency shall cancel any Warrant surrendered for exercise or registration
of transfer or exchange and deliver such canceled Warrants to Holdings.
5.5. Notice of Refinancing. Holdings shall give notice to each of the
Warrantholders of any intent by Holdings or the Company to refinance in their
entirety the Notes (as defined in the Credit Agreement) not less than 60 days
prior to the proposed closing date of such refinancing, setting forth such
proposed closing date and notifying each Warrantholder of its rights under
Section 5.2 (such notice, the "Refinancing Notice").
ARTICLE VI
DEFINITIONS
The following terms, as used in this Warrant, have the following
meanings:
"Affiliate" has the meaning specified in the Warrantholders Rights
Agreement.
"Appraisal Notice" has the meaning set forth in Section 3.3(a).
"Appraiser" has the meaning set forth in Section 3.3(b).
"Appraiser Determination" has the meaning set forth in Section 3.3(b).
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day excluding Saturday, Sunday and any day on
which banking institutions located in New York are authorized by law or other
governmental action to be closed, unless there shall have been an offering of
Common Stock registered under the Securities Act, in which case "Business Day"
means (a) if Common Stock is listed or admitted to trading on a national
securities
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exchange, a day on which the principal national securities exchange on which the
Common Stock is listed or admitted to trading is open for business or (b) if
Common Stock is not so listed or admitted to trading, a day on which the New
York Stock Exchange is open for business.
"Capital Reorganization" has the meaning set forth in Section 4.5.
"Closing Date" means December 31, 1996.
"Closing Price" on any day means (a) if Common Stock is listed or
admitted for trading on a national securities exchange, the reported last sales
price regular way or, if no such reported sale occurs on such day, the average
of the closing bid and asked prices regular way on such day, in each case on the
principal national securities exchange on which Common Stock is listed or
admitted to trading, or (b) if Common Stock is not listed or admitted to trading
on any national securities exchange, the average of the closing bid and asked
prices in the over-the-counter market on such day as reported by NASDAQ or any
comparable system or, if not so reported, as reported by any New York Stock
Exchange member firm selected by Holdings for such purpose.
"Common Stock" means the common stock, par value $0.0001 per share, of
Holdings.
"Common Stock Distribution" has the meaning set forth in Section
4.3(a).
"Common Stock Reorganization" has the meaning set forth in Section 4.2.
"Consolidated Total Debt" has the meaning specified in the Credit
Agreement.
"Convertible Securities" has the meaning set forth in Section 4.3(b).
"Credit Agreement" has the meaning set forth in the second paragraph of
this Warrant.
"Determination Notice" has the meaning set forth in Section 5.2.
"EBITDA" has the meaning specified in the Credit Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor Federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Exercise Price" means $.0001 per share of the Common Stock, subject to
17
<PAGE> 48
adjustment pursuant to Article IV.
"Fair Market Value" as at any date of determination means the fair
market value of the business or property or services in question as of such
date, as determined in good faith by the Board of Directors of Holdings or
otherwise in accordance with Section 3.3 hereof. The Fair Market Value of
Holdings as at any date of determination shall be the sum of (i) the greatest of
(w) the Fair Market Value at such date of the common stockholders' equity of
Holdings and its Subsidiaries as a going concern, (x) the liquidation value at
such date of the common stockholders' equity of Holdings and its Subsidiaries,
(y) the consolidated net worth of Holdings and its Subsidiaries as shown on the
latest available consolidated balance sheet of Holdings and (z) the result of
(A) EBITDA for the twelve consecutive months most recently ended prior to such
date multiplied by four plus (B) cash and cash equivalents at such date minus
(C) Consolidated Total Debt at such date, and (ii) the amount by which any of
the foregoing amounts would have been increased had LTC not made any payments
pursuant to stock appreciation rights or other equity-based payments to
employees of LTC or any of its Subsidiaries. Notwithstanding the foregoing, if,
at any date of determination of the Fair Market Value of Holdings, the Common
Stock shall then be publicly traded, the Fair Market Value of Holdings on such
date shall be the Market Price on such date multiplied by the number of shares
of Common Stock then outstanding. Determination of the Fair Market Value of
Holdings per share of Common Stock, shall be made without giving effect to any
discount for (i) minority interest or (ii) any lack of liquidity of the Common
Stock due to the fact that there may be no public market for the Common Stock.
"Fully Diluted Basis" means at any time (i) as applied to any
calculation of the number of securities of Holdings, after giving effect to (x)
all shares of common stock of Holdings (including the Common Stock) outstanding
at the time of determination, (y) all shares of Holdings' common stock issuable
upon the exercise of any option, warrant (including the Warrants) or similar
right outstanding at the time of determination and (z) all shares of common
stock of Holdings issuable upon the exercise of any conversion or exchange right
contained in any security convertible into or exchangeable for shares of common
stock of Holdings; and (ii) as applied to any calculation of value, after giving
effect to the foregoing securities and the payment of any consideration payable
upon the exercise of any option, warrant or similar right referred to in clause
(y) above if such option, warrant or similar right were exercisable at such
time.
"Holder" has the meaning set forth in the first paragraph of this
Warrant.
"Holdings" has the meaning set forth in the first paragraph of this
Warrant.
"Holdings Determination" has the meaning set forth in Section 3.2(a).
18
<PAGE> 49
"IPO" means the initial sale of shares of Common Stock by and for the
account of Holdings pursuant to an underwritten public offering registered under
the Securities Act.
"Mandatory Redemption Right" has the meaning set forth in Section 5.2.
"Market Price" as at any date of determination means the average of the
daily Closing Prices of a share of Common Stock for the shorter of (i) the 20
consecutive Business Days ending on the most recent Business Day prior to the
Time of Determination and (ii) the period commencing on the date next succeeding
the first public announcement of the issuance, sale, distribution, grant or
exercise in question through such most recent Business Day prior to the Time of
Determination. "Time of Determination" means the time and date of the earliest
of (x) the determination of the stockholders entitled to receive such issuance,
sale, distribution or grant, (y) the determination of the Holders or Holdings to
exercise their respective rights set forth in Sections 5.2 or 5.3 hereof and (z)
the commencement of "ex-dividend" trading in respect thereof.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"NationsCredit" has the meaning set forth in the second paragraph of
this Warrant.
"Optional Redemption Price" means, as of any date of determination, a
price for each share of Common Stock issuable upon exercise of the Warrants
equal to 110% of the Redemption Price, determined as of such date.
"Options" has the meaning set forth in Section 4.3(b).
"Person" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust or other organization,
whether or not a legal entity, and any government agency or political
subdivision thereof.
"Redemption Due Date" has the meaning set forth in Section 5.2 hereof.
"Redemption Price" means, as of any date of determination, a price for
each share of Common Stock issuable upon exercise of the Warrants equal to the
excess of (a)(i) the Fair Market Value of Holdings plus the aggregate Exercise
Price of all Warrants either being redeemed or then outstanding and not being
redeemed divided by (ii) the number of shares of Common Stock outstanding on a
Fully Diluted Basis over (b) the Exercise Price then in effect.
19
<PAGE> 50
"Refinancing Notice" has the meaning set forth in Section 5.5 hereof.
"Refinancing Redemption" has the meaning set forth in Section 5.2
hereof.
"Regulation Y Holder" means the Holder or a holder of Warrant Shares,
if such Holder or holder of Warrant Shares is a bank holding company within the
meaning of the BHC Act or a subsidiary thereof subject to Regulation Y under the
BHC Act.
"Required Interest" has the meaning set forth in Section 3.3(a).
"Securities Act" means the Securities Act of 1933, as amended, and
rules and regulations of the Securities and Exchange Commission thereunder.
"Special Dividend" has the meaning set forth in Section 4.4.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, association or other business entity of which more than 50% of the
total voting power of shares of stock or other interests therein entitled to
vote in the election of members of the board of directors, partnership
committee, board of managers or trustees or other managerial body thereof is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such Person or a combination thereof. Unless
otherwise specified, "Subsidiary" means a Subsidiary of Holdings and
"Subsidiaries" means all Subsidiaries of Holdings.
"Warrant Agency" has the meaning set forth in Section 2.1.
"Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants.
"Warrantholder" means a holder of a Warrant.
"Warrantholders Rights Agreement" has the meaning set forth in Section
3.1.
"Warrants" has the meaning set forth in the second paragraph of this
Warrant.
All references herein to "days" shall mean calendar days unless
otherwise specified.
20
<PAGE> 51
ARTICLE VII
MISCELLANEOUS
7.1. Notices. Notices and other communications provided for herein
shall be in writing and may be given by mail, courier, confirmed telex or
facsimile transmission and shall, unless otherwise expressly required, be deemed
given when received or, if mailed, four Business Days after being deposited in
the United States mail with postage prepaid and properly addressed. In the case
of the Holder, such notices and communications shall be addressed to its address
as shown on the books maintained by the Warrant Agency, unless the Holder shall
notify the Warrant Agency that notices and communications should be sent to a
different address (or telex or facsimile number), in which case such notices and
communications shall be sent to the address (or telex or facsimile number)
specified by the Holder.
7.2. Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on Holdings in any case shall entitle
Holdings to any other or future notice or demand in similar or other
circumstances. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of Holdings and the holders of Warrants entitling such
holders to purchase a majority of the Common Stock subject to purchase upon
exercise of such Warrants at the time outstanding (exclusive of Warrants then
owned by Holdings or any Subsidiary (as defined in the Credit Agreement) or
Affiliate (as defined in the Credit Agreement) thereof); provided, however, that
no such amendment, modification or waiver shall, without the written consent of
the holders of all Warrants at the time outstanding, (a) change the number of
shares of Common Stock subject to purchase upon exercise of this Warrant, the
Exercise Price or provisions for payment thereof or (b) amend, modify or waive
the provisions of this Section or Article III or IV or Section 1.5, 5.2, 5.3 or
5.5. The provisions of the Credit Agreement and the Warrantholders Rights
Agreement may be amended, modified or waived only in accordance with the
respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to and in
accordance with the provisions of this Section or the applicable provisions of
the Credit Agreement or the Warrantholders Rights Agreement shall be binding
upon the holders of all Warrants and Warrant Shares, upon each future holder
thereof and upon Holdings. In the event of any such amendment, modification or
waiver Holdings shall give prompt notice thereof to all holders of Warrants and
Warrant
21
<PAGE> 52
Shares and, if appropriate, notation thereof shall be made on all Warrants
thereafter surrendered for registration of transfer or exchange.
7.3. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW).
7.4. Transfer; Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of Holdings or the Holder shall bind its successors and assigns, whether so
expressed or not. This Warrant shall be transferable and assignable by the
Holder hereof in whole or from time to time in part to any other Person and the
provisions of this Warrant shall be binding upon and inure to the benefit of the
Holder hereof and its successors and assigns.
7.5. Severability. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
7.6. Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.7. Tax Basis. Holdings and the Holder agree pursuant to Proposed
Treasury Regulation Section 1.1273-2 that, for Federal income tax purposes, the
aggregate issue price of the Term Loans (as defined in the Credit Agreement) and
the aggregate purchase price for the Lender Interest and the Warrants are those
set forth in Section 2.05 of the Credit Agreement. Neither Holdings nor the
Holder hereof shall voluntarily take (nor shall Holdings permit the Company
voluntarily to take) any action inconsistent with the agreement set forth in
this Section 7.7.
22
<PAGE> 53
IN WITNESS WHEREOF, Holdings has caused this Warrant to be executed in
its corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ Nicolas Molina
--------------------------------------------------
Name: Nicolas Molina
Title: Chief Executive Officer
Attest:
/s/ Brett Beveridge
- ---------------------------
Name: Brett Beveridge
Title: President
23
<PAGE> 1
EXHIBIT 10.15
CREDIT AGREEMENT
dated as of December 31, 1996
and
amended and restated as of June 27, 1997
among
TELEPHONE WAREHOUSE, INC.,
NATIONAL CELLULAR, INCORPORATED,
LET'S TALK CELLULAR & WIRELESS, INC.,
TEXAS CELLULAR PARTNERS, L.P.,
The LENDERS referred to herein
and
NATIONSCREDIT COMMERCIAL CORPORATION,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C>
ARTICLE 1
- ---------
DEFINITIONS
-----------
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 1.03. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 2
- ---------
TERM LOANS
----------
SECTION 2.01. Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.02. Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.03. Interest on the Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.04. Repayments and Prepayments of Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 3
- ---------
WORKING CAPITAL LOANS
---------------------
SECTION 3.01. Working Capital Loans and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.02. Working Capital Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.03. Interest on Working Capital Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.04. Advancing Working Capital Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.05. Mandatory Repayments and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.06. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.07. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.08. Obligation to Make Working Capital Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.09. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 4
- ---------
GUARANTY
--------
SECTION 4.01. The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.02. Guaranty Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.03. Discharge Only upon Payment in Full; Reinstatement
In Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.04. Waiver by the Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.05. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.06. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 5
- ---------
CONDITIONS
----------
SECTION 5.01. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.02. Conditions to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 6
- ---------
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 6.01. Legal Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.02. Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.03. Binding Effect; Liens of Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.06. Ownership of Property, Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.07. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.08. No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.09. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.10. Subsidiaries; Other Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.11. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.12. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.14. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.15. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.16. Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.17. Employment, Shareholders and Subscription Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.18. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.19. Representations and Warranties from Other
Operative Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.20. Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.21. Compliance with Environmental Requirements; No
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.22. Initial Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 7
- ---------
AFFIRMATIVE COVENANTS
---------------------
SECTION 7.01. Financial Statements and Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.03. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.04. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.05. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.06. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.07. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.08. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.09. Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.10. Lenders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.11. Consummation of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
ii
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<TABLE>
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----
<S> <C>
SECTION 7.12. Hazardous Materials; Remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.13. Collateral Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.14. Collections; Right to Notify Account Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.15. Enforcement of Covenants Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.16. Landlord and Warehouseman Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8
- ---------
NEGATIVE COVENANTS
------------------
SECTION 8.01. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.02. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.03. Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.04. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.05. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.06. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.07. Purchase of Assets, Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.08. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.09. Amendments or Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.10. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.11. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.12. Total Debt Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.13. Lease Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.14. Minimum EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.15. Limitations on Activities by Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.16. Investor Affiliate Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.17. Subordinated Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 9
- ---------
EVENTS OF DEFAULT
-----------------
SECTION 9.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.02. Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 10
- ----------
FEES, EXPENSES AND INDEMNITIES; GENERAL PROVISIONS RELATING TO
--------------------------------------------------------------
PAYMENTS
--------
SECTION 10.01. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.02. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.03. General Provisions Regarding Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.04. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.05. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.06. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.07. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 10.08. Maximum Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 11
- ----------
THE AGENT
---------
SECTION 11.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE 12
- ----------
MISCELLANEOUS
-------------
SECTION 12.01. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.02. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.04. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.06. Successors and Assigns; Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 12.08. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 12.09. GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 12.10. Notice of Breach by Agent or Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 12.11. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 12.12. Counterparts; Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
EXHIBIT A-1 - National Cellular Term Note
EXHIBIT A-2 - TWI Term Note
EXHIBIT A-3 - LTC Term Note
EXHIBIT B - Working Capital Note
EXHIBIT C - Company Security Agreement
EXHIBIT D - Holdings Pledge Agreement
EXHIBIT E - HIG Pledge Agreement
EXHIBIT F - LTC Pledge Agreement
EXHIBIT G - Borrowing Base Certificate
EXHIBIT H - Opinion of Greenberg Traurig, Counsel for
the Companies
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT I - Opinion of Davis Polk & Wardwell, Special Counsel for the Agent
EXHIBIT J - Lender Interest Warrants
EXHIBIT K - Warrantholders Rights Agreement
SCHEDULE 1.01 - Existing LTC Loan Agreements
SCHEDULE 6.17 - Employment, Shareholders' and Subscription Agreements
SCHEDULE 6.21 - Environmental Matters
SCHEDULE 6.22 - Initial Capitalization
SCHEDULE 6.23 - Real Property Leases
SCHEDULE 7.04 - Required Insurance
SCHEDULE 8.01 - Outstanding Debt
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of December 31, 1996, as amended and restated as
of June 27, 1997, among TELEPHONE WAREHOUSE, INC., NATIONAL CELLULAR,
INCORPORATED, LET'S TALK CELLULAR & WIRELESS, INC., TEXAS CELLULAR PARTNERS,
L.P., the LENDERS listed on the signature pages hereof and NATIONSCREDIT
COMMERCIAL CORPORATION, as Agent.
W I T N E S S E T H:
WHEREAS, Telephone Warehouse, Inc. (f/k/a HIG Cellular Acquisition
Corporation) , National Cellular, Incorporated (f/k/a HIG Cellular Acquisition
Corporation II), Texas Cellular Partners, L.P. and NationsCredit Commercial
Corporation, as Lender and Agent, are parties to a Credit Agreement dated as of
December 31, 1996 (the "Original Credit Agreement");
WHEREAS, in connection with (i) the proposed merger of Merger Sub 1,
Inc., a wholly-owned subsidiary of Let's Talk Cellular & Wireless, Inc., with
and into Telephone Warehouse, Inc. and (ii) the proposed merger of Merger Sub
2, Inc., a wholly-owned subsidiary of Let's Talk Cellular & Wireless, Inc.,
with and into National Cellular, Incorporated, the parties hereto desire to
amend the Original Credit Agreement to increase the commitments of
NationsCredit Commercial Corporation as Lender, to add Let's Talk Cellular &
Wireless, Inc. as a borrower thereunder, to modify certain financial covenants
and to make numerous other changes thereto, all as hereinafter set forth; and
WHEREAS, in order to set forth in one document, for the convenience
of the parties, the text of the Original Credit Agreement as amended by the
amendments to be made upon the effectiveness hereof, the Original Credit
Agreement will, upon satisfaction of the conditions set forth in Section 5.01
hereof, be amended and restated to read in full as set forth herein;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Certain Defined Terms. The following terms have the
following meanings:
<PAGE> 8
"Affiliate" means, with respect to any Person (the "Subject
Company") (i) any other Person that directly, or indirectly through one or more
intermediaries, controls the Subject Company (a "Controlling Person") or (ii)
any Person (other than the Subject Company or any of its Subsidiaries) which is
controlled by or is under common control with a Controlling Person. As used
herein, the term "control" of a Person means the possession, directly or
indirectly, of the power to vote 10% or more of any class of voting securities
of such Person or to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agent" means NationsCredit in its capacity as agent for the Lenders
hereunder, and its successors in such capacity.
"Applicable Premium Percentage" has the meaning set forth in Section
2.04(c).
"Asset Sale" means any sale, lease or other disposition (including
any such transaction effected by way of merger or consolidation) by Holdings,
any Company or any of their respective Subsidiaries of any asset, but excluding
(i) dispositions of inventory in the ordinary course of business, (ii)
dispositions of Temporary Cash Investments and cash payments otherwise
permitted under this Agreement and (iii) dispositions of equipment no longer
used or useful in the business of any Company to the extent the Net Cash
Proceeds from any such disposition are used to replace such equipment with the
same or similar equipment; provided that a disposition of assets not excluded
by clauses (i), (ii) or (iii) above during any Fiscal Year shall not constitute
an Asset Sale unless and until (and only to the extent that) the aggregate Net
Cash Proceeds from such disposition, when combined with all other such
dispositions previously made during such Fiscal Year, exceeds $100,000.
"Assumption Agreement" means the Assumption Agreement dated December
31, 1996 signed by National Cellular, Incorporated.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrowing Base" means, on any date, a dollar amount equal to the
sum of 85% of Eligible Receivables determined as of such date and 60% of
Eligible Inventory determined as of the last day of the month most recently
ended prior to the tenth day prior to such date.
2
<PAGE> 9
"Borrowing Base Certificate" means a certificate, duly executed by
the chief executive officer, chief financial officer, president, or treasurer
of LTC, appropriately completed and substantially in the form of Exhibit G.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in Chicago or New York City are authorized by law to
close.
"Capital Lease" of any Person means any lease of any property
(whether real, personal or mixed) by such Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of such Person.
"Casualty Insurance Policy" means any insurance policy maintained by
Holdings or any of its Subsidiaries covering losses with respect to tangible
real or personal property or improvements or losses from business interruption.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as
amended from time to time, and regulations promulgated thereunder.
"Class" refers, with respect to Loans, to whether such Loans are
Term Loans or Working Capital Loans and, with respect to Commitments, to
whether such Commitments are Term Commitments or Working Capital Commitments.
"Closing Date" means December 31, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" means all property mortgaged, pledged or otherwise
purported to be subjected to a Lien pursuant to the Security Documents.
"Commitment" means the Term Commitment or a Working Capital
Commitment, or any combination of the foregoing, as the context may require.
"Company" means National Cellular, TWI or LTC, as the context may
require, and "Companies" means National Cellular, TWI and LTC.
"Company Account" means, with respect to each Company, the account
specified on the signature page hereof into which all Loans to such Company
shall be made available, or such other account as such Company shall from time
to time specify by notice to the Lenders.
3
<PAGE> 10
"Company Security Agreement" means the Security Agreement dated as
of December 31, 1996, as amended and restated as of June 27, 1997, between the
Companies and the Agent, substantially in the form of Exhibit C.
"Consolidated Capital Expenditures" with respect to any Company
means, for any period, the aggregate amount of expenditures by such Company and
its Consolidated Subsidiaries for plant, property and equipment during such
period (including any such expenditure by way of acquisition of a Person or by
way of assumption of indebtedness or other obligations of a Person, to the
extent reflected as plant, property and equipment), but excluding any such
expenditures made for the replacement or restoration of assets to the extent
financed by condemnation awards or proceeds of insurance received with respect
to the loss or taking of or damage to the asset or assets being replaced or
restored.
"Consolidated Current Assets" means, at any date, the consolidated
current assets (excluding cash and cash equivalents) of LTC and its
Consolidated Subsidiaries determined as of such date.
"Consolidated Current Liabilities" means, at any date, (i) the
consolidated current liabilities (excluding Debt) of LTC and its Consolidated
Subsidiaries plus (ii) the current liabilities of any Person (other than LTC or
any of its Consolidated Subsidiaries) which are Guaranteed by LTC or any of its
Consolidated Subsidiaries, all determined as of such date.
"Consolidated Free Cash Flow" with respect to any Company means, for
any period, EBITDA of such Company for such period minus (a) all cash payments
of income taxes by such Company and its Consolidated Subsidiaries during such
period; (b) Consolidated Capital Expenditures of such Company for such period,
to the extent that such Consolidated Capital Expenditures are permitted by
Section 8.11 and are not financed during such period (and will not be financed
in any future period) with the proceeds of Debt of any Company permitted by
Section 8.01(c); and (c) any net gain by such Company or any of its
Consolidated Subsidiaries in respect of Asset Sales during such period; plus
(d) any expenditures made by such Company or any of its Consolidated
Subsidiaries during such period for the replacement or restoration of assets to
the extent financed by condemnation awards or proceeds of insurance received
with respect to the loss or taking of or damage to the asset or assets being
replaced or restored.
"Consolidated Subsidiary" means, with respect to any Person at any
date, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date.
4
<PAGE> 11
"Consulting Agreement" means the Amended and Restated Consulting
Agreement dated as of June 27, 1997 by and between LTC, TWI and H.I.G. Capital
Management, Inc.
"Debt" of a Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all Capital Leases of such Person, (v) all obligations
of such Person to purchase securities (or other property) which arise out of or
in connection with the sale of the same or substantially similar securities (or
property), (vi) all non-contingent obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (vii) all equity securities of such Person subject to
repurchase or redemption otherwise than at the sole option of such Person
(other than the Lender Interest), (viii) all Debt secured by a Lien on any
asset of such Person, whether or not such Debt is otherwise an obligation of
such Person, and (ix) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"EBITDA" with respect to any Company means, for any period, the
consolidated net income of such Company and its Consolidated Subsidiaries for
such period plus depreciation, interest, amortization and income and franchise
taxes, determined in accordance with GAAP eliminating (i) all intercompany
items, (ii) all earnings (or losses) attributable to equity interests in
Persons that are not Subsidiaries of such Company unless, in the case of
earnings, actually received by such Company or any of its Consolidated
Subsidiaries, (iii) all income (or loss) arising from the forgiveness,
adjustment, or negotiated settlement of any indebtedness, (iv) any
extraordinary items of income or expense, and (v) any increase or decrease in
income arising from any change in such Company's method of accounting, subject
to Section 1.02(a).
"Eligible Inventories" means, at any date of determination thereof,
the aggregate value (determined at the lower of cost or market on a basis
consistent with that used in the preparation of the financial statements
referred to in Section 6.04(a)) at such date of all Inventories owned by any
Company and located in any jurisdiction in the United States of America as to
which appropriate UCC financing statements have been filed naming such Company
as "debtor" and the Agent as "secured party", all net of any amounts payable by
such Company in respect of
5
<PAGE> 12
commissions, processing fees or other charges, excluding, however, without
duplication (i) any such Inventory which has been shipped to a customer, even
if on a consignment or "sale or return" basis and whether or not such Inventory
has been subsequently returned by such customer; (ii) any Inventory subject to
a Lien, including a landlord's or warehouseman's Lien (other than Liens created
pursuant to the Company Security Agreement), other than (x) Inventory subject
to a Lien in favor of any vendor to such Company but only to the extent that
the aggregate value of such Inventory (determined as set forth above) exceeds
110% of the aggregate amount of all obligations owed by such Company to such
vendor and (y) in the case of LTC, Inventory subject to a landlord's lien in
favor of any landlord of LTC; (iii) any item of Inventory against which such
Company has taken a reserve or that is aged more than 365 days; (iv) any
Inventory not subject to a valid and perfected first-priority Lien in favor of
the Agent under the Company Security Agreement subject to no prior or equal
Lien; (v) any Inventory not produced in compliance with the applicable
requirements of the Fair Labor Standards Act; and (vi) any supply, scrap or
obsolete Inventory (other than scrap metal or supplies that are used in the
manufacturing process that are readily marketable) and any Inventory that is
not reasonably marketable.
"Eligible Receivables" means, at any date of determination thereof,
the aggregate amount of all Receivables at such date due to any Company other
than the following (determined without duplication):
(a) (i) any Receivable due from a Foreign Account Debtor to the
extent that all Receivables due from Foreign Account Debtors exceed $100,000 at
any time, other than any Receivable that is backed by a letter of credit issued
by a bank organized under the laws of the United States of America or a State
thereof having combined capital and surplus in excess of $250,000,000 and
having outstanding senior unsecured long-term debt securities rated A or higher
by Standard & Poor's Corporation or A2 or higher by Moody's Investor Service,
Inc. (so long as such letter of credit has been delivered to the Agent as
additional collateral under the Security Documents), and (ii) any Receivable
that is not denominated and payable in U.S. dollars;
(b) any Receivable that does not comply with all applicable legal
requirements, including, without limitation, all laws, rules, regulations and
orders of any governmental or judicial authority;
(c) any Receivable in respect of which there is any unresolved
dispute with the account debtor, but only to the extent of such dispute;
(d) any Receivable payable by its terms more than 30 days, in the
case of any Receivable owing by any paging or other retail customer, and 60
days, in the
6
<PAGE> 13
case of any other Receivable, after the date of the issuance of the original
invoice therefor;
(e) any Receivable that remains unpaid for more than 45 days, in
the case of any Receivable owing by any paging or other retail customer, and 60
days, in the case of any other Receivable, from the original due date specified
at the time of the original issuance of the invoice therefor;
(f) any unbilled Receivable and any Receivable in respect of
goods not yet shipped;
(g) any Receivable arising outside the ordinary course of
business of such Company.
(h) any Receivable in respect of which there has been established
a contra account, or which is due from an account debtor to whom such Company,
as the case may be, owes a trade payable, but only to the extent of such
account or trade payable;
(i) any Receivable that is not subject to a first priority
perfected Lien under the Company Security Agreement and any Receivable
evidenced by an "instrument" (as defined in the UCC) not in the possession of
the Agent;
(j) any Receivable due from an account debtor (I) as to which on
such date Receivables representing more than 30% of the aggregate amount of all
Receivables of such account debtor have remained unpaid for more than 90 days
from the original due date specified at the time of the original issuance of
the invoice therefor, (II) in respect of which a credit loss has been
recognized or reserved by such Company, (III) in respect of which the Agent
shall have notified such Company that such account debtor does not have a
satisfactory credit standing as determined in good faith by the Agent, (IV)
that is a Subsidiary or Affiliate of such Company, (V) that is the United
States of America or any department, agency or instrumentality thereof, unless
such Company has complied in all respects with the Federal Assignment of Claims
Act of 1940, or (VI) that is the subject of a case or proceeding of the type
described in clauses (g) and (h) of Section 9.01;
(k) any Receivable due from an account debtor that such Company
has not instructed such account debtor in the invoice therefor to make payments
in respect of such Receivable to the applicable Lockbox Account (as defined in
the Company Security Agreement) or from any account debtor that makes payments
in a form that cannot be accepted in the applicable Lockbox Account; and
7
<PAGE> 14
(l) any Receivables due from an account debtor (other than Bell
South Mobility, Bell Atlantic/Nynex, L.A. Cellular, CellularOne, Airtouch
Cellular and AT&T Wireless Services) at any time, to the extent that the
aggregate outstanding amount of Receivables due from such account debtor and
its affiliates at such time exceeds 30% of the aggregate amount of all
Receivables due to such Company at such time, but only to the extent of such
excess.
"Employment Contracts" means the Employment Contract dated as of
December 31, 1996 between TWI and Ron Koonsman, amended and restated as of June
27, 1997, and the employment agreements delivered by Holdings to NationsCredit
on the LTC Closing Date pursuant to Section 5.01(o).
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Materials or wastes into the environment, including ambient air, surface water,
ground water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Materials or wastes or the clean-up or
other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any successor statute.
"ERISA Group" means Holdings, any Company, any Subsidiary of any
Company and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together
with Holdings, any Company or any Subsidiary of any Company are treated as a
single employer under Section 414 of the Code.
"Equity Agreement" means the Equity Agreement dated as of December
31, 1996 among Holdings, the Partners listed on the signature pages thereof and
NationsCredit.
"Event of Default" has the meaning set forth in Section 9.01.
"Excess Cash Flow" means, for any period, an amount equal to (i)
Consolidated Free Cash Flow of LTC for such period plus (or minus) (ii) any net
cash extraordinary gains (or extraordinary cash losses) for such period of LTC
and its Consolidated Subsidiaries (except any such gains or losses in respect
of Asset Sales) plus (or minus) (iii) to the extent reflected in Consolidated
Free Cash Flow
8
<PAGE> 15
of LTC for such period, any non-cash charges (or non-cash gains) for such
period of LTC and its Consolidated Subsidiaries plus (or minus) (iv) any
decrease (or increase) in average of the Net Working Investment at the end of
each fiscal month ended during such period, when compared with average of the
Net Working Investment at the end of each fiscal month ended during the
corresponding period in the prior Fiscal Year, minus (v) the sum for such
period of (A) Total Debt Service of LTC (exclusive of amortization of debt
discount or premium) for such period, (B) all optional payments of the Term
Notes during such period pursuant to Section 2.04(c) and (C) the aggregate
amount of Restricted Payments made during such period in accordance with
clauses (i), (ii), (iii) or (iv) of the proviso to Section 8.04(a).
"Financing Documents" means this Agreement, the Notes and the
Security Documents.
"Fiscal Year" means a fiscal year of each Company and Holdings.
"Foreign Account Debtor" means an account debtor that is not both
domiciled in the United States of America and (if not a natural person)
organized under the laws of the United States of America or any political
subdivision thereof.
"GAAP" has the meaning set forth in Section 1.02.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means each of the Companies and Holdings in their
capacity as a guarantor pursuant to Article 4.
"Hazardous Materials" means (i) any "hazardous substance" as defined
in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) petroleum, its
derivatives, by-products and other hydrocarbons; and (v) any other toxic,
9
<PAGE> 16
radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.
"Hazardous Materials Contamination" means contamination which is
subject to clean-up, remediation, removal, permitting or other regulation under
any Environmental Law (a) of the improvements, buildings, facilities,
personalty, soil, groundwater, air or other elements on or of the relevant
property by Hazardous Materials, or any derivatives thereof, or (b) on or of
any other property as a result of Hazardous Materials, or any derivatives
thereof, generated on, emanating from or disposed of in connection with the
relevant property.
"HIG" means HIG Fund V, Inc., a Cayman Islands corporation, and its
successors.
"HIG Investor" means HIG Texas Cellular Company, a Cayman Islands
corporation.
"HIG Pledge Agreement" means the HIG Pledge Agreement dated as of
the date hereof between HIG and the Agent, substantially in the form of Exhibit
E.
"Holdings" means Texas Cellular Partners, L.P., a Delaware limited
partnership, and its successors.
"Holdings Documents" has the meaning set forth in Section 8.16.
"Holdings Pledge Agreement" means the Holdings Pledge Agreement
dated as of December 31, 1996, as amended and restated as of June 27, 1997,
between Holdings and the Agent, substantially in the form of Exhibit D.
"Indemnitees" has the meaning set forth in Section 10.05.
"Insurance Accounts" has the meaning set forth in the Company
Security Agreement.
"Intercreditor Agreement" means the Intercreditor Agreement dated as
of December 31, 1996 by and between NationsCredit and the Seller.
"Inventory" means inventory (as defined in Article 9 of the UCC) to
the extent comprised of readily marketable materials of a type manufactured,
consumed or held for resale (including raw materials and work-in-process) by
any Company in the ordinary course of its business as presently conducted, or
as modified from time to time in a manner not prohibited by this Agreement.
10
<PAGE> 17
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"IPO" means the initial sale of shares of common stock of LTC by and
for the account of LTC and certain selling shareholders pursuant to an
underwritten public offering registered under the Securities Act.
"LC Collateral Account" has the meaning set forth in the Company
Security Agreement.
"LC Credit Event" has the meaning set forth in Section 3.09(a).
"LC Issuer" means NationsCredit in its capacity as issuer of Letters
of Credit pursuant to Section 3.09(a).
"Lender" means NationsCredit and each other Person that becomes a
holder of a Note pursuant to Section 12.06, and their respective successors,
and "Lenders" means all of the foregoing.
"Lender Interest" has the meaning set forth in Section 2.05.
"Lender Interest Warrants" has the meaning set forth in Section
2.05.
"Letter of Credit" means a letter of credit issued for the account
of any Company by the LC Issuer.
"Letter of Credit Liabilities" means, at any time and in respect of
any Letter of Credit, the sum, without duplication, of (i) the amount available
for drawing under such Letter of Credit (without regard to whether any
conditions to drawing thereunder can then be met) plus (ii) the aggregate
unpaid amount of all Reimbursement Obligations in respect of previous drawings
made under such Letter of Credit.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement and the
other Financing Documents, any Company or any of such Company's Subsidiaries
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
11
<PAGE> 18
"Loans" means the Term Loans and the Working Capital Loans, or any
combination of the foregoing, as the context may require.
"Lockbox Accounts" has the meaning set forth in the Company Security
Agreement.
"Lockbox Agreements" has the meaning set forth in the Company
Security Agreement.
"LTC" means Let's Talk Cellular & Wireless, Inc., a Florida
corporation, together with its successors.
"LTC Merger" means the transactions contemplated by the LTC Merger
Documents to be consummated on or before the LTC Closing Date.
"LTC Merger Documents" means the LTC Merger Agreement, including the
exhibits and schedules thereto, and all agreements, documents and instruments
executed and delivered pursuant thereto or in connection therewith, including
without limitation the LTC Shareholders' Agreement.
"LTC Closing Date" has the meaning set forth in Section 5.01.
"LTC Merger Agreement" means the Agreement and Plan of Merger by and
among LTC, Merger Sub 1, Merger Sub 2, TWI, NCI and Holdings, dated as of April
11, 1997.
"LTC Pledge Agreement" means the LTC Pledge Agreement dated as of
June 27, 1997 between LTC and the Agent, substantially in the form of Exhibit
F.
"LTC Shareholders' Agreement" means the Shareholders' Agreement
dated as of June 27, 1997 by and among LTC and the Current Shareholders and
Investors party thereto.
"LTC Term Loan" has the meaning set forth in Section 2.01.
"LTC Term Note" has the meaning set forth in Section 2.02.
"LTC Working Capital Loan" means any Working Capital Loan of LTC
made pursuant to Section 3.01.
"LTC Working Capital Note" means any Working Capital Note of LTC
issued pursuant to Section 3.02.
12
<PAGE> 19
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received in connection with one or more related events by LTC or any of its
Subsidiaries under any Casualty Insurance Policy or (ii) any award or other
compensation with respect to any condemnation of property (or any transfer or
disposition of property in lieu of condemnation) received by LTC or any of its
Subsidiaries, if the amount of such aggregate insurance proceeds or award or
other compensation exceeds $250,000.
"Margin Stock" has the meaning assigned thereto in Regulation G, U
or X of the Federal Reserve Board, as the same may be amended, supplemented or
modified from time to time.
"Material Debt" means Debt (other than the Notes) of LTC and/or one
or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal or face amount not exceeding $100,000.
"Material Plan" means at any time a Plan having Unfunded
Liabilities.
"Merger Sub 1" means Merger Sub 1, Inc., a Delaware corporation.
"Merger Sub 1 Merger" means the merger of Merger Sub 1 with and into
Telephone Warehouse, Inc. (with Telephone Warehouse, Inc., as the surviving
corporation) pursuant to the LTC Merger Agreement on the LTC Closing Date.
"Merger Sub 2" means Merger Sub 2, Inc., a Texas corporation.
"Merger Sub 2 Merger" means the merger of Merger Sub 2 with and into
National Cellular, Incorporated (with National Cellular, Incorporated, as the
surviving corporation) pursuant to the LTC Merger Agreement on the LTC Closing
Date.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"National Cellular" means National Cellular, Incorporated, a Texas
corporation and the surviving corporation in the Merger Sub 2 Merger, together
with its successors.
13
<PAGE> 20
"National Cellular Merger Agreement" means the Merger Agreement
dated as of December 31, 1996 between HIG Cellular Acquisition Corporation II
and National Cellular.
"National Cellular Term Loan" has the meaning set forth in Section
2.01.
"National Cellular Term Note" has the meaning set forth in Section
2.02.
"National Cellular Working Capital Loan" means any Working Capital
Loan of National Cellular made pursuant to Section 3.01.
"National Cellular Working Capital Note" means any Working Capital
Note of National Cellular issued pursuant to Section 3.02.
"NationsCredit" means NationsCredit Commercial Corporation, a
Delaware corporation, and its successors and assigns.
"Net Cash Proceeds" means, with respect to any transaction, an
amount equal to the cash proceeds received by Holdings, any Company or any of
their respective Subsidiaries from or in respect of such transaction (including
any cash proceeds received as income or other proceeds of any non-cash proceeds
of such transaction), less (x) any expenses (including commissions) reasonably
incurred by such Person in respect of such transaction and (y) in the case of
an Asset Sale, the amount of any Debt secured by a Lien on the related asset
and discharged from the proceeds of such Asset Sale and any taxes paid or
payable by such Person (as estimated by the chief financial officer of
Holdings) in respect of such Asset Sale.
"Net Working Investment" means, at any date, Consolidated Current
Assets minus Consolidated Current Liabilities, all determined at such date.
"New Lease" means, for any Fiscal Year, any operating lease entered
into by any Company or any of such Company's Subsidiaries during such Fiscal
Year, and includes (i) any renewal, renegotiation or material change in any
operating lease existing prior to the first day of such Fiscal Year and (ii)
any operating lease existing prior to the first day of such Fiscal Year that
provides for liability for rental payments in such Fiscal Year in excess of the
liability for rental payments under such lease for the immediately preceding
Fiscal Year.
"Notes" means the Term Notes and the Working Capital Notes, or any
combination of the foregoing, as the context may require.
"Notice of Borrowing" has the meaning set forth in Section 3.04.
14
<PAGE> 21
"Notice of LC Credit Event" has the meaning set forth in Section
3.09(d).
"Officers' Certificate" means a certificate executed on behalf of a
Person by its chairman of the board (if an officer), chief executive officer or
president or one of its vice presidents and by its chief financial officer or
treasurer.
"Operative Documents" means the Financing Documents, the Original
Acquisition Documents, the LTC Merger Documents, the Assumption Agreement, the
Partnership Agreement, the Employment Contracts, the Consulting Agreement, the
Subscription Agreements, the Equity Agreement, the Lender Interest Warrants,
the Warrantholders Rights Agreement, the Seller Note, the Seller Pledge
Agreement, the InterCreditor Agreement, the Subordination Agreements and the
Seller Subsidiary Guaranties.
"Original Acquisition" means the transactions contemplated by the
Original Acquisition Documents consummated on or before the Closing Date.
"Original Acquisition Documents" means the Purchase Agreement,
including the exhibits and schedules thereto, and the Original Merger
Agreements, and all agreements, documents and instruments executed and
delivered pursuant thereto or in connection therewith.
"Partnership Agreement" means the Agreement of Limited Partnership
dated as of December 16, 1996 under which Holdings is organized.
"Original Credit Agreement" has the meaning set forth in the first
recital to this Agreement.
"Original Merger Agreements" means the National Cellular Merger
Agreement and the TWI Merger Agreement.
"Partnership Interests" means partnership interests of Holdings.
"Payment Account" means, with respect to each Lender, the account
specified on the signature pages hereof into which all payments by or on behalf
of any Company to such Lender under the Financing Documents shall be made, or
such other account as such Lender shall from time to time specify by notice to
such Company.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
15
<PAGE> 22
"Permitted Contest" means a contest maintained in good faith by
appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made; provided that
compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge.
"Permitted Liens" means Liens permitted pursuant to Section 8.02.
"Person" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust or other organization,
whether or not a legal entity, and any government agency or political
subdivision thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees
of any member of the ERISA Group or (ii) has at any time within the preceding
five years been maintained, or contributed to, by any Person which was at such
time a member of the ERISA Group for employees of any Person which was at such
time a member of the ERISA Group.
"Purchase Agreement" means the Amended and Restated Stock Purchase
Agreement dated as of December 6, 1996 among HIG Cellular Acquisition
Corporation I, HIG Cellular Acquisition Corporation II and the Seller.
"Quarterly Date" means the first Business Day of each February, May,
August and November occurring after the Closing Date.
"Real Property" means the premises known as 419 W. Airport Freeway,
Irving, Texas, all as more fully described in Exhibit A to the TWI Mortgage.
"Receivable" means, with respect to any Company as at any date of
determination thereof, the unpaid portion of the obligation, as stated in the
respective invoice, of a customer such Company in respect of Inventory sold or
services rendered in the ordinary course of business, which amount has been
earned by performance under the terms of the related contract and recognized as
revenue on the books of such Company net of any credits, rebates or offsets
owed to the customer and also net of any commissions payable to Persons other
than employees of such Company or its respective Subsidiaries.
16
<PAGE> 23
"Reimbursement Obligations" means, at any date, the obligations of
the Companies then outstanding to reimburse the LC Issuer and/or the Lenders
for payments made by the LC Issuer under a Letter of Credit and/or the Lenders
under Section 3.09(a) or Section 3.09(b).
"Reimbursement Refunding Borrowing" means a Working Capital
Borrowing made solely for the purpose of repaying Reimbursement Obligations
coming due not later than the date of such borrowing, and in an aggregate
amount equal to the aggregate amount of such Reimbursement Obligations.
"Required Lenders" means at any time Lenders holding Notes
evidencing at least 51% of the aggregate unpaid principal amount of the Loans
or, if no Loans are outstanding, having at least 51% of the aggregate amount of
the Commitments.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of any Company's capital stock (except dividends payable solely in
shares of its capital stock of the same class) or (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (a) any shares of any
Company's capital stock or (b) any option, warrant or other right to acquire
shares of any Company's capital stock.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Security Documents" means the Company Security Agreement, the
Holdings Pledge Agreement, the HIG Pledge Agreement, the LTC Pledge Agreement,
the TWI Mortgage and any other agreement pursuant to which Holdings, any
Company or any of their respective Subsidiaries or Affiliates provides a Lien
on its assets in favor of the Agent for the benefit of the Lenders, and all
supplementary assignments, security agreements, pledge agreements,
acknowledgments or other documents delivered or to be delivered pursuant to the
terms hereof or of any other Security Document.
"Seller" means Mr. Ron Koonsman.
"Seller Note" means the Subordinated Note in the principal amount of
$3,585,000 issued by Holdings to the Seller on December 31, 1996 and amended
and restated on June 27, 1997.
"Seller Pledge Agreement" means the Stock Pledge Agreement dated
December 31, 1996 between Holdings and the Seller.
17
<PAGE> 24
"Seller Subsidiary Guaranties" means each of the Subsidiary Guaranty
Agreements dated December 31, 1996 by each of National Cellular and TWI in
favor of the Seller.
"Subordination Agreements" means each of the Subordination
Agreements dated as of December 31, 1996 between the Seller, NationsCredit and
each of Holdings, TWI and National Cellular.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Ratings Service and P-1 by Moody's
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of any bank or trust
company which is organized under the laws of the United States or any State
thereof and has capital, surplus and undivided profits aggregating at least
$500,000,000 and which issues (or the parent of which issues) certificates of
deposit or commercial paper with a rating described in clause (ii) above, or
(iv) repurchase agreements with respect to securities described in clause (i)
above entered into with an office of a bank or trust company meeting the
criteria specified in clause (iii) above, provided in each case that such
Investment matures within one year from the date of acquisition thereof by any
Company or any of such Company's Subsidiaries.
"Total Debt Service" with respect to any Company means, for any
period, the sum of (i) the aggregate interest charges incurred by such Company
and its Consolidated Subsidiaries for such period, whether expensed or
capitalized, including the portion of any obligation under Capital Leases
allocable to interest expense in accordance with GAAP and the portion of any
debt discount or premium (but not expenses of issuance) that shall be amortized
in such period and (ii) the aggregate amount during such period of mandatory
principal payments payable by such Company pursuant to Section 2.04(a) and all
other scheduled principal payments on all other Debt payable by such Company or
any of its Consolidated Subsidiaries, including the portion of any payments
under Capital Leases that is allocable to principal.
"Term Commitment" means, for NationsCredit as Lender, an amount
equal to $2,000,000.
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<PAGE> 25
"Term Loan" has the meaning set forth in Section 2.01.
"Term Notes" has the meaning set forth in Section 2.02.
"TWI" means Telephone Warehouse, Inc., a Delaware corporation and
the surviving corporation of the Merger Sub 1 Merger, together with its
successors.
"TWI Merger Agreement" means the Merger Agreement dated as of
December 31, 1996 among HIG Cellular Acquisition Corporation, Telephone
Warehouse - San Antonio, Inc., Telephone Warehouse - KC, Inc. and Telephone
Warehouse Inc.
"TWI Mortgage" means the Mortgage, Assignment, Assignment of Leases
and Rents, Security Agreement and Fixture Filing dated as of December 31, 1996
between TWI and the Agent.
"TWI Term Loan" has the meaning set forth in Section 2.01.
"TWI Term Note" has the meaning set forth in Section 2.02.
"TWI Working Capital Loan" means any Working Capital Loan of TWI
made pursuant to Section 3.01.
"TWI Working Capital Note" means any Working Capital Note of TWI
issued pursuant to Section 3.02.
"UCC" has the meaning set forth in the Security Agreement.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"Warrantholders Rights Agreement" means the Warrantholders Rights
Agreement dated as of June 27, 1997 among LTC, HIG and NationsCredit,
substantially in the form of Exhibit K hereto.
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<PAGE> 26
"Working Capital Borrowing" means the aggregation of Working Capital
Loans of the Lenders to be made to any Company pursuant to Section 3.01 on a
single date.
"Working Capital Commitment" means, (i) for NationsCredit as Lender,
initially $9,000,000, less any amount assigned to another Person that becomes a
Lender after the date hereof (a "Subsequent Lender") and (ii) for any
Subsequent Lender, the amount of Working Capital Commitment assigned to such
Lender.
"Working Capital Loans" has the meaning set forth in Section 3.01.
"Working Capital Note" has the meaning set forth in Section 3.02.
"Working Capital Outstandings" means at any time, as to any Lender,
the sum of the aggregate outstanding principal amount of such Lender's Working
Capital Loans and its pro rata share of the aggregate outstanding Letter of
Credit Liabilities.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time ("GAAP"), applied, with respect to any of any Company or Holdings, on a
basis consistent (except for changes concurred in by such Company's and
Holdings' independent public accountants) with the most recent audited
consolidated and consolidating financial statements of LTC and its Consolidated
Subsidiaries delivered to the Lenders; provided that, if LTC notifies the
Lenders that LTC wishes to amend any covenant in Article 8 or the definition of
"Excess Cash Flow" or any related definition to eliminate the effect of any
change in GAAP on the operation of such covenant or the determination of
"Excess Cash Flow" (or if the Agent notifies LTC that the Required Lenders wish
to amend Article 8 or the definition of "Excess Cash Flow" or any related
definition for such purpose), then LTC's compliance with such covenant or
"Excess Cash Flow", as the case may be, shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to Holdings and the Required Lenders.
SECTION 1.03. Other Definitional Provisions. References in this
Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to
Articles, Sections, Schedules or Exhibits of or to this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.01 may,
unless the
20
<PAGE> 27
context otherwise requires, be used in the singular or plural depending on the
reference. "Include", "includes" and "including" shall be deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import. "Writing", "written" and comparable terms
refer to printing, typing and other means of reproducing words in a visible
form. References to any agreement or contract are to such agreement or
contract as amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof. References to any Person include the
successors and assigns of such Person. References "from" or "through" any date
mean, unless otherwise specified, "from and including" or "through and
including", respectively.
ARTICLE 2
TERM LOANS
SECTION 2.01. Term Loans. (a) On the Closing Date, NationsCredit
made one senior floating rate loan in the amount of $5,600,000 to NCI (such
loan, or any portion thereof assigned to any other Lender in accordance with
Section 12.06, a "National Cellular Term Loan") and one senior floating rate
loan in the amount of $5,600,000 to TWI pursuant to this Agreement (such loan,
or any portion thereof assigned to any other Lender in accordance with Section
12.06, a "TWI Term Loan"). As of the LTC Closing Date, $5,537,500 in principal
amount of the NCI Term Loan and $5,537,500 in principal amount of the TWI Term
Loan remain outstanding.
(b) Upon the terms and subject to the conditions set forth
herein, NationsCredit agrees to make an additional senior floating rate loan to
LTC on the LTC Closing Date pursuant to this Section 2.01(b) in a principal
amount equal to its Term Commitment (such loan, or any portion thereof assigned
to any other Lender in accordance with Section 12.06, a "LTC Term Loan", and,
together with the National Cellular Term Loans and the TWI Term Loans, the
"Term Loans"). Term Loans are not revolving in nature and amounts of such
Loans repaid or prepaid may not be reborrowed. The Term Commitment shall
terminate at the close of business on the LTC Closing Date.
SECTION 2.02. Term Notes. Each National Cellular Term Loan
shall be evidenced by a Term Note of National Cellular substantially in the
form of Exhibit A-1 (each such note, a "National Cellular Note"), dated the
Closing Date in a principal amount equal to the initial principal amount of
such National Cellular Term Loan, duly executed and delivered by National
Cellular and payable to the Lender of such Term Loan. Each TWI Term Loan shall
be evidenced by a Term Note of TWI substantially in the form of Exhibit A-2
(each such note, a "TWI
21
<PAGE> 28
Term Note"), dated the Closing Date in a principal amount equal to the initial
principal amount of such TWI Term Loan, duly executed and delivered by TWI and
payable to the Lender of such TWI Term Loan. Each LTC Term Loan shall be
evidenced by a Term Note of LTC substantially in the form of Exhibit A-3 (each
such note, a "LTC Term Note" and, together with National Cellular Term Notes
and TWI Term Notes, "Term Notes"), dated the LTC Closing Date in a principal
amount equal to the initial principal amount of such LTC Term Loan, duly
executed and delivered by LTC and payable to the Lender of such LTC Term Loan.
SECTION 2.03. Interest on the Term Loans. Interest on each
Term Loan shall accrue from the date on which such Term Loan was made on the
outstanding principal amount thereof at the rate set forth in the Term Note in
respect thereof, and shall be payable monthly in arrears as set forth therein.
SECTION 2.04. Repayments and Prepayments of Term Notes. (a)
Mandatory Scheduled Repayments. There shall become due and payable and each
Company shall repay an aggregate principal amount of the Term Notes issued by
such Company on each Quarterly Date, commencing with the Quarterly Date
occurring on August 1, 1997, equal to the applicable installment amount set
forth below (or, if less, the aggregate outstanding principal amount of the
Applicable Term Notes), in each case together with accrued and unpaid interest
on the principal amount being repaid to and but excluding the date of payment:
<TABLE>
<CAPTION>
AMORTIZATION SCHEDULE
---------------------
PRINCIPAL AMOUNT OF TERM PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF
NOTES OF OF TERM NOTES OF TERM NOTES OF
INSTALLMENT NATIONAL CELLULAR TWI LTC
----------- ----------------- --- ---
<S> <C> <C> <C>
No. 1 $ 62,500 $ 62,500 25,000
No. 2 62,500 62,500 25,000
No. 3 62,500 62,500 25,000
No. 4 125,000 125,000 25,000
No. 5 125,000 125,000 25,000
No. 6 125,000 125,000 25,000
No. 7 125,000 125,000 25,000
No. 8 187,500 187,500 25,000
No. 9 187,500 187,500 25,000
No. 10 187,500 187,500 25,000
No. 11 187,500 187,500 25,000
No. 12 275,000 275,000 25,000
No. 13 275,000 275,000 100,000
</TABLE>
22
<PAGE> 29
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF TERM PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF
NOTES OF OF TERM NOTES OF TERM NOTES OF
INSTALLMENT NATIONAL CELLULAR TWI LTC
----------- ----------------- --- ---
<S> <C> <C> <C>
No. 14 275,000 275,000 100,000
No. 15 275,000 275,000 100,000
No. 16 62,500 62,500 100,000
No. 17 62,500 62,500 100,000
No. 18 62,500 62,500 100,000
No. 19 62,500 62,500 100,000
No. 20 312,500 312,500 100,000
No. 21 312,500 312,500 100,000
No. 22 312,500 312,500 100,000
No. 23 312,500 312,500 100,000
No. 24 375,000 375,000 100,000
No. 25 375,000 375,000 125,000
No. 26 375,000 375,000 125,000
No. 27 375,000 375,000 125,000
No. 28 -0- -0- 125,000
</TABLE>
(b) Mandatory Incremental Prepayments. (i) There shall become due
and payable, and the Companies shall prepay, an aggregate principal amount of
the Term Notes (or, if less, the aggregate outstanding principal amount of the
Term Notes) in the following amounts at the following times, together with, in
the case of any prepayment of the remaining Term Notes in whole, accrued and
unpaid interest on the principal amount being prepaid to but excluding the date
of such payment:
(A) on the earlier of (x) the date on which the
financial statements required by Section 7.01(b) are delivered to
the Agent and (y) the 120th day following the last day of each
Fiscal Year, beginning with the Fiscal Year ending July 31, 1998,
an amount equal to 50% of the Excess Cash Flow for such Fiscal
Year; and
(B) promptly upon receipt by Holdings or LTC of the
proceeds from the issuance and sale of limited partnership
interests or other equity securities, as the case may be, in a
public offering after the LTC Closing Date, an amount equal to
100% of the Net Cash Proceeds of such issuance and sale.
23
<PAGE> 30
(ii) There shall become due and payable, and each Company shall
prepay, an aggregate principal amount of the Term Notes of such Company
(or, if less, the aggregate outstanding principal amount of such Term
Notes) in the following amounts at the following times, together with, in
the case of any payment of the remaining such Term Notes in whole,
accrued and unpaid interest on the principal amount being prepaid to but
excluding the date of such payment:
(A) on the date on which such Company or any of its
Subsidiaries receives any payment which constitutes Major Casualty
Proceeds, an amount equal to the amount of such payment, unless
the Required Lenders shall otherwise direct (in which case the
amount of such payment shall be deposited into the applicable
Insurance Account to be held and applied in accordance with
Section 5 of the Company Security Agreement); and
(B) promptly upon receipt by such Company or any of
its Subsidiaries of the proceeds of any Asset Sale by such Company
(or promptly upon receipt by Holdings or LTC of the proceeds of
any Asset Sale consisting of equity securities or other interests
in such Company) after the LTC Closing Date, other than a sale
pursuant to and in accordance with Section 8.06(c), an amount
equal to 100% of the Net Cash Proceeds of such Asset Sale.
(c) Optional Prepayments. (i) Each Company may prepay the Term
Notes of such Company in whole or in part (in principal amounts of $125,000 or
in any integral multiple of $50,000 in excess thereof) upon at least 10 days'
prior irrevocable written notice to the Lenders (and such amounts specified in
such notice shall become due and payable on the date so specified), by paying
an amount equal to the Applicable Premium Percentage on the date of payment of
the aggregate principal amount being prepaid together with, in the case of any
prepayment of the remaining Term Notes in whole, accrued and unpaid interest on
the principal amount being prepaid to but excluding the date of payment.
"Applicable Premium Percentage" means (i) in the case of any
prepayment made with proceeds of Debt of Holdings or any of its Subsidiaries,
(1) in the case of any prepayment with respect to National Cellular Term Loans
or TWI Term Loans, (x) for any date from December 31, 1996 to but excluding
December 31, 1999, the excess of (A) 101.25% over (B) the product of .0347%
multiplied by the number of times the first day of a month has occurred
subsequent to December 31, 1996 and (y) for any date from and after December
31, 1999, 100%, and (2) in the case of any prepayment with respect to LTC Term
Loans, (x) for any date from June 27, 1997 to but excluding June 27, 2000, the
excess of (A) 101.25% over (B)
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the product of .0347% multiplied by the number of times the first day of a
month has occurred subsequent to June 27, 1997 and (y) for any date from and
after June 27, 2000, 100%, and (ii) in any other case, 100%.
(ii) Notwithstanding the foregoing, no Company may
prepay its Term Notes in whole pursuant to this subsection (c)
with the proceeds of other Debt unless simultaneously with such
prepayment (x) (A) the Companies prepay any outstanding balance
of the Term Notes, together with accrued interest thereon, in
accordance with this subsection (c) and (B) the Companies prepay
all Working Capital Loans, cash collateralize all outstanding
Letter of Credit Liabilities in accordance with Section 3.09(f)
(or provide for the replacement or cancellation thereof on terms
acceptable to each Lender) and terminate the Working Capital
Commitments and (y) Holdings redeems in cash, as provided in
Section 5.3 of the Equity Agreement, the portion of Lender
Interest which any Lender holding such portion of Lender
Interest requests Holdings in writing to redeem.
(d) Application of Payments. Each repayment or prepayment of less
than all the outstanding aggregate principal amount of the Term Notes shall be
applied pro rata to all the Term Notes according to their respective
outstanding principal amounts. Each repayment or prepayment of less than all
the outstanding aggregate principal amount of the Term Notes of any Company
pursuant to Section 2.04(a), 2.04(b)(ii) or 2.04(c) shall be applied pro rata
to their respective outstanding principal amounts. The principal amount of
each payment pursuant to Section 2.04(b) or (c) shall be applied to reduce the
remaining payments required by Section 2.04(a) in pro rata order of the
maturity thereof. No payment pursuant to Section 2.04(a) or (c) shall (except
as reflected in any determination of Excess Cash Flow) reduce the amount of any
payment required by Section 2.04(b).
Section 2.5. Lender Interest. On the Closing Date, NationsCredit
acquired from Holdings, in consideration for making the initial Term Loans,
Partnership Interests (as defined in the Partnership Agreement) equivalent to
5% of the Partnership Interests on a fully diluted basis (taking into account
all of the Partnership Interests of Holdings issued and outstanding as of the
Closing Date (the "Lender Interest"). Holdings and NationsCredit agree that,
for Federal income tax purposes, (i) the initial Term Loans and the Lender
Interest constitute an investment unit and (ii) the aggregate issue price of
the initial Term Loans drawn on the Closing Date is $11,100,000 and the
aggregate purchase price for the Lender Interest on the Closing Date is
$100,000. On the LTC Closing Date, LTC issued to NationsCredit, as an
adjustment to the Lender Interest in connection with the LTC Merger, Warrants
initially exercisable for shares of
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common stock of LTC initially equivalent to 1.72% of the common stock of LTC on
a fully diluted basis (taking into account all of the common stock of LTC
issued and outstanding as of the LTC Closing Date (the "Lender Interest
Warrants"). None of the Companies, Holdings nor any Lender shall voluntarily
take any action inconsistent with the agreement set forth in the immediately
preceding sentence.
ARTICLE 3
WORKING CAPITAL LOANS
SECTION 3.01. Working Capital Loans and Commitments. Upon the
terms and subject to the conditions set forth herein, each Lender severally and
not jointly agrees to make working capital loans ("Working Capital Loans") from
time to time to any Company in an aggregate principal amount at any time
outstanding such that, after giving effect to the application of the proceeds
of any Working Capital Loan made by it on any date, the Working Capital
Outstandings as to such Lender do not exceed such Lender's LTC Working Capital
Commitment. Each Working Capital Borrowing (other than any Reimbursement
Refunding Borrowing) shall be in an aggregate amount of $100,000 or an integral
multiple of $10,000 in excess thereof. No more than three Working Capital
Borrowings (other than any Reimbursement Refunding Borrowing) shall be made
within any week beginning on Monday of such week and ending on the last
Business Day of such week. Within the foregoing limits, each Company may
borrow under this Section 3.01, prepay or repay Working Capital Loans as
required under Section 3.05(b) or to the extent permitted by Section 3.06, and
reborrow pursuant to this Section 3.01.
SECTION 3.02. Working Capital Notes. The Working Capital Loans of
each Lender to each Company shall be evidenced by a single Working Capital
Note, substantially in the form of Exhibit B (each such note, a "Working
Capital Note"), dated the Closing Date or LTC Closing Date, as the case may be,
in an aggregate principal amount equal to (a) in the case of any National
Cellular Working Capital Note or TWI Working Capital Note, the amount of such
Lender's National Cellular's/TWI Working Capital Commitment, and (b) in the
case of any LTC Working Capital Note, the amount of such Lender's LTC Working
Capital Commitment, in each case duly executed and delivered and payable to
such Lender. Each Lender shall record the date and amount of each Working
Capital Loan made by it to such Company and the date and amount of each payment
of principal made by such Company with respect thereto, and prior to any
transfer of its Working Capital Notes shall endorse on Schedule A thereto (or
any continuation thereof) forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Working Capital
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Loan then outstanding; provided that the failure of any Lender to make any such
recordation or endorsement shall not affect the obligations of each Company
hereunder or under the Working Capital Notes. Each Lender is hereby
irrevocably authorized by each Company so to endorse its Working Capital Note
of such Company and to attach to and make a part of its Working Capital Note of
such Company a continuation of any such schedule as and when required.
SECTION 3.03. Interest on Working Capital Loans. Interest on the
Working Capital Loans shall accrue on the aggregate outstanding principal
amount thereof at the rate set forth in the Working Capital Note with respect
thereto, and shall be payable monthly in arrears as set forth therein.
SECTION 3.04. Advancing Working Capital Loans. (a) Each Company
borrowing pursuant to this Article 3 shall give each Lender and NationsCredit
notice (a "Notice of Borrowing") not later than Noon (New York City time) on
the Business Day immediately preceding each Working Capital Borrowing, signed
by the chief financial officer or treasurer of such Company, specifying the
date (which shall be a Business Day) and aggregate principal amount of such
Working Capital Borrowing, and certifying as to the satisfaction of the
conditions set forth in clauses (b), (c) and (d) of Section 5.02.
(b) Not later than 1:00 P.M. (New York City time) on the date of
each borrowing specified in a Notice of Borrowing, each Lender shall make
available its ratable share of such Working Capital Borrowing, in Federal or
other immediately available funds, to the applicable Company Account.
SECTION 3.05. Mandatory Repayments and Prepayments. (a) The
Working Capital Commitment of each Lender shall terminate at the opening of
business on the earlier of (i) May 1, 2004 and (ii) the date on which the Term
Notes shall have been paid in full (the "Termination Date"), and there shall
become due and each Company shall pay on the Termination Date, the entire
outstanding principal amount of each Working Capital Loan made to such Company,
together with accrued and unpaid interest thereon to but excluding the
Termination Date.
(b) If at any time the aggregate Working Capital Outstandings exceed
the lesser of the Borrowing Base and the aggregate Working Capital Commitments
of the Lenders, then, on the next succeeding Business Day, the Companies shall
apply an amount equal to such excess to repay the Working Capital Loans or cash
collateralize Letter of Credit Liabilities, or both, as and to the extent
required by Section 3.07(b), and to the extent the Companies fail to make any
such payment, the Companies shall provide for the replacement or cancellation
of any outstanding Letters of Credit until the aggregate Working Capital
Outstandings do not exceed
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the lesser of the Borrowing Base and the aggregate Working Capital Commitments
of the Lenders.
SECTION 3.06. Optional Prepayments. Each Company may prepay the
Working Capital Loans made to such Company in whole or in part (except with
respect to any Reimbursement Refunding, in minimum principal amounts of
$100,000 or in any larger integral multiple of $50,000) upon at least one
Business Day's prior irrevocable written notice to the Lenders, in an amount
equal to 100% of the principal amount being prepaid. The aggregate principal
amount of the Working Capital Loans designated for prepayment in any notice of
optional prepayment given pursuant to this subsection shall become due and
payable on the date fixed for prepayment as specified above.
SECTION 3.07. Application of Payments (a) Each payment or
prepayment of less than all the outstanding aggregate principal amount of the
Working Capital Loans made to any Company shall be applied pro rata to all the
Working Capital Loans made to such Company according to their respective
outstanding principal amounts.
(b) Amounts to be applied pursuant to Section 3.05(b) shall be
applied first to ratably repay the principal amount of the Working Capital
Loans then outstanding until all such Working Capital Loans shall have been
repaid in full, and if any excess then remains such excess shall be deposited
in the LC Collateral Account to be held, applied or released for application as
provided in Section 5(F) of the Company Security Agreement.
SECTION 3.08. Obligation to Make Working Capital Loans. If any
Lender shall fail to perform its obligation to make a Working Capital loan
hereunder, the amount of the Working Capital Commitments of such Lender shall,
at the time of any such failure, be immediately assumed by NationsCredit so
that the aggregate amount of the Working Capital Commitments to make any
Working Capital Loans provided for herein shall not be reduced. No such
assumption shall relieve any Lender from its Working Capital Commitments, and
each such defaulting Lender agrees to repay on demand NationsCredit any Working
Capital Loans made by NationsCredit in respect of such assumed Working Capital
Commitments, together with interest thereon from the date of such Loan to but
excluding the date of repayment at the rate applicable to such Working Capital
Loans plus 1%.
SECTION 3.09. Letters of Credit. (a) Issuance and Increase of
Letters of Credit; Lender Reimbursement Agreement. (i) Subject to the terms
and conditions hereof and such additional terms and conditions as the LC Issuer
shall from time to time require, each Company may from time to time request
that the
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LC Issuer issue Letters of Credit for the account of such Company or increase
the stated amount of any existing Letter of Credit (each event, an "LC Credit
Event").
(ii) Upon receipt from the beneficiary of any
Letter of Credit of any notice of a drawing under such Letter of
Credit, the LC Issuer shall notify the Agent and the Agent shall
promptly notify the Company for whose account such Letter of
Credit was issued and each other Lender as to the amount to be
paid as a result of such demand or drawing and the payment date.
Each Company shall be irrevocably and unconditionally obligated
forthwith to reimburse the LC Issuer for any amounts paid by the
LC Issuer upon any drawing under any Letter of Credit issued for
the account of such Company, without presentment, demand,
protest or other formalities of any kind. All such amounts paid
by the LC Issuer and remaining unpaid by such Company shall bear
interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate applicable to
Working Capital Loans for such day. In addition, each Lender
agrees for the benefit of the LC Issuer that in the event that
any Company fails to reimburse the LC Issuer for any drawing
under any Letter of Credit issued for the account of such
Company for the full amount of such drawing on the date of such
drawing, each Lender shall be obligated to pay to the LC Issuer,
for value on the second Business Day following such date to the
relevant account notified by the LC Issuer to the Lenders in the
notice referred to in the following sentence, an amount equal to
its pro rata share (determined by reference to the Working
Capital Commitments of each of the Lenders) of such unreimbursed
amount (after giving effect to any reimbursement thereof
theretofore paid by such Company to the LC Issuer in respect of
such drawing). The LC Issuer shall notify each Lender of any
such unreimbursed amount (together with the account to which
such Lender's share in respect thereof is to be paid) not later
than 11:00 A.M. (New York City time) on the Business Day
immediately preceding the date that payment by such Lender is
due.
(iii) In consideration of the foregoing, the
parties hereto agree (and the LC Issuer by accepting the
benefits conferred on it hereby shall be deemed to have agreed)
that upon each LC Credit Event, the LC Issuer shall be deemed,
without further action on the part of the LC Issuer or of any
party hereto, to have sold to each Lender and each Lender shall
be deemed, without further action by the LC Issuer or any party
hereto, to have purchased from the LC Issuer, a participation
(or an increased participation, in the case of any LC Credit
Event that is an increase in the stated amount of an existing
Letter of Credit) in such Letter of Credit and the related
Letter of Credit Liabilities, in the amount required so that the
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participations of the Lenders therein shall be in proportion to
their respective Working Capital Commitments.
(iv) The several obligations of the Lenders to the LC
Issuer under this Section 3.09(a) shall be absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall not
be affected by any circumstance, including, without limitation, (1) any
set-off, counterclaim, recoupment, defense or other right which any
such Lender or any other Person may have against the LC Issuer or any
other Person for any reason whatsoever; (2) the occurrence or
continuance of a Default or an Event of Default or the termination of
the Working Capital Commitments; (3) any adverse change in the
condition (financial or otherwise) of any Company or any other Person;
(4) any breach of any Financing Document by any party thereto; (5) the
fact that any condition precedent to the issuance of, or the making of
any payment under, any Letter of Credit was not in fact met; (6) any
violation or asserted violation of law by any Lender or any affiliate
thereof; or (7) to the extent permitted under applicable law, any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing. Each payment by each Lender to the LC Issuer for
its own account shall be made without any offset, abatement,
withholding or reduction whatsoever.
(v) Each Lender acknowledges and agrees that the
LC Issuer will rely upon the provisions of this Section 3.09(a) in
issuing or increasing the stated amount of Letters of Credit for the
account of any Company; provided that the LC Issuer shall not be
entitled to rely on the provisions of this Section 3.09 with respect to
any Letter of Credit issued or increased by it after a Stop-Issuance
Notice has been received by the LC Issuer and remains in effect and the
Lenders shall not be under any obligation to reimburse the LC Issuer
for any amounts drawn under any Letter of Credit so issued or increased
(if increased, only to the extent of such increase).
"Stop Issuance Notice" means a notice to the LC Issuer from the Agent
to the effect that either (i) the Working Capital Commitments of the Lenders
have terminated or (ii) the conditions to an LC Credit Event specified in
Section 3.09(e) are not satisfied (either generally as to all Letters of Credit
or specifically with respect to any proposed LC Credit Event requested in a
Notice of Issuance delivered hereunder). A Stop-Issuance Notice shall become
effective upon receipt by the LC Issuer and may only be canceled by delivery to
the LC Issuer of a written notice of cancellation signed by the Agent (with the
consent of the Required Lenders).
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(b) Reimbursement Obligations of the Companies. Each Company
agrees, as a separate obligation, independent from any obligation it may have
to reimburse the LC Issuer pursuant to Section 3.09(a), that if at any time any
Lender shall make a payment to the LC Issuer pursuant to Section 3.09(a)(ii) in
respect of a Letter of Credit issued for the account of such Company, such
Company shall be irrevocably and unconditionally obligated forthwith to
reimburse such Lender for the amount of such payment in like currency, without
presentment, demand, protest or other formalities of any kind. All amounts
paid by any Lender to the LC Issuer pursuant to Section 3.09(a)(ii) shall bear
interest, payable on demand, for each day until such Company reimburses such
Lender therefor, at a rate per annum equal to the sum of 2% plus the rate
applicable to Working Capital Loans for such day.
(c) Reimbursement and Other Payments by the Companies. The
obligations of each Company to reimburse the Issuing Bank and each Lender
pursuant to Section 3.09(a) and 3.09(b) shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under all circumstances whatsoever, including without
limitation the following circumstances:
(i) any lack of validity or enforceability of any
Letter of Credit or any related document;
(ii) any amendment or waiver of or any consent to
departure from any Letter of Credit or any related document;
(iii) the existence of any claim, set-off, defense
or other right which such Company may have at any time against
the beneficiary of any Letter of Credit (or any Person or entity
for whom such beneficiary may be acting), the Agent, the LC
Issuer or any Lender or any other Person or entity, whether in
connection with this Agreement, any other Financing Document or
any unrelated transaction, provided that nothing herein shall
prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(iv) any statement or any other document presented
under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever;
(v) payment by the LC Issuer under any Letter of
Credit against presentation of a draft or document which does
not comply with the terms of such Letter of Credit;
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(vi) any affiliation between the LC Issuer and any
Lender; or
(vii) to the extent permitted under applicable law,
any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
(d) Notice of LC Credit Event. Any Company requesting the issuance
or increase of a Letter of Credit hereunder shall give the Agent notice (a
"Notice of LC Credit Event") at least two Business Days before the relevant
issuance or increase, specifying:
(i) the date of issuance or increase of such
Letter of Credit;
(ii) the expiry date of such Letter of Credit
(which shall comply with the requirements of Section
3.09(e)(ii));
(iii) the proposed terms of such Letter of Credit,
including the face amount and currency thereof (which shall
comply with the requirements of Section 3.09(e)(iii)); and
(iv) the transactions or additional transaction or
transactions that are to be supported or financed with such
Letter of Credit or increase thereof.
Upon the receipt of a Notice of LC Credit Event, the Agent shall
promptly notify each Lender of the contents thereof and of the amount of such
Lender's participation in such Letter of Credit.
(e) Conditions to LC Credit Event. No Company shall request or
permit to occur a LC Credit Event unless each of the following conditions shall
have been satisfied:
(i) the Agent shall have received a Notice of LC
Credit Event with respect to such Letter of Credit or increase
thereof in accordance with Section 3.09(d) and a Borrowing Base
Certificate in accordance with Section 7.01(l);
(ii) such Letter of Credit shall by its terms
expire no later than the earlier of (x) one year after its
issuance (but may by its terms be renewable by notice given to
the LC Issuer, subject in any event to clause (y)) and (y) five
Business Days prior to May 1, 2004;
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(iii) such Letter of Credit shall be in a face
amount (including after giving effect to any contemplated
increase thereof) of not more than the amount that would, after
giving effect to the issuance thereof and to the borrowing and
repayment of Working Capital Loans on the date of issuance
thereof, cause (x) the aggregate Letter of Credit Liabilities of
all Letters of Credit to exceed $250,000 or (y) the Working
Capital Outstandings of the Lenders to exceed the lesser of (A)
the Borrowing Base and (B) the aggregate amount of the Working
Capital Commitments;
(iv) the fact that, immediately before and
immediately after such LC Credit Event, no Default shall have
occurred and be continuing; and
(v) the fact that the representations and
warranties of each Company and its Subsidiaries and Holdings
contained in the Financing Documents shall be true on and as of
the date of such LC Credit Event.
Each Notice of LC Credit Event shall be deemed to be a
representation and warranty by the Company delivering such Notice of LC Credit
Event to the Lenders and the Agent as of the date of the issuance or increase
of the relevant Letter of Credit as to the facts specified in clauses (iii),
(iv) and (v) above.
(f) If on any date the Working Capital Commitments are
terminated pursuant to Section 2.04(c)(ii), the Companies on such date shall
deposit in the LC Collateral Account an amount equal to all Letter of Credit
Liabilities then outstanding, to be held, applied or released for application
as provided in Section 5(F) of the Company Security Agreement.
ARTICLE 4
GUARANTY
SECTION 4.01. The Guaranty. Each of the Companies and Holdings
hereby unconditionally guarantees the full and punctual payment (whether at
stated maturity, upon acceleration or otherwise) of the principal of and
interest (including any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Company, whether or not allowed or allowable as a claim
in any such proceeding) on each Note issued by, in the case of such Company,
each other Company and, in the case of Holdings, any Company, pursuant to this
Agreement, and the full and punctual payment of all other amounts payable by,
in the case of such Company, each other Company and, in the case of Holdings,
any Company under this Agreement or any other Financing Document, including any
amounts payable with
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respect to Letter of Credit Liabilities. Upon failure by, in the case of such
Company, each other Company and, in the case of Holdings, any Company, to pay
punctually any such amount, such Company or Holdings, as the case may be, shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in this Agreement or the other Financing Documents.
SECTION 4.02. Guaranty Unconditional. The obligations of
each Guarantor under this Article 4 shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(i) any extension, renewal, settlement,
compromise, waiver or release in respect of any obligation of
the Companies under this Agreement, other than this Article 4,
or any other Financing Document, by operation of law or
otherwise;
(ii) any modification or amendment of or
supplement to this Agreement or any other Financing Document;
(iii) any release, impairment, non-perfection or
invalidity of any direct or indirect security for any obligation
of the Companies under this Agreement or any other Financing
Document;
(iv) any change in the corporate existence,
structure or ownership of the Companies, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting
the Companies or their assets or any resulting release or
discharge of any obligation of the Companies contained in this
Agreement or any Financing Document;
(v) the existence of any claim, set-off or other
rights which such Guarantor may have at any time against any
Company, the Agent, any Lender or any other corporation or
person, whether in connection herewith or any unrelated
transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) any invalidity or unenforceability relating
to or against any Company for any reason of this Agreement or
any Financing Document, or any provision of applicable law or
regulation purporting to prohibit the payment by such Company of
the principal of or interest on any Note or any other amount
payable by such Company under this Agreement or any other
Financing Document; or
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(vii) any other act or omission to act or delay of
any kind by any Company, the Agent, any Lender or any other
corporation or person or any other circumstance whatsoever which
might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of or defense to such Guarantor's
obligations hereunder.
SECTION 4.03. Discharge Only upon Payment in Full; Reinstatement In
Certain Circumstances. Each Guarantor's obligations hereunder shall remain in
full force and effect until the earlier of the date on which the Commitments
shall have terminated and the principal of and interest on the Notes and all
other amounts payable by the Companies under this Agreement or any other
Financing Document shall have been paid in full. If at any time any payment of
the principal of or interest on any Note or any other amount payable by any
Company under this Agreement or any other Financing Document is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of such Company or otherwise, the Guarantor's obligations with
respect to such Company's obligations hereunder with respect to such payment
shall be reinstated as though such payment had been due but not made at such
time.
SECTION 4.04. Waiver by the Guarantors. Each Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any corporation or person against any Company or any other corporation
or person.
SECTION 4.05. Subrogation. Upon making any payment with respect to
any Company hereunder, the Guarantor shall be subrogated to the rights of the
payee against such Company with respect to such payment; provided that such
Guarantor shall not enforce or accept any payment by way of subrogation until
all amounts of principal of and interest on the Notes and all other amounts
payable by such Company under the Loan Documents have been paid in full.
SECTION 4.06. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by any Company under this Agreement, the Notes or
any other Financing Document is stayed upon the insolvency, bankruptcy or
reorganization of such Company, all such amounts otherwise subject to
acceleration under the terms of this Agreement shall nonetheless be payable by
each Guarantor hereunder forthwith on demand by the Agent made at the request
of the requisite proportion of the Lenders specified in Article 9 of this
Agreement.
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ARTICLE 5
Conditions
SECTION 5.01. Conditions to Closing. This Agreement shall become
effective on the date (the "LTC Closing Date", which shall not in any event be
later than June 30, 1997) that each of the following conditions precedent shall
have been satisfied:
(a) receipt by the Agent of counterparts hereof signed by each of
the parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by NationsCredit of a duly executed LTC Term Note and
LTC Working Capital Note for its account, each in the form provided for herein;
(c) receipt by the Agent of duly executed counterparts of each
Security Document required to be effective on the LTC Closing Date, together
with evidence satisfactory to it in its sole good faith discretion of the
effectiveness of the security contemplated thereby;
(d) receipt by NationsCredit of evidence satisfactory to it in its
sole good faith discretion of the satisfaction (without waiver) of all other
conditions to the closing of the LTC Merger on the LTC Closing Date, and that
all transactions contemplated by the Operative Documents to be consummated on
the closing date of the LTC Merger will take place prior to or simultaneously
with the transactions hereunder contemplated to take place on the LTC Closing
Date, and satisfaction of NationsCredit in its sole good faith discretion with
the terms and conditions of the LTC Merger Documents;
(e) receipt by NationsCredit of (i) evidence satisfactory to it in
its sole good faith discretion of the effectiveness of all other Operative
Documents to be executed in connection with the LTC Merger, each of which shall
be in form and substance satisfactory to NationsCredit in its sole good faith
discretion, and (ii) each opinion, report, and other document required to be
delivered pursuant to the LTC Merger Documents in connection with the LTC
Merger, with a letter from each Person delivering any such opinion, report and
other document authorizing reliance thereon by the Agent and the Lenders, all
in form and substance satisfactory to NationsCredit;
(f) receipt by NationsCredit of evidence satisfactory to it that (i)
the shares of common stock of each of National Cellular and TWI shall have been
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converted into shares of common stock of LTC, (ii) the shares of common stock
of Merger Sub 1 shall have been converted into shares of TWI and (iii) the
shares of common stock of Merger Sub 2 shall have been converted into shares of
National Cellular, in each case pursuant to the terms of the LTC Merger
Agreement;
(g) receipt by the Agent of an opinion of Greenberg Traurig,
counsel for the Companies and Holdings substantially in the form of Exhibit H,
covering such additional matters relating to the transactions contemplated
hereby as NationsCredit may reasonably request (by its execution and delivery
of this Agreement, each of the Companies and Holdings authorizes and directs
each such counsel to deliver such opinions to the Agent);
(h) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit I, covering
such additional matters relating to the transactions contemplated hereby as
NationsCredit may reasonably request;
(i) receipt by NationsCredit, including in its capacity as Agent, of
all fees and any other amounts due and payable hereunder (including fees and
expenses payable pursuant to Section 10.04) of which Holdings has received
notice;
(j) [intentionally omitted]
(k) receipt by NationsCredit of any information it may request
concerning the financial condition, results of operations, liabilities
(contingent and otherwise, including with respect to environmental liabilities
and employee and retiree benefits) and prospects of, and the financial
reporting and accounting systems and the management information systems of, the
Companies; and confirmation satisfactory to NationsCredit, after consultation
with management of the Companies, and any independent environmental consultant
or independent accountant retained by NationsCredit, of all such information;
and satisfaction of NationsCredit in its sole good faith discretion with all
such information;
(l) satisfaction of NationsCredit in its sole good faith discretion
as to the absence of any material adverse change in any aspect of the business,
operations, properties, prospects or condition (financial or otherwise) of
Holdings and its Subsidiaries, or any event or condition which is reasonably
likely to result in such a material adverse change;
(m) receipt by NationsCredit of a certificate signed by an officer
of each Company to the effect that, both before and immediately after the
making of the Loans and the consummation of the LTC Merger and the other
transactions contemplated to take place on the LTC Closing Date, (i) no Default
shall have
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occurred and be continuing and (ii) the representations and warranties of the
Companies made in or pursuant to the Operative Documents are true;
(n) receipt by NationsCredit of the certificates referred to in
Section 7.04(c);
(o) receipt by NationsCredit of evidence satisfactory to it in its
sole good faith discretion of the effectiveness of the employment agreements
for Brett Beveridge and Nicholas Molina in the forms attached as Exhibit 7.6 to
the LTC Merger Agreement;
(p) receipt by NationsCredit of (i) the financial statements and
pro forma balance sheet referred to in Sections 6.04(a), (b), (c) and (d), (ii)
a statement of sources and uses of funds covering all payments reasonably
expected to be made by each Company and Holdings in connection with the
transactions contemplated by the Operative Documents to be consummated on the
LTC Closing Date, including an itemized estimate of all fees, expenses and
other closing costs in an aggregate amount not to exceed $50,000 over the
aggregate amount provided for such fees, expenses and closing costs in the
commitment letter dated June 3, 1997 from NationsCredit to H.I.G. Capital
Management, Inc. and (iii) payment instructions with respect to each wire
transfer to be made by the Agent, Holdings or any Company on the LTC Closing
Date setting forth the amount of such transfer, the purpose of such transfer,
the name and number of the account to which such transfer is to be made, the
name and ABA number of the bank or other financial institution where such
account is located and the name and telephone number of an individual that can
be contacted to confirm receipt of such transfer;
(q) receipt by the Agent of an Officer's Certificate of Holdings and
each Company satisfactory to the Agent stating in substance that after giving
effect to the LTC Merger, including the transactions contemplated by this
Agreement, each Company will not (and in the case of each of Holdings and LTC,
each of Holdings and LTC will not on a consolidated basis) be insolvent or be
rendered insolvent thereby, be left with unreasonably small capital with which
to engage in its business or have incurred debts beyond its ability to pay such
debts as they mature, by a margin reasonably satisfactory to the Agent;
(r) receipt by the Agent of evidence satisfactory to it in its sole
good faith discretion that all outstanding obligations of LTC under the loan
agreements specified in Schedule 1.01 have been paid in full, all commitments
thereunder have been terminated and all Liens securing such obligations and all
guarantees thereof have been released; and
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(s) receipt by the Agent of all documents it may reasonably request
relating to the existence of Holdings and the Companies, the corporate
authority for and the validity of the Financing Documents and the other
Operative Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent in its sole good faith discretion.
The documents referred to in this Section shall be delivered to the
Agent no later than the LTC Closing Date. The certificates and opinions
referred to in this Section shall be dated the LTC Closing Date. On the LTC
Closing Date and without further action by any party hereto, the Original
Credit Agreement among the parties hereto shall be amended and restated to read
in full as set forth herein. All references to "this Agreement" shall refer to
this Agreement as amended and restated as set forth herein.
SECTION 5.02. Conditions to Each Loan. The obligation of any
Lender to make a Loan on the occasion of any borrowing thereof (including on
the LTC Closing Date) is subject to the satisfaction of the following
additional conditions:
(a) in the case of a Working Capital Borrowing, receipt by each
Lender of a Notice of Borrowing in accordance with Section 3.04 and a Borrowing
Base Certificate as of the close of business on the Business Day immediately
preceding the date of such borrowing and, in the case of the Borrowing Base
Certificate delivered in connection with the initial borrowing, on a pro forma
basis after giving effect to the LTC Merger;
(b) the fact that, immediately after such borrowing and after
application of the proceeds thereof, the aggregate Working Capital Outstandings
of the Lenders will not exceed the lesser of (i) the Borrowing Base and (ii)
the Working Capital Commitments;
(c) the fact that, immediately before and after such borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of each Company
and Holdings contained in the Financing Documents shall be true on and as of
the date of such borrowing.
Each borrowing hereunder shall be deemed to be a representation and
warranty by each Company and Holdings on the date of such borrowing as to the
facts specified in clauses (b), (c) and (d) of this Section.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Each Company and Holdings, jointly and severally, represent and
warrant (including, in the case of any such representation and warranty made or
deemed made before the consummation of the LTC Merger, at the time such
representation and warranty is made or deemed made and immediately after giving
effect to the consummation of the LTC Merger) that:
SECTION 6.01. Legal Existence and Power. Each of Holdings and the
Companies is duly incorporated or organized, validly existing and in good
standing under the laws of the state of its formation or incorporation, as the
case may be. Each of Holdings, the Companies and their respective Subsidiaries
has all partnership or corporate powers, as the case may be, and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted and as will be conducted after the LTC Merger.
Each of Holdings, the Companies and their respective Subsidiaries is qualified
to do business as a foreign partnership or corporation, as the case may be, in
each jurisdiction in which Holdings or such Subsidiary is required to be so
qualified.
SECTION 6.02. Authorization; No Contravention. The execution,
delivery and performance by each of Holdings, each Company and each Subsidiary
of such Company of the Operative Documents to which it is a party are within
Holdings', such Company's or such Subsidiary's (as the case may be) partnership
or corporate powers, as the case may be, have been duly authorized by all
necessary partnership or corporate action, as the case may be, require no
action by or in respect of, or filing with, any governmental body, agency or
official other than the filing of certificates of merger with the Secretary of
State of the States of Delaware and Texas, the filing of UCC-1 financing
statements, all of which have been made and are in full force and effect) and
do not contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of limited partnership of Holdings, the
Partnership Agreement, the certificate of incorporation or by-laws of any
Company or of any Company's Subsidiaries or of any agreement, judgment,
injunction, order, decree or other instrument binding upon Holdings, any
Company or any of their respective Subsidiaries or result in the creation or
imposition of any Lien (other than the Liens created by the Security Documents)
on any asset of Holdings, any Company or any of their respective Subsidiaries.
SECTION 6.03. Binding Effect; Liens of Security Documents. (a) Each
of the Operative Documents to which any Company is a party (other than the
Notes) constitutes a valid and binding agreement of such Company, and each of
the Notes of such Company, when executed and delivered in accordance with this
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<PAGE> 47
Agreement, will constitute valid and binding obligations of such Company, in
each case enforceable in accordance with its respective terms.
(b) Each of the Operative Documents to which Holdings is a party
constitutes a valid and binding agreement of Holdings, in each case enforceable
in accordance with its respective terms. The issuance of the Lender Interest
has been duly and validly authorized and, when issued and sold in accordance
with this Agreement, the Lender Interest will be duly and validly issued, fully
paid and nonassessable and free of preemptive rights.
(c) The Security Documents create valid security interests in, and
first mortgage Liens on, the Collateral purported to be covered thereby, which
security interests and mortgage Liens are and will remain perfected security
interests and mortgage Liens, prior to all other Liens other than Permitted
Liens. Each of the representations and warranties made by Holdings, any
Company or any of their respective Subsidiaries in the Security Documents is
true and correct.
SECTION 6.04. Financial Information. (a) The combined unaudited
balance sheet of National Cellular and TWI as of April 30, 1997 and the related
combined statement of operations, shareholders' equity and cash flows for the
three months then ended, copies of which have been delivered to each of the
Lenders, fairly present, in conformity with GAAP, the combined financial
position of National Cellular and TWI as of such date and their results of
operations, shareholders' equity and cash flows for the three months then
ended.
(b) The consolidated balance sheet of LTC and its Consolidated
Subsidiaries as of July 31, 1996 and the related statement of operations,
shareholder's equity and cash flows for the Fiscal Year then ended, reported on
by Ernst & Young LLP, copies of which have been delivered to each of the
Lenders, fairly present, in conformity with GAAP, the consolidated financial
position of LTC and its Consolidated Subsidiaries as of such date and its
operations, shareholder's equity and cash flows for such period.
(c) The unaudited consolidated balance sheet of LTC and its
Consolidated Subsidiaries as of April 30, 1997 and the related statements of
operations, shareholders' equity and cash flows for the nine months then ended,
copies of which have been delivered to each of the Lenders, fairly present, in
conformity with GAAP, the consolidated financial position of LTC and its
Consolidated Subsidiaries as of such date and its consolidated operations,
shareholders' equity and cash flows for the nine months then ended.
(d) The pro forma balance sheet of LTC as of April 30, 1997, copies
of which have been delivered to each of the Lenders, fairly presents, in
conformity
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with GAAP, the consolidated and consolidating financial position of LTC and its
Subsidiaries as of such date, adjusted to give effect (as if such events had
occurred on such date) to (i) the transactions contemplated by the LTC Merger
Documents, (ii) the making of the Loans and (iii) the payment of all legal,
accounting and other fees related thereto to the extent known at the time of
the preparation of such balance sheet. As of the date of such balance sheet
and the date hereof, neither any Company nor any of their respective
Subsidiaries had and has any material liabilities, contingent or otherwise,
including liabilities for taxes, long-term leases or forward or long-term
commitments, which are not properly reflected on such balance sheet.
(e) The information contained in the most recently delivered
Borrowing Base Certificate is complete and correct and the amounts shown
therein as "Eligible Receivables" and "Eligible Inventories" have been
determined as provided in the Financing Documents.
(f) Since April 30, 1997, there has been no material adverse change
in the business, operations, properties, prospects or condition (financial or
otherwise) of each Company and its Consolidated Subsidiaries, taken as a whole.
SECTION 6.05. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of any Company or Holdings threatened
against or affecting, Holdings, any Company or any of their respective
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, consolidated financial
position or consolidated results of operations of such Company and its
Consolidated Subsidiaries or which in any manner draws into question the
validity of any of the Operative Documents. There is no action, suit or
proceeding pending against, or to the knowledge of any Company or Holdings
threatened against or affecting, any party to any of the Operative Documents
(other than Holdings, any Company or any of their respective Subsidiaries)
before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity of any of the Operative
Documents.
SECTION 6.06. Ownership of Property, Liens. On and as of the LTC
Closing Date, after giving effect to the LTC Merger, each of Holdings, the
Companies and their respective Subsidiaries is the lawful owner of, has good
and marketable title to and is in lawful possession of, or has valid leasehold
interests in, all properties and other assets (real or personal, tangible,
intangible or mixed) purported to be owned or leased (as the case may be) by
Holdings, such Company or such Subsidiary on the balance sheet referred to in
Section 6.04(a), and none of its properties and assets is subject to any Liens,
except Permitted Liens. Holdings,
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each Company and their respective Subsidiaries conduct their business without
infringement or claim of infringement of any material license, patent,
trademark, trade name, service mark, copyright, trade secret or other
intellectual property right of others and there is no infringement or claim of
infringement by others of any material license, patent, trademark, trade name,
service mark, copyright, trade secret or other intellectual property right of
Holdings, any Company or any of their respective Subsidiaries.
SECTION 6.07. No Default. No Default or Event of Default has
occurred and is continuing and neither Holdings, any Company nor any of their
respective Subsidiaries is in default under or with respect to any material
contract, agreement, lease or other instrument to which it is a party or by
which its property is bound or affected.
SECTION 6.08. No Burdensome Restrictions. No contract, lease,
agreement or other instrument to which Holdings, any Company
or any of their respective Subsidiaries is a party or by which any of its
property is bound or affected, no charge, corporate restriction, judgment,
decree or order and no provision of applicable law or governmental regulation
is reasonably likely to have a material adverse effect on the business,
operations, properties, prospects or condition (financial or otherwise) of each
Company and its Consolidated Subsidiaries, taken as a whole.
SECTION 6.09. Labor Matters. There are no strikes or other labor
disputes pending or, to the best knowledge of any Company, threatened, against
any Company or any of its Subsidiaries. Hours worked and payments made to the
employees of each Company and its Subsidiaries have not been in violation of
the Fair Labor Standards Act or any other applicable law dealing with such
matters. All payments due from any Company or any of its Subsidiaries, or for
which any claim may be made against any of them, on account of wages and
employee and retiree health and welfare insurance and other benefits have been
paid or accrued as a liability on their books, as the case may be. The
consummation of the transactions contemplated by the Financing Documents and
the other Operative Documents will not give rise to a right of termination or
right of renegotiation on the part of any union under any collective bargaining
agreement to which it is a party or by which it is bound.
SECTION 6.10. Subsidiaries; Other Equity Investments. None of
Holdings or any Company has any Subsidiaries on the date hereof other than, in
the case of Holdings, the Companies and, in the case of LTC, Merger Sub 1,
Merger Sub 2, Let's Talk Cellular of Bayside, Inc. and LTC Kiosk Management,
Inc. In the case of any additional corporate Subsidiaries formed by Holdings
or any Company after the LTC Closing Date, each of such corporate Subsidiaries
will
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be at each time that this representation is made or deemed to be made after the
LTC Closing Date, a wholly-owned Subsidiary of a Company that is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Neither Holdings, any Company nor any of
their respective Subsidiaries is engaged in any joint venture or partnership
with any other Person. The aggregate book value of the assets of all
Subsidiaries of LTC in which the Agent does not have, for the benefit of itself
and the Lenders, a valid and perfected first priority security interest does
not exceed $100,000.
SECTION 6.11. Investment Company Act. Neither Holdings, any Company
nor any of their respective Subsidiaries is an "investment company" as defined
in the Investment Company Act of 1940, as amended. The consummation of the
transactions contemplated by the Operative Documents do not and will not
violate any provision of such Act or any rule, regulation or order issued by
the Securities and Exchange Commission thereunder.
SECTION 6.12. Margin Regulations. None of the proceeds from the
Loans have been or will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any of the loans
under this Agreement to be considered a "purpose credit" within the meaning of
Regulation G, U or X of the Board of Governors of the Federal Reserve Board.
SECTION 6.13. Taxes All Federal, state and local tax returns,
reports and statements required to be filed by Holdings, any Company or any of
their respective Subsidiaries have been filed with the appropriate governmental
agencies in all jurisdictions in which such returns, reports and statements are
required to be filed, and all taxes (including real property taxes) and other
charges shown to be due and payable have been timely paid prior to the date on
which any fine, penalty, interest, late charge or loss may be added thereto for
nonpayment thereof. All state and local sales and use taxes required to be
paid by Holdings, any Company or any of their respective Subsidiaries have been
paid. All Federal and state returns have been filed by Holdings, the Companies
and their respective Subsidiaries for all periods for which returns were due
with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid in full or adequate provisions therefor have been made. National
Cellular's federal tax identification number is 75-1972784, TWI's federal tax
identification number is 65- 0712485, LTC's federal tax identification number
is 65-0292891 and Holdings' federal tax identification number is 65- 0719982.
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SECTION 6.14. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code with
respect to each Plan. No member of the ERISA Group has (i) sought a waiver of
the minimum funding standard under Section 412 of the Code in respect of any
Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Code or (iii) incurred any liability under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA.
SECTION 6.15. Brokers. No broker, finder or other intermediary has
brought about the obtaining, making or closing of the transactions contemplated
by the Operative Documents, and none of Holdings, LTC, National Cellular or TWI
has or will have any obligation to any Person in respect of any finder's or
brokerage fees in connection herewith or therewith.
SECTION 6.16. Related Transactions. The closing of the LTC Merger
will occur simultaneously with the making of the LTC Term Loan and the LTC
Working Capital Loan hereunder and no party has waived, without the consent of
the Required Lenders, any condition precedent to their obligations to close as
set forth in the LTC Merger Documents. True and complete copies of all of the
LTC Merger Documents have been delivered to each of the Lenders, together with
a true and complete copy of each document to be delivered at the closing of the
LTC Merger.
SECTION 6.17. Employment, Shareholders and Subscription Agreements.
Except for the Operative Documents and the other agreements described in
Schedule 6.17, true and complete copies of which have been delivered to the
Lenders, there are no (i) employment agreements covering the management of
Holdings, the Companies and their respective Subsidiaries, (ii) collective
bargaining agreements or other labor agreements covering any employees of
Holdings, any Company or any of their respective Subsidiaries, (iii)
agreements for managerial, consulting or similar services to which Holdings,
any Company or any of their respective Subsidiaries is a party or by which it
is bound or (iv) agreements regarding Holdings, the Companies and their
respective Subsidiaries, its assets or operations or any investment therein to
which any of its stockholders is a party or by which it is bound, including
without limitation any stock option plan or stock appreciation right plan.
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SECTION 6.18. Full Disclosure. None of the information (financial
or otherwise) furnished by or on behalf of Holdings, any Company or any of
their respective Subsidiaries to the Agent or any Lender in connection with the
consummation of the transactions contemplated by any of the Operative Documents
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading in the light of the circumstances under which such statements were
made. All financial projections delivered to the Lenders have been prepared on
the basis of the assumptions stated therein. Such projections represent
Holdings' best estimate of the future financial performance of Holdings, the
Companies and their respective Subsidiaries and such assumptions are believed
by the Companies to be fair in light of current business conditions.
SECTION 6.1. Representations and Warranties from Other Operative
Documents. As of the LTC Closing Date, each of the representations and
warranties made in the Operative Documents by each of the parties thereto is
true and correct in all material respects, and such representations and
warranties are hereby incorporated herein by reference with the same effect as
though set forth in their entirety herein, as qualified therein.
SECTION 6.20. Private Offering. Neither Holdings, any Company nor
any Person acting on its or their behalf has offered the Notes or the Lender
Interest or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any Person other than the Lenders and not more than ten other
institutional investors. Neither Holdings, any Company nor any Person acting
on its or their behalf has taken, or will take, any action which would subject
the issuance or sale of the Notes or the Lender Interest to Section 5 of the
Securities Act, other than as provided in the Equity Agreement.
SECTION 6.21. Compliance with Environmental Requirements; No
Hazardous Materials. After giving effect to the Acquisition and except for
liabilities of any Company and any Subsidiary resulting from the matters
described in Sections 6.21(a)-(e) of this Agreement that would not,
individually or in the aggregate, be reasonably likely to exceed $50,000:
(a) Other than generation in compliance with all applicable
Environmental Laws, no Hazardous Materials are located on any properties now or
previously owned, leased or operated by any Company or any of such Company's
Subsidiaries or have been released into the environment, or deposited,
discharged, placed or disposed of at, on, under or near any of such properties.
No portion of any such property is being used, or has been used at any previous
time, for the disposal, storage, treatment, processing or other handling of
Hazardous
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Materials (other than processing or handling incidental to the generation of
Hazardous Materials in compliance with all applicable Environmental Laws), nor
is any such property affected by any Hazardous Materials Contamination.
(b) No asbestos or asbestos-containing materials that would require
abatement or removal prior to demolition or renovation are present on any of
the properties now or previously owned, leased or operated by any Company or
any of such Company's Subsidiaries.
(c) No polychlorinated biphenyls are located on or in any properties
now or previously owned, leased or operated by any Company or any of such
Company's Subsidiaries, in the form of electrical transformers, fluorescent
light fixtures with ballasts, cooling oils or any other device or form.
(d) No underground storage tanks are located on any properties now
or previously owned, leased or operated by any Company or any of such Company's
Subsidiaries, or were located on any such property and subsequently removed or
filled.
(e) No notice, notification, demand, request for information,
complaint, citation, summons, investigation, administrative order, consent
order and agreement, litigation or settlement with respect to Hazardous
Materials or Hazardous Materials Contamination is in existence or, to any
Company's knowledge, threatened with respect to or in connection with the
operation of any properties now or previously owned, leased or operated by any
Company or any of such Company's Subsidiaries. All uses by any Company or any
of such Company's Subsidiaries of any now or previously owned, leased or
operated property comply and at all times have complied with applicable
Environmental Laws. The prior uses of all now or previously owned, leased or
operated properties have at all times complied with applicable Environmental
Laws. No property now or previously owned, leased or operated by any Company
or any of such Company's Subsidiaries, no property to which any materials
originating at or from any Company or any of such Company's Subsidiaries have
been sent, and no property to which any Company or any of such Company's
Subsidiaries has transported or arranged for the transportation of any material
is listed or, to any Company's knowledge, proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in
CERCLA) or on any similar federal, state or foreign list of sites requiring
investigation or cleanup, nor, to the knowledge of any Company, is any such
property threatened to be placed on any such list.
(f) There has been no environmental investigation, study, audit,
test, review or other analysis conducted of which any Company has knowledge in
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relation to the current or prior business of any Company or any property or
facility now or previously owned, leased or operated by any Company or any of
its Subsidiaries which has not been delivered to the Lenders at least five days
prior to the date hereof.
(g) For purposes of this Section 6.21, the terms "Company" and
"Subsidiary" shall include any business or business entity (including a
corporation) which is, in whole or in part, a predecessor of any Company
(including the Seller) or any Subsidiary of any Company.
SECTION 6.22. Initial Capitalization. Set forth on Schedule 6.22 is
a schedule of the initial capitalization of Holdings, LTC and each of LTC's
Subsidiaries, after giving effect to the transactions contemplated to take
place on the LTC Closing Date, specifying each class of interest held and the
amount and holder thereof.
SECTION 6.23. Real Property Interests. Except for the ownership,
leasehold or other interests set forth on Schedule 6.23, LTC and its
Subsidiaries have, as of the LTC Closing Date, no ownership, leasehold or other
interest in real property.
ARTICLE 7
AFFIRMATIVE COVENANTS
Each Company (and in the cases of Sections 7.01, 7.02, 7.05, 7.08,
7.09, 7.11 and 7.12, Holdings) agrees that, so long as any Lender has any
Commitment hereunder, any amount payable under any Note or any Reimbursement
Obligation remains unpaid or any Letter of Credit remains outstanding:
SECTION 7.01. Financial Statements and Other Reports. Each of the
Companies and Holdings will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with GAAP, and will deliver to each of
the Lenders:
(a) as soon as practicable and in any event within 45 days after the
end of each month, a consolidated and consolidating balance sheet of LTC and
its Consolidated Subsidiaries, as at the end of such month and the related
consolidated and consolidating statements of operations and cash flows for such
month, and for the portion of the Fiscal Year ended at the end of such month
setting forth in each case in comparative form the figures for the
corresponding
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periods of the previous Fiscal Year and the figures for such month and for such
portion of the Fiscal year ended at the end of such month set forth in the
annual operating and capital expenditure budgets and cash flow forecast
delivered pursuant to Section 7.01(k), all in reasonable detail and certified
by the chief financial officer of LTC as fairly presenting the financial
condition and results of operations of LTC and its Consolidated Subsidiaries,
and as having been prepared in accordance with GAAP applied on a basis
consistent with the audited financial statements of Holdings subject to changes
resulting from audit and normal year-end adjustments;
(b) (i) as soon as available and in any event within 120 days after
the end of each Fiscal Year, a consolidated and consolidating balance sheet of
LTC and its Consolidated Subsidiaries, as of the end of such Fiscal Year and
the related consolidated and consolidating statements of operations,
stockholders' equity and cash flows for such Fiscal Year, certified without
qualification by independent public accountants of nationally recognized
standing and setting forth in each case in comparative form the figures for the
previous Fiscal Year (other than for Fiscal Year 1995) and the figures for such
Fiscal Year set forth in the annual operating and capital expenditure budgets
and cash flow forecast delivered pursuant to Section 7.01(k) and (ii) as soon
as available and in any event by no later than September 30, 1997, a combined
balance sheet of NCI and TWI and their respective Consolidated Subsidiaries, as
of the end of the Fiscal Year ended December 31, 1996 and the related
consolidated and consolidating statements of operations, stockholders' equity
and cash flows for such Fiscal Year, certified without qualification by
independent public accountants of nationally recognized standing;
(c) (i) together with each delivery of financial statements pursuant to
(a) and (b) above, an Officers' Certificate of LTC stating that the officers
executing such certificate have reviewed the terms of this Agreement and have
made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of each Company and such Company's
Subsidiaries during the accounting period covered by such financial statements
and that such review has not disclosed the existence during or at the end of
such accounting period, and that such officers do not have knowledge of the
existence as at the date of such Officers' Certificate, of any Default, or, if
any such Default existed or exists, specifying the nature and period of
existence thereof and what action any Company has taken or is taking or
proposes to take with respect thereto; (ii) together with each delivery of
financial statements for each month, fiscal quarter and Fiscal Year, a
compliance certificate of the chief financial officer or treasurer of LTC (x)
providing details of all transactions between each Company or any of its
Subsidiaries and any Person referred to in Section 8.08, (y) demonstrating in
reasonable detail compliance during and at the end of such accounting period
with
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the restrictions contained in Sections 8.11 through 8.17 and (z) if not
specified in the financial statements delivered pursuant to (a) or (b) above,
as the case may be, specifying the aggregate amount of interest paid or accrued
by LTC and its Subsidiaries and the aggregate amount of depreciation and
amortization charged, during such accounting period; and (iii) together with
each delivery of financial statements pursuant to (b) above, a statement
setting forth in reasonable detail the computation of Excess Cash Flow, if any,
for such Fiscal Year, certified by the chief financial officer of Holdings as
having been prepared from such financial statements in accordance with this
Agreement;
(d) together with each delivery of financial statements pursuant to
(b) above, a written statement by the independent public accountants giving the
report thereon (i) stating that their audit examination has included a review
of the terms of this Agreement as it relates to accounting matters, (ii)
stating whether, in connection with their audit examination, any Default has
come to their attention, and if such a condition or event has come to their
attention, specifying the nature and period of existence thereof, and (iii)
stating that based on their annual audit examination nothing has come to their
attention which causes them to believe that the information contained in the
certificates delivered therewith pursuant to (c) above is not correct and that
the matters set forth in the compliance certificate delivered therewith
pursuant to clause (ii) of (c) above for the applicable Fiscal Year are not
stated in accordance with the terms of this Agreement;
(e) promptly upon receipt thereof, copies of all reports submitted
to any Company by independent public accountants in connection with each
annual, interim or special audit of the financial statements of any Company,
made by such accountants, including the comment letter submitted by such
accountants to management in connection with their annual audit;
(f) promptly upon their becoming available, copies of (i) all
financial statements, reports, notices and proxy statements sent or made
available generally by Holdings or any Company to its security holders, (ii)
all regular and periodic reports and all registration statements and
prospectuses filed by Holdings or any Company with any securities exchange or
with the Securities and Exchange Commission or any governmental authority
succeeding to any of its functions and (iii) all press releases and other
statements made available generally by Holdings or any Company to the public
concerning material developments in the business of Holdings or any Company;
(g) promptly upon any officer of Holdings or any Company obtaining
knowledge (i) of the existence of any Default, or becoming aware that the
holder of any Debt of Holdings, any Company or any of their respective
Subsidiaries has given any notice or taken any other action with respect to a
claimed default
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thereunder, (ii) of any change in LTC's certified accountant or any
resignation, or decision not to stand for re-election, by any member of LTC's
board of directors, (iii) that any Person has given any notice to Holdings or
any Company or taken any other action with respect to a claimed default under
any agreement or instrument (other than the Financing Documents) to which
Holdings, any Company or any of their respective Subsidiaries is a party or by
which any of their assets are bound or (iv) of the institution of any
litigation or arbitration involving an alleged liability of Holdings, any
Company or any of their respective Subsidiaries equal to or greater than
$250,000 or any adverse determination in any litigation or arbitration
involving a potential liability of Holdings, any Company or any of their
respective Subsidiaries equal to or greater than $100,000, an Officers'
Certificate of Holdings specifying the nature and period of existence of any
such condition or event, or specifying the notice given or action taken by such
holder or Person and the nature of such claimed default (including any
Default), event or condition, and what action Holdings or any Company has
taken, is taking or proposes to take with respect thereto;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a
copy of such notice; (iv) applies for a waiver of the minimum funding standard
under Section 412 of the Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer of
LTC setting forth details as to such occurrence and action, if any, which LTC
or applicable member of the ERISA Group is required or proposes to take;
(i) simultaneously with the financial statements referred to in (a)
above, operating plans and financial forecasts, including cash flow projections
covering
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proposed fundings, repayments, additional advances, investments and other cash
receipts and disbursements, as prepared from time to time by the management of
Holdings or any Company for internal use;
(j) copies of any reports or notices related to taxes and any other
material reports or notices received by Holdings or any Company from, or filed
by Holdings or any Company with, any Federal, state or local governmental
agency or body regulating the activities of Holdings or any Company, as the
case may be;
(k) within 30 days prior to the conclusion of each Fiscal Year,
LTC's annual operating and capital expenditure budgets and cash flow forecast
for the following Fiscal Year presented on a monthly basis, which shall be in a
format reasonably consistent with projections, budgets and forecasts
theretofore provided to the Lenders;
(l) together with each Notice of Borrowing and on the first Business
Day of each week (unless the Companies have delivered a Borrowing Base
Certificate as of a Business Day during the next preceding week), a Borrowing
Base Certificate as of the close of business of the next preceding Business
Day;
(m) within two Business Days after any request therefor, such
information in such detail concerning the amount, composition and manner of
calculation of the Borrowing Base as any Lender may reasonably request;
(n) within ten days after the end of each calendar month, a report,
in form and substance acceptable to the Required Lenders, as to all accounts
receivable of any Company outstanding as of the last day of such month (a
"Receivables Report"), which shall set forth in summary form an aging of such
receivables and a summary by account debtor of the warranty claims made by such
account debtor and the percentage that such warranty claims represent of all
receivables due from such account debtor, and which shall, if any Lender so
requests, include a detailed aged trial balance of all such receivables
specifying the names, addresses, face amount and dates of all invoices for each
account debtor obligated on a receivable so listed; upon the request of any
Lender and to the extent available, each Receivables Report shall be
accompanied by copies of customer statements, and all documents, including
repayment histories and present status reports, relating to the receivables so
scheduled and such other matters and information relating to the status of any
receivables as any Lender shall reasonably request;
(o) together with the next delivery of a Receivables Report after
any Company becomes aware thereof, notice of any dispute between any account
debtor and such Company with respect to any amounts due and owing in excess of
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$50,000, with an explanation in reasonable detail of the reason for the
dispute, all claims related thereto and the amount in controversy;
(p) within 10 days after the end of each calendar month, a
calculation of the daily average amount during the month then ended of (i) the
aggregate amount available for drawing under all outstanding Letters of Credit
(whether or not any conditions to drawing can then be met) and (ii) the
aggregate unreimbursed amount payable to the LC Issuer (either by any Company
or by the Lenders) in respect of previous drawings under all outstanding
Letters of Credit; and
(q) with reasonable promptness, such other information and data with
respect to Holdings, any Company or any of their respective Subsidiaries as
from time to time may be reasonably requested by any Lender.
SECTION 7.2. Payment of Obligations. Each of Holdings and the
Companies (i) shall pay and discharge, and each Company will cause each of its
Subsidiaries to pay and discharge, at or before maturity, all of its material
obligations and liabilities, including tax liabilities, except where the same
may be the subject of a Permitted Contest, (ii) shall maintain, and any
Company will cause each of its Subsidiaries to maintain, in accordance with
GAAP, appropriate reserves for the accrual of any of the same and (iii) shall
not breach, and each Company shall not permit any of its Subsidiaries to
breach, in any material respect, or permit to exist any material default under,
the terms of any lease, commitment, contract, instrument or obligation to which
it is a party, or by which its properties or assets are bound.
SECTION 7.03. Conduct of Business and Maintenance of Existence.
Each Company will continue, and will cause each of its Subsidiaries to
continue, to engage in business of the same general type as now conducted by
such Company and its Subsidiaries, and will preserve, renew and keep in full
force and effect, and will cause each of its Subsidiaries to preserve, renew
and keep in full force and effect their respective corporate existence and
their respective rights, privileges and franchises necessary or desirable in
the normal conduct of business.
SECTION 7.04. Maintenance of Property; Insurance(a). Each Company
and its Subsidiaries will keep all property useful and necessary in its
business in good working order and condition, ordinary wear and tear excepted.
(b) Each Company will maintain, and such Company will cause each of
its Subsidiaries to maintain, (i) physical damage insurance on all real and
personal property on an all risks basis (not including the perils of flood and
quake), covering the actual cash value of all such property and consequential
loss coverage for business interruption and extra expense, covering such risks,
for amounts not less than those, and with deductible amounts not greater than
those, set forth in Part I of Schedule 7.04, (ii) public liability insurance
(including products/ completed operations liability coverage) covering such
risks, for amounts not less
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than those, and with deductible amounts not greater than those, set forth in
Part II of Schedule 7.04 and (iii) such other insurance coverage in such
amounts and with respect to such risks as the Required Lenders may reasonably
request. All such insurance shall be provided by insurers having an A.M. Best
policyholders rating of not less than B+ or such other insurers as the Required
Lenders may approve in writing.
(c) On or prior to the LTC Closing Date, each Company shall cause
the Agent to be named as an additional insured and loss payee on each insurance
policy required to be maintained pursuant to this Section 7.04. LTC will
deliver to the Lenders on the LTC Closing Date, a certificate from its
insurance broker dated such date showing the amount of coverage as of such
date, and certifying that, in the opinion of such broker, such amounts are
reasonable and customary for companies of established repute engaged in the
same or a similar business, that such policies will include effective waivers
(whether under the terms of any such policy or otherwise) by the insurer of all
claims for insurance premiums against all loss payees and additional insureds
and all rights of subrogation against all loss payees and additional insureds,
and that if all or any part of such policy is canceled, terminated or expires,
the insurer will forthwith give notice thereof to each additional insured and
loss payee and that no cancellation, reduction in amount or material change in
coverage thereof shall be effective until at least 30 days after receipt by
each additional insured and loss payee of written notice thereof. Each Company
will deliver to the Lenders (i) upon the request of any Lender through the
Agent from time to time full information as to the insurance carried, (ii)
within five days of receipt of notice from any insurer, a copy of any notice of
cancellation, nonrenewal or material change in coverage from that existing on
the date of this Agreement and (iii) forthwith, notice of any cancellation or
nonrenewal of coverage by such Company.
(d) Any proceeds in excess of $200,000 from any Casualty Insurance
Policy which are payable to the insured in respect of any claim, or any
condemnation award or other compensation in respect of a condemnation (or any
transfer or disposition of property in lieu of condemnation) for which any
Company or any of its Subsidiaries receives a condemnation award or other
compensation in excess of $50,000, shall be paid to the Agent to be held,
applied or released for application in accordance with Section 5 of the Company
Security Agreement, and each Casualty Insurance Policy shall provide that all
insurance proceeds in excess of $50,000 per claim which are payable to the
insured shall be adjusted with and payable to the Agent or such Company, as the
case may be. Each Company hereby appoints the Agent as its attorney-in-fact to
make proof of loss, claim for insurance and adjustments with insurers, and to
execute or endorse
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all documents, checks or drafts in connection with payments under Casualty
Insurance Policies.
SECTION 7.05. Compliance with Laws. Each of Holdings and the
Companies will comply, and each Company will cause each of its Subsidiaries to
comply, in all material respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including
Environmental Laws and ERISA and the rules and regulations thereunder).
SECTION 7.06. Inspection of Property, Books and Records. Each
Company and Holdings will keep, and each Company will cause each of its
Subsidiaries to keep, proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to its business and activities; and each Company and Holdings will permit, and
each Company will cause each of its Subsidiaries to permit, representatives of
any Lender at such Lender's expense to visit and inspect any of its properties,
to examine and make abstracts or copies from any of its books and records, to
conduct a collateral audit and analysis of its inventories and accounts
receivable and to discuss its affairs, finances and accounts with its officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
SECTION 7.07. Use of Proceeds. LTC will use the proceeds of Loans
borrowed on the LTC Closing Date solely for (i) payment of amounts due under
the LTC Merger Documents and transaction fees incurred in connection with the
Operative Documents and (ii) repayment of outstanding obligations of LTC
pursuant to Section 5.01(r). Working Capital Loans borrowed after the LTC
Closing Date shall be used by each Company solely for (x) working capital needs
of such Company and its Subsidiaries and (y) for capital expenditures in
connection with the opening of new stores. None of such proceeds will be used
in violation of any applicable law or regulation.
SECTION 7.08. Further Assurances. Each of Holdings and the
Companies will, and each Company will cause each of its Subsidiaries to, at its
own cost and expense, cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances (x)
as may from time to time be necessary or as the Required Lenders may from time
to time request in order to carry out the intent and purposes of the Financing
Documents and the transactions contemplated thereby, including all such actions
to establish, preserve, protect and perfect the estate, right, title and
interest of the Lenders to the Collateral (including Collateral acquired after
the date hereof), including first priority Liens thereon, subject only to
Permitted Liens and (y) as the Required Lenders may from time to time request,
to establish, preserve, protect
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and perfect first priority Liens in favor of the Lenders on any and all assets
of Holdings, the Companies and their respective Subsidiaries, now owned or
hereafter acquired, that are not Collateral on the date hereof. Each Company
shall promptly give notice to the Agent of the acquisition after the LTC
Closing Date by such Company or any of its Subsidiaries of any real property
(including leaseholds in respect of real property), trademark, copyright or
patent.
SECTION 7.09. Board Meetings. Each Company will notify the Lenders
of all meetings and actions by written consent of the board of directors of
each of Holdings and such Company and each committee thereof at the same time
and in the same manner as notice of any meetings of such board or committee is
required to be given to its directors who do not waive such notice (or, if such
action requires no notice or notice is waived by the Board, then two days
written notice thereof describing the matters upon which action is to be
taken). All meetings of the board of directors of each Company other than LTC
or each committee thereof shall be held on the same day and in the same
location as the analogous meeting of the board of directors of each of LTC or
relevant committee thereof, as the case may be. The Lenders shall have the
right at their cost to send two representatives selected by them to each such
meeting, who shall be permitted to attend such meeting and any adjournments
thereof (other than any portion of such meeting devoted to discussion of the
Lenders).
SECTION 7.10. Lenders' Meetings. Within 45 days after the end of
each fiscal quarter, each Company will conduct a meeting of the Lenders to
discuss such fiscal quarter's results and the financial condition of such
Company at which shall be present the chief executive officer and the chief
financial officer of each Company and such other officers of such Company as
such Company's chief executive officer shall designate. Such meetings shall be
held at a time and place convenient to the Lenders and such Company. Each of
the Lenders agrees that any Company's chief executive office on the LTC Closing
Date is convenient to the Lenders.
SECTION 7.11. Consummation of the Acquisition. Each of the
Companies and Holdings will cause the closing of the LTC Merger to occur
concurrently with the making of the Loans on the LTC Closing Date, and will not
without the prior written consent of the Required Lenders waive any condition
to its obligations to consummate the LTC Merger.
SECTION 7.12. Hazardous Materials; Remediation. Each Company will
(i) promptly give notice to the Lenders in writing of any complaint, order,
citation, notice or other written communication from any Person with respect
to, or if such Company becomes aware of, (x) the existence or alleged existence
of a violation of any applicable Environmental Law or the incurrence of any
liability, obligation,
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loss, damage, cost, expense, fine, penalty or sanction or the requirement to
commence any remedial action resulting from or in connection with any air
emission, water discharge, noise emission, Hazardous Material or any other
environmental, health or safety matter at, upon, under or within any of the
properties now or previously owned, leased or operated by such Company or any
of its Subsidiaries, or due to the operations or activities of such Company,
any Subsidiary of such Company or any other Person on or in connection with any
such property or any part thereof or (y) any release on any of such properties
of Hazardous Materials in a quantity that is reportable under any applicable
Environmental Law; (ii) promptly comply with any governmental requirements
requiring the removal, treatment or disposal of such Hazardous Materials or
Hazardous Materials Contamination and provide evidence satisfactory to the
Required Lenders of such compliance; and (iii) provide the Lenders, within 30
days after demand therefor by the Required Lenders, with a bond, letter of
credit or similar financial assurance evidencing to the satisfaction of the
Required Lenders that sufficient funds are available to pay the cost of
removing, treating and disposing of such Hazardous Materials or Hazardous
Materials Contamination and discharging any assessment which may be established
on any such property as a result thereof.
SECTION 7.13. Collateral Reports. Each Company shall keep accurate
and complete records of its accounts receivable in at least so much detail as
to enable such Company to provide the Receivables Reports and other information
described in Section 7.01.
SECTION 7.14. Collections; Right to Notify Account Debtors. At any
time following the occurrence of an Event of Default and during the continuance
thereof, in addition to the Lenders' rights under the Security Documents, each
Company hereby authorizes the Agent, at any time, to (i) notify any or all
account debtors that the accounts receivable of such Company and its
Subsidiaries have been assigned to the Agent and that the Agent has a security
interest therein and (ii) direct such account debtors to make all payments due
from them to such Company upon such accounts receivable directly to the Agent
or to a Lockbox designated by the Agent. The Agent shall promptly furnish such
Company with a copy of any such notice sent. Any such notice, in the Agent's
sole discretion, may be sent on such Company's stationery, in which event such
Company shall, if requested by the Agent, co-sign such notice with the Agent.
SECTION 7.15. Enforcement of Covenants Not to Compete. Each Company
shall preserve, protect and defend, to the extent permitted by applicable law
and commercially reasonable, all of its rights, if any, with respect to any
covenant not to compete contained in any of the material contracts of such
Company or contained in any employment agreement with any employee whose
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annual salary and other compensation payable by such Company and its
Subsidiaries is $100,000 or more.
SECTION 7.16. Landlord and Warehouseman Waivers. Each Company shall
use its best efforts to (i) deliver to the Agent waivers of contractual and
statutory landlord's, landlord's mortgagee's and warehouseman's Liens in form
and substance satisfactory to the Agent under each existing lease, warehouse
agreement or similar agreement (other than leases with respect to retail mall
locations) to which such Company or any of its Subsidiaries is a party and (ii)
incorporate such waivers when the existing lease, warehouse agreement or
similar agreement (other than leases with respect to retail mall locations) is
amended, renewed or extended; provided that such Company will obtain waivers of
both contractual and statutory landlord's, landlord's mortgagee's and
warehouseman's Liens in form and substance satisfactory to the Agent in
connection with each new lease, warehouse agreement or similar agreement (other
than leases with respect to retail mall locations) entered into by such Company
or any of its Subsidiaries. Without limiting the obligations of such Company
under this Section 7.17, it is understood and agreed that any Inventory that is
subject to a landlord's, landlord's mortgagee's or warehouseman's Lien or any
other Lien not created by the Security Documents shall not be included in
Eligible Inventories.
ARTICLE 8
NEGATIVE COVENANTS
Each Company (and, in the case of Sections 8.03, 8.05, 8.09, 8.10,
8.11, 8.12, 8.14, 8.15, 8.16 and 8.19, Holdings) agrees that, so long as any
Lender has any Commitment hereunder, any amount payable under any Note or any
Reimbursement Obligation remains unpaid or any Letter of Credit remains
outstanding:
SECTION 8.1. Debt. Each Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee or otherwise become or remain directly or indirectly liable with
respect to, any Debt, except for:
(a) Debt of such Company outstanding on the date of this Agreement
as set forth in Schedule 8.01;
(b) Debt of such Company under the Financing Documents;
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(c) Debt of such Company or any of its Subsidiaries incurred or
assumed for the purpose of financing all or any part of the cost of acquiring
any asset (including through Capital Leases), in an aggregate principal amount
at any time outstanding not greater than $300,000;
(d) Debt of such Company or any of its Subsidiaries to a
wholly-owned Subsidiary of such Company, or of any Subsidiary of such Company
to such Company; and
(e) in the case of LTC, Debt of such Company consisting of Capital
Leases incurred for the purpose of financing the cost of leasing management
information systems, in an aggregate principal amount at any time outstanding
not greater than $650,000; and
(f) Debt of such Company under the Seller Subsidiary Guaranties.
SECTION 8.2. Negative Pledge. Each Company will not, and will not
permit any of its Subsidiaries to, create, assume or suffer to exist any Lien
on any asset now owned or hereafter acquired by it, except:
(a) any Lien on any asset securing Debt permitted under Section
8.01(c) incurred or assumed for the purpose of financing all or any part of the
cost of acquiring such asset, provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition thereof;
(b) Liens existing on the date of this Agreement securing Debt or
other obligations outstanding on such date permitted by Section 8.01(a) in an
aggregate principal amount not exceeding $1,750,000;
(c) Liens in favor of vendors to any Company on Inventory securing
trade payables in an aggregate amount outstanding not to exceed $2,500,000 at
any time; provided that at no time on or after June 30, 1997 shall any such
Lien in favor of any vendor extend to any asset of any Company other than
Inventory supplied by such vendor;
(d) Liens arising in the ordinary course of its business which (i)
do not secure Debt, (ii) do not secure any obligation in an amount exceeding
$50,000 and (iii) do not in the aggregate materially detract from the value of
its assets or materially impair the use thereof in the operation of its
business; and
(e) Liens created by the Security Documents.
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SECTION 8.03. Capital Stock. Each Company will not, and will not
permit any of its Subsidiaries to, issue any shares of capital stock except (i)
shares of capital stock issued by any of its Subsidiaries to such Company and
shares of capital stock of such Company issued to Holdings or (ii) shares of
capital stock of LTC issued pursuant to the IPO; provided that LTC shall prepay
the Term Notes pursuant to Section 2.04(b). Holdings shall not issue any
equity security that under the Partnership Agreement is entitled to a
preference over the Partnership Interests as to payment of dividends or
distributions.
SECTION 8.04. Restricted Payments. Each Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, declare, order,
pay, make or set apart any sum for any Restricted Payment; provided that the
foregoing shall not restrict or prohibit dividends or distributions from such
Company to Holdings at such times and in such amounts as are necessary to
permit:
(i) purchases or redemptions of the Lender
Interest under the terms of the Equity Agreement;
(ii) payment of taxes and de minimis
administrative expenses payable by Holdings in the ordinary
course, so long as before and after giving effect to any such
dividend or distribution for such purpose, no Default shall have
occurred and be continuing;
(iii) distributions to partners of Holdings at the
timed and in the amounts necessary to enable them to pay their
respective federal, state and local tax liabilities in respect
of the taxable income of Holdings (but in no event at a rate
higher than the amounts payable by such partners assuming the
then-highest federal, state and local tax rates applicable to
corporations in the applicable jurisdiction); and
(iv) payments of interest and principal on the
Seller Note and the Employment Agreement to the extent permitted
by Section 8.18.
SECTION 8.05 ERISA. Holdings and each Company will not,
and each Company will not permit any of its Subsidiaries to:
(a) engage in any transaction in connection with which Holdings or
any of its Subsidiaries could be subject to any material liability arising from
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code;
(b) terminate any Plan in a manner, or take any other action, which
could result in any material liability of any member of the ERISA Group to the
PBGC;
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(c) fail to make full payment when due of all amounts which, under
the provisions of any Plan, it is required to pay as contributions thereto, or
permit to exist any accumulated funding deficiency, whether or not waived, with
respect to any Plan;
(d) permit the present value of all benefit liabilities under all
Plans to exceed the fair market value of the assets of such Plans; or
(e) fail to make any payments to any Multiemployer Plan that it may
be required to make under any agreement relating to such Multiemployer Plan or
any law pertaining thereto.
SECTION 8.06. Consolidations, Mergers and Sales of Assets. Each
Company will not, and will not permit any of its Subsidiaries to, (i)
consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, any of its or their assets, other
than (a) sales of inventory in the ordinary course of their respective
businesses, (b) dispositions of Temporary Cash Investments, (c) exchanges of
equipment for replacement equipment in the ordinary course of business, and (d)
dispositions for cash and fair value of assets that the board of directors of
such Company determines in good faith are no longer used or useful in the
business of such Company and its Subsidiaries, provided that immediately after
any such disposition, the aggregate fair market value of all such assets
disposed of pursuant to this clause (d) during the Fiscal Year in which such
disposition is made does not exceed $250,000.
SECTION 8.07. Purchase of Assets, Investments. Each Company will
not, and will not permit any of its Subsidiaries to, acquire any assets other
than in the ordinary course of business. Each Company will not, and will not
permit any of its Subsidiaries to, make, acquire or own any Investment in any
Person other than (a) Temporary Cash Investments and (b) Investments in its
Subsidiaries made after the date hereof in an aggregate amount not exceeding
$100,000. Without limiting the generality of the foregoing, each Company will
not, and will not permit any of its Subsidiaries to, (i) acquire or create any
Subsidiary without (x) the consent of the Required Lenders and (y) arrangements
satisfactory to the Required Lenders for a pledge of the stock of such
Subsidiary to the Agent for the benefit of the Lenders and a guaranty by such
Subsidiary of the obligations of such Company hereunder or (ii) engage in any
joint venture or partnership with any other Person.
SECTION 8.08. Transactions with Affiliates. Each Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
such Company, any
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stockholder of Holdings or such Company or any affiliate of any such
stockholder on terms that are less favorable to such Company or such
Subsidiary, as the case may be, than those which might be obtained at the time
from a Person who is not an Affiliate of such Company, a stockholder of
Holdings or an affiliate of such stockholder, as the case may be; provided that
each Company shall be permitted to (i) to make payments to Holdings to the
extent permitted by Section 8.04 and (ii) pay fees to H.I.G. Capital
Management, Inc. to the extent permitted by Section 8.16.
SECTION 8.09. Amendments or Waivers. Without the prior written
consent of the Required Lenders, none of Holdings and the Companies will, nor
will any of them permit any Subsidiary of any Company to, agree to (i) any
amendment to or waiver of or in respect of any Operative Document or (ii) any
other material amendment to or waiver of any material contract constituting a
part of the Collateral.
SECTION 8.10. Fiscal Year. None of National Cellular, TWI, LTC or
Holdings shall change its fiscal year from a fiscal year ending July 31.
SECTION 8.11. Capital Expenditures. (a) The aggregate amount of
Consolidated Capital Expenditures of LTC for the period commencing on the LTC
Closing Date and ending on July 31, 1997 shall not exceed $1,400,000.
(b) The aggregate amount of Consolidated Capital Expenditures of LTC
for the Fiscal Year ending July 31, 1998 shall not exceed $4,000,000.
(c) The aggregate amount of Consolidated Capital Expenditures of LTC
for the Fiscal Year ending July 31, 1999 shall not exceed the lesser of (i)
$4,000,000 and (ii) an amount equal to the sum of (x) $2,000,000 plus (y) an
amount equal to 70% of the excess (if any) of EBITDA of LTC for the prior
Fiscal Year over the minimum EBITDA of LTC for such prior Fiscal Year as
required pursuant to Section 8.14(b)(iv).
(d) The aggregate amount of Consolidated Capital Expenditures of LTC
for the Fiscal Year ending July 31, 2000 and for each Fiscal Year thereafter
shall not exceed the lesser of (i) $4,000,000 and (ii) an amount equal to the
sum of (x) $1,700,000 plus (y) for any Fiscal Year, an amount equal to 70% of
the excess (if any) of EBITDA of LTC for the prior Fiscal Year over the minimum
EBITDA of LTC for such prior Fiscal Year as required pursuant to Section
8.14(b)(iv).
For purposes of this Section 8.11, (x) to the extent that the amount
of Consolidated Capital Expenditures of LTC in any Fiscal Year are less than
the amount set forth above, the amount of Consolidated Capital Expenditures of
LTC
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otherwise permitted to be made in the immediately succeeding Fiscal Year (the
"Current Amount") (but not for any other subsequent year) will be increased by
the amount of such shortfall (the "Capital Expenditure Carryforward Amount")
and (y) Consolidated Capital Expenditures of LTC expended, incurred or accrued
during any Fiscal Year shall be applied, first, against, the Current Amount and
second, against the Capital Expenditure Carryforward Amount for such Fiscal
Year.
SECTION 8.12. Total Debt Coverage Ratio. (a) The ratio of (x)
Consolidated Free Cash Flow of LTC to (y) Total Debt Service of LTC for each
period commencing on August 1, 1997 and ending on each of October 31, 1997,
January 31, 1998 and April 30, 1998 shall not be less than 1.1 to 1.0.
(b) The ratio of (x) Consolidated Free Cash Flow of LTC to (y) Total
Debt Service of LTC for the four consecutive fiscal quarters ending the last
date of each fiscal quarter of LTC, commencing with July 31, 1998, shall not be
less than 1.1 to 1.0.
SECTION 8.13. Lease Payments. Each Company will not, and will not
permit any of its Subsidiaries to, incur or assume (whether pursuant to a
Guarantee or otherwise) any liability for rental payments under a lease with a
lease term (as defined in Financial Accounting Standards Board Statement No.
13, as in effect on the date hereof) of one year or more if, after giving
effect thereto, the aggregate amount of minimum lease payments that such
Company and its Consolidated Subsidiaries have so incurred or assumed will
exceed, on a consolidated basis, (i) in the case of the Fiscal Year ending July
31, 1997, $7,000,000 for such Fiscal Year under all such leases (excluding
Capital Leases), (ii) in the case of the Fiscal Year ending July 31, 1998,
$3,750,000 for such Fiscal Year under all such leases that are New Leases
(excluding Capital Leases), and (iii) in the case of any Fiscal Year ending
after July 31, 1998, the Permitted Amount for such Fiscal Year under all such
leases that are New Leases (excluding Capital Leases).
For purposes of this Section:
(a) the amount of liability for rental payments under any New Lease
in any Fiscal Year consisting of, or consisting of a renewal of, an operating
lease existing prior to the first day of such Fiscal Year shall be the amount,
if any, by which the amount of liability for rental payments under such New
Lease for such Fiscal Year exceeds 110% of the amount of liability for rental
payments under such New Lease for the Fiscal Year of the Companies most
recently ended prior to the date on which such New Lease became a New Lease;
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(b) "Permitted Amount" means, (i) with respect to the Fiscal Year
ending July 31, 1999, an amount equal to the lesser of (x) $4,000,000 and (y)
the Available Excess Amount for such Fiscal Year, (ii) with respect to the
Fiscal Year ending July 31, 2000, an amount equal to the lesser of (x)
$4,250,000 and (y) the Available Excess Amount for such Fiscal Year, (iii) with
respect to the Fiscal Year ending July 31, 2001, an amount equal to the lesser
of (x) $4,500,000 and (y) the Available Excess Amount for such Fiscal Year,
(iv) with respect to the Fiscal Year ending July 31, 2002, an amount equal to
the lesser of (x) $4,750,000 and (y) the Available Excess Amount for such
Fiscal Year, and (v) with respect to the Fiscal Year ending July 31, 2003, an
amount equal to the lesser of (x) $5,000,000 and (y) the Available Excess
Amount for such Fiscal Year; and
(c) "Available Excess Amount" means, with respect to any Fiscal
Year, an amount equal to the sum of (A) the lesser of (1) $2,000,000 and (2) an
amount equal to the excess (if any) of EBITDA of LTC for the prior Fiscal Year
over the minimum EBITDA of LTC for such prior Fiscal Year required pursuant to
Section 8.14(b)(iv), plus (B) an amount equal to 200% of the excess (if any) of
EBITDA of LTC for the prior Fiscal Year over the sum of $2,000,000 plus the
minimum EBITDA of LTC for such prior Fiscal Year required pursuant to Section
8.14(b)(iv).
SECTION 8.14. Minimum EBITDA. (a) EBITDA for the period commencing
on the LTC Closing Date and ending on October 31, 1997 shall not be less than
$1,100,000.
(b) EBITDA for the period commencing on August 1, 1997 and ending
on January 31, 1998 shall not be less than $2,500,000.
(c) EBITDA for the period commencing on August 1, 1997 and ending
on April 30, 1998 shall not be less than $4,000,000.
(d) EBITDA for the four consecutive fiscal quarters ending on a
date set forth below shall not be less than the corresponding amount set forth
below opposite such date:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
07/31/1998 $5,200,000
10/31/1998 $5,350,000
01/31/1999 $5,500,000
04/30/1999 $5,650,000
</TABLE>
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<PAGE> 71
<TABLE>
<S> <C>
07/31/1999 $5,800,000
10/31/1999 $5,950,000
01/31/2000 $6,100,000
04/30/2000 $6,250,000
07/31/2000 $6,400,000
10/31/2000 $6,550,000
01/31/2001 and the last day of $6,700,000
each fiscal quarter thereafter
</TABLE>
SECTION 8.15. Limitations on Activities by Holdings. Holdings
shall not, directly or indirectly, (i) enter into or permit to exist any
transaction or agreement (including any agreement for incurrence or assumption
of Debt, any purchase, sale, lease or exchange of any property or the rendering
of any service), between itself and any other Person, other than (x) the
Operative Documents to which it is a party (the "Holdings Documents"), or (y)
the incurrence of Debt to any Company to finance the redemption of the Lender
Interest in accordance with the terms of the Equity Agreement, (ii) engage in
any business or conduct any activity (including the making of any Investment or
payment) or transfer any of its assets, other than the making of the
Investments in the Companies and the performance of the Holdings Documents in
accordance with the terms thereof and performance of ministerial activities and
payment of taxes and administrative fees necessary for compliance with the next
succeeding sentence or (iii) consolidate or merge with or into any other
Person. Holdings shall preserve, renew and keep in full force and effect its
partnership existence and any rights, privileges and franchises necessary or
desirable in the conduct of its business, and shall comply in all material
respects with all material applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities, provided that Holdings may terminate
any such right, privilege or franchise (other than its partnership existence)
if the board of directors of its general partner in good faith determines that
such termination is in the best interests of Holdings and not materially
disadvantageous to the Lenders.
SECTION 8.16. Investor Affiliate Fees. Each Company shall not and
shall not permit any of its Subsidiaries to, directly or indirectly, pay or
become obligated to pay any fees or other amounts to or for the account of
H.I.G. Capital Management, Inc. or any of its Affiliates except, so long as no
Default is then continuing or would result therefrom, pursuant to the
Consulting Agreement, which fees or amounts, so long as no Default is then
continuing or would result therefrom, may be increased by an aggregate amount
equal to $100,000 per year.
SECTION 8.17. Subordinated Obligations. Neither Holdings nor any
Company shall permit, nor shall such Company suffer any of its Subsidiaries to,
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purchase, redeem, retire, defease or otherwise acquire for value, deposit any
monies with any Person with respect to, or make any payment or prepayment of
the principal of or interest on, or any other amount owing in respect of, any
Debt outstanding under the Seller Note or any obligation owing to the Seller
pursuant to the Employment Agreement other than scheduled payments of principal
of or interest on such Debt or obligation, as the case may be, required
pursuant to the terms thereof; provided that (i) any such payment shall be
permitted only if no Default, in the case of payment under the Seller Note, and
no Default pursuant to Section 8.14, in the case of payment under the
Employment Agreement, shall have occurred and be continuing at the time of such
payment and (ii) no payment shall be made pursuant to Section 3(b) of the
Employment Agreement unless Adjusted EBIT (as defined in the Seller Note) for
the twelve months ended December 31, 1997 equals or exceeds $4,000,000.
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.1. Events of Default. If any one or more of the
following events (hereinafter called "Events of Default") shall occur and be
continuing for any reason whatsoever (whether voluntary or involuntary, by
operation of law or otherwise):
(a) any Company shall fail to pay any principal on any Note or any
Reimbursement Obligation when due, or shall fail to pay any interest or premium
on any Note, or any fees or any other amount payable hereunder within three
Business Days after the due date thereof;
(b) any Company shall fail to observe or perform any covenant
contained in Section 7.01(a), 7.01(b), 7.01(c) or 7.14, or Article 8 hereof, or
Section 5 or Sections 4(A), (E) or (I) of the Company Security Agreement, or
Holdings shall fail to perform any covenant contained in Article 8 hereof or
Section 3(B) of the Holdings Pledge Agreement, or HIG shall fail to perform any
covenant contained in Section 3(B) of the HIG Pledge Agreement;
(c) any Company or any of such Company's Subsidiaries or Holdings
shall fail to observe or perform any covenant or agreement contained in the
Financing Documents (other than those covered by clause (a) or (b) above) for
10 days after notice thereof has been given to LTC by the Agent;
(d) any representation, warranty, certification or statement made by
any Company or Holdings in any Financing Document or in any certificate,
financial
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statement or other document delivered pursuant to the Financing Documents shall
prove to have been incorrect in any respect (or in any material respect if such
representation, warranty, certification or statement is not by its terms
already qualified as to materiality) when made (or deemed made);
(e) any Company or any of such Company's Subsidiaries or Holdings
shall fail to make any payment in respect of any Material Debt;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt of any Company or any of its
Subsidiaries or Holdings, or enables (or, with the giving of notice or lapse of
time or both, would enable) the holder of such Debt or any Person acting on
such holder's behalf to accelerate the maturity thereof;
(g) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against Holdings, any Company or any of such Company's Subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
Holdings, any Company or any of such Company's Subsidiaries under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $50,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition shall exist
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by reason of which the PBGC would be entitled to obtain a decree adjudicating
that any Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section 4219(c)(5)
of ERISA, with respect to, one or more Multiemployer Plans which could cause
one or more members of the ERISA Group to incur a current payment obligation in
excess of $50,000;
(j) a judgment or order for the payment of money in excess of
$100,000 shall be rendered against Holdings, any Company or any of such
Company's Subsidiaries and such judgment or order shall continue unsatisfied
and unstayed for a period of 10 days;
(k) (i) except as the result of the IPO (provided that LTC shall prepay
the Term Notes pursuant to Section 2.04(b)(i)(B)) or any transfer made pursuant
to the Holdings Pledge Agreement or the HIG Pledge Agreement, Holdings and HIG
shall cease to be the record and beneficial owner of a majority of the issued
and outstanding capital stock of LTC; (ii) except as the result of any transfer
pursuant to the LTC Pledge Agreement, LTC shall cease to be the record and
beneficial owner of 100% of the issued and outstanding stock of each of TWI and
National Cellular; (iii) any person or group of persons (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchanges Commission under the
Securities Exchange Act of 1934, as amended), other than the HIG Investor and
HIG shall have acquired beneficial ownership (within the meaning of such Rule
13d-3) of 50% or more of the issued and outstanding common stock of LTC; (iv)
Ron Koonsman shall cease to be chief executive officer of National Cellular and
TWI and a successor shall not have been appointed by LTC and approved by the
Required Lenders within 90 days thereafter; (v) Nicholas Molina shall cease to
be chief executive officer of LTC and a successor shall not have been appointed
by LTC and approved by the Required Lenders within 90 days thereafter; (vi)
Brett Beveridge shall cease to be the president of LTC and a successor shall
not have been appointed by LTC and approved by the Required Lenders within 90
days thereafter; (vii) the HIG Investor shall cease to be the general partner
of Holdings; or (viii) representatives of the HIG Investor shall cease to
constitute a majority of the board of directors or functional equivalents of
Holdings;
(l) the auditor's report or reports on the audited statements
delivered pursuant to Section 7.01 shall include any material qualification
(including with respect to the scope of audit) or exception;
(m) the Lien created by any of the Security Documents shall at any
time fail to constitute a valid and perfected Lien on all of the Collateral
purported to be secured thereby, subject to no prior or equal Lien except
Permitted Liens, or Holdings or any Company shall so assert in writing;
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(n) any Company shall be prohibited or otherwise materially
restrained from conducting the business theretofore conducted by it by virtue
of any determination, ruling, decision, decree or order of any court or
regulatory authority of competent jurisdiction and such determination, ruling,
decision, decree or order remains unstayed and in effect for any period of 10
days beyond any period for which any business interruption insurance policy of
such Company shall provide full coverage to such Company of any losses and lost
profits; or
(o) any of the Operative Documents shall for any reason fail to
constitute the valid and binding agreement of any party thereto, or Holdings,
any Company or any of such Company's Subsidiaries shall so assert in writing;
then, and in every such event and at any time thereafter during the continuance
of such event, the Agent shall if requested by the Required Lenders, (i) by
notice to the Companies terminate the Commitments and they shall thereupon
terminate and/or (ii) by notice to the Companies declare the Notes (together
with accrued interest thereon) to be, and the Notes shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by Holdings and the
Companies; provided that in the case of any of the Events of Default specified
in clause (g) or (h) above with respect to any Company, without any notice to
such Company or any other act by the Agent or the Lenders, the Commitments
shall thereupon terminate and all of the Notes (together with accrued interest
thereon) shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by each
Company.
SECTION 9.2. Cash Collateral. If any Event of Default specified in
clause (g) or (h) of Section 9.01 with respect to any Company shall occur or
the Loans shall have otherwise been accelerated pursuant to Section 9.01, then
without any request or the taking of any other action by the Agent or any of
the Lenders, the Companies shall be obligated forthwith to deposit in the LC
Collateral Account an amount in immediately available funds equal to the then
aggregate amount available for drawings (regardless of whether any conditions
to any such drawing can then be met) under all Letters of Credit at the time
outstanding, to be held in the LC Collateral Account as provided in Section
5(F) of the Company Security Agreement.
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ARTICLE 10
FEES, EXPENSES AND INDEMNITIES; GENERAL PROVISIONS RELATING TO
PAYMENTS
SECTION 10.01. Fees. (a) Participation Fees. On the LTC Closing
Date, the Companies shall pay to each Lender a fee in an amount equal to 1.50%
of such Lender's aggregate Term Commitment and LTC Working Capital Commitment.
(b) Unused Commitment Fee. During the period from the LTC Closing
Date through the date on which Working Capital Commitments are terminated, the
Companies shall pay to each Lender a fee at the rate of 0.25% per annum on the
daily average amount by which the amount of such Lender's Working Capital
Commitment exceeds the aggregate amount of its Working Capital Outstandings.
Accrued fees under this Section shall be payable quarterly in arrears on each
Quarterly Date prior to the date on which the Working Capital Commitments are
terminated and on the date of such termination.
(c) Letter of Credit Fee. Each Company agrees to pay to the
Lenders, ratably in proportion to their respective Working Capital Commitments,
a letter of credit fee with respect to each Letter of Credit issued for the
account of such Company, computed for each day from and including the date of
issuance of such Letter of Credit to but excluding the date that is two
Business Days after the last day a drawing is available under such Letter of
Credit, at a rate of 1.5% per annum on the sum of (i) the aggregate amount of
such Letter of Credit that is undrawn but available for drawing from time to
time (whether or not any conditions to drawing can then be met) plus (ii) the
aggregate unreimbursed amount payable to the LC Issuer (either by such Company
or by the Lenders pursuant to Section 3.09(a)) in respect of previous drawings
thereunder; provided that to the extent such Letter of Credit is not drawn on
or before the last day a drawing is available under such Letter of Credit, such
letter of credit fee shall cease to accrue on the last such day. Such fee
shall be payable in arrears on each Quarterly Date prior to the date on which
the Working Capital Commitments are terminated and on the date of such
termination.
SECTION 10.02. Computation of Interest and Fees Commitment fees
pursuant to Section 10.01(b), letter of credit fees pursuant to Section
10.01(c) and all interest hereunder and under the Notes shall be calculated on
the basis of a 360-day year for the actual number of days elapsed.
SECTION 10.03. General Provisions Regarding Payments All payments
(including prepayments) to be made by any Company or Holdings under any
Financing Document, including payments of principal of and premium and interest
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on the Notes, Reimbursement Obligations, fees, expenses and indemnities, shall
be made without set-off or counterclaim and in immediately available funds. If
any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension. Each Company and Holdings shall
make all payments in immediately available funds to each Lender's Payment
Account before 11:00 A.M. (New York City time) on the date when due. Each
payment (including prepayments) by any Company on account of principal of and
interest on any Loans shall be made pro rata according to the respective
outstanding principal amounts of such Class of Loans made to such Company held
by each Lender. All amounts payable by any Company or Holdings hereunder or
under any other Financing Document not paid when due (other than payments of
principal and interest on the Notes, which shall bear interest as set forth
therein) shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to 5% plus the rate announced by NationsBank, N.A. from
time to time as its prime rate (calculated on the basis of a 360-day year for
the actual number of days elapsed).
SECTION 10.04. Expenses. Whether or not the transactions
contemplated hereby shall be consummated, the Companies agree, jointly and
severally, to pay on demand (i) all costs and expenses of preparation of this
Agreement, the other Financing Documents and the other Operative Documents and
of each Company's performance of and compliance with all agreements and
conditions contained herein and therein, (ii) the fees, expenses and
disbursements of counsel (including the reasonable allocation of the
compensation, costs and expenses of in-house counsel, based upon time spent)
to, and independent appraisers and consultants retained by, the Lenders in
connection with the negotiation, preparation, execution and administration of
this Agreement, the other Financing Documents and the other Operative Documents
and any amendments hereto or thereto and waivers hereof and thereof, (iii) all
costs and expenses of creating, perfecting and maintaining Liens pursuant to
the Financing Documents, including filing and recording fees and expenses, the
costs of any bonds required to be posted in respect of future filing and
recording fees and expenses, title investigations and fees and expenses of such
local counsel as the Agent shall request, (iv) the fees, expenses and
disbursements of independent accountants or other experts retained by the Agent
in connection with not more than two accounting and collateral audits or
reviews of each Company and its affairs during any calendar year and (v) if an
Event of Default occurs, all out-of-pocket expenses incurred by the Agent and
each Lender, including fees and disbursements of counsel (including the
reasonable allocation of the compensation, costs and expenses of in-house
counsel, based upon time spent), in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
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SECTION 10.05. Indemnity. Whether or not the transactions
contemplated hereby shall be consummated, each Company agrees to indemnify, pay
and hold harmless the Agent and each Lender and any subsequent holder of any of
the Notes, Letter of Credit Liabilities or Lender Interest and the officers,
directors, employees and agents of the Agent, each Lender and such holders
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the fees and disbursements of counsel for such
Indemnitee) in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitee shall be designated a party thereto
and including any such proceeding initiated by or on behalf of such Company or
any of its Subsidiaries or Holdings, and the expenses of investigation by
engineers, environmental consultants and similar technical personnel and any
commission, fee or compensation claimed by any broker (other than any broker
retained by NationsCredit) asserting any right to payment for the transactions
contemplated hereby, which may be imposed on, incurred by or asserted against
such Indemnitee as a result of or in connection with the transactions
contemplated hereby or by the other Operative Documents (including (i)(A) as a
direct or indirect result of the presence on or under, or escape, seepage,
leakage, spillage, discharge, emission or release from, any property now or
previously owned, leased or operated by such Company or any of its Subsidiaries
of any Hazardous Materials or any Hazardous Materials Contamination, (B)
arising out of or relating to the offsite disposal of any materials generated
or present on any such property or (C) arising out of or resulting from the
environmental condition of any such property or the applicability of any
governmental requirements relating to Hazardous Materials, whether or not
occasioned wholly or , accident or event caused by any act or omission of such
Company or any of its Subsidiaries, and (ii) proposed and actual extensions of
credit under this Agreement) and the use or intended use of the proceeds of the
Notes, the Letters of Credit and the Lender Interest, except that such Company
shall have no obligation hereunder to an Indemnitee with respect to any
liability resulting from the gross negligence or wilful misconduct of such
Indemnitee. To the extent that the undertaking set forth in the immediately
preceding sentence may be unenforceable, each Company shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all such indemnified liabilities incurred by
the Indemnitees or any of them. Without limiting the generality of any
provision of this Section, to the fullest extent permitted by law, each Company
hereby waives all rights for contribution or any other rights of recovery with
respect to liabilities, losses, damages, costs and expenses arising under or
relating to Environmental Laws that it might have by statute or otherwise
against any Indemnitee.
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SECTION 10.06. Taxes. Each Company agrees to pay all governmental
assessments, charges or taxes (except income or other similar taxes imposed on
any Lender or any holder of a Note), including any interest or penalties
thereon, at any time payable or ruled to be payable in respect of the
existence, execution or delivery of this Agreement, the other Financing
Documents or the Lender Interest, or the issuance of the Notes, the Letters of
Credit or the Lender Interest, and to indemnify and hold each Lender and each
and every holder of the Notes, Letter of Credit Liabilities or the Lender
Interest harmless against liability in connection with any such assessments,
charges or taxes.
SECTION 10.07. Funding Losses. If any Company fails to borrow any
Working Capital Loans after notice has been given to any Lender in accordance
with Section 3.04 or make any payment when due by such Company (including
pursuant to a notice of optional prepayment), such Company shall reimburse each
Lender within 15 days after demand for any resulting loss or expense incurred
by it (or by an existing or prospective participant in the related Loan),
including any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period after any such
payment or failure to borrow, provided that such Lender shall have delivered to
such Company a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 10.08. Maximum Interest. (a) In no event shall the
interest charged with respect to the Notes issued by any Company or any other
obligations of such Company under the Financing Documents exceed the maximum
amount permitted under the laws of the State of New York or of any other
applicable jurisdiction.
(b) Notwithstanding anything to the contrary herein or elsewhere, if
at any time the rate of interest payable by any Company for the account of any
Lender hereunder or under any Note or other Financing Document (the "Stated
Rate") would exceed the highest rate of interest permitted under any applicable
law to be charged by such Lender to such Company (the "Maximum Lawful Rate"),
then for so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable by such Company for the account of such Lender shall be equal
to the Maximum Lawful Rate; provided, that if at any time thereafter the Stated
Rate is less than the Maximum Lawful Rate, such Company shall, to the extent
permitted by law, continue to pay interest for the account of such Lender at
the Maximum Lawful Rate until such time as the total interest received by such
Lender is equal to the total interest which such Lender would have received had
the Stated Rate been (but for the operation of this provision) the interest
rate payable. Thereafter, the interest rate payable for the account of such
Lender shall
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be the Stated Rate unless and until the Stated Rate again would exceed the
Maximum Lawful Rate, in which event this provision shall again apply.
(c) In no event shall the total interest received by any Lender from
any Company exceed the amount which such Lender could lawfully have received
from such Company had the interest been calculated for the full term hereof at
the Maximum Lawful Rate with respect to such Lender and such Company.
(d) In computing interest payable with reference to the Maximum
Lawful Rate applicable to any Lender, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of days in
the year in which such calculation is made.
(e) If any Lender has received interest hereunder in excess of the
Maximum Lawful Rate with respect to such Lender and in respect of Loans made to
such Company, such excess amount shall be applied to the reduction of the
principal balance of its Loans or to other amounts (other than interest)
payable hereunder, and if no such principal or other amounts are then
outstanding, such excess or part thereof remaining shall be paid to such
Company.
ARTICLE 11
THE AGENT
SECTION 11.01. Appointment and Authorization. Each Lender
irrevocably appoints and authorizes the Agent to enter into each of the
Security Documents on its behalf and to take such action as agent on its behalf
and to exercise such powers under the Financing Documents as are delegated to
the Agent by the terms thereof, together with all such powers as are reasonably
incidental thereto.
SECTION 11.02. Agent and Affiliates. NationsCredit shall have the
same rights and powers under the Financing Documents as any other Lender and
may exercise or refrain from exercising the same as though it were not the
Agent, and NationsCredit and its affiliates may lend money to and generally
engage in any kind of business with Holdings, any Company or any of such
Company's Subsidiaries or affiliates as if it were not the Agent hereunder.
SECTION 11.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein and under the other
Financing Documents. Without limiting the generality of the foregoing, the
Agent shall not be required to
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take any action with respect to any Default, except as expressly provided in
Article 9.
SECTION 11.04. Consultation with Experts. The Agent may consult
with legal counsel (who may be counsel for any Company or Holdings),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 11.05. Liability of Agent. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for any action taken
or not taken by it in connection with the Financing Documents (i) with the
consent or at the request of the Required Lenders or (ii) in the absence of its
own gross negligence or willful misconduct. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any Company or Holdings; (iii) the satisfaction of any condition
specified in Article 5, except receipt of items required to be delivered to the
Agent; or (iv) the validity, effectiveness, sufficiency or genuineness of any
Financing Document or any other instrument or writing furnished in connection
therewith. The Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex, facsimile transmission or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 11.06. Indemnification. Each Lender shall, ratably in
accordance with its Working Capital Commitment (whether or not the Working
Capital Commitments have been terminated), indemnify the Agent (to the extent
not reimbursed by any Company) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except such
as result from the Agent's gross negligence or willful misconduct) that the
Agent may suffer or incur in connection with the Financing Documents or any
action taken or omitted by the Agent hereunder or thereunder.
SECTION 11.07. Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking any action under the Financing Documents.
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SECTION 11.08. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Companies. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent, which shall be an institution
organized or licensed under the laws of the United States of America or of any
State thereof. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Survival. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement, the other Operative Documents and the execution, sale and delivery
of the Notes and the Lender Interest. The indemnities and agreements set forth
in Articles 10 and 11 shall survive the payment of the Notes, the exercise,
redemption or expiration of the Lender Interest and the termination of this
Agreement. 12.2No Waiver No failure or delay by the Agent or any Lender in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein and therein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
SECTION 12.03. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including prepaid
overnight courier, telex, facsimile transmission or similar writing) and shall
be given to such party at its address or telecopy or telex number set forth on
the signature pages hereof (or, in the case of any such Lender who becomes a
Lender after the date hereof, in a notice delivered to each Company and the
Agent by the assignee Lender forthwith upon such assignment) or at such other
address or telecopy or telex number as such party may hereafter specify for the
purpose by notice to the Agent and the Companies. Each such notice, request or
other communication shall be effective
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(i) if given by telex or telecopy, when such telex or telecopy is transmitted
to the telex or telecopy number specified in this Section and the appropriate
answerback is received (in the case of telex) or telephonic confirmation of
receipt thereof is obtained (in the case of telecopy) or (ii) if given by mail,
prepaid overnight courier or any other means, when received at the address
specified in this Section or when delivery at such address is refused.
SECTION 12.04. Severability. In case any provision of or obligation
under this Agreement or the Notes or any other Financing Document shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 12.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by Holdings, each Company, and the
Required Lenders (and, if the rights or duties of the Agent or the LC Issuer
are affected thereby, by the Agent or the LC Issuer, as the case may be);
provided that no such amendment or waiver shall, unless signed by all the
Lenders, (i) increase or decrease any Commitment of any Lender (except for a
ratable decrease in the Commitments of all Lenders) or subject any Lender to
any additional obligation, (ii) reduce the principal of or rate of interest on
any Loan, Reimbursement Obligation or fees hereunder, (iii) postpone the date
fixed for any payment of principal of any Loan pursuant to Section 2.04(a),
3.05(a), or any Reimbursement Obligation, or of interest on any Loan or any
Reimbursement Obligation or any fees hereunder or for any termination of any
Commitment, (iv) release any of the Collateral or any guaranty or (v) change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the Notes which shall be required for the Lenders or any of them to take any
action under this Section or any other provision of this Agreement.
SECTION 12.06. Successors and Assigns; Registration. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns (including any
transferee of any Note or Lender Interest), except that (i) no Company may
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Lenders and (ii) no assignment or other transfer
by a Lender of its Working Capital Commitments or any portion thereof shall
release it from its obligations in favor of the LC Issuer under Section 3.09
with respect to any Letters of Credit outstanding at the time of such
assignment or other transfer unless such assignment or other transfer was with
the prior written consent of the LC Issuer.
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(b) The terms and provisions of this Agreement shall inure to the
benefit of any transferee or assignee of any Note or Lender Interest, except
that NationsCredit may not transfer its obligations pursuant to Section 3.08
without the consent of each Company, and, in the event of such transfer or
assignment, the rights and privileges herein conferred upon the assigning
Lender shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof. Any assignment shall
be for an equal percentage of each Class of such assignor Lender's Loans and
its Working Capital Commitments, and any such assignee Lender shall, upon its
registration in the Note Register referred to below, become a "Lender" for all
purposes hereunder. Upon any such assignment, the assignor Lender shall be
released from its Working Capital Commitments to the extent assigned to and
assumed by the assignee Lender.
(c) Upon any assignment of any Note(s) issued by any Company, the
assigning Lender shall surrender its Note(s) to such Company for exchange or
registration of transfer, and such Company will promptly execute and deliver in
exchange therefor a new Note or Note(s) of the same tenor and registered in the
name of the assignor Lender (if less than all of such Lender's Notes are
assigned) and the name of the assignee Lender.
(d) Each Company shall maintain a register (the "Note Register") of
the Lenders and all assignee Lenders that are the holders of all the Notes
issued pursuant to this Agreement. Each Company will allow any Lender to
inspect and copy such list at such Company's principal place of business during
normal business hours. Prior to the due presentment for registration of
transfer of any Note issued by any Company, such Company may deem and treat the
Person in whose name a Note is registered as the absolute owner of such Note
for the purpose of receiving payment of principal of and premium and interest
on such Note and for all other purposes whatsoever, and such Company shall not
be affected by notice to the contrary.
(e) Each Lender (including any assignee Lender at the time of such
assignment) represents that it (i) is acquiring its Notes and Lender Interest
solely for investment purposes and not with a view toward, or for sale in
connection with, any distribution thereof, (ii) has received and reviewed such
information as it deems necessary to evaluate the merits and risks of its
investment in the Notes and the Lender Interest, (iii) is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act and (iv)
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment in the Notes and
the Lender Interest, including a complete loss of its investment.
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(f) Each Lender understands that the Notes and the Lender Interest
are being offered only in a transaction not involving any public offering
within the meaning of the Securities Act, and that, if in the future such
Lender decides to resell, pledge or otherwise transfer any of the Notes or the
Lender Interest, such Notes or Lender Interest, as the case may be, may be
resold, pledged or transferred only (i) to any Company, (ii) to a person who
such Lender reasonably believes is a qualified institutional buyer that
purchases for its own account or for the account of a qualified institutional
buyer to whom notice is given that such resale, pledge or transfer is being
made in reliance on Rule 144A under the Securities Act or (iii) pursuant to an
exemption from registration under the Securities Act.
(g) Each Lender understands that the Notes and the Lender Interest
will, unless otherwise agreed by each Company and the holder thereof, bear a
legend to the following effect:
THIS SECURITY IS NOT BEING REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF,
BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE
ISSUER THAT THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO THE COMPANY, (2) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER THAT IS AWARE THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (3)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT.
(h) If any Note issued by any Company becomes mutilated and is
surrendered by the Lender with respect thereto to such Company, or if any
Lender claims that any of its Notes issued by such Company has been lost,
destroyed or wrongfully taken, such Company shall execute and deliver to such
Lender a replacement Note, upon the affidavit of such Lender attesting to such
loss, destruction or wrongful taking with respect to such Note together with,
in the case of any lost, destroyed or wrongfully taken Note, an indemnity if so
requested by such Company, and such lost, destroyed, mutilated, surrendered or
wrongfully taken Note shall be deemed to be canceled for all purposes hereof.
Such affidavit shall be accepted as satisfactory evidence of the loss, wrongful
taking or
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destruction thereof and no surety or bond shall be required as a condition of
the execution and delivery of a replacement Note. Any costs and expenses of
such Company in replacing any such Note shall be for the account of such
Lender.
SECTION 12.07. Collateral. Each of the Lenders represents to the
Agent and each of the other Lenders that it in good faith is not relying upon
any Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 12.08. Headings. Headings and captions used in the
Financing Documents (including the Exhibits and Schedules hereto and thereto)
are included herein and therein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 12.09. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. EACH OF THE COMPANIES AND HOLDINGS HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING
IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF
THE COMPANIES AND HOLDINGS HEREBY ACKNOWLEDGES AND AGREES THAT NATIONSCREDIT
DOES NOT SUBMIT TO THE JURISDICTION OF THE BANKRUPTCY COURT AND THAT THE
BANKRUPTCY COURT IS NOT THE APPROPRIATE FORUM FOR ANY LEGAL PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH OF THE COMPANIES AND HOLDINGS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO SERVICE
OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 12.03. NOTHING IN
THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
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SECTION 12.10. Notice of Breach by Agent or Lender. Each of the
Companies and Holdings agrees to give the Agent and the Lenders notice of any
action or inaction by the Agent or any Lender or any agent or attorney of the
Agent or any Lender in connection with this Agreement or any other Financing
Document or the obligations of such Company or Holdings under this Agreement or
any other Financing Document that may be actionable against the Agent or any
Lender or any agent or attorney of the Agent or any Lender or a defense to
payment of any obligations of any Company or Holdings under this Agreement or
any other Financing Document for any reason, including commission of a tort or
violation of any contractual duty or duty implied by law. Each of the
Companies and Holdings agrees, to the fullest extent that it may lawfully do
so, that unless such notice is given promptly (and in any event within ten (10)
days after such Company or Holdings has knowledge, or with the exercise of
reasonable diligence could have had knowledge, of any such action or inaction),
such Company and Holdings shall not assert, and such Company and Holdings shall
be deemed to have waived, any claim or defense arising therefrom to the extent
that the Agent or any Lender could have mitigated such claim or defense after
receipt of such notice.
SECTION 12.11. WAIVER OF JURY TRIAL. EACH OF THE COMPANIES,
HOLDINGS, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE
FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND TO THE FULLEST
EXTENT PERMITTED BY LAW WAIVES ANY RIGHTS THAT IT MAY HAVE TO CLAIM OR RECEIVE
CONSEQUENTIAL OR SPECIAL DAMAGES IN CONNECTION WITH ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
SECTION 12.12. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement, the other Financing Documents, the Partnership
Agreement and the Equity Agreement constitute the entire agreement and
understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
TELEPHONE WAREHOUSE, INC.
By: /s/ Anthony Tamer
------------------------------
Title: Vice President
Address: 1001 South Bayshore Drive
Suite 2708
Miami, Florida 33131
Account Designation:
-------------------
Bank One, Texas, N.A.
ABA No.: 111000614
Account No.: 0014933915
Account Name: Telephone Warehouse
NATIONAL CELLULAR,
INCORPORATED
By: /s/ Anthony Tamer
---------------------------------
Title: Vice President
Address: 1001 South Bayshore Drive
Suite 2708
Miami, Florida 33131
Account Designation:
-------------------
Bank One, Texas, N.A.
ABA No.: 111000614
Account No.: 0014933899
Account Name: National Cellular
Incorporated
<PAGE> 89
LET'S TALK CELLULAR & WIRELESS,
INC.
By: /s/ Brett Beveridge
----------------------------
Title: President
Address: 5200 NW 77th Court
Miami, Florida 33166
Account Designation:
-------------------
Bank Name: Republic National Bank
ABA No.: 066002194
Account No.: 001-129-2723
Account Name: Let's Talk Cellular
<PAGE> 90
TEXAS CELLULAR PARTNERS, L.P.
By HIG Texas Cellular Company,
as Managing General Partner
By: /s/ Anthony Tamer
-------------------------------
Title: President
Address: 1001 South Bayshore Drive
Suite 2708
Miami, Florida 33131
NATIONSCREDIT COMMERCIAL
CORPORATION, as Lender and Agent
By: /s/ Edward Alt
--------------------------------
Title: Authorized Signatory
Address: One Canterbury Green
P.O. Box 120013
Stamford, CT 06912-0013
Telecopy: 203-352-4171
Payment Account Designation:
---------------------------
First Chicago National Bank
Chicago, Illinois
ABA No.: 071000013
Account No.: 52-56933
Account Name: NationsCredit Commercial
Corporation
<PAGE> 1
EXHIBIT 10.16
AMENDED AND RESTATED
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("AGREEMENT") is made and entered into as of
the 27th day of June, 1997, by and between Let's Talk Cellular & Wireless, Inc.,
a Florida corporation f/k/a Let's Talk Cellular of America, Inc. ("LTC"),
Telephone Warehouse, Inc., a Texas corporation ("TWI" and collectively with LTC,
the "COMPANIES") and H.I.G. Capital Management, Inc. (the "CONSULTANT").
1. APPOINTMENT OF CONSULTANT. The Companies appoint the Consultant and
the Consultant accepts appointment on the terms and conditions provided in this
Agreement as a consultant to the Companies' businesses, including any other
corporations hereafter formed or acquired by the Companies to engage in any
business.
2. BOARD OF DIRECTORS SUPERVISION. The activities of the Consultant to
be performed under this Agreement shall be subject to the supervision of the
Chief Executive Officer (the "CEO") and the President of LTC and subject to
reasonable policies not inconsistent with the terms of this Agreement adopted by
the Board of Directors of LTC (the "BOARD") and in effect from time to time.
Subject to the foregoing limitations and otherwise where not required by
applicable law or regulation, the Consultant shall not require the prior
approval of the Board to perform its duties under this Agreement.
3. AUTHORITY OF CONSULTANT. Subject to any limitations imposed by
applicable law or regulation or by the CEO, the President or the Board, the
Consultant shall render management, consulting and financial services to the
Companies which services shall include advice and assistance in connection with
the planning and effectuation of a Reorganization or Public Offering. The
Consultant will use its best efforts to cause its employees and agents to give
the Companies the benefit of their special knowledge, skill and business
expertise to the extent relevant to the Companies' businesses and offers.
For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "REORGANIZATION" shall mean (i) a merger or consolidation of
LTC with or into another corporation of which LTC is not the
surviving corporation, (ii) the sale of all or substantially
all of LTC's properties and assets to any other person, or
(iii) any transaction or series of related transactions in
which HIG Fund V, Inc. and its affiliates (including Texas
Cellular Partners, L.P.) cease to own at least fifty percent
(50%) of the outstanding common stock of LTC.
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(ii) "PUBLIC OFFERING" shall mean an underwritten pubic offering
pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and
sale of common stock of LTC.
4. REIMBURSEMENT OF EXPENSES; INDEPENDENT CONTRACTOR. The Consultant
shall not, without the written consent of the CEO or the President, (i) make any
advance to or for the account of the Companies, (ii) pay any sums held in
accounts maintained by the Companies, or (iii) incur any liability or obligation
for the account of the Companies. The Consultant shall be an independent
contractor, and nothing obtaining in this Agreement shall be deemed or construed
(i) to create a partnership or joint venture between the Companies and the
Consultant, (ii) to cause the Consultant to be responsible in any way for the
debts, liabilities or obligations of the Companies or any other party, or (iii)
to constitute the Consultant or any of its employees as employees, officers or
agents of either of the Companies.
5. OTHER ACTIVITIES OF CONSULTANT; INVESTMENT OPPORTUNITIES. The
Companies acknowledge and agree that neither the Consultant nor any of the
Consultant's employees, officers, directors, affiliates or associates shall be
required to devote full time and business efforts to the duties of the
Consultant specified in this Agreement, but instead shall devote only so much of
such time and efforts as the Consultant reasonably deems necessary. The
Companies further acknowledge and agree that the Consultant and its affiliates
are engaged in the business of investing in, acquiring and/or managing
businesses for the Consultant's own account, for the account of unaffiliated
parties, and understand that the Consultant plans to continue to be engaged in
such businesses (and other business or investment activities) during the term of
this Agreement. No aspect or element of such activities shall be deemed to be
engaged in for the benefit of the Companies or any of their subsidiaries nor to
constitute a conflict of interest. Furthermore, notwithstanding anything herein
to the contrary, the Consultant shall be required to bring only such investments
and/or business opportunities to the attention of the Companies as the
Consultant, in its sole discretion, deems appropriate, except that if at any
time the Consultant, Texas Cellular Partners, L.P. or HIG Fund V, Inc. or any of
their respective affiliates desires to acquire all or a portion of a company,
partnership or other business entity in the business of the retailing or the
wholesale distribution of cellular or wireless communication services or
products (a "TARGET COMPANY"), the Consultant shall make LTC aware of the Target
Company as soon as the Target Company is identified as a suitable acquisition
candidate by providing written notice of the potential acquisition to LTC and
LTC shall have the right to participate with the Consultant in the due diligence
review and negotiation process and shall also have a right of first refusal to
acquire the Target Company. The directors of LTC that are not affiliated with
the Consultant have the right to determine, on behalf of LTC, whether or not LTC
will exercise its right of first refusal. LTC may exercise its right of first
refusal by (a) notifying the Consultant in writing within thirty (30) days after
the date a fully-executed letter of intent between Consultant, Texas Cellular
Partners, L.P., or HIG Fund V, Inc. or their respective affiliates and the
Target Company is delivered to LTC that it intends to acquire the Target Company
and (b) reimbursing the Consultant for its out-of-pocket fees and expenses, if
any. Once LTC notifies the Consultant of its intent to acquire the Target
Company, LTC shall have the right to acquire the Target Company so long as
acquisition negotiations are actively and substantively continuing. If (a) at
any time
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<PAGE> 3
LTC ceases to actively pursue acquiring the Target Company it shall notify the
Consultant of such event or (b) LTC does not exercise its right of first
refusal, then in either case the Consultant shall have the right to acquire the
Target Company. The Consultant's right to acquire the Target Company shall
continue so long as acquisition negotiations are actively and substantively
continued. In the event the Consultant ceases such negotiations for more than
thirty (30) days, LTC shall have an additional right of first refusal to acquire
the Target Company each time such event occurs.
6. EQUITY CAPITAL LOANS. In the event LTC acquires or intends to
acquire one or more businesses which results in the need for LTC to obtain
additional equity capital from its existing shareholders, the Consultant agrees
to lend (i) to Messrs. Molina and Beveridge and Ms. Gozlan and (ii) in the event
the aggregate additional equity required equals or exceeds $2.5 million, to Mr.
Sorensen, the funds necessary to buy their pro rata portion of equity securities
issued for such purpose. The loans shall accrue interest at the prime rate of
NationsBank, N.A. plus 1% per annum payable at maturity, be secured by a first
and only perfected security interest in their shares of LTC's common stock
purchased with such funds, may be prepaid in whole or in part at any time or
from time to time without premium or penalty and shall be repaid as follows:
upon any sale of stock by an individual, each individual shall repay his or her
respective loan up to a maximum payment equal to 50% of the proceeds, after
taxes, received by such individual from such sale or sales, with any remaining
balance due June 25, 2001.
7. COMPENSATION OF CONSULTANT. In full and complete payment and
satisfaction of Consultant's previous agreements to provide the management
services to the Companies, the Companies will pay to the Consultant an
investment banking fee equal to $240,000 upon the occurrence of a Public
Offering (the "PAYMENT DATE"). These fees are for Consultant's provision of
investment banking services in connection with such Public Offering. For future
consulting services described herein, the Companies shall pay the Consultant a
fee of $350,000 per annum, payable monthly in advance on the first day of each
month. For purposes of this Agreement, the term "Liquidation" shall mean any
liquidation, dissolution or winding up of LTC, whether voluntary or involuntary.
8. TERM. This Agreement shall commence as of the date hereof and shall
remain in effect until the earlier to occur of (i) a Liquidation, Reorganization
or Public Offering or (ii) June 25, 2001.
9. TERMINATION UPON BREACH. Either the Companies or the Consultant may
terminate this Agreement in the event of the breach of any of the material terms
or provisions of this Agreement by the other party, which breach is not cured
within 30 business days after notice of the same is given to the party alleged
to be in breach by the other party.
10. STANDARD OF CARE. The Consultant (including any person or entity
acting for or on behalf of the Consultant) shall not be liable for any mistakes
of fact, errors of judgment, for losses sustained by the Companies or for any
acts or omissions of any kind (including acts or omissions of the Consultant),
unless caused by gross negligence or intentional misconduct of the Consultant.
- 3 -
<PAGE> 4
11. INDEMNIFICATION OF CONSULTANT. The Companies hereby agree to
indemnify and hold harmless the Consultant and its present and future officers,
directors, affiliates, employees and agents ("INDEMNIFIED Parties") to the
fullest extent permitted by law. The Companies further agree to reimburse the
Indemnified Parties on a monthly basis for any cost of defending any action or
investigation (including attorneys' fees and expenses), subject to an
undertaking from such Indemnified Party to repay the Companies if such party is
determined not to be entitled to such indemnity.
12. NO ASSIGNMENT. Without the consent of the Consultant, the Companies
shall not assign, transfer or convey any of their respective rights, duties or
interest under this Agreement, nor shall the Companies delegate any of the
obligations or duties required to be kept or performed by them hereunder.
Without the prior written consent of the Companies, the Consultant shall not
assign, transfer or convey any of its rights, duties or interests under this
Agreement, nor shall it delegate any of the obligations or duties required to be
kept or performed by it under this Agreement.
13. NOTICES. All notices, demands, consents, approvals and requests
given by either party to the other hereunder shall be in writing and shall be
personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, to the parties at the following addresses:
If to the Companies: Let's Talk Cellular & Wireless, Inc.
5200 NW 77th Court
Miami, Florida 33166
Attention: Nick Molina,
Chief Executive Officer,
and Brett Beveridge,
President
If to the Consultant: H.I.G. Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Attention: Anthony Tamer
Any party may at any time change its respective address by sending written
notice to the other party of the change in the manner hereinabove prescribed.
14. SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or enforceable, shall not be affected thereby, and each term
or provision of this Agreement shall be valid and be enforced to the fullest
extent permitted by law.
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<PAGE> 5
15. NO WAIVER. The failure by any party to exercise any right, remedy
or elections herein contained or permitted by law shall not constitute or be
construed as a waiver or relinquishment for the future exercise of such right,
remedy or election, but the same shall continue and remain in full force and
effect. All rights and remedies that any party may have at law, in equity or
otherwise upon breach of any term or condition of this Agreement, shall be
distinct, separate and cumulative rights and remedies and no one of them,
whether exercised or not, shall be deemed to be in exclusion of any other right
or remedy.
16. ENTIRE AGREEMENT. This Agreement supersedes that certain Consulting
Agreement, dated as of June 25, 1996, between the Consultant and LTC, and that
certain Consulting Agreement, dated as of December 31, 1996, between the
Consultant and TWI, and contains the entire agreement between the parties hereto
with respect to the matters herein contained. Any agreement hereafter made shall
be ineffective to effect any change or modification, in whole or in part, unless
such agreement is in writing and signed by the party against whom enforcement of
the change or modification is sought.
17. GOVERNING LAWS. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without reference to the
laws of any other state.
* * *
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Consulting
Agreement to be duly exercised by their authorized representatives as of the
date first above written.
LET'S TALK CELLULAR & WIRELESS, INC.
By:/s/ NICK MOLINA
-----------------------------------------
Nick Molina, Chief Executive Officer
TELEPHONE WAREHOUSE, INC.
By:/s/ DOUGLAS BERMAN
-----------------------------------------
Douglas Berman, Vice President
H.I.G. CAPITAL MANAGEMENT, INC.
By:/s/ ANTHONY TAMER
-----------------------------------------
Anthony Tamer, President
- 6 -
<PAGE> 1
EXHIBIT 10.17
Let's Talk Cellular of America, Inc.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
Dated as of June 25, 1996
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Preferred Stock .................................1
1.2 The Conversion Shares ................................................1
1.3 Initial Closing ......................................................1
1.4 Release of Funds From Escrow .........................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
2.1 Organization and Corporate Power .....................................3
2.2 Authorization ........................................................3
2.3 Government Approvals .................................................4
2.4 Authorized and Outstanding Stock .....................................4
2.5 Subsidiaries .........................................................4
2.6 Financial Information ................................................5
2.7 Events Subsequent to the Date of the Financial
Statements ...........................................................5
2.8 Litigation ...........................................................6
2.9 Compliance with Laws and Other Instruments ...........................6
2.10 Taxes ................................................................7
2.11 Property .............................................................7
2.12 Governmental and Industrial Approvals ................................8
2.13 Contracts and Commitments ............................................8
2.14 Securities Act .......................................................8
2.15 Insurance Coverage ...................................................9
2.16 Employee Matters .....................................................9
2.17 No Brokers or Finders ...............................................10
2.18 Transactions with Affiliates ........................................10
2.19 Assumptions, Guarantees, etc. of Indebtedness of
Other Persons .......................................................10
2.20 Restrictions on Subsidiaries ........................................10
2.21 Disclosures .........................................................10
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
3.1 Accounts and Reports ................................................11
3.2 Payment of Taxes ....................................................12
3.3 Maintenance of Key Man Insurance ....................................12
3.4 Compliance with Laws, etc ...........................................12
3.5 Inspection ..........................................................13
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
3.6 Corporate Existence; Ownership of Subsidiaries ......................13
3.7 Board Of Directors ..................................................13
3.8 Use of Proceeds .....................................................13
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
4.1 Investments in Other Persons ........................................14
4.2 Distributions .......................................................14
4.3 Dealings with Affiliates ............................................15
4.4 Merger ..............................................................15
4.5 Option Shares .......................................................15
4.6 Indebtedness ........................................................16
4 7 Limitation on Restrictions on Subsidiary Dividends
and Other Distributions .............................................16
4.8 No Conflicting Agreements ...........................................16
4.9 Compensation; Consulting and Other Agreements .......................16
4.10 Fundamental Changes .................................................16
4.11 Capital Expenditures ................................................17
ARTICLE V
PREEMPTIVE RIGHT
5.1 Right of Purchase ...................................................17
5.2 Definition of New Securities ........................................17
5.3 Notice from the Company .............................................17
5.4 Sale by the Company .................................................18
5.5 Termination of Rights ...............................................18
ARTICLE VI
PURCHASER'S REPRESENTATIONS
6.1 Representations and Warranties ......................................18
6.2 Permitted Sales; Legends ............................................19
ARTICLE VII
REGISTRATION RIGHTS
7.1 Certain Definitions .................................................19
7.2 Requested Registrations .............................................20
7.3 "Piggy Back" Registrations ..........................................21
7.4 Expenses of Registration ............................................22
7.5 Registration on Form S-3 ............................................22
7.6 Registration Procedures .............................................22
7.7 Indemnification .....................................................23
7.8 Limitations on Registration Rights ..................................26
7.9 Rule 144 Reporting ..................................................26
7.10 Listing Application .................................................26
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
7.11 Damages .............................................................27
ARTICLE VIII
CONDITIONS OF THE PURCHASER'S OBLIGATION
8.1 Effect of Conditions ................................................27
8.2 Representations and Warranties ......................................27
8.3 Performance .........................................................27
8.4 Board Election ......................................................27
8.5 Certified Documents, etc ............................................27
8.6 Amendment to Articles of Incorporation ..............................27
8.8 Redemption Agreement ................................................28
8.9 Opinion of Counsel ..................................................28
8.10 Employment Agreements ...............................................28
8.11 Consulting Agreement ................................................28
8.12 Shareholder Indebtedness ............................................28
ARTICLE IX
CONDITIONS OF THE COMPANY'S OBLIGATION ................28
ARTICLE X
CERTAIN DEFINITIONS ............................29
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations .........................................31
11.2 Parties in Interest .................................................31
11.3 Shares Owned by Affiliates ..........................................31
11.4 Amendments and Waivers ..............................................31
11.5 Notices .............................................................32
11.6 Expenses ............................................................32
11.7 Counterparts ........................................................32
11.8 Effect of Headings ..................................................33
11.9 Adjustments .........................................................33
11.10 Governing Law .......................................................33
</TABLE>
(iii)
<PAGE> 5
June 25, 1996
HIG Fund V, Inc.
c/o HIG Capital Management, Inc.
1001 South Bayshore Dr.
Suite 2310
Miami, Florida 33131
Re: Series A Preferred Stock
Gentlemen:
Let's Talk Cellular of America, Inc., a Florida corporation {the
"Company"), Nick Molina and Brett Beveridge (individually a "Principal
Shareholder" and collectively, the "Principal Shareholders") hereby agree with
you as follows (terms used herein and not otherwise defined shall have the
meanings as set forth in Article X hereof):
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Preferred Stock. At the Closing, the Company
will sell to you (the "Purchaser") an aggregate of 100,000 shares of the
Company's Series A Preferred Stock, par value $30 per share (the "Preferred
Stock"), at a price of $32.95 per share, for an aggregate purchase price of
$3,295,000 payable as provided in Section 1.3. The Preferred Stock shall have
the rights, terms and privileges set forth on Exhibit A attached hereto. The
shares of Preferred Stock purchased pursuant to this Section 1.1 are referred to
herein as the "Purchased Shares."
1.2 The Conversion Shares. The Company has authorized and reserved and
hereby covenants that it will continue to reserve, free of any preemptive rights
or encumbrances, a sufficient number of its authorized but previously unissued
shares of Common Stock to satisfy the rights of conversion of the holders of the
Purchased Shares. The shares of Common Stock issued or issuable upon conversion
of the Purchased Shares are referred to herein as the "Conversion Shares."
1.3 Initial Closing. Subject to the satisfaction or waiver of the
conditions set forth in Articles VIII and IX hereof, the purchase of the
Purchased Shares shall be made at a closing (the "Closings") to be held at the
offices of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221
Brickell Avenue, Miami, Florida, at 10:00 A.M. on June 25, 1996, or at such
other time and on such other date as the Purchaser and the Company may mutually
agree. Payment at the Closing for the Purchased Shares shall be by wire transfer
payable in immediately available federal
<PAGE> 6
funds. At the Closing, (a) the Company shall deliver a certificate representing
33,334 shares of Preferred Stock to the Purchaser and two certificates, each
representing 33,333 shares of Preferred Stock issued in the name of the
Purchaser, to the Escrow Agent subject to the Escrow Agreement, and (b) the
Purchaser shall deliver $1,285,000 in immediately available funds to the Company
and deposit $2,000,000 in the escrow account subject to the Escrow Agreement.
For purposes of this Agreement and the Escrow Agreement, the $2,000,000 shall be
the property of the Company and the Escrowed Shares shall be validly issued,
fully paid and nonassessable shares of Preferred Stock issued in the name of the
Purchaser, in each case, subject only to the conditions subsequent of the
release of the escrowed funds set forth in Section 1.4 hereof.
1.4 Release of Funds From Escrow.
(a) The Company shall have the right at any time after the Closing
to draw the first and second $1 million held in the Escrow Account upon the
occurrence of each of the following events: (i) the Company shall have used
substantially all of the previous amounts funded at closing or at the first draw
from the Escrow Account in accordance with Schedule 3.8 or as otherwise agreed
to by the Purchaser in writing (ii) there shall have been no material adverse
change in the Company's condition or prospects which would result in a disaster,
(iii) the representations and warranties in Article II shall be true and correct
in all material respects such that the breach thereof has a disasterous effect
on the Company, (iv) the Company shall have complied in all material respects
with the covenants set forth in Articles III and IV and the Related Agreements
as of the date of the Draw Certificate, and (v) there shall have been no fraud
or embezzlement at the Company. The Company shall effect the second and third
draw by delivering (i) a certificate confirming the foregoing and showing the
use of the funds to the Purchaser, executed by one or more of the Principal
Shareholders in their capacity as officers of the Company (the "Draw
Certificate") and (ii) disbursement instructions to the Escrow Agent releasing
the corresponding certificate representing shares of Preferred Stock to the
Purchaser. Within two (2) business days of receiving the Draw Certificate, the
Purchaser shall confirm its contents and upon such confirmation issue
disbursement instructions to the Escrow Agent releasing the second or third $1
million to the Company. In each case, the disbursement instructions shall be in
the form provided for in the Escrow Agreement.
(b) The Purchaser shall have the unilateral right to release all
or a portion of the funds in the Escrow Account and receive the corresponding
number of shares of Preferred Stock (1 share for each $30 released) without any
action or notice required by the Company.
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<PAGE> 7
(c) The Company and the Purchaser can agree in writing to any
other alternative arrangement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
In order to induce the Purchaser to purchase the Purchased Shares, the
Company and the Principal Shareholders, acting jointly and severally, make the
following representations and warranties which shall be true, correct and
complete in all respects as of the Closing and on the date of each Draw
Certificate.
2.1 Organization and Corporate Power. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own its properties and to carry on
its business as presently conducted. The Company and each of its Subsidiaries is
duly licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on the operations or financial conditions of the Company and its
Subsidiaries, taken as a whole.
2.2 Authorization. The Company has all necessary corporate power
and has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement, the
Shareholders' Agreement referred to in Section 8.7, the Redemption Agreement
referred to in Section S.8, the Employment Agreements referred to in Section
8.10 and the Consulting Agreement referred to in Section 8.11 (collectively, the
"Related Aqreements"), and any other agreements or instruments executed by the
Company in connection herewith or therewith and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Purchased Shares and the Conversion Shares issuable
upon conversion of the Purchased Shares. Sufficient shares of authorized but
unissued Common Stock have been reserved for issuance upon conversion of the
Purchased Shares. The issuance of the Purchased Shares hereunder does not, and
the issuance of the Conversion Shares upon conversion of the Purchased Shares
will not, require any further corporate action and is not and will not be
subject to any preemptive right, right of first refusal or the like. Assuming
the due execution and delivery by the Purchaser, this Agreement, the Related
Agreements and the other agreements and instruments executed by the Company in
connection herewith or therewith will each be a valid and binding obligation of
the Company enforceable in accordance with its respective terms. Based on the
representations made by the Purchaser in Article VI of this Agreement, the offer
and sale of the Purchased Shares will be
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<PAGE> 8
exempt from the registration or qualification requirements of applicable federal
and state securities laws.
2.3 Government Approvals. No consent, approval, license or
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement, any of the Related Agreements and any other agreements or instruments
executed by the Company in connection herewith or therewith, or in connection
with the issuance of the Purchased Shares or the issuance of the Conversion
Shares upon conversion of the Purchased Shares, except for (i) those which have
already been made or granted and (ii) the filing of registration statements with
the Securities and Exchange Commission (the "Commission") and any applicable
state securities commission as specifically provided for in Article VII hereof.
2.4 Authorized and Outstanding Stock. The authorized capital stock
of the Company consists of (i) 50,000,000 shares of Common Stock, of which
650,000 shares are validly issued and outstanding on the date hereof and are
held of record and owned beneficially as set forth in Schedule 2.4 hereto; and
(ii) 150,000 shares of Preferred Stock, all of which have been designated as
Series A Preferred Stock with the rights, terms and privileges set forth in
Exhibit A, and of which no shares are issued or outstanding. There are no
treasury shares held by the Company. All issued and outstanding shares of
capital stock are, and when issued in accordance with the terms hereof, all
Purchased Shares and Conversion Shares issued upon conversion of the Purchased
Shares will be, duly and validly authorized, validly issued and fully paid and
non-assessable and free from any restrictions on transfer, except for
restrictions imposed by federal or state securities or "blue-sky" laws and
except for those imposed pursuant to this Agreement or any Related Agreement.
Except as set forth on Schedule 2.4 hereto, there are no outstanding warrants,
options, commitments, preemptive rights, rights to acquire or purchase,
conversion rights or demands of any character relating to the capital stock or
other securities of the Company.
2.5 Subsidiaries. Except as set forth in Schedule 2.5 hereto, the
Company has no Subsidiaries nor any investment or other interest in, or any
outstanding loan or advance to or from, any Person, including, without
limitation, any officer, director or shareholder. Except as set forth on
Schedule 2.5 hereto, (a) the Company owns of record and beneficially, free and
clear of all liens, charges, restrictions, claims and encumbrances of any
nature, all of the issued and outstanding capital stock of each of its
Subsidiaries and (b) no shares of capital stock of any subsidiary was redeemed
in violation of any laws or statutes or contract or other rights of any person.
- 4 -
<PAGE> 9
2.6 Financial Information. Attached hereto as Exhibit 2.6 are true
and complete copies of (x) the audited financial statements of the Company for
each of the fiscal years ended July 31, 1994 and July 31, 1995, certified by
Deloitte & Touche LLP, Company's independent certified public accountants, and
(y) the unaudited balance sheet of the Company at April 30, 1996, and the
related statements of income, retained earnings and statements cash flows for
the nine-months then ended (all of such financial statements being collectively
referred to herein as the "Financial Statements"). The Financial Statements are
complete and correct, are in accordance with the books and records of the
Company and present fairly in accordance with generally accepted account
principles applied on a basis consistent with prior periods the financial
condition and results of operations of the Company as of the dates and for the
periods shown except that the unaudited financial statements in (y) above have
no notes thereto and do not have any year end adjustments (all of which
adjustments are nonrecurring in nature). The Company does not have any
liability, contingent or otherwise, which is not adequately reflected in
reserved against in the Financial Statements that could materially and adversely
affect the financial or condition of the Company. Since the date of the
Financial Statements, (i) there has been no change in the business, assets,
liabilities, condition (financial or otherwise) or operations of the Company
except for changes in the ordinary course of business which, individually or in
the aggregate, have not been materially adverse, and (ii) none of the business,
prospects, condition (financial or otherwise), operations property or affairs of
the Company has been materially adversely affected by any occurrence or
development, individually or in the aggregate, whether or not insured against.
2.7 Events Subsequent to the Date of the Financial Statements.
Except as set forth on Schedule 2.7 hereto, since April 30, 1996, neither the
Company nor any Subsidiary has (i) issued any stock, bond or other corporate
security, (ii) borrowed any amount or incurred or become subject to any
liability (absolute, accrued or contingent), except liabilities under contracts
entered into in the ordinary course of business, (iii) discharged or satisfied
any lien or encumbrance or incurred or paid any obligation or liability
(absolute, accrued or contingent) other than current liabilities shown on the
Financial Statements and current liabilities incurred since July 31, 1995 in the
ordinary course of business, (iv) declared or made any payment or distribution
to stockholders or purchased or redeemed any shares of its capital stock or
other securities, (v) sold, assigned or transferred any of its tangible assets
or cancelled any debt or claim, in each case, except in the ordinary course of
business, (vi) sold, assigned, transferred or granted any license with respect
to any Intellectual Property (as defined in Section 2.11), except pursuant to
license or other agreements entered into in the ordinary course of business,
(vii) suffered any loss of property or waived any right of substantial value
whether or not in the
- 5 -
<PAGE> 10
ordinary course of business, (viii) made any change in officer compensation,
(ix) entered into any transaction except in the ordinary course of business or
as otherwise contemplated hereby or (x) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
2.8 Litigation. Except as otherwise set forth on Schedule 2.8
hereto, there is no litigation or governmental proceeding or investigation
pending or, to the knowledge of the Company and the Principal Shareholders,
threatened, against the Company or any Subsidiary or affecting any of the
Company's or such Subsidiary's properties or assets, or against any officer,
employee or shareholder of the Company or any Subsidiary in his capacity as
such, which litigation, proceeding or investigation may have any substantial
chance of recovery where such recovery would likely have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, nor, to the
knowledge of the Company and the Principal Shareholders, has there occurred any
event or does there exist any condition on the basis of which any litigation,
proceeding or investigation might properly be instituted with any substantial
chance of recovery where such recovery would likely have a material adverse
effect on the Company and its Subsidiaries, taken as a whole. Neither the
Company nor any Subsidiary, nor any officer, employee, or shareholder of the
Company or any Subsidiary in his capacity as such is, to the knowledge of the
Company and the Principal Shareholders, in default with respect to any order,
writ, injunction, decree, ruling or decision of any court, commission, board or
other government agency which may materially and adversely affect the business
or assets of the Company and its Subsidiaries, taken as a whole.
2.9 Compliance with Laws and Other Instruments. The Company and
its Subsidiaries are in compliance with all of the provisions of this Agreement
and of its charter and by-laws and the agreements set forth in Schedule 2.13
hereto and to the knowledge of the Company and the Principal Shareholders is in
compliance, in all material respects, with the provisions of each other
mortgage, indenture, lease, license, other agreement or instrument, judgment,
decree, judicial order, statute, law, and/or regulation by which any of them is
bound or to which any of them or any of their respective properties are subject.
Neither the execution, delivery or performance of this Agreement and the Related
Agreements, nor the offer, issuance, sale or delivery of the Purchased Shares,
or the Conversion Shares upon conversion of the Purchased Shares, or the
transactions contemplated hereby (including the use of the proceeds in the
manner contemplated by Section 3.8), with or without the giving of notice or
passage of time, or both, will violate, or result in any breach of, or
constitute a default under, or result in the imposition of any encumbrance upon
any asset of the Company or any Subsidiary pursuant to any provision of the
Company's or such Subsidiary's charter or by-laws, or any statute, rule or
regulation, material contract, judgment, decree or, to the
- 6 -
<PAGE> 11
knowledge of the Company and its Principal Shareholders, other document or
instrument by which the Company or any Subsidiary is bound or to which the
Company or any Subsidiary or any of their respective Properties are subject.
2.10 Taxes. The Company and each of its Subsidiaries has filed all
tax returns (including statements of estimated taxes owed) required to be filed
within the applicable periods for such filings and has paid all taxes required
to be paid, and has established adequate reserves (net of estimated tax payments
already made) for the payment of all taxes payable in respect to the period
subsequent to the last periods covered by such returns. No deficiencies for any
tax in excess of $1,000 are currently assessed against the Company or any
Subsidiary, and no tax returns of the Company or any Subsidiary have ever been
audited, and, to the knowledge of the Company and the Principal Shareholders,
there is no such audit pending or contemplated. There is no tax lien, whether
imposed by any federal, state or local taxing authority, outstanding against the
assets, properties or business of the Company. For the purposes of this
Agreement, the term "tax" shall include all federal, state and local taxes,
including income, franchise, property, sales, withholding, payroll and
employment taxes.
2.11 Property. (a) Schedule 2.11(a)(i) hereto sets forth the
addresses of all real property that the Company or any Subsidiary owns, leases
or subleases, and any material lien or encumbrance on any such owned real
property or the Company's or Subsidiary's leasehold interest therein. Except as
set forth on Schedule 2.11(a)(ii) hereto, the Company or its Subsidiary, as the
case may be, has good and marketable title to, and owns free and clear of all
liens and encumbrances, all real and personal, tangible and intangible property
shown as owned by the Company or any Subsidiary on the Financial Statements
except for such property as sold in the ordinary course of business. Except as
set forth on Schedule 2.11(a)(iii) hereto, there are no defaults by the Company
or any Subsidiary or, to the knowledge of the Company and the Principal
Shareholders, by any other party thereto, which might curtail in any material
respect the present use of the Company's and such Subsidiary's real and
personal, tangible and intangible property. The performance by the Company of
this Agreement and the Related Agreements will not result in the termination of,
or in any increase of any amounts payable under, any lease listed on Schedule
2.11 hereto.
(b) Set forth on Schedule 2.11(b) hereto is a list and brief
description of all material patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service mark applications
trade names and copyrights, and all applications for such that are in the
process of being prepared, owned by or registered in the name of the Company or
any Subsidiary, or of which the Company or any Subsidiary is a licensor
- 7 -
<PAGE> 12
or licensee or in which the Company or any Subsidiary has any right
(collectively, the "Intellectual Property"). The Company and its Subsidiaries
own or possess adequate licenses or other rights to use all Intellectual
Property necessary or desirable to the conduct of their businesses as conducted
and as proposed to be conducted, and has taken all actions reasonably necessary
to protect the Intellectual Property and no claim is pending or, to the
knowledge of the Company and the Principal Shareholders, threatened to the
effect that the operations of the Company infringe upon or conflict with the
asserted rights of any other person under any Intellectual Property, which
claim, if successfully asserted, could have a material adverse effect on the
business of the Company or its Subsidiaries.
2.12 Governmental and Industrial Approvals. The Company and
each of its Subsidiaries has all the material permits, licenses, orders,
franchises and other rights and privileges of all federal, state, local or
foreign governmental or regulatory bodies necessary for the Company and such
Subsidiaries to conduct their respective businesses, the absence of which would
have a material adverse effect on the Company or its Subsidiaries. None of such
permits, licenses, orders, franchises or other rights and privileges will be
affected by the consummation of the transactions contemplated in this Agreement
and the Related Agreements.
2.13 Contracts and Commitments. Except as set forth on
Schedule 2.13 hereto, neither the Company nor any Subsidiary has any contract,
obligation or commitment which is material or which involves a potential
material commitment or any stock redemption or stock purchase agreement,
financing agreement, management agreement, services agreement, license, lease,
or stock option plan. For purposes of this Section 2.13, a contract, obligation
or commitment shall be deemed material if it requires future expenditures by the
Company or any Subsidiary in excess of $10,000 or might result in payments to
the Company or any Subsidiary in excess of $10,000. To the knowledge of the
Company and the Principal Shareholders, the Company and its Subsidiaries and
each other party to such agreement have performed all the obligations required
to be performed by them to date, have received no notice of default and are not
in default (with due notice or lapse of time or both) under the contracts,
obligations and commitments listed on Schedule 2.13 hereto which would have a
material adverse effect on the Company or its Subsidiaries, and such contracts,
obligations and commitments are in full force and effect on the date hereof.
2.14 Securities Act. The Company has complied and will comply
with all applicable federal or state securities laws in connection with the
issuance and sale of the Purchased Shares and the issuance of the Conversion
Shares upon conversion of the Purchased Shares. Neither the Company nor anyone
acting on its behalf has offered any of the Purchased Shares, or similar
securities, or solicited any offers to purchase any of such
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<PAGE> 13
securities, so as to bring the issuance and sale of the Purchased Shares under
the registration provisions of the Securities Act. The Company has not granted
any rights relating to registration of its capital stock under the Securities
Act or state securities laws other than those contained in this Agreement.
2.15 Insurance Coverage. Schedule 2.15 hereto contains an accurate
summary of the insurance policies currently maintained by the Company and its
Subsidiaries. Except as described on Schedule 2.15, there are currently no
material claims pending against the Company or any Subsidiary under any
insurance policies currently in effect and covering the property, business or
employees of the Company and its Subsidiaries, and all premiums due and payable
with respect to the policies maintained by the Company and its Subsidiaries has
been paid to date.
2.16 Employee Matters. Except as set forth on Schedule 2.16 hereto,
neither the Company nor any Subsidiary has in effect any employment agreements,
consulting agreements, deferred compensation, pension or retirement agreements
or arrangements, bonus, incentive or profit-sharing plans or arrangements, or
labor or collective bargaining agreements, written or oral. Schedule 2.16 hereto
sets forth a true and complete list of the compensation paid to the Company's
three highest compensated employees for the two years ended July 31, 1994 and
1995. The Company and the Principal Shareholders have no knowledge that any of
the officers or other key employees of the Company or any Subsidiary presently
intends to terminate his employment. The Company and its Subsidiaries are in
compliance in all material respects with all applicable laws and regulations
relating to labor, employment, fair employment practices, terms and conditions
of employment, and wages and hours. The Company and each Subsidiary is in
material compliance with the terms of all plans, programs and agreements listed
on Schedule 2.16, and each such plan, program or agreement is in compliance with
all of the requirements and provisions of the Employee Retirement Income
Security Securities Act of 1974, as amended ("ERISA"). No such plan or program
has engaged in any "prohibited transaction" as defined in Section 4975 of the
Internal Revenue Code of 1986 (the "Code"), or has incurred any "accumulated
funding deficiency" as defined in Section 302 of ERISA, nor has any reportable
event as defined in Section 4043(b) of ERISA occurred with respect to any such
plan or program. Neither the Company nor any Subsidiary has or has maintained
any group health plan subject to Section 4980B of the Code or Section 162(i) or
(k) of the Code as amended by the Consolidated Omnibus Budget Reconciliation
Securities Act of 1985, as amended by the Technical and Miscellaneous Revenue
Securities Act of 1988. With respect to each plan listed on Schedule 2.16
hereto, to the knowledge of the Company and its Principal Shareholders all
required filings, including all filings required to be made with the United
States Department of Labor and Internal Revenue Service, have been timely filed.
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<PAGE> 14
2.17 No Brokers or Finders. No person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company or any of its Subsidiaries for any commission, fee
or other compensation as a finder or broker because of any act or omission by
the Company or and of its Subsidiaries.
2.18 Transactions with Affiliates. Except as set forth on Schedule 2.18
hereto, there are no loans, leases or other continuing transactions between the
Company or any Subsidiary on the one hand, and any officer or director of the
Company or any Subsidiary or any person owning five percent (5%) or more of the
Common Stock of the Company or any respective family member or affiliate of such
officer, director or shareholder on the other hand.
2.19 Assumptions. Guarantees etc. of Indebtedness of Other Persons.
Neither the Company nor any Subsidiary has assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on or for any indebtedness of
any other Person, except guarantees by endorsement of negotiable instruments For
deposit or collection or similar transactions in the ordinary course of
business.
2.20 Restrictions on Subsidiaries. There are no restrictions on the
Company or any of its Subsidiaries which prohibit or otherwise restrict the
transfer of cash or other assets between the Company and any of its Subsidiaries
or between any Subsidiaries of the Company.
2.21 Disclosures. Neither this Agreement, any schedule or exhibit to this
Agreement, the Related Agreements, the Financial Statements, nor any other
agreement, document or written statement made by the Company or the Principal
Shareholders and furnished by the Company or the Principal Shareholders to the
Purchaser or the Purchaser's special counsel in connection with the transactions
contemplated hereby, contains any untrue statement of material fact or omits to
state any material fact necessary to make the statements contained herein or
therein not materially misleading. There is no material fact known to the
Company or the Principal Shareholders that has not been disclosed herein or in
any other material agreement, document or written statement furnished by the
Company or any of its Subsidiaries to the Purchaser or its special counsel in
connection with the transactions contemplated hereby which materially adversely
affects the business, properties, assets or financial condition of the Company
or any of its Subsidiaries.
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ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the date hereof and until the consummation of the first Qualified Public
Offering:
3.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied and the Company
will, and will cause each of its Subsidiaries to, keep full and complete
financial records. The Company will furnish to the Purchaser the information set
forth in this Section 3.1.
(a) Within ninety (90) days after the end of each fiscal year, a
copy of the consolidated and consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and duly certified by a "big six" independent public
accountant of national recognition selected by the Board of Directors of the
Company.
(b) Within thirty (30) days after the end of each calendar month,
a preliminary consolidated and consolidating balance sheet of the Company and
its Subsidiaries as of the end of such month and preliminary consolidated and
consolidating statements of income, shareholders, equity and cash flow for such
month and for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail.
(c) Prior to the end of each fiscal year, a copy of the operating
plan and budget for the next fiscal year required under Section 3.7, in form
consistent with good business practice.
(d) Promptly upon receipt thereof, any written report, so called
"management letter", and any other communication submitted to the Company or
any Subsidiary by its independent public accountants relating to the business,
prospects or financial condition of the Company and its Subsidiaries.
(e) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instru-
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<PAGE> 16
mentality, domestic or foreign, affecting the Company (or any Subsidiary) which,
if successful, could have a material adverse effect on the Company and its
Subsidiaries, taken as a whole; (ii) all material defaults by the Company or any
Subsidiary (whether or not declared) under any agreement for money borrowed; and
(iii) any action, event or circumstance that is reasonably likely to have a
material adverse effect on the Company or any Subsidiary, taken as a whole.
(f) Promptly upon sending, making available, or filing the same,
all reports and financial statements as the Company (or any Subsidiary) shall
send or make available generally to the shareholders of the company as such or
to the commission.
(g) Such other information with regard to the business, properties
or the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as the Purchaser may from time to time reasonably request.
3.2 Payment of Taxes. The Company will pay and discharge (and cause any
Subsidiary to pay and discharge) all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company (or any Subsidiary), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto.
3.3 Maintenance of Key Man Insurance. The Company will, at its expense,
within sixty (60) days of the Closing Date maintain a life insurance policy with
a responsible and reputable insurance-company payable to the Company on the life
of each of Nick Molina and Brett Beveridge, each in the face amount of $2
million. The Company will maintain such policies and will not cause or permit
any assignment of the proceeds of such policies and will not borrow against such
policies. The Company will add one designee of the Purchaser as a notice party
to such policies, and will request that the issuer of such policies provide such
designee with ten (10) days, notice before either of such policy is terminated
(for failure to pay premium or otherwise) or assigned, or before any change is
made in the designation of the beneficiary thereof.
3.4 Compliance with Laws, etc. The Company will comply (and cause each
of its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which could
materially adversely affect the
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<PAGE> 17
business or condition, financial or otherwise, of the Company and its
Subsidiaries, taken as a whole.
3.5 Inspection. At any reasonable time during normal business hours and
from time to time upon five (5) days written notice, the Company (and each of
its Subsidiaries) will permit the Purchaser who then owns, of record or
beneficially, or has the right to acquire, at least twenty-five percent (25%) of
the Conversion Shares, or any transferee of a Purchaser who owns, of record or
Beneficially, or has the right to acquire, at least five percent (at) of the
then outstanding Common Stock, or any of the agents or representatives of the
foregoing Persons, to examine and make copies of and extracts from the records
and books of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its officers or directors. If the Purchaser or its transferee or any of
their agents or representatives exercise their inspection rights under this
Section 3.5, then such Person shall agree to execute an acceptable
confidentiality agreement with the Company or its Subsidiaries regarding the
matters or materials to Le reviewed pursuant to such inspection.
3.6 Corporate Existence: Ownership of Subsidiaries. The Company will,
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company and its Subsidiaries, taken as a whole.
3.7 Board Of Directors. Prior to the end of each fiscal year, the
Company will prepare and submit to its Board of Directors for its approval prior
to such year end an operating plan and budget, cash flow projections and profit
and loss projections, all itemized in reasonable month by month detail for the
immediately following year. The budget shall be in form and substance
satisfactory to a majority of the Board of Directors. The Directors shall
schedule regular meetings not less frequently than once every sixty days.
3.8 Use of Proceeds. The Company shall use the proceeds from the sale
of the Purchased Shares in the manner and for the purposes set forth in Schedule
3.8 hereto and for no other manner or purpose.
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<PAGE> 18
ARTIVLE IV
NEGATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and divisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) with each of the provisions of this Article IV on and after the date
hereof and until the consummation of the first Qualified Public Offering;
provided, however, that the provisions of Section 4.2 shall continue in force
only so long as there are Purchased Shares outstanding.
4.1 Investments in Other Persons. The Company will not make or permit
any Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock, assets comprising the business of, obligations of, or any interest in,
any Person, except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America
and having a maturity of not more than one year from the date of
acquisition;
(ii) investments by the Company or a Subsidiary in certificates of
deposit, notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by (A) a bank
organized in the United States having capital, surplus and undivided
profits of at least $250,000,000 or (B) Republic National Bank;
(iii) loans or advances from a Subsidiary to the Company or from a
Subsidiary to another Subsidiary;
(iv) investments by the Company or a Subsidiary in A-rated or
better commercial paper having a maturity of not more than one year from
the date of acquisition;
(v) investments by the Company or a Subsidiary in "money market"
fund shares, or in "money market" accounts fully insured by the Federal
Deposit Insurance Corporation and sponsored by banks and other financial
institutions, provided that such Money market fund or "money market"
accounts invest principally in investments of the types described in
clauses (i), (ii) or (iv) of this subsection 4.1; and
(vi) loans to employees in the aggregate amount of up to $7,500 for
any individual employee and up to $50,000 to all employees at any one
time.
4.2 Distributions. The Company will not declare or pay any dividends,
purchase, redeem, retire, or otherwise acquire for value
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<PAGE> 19
any of its capital stock (or rights, options or warrants to purchase such
shares) now or hereafter outstanding, return any capital to its shareholders as
such, or make any distribution of assets to its shareholders as such, or permit
any Subsidiary to do any of the foregoing, except that the Subsidiaries may
declare and make payment of cash and stock dividends, return capital and make
distributions of assets to the Company and except that nothing herein contained
shall prevent the Company from: (i) effecting a stock split or declaring or
paying any dividend consisting of shares of any class of capital stock to the
holders of shares of such class of capital stock; (ii) complying with any
specific provision of the terms of the Preferred Stock as contained in Exhibit A
hereto relating to the payment of dividends, liquidation preferences or
redemption payments on or with respect to the Preferred Stock or redemption of
the Preferred Stock; or (iii) repurchasing the Purchased Shares or shares of
Common Stock from the Purchaser in accordance with the Redemption Agreement
attached as Exhibit C hereto.
4.3 Dealings with Affiliates. Except for the Consulting Agreement with
HIG Capital Management, Inc., the Company will not enter into (or permit any
Subsidiary to enter into) any transaction including, without limitation, any
loans or extensions of credit or royalty or services agreements with any officer
or director of the Company or any Subsidiary or holder of any class of capital
stock of the Company, or any member of their respective immediate families or
any corporation or other entity directly or indirectly controlled by one or more
of such officers, directors or shareholders or members of their immediate
families.
4.4 Merger. The Company shall not, and shall not permit any Subsidiary
to, merge or consolidate with any other corporation, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) all, or substantially all, of its
assets (whether now owned or hereinafter acquired) or sell, assign or otherwise
dispose of (whether in one transaction or in a series of transactions) any of
its accounts receivable (whether now in existence or hereinafter created) at a
discount or with recourse, to any Person, or permit any Subsidiary to do any of
the foregoing, (i) except for sales or other dispositions of assets in the
ordinary course of business, and (ii) except that (a) any wholly owned
Subsidiary may merge into or consolidate with or transfer assets to any other
wholly owned Subsidiary and (b) any wholly owned Subsidiary may merge into or
transfer assets to the Company.
4.5 Option Shares. The Company will not issue shares of its capital
stock and will not grant any options, rights or warrants to acquire its capital
stock to employees and directors of, and consultants to, the Company and its
Subsidiaries, except that not more than 50,000 shares of Common Stock, which
number includes options previously granted, may be issued to employees of
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<PAGE> 20
the Company (other than the Principal Shareholders), which options granted after
the date hereof have an exercise price per share that is not less than the
greater of (a) fair market value of the Common Stock on the date of grant and
(b) the purchase price for the Purchased Shares. Each grant of stock options
shall be approved by the Compensation Committee of the Company's Board of
Directors established pursuant to the Shareholders' Agreement.
4.6 Indebtedness. The Company shall not (a) be liable for Indebtedness
in excess of the amounts set forth on Schedule 4.6 hereto at any time, (b) issue
additional capital stock, in each case, without the prior written consent of the
Purchaser and (c) repay or prepay any Indebtedness owed the Principal
shareholders except as set forth in Exhibit hereto.
4.7 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions. The Company shall not permit any of its Subsidiaries, directly or
indirectly, to create or suffer to exist or become effective any encumbrances or
restrictions on the ability of any of its Subsidiaries to (i) pay dividends or
make any other distributions on its capital stock or any other interest or
participation in its profit owned by any of the Company or any of its
Subsidiaries, or pay any indebtedness owed by any of the Subsidiaries, (ii) make
loans or advances to the Company, or (iii) transfer any of its properties or
assets to the Company.
4.8 No Conflicting Agreements. The Company agrees that neither it nor
any Subsidiary will, without the consent of the Purchaser, enter into or amend
any agreement, contract, commitment or understanding which would restrict or
prohibit the exercise by the Purchaser of any of their rights under this
Agreement or any of the Related Agreements.
4.9 Compensation; Consulting and Other Agreements. The Company shall not
pay to its management or consultants compensation in excess of that compensation
determined by the Compensation Committee of the Board of Directors established
pursuant to the Shareholders' Agreement.
4.10 Fundamental Changes. Without the consent of a majority of its Board
of Directors, the Company shall not (a) engage in any businesses other than the
businesses in which it is presently engaged or currently proposes to engage in
(including without limitation the business contemplated by the Kiosk Staffing
Agreement by and between Cellular Telephone Company and LTC Kiosk Corporation),
(b) sell, distribute, lease, manufacture or otherwise engage in the business of
new forms of wireless communications systems (including personal communications
systems) and (c) change cellular carriers within an existing geographic area
from the cellular carrier it is using as of the date of this Agreement in such
area Without the prior written consent of the Purchaser, the Company shall not
engage in any other business other than the sale
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<PAGE> 21
and display of retail of communication devices and equipment including but not
limited to all types of cellular and mobile telephones, personal communicators,
long and short range cordless telephones, beepers and other types of paging
devices, radar detectors, facsimile machines, video and novelty telephones, any
device that transmits, receives or stores any type of data and any other types
of electronic devices and accessories related to all such devices and equipment;
provided, that any retail store may sell any other electric devices and
equipment so long as the sales of such other electric devices and equipment do
not exceed ten percent (10%) of such store's gross sales.
4.11 Capital Expenditures. The Company shall not make capital
expenditures in excess of the amounts set forth on Schedule 4.11 hereto without
the prior written consent of the Purchaser.
ARTICLE V
PREEMPTIVE RIGHT
5.1 Right of Purchase. The Company hereby grants to the Purchaser so
long as it shall own, of record or beneficially, or have the right to acquire,
any Purchased Shares, Conversion Shares or Common Stock, the right to purchase
all or part of its pro rata share of New Securities (as defined in Section 5.2)
which the Company, from time to time, proposes to sell and issue. A Purchaser's
pro rata share, for purposes of this preemptive right, is the ratio of the
number of Purchased Shares, Conversion Shares and shares of Common Stock which
such Purchaser owns or has the right to acquire to the total number of Purchased
Shares, Conversion Shares and shares of Common Stock then outstanding.
5.2 Definition of New Securities. "New Securities" shall mean any
capital stock of the Company whether now authorized or not, and rights, options
or warrants to purchase capital stock, and securities of any type whatsoever
that are, or may become convertible into or exchangeable for capital stock,
issued on or after the date hereof; provided that the term "New Securities" does
not include (I) securities purchased under this Agreement or Conversion Shares
issued upon conversion of the Purchased Shares, (ii) Common Stock issued as a
stock dividend to holders of Common Stock or upon any stock split, subdivision
or combination of shares of Common Stock, (iii) Preferred Stock issued as a
dividend to holders of Preferred Stock or upon any stock split, subdivision or
combination of Preferred Stock, (iv) the aggregate number of shares of Common
Stock issued upon exercise of options permitted under Section 4.5 hereof, and
(v) Common Stock issued to a new chief executive officer or President selected
by the Board of Directors and approved by the holders of a majority of the
Preferred Shares.
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<PAGE> 22
5.3 Notice from the Company. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the Purchaser written
notice of its intention, describing the type of New Securities and the price and
the terms upon which the Company proposes to issue the same. The Purchaser shall
have twenty (20) business days from the date of receipt of any such notice to
agree to purchase up to the Purchaser's pro rata share of such New Securities
for the price and upon the terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
5.4 Sale by the Company. In the event the Purchaser fails to exercise in
full its preemptive right, the Company shall have sixty (60) days thereafter to
sell the New Securities with respect to which and to the extent the Purchaser's
option was not exercised at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice. To the extent the
Company does not sell all the New Securities offered within said 60 day period,
the Company shall not thereafter issue or sell such New Securities without first
again offering such securities to the Purchaser in the manner provided above.
5.5 Termination of Rights. The rights granted to the Purchaser under
this Article V shall expire immediately prior to, and shall not apply in
connection with, the consummation of the first Qualified Public Offering.
ARTICLE VI
PURCHASER'S REPRESENTATIONS
6.1 Representations and Warranties. The Purchaser has all necessary
corporate power and has taken all necessary corporate action required for the
due authorization, execution, delivery and performance by the Purchaser of this
Agreement and the Related Agreements, and any other agreements or instruments
executed by the Purchaser in connection herewith or therewith and the
consummation of the transactions contemplated herein or therein. The Purchaser
hereby represents and warrants to the Company that, assuming due execution and
delivery by the Company of the Agreement and the Related Agreements, this
Agreement and the Related Agreements to which the Purchaser is a party
constitute legal, valid and binding obligations of the Purchaser, enforceable
against such Purchaser in accordance with their respective terms; the Purchaser
has been advised and understands that the Purchased Shares have not been
registered under the Securities Act, on the grounds that no distribution or
public offering of the Purchased Shares is to be effected, and that in this
connection, the Company is relying in part on the representations of the
Purchaser set forth in this Article VI; the Purchaser has been further advised
and understands that no public market now exists for any of the securities
issued
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<PAGE> 23
by the Company and that a public market may never exist for the Purchased Shares
or Conversion Shares; the Purchaser is purchasing the Purchased Shares for
investment purposes, for its own account and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof; and by reason of its business or
financial experience, the Purchaser has the capacity to protect its own interest
in connection with the transactions contemplated hereunder.
6.2 Permitted Sales; Legends. Notwithstanding the foregoing
representations, the Company agrees that it will permit a distribution of
Purchased Shares or Conversion Shares by the Purchaser to one or more of its
affiliates and Qualified Institutional Buyers, as defined in Rule 144A of the
Securities Act, if (i) the transfer is in accordance with the Shareholders
Agreement, (ii) the transferee agrees in writing to be subject to the terms
hereof and the Shareholders Agreement to the same extent as if it were an
original Purchaser hereunder and (iii) a sale or other transfer of any of the
Purchased Shares or Conversion Shares upon obtaining an opinion of counsel
satisfactory to the Company that such transaction is exempt from the
registration requirements of, or is covered by an effective registration
statement under, the Securities Act and applicable state securities or
"blue-sky" laws.
6.3 Current Shareholder Guaranties. HIG Fund V, Inc., so long as it is a
holder of Purchased Shares, shall use all reasonable efforts (other than the
extension of money or credit accommodations) to assist the Principal
Shareholders in removing themselves as guarantors of the Company's outstanding
indebtedness and leases; provided, however, that nothing in this Section 6.3
shall result in any liability to HIG Fund V, Inc. in the event the Principal
Shareholders are unable to remove themselves as sureties for the Company's
obligations.
ARTICLE VII
REGISTRATION RIGHTS
7.1 Certain Definitions. As used in this Article VII, the following
terms shall have the following respective meanings:
"Holder" means the person who is then the record owner of Registrable
Securities, which have not been sold to the public.
"Initiating Holders" means any Purchaser or its assignee who in the
aggregate are holders of at least twenty-five percent (25%) of the Registrable
Securities.
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<PAGE> 24
"Registrable Securities" means (i) all of the Conversion Shares owned by
the Purchaser, (ii) all other shares of Common Stock now owned or hereafter
acquired by the Purchaser; (iii) all shares of Common Stock issuable with
respect to securities of the Company convertible into or exercisable for shares
of Common Stock now owned or hereafter acquired by the Purchaser; and (iv) any
Common Stock issued in respect of the shares described in clauses (i) through
(iii) upon any stock split, stock dividend, recapitalization other similar
event.
The term "registers" means to register under the Securities Act and
applicable state securities laws for the purpose of effecting a public sale of
securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 7.2, 7.3 or 7.5 hereof, including, without limitation,
all registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders and other
security holders, and the expense of any special audits incident to or required
by any such registration.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
7.2 Requested Registrations.
(a) If after the earlier of (i) the fourth anniversary of the date
hereof and (ii) the consummation of a public offering by the Company, the
Company shall receive from one or more Initial Holders a written request that
the Company effect the registration of Registrable Securities representing at
least twenty five percent (25%) of the Registrable Securities then outstanding
or issuable and the reasonably anticipated aggregate price to the public of the
Registrable Securities to be included in such registration would exceed $5
million, in connection with a firm commitment underwriting financed by a
nationally recognized underwriter, the Company shall:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration as may be so requested and as would permit or facilitate the
sale and distribution of such portion of such Registrable Securities as
are specified in such request, together with such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request given within thirty (30) days after
receipt of such written notice from the Company. If
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<PAGE> 25
the underwriter managing the offering advises the Holders who have
requested inclusion of their Registrable Securities in such registration
that marketing considerations require a limitation on the number of shares
offered, such limitation shall be imposed pro rata among such Holders who
requested inclusion of Registrable Securities in such registration
according to the number of Registrable Securities each such Holder
requested to be included in such registration. Neither the Company nor any
other shareholder may include shares in a registration effected under this
Section 7.2 without the consent of the Holders holding a majority of the
Registrable Securities sought to be included in such registration if the
inclusion of shares by the Company or the other shareholders would limit
the number of Registrable Securities sought to be included by the Holders
or reduce the offering price thereof. No registration initiated by
Initiating Holders hereunder shall count as a registration under this
Section 7.2 unless and until it shall have been declared effective.
(iii) the Holders of the Purchased Shares and the Conversion Shares
shall have the right to demand registration twice under this Section
7.2(a).
(b) Selection of Underwriter. The underwriter of any underwriting
requested under this Section 7.2 shall be selected by the Holders holding a
majority of the Registrable Securities included therein; provided that such
underwriter must be acceptable to the Company.
7.3 "Piggy Back" Registrations.
(a) If the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their registration rights, other than a registration relating
solely to employee benefit plans, or a registration on any registration form
which does not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company shall:
(i) Promptly give to each Holder of Registrable Securities written
notice thereof (which shall include the number of shares the Company or
other security holder proposes to register and, if known, the name of the
proposed underwriter); and
(ii) Use its best efforts to include in such
registration all the Registrable Securities specified in a written request
or requests, made by any Holder within ten (10) days after the date of
delivery of the written notice from the Company described in clause (I)
above. If the
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<PAGE> 26
underwriter advises the Company that marketing considerations require a
limitation on the number of shares offered pursuant. to any registration
statement, then the Company may offer all of the Securities it proposes to
register for its own account or the maximum amount that the underwriter
considers saleable and such limitation on any remaining securities that
may, in the opinion of the underwriter, be sold will be imposed pro rata
among all Shareholders who are entitled to include shares in such
Registration Statement according to the number of Registrable Securities
each such shareholder requested to be included In such registration
statement.
(b) The Company shall select the underwriter for an offering made
pursuant to this Section 7.3.
7.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 7.2, 7.3 or 7.5 shall be paid by the Company. All Selling Expenses
incurred in connection with any such registration, qualification or compliance
shall be borne by the holders of the securities registered, pro rata on the
basis of the number of their shares so registered.
7.5 Registration on Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Securities Exchange Act of 1934 (the "Exchange Act)
in Accordance with the provisions of the Exchange Act following the effective
date of the first registration of any securities of the Company on Form S-1 or
any comparable or successor form. After the Company has qualified for the use of
Form S-3, in addition to the rights contained in the foregoing provisions of
this Article VII, the Holders of Registrable Securities shall have the right to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders);
provided that in no event shall the Company be required to register shares with
an aggregate market value of less than $500,000.
7.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Article VII, the Company shall keep each Holder
of Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company shall do the following for the benefit of such Holders:
(a) Use its best efforts to keep such registration effective for a
period of one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first
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occurs, and amend or supplement such registration statement and the prospectus
contained therein from time to time to the extent necessary to comply with the
Securities Act and applicable state securities laws;
(b) Use its best efforts to register or qualify the Registrable
Securities covered by such registration under the applicable securities or "blue
sky" laws of such jurisdictions as the selling shareholders may reasonably
request; provided, that the Company shall not be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or otherwise
required to be so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of such registration;
(c) Furnish such Number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 7.2 hereof, the Company shall
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the Holders and
provided further that, if the underwriter so requests, the underwriting
agreement shall contain customary indemnification and contribution provisions on
the part of the Company;
(e) To the extent then permitted under applicable professional
guidelines and standards, obtain a comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's counsel
in customary form and covering such matters of the type customarily covered in a
public issuance of securities, in each case addressed to the Holders, and
provide copies thereof to the Holders; and
(f) Permit the counsel to the selling shareholders to inspect and
copy such corporate documents as he may reasonably request.
7.7 Indemnification.
(a) The Company shall, and hereby does, indemnify each Holder,
each of its officers and stockholders, and each person controlling such Holder
within the meaning of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Article VII, and
each underwriter, if any, and each person who controls such underwriter within
the meaning of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
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based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or: other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein of
necessary to make the statements therein not misleading, or an, violation by the
Company of the Securities Act or the Exchange Act or the securities act of any
state or any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and shall reimburse each such
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, whether or not resulting in any liability, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
based upon written information furnished to the Company by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder shall, if Registrable Securities held by him are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each other such Holder and each of their officers,
directors and partners, and each person controlling such Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holder's directors, officers, partners, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
whether or not resulting in liability, in each case to the extent, but only to
the extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in Conformity with
written information furnished to the Company by such Holder and stated to be
specifically for use therein;
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provided, however, that the obligations of each Holder hereunder shall be
limited to an amount equal to the net proceeds received by such Holder upon sale
of his securities.
(c) Each party entitled to indemnification under this Section 7.7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought, but
the failure of any Indemnifying Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 7.7 (except and to the
extent the Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party shall be entitled to participate in, and to extent that it
may elect by written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its expense to
assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Party, provided that
the Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying Party, and
provided, further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or Parties and the fees and expenses of such counsel shall be
paid by the Indemnifying Party. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall (i) furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom and
(ii) shall reasonably assist the Indemnifying Party in any such defense,
provided that the Indemnified Party shall not be required to expend its funds in
connection with such assistance.
(d) No Holder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under Section 7.2 or 7.3 which imposes
indemnification or contribution obligations on such Holder more onerous than
those imposed hereunder; provided, however, that the Company shall not be deemed
to breach the provisions of Section 7.2 or 7.3 if a Holder
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is not permitted to participate in a registration on account of his refusal to
execute an underwriting agreement on the basis of this subsection (d).
7.8 Limitations on Registration Rights. From and after the date of
this Agreement, the Company shall not enter into any agreement with any holder
or prospective holder of any securities of the Company giving such holder or
prospective holder (a) the right to require the Company, upon any registration
of any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder, unless under the terms of
such agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of its securities
will not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities or reduce the offering price thereof; or (b)
the right to require the Company to initiate any registration of any securities
of the Company.
7.9 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of restricted securities (as that term is used in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to use
its best efforts to:
(a) make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as a Purchaser owns any restricted securities,
furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Purchaser may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Purchaser to sell any such
securities without registration.
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7.10 Listing Application. If shares of any class of stock of the Company
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Purchaser.
7.11 Damages. The Company recognizes and agrees that the holder of
Registrable Shares shall not have an adequate remedy if the Company fails to
comply with the provisions of this Article VII, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Shares shall be entitled to seek specific
performance of the Company's obligations hereunder and that the Company will not
oppose an application seeking such specific performance.
ARTICLE VIII
CONDITIONS OF THE PURCHASER'S OBLIGATION
8.1 Effect of Conditions. The obligation of the Purchaser to purchase
and pay for the Purchased Shares at the Closing shall be subject to the
satisfaction of each of the conditions stated in the following Sections of this
Article.
8.2 Representations and Warranties. The representations and warranties
of the Company and the Principal Shareholders Contained in this Agreement shall
be true and correct on the date of the Closing, and the Purchaser shall have
received a certificate dated as of such Closing and signed on behalf of the
Company and the Principal Shareholders to that effect.
8.3 Performance. The Company and the Principal Shareholders shall have
performed and complied with all of the agreements, covenants and conditions
contained in this Agreement required to be performed or complied with by it and
him at or prior to the Closing, and the Purchaser shall have received a
certificate dated as of such Closing and signed on behalf of the Company and by
the Principal Shareholders to that effect.
8.4 Board Election. Concurrently with the Closing, the Board of
Directors of the Company shall have been expanded to comply with the provisions
of the Shareholders' Agreement.
8.5 Certified Documents. etc. Counsel for the Purchaser shall have
received a copy of the Company's Articles of Incorporation, as amended,
certified by the Secretary of State of the State of Florida and copies of the
Company's By-Laws certified by its Secretary, as well as any and all other
documents, including certificates as to votes adopted and incumbency of officers
and certificates from appropriate authorities as to the legal existence
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and tax good standing of the Company and its Subsidiaries, which the Purchaser
or its counsel may reasonably request.
8.6 Amendment to Articles of Incorporation. The Articles of
Incorporation of the Company shall have been amended to provide for the
authorization of the Preferred Stock with the terms set forth in Exhibit A
hereto.
8.7 Shareholders' Agreement. A Shareholders' Agreement in the form of
Exhibit B attached hereto shall have been executed by he Company and the
shareholders named therein.
8.8 Redemption Agreement. A Redemption Agreement in the form of Exhibit
C attached hereto shall have been executed by the Company.
8.9 Opinion of Counsel. The Purchaser shall have received an opinion,
dated the date of the Closing, from Steel, Hector & Davis, counsel to the
Company, substantially in the form attached as Exhibit D hereto.
8.10 Employment Agreements. The Principal Shareholders shall have
executed an Employment Agreement in the form of Exhibit E hereto.
8.11 Consulting Agreement. A Consulting Agreement in the form of Exhibit
F attached hereto shall have been executed by the Company.
8.12 Shareholder Indebtedness. The Company and the Principal Shareholders
shall have amended and restated all of the Company's indebtedness to the
Principal Shareholders on the terms and the conditions as set forth in the form
of promissory note attached as Exhibit G hereto.
8.13 Side Letters. Mr. Sorenson and Ms. Gozlan, Republic National Bank
and AT&T shall have executed their respective side letters as set forth in
Exhibit H hereto.
ARTICLE IX
CONDITIONS OF THE COMPANY'S OBLIGATION
The obligations of the Company under this Agreement are subject to the
fulfillment, or the waiver, of the following conditions on or before the
Closing:
(a) The representations and warranties of the Purchaser contained in
Article VI shall be true and correct on and as of the date of Closing with the
same effect as though such representations and warranties had been made on and
as of that date.
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(b) The Purchaser shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by the Purchaser prior to or at the Closing.
ARTICLE X
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Agreement" means this Series A Preferred Stock Purchase Agreement as from
time to time amended and in effect between the parties.
"Applicable Conversion Value" shall mean the Applicable Conversion Value
of the Preferred Stock under Section 5(c) of Exhibit A.
"Closing" shall have the meaning set forth in Section 1.3.
"Commission" shall have the meaning set forth in Section 2.3.
"Common Stock" will include (a) the Company's Common Stock, par value
$1.00 per share, as authorized on the date of this Agreement, (b) any other
capital stock of any class or classes of the Company authorized on or after the
date hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and (c) any other securities of the Company into
which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Company" means and shall include Let's Talk Cellular of America, Inc., a
Florida corporation, and its successors and assigns.
"Conversion Shares" shall have the meaning set forth in Section 1.2.
"Escrow Accounts" shall mean the account established in the Custody of the
Escrow Agent pursuant to the Escrow Agreement.
"Escrow Agents" shall mean Greenberg, Traurig and its permitted successors
and assigns.
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"Escrow Agreement" shall mean that certain escrow agreement by and among
the Company, the Purchaser and the Escrow Agent in the form of Exhibit H hereto.
"Holders" shall have the meaning set forth in Section 7.1.
"Indebtedness" means all obligations, contingent and otherwise, for
borrowed money which are required to be reflected an indebtedness on a balance
sheet prepared in accordance with generally accepted accounting principles
including, without limitation, any current portion of long-term indebtedness,
capitalized leases and all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
"Indemnified Party" shall have the meaning set forth in Section 7.7.
"Indemnifying Party" shall have the meaning set forth in Section 7.7.
"Initiating Holders" shall have the meaning set forth in Section 7.1.
"New Securities" shall have the meaning set forth in Section 5.2.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Preferred Stock" shall have the meaning set forth in Section 1.1
"Purchased Shares" shall have the meaning set forth in Section 1.1.
"Purchaser" shall have the meaning set forth in Section 1.1.
"Qualified Public Offerings" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the Securities Act covering the offer and sale of Common Stock
for the account of the Company in which the aggregate net proceeds to the
Company equal at least $10,000,000 and in which the price per share of Common
Stock equals or exceeds one point seven five (1.75) times the then Applicable
Conversion Value of the Preferred Stock under Section 5(c) of Exhibit A.
"Registrable Securities" shall have the meaning set forth in Section 7.1.
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"Registration Expense" shall have the meaning set forth in Section 7.1.
"Related Agreements" shall have the meaning set forth in Section 2.2.
"Securities Acts" means the Securities Act of 1933, as amended.
"Selling Expenses" shall have the meaning set forth in Section 7.1.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries tan
herein defined) directly or indirectly owns at the time more than fifty percent
(50~) of the outstanding voting shares of every class of such corporation or
trust other than directors' qualifying shares.
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby for a period of six (6)
months from the date of Closing, or to the extent otherwise specifically set
forth herein.
11.2 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any of the Purchased Shares or Conversion Shares); provided, however, that
the Company may not assign interests hereunder without the consent of the
Purchaser.
11.3 Shares Owned by Affiliates. For the purpose. of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of a
Purchaser shall be deemed to be owned by such Purchaser. For the purpose of this
Agreement, the term "affiliate" shall mean any Person controlling, controlled by
or under common control with, a Purchaser.
11.4 Amendments and Waivers. Amendments or additions to this Agreement
may be made, agreements with any decision of the
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<PAGE> 36
Company may be made, and compliance with any term, covenant, agreement,
condition or provision net forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
upon the written consent of the company and the holders of a majority of the
issued and issuable conversion Shares. Prompt notice of any such amendment or
waiver shall be given to any Person who did not consent thereto. This Agreement
(including the schedules and exhibits annexed hereto, which are an integral part
of this Agreement) constitutes the full and complete agreement of the parties
with respect to the subject matter hereof.
11.5 Notices. All notices, requests, consents, reports and demands shall
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Purchaser at the
address net forth below or to such other address as may be furnished in writing
to the other parties hereto:
The Company: Let's Talk Cellular of America, Inc.
5200 N.W. 77th Court
Miami, Florida 33166
Attention: Mr. Nick Molina
with copy to: Steel, Hector & Davis
200 South Biscayne Blvd.
Miami, Florida
Attention: Harvey Goldman, Esquire
The Purchaser: HIG Fund V, Inc.
c/o HIG Capital Management, Inc.
1001 South Bayshore Drive
Suite 2310
Miami, Florida 33131
Attn: Mr. Anthony Tamer
with copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Guentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Jorge L. Freeland, Esquire
11.6 Expenses. The Company will pay its own expenses and the legal fees
and legal expenses of the Purchaser in connection with the transactions
contemplated hereby.
11.7 Counterparts. This Agreement and any exhibit hereto may be executed
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument.
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11.8 Effect of Headings. The article and section headings herein are for
convenience only and "hall not affect the construction hereof
11.9 Adjustments. All provisions of thin Agreement shall be automatically
adjusted to reflect any stock dividend, stock split or other such form of
recapitalization.
11.10 Governing Law. This Agreement shall be deemed a contract made under
the internal laws of the State of Florida and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such State.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
PRINCIPAL SHAREHOLDERS: Let's Talk Cellular of America,
Inc.
/s/ Nick Molina
- ------------------------------- /s/ Nick Molina
Nick Molina -------------------------------
By: Nick Molina
----------------------------
/s/ Brett Beveridge Name:
- ------------------------------- Title: President
Brett Beveridge
PURCHASER:
HIG Fund V, Inc.
/s/ Anthony Tamer
-------------------------------
By: Anthony Tamer
----------------------------
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CONVERSION AGREEMENT, dated as of the 27th day of June, 1997, by and
between Let's Talk Cellular & Wireless, Inc., a Florida corporation f/k/a Let's
Talk Cellular of America Inc. ("LTC"), HIG Fund V, Inc., a Cayman Islands
corporation ("HIG"), and Texas Cellular Partners, L.P., a Delaware limited
partnership ("TCP").
WHEREAS, HIG currently owns 100,000 shares of Series A Preferred Stock of
LTC (the "Preferred Stock"), purchased pursuant to that certain Series A
Preferred Stock Purchase Agreement, dated as of June 25, 1996 (the "Purchase
Agreement"), by and between LTC and HIG.
WHEREAS, LTC has requested that HIG convert the Preferred Stock into
Common Stock of LTC, par value $.001 per share (the "Common Stock");
WHEREAS, LTC is willing to provide HIG with additional shares of Common
Stock as consideration for HIG's agreement to convert the Preferred Stock prior
to LTC's optional redemption date and for giving up certain rights and
privileges granted to HIG incident thereto;
WHEREAS, HIG has agreed to convert the Preferred Stock into Common Stock
and LTC has agreed to issue Common Stock to HIG on the terms and subject to the
conditions set forth herein; and
WHEREAS, the parties hereto have agreed to terminate certain provisions of
the Purchase Agreement and amend the Purchase Agreement to provide TCP with
registration rights equivalent to those of HIG.
NOW, THEREFORE, the parties hereby agree as follows:
1. Agreement to Convert. HIG agrees to convert its 100,000 shares of
Preferred Stock in return for 650,000 shares of Common Stock, and hereby
delivers to LTC HIG's stock certificates representing the Preferred Stock.
2. Issuance of Shares. LTC hereby agrees to issue to HIG on the date
hereof 650,000 shares of Common Stock as consideration for HIG's conversion of
its Preferred Stock on the date hereof and HIG's agreement to give up the rights
and privileges incident thereto prior to LTC's optional redemption date.
3. Termination of Purchase Agreement Provisions. Articles III, IV and V
of the Purchase Agreement are hereby terminated in their entirety.
4. Registration Rights. The definition of Registrable Securities in
Section 7.1 of the Purchase Agreement is hereby amended and restated in its
entirety as follows:
"Registrable Securities" means (i) all of the Conversion Shares owned by
the Purchaser, (ii) all other shares of Common Stock now owned or hereafter
acquired by the Purchaser or TCP; (iii) all shares of Common Stock issued with
respect to securities of the Company convertible into or exercisable for shares
of Common Stock now owned or hereafter acquired by
<PAGE> 39
the Purchaser or TCP; and (iv) any Common Stock issued in respect of shares
described in clauses (i) through (iii) upon any stock split, stock dividend,
recapitalization or other similar event.
<PAGE> 40
IN WITNESS WHEREOF, the undersigned have execute this Agreement as of the
date first above written.
LETS TALK CELLULAR & WIRELESS, INC.
By: /s/Nick Molina
---------------------------------
Name: Nick Molina
Title: Chief Executive Officer
HIG FUND V,INC.
By: /s/Anthony Tamer
---------------------------------
Name: Anthony Tamer
Title: President
TEXAS CELLULAR PARTNERS, L.P.
By: HIG TEXAS CELLULAR COMPANY
By: /s/Douglas Berman
---------------------------------
Name: Douglas Berman
Title: Vice President
<PAGE> 1
EXHIBIT 10.18
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made this 5th day of October, 1994, by
and between LET'S TALK CELLULAR OF AMERICA, INC., a Florida corporation (the
"Company"), and ALLAN C. SORENSEN, a Florida resident ("Purchaser").
WHEREAS, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, shares of the common stock of
the Company, par value $1.00 per share (the "Shares"), on the terms and
conditions set forth herein;
NOW, THEREFORE, for and in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
Section 1. Transfer of the Shares.
(a) Upon the terms and subject to the conditions set forth herein, the
Company shall issue to the Purchaser, 100 Shares, free and clear of all
liens, encumbrances and limitations of any kind or nature (collectively,
"Liens"), 60 of which Shares shall be delivered to the Purchaser at the
Closing and 40 of which Shares shall be delivered to the Escrow Agent (as
defined in Section 8.2) at the Closing to be held pursuant to the terms of
the Escrow Agreement (as defined in Section 8.2).
(b) If the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with another corporation, or sell or
otherwise consummate any transaction involving the issuance of the capital
stock of the Company ("Dilutive Event"), the Company shall issue to the
Purchaser additional Shares, free and clear of all Liens, such that, after
giving effect to all such transactions and the Purchaser's then current
holdings of Shares, the Purchaser shall own 10% of the issued and
outstanding capital stock of the Company. The obligation of the Company to
issue to the Purchaser additional Shares pursuant hereto shall terminate on
(the "Termination Date"): (i) the day prior to the consummation of the
Company's initial public offering which is registered with the Securities
and Exchange Commission (the "Registered Offering") or, if earlier, (ii) the
date on which Nick Molina and Brett Beveridge (collectively, the "Principal
Shareholders") shall
<PAGE> 2
cease to own in the aggregate at least 75% of the issued and outstanding
capital stock of the Company as a result of the issuance of capital stock
pursuant to Dilutive Events (thus, for purposes of determining pursuant to
this clause (b) whether the Principal Shareholders still own at least
seventy-five percent (75%) of the issued and outstanding capital stock of
the Company, they shall be deemed to still own all shares of capital stock
transferred by the Principal Shareholders and all capital stock issued by
the Company to family members and affiliates of the Principal
Shareholders.) The purpose of this Section 1(b) is to assure that the
Purchased Shares represent, at all times through and including the
Termination Date, ten percent (10%) of the issued and outstanding capital
stock of the Company on a fully-diluted basis. For purposes of this
Agreement, the phrase "on a fully-diluted basis" shall mean after giving
effect to the issuance of securities pursuant to any then outstanding
preemptive rights, subscriptions, options, warrants, puts, calls,
rights, exchangeable or convertible securities or other agreements or
commitments of any character obligating the Company to issue, transfer,
sell, purchase or redeem any of its securities. Promptly after the
consummation of each transaction giving rise to such issuance, the Company
shall deliver certificates representing 60% of all additional Shares
issued hereunder to the Purchaser and certificates representing the
remaining 40% of such additional shares to the Escrow Agent, or, if the
Escrow Agreement shall have terminated pursuant to the terms thereof, all
such certificates to the Purchaser, in each case bearing such legends as
the Company shall reasonably require.
The Shares described in clauses (a) and (b) above are hereinafter
referred to as the "Purchased Shares".
Section 2. Consideration.
In consideration and payment in full for the Purchased Shares, the
Purchaser shall pay $250,000 in cash to the Company on the Closing Date.
Section 3. Option to Repurchase.
The Company shall have the right, but not the obligation, to purchase
from the Purchaser, in each case free and clear of all Liens:
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<PAGE> 3
(a) one-fourth of all Purchased Shares held in escrow by the Escrow
Agent, for an aggregate exercise price of $1.00, if, on or before the first
anniversary of the Closing Date, the Purchaser has not submitted to the
Board of Directors of the Company a Proposal for a Nationwide Distribution
Network. For purposes of this clause (a), "Proposal for a Nationwide
Distribution Network" shall mean a written proposal prepared by or on behalf
of the Purchaser setting forth in reasonable detail the comparative
material features, including, without limitation, geographic scope, time to
implement, costs, projected benefits, legal requirements and marketing
advantages, of three or more methods of distributing the Company's
products, including franchising and licensing, and containing the
Purchaser's recommendations and reasons therefor; and
(b) three-fourths of all Purchased Shares held in escrow by the Escrow
Agent, for an aggregate exercise price of $1.00, if, on or before the second
anniversary of the Closing Date, the Company has not received net proceeds
in the aggregate amount of $1,000,000 or more from any sale or sales of
securities of the Company (whether through a public offering, private
placement or otherwise), or from any institutional or other borrowing (other
than pursuant to any lines of credit which any of the Principal Shareholders
have guaranteed), or from any combination thereof.
The option granted pursuant to clause (a) above shall be exercisable by
delivery of notice to the Purchaser and payment of the exercise price at any
time after the first anniversary of the Closing Date, and the option granted
pursuant to clause (b) above shall be exercisable by delivery of notice and
payment of the exercise price to the Purchaser at any time after the second
anniversary of the Closing Date, Each option shall expire if notice of exercise
and payment are not received by the Purchaser on or before the thirtieth day
after such option first becomes exercisable. Upon exercise or expiration or an
option, as the case may be, the Company and the Purchaser shall give written
instructions to the Escrow Agent to release the Purchased Shares subject to
such option which are then held in escrow, to the Company in the event of an
exercise, or to the Purchaser in the event of expiration.
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<PAGE> 4
Section 4. Representations and Warranties of the Company.
The Company represents and warrants to the Purchaser as of the date
hereof, as of the Closing Date and, with respect to Section 4.5 only, as of the
date of each issuance of Purchased Shares subsequent to the date hereof, as
follows:
4.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and has all
requisite corporate power and authority to own, lease and operate its properties
and carry on its business as now being conducted. The Company has heretofore
delivered to the Purchaser accurate and complete copies of its Articles of
Incorporation and By-Laws, as currently in effect.
4.2 Enforceable Obligation. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. Each of
the Consulting Agreement (as defined in Section 8.2) and the Escrow Agreement
shall, when it is executed and delivered by the Company, be duly executed and
delivered by the Company and shall constitute a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.
4.3 No Violation. The execution, delivery and performance by the
Company of this Agreement, the Consulting Agreement and the Escrow Agreement
shall not constitute a violation of, or be in conflict with, or result in a
breach of, or constitute a default under, or contravene any provision of, any
contract, agreement or instrument, any law, statute, rule or regulation, or any
judgment, decree, order or award, by which the Company is bound or to which any
of its assets are subject, or any provision of the Articles of Incorporation or
By-Laws of the Company.
4.4 Capitalization. As of the Closing Date, the authorized capital
stock of the Company consists solely of 50,000,000 shares of common stock, par
value $1.00 per share. As of the Closing Date, there were 1,000 Shares issued
and outstanding, after giving effect to the issuance of the Shares to Purchaser
as described in Section l(a), the remaining 900 shares of which are owned
legally, beneficially and of record by the Principal Shareholders. All of the
Shares are validly issued, fully paid and nonassessable. As of the Closing
Date, there are no
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<PAGE> 5
preemptive rights, subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other agreements or commitments of any
character obligating the Company to issue, transfer, sell, purchase or redeem
any of its securities. The Company has not issued any Shares or any other
securities exchangeable or exercisable for or convertible into shares of capital
stock of the Company.
4.5 Shares. The Purchased Shares to be issued pursuant to this
Agreement are duly authorized, and upon their issuance pursuant hereto, shall be
validly issued, fully paid and nonassessable and free and clear of all Liens.
The Purchased Shares delivered pursuant to Section l(a) constitute 10% of the
issued and outstanding capital stock of the Company on a fully diluted basis as
of the Closing Date.
4.6 Financial Statements. The Company has heretofore delivered to the
Purchaser true and complete copies of the financial statements of the Company
for and as of the fiscal year ended July 31, 1994 ("Financial Statements"),
including a balance sheet ("Balance Sheet") for the Company as of July 31, 1994.
The Financial Statements were prepared in accordance with generally accepted
accounting principles (applied on a consistent basis throughout the period
covered thereby, present fairly, in all material respects, the financial
condition and results of operations of the Company as of and for such period and
have been prepared from the books and records of the Company. Since the date of
the Balance Sheet, there has not been any material adverse change in the
Company's financial condition and assets.
4.7 Undisclosed Liabilities. Except as disclosed in the Balance Sheet,
since the date of the Balance Sheet, the Company has not incurred any
material liability (absolute, contingent or otherwise), except liabilities
incurred in the ordinary course of business consistent with past practice.
4.8 Taxes. The Company has filed all tax returns that it has been
required to file, and has paid all taxes shown thereon as arising, except
where the failure to file such returns or to pay such taxes would not have a
material adverse effect on the financial condition of the Company. There are
no audits of any tax returns of the Company currently in progress, and the
Company has not received any written notices of deficiency or assessment or
proposed deficiency or assessment from any taxing authority which has not
been paid.
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<PAGE> 6
Section 5. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company as of the date
hereof and as of the Closing Date as follows:
5.1 Enforceable Obligation. This Agreement has been duly executed
and delivered by the Purchaser and constitutes a valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms.
Each of the Consulting Agreement and the Escrow Agreement shall, when it is
executed and delivered by the Purchaser, be duly executed and delivered by the
Purchaser and shall constitute the valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms.
5.2 No Violation. The execution, delivery and performance by the
Purchaser of this Agreement, the Escrow Agreement and the Consulting Agreement
shall not constitute a violation of, or be in conflict with, or result in a
breach of, or constitute a default under, or contravene any provision of, any
contract, agreement or instrument, any law, statute, rule or regulation, or any
judgment, decree, order or award, by which the Purchaser is bound or to which
any of his assets are subject.
5.3 Securities Laws. The Purchaser is purchasing the Purchased Shares
for his own account and for investment and not with a view to, or for sale in
connection with, any distribution of securities.
Section 6. Covenants.
6.1 Conduct of the Business. Prior to the Closing, the Company and its
subsidiaries shall carry on their businesses in the ordinary course consistent
with past practice and shall use their best efforts to preserve intact their
present business organization and their relationships with customers.
6.2 Access to Information. During the period from the date hereof
to the Closing Date, upon reasonable notice, the Company shall afford to the
Purchaser access, during normal business hours, to the properties, books,
contracts, commitments and records of the Company and its subsidiaries; provided
however, that in conducting such activities, the Purchaser shall not, and shall
cause his representatives not to, unduly interfere with the business and
employees of the Company and its subsidiaries. The
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<PAGE> 7
Purchaser shall use all non-public information disclosed by the Company or its
representatives solely for the purpose of evaluating the transactions
contemplated hereby and shall not disclose to any person or entity other than
his representatives or use such information for any other purpose, except as
required by applicable law or legal process, without the prior written consent
of the Company. The Purchaser shall inform his representatives of the
confidential nature of such information and shall obtain the agreement of each
such representative to maintain and use such non-public information in a manner
consistent with the provisions of this Section 6.2. If this Agreement is
terminated, the Purchaser shall, and shall cause his representatives to,
destroy or deliver to the Company all non-public documents, work papers and
other materials containing any non-public information, whether obtained before
or after the date of execution hereof.
6.3 Restrictions on Transfer.
(a) If the Purchaser shall desire to sell or otherwise dispose of,
grant any option with respect to, or create, incur, assume or suffer to
exist any Lien on the Purchased Shares (collectively, a "Transfer"), then
in his possession and not held by the Escrow Agent (the "Non-Escrow
Shares"), he shall first offer to sell such Shares to the Company by
delivering to the Company notice of the proposed Transfer. Such notice shall
state the number of Non-Escrow Shares offered and the price and terms upon
which such Shares are proposed to be Transferred. The Company shall have
the right to elect upon notice to the Purchaser within 30 days thereafter
to purchase all, but not less than all, of the Non-Escrow Shares at the
same price and upon the same terms and conditions as those contained in
such offer by giving notice to the Purchaser within the 30-day period.
Notwithstanding the foregoing, if the proposed Transfer is to occur
subsequent to the Registered Offering, the Purchaser may give Company
notice of the Transfer telephonically or by fax and the Company's right
to elect to purchase pursuant this Section 6.3 must be exercised within
forty-eight (48) hours after notice is given telephonically or by fax by
the Purchaser. If the Company does not elect to purchase all of the
Non-Escrow Shares within the aforesaid period or, if, after accepting such
offer, the Company fails to purchase all such Shares in accordance
herewith, then the Purchaser shall be free to Transfer all such Shares to
anyone at not less than the price and on the same terms and conditions
contained in the
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<PAGE> 8
offer within 90 days following, as the case may be, (x) the default by the
Company to make such purchase of such Shares on the closing date, or (y) the
earlier of either (1) the expiration of the period within which the Company
may elect to purchase such Shares or (2) the giving of notice by the
Company to the Purchaser that it does not elect to purchase all of
Non-Escrow Shares. Promptly after the execution of any contract for the
Transfer of such Shares, the Purchaser shall deliver to the Company a true
and complete copy of such contract and all amendments thereto, and such
other information relating to the contract and the proposed purchaser as
the Company may request. Upon the consummation of the Transfer of such
Shares, the Purchaser shall notify the Company thereof and shall certify
the price and terms and conditions upon which such Transfer was made. Any
attempted Transfer of Purchased Shares by the Purchaser otherwise than in
full compliance herewith shall be null and void.
(b) In the event that either or both of the Principal Shareholders
propose to engage in one or more Transfers prior to the consummation of the
Registered Offering which would result in the Principal Shareholders owning
in the aggregate less than 51% of the voting capital stock of the Company,
the Transferors shall give written notice to the Purchaser setting forth
the material terms of the proposed Transfer. If the Purchaser so elects by
delivery of written notice to the Transferors, the Principal Shareholders
shall not Transfer their Shares unless the Transferee agrees to purchase
such number of Non-Escrow Shares as is specified in the notice, at the same
pries per share and upon the same terms and conditions, as such Transferee
proposes to purchase the Shares of the Transferors.
6.4 Incidental Registration.
(a) If, on any one or more occasions, the Company proposes to register
its Shares under the Securities Act of 1933, as amended (the "Securities
Act"), by registration on Forms S-1, S-2, S-3, SB-1 or SB-2, or any
successor, or similar form(s), whether or not for sale for its own account,
it will each such time give prompt written notice to the Purchaser of its
intention to do so. The Purchaser shall be entitled pursuant to the
provisions of this Section 6.4 to request the registration of up to 30% of
his Non-Escrow Shares. Upon the written request of the
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<PAGE> 9
Purchaser made as promptly as practicable and in any event within 20 days
after the receipt of any such notice (which request shall specify the
Purchased Shares intended to be included by the Purchaser in such
registration), the Company will use its best efforts to effect the
registration under the Securities Act of a number of Purchased Shares not to
exceed 30% of the Non-Escrow Shares which the Company has been so requested
to register; provided, however, that if, at any time after giving written
notice of its intention to register any Non-Escrow Shares and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason to delay or not to
complete the registration of the Company's Shares in which Purchased Shares
were to be included pursuant to this Section 6.4(a). The Company may, at its
election, give written notice of such determination to the Purchaser and (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Non-Escrow Shares in connection with such
registration, without prejudice, however, to the rights of the Purchaser
hereunder, and (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Non-Escrow Shares for the same
period as the delay in registering such other securities; and provided
further that, subsequent to the Registered Offering, the Company shall not
be required to register pursuant to this Section 6.4(a) Purchased Shares
that are then eligible for resale pursuant to Rule 144 under the Securities
Act. For purposes of this Section 6.4, the term "Non-Escrow Shares" will be
deemed to include all shares issued on or in respect of the Purchased Shares
as a result of a stock split, stock dividend or otherwise. The rights of the
Purchaser under this Section 6.4 shall be pari passu with, but not superior
to, any other registration rights outstanding in regard to the capital stock
of the Company. Any underwriters' discounts and commissions with respect to
the Purchased Shares shall be allocated to and paid by the Purchaser based
on the number of Non-Escrow Shares registered. The Purchaser shall pay for
all of the fees and expenses of counsel retained by him.
(b) If the managing underwriter of any underwritten offering shall
inform the Company by letter of its belief that the number of Shares
requested to be included in such registration would materially adversely
affect such offering, then the Company will include in such registration, to
the
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<PAGE> 10
extent of the number which the Company is so advised can be sold in (or
during the time of) such offering, first, all Shares proposed by the
Company to be sold for its own account and second, such Shares requested to
be included in such registration pro rata among the requesting holders
according to the total number of Shares requested by such holders.
(c) If and whenever the Company is required to use its best efforts to
effect the registration of any Shares under the Securities Act as provided
in Section 6.4(a), the Company will as soon as practicable:
(i) prepare and (within 60 days after the end of the Company's
fiscal quarter within which requests for registration may be given to
the Company or 90 days in the case of the Company's fourth fiscal
quarter) file with the Securities and Exchange Commission the requisite
registration statement to effect such registration and thereafter use
its best efforts to cause such registration statement to become
effective;
(ii) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the
disposition of all Shares covered by such registration statement until
the earlier of such time as all of such Shares shall have been
disposed and 45 days after the effective date of the registration
statement;
(iii) furnish to the Purchaser such number of conformed copies of
such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, as the Purchaser may
reasonably request;
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<PAGE> 11
(iv) use its best efforts (x) to register or qualify all of the
Shares covered by such registration statement under such other
securities or blue sky laws of the State of Florida and such other
States of the United States of America where an exemption is not
available and as a majority of the sellers of Shares covered by such
registration statement shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect, and (z) to take any other
action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the
securities to be sold by such sellers, except that the Company shall
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subclause (iv) be obligated to be
so qualified, to consent to general service of process in any such
jurisdiction or to subject itself to taxation in any such jurisdiction;
and
(v) use its best efforts to cause all Shares covered by such
registration statement to be registered with or approved by such other
Federal or state governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company and counsel to the
sellers of Shares to enable the sellers thereof to consummate the
disposition of such Shares.
The Company may require the Purchaser to furnish to the Company such
information regarding the Purchaser and the distribution of his Purchased Shares
as the Company may from time to time reasonably request in writing.
Section 7. Conditions Precedent.
7.1 Conditions to the Company's Obligations. The obligations of the
Company under this Agreement are subject to the satisfaction of all of the
following conditions at or prior to the Closing, unless waived by the Company:
(a) The representations and warranties of the Purchaser contained in
this Agreement shall be accurate in all material respects on and as of
the Closing Date with the same effect as though
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<PAGE> 12
such representations and warranties had been made on and as of such date.
(b) Each and all of the obligations of the Purchaser to be performed
or complied with on or before the Closing pursuant to the terms hereof shall
have been performed or complied with in all material respects.
7.2 Conditions to the Purchaser's Obligations.
The obligations of the Purchaser under this Agreement are subject to the
satisfaction of all of the following conditions at or prior to the Closing,
unless waived by the Purchaser:
(a) The representations and warranties of the Company contained in
this Agreement shall be accurate in all material respects on and as of the
Closing Date with the same effect as though such representations and
warranties had been made on and as of such date.
(b) Each and all of the obligations of the Company to be performed or
complied with on or before the Closing pursuant to the terms hereof shall
have performed or complied with in all material respects.
Section 8. The Closing.
8.1 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of White & Case, 200
South Biscayne Boulevard, Miami, Florida, at such time and date as the parties
hereto shall agree, which, in any event, shall not be later than October 5,
1994, (such time and date on which the Closing takes place, the "Closing Date").
8.2 Obligations of the Company at the Closing. At the Closing, the
Company shall:
(a) Deliver to the Purchaser a counterpart of a Consulting Agreement,
substantially in the form attached hereto as Exhibit A (the "Consulting
Agreement"), duly executed by the Company;
(b) Deliver to the Purchaser a counterpart of an Escrow Agreement,
substantially in the form attached hereto as Exhibit B (the "Escrow
Agreement"), duly executed by the Company; and
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<PAGE> 13
(c) Issue, execute and deliver to the Purchaser and to the escrow
agent under the Escrow Agreement (the "Escrow Agent"), stock certificates,
representing the Shares described in Section l(a), bearing such legends as
the Company shall reasonably require.
8.3 Obligations of the Purchaser at the Closing. At the Closing, the
Purchaser shall:
(a) Pay the amount set forth in Section 2 hereof to the Company;
(b) Deliver to the Company a counterpart of the Consulting Agreement,
duly executed by Purchaser;
(c) Deliver to the Company a counterpart of the Escrow Agreement,
duly executed by the Purchaser; and
(d) Deliver to the Escrow Agent stock powers executed in blank in
respect of Purchased Shares deposited by the Company with the Escrow Agent.
Section 9. Miscellaneous.
9.1 Survival of Representations and Warranties. The representations
and warranties of the parties contained in Sections 4 and 5 hereof shall survive
the Closing until the third anniversary thereof.
9.2 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when delivered in person, or when sent by telex
or telecopy or other facsimile transmission (with receipt confirmed), or on the
fifth business day after posting thereof by registered or certified mail, return
receipt requested, prepaid and addressed as follows (or at such other addresses
as the parties may designate by written notice in the manner aforesaid):
If to the Company:
Let's Talk Cellular of America, Inc.
1912 N.W. 84th Avenue
Miami, Florida 33126
Telephone: (305) 477-8255
Facsimile: (305) 594-0498
Attention: President and
Executive Vice President
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<PAGE> 14
With a copy to:
Emilio Alvarez-Farre
White & Case
First Union Financial Center
200 South Biscayne Blvd.
Miami, Florida 33131
Telephone: (305) 371-2700
Facsimile: (305) 358-5744
If to Purchaser:
Allan C. Sorensen
c/o Interim Services, Inc.
2050 Spectrum Boulevard
Ft. Lauderdale, Florida 33309-3008
Telephone: (305) 938-7705
Facsimile: (305) 351-8117
With a copy to:
Scott H. Margol, Esq.
Ruden, Barnett, McClosky, Smith,
Schuster & Russell, P.A.
200 East Broward Boulevard
Fort Lauderdale, Florida 33301
Telephone: (305) 527-2408
Facsimile: (305) 764-4996
9.3 Assignment. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof may be assigned or
delegated by either party hereto without the prior written consent of the other
party.
9.4 Severability. In the event any provision of this Agreement is held
to be invalid, illegal or unenforceable for any reason and in any respect, such
invalidity, illegality or unenforceability shall not affect, prejudice or
disturb the validity of any other provision contained herein and all such other
provisions shall remain in full force and effect.
9.5 Attorneys' Fees. In the event of any litigation between the
parties as to any matter arising under this Agreement or relating to the subject
matter hereof, the prevailing party in any such litigation shall be entitled to
recover from the other party his or its reasonable attorneys' fees, costs and
expenses incurred in such litigation (including appellate litigation).
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<PAGE> 15
9.6 Benefit. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective successors and permitted
assigns.
9.7 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings of the parties with respect
to such subject matter.
9.8 Amendments and Waivers. Neither this Agreement nor any of the
terms hereof may be changed, waived or discharged, unless such change, waiver or
discharge is in a writing signed by all the parties hereto.
9.9 Captions. The captions contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provision hereof.
9.10 Construction. This Agreement shall be interpreted without regard
to any presumption or rule requiring construction against the party causing this
Agreement to be drafted.
9.11 Counterparts. This Agreement may be executed in two or more
counterparts, including facsimile counterparts, each and all of which shall be
deemed an original and all of which together shall constitute but one and the
same agreement.
9.12 Governing Law. This Agreement has been executed and delivered in,
and shall be interpreted, construed, and enforced in accordance with, the laws
of the State of Florida.
9.13 Confidentiality Agreement. Without prejudice to the Company's
rights under the Consulting Agreement, the Confidentiality Agreement dated as of
June 27, 1994, between the Company and the Purchaser is hereby terminated.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the day and year first above written.
LET'S TALK CELLULAR OF
AMERICA, INC.
/s/ Nicolas Molina
-----------------------------------
Name: Nicolas Molina
-------------------------------
Title: President
------------------------------
/s/ Allan C. Sorensen
------------------------------------
Allan C. Sorensen
-16-
<PAGE> 17
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to that certain Stock Purchase Agreement dated
October 5, 1994 ("Agreement"), by and between LET'S TALK CELLULAR OF AMERICA,
INC., a Florida corporation (the "Company") and ALLAN C. SORENSEN, a Florida
resident ("Purchaser"), is dated as of May 15 , 1996 and shall read as follows:
WITNESSETH:
WHEREAS, the Company and Purchaser wish to make certain revisions to
the Agreement, the terms and conditions of which are set forth herein;
NOW, THEREFORE, for and in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
1. Section 1. Transfer of the Shares. In Subparagraph (a), all of
the Purchased Shares shall be delivered to the Purchaser. With regard to same,
those of the Purchased Shares held by the Escrow Agent, pursuant to the terms
of the Escrow Agreement, shall be immediately distributed by the Escrow Agent
to the Purchaser In conjunction therewith, the parties hereto have executed a
Termination of Escrow Agreement, of even date herewith, pursuant to which the
Escrow Agent is authorized and instructed to release and distribute to the
Purchaser all of the Purchased Shares held by the Escrow Agent, upon which the
Escrow Agreement shall terminate and be of no further force and effect.
2. Section 1. Transfer of Shares. In Subsection (b), the second
sentence only shall be deleted in its entirety and shall be replaced with the
following:
"The obligation of the Company to issue to the Purchaser
additional Shares pursuant hereto shall terminate on (the
1
<PAGE> 18
Termination Date"): (i) the day prior to the consummation of the
Company's initial public offering which is registered with the
Securities and Exchange Commission (the "Registered Offering") or,
if earlier, (ii) the date on which Nick Molina and Brett Beveridge
(collectively, the "Principal Shareholders") shall cease to own in
the aggregate at least ninety (90%) percent of the issued and
outstanding capital stock of the Company, (inclusive of Shares
owned by Anne Gozlan, in an amount not to exceed three (3%)
percent of the issued and outstanding capital stock of the
Company), as a result of the issuance of capital stock pursuant to
Dilutive Events (thus, for purposes of determining pursuant to
this clause (b) whether the Principal Shareholders still own at
least ninety (90%) percent of the issued and outstanding capital
stock of the Company (inclusive of Shares owned by Anne Gozlan, in
an amount not to exceed three (3%) percent of the issued and
outstanding capital stock of the Company), they shall be deemed to
still own all shares of capital stock transferred by the Principal
Shareholders and all capital stock issued by the Company to family
members and affiliates of the Principal Shareholders.)"
3. Section 3. Option to Repurchase. This Section shall be deleted
in its entirety.
4. A new Section 9.14 entitled "Death or Disability of Purchaser,"
shall be included in the Agreement and shall read as follows:
2
<PAGE> 19
"(a) In the event of the death of the Purchaser, the Company shall
be required to purchase the Shares of the Purchaser owned by him
at the time of his death. The purchase price shall be determined
as of the last day of the month preceding Purchaser's death (the
"Determination Date").
(b) The purchase price to be paid by the Company to the estate or
personal representative of the Purchaser for the Shares of the
Purchaser shall be the highest of the following amounts, as
calculated;
(i) The sum of Two Hundred Fifty Thousand ($250,000.00)
Dollars;
(ii) Five (5x) times the After-Tax Earnings of the Company,
calculated for the immediately preceding twelve (12) month period,
ending on the Determination Date, multiplied by the Purchaser's
percentage ownership of the issued and outstanding Shares of the
Company; or
(iii) The Book Value of the Company, as of the Determination
Date, multiplied by the Purchaser's percentage ownership of the
issued and outstanding Shares of the Company.
(c) The payment of the Purchase Price for the Shares of the
Purchaser may be made in equal monthly installments of principal
and interest and shall be paid commencing on the first
3
<PAGE> 20
day of the fourth month following the Determination Date, with
payments to be made on the first day of each month (or next
business day thereafter) for a period of thirty-six (36) months.
The deferred portion of the Purchase Price shall bear interest on
the unpaid balance at the Wall Street Journal Prime Rate (plus
1%), as of the date the initial payment is due.
(d) for purposes hereof, the term "Book Value" shall mean, as of
any date, the total shareholder's equity (including capital stock,
additional paid in capital and retained earnings after deducting
treasury stock) which would appear on the audited balance sheet of
the Company as of such date, in accordance with generally accepted
accounting principles, consistently applied. For purposes hereof,
the term "After-Tax Earnings" shall mean, as of any date, the
After-Tax Earnings which would appear on the audited income
statement of the Company as of such date, in accordance with
generally accepted accounting principles, consistently applied.
The Book Value and After-Tax Earnings shall be determined by the
then existing independent certified public accountants of the
Company. The determination by such independent certified public
accountants of the Book Value and the After-Tax Earnings shall be
conclusive and binding on the Company and the Purchaser.
4
<PAGE> 21
5. Except for those changes set forth in this Amendment, the terms,
conditions and provisions contained in the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Addendum to the Stock Purchase Agreement on the day and year first above
written.
COMPANY:
LET'S TALK CELLULAR OF AMERICA, INC.,
a Florida corporation
/s/ Nicolas Molina By: /s/ Brett Beveridge
- -------------------------- --------------------------------
Witness Name: Brett Beveridge
------------------------------
Title: Vice-President
-----------------------------
PURCHASER:
/s/ Allan C. Sorensen
------------------------------------
Allan C. Sorensen
5
<PAGE> 22
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This FIRST AMENDMENT, date as of June ____, 1996 (the "Amendment") is
entered into by and between LET'S TALK CELLULAR OF AMERICA, INC., a Florida
Corporation (the "Company") and ALLAN C. SORENSEN (the "Consultant"), and amends
that certain Stock Purchase Agreement, dated as of October 5, 1994 (the
"Purchase Agreement," and together with this Amendment, the "Agreement")
RECITALS
WHEREAS, the Consultant currently provides various consulting services to
the Company which are more particularly described in the Agreement;
WHEREAS, the Consultant and the Company desire to amend the Agreement in
accordance with the terms hereof;
NOW THEREFORE, for good and valuable consideration, the receipt, adequacy
and sufficiency whereof are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. The above recitals are true and correct and are incorporated herein by
this reference. All capitalized terms used but not otherwise defined
herein shall have the respective meanings provided for them in the
Agreement.
2. The following sections of the Agreement are hereby amended to read as
follows:
a) Section 6.3(b) of the Agreement is amended by inserting as the
last sentence of that section the following:
Immediately prior to the consummation of a Registered Offering by
the Company, the right of the Consultant to cause the Company to
repurchase his shares under this Section 6.3(b) shall
automatically terminate and be of no further force and effect.
b) Section 6.4 of the Agreement is deleted in its entirety and
replaced with the "Registration Rights" set forth in Section 7.3
of that certain Series A Preferred Stock Purchase Agreement dated
as of the date hereof, by and among the Employer, HIG Fund V,
Inc., Nick Molina, and Brett Beveridge. For purposes of the
Employee's Piggy-back Registration Rights, the definition of
"Registrable Securities" under the Purchase Agreement shall be
deemed to include the shares owned by the Consultant. The
Consultant hereby agrees and acknowledges that his shares shall be
treated pro rata with the shares of the other Holders of
Registrable Securities.
<PAGE> 23
P. 3
c. The Consultant hereby confirms that he will subordinate whatever
rights he may have to cause the Company to repurchase his shares
if the Company commits an "EBIT Default" (as such term is defined
in that certain Shareholders Agreement, dated as of the date
hereof, by and among the Company, the Consultant, HIG Fund V.
Inc., ("HIG"), Nick Molina, and Brett Beveridge and Anne Gozlan)
to the redemption rights of HIG under (I) the Redemption
Agreement, dated as of the date hereof, by and between HIG and the
Company and (II) the Description of Series A Preferred Stock
attached as Exhibit A to the Purchase Agreement. The Consultant
agrees that he will not require or receive payment for his shares
upon the occurrence of an EBIT Deficit until HIG has received all
payment for the number of shares that it requested the Company to
repurchase following the occurrence of such an event.
d. The Consultant hereby confirms that (I) he currently owns and is
in possession of 100 shares of the Company's Common Stock, par
value $1.00 per share, which is evidenced by a Certificate issued
in the name of Allan C. Sorensen (the "Certificate") and (II) upon
the effectiveness of the 650-for-1 forward stock split, he shall
return the Certificate to the Company in exchange for a
certificate evidencing 65,000 shares of the Company's Common
Stock, par value $.001 per share.
3. Except as modified by this Amendment, the parties hereto acknowledge that
the Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date and year first witness above.
COMPANY: LET'S TALK CELLULAR OF AMERICA, INC.:
By: /s/ Nicolas Molina
----------------------------------
Its: President
CONSULTANT: /s/Allan C. Sorensen
----------------------------------
Allan C. Sorensen
<PAGE> 1
EXHIBIT 10.19
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LET'S TALK CELLULAR & WIRELESS, INC.,
MERGER SUB 1, INC.
MERGER SUB 2, INC.
TELEPHONE WAREHOUSE, INC.
NATIONAL CELLULAR, INCORPORATED
AND
TEXAS CELLULAR PARTNERS, L.P.
DATED AS OF JUNE 27, 1997
<PAGE> 2
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of the
27th day of June, 1997, by and among LET'S TALK CELLULAR & WIRELESS, INC., a
Florida corporation f/k/a Let's Talk Cellular of America, Inc. ("LTC"), MERGER
SUB 1, INC., a Delaware corporation ("Merger Sub 1"), MERGER SUB 2, INC., a
Texas corporation ("Merger Sub 2" and collectively with Merger Sub 1, the
"Buyers"), TELEPHONE WAREHOUSE, INC., a Delaware corporation ("TWI"), NATIONAL
CELLULAR, INCORPORATED, a Texas corporation ("NCI") and TEXAS CELLULAR
PARTNERS, L.P., a Delaware limited partnership ("TCP"). Terms used herein and
not otherwise defined shall have the meanings set forth in Section 11.3 hereof.
WHEREAS, Merger Sub 1 desires to merge with and into TWI and TWI
desires that Merger Sub 1 be merged with and into TWI (the "TWI Merger"), so
that TWI will be the surviving corporation, all upon the terms and subject to
the conditions set forth herein and in accordance with the laws of the State of
Delaware;
WHEREAS, Merger Sub 2 desires to merge with and into NCI and NCI
desires that Merger Sub 2 be merged with and into NCI (the "NCI Merger" and
collectively with the TWI Merger, the "Mergers"), so that NCI will be the
surviving corporation, all upon the terms and subject to the conditions set
forth herein and in accordance with the laws of the State of Texas; and
WHEREAS, the parties hereto have previously executed an Agreement and
Plan of Merger on April 11, 1997 and now desire to amend and restate such
agreement to amend certain provisions thereof.
NOW, THEREFORE, in consideration of the representations and
warranties, covenants and agreements, and subject to the conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1 TWI Merger. At the Effective Time, (i) Merger Sub 1 shall be
merged with and into TWI on the terms and in accordance with the provisions
contained in this Agreement; (ii) the separate corporate existence of Merger
Sub 1 shall cease; (iii) the corporate existence of TWI shall continue under
the laws of the State of Delaware unaffected and unimpaired by the TWI Merger;
and (iv) TWI shall be the surviving corporation of the TWI Merger. At the
Effective Time, all of the assets and properties of Merger Sub 1, whether real,
personal or mixed, and whether tangible or intangible, and all of the
liabilities and obligations of Merger Sub 1, whether fixed or contingent, shall
vest in TWI as the surviving corporation, without any further action of either
Merger Sub 1 or TWI. From and after the Effective Time, TWI shall (i) possess
all of the
<PAGE> 3
rights, privileges, immunities, franchises (both public and private), assets
and properties whether real, personal or mixed, and (ii) shall be responsible
and liable for all of the liabilities and obligations of Merger Sub 1.
1.2 NCI Merger. At the Effective Time, (i) Merger Sub 2 shall be
merged with and into NCI on the terms and in accordance with the provisions
contained in this Agreement; (ii) the separate corporate existence of Merger
Sub 2 shall cease; (iii) the corporate existence of NCI shall continue under
the laws of the State of Texas unaffected and unimpaired by the NCI Merger; and
(iv) NCI shall be the surviving corporation of the NCI Merger. At the Effective
Time, all of the assets and properties of Merger Sub 2, whether real, personal
or mixed, and whether tangible or intangible, and all of the liabilities and
obligations of Merger Sub 2, whether fixed or contingent, shall vest in NCI as
the surviving corporation, without any further action of either Merger Sub 2 or
NCI. From and after the Effective Time, NCI shall (i) possess all of the
rights, privileges, immunities, franchises (both public and private), assets
and properties (whether real, personal or mixed and whether tangible or
intangible) of Merger Sub 2; and (ii) shall be responsible and liable for all
of the liabilities and obligations of Merger Sub 2.
1.3 Filing. As soon as practicable following fulfillment of the
conditions specified in Article VII and Article VIII hereof, and provided that
the Agreement has not been terminated and abandoned pursuant to Article X
hereof, (i) TWI and Merger Sub 1 will cause an executed counterpart of a
certificate of merger to be filed with the Secretary of State of Delaware, and
(ii) NCI and Merger Sub 2 will cause an executed counterpart of articles of
merger to be filed with the Secretary of the State of Texas.
1.4 Effective Time of the Mergers. The term "Effective Time" as
used herein is defined to mean the time that the filing of the certificate of
merger with the Secretary of State of Delaware (as to the TWI Merger) and the
filing of the articles of merger with the Secretary of State of Texas (as to
the NCI Merger) are completed.
1.5 Conversion of Shares. At the Effective Time, (i) each issued
and outstanding share of Common Stock of TWI shall be converted into 276.295
shares of Common Stock of LTC, (ii) each issued and outstanding share of
common stock of Merger Sub 1 shall be converted into one share common stock of
TWI, as the surviving corporation of the TWI Merger; (iii) each issued and
outstanding share of common stock of NCI shall be converted into 276.295 shares
of common stock of LTC, and (iv) each issued and outstanding share of common
stock of Merger Sub 2 shall be converted into one share of common stock of NCI,
as the surviving corporation of the NCI Merger.
1.6 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of TWI in effect at the Effective Time shall be the
certificate of incorporation and bylaws of the surviving corporation of the TWI
Merger. The articles of incorporation and bylaws of NCI in effect at the
Effective Time shall be the articles of incorporation and bylaws of the
surviving corporation of the NCI Merger.
1.7 Officers and Directors. The officers of TWI in effect at the
Effective Time shall be the officers of the surviving corporation of the TWI
Merger. The directors of the surviving
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<PAGE> 4
corporation of the TWI Merger shall be Nicholas Molina, Brett Beveridge and
Douglas Berman. The officers of NCI in effect at the Effective Time shall be
the officers and directors of the surviving corporation of the NCI Merger. The
directors of the surviving corporation of the NCI Merger shall be Nicholas
Molina, Brett Beveridge and Douglas Berman.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TCP, TWI AND NCI
TCP, TWI and NCI, jointly and severally, represent and warrant to the
Buyers as of the date hereof and as of the Closing Date:
2.1 Organization, Etc. Each of TWI and NCI is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and proposed to be conducted, and
to own, operate and lease its properties and assets. Each of TWI and NCI is
duly qualified or licensed to do business and is in corporate and tax good
standing in every jurisdiction in which the conduct of its business or the
ownership or lease of its properties require it to be so qualified or licensed,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect.
2.2 Subsidiaries. Neither TWI nor NCI has any subsidiaries.
2.3 Stock Record Books. The stock record books of TWI and NCI
which have been delivered to LTC for inspection prior to the date hereof are
complete and correct in all material respects. The issued and outstanding
capital stock of each of TWI and NCI is 1,000 shares of Common Stock issued to
Texas Cellular Partners, L.P. There are no shares of capital stock of TWI or
NCI held in the treasury of TWI or NCI and no shares of capital stock of TWI or
NCI are currently reserved for issuance for any purpose or upon the occurrence
of any event or condition.
2.4 Title to Stock. All of the outstanding shares of capital
stock of TWI and NCI are owned by TCP free of all Liens and Contracts, except
for Liens in favor of NationsCredit Commercial Corporation and Mr. Ronald L.
Koonsman, and have been issued in compliance with all applicable securities
laws. Neither TWI nor NCI is a party to any outstanding Contract with any other
Person to purchase, redeem or otherwise acquire any outstanding capital stock
of TWI or NCI. Neither TWI nor NCI has redeemed any securities in violation of
any Contract or Regulation (including, without limitation, any state or federal
securities laws). All of the outstanding shares of the capital stock of TWI and
NCI are owned by TCP, are duly authorized, validly issued, fully paid and
nonassessable.
2.5 Authorization.
(a) TWI and NCI each have full power and authority to
enter into this Agreement and the agreements contemplated hereby and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement
-3-
<PAGE> 5
and all other agreements and transactions contemplated hereby have been duly
authorized by the respective boards of directors and shareholders of TWI and
NCI and no other corporate proceedings on their respective parts are necessary
to authorize this Agreement and the transactions contemplated hereby. This
Agreement and all other agreements contemplated hereby to be entered into by
TWI and NCI each constitutes a legal, valid and binding obligation of TWI and
NCI, enforceable against TWI and NCI in accordance with its terms.
(b) TCP is the sole owner of and has full right, power
and authority to sell the capital stock of TWI and NCI. TCP has full
partnership power and authority to enter into this Agreement and the agreements
contemplated hereby and to deliver the shares of outstanding capital stock of
TWI and NCI and the certificates evidencing such shares to LTC as provided for
herein, free and clear of all Liens, except for Liens in favor of NationsCredit
Commercial Corporation and Mr. Ronald L. Koonsman. This Agreement and all other
agreements contemplated hereby to be entered into by TCP each constitute a
legal, valid and binding obligation of TCP enforceable against TCP in
accordance with its terms.
2.6 Options and Rights. At the Closing Date there shall be no
outstanding Options with respect to TWI's or NCI's outstanding capital stock or
TCP's partnership interests, except the warrant issued to NationsCredit
Commercial Corporation. There are no existing Contracts or Options between TCP
on the one hand, and any other Person, on the other hand, regarding the shares
of outstanding capital stock of TWI and NCI, except as may relate to
NationsCredit Commercial Corporation and Mr. Ronald L. Koonsman.
2.7 No Violation. Except as set forth in Schedule 2.7 hereto, the
execution, delivery and performance by TCP, TWI and NCI of this Agreement, and
all other agreements contemplated hereby, and the fulfillment of and compliance
with the respective terms hereof and thereof by TCP, TWI and NCI, do not and
will not (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default or event of default under (with due
notice, lapse of time or both), (c) result in the creation of any Lien upon
TWI's or NCI's capital stock or assets pursuant to, (d) give any third party
the right to accelerate any obligation under, (e) result in a violation of, or
(f) require any authorization, consent, approval, exemption or other action by,
notice to, or filing with any Authority pursuant to, the organizational
documents of TCP, TWI or NCI or any applicable Regulation (including, without
limitation, approvals pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976), Order or any material Contract to which TCP, TWI or NCI or their
respective properties, partnership interests or capital stock are subject. Each
of TCP, TWI and NCI will comply with all applicable Regulations and Orders in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
2.8 Financial Statements. Attached as Schedule 2.8 hereto are
unaudited consolidated year-end balance sheets and statements of operations of
TCP for 1996 and audited year-end balance sheets and statements of operations
of TCP's predecessors as for each of the years 1995 and 1994. Such balance
sheets and the notes thereto have been prepared in accordance with GAAP (except
as stated therein or in the notes thereto) and fairly present the financial
position of TCP or its predecessors, as applicable, at the respective dates
thereof, and such statements of operations and the notes thereto (i) fairly
present the results of operations for the periods therein
-4-
<PAGE> 6
referred to, all in accordance with GAAP (except as stated therein or in the
notes thereto), and (ii) fairly present the financial condition of TCP at the
respective date of, and for the period covered by such statements.
2.9 Absence of Certain Changes. Since the date of TCP's most
recent financial statements, there has not been (a) any Material Adverse Change
in the business, operations, properties, assets, condition (financial or
otherwise) of TCP, TWI or NCI; (b) any damage, destruction or loss, whether
covered by insurance or not, having a Material Adverse Effect, with regard to
TWI's or NCI's property and business; (c) any declaration, setting aside or
payment of any dividend or distribution (whether in cash, stock or property) in
respect of TCP's partnership interests, or any redemption or other acquisition
of such partnership interests by TCP; (d) any entry into any material Contract
not in the ordinary course of business, including without limitation, any
borrowing or capital expenditure; or (e) any change by TCP in accounting
methods or principles.
2.10 Litigation. There is no Claim pending or, to the best
knowledge of TCP, TWI or NCI threatened against TWI or NCI which, if adversely
determined, would have a Material Adverse Effect on TWI or NCI, nor is there
any Order outstanding against TWI or NCI having, or which, insofar as can be
reasonably foreseen, in the future may have, a Material Adverse Effect on TWI
or NCI.
2.11 Compliance with Law. TWI and NCI are presently in material
compliance with regard to their respective operations, practices, real property
and other property, and all other aspects of its business, with all applicable
Regulations and Orders. There are no Claims pending, or threatened, nor has
TCP, TWI or NCI received any written notice, regarding any violations of any
Regulations and Orders enforced by any Authority which could reasonably be
expected to have a Material Adverse Effect.
2.12 Contracts.
(a) Except as set forth in Schedule 2.12 hereto, as of
the Closing Date, neither TWI nor NCI is a party to any written or oral:
(i) pension, profit sharing, stock option,
employee stock purchase or other plan providing for deferred
or other compensation to employees or any other employee
benefit plan, or any Contract with any labor union;
(ii) Contract relating to loans to officers,
directors, or Affiliates;
(iii) Contract relating to the borrowing of money
or the mortgaging, pledging or otherwise placing a Lien on
any asset of TWI or NCI;
(iv) Guarantee of any obligation;
(v) Contract under which TWI or NCI has advanced
or loaned any Person amounts in the aggregate exceeding
$10,000;
-5-
<PAGE> 7
(vi) Contract under which TWI or NCI is lessee of
or holds or operates any property, real or personal, owned by
any other party, except for any lease of real or personal
property under which the aggregate annual rental payments do
not exceed $25,000;
(vii) Contract pursuant to which TWI or NCI is
lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by TWI or
NCI;
(viii) Contract or group of related Contracts with
the same party or group of affiliated parties the performance
of which involves annual consideration in excess of $25,000;
(ix) assignment, license, indemnification or
Contract with respect to any intangible property;
(x) Contract for the purchase, acquisition or
supply of inventory and other property and assets, whether
for resale or otherwise in excess of $25,000;
(xi) Contracts with independent agents, brokers,
dealers or distributors which provide for annual payments in
excess of $25,000;
(xii) employment or consulting Contracts;
(xiii) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations; or
(xiv) Contracts with Persons with which, directly
or indirectly, TCP also has a Contract.
(b) TWI and NCI have performed in all material respects
all obligations required to be performed by them and are not in default in any
respect under or in breach of nor in receipt of any claim of default or breach
under any material Contract to which TWI or NCI is subject (including without
limitation all performance bonds, warranty obligations or otherwise); no event
has occurred which with the passage of time or the giving of notice or both
would result in a default, breach or event of non-compliance under any material
Contract to which TWI or NCI is subject (including without limitation all
performance bonds, warranty obligations or otherwise); neither TWI nor NCI have
any present expectation or intention of not fully performing all such
obligations; neither TWI nor NCI have any knowledge of any breach or
anticipated breach by the other parties to any such Contract to which it is a
party.
-6-
<PAGE> 8
2.13 Title and Related Matters.
(a) Except as set forth in Schedule 2.13(a) hereto, TWI
and NCI have good and marketable title to all of their real and personal
property and other assets in TCP's financial statements provided pursuant to
Section 2.8 hereof or acquired after the date of such financial statements,
free and clear of all Liens, except Permitted Liens.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE BUYERS
The Buyers and LTC represent and warrant to TCP, TWI and NCI as
follows as of the date hereof and as of the Closing Date:
3.1 Corporate Organization, Etc. Each of the Buyers and LTC is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation with full corporate power and
authority to carry on its business as it is now being conducted and to own,
operate and lease its properties and assets. Each of the Buyers and LTC is
duly qualified or licensed to do business and is in corporate and tax good
standing in every jurisdiction in which the conduct of its business or the
ownership or lease of its properties require it to be so qualified or licensed,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect.
3.2 Subsidiaries and Affiliates. Each of the Buyers is a
wholly-owned subsidiary of LTC.
3.3 Authorization. Each of the Buyers and LTC has full corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby and thereby. The Board of Directors of each of
the Buyers and LTC and the shareholders of each of the Buyers has duly
authorized the execution, delivery and performance of this Agreement and to
consummate the transactions contemplated hereby, and no other corporate
proceedings on their part are necessary to authorize this Agreement and the
transactions contemplated hereby and thereby. This Agreement constitutes the
legal, valid and binding obligation of each of the Buyers and LTC enforceable
against such Buyer and LTC in accordance with its terms.
3.4 No Violation. Except as set forth in Schedule 3.4 hereto, the
execution, delivery and performance by each of the Buyers and LTC of this
Agreement, and all other agreements contemplated hereby, and the fulfillment of
and compliance with the respective terms hereof and thereof by such Buyer and
LTC, do not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, or (b) result in a violation of, or require any
authorization, consent, approval, exemption or other action by, or notice to,
or filing with any court or Authority pursuant to, the charter or bylaws of any
of the Buyers or LTC or, to the best knowledge of any of the Buyers and LTC,
any applicable Regulation (including, without limitation, approvals pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976),
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Order or any material Contract to which any of the Buyers or LTC, or their
respective properties are subject. The Buyers and LTC will comply in all
material respects with all applicable Regulations and Orders in connection with
its execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
3.5 Financial Statements. Attached as Schedule 3.5 hereto are
audited consolidated year-end balance sheets and statements of operations,
shareholders' equity and cash flow of LTC as for each of the years ended July
31, 1996, 1995 and 1994 and an unaudited consolidated balance sheet for the six
month period commencing August 1, 1996 and ending January 31, 1997 and
unaudited consolidated statements of operations, shareholders' equity and cash
flow for the six month period then ended. Such balance sheets and the notes
thereto fairly present the financial position of LTC as applicable, at the
respective dates thereof, and such statements of operations, shareholders'
equity and cash flow and the notes thereto (i) fairly present the results of
operations for the periods therein referred to, all in accordance with GAAP
(except as stated therein or in the notes thereto), and (ii) fairly present the
financial condition of LTC at the respective date of, and for the period
covered by such statements.
3.6 Absence of Certain Changes. Since the date of LTC's most
recent financial statements, there has not been (a) any Material Adverse Change
in the business, operations, properties, assets, condition (financial or
otherwise) of LTC; (b) any damage, destruction or loss, whether covered by
insurance or not, having a Material Adverse Effect, with regard to LTC's
property and business; (c) any declaration, setting aside or payment of any
dividend or distribution (whether in cash, stock or property) in respect of
LTC's capital stock, or any redemption or other acquisition of such stock by
LTC; (d) any entry into any material Contract not in the ordinary course of
business, including without limitation, any borrowing or capital expenditure;
or (e) any change by LTC in accounting methods or principles.
3.7 Litigation. There is no Claim pending or, to the best
knowledge of LTC, threatened against LTC which, if adversely determined, would
have a Material Adverse Effect on LTC, nor is there any Order outstanding
against LTC having, or which, insofar as can be reasonably foreseen, in the
future may have, a Material Adverse Effect on LTC.
3.8 Compliance with Law. LTC is presently in material compliance
with regard to its operations, practices, real property and other property, and
all other aspects of its business, with all applicable Regulations and Orders.
There are no Claims pending, or threatened, nor has LTC received any written
notice, regarding any violations of any Regulations and Orders enforced by any
Authority which could reasonably be expected to have a Material Adverse Effect.
3.9 Contracts.
(a) Except as set forth in Schedule 3.9 hereto, as of the
Closing Date, LTC is not a party to any written or oral:
(i) pension, profit sharing, stock option,
employee stock purchase or other plan providing for deferred
or other compensation to employees or any other employee
benefit plan, or any Contract with any labor union;
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(ii) Contract relating to loans to officers,
directors, or Affiliates;
(iii) Contract relating to the borrowing of money
or the mortgaging, pledging or otherwise placing a Lien on
any asset of LTC;
(iv) Guarantee of any obligation;
(v) Contract under which LTC has advanced or
loaned any Person amounts in the aggregate exceeding $10,000;
(vi) Contract under which LTC is lessee of or
holds or operates any property, real or personal, owned by
any other party, except for any lease of real or personal
property under which the aggregate annual rental payments do
not exceed $25,000;
(vii) Contract pursuant to which LTC is lessor of
or permits any third party to hold or operate any property,
real or personal, owned or controlled by LTC;
(viii) Contract or group of related Contracts with
the same party or group of affiliated parties the performance
of which involves annual consideration in excess of $25,000;
(ix) assignment, license, indemnification or
Contract with respect to any intangible property;
(x) Contract for the purchase, acquisition or
supply of inventory and other property and assets, whether
for resale or otherwise in excess of $25,000;
(xi) Contracts with independent agents, brokers,
dealers or distributors which provide for annual payments in
excess of $25,000;
(xii) employment or consulting Contracts;
(xiii) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations; or
(xiv) Contracts with Persons with which, directly
or indirectly, a shareholder of LTC also has a Contract.
(b) LTC has performed in all material respects all
obligations required to be performed by it and is not in default in any respect
under or in breach of nor in receipt of any claim of default or breach under
any material Contract to which LTC is subject (including without limitation all
performance bonds, warranty obligations or otherwise); no event has occurred
which with the passage of time or the giving of notice or both would result in
a default, breach or event of non-compliance under any material Contract to
which LTC is subject (including without limitation all performance bonds,
warranty obligations or otherwise); LTC has no present
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expectation or intention of not fully performing all such obligations; LTC has
no knowledge of any breach or anticipated breach by the other parties to any
such Contract to which it is a party.
3.10 Title and Related Matters.
(a) Except as set forth in Schedule 3.10(a) hereto, LTC
has good and marketable title to all real and personal property and other
assets reflected in LTC's financial statements provided pursuant to Section 3.5
hereto or acquired after the date of such financial statements free and clear
of all Liens, except Permitted Liens.
ARTICLE IV
COVENANTS OF TCP, TWI AND NCI
Until the Closing Date, except as otherwise consented to or approved
by the Buyers in writing, TCP, TWI and NCI agree that they shall act, or
refrain from acting where required hereinafter, to comply with the following:
4.1 Regular Course of Business. TCP, TWI and NCI shall operate
their respective business diligently and in good faith, consistent with past
management practices; shall maintain all of its properties in customary repair,
order and condition, reasonable wear and tear excepted; shall maintain (except
for expiration due to lapse of time), all material leases and material
Contracts in effect which are in the best interests of their respective
businesses; shall comply in all material respects with the provisions of all
Regulations and Orders applicable to TCP, TWI and NCI and the conduct of their
respective businesses; and shall not cancel, release, waive or compromise any
debt, Claim or right in their respective favors having a value in the aggregate
in excess of $20,000 other than in connection with returns for credit or
replacement in the ordinary course of business. Neither TWI nor NCI shall
incur, assume or guarantee any Indebtedness not reflected in TCP's financial
statements, except in the ordinary course of business.
4.2 Amendments. No change or amendment shall be made in the
organizational documents of TWI or NCI. Neither TWI nor NCI shall merge into
or consolidate with any other Person or change the character of its business.
4.3 Capital Changes; Pledges. Neither TWI nor NCI shall issue or
sell any shares of capital stock or issue or sell any securities convertible
into, or Options to subscribe for any shares of capital stock and TCP shall not
pledge or otherwise encumber any of their capital stock except for the Liens in
favor of NationsCredit Commercial Corporation and Mr. Ronald L. Koonsman. In
addition, neither TWI nor NCI shall allow the transfer of any capital stock on
their respective transfer ledger or other books and records.
4.4 Dividends. Neither TWI nor NCI shall declare, pay or set
aside for payment any dividend or other distribution in respect of its
outstanding capital stock, nor shall TWI nor NCI, directly or indirectly,
redeem, purchase or otherwise acquire any of their capital stock.
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ARTICLE V
COVENANTS OF LTC
LTC hereby covenants and agrees with TCP and the Sellers that:
5.1 Regular Course of Business. LTC shall operate its business
diligently and in good faith, consistent with past management practices; shall
maintain all of its properties in customary repair, order and condition,
reasonable wear and tear excepted; shall maintain (except for expiration due to
lapse of time), all material leases and material Contracts in effect which are
in the best interests of its business; shall comply in all material respects
with the provisions of all Regulations and Orders applicable to LTC and the
conduct of its business; and shall not cancel, release, waive or compromise any
debt, Claim or right in its favor having a value in the aggregate in excess of
$20,000 other than in connection with returns for credit or replacement in the
ordinary course of business. LTC shall not incur, assume or guarantee any
Indebtedness not reflected on LTC's financial statements except in the ordinary
course of business.
5.2 Amendments. Except as required for the transactions
contemplated in this Agreement, no change or amendment shall be made in the
charter or bylaws of LTC. LTC shall not merge into or consolidate with any
other Person or change the character of its business.
5.3 Capital Changes; Pledges. LTC shall not issue or sell any
shares of its capital stock of any class or issue or sell any securities
convertible into, or Options to subscribe for any shares of its capital stock
and LTC shall not pledge or otherwise encumber any shares of its capital stock,
with the exception of shares of Common Stock issued upon the conversion of
LTC's Series A Convertible Preferred Stock. In addition, LTC shall not allow
the transfer of any shares of its capital stock on the stock transfer ledger or
other books and records.
5.4 Dividends. LTC shall not declare, pay or set aside for
payment any dividend or other distribution in respect of its capital stock, nor
shall LTC, directly or indirectly, redeem, purchase or otherwise acquire any
shares of its capital stock.
ARTICLE VI
OTHER AGREEMENTS
The parties further agree as follows:
6.1 Agreement to Defend. In the event any action, suit,
proceeding or investigation of the nature specified in Section 7.4 or Section
8.4 hereof is commenced all the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto.
6.2 Further Assurances. Subject to the terms and conditions of
this Agreement, the parties hereto shall use their best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and Regulations
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to consummate and make effective as promptly as possible the transactions
contemplated by this Agreement, and to cooperate with each other in connection
with the foregoing.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF LTC AND THE BUYERS
Each and every obligation of LTC and the Buyers under this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions unless waived in writing by the Buyers:
7.1 Representations and Warranties; Performance. The
representations and warranties of TCP, TWI and NCI contained in Article II of
this Agreement shall be true and correct in all material respects when made and
on the Closing Date as though then made, except as expressly provided herein.
TCP, TWI and NCI shall have performed and complied in all material respects
with all agreements, covenants and conditions required by this Agreement to be
performed and complied with by them prior to the Closing Date. The general
partner of TCP and the president of each of TWI and NCI shall have delivered to
LTC certificates, dated the Closing Date, in the form designated Exhibit 7.1
hereto, certifying to the foregoing.
7.2 Consents and Approvals. TCP, TWI and NCI shall have obtained
any and all consents, approvals, qualifications, licenses or other
authorizations required by all applicable Regulations with respect to the
execution, delivery and performance of the Agreement.
7.3 No Material Adverse Change. There shall have been no Material
Adverse Change in the business or properties of TWI or NCI since the date of
this Agreement. LTC shall have received certificates, dated the Closing Date,
of the president and chief financial officer of each of TWI and NCI, in the
form of Exhibit 7.3 hereto, certifying to the foregoing.
7.4 No Proceeding or Litigation. No preliminary or permanent
injunction or other Order issued by a court of competent jurisdiction or by any
governmental agency, or any Regulation shall be in effect, which would prevent
the consummation of the transactions contemplated hereby.
7.5 Shareholders Agreement of LTC. The Shareholders Agreement of
LTC shall be amended and restated in the form of Exhibit 7.5 hereto.
7.6 Modification of Employment Agreements. The Employment
Agreements of Brett Beveridge and Nicholas Molina with LTC shall be amended and
restated in the form attached hereto as Exhibit 7.6.
7.7 Conversion of Preferred Stock. HIG Fund V, Inc., the owner of
100,000 shares of LTC's Series A Preferred Stock, shall have converted such
preferred stock into common stock of LTC and Articles III, IV and V of the
Series A Preferred Stock Purchase Agreement shall terminate upon the
consummation of the transactions contemplated hereby.
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7.8 Consulting Agreement. HIG Capital Management, Inc. shall have
executed and delivered to LTC and TWI the Consulting Agreement, in the form of
Exhibit 7.8 hereto.
7.9 Lenders' Consents. NationsCredit Commercial Corporation and
Mr. Ronald L. Koonsman (if required) shall have consented to the transactions
contemplated hereby.
7.10 Termination of Redemption Agreement. The Redemption Agreement
between LTC and HIG Fund V, Inc. shall have been terminated.
7.11 Grant of Options. LTC shall have granted to each of Messrs.
Molina and Beveridge options to purchase 27,721 shares of LTC's Common Stock,
such options to vest upon consummation of an initial public offering of LTC's
Common Stock.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF TCP, TWI AND NCI
Each and every obligation of TCP, TWI and NCI under this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions unless waived in writing by TCP, TWI and NCI:
8.1 Representations and Warranties; Performance. The
representations and warranties of the Buyers contained in Article III of this
Agreement shall be true and correct in all material respects when made and on
the Closing Date as though then made, except as expressly provided herein. The
Buyers shall have performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing Date. The president of each of the Buyers shall have
delivered to TCP, TWI and NCI certificates, dated the Closing Date, in the form
designated Exhibit 8.1 hereto, certifying to the foregoing.
8.2 Consents and Approvals. The Buyers shall have obtained any
and all material consents, approvals, qualifications, licenses or other
authorizations required by all applicable Regulations with respect to the
execution, delivery and performance of the Agreement.
8.3 No Material Adverse Change. There shall have been no Material
Adverse Change in the business or properties of the Buyers since the date of
this Agreement. TCP, TWI and NCI shall have received certificates dated the
Closing Date, of the president and chief financial officer of each of the
Buyers, in the form of Exhibit 7.3 hereto, certifying to the foregoing.
8.4 No Proceeding or Litigation. No preliminary or permanent
injunction or other Order issued by a court of competent jurisdiction or by any
governmental agency, or any Regulation shall be in effect, which would prevent
the consummation of the transactions contemplated hereby.
8.5 Lenders Consents. NationsCredit Commercial Corporation and
Mr. Ronald L. Koonsman (if required) shall have consented to the transactions
contemplated hereby.
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8.6 Shareholders Agreement of LTC. The Shareholders Agreement of
LTC shall be amended and restated in the form of Exhibit 7.5 hereto.
8.7 Conversion of Preferred Stock. HIG Fund V, Inc. shall have
received 350,000 shares of LTC common stock upon conversion of the Series A
Preferred Stock.
8.8 Consulting Agreement. LTC and TWI shall have executed a new
consulting agreement with HIG Capital Management, Inc.
ARTICLE IX
CLOSING
9.1 Closing. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "Closing") shall be held on
June 27, 1997, or on such other date (the "Closing Date") designated by the
parties in the offices of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., 1221 Brickell Avenue, Miami, Florida 33131, provided that the Closing
shall not occur, in any event, after July 11, 1997.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination. This Agreement may be terminated and
the transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of LTC, the Buyers, TCP, TWI and
NCI;
(b) by any of LTC the Buyers, TCP, TWI or NCI if this
Agreement is not consummated on or before July 11, 1997; provided that if any
party has breached or defaulted with respect to its respective obligations
under this Agreement on or before such date, such party may not terminate this
Agreement pursuant to this Section 10.1(b), and each other party to this
Agreement shall at its option enforce its rights against such breaching or
defaulting party and seek any remedies against such party, in either case as
provided hereunder and by applicable law;
(c) by any of LTC or the Buyers if as of the Closing Date
any of the conditions specified in Article VII hereof have not been satisfied
in any material respect or if TCP, TWI or NCI are otherwise in default in any
material respect under this Agreement; or
(d) by TCP, TWI or NCI if as of the Closing Date any of
the conditions specified in Article VIII hereof have not been satisfied in any
material respect or if any of LTC or the Buyers are otherwise in default in any
material respect under this Agreement.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement
of the parties hereto, at any time prior to the Closing Date with respect to
any of the terms contained herein.
11.2 Waiver of Compliance; Consents. Any failure of any party
hereto to comply with any obligation, covenant, agreement or condition herein
may be waived in writing by the other parties hereto, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
or permits consent by or on behalf of any party hereto, such consent shall be
given in writing.
11.3 Certain Definitions.
"Affiliate" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or
controlling such Person, (b) any Person, directly or indirectly, in
which such Person holds, of record or beneficially, five percent or
more of the equity or voting securities, (c) any Person that holds,
of record or beneficially, five percent or more of the equity or
voting securities of such Person, (d) any Person that, through
Contract, relationship or otherwise, exerts a substantial influence
on the management of such person's affairs, (e) any Person that,
through Contract, relationship or otherwise, is influenced
substantially in the management of their affairs by such Person, or
(f) any director, officer, partner or individual holding a similar
position in respect of such Person.
"Authority" means any governmental, regulatory or
administrative body, agency, commission, board, arbitrator or
authority, any court or judicial authority, any public, private or
industry regulatory authority, whether international, national,
federal, state or local.
"Claim" means any action, claim, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation, litigation,
proceeding, arbitration, appeals or other dispute, whether civil,
criminal, administrative or otherwise.
"Closing" shall have the meaning set forth in Section 9.1.
"Closing Date" shall have the meaning set forth in Section
9.1.
"Contract" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether
written or oral.
"Effective Time" shall have the meaning set forth in Section
1.4.
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"GAAP" means generally-accepted accounting principles,
consistently applied, as in existence at the date hereof.
"Guarantee" means any guarantee or other contingent liability
(other than any endorsement for collection or deposit in the ordinary
course of business), direct or indirect with respect to any
obligations of another Person, through an agreement or otherwise,
including, without limitation, (a) any endorsement or discount with
recourse or undertaking substantially equivalent to or having
economic effect similar to a guarantee in respect of any such
obligations and (b) any Contract (i) to purchase, or to advance or
supply funds for the payment or purchase of, any such obligations,
(ii) to purchase, sell or lease property, products, materials or
supplies, or transportation or services, in respect of enabling such
other Person to pay any such obligation or to assure the owner
thereof against loss regardless of the delivery or nondelivery of the
property, products, materials or supplies or transportation or
services or (iii) to make any loan, advance or capital contribution
to or other investment in, or to otherwise provide funds to or for,
such other Person in respect of enabling such Person to satisfy an
obligation (including any liability for a dividend, stock liquidation
payment or expense) or to assure a minimum equity, working capital or
other balance sheet condition in respect of any such obligation.
"Indebtedness" with respect to any Person means any
obligation of such Person for borrowed money, but in any event shall
include (a) any obligation or liabilities incurred for all or any
part of the purchase price of property or other assets or for the
cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities
and incurred in respect of property purchased in the ordinary course
of business, (whether or not such Person has assumed or become liable
for the payment of such obligation) (whether accrued, absolute,
contingent, unliquidated or otherwise, known or unknown, whether due
or to become due), (b) the face amount of all letters of credit
issued for the account of such Person and all drafts drawn
thereunder, (c) obligations incurred for all or any part of the
purchase price of property or other assets or for the cost of
property or other assets constructed or of improvements thereto,
other than accounts payable included in current liabilities and
incurred in respect of property purchased in the ordinary course of
business (whether or not such Person has assumed or become liable for
the payment of such obligation) secured by Liens, (d) capitalized
lease obligations, and (e) all Guarantees of such Person.
"Lien" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction on transfer
or otherwise, or interest of another Person of any kind or nature.
"Material Adverse Change" means any developments or changes
which would have a Material Adverse Effect.
"Material Adverse Effect" means any circumstances, state of
facts or matters which might reasonably be expected to have a
material adverse effect in respect of LTC's or TCP's, TWI's or NCI's
respective business, operations, properties, assets, condition
(financial or otherwise), results, plans, strategies or prospects.
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"Option" means any subscription, option, warrant, right,
security, Contract, commitment, understanding, outstanding or stock
appreciation, phantom stock option, profit participation or
arrangement by which with respect to any of the Buyers, LTC, TWI or
NCI such corporation is or may become bound to issue any additional
partnership interests or shares of its capital stock (as applicable)
or rights pursuant to which any Person has a right to purchase or
otherwise acquire shares of capital stock or (ii) with respect to a
Person, such Person is or may become bound to sell or allow another
Person to vote, encumber or control the disposition of any
partnership interests or capital stock or rights pursuant to which
any Person has a right to purchase or otherwise acquire, vote,
encumber or control the disposition of partnership interests of TCP
or shares of capital stock of any of the Buyers, LTC, TWI or NCI.
"Order" means any decree, order, judgment, injunction, rule,
lien, voting right, consent of or by an Authority.
"Permits" means all permits, licenses, registrations,
certificates, orders or approvals from any Authority or other Person
(including without limitation those relating to the occupancy or use
of owned or leased real property) issued to or held by any Buyer,
LTC, TCP, TWI or NCI.
"Permitted Liens" means (i) statutory Liens not yet
delinquent, (ii) such imperfections or irregularities of title,
Liens, easements, charges or encumbrances as do not materially
detract from or interfere with the present use of the properties or
assets subject thereto or affected thereby, otherwise impair present
business operations at such properties, or do not detract from the
value of such properties and assets, taken as a whole, (iii) Liens
reflected in TCP's or LTC's financial statements or the notes
thereto, (iv) the rights of customers of TWI, NCI or LTC with respect
to inventory or work in progress under orders or contracts entered
into by TWI, NCI or LTC in the ordinary course of business, (v)
mechanics', carriers', workers', repairmen's, warehousemen's, or
other similar Liens arising in the ordinary course of business in
respect of obligations not overdue or which are being contested in
good faith and covered by a bond in an amount at least equal to the
amount of the Lien, and (vi) deposits or pledges to secure workmen's
compensation, unemployment insurance, old age benefits or other
social security obligations in connection with, or to secure the
performance of, bids, tenders, trade contracts not for the payment of
money or leases, or to secure statutory obligations or surety or
appeal bonds or other pledges or deposits for purposes of like nature
in the ordinary course of business.
"Person" means any corporation, partnership, joint venture,
organization, entity, Authority or natural person.
"Regulation" means any rule, law, code, statute, regulation,
ordinance, requirement, announcement or other binding action of or by
an Authority.
11.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when
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delivered by hand or mailed, first class certified mail with postage paid or by
overnight receipted courier service:
(a) If to the Buyers to:
5200 N.W. 77th Court
Miami, Florida 33166
Attn: Nicholas Molina and Brett Beveridge
with a copy to:
Buchanan Ingersoll
NationsBank Tower
100 S.E. Second Street, Suite 2950
Miami, Florida 33131
Attention: John Schwartz
or to such other person or address as LTC and the Buyers shall furnish by
notice to TCP, TWI and NCI in writing.
(b) If to TCP, TWI or NCI, to:
1001 South Bayshore Drive, Suite 2708
Miami, Florida 33131
Attn: Anthony Tamer and
Douglas Berman
with a copy to:
Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Jorge L. Freeland, Esq.
or to such other person or address as TCP, TWI or NCI shall furnish by notice
to LTC and the Buyers in writing.
11.5 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
11.6 Governing Law. The Agreement shall be governed by the law of
the State of Florida as to all matters, including but not limited to matters of
validity, construction, effect and performance.
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11.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.9 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and the documents, certificates and instruments referred to
herein, embodies the entire agreement and understanding of the parties hereto
in respect of the mergers contemplated hereby.
11.10 Binding Effect. This Agreement shall not be construed so as
to confer any right or benefit upon any Person other than the signatories to
this Agreement and each of their respective successors and permitted assigns.
11.11 Injunctive Relief. The parties hereto agree that in the event
of a breach of any provision of this Agreement, the aggrieved party or parties
may be without an adequate remedy at law. The parties therefore agree that in
the event of a breach of any provision of this Agreement, the aggrieved party
or parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
11.12 Survival of Representations, Warranties and Covenants. Each
and every representation, warranty and covenant shall expire with, and be
terminated and extinguished by, the earlier to occur of the Closing or the
termination of this Agreement pursuant to Section 10.1 hereof or otherwise, and
thereafter neither the Buyers, LTC, TCP, TWI or NCI, nor any partner, officer,
director or principal thereof shall be under any liability whatsoever with
respect to such representation, warranty or covenant.
* * *
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IN WITNESS WHEREOF, the parties hereto have made and entered into
this Agreement the date first hereinabove set forth.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ Nicolas Molina
------------------------------------
Title: Chief Executive Officer
---------------------------------
MERGER SUB 1, INC.
By: /s/ Nicolas Molina
------------------------------------
Title: Chief Executive Officer
---------------------------------
MERGER SUB 2, INC.
By: /s/ Bucikas Molina
------------------------------------
Title: Chief Executive Officer
---------------------------------
TEXAS CELLULAR PARTNERS, L.P.
By: HIG Texan Cellular Company, its
managing general partner
By: /s/ Anthony Tamer
------------------------------------
Title: President
---------------------------------
TELEPHONE WAREHOUSE, INC.
By: /s/ Anthony Tamer
------------------------------------
Title: Vice President
---------------------------------
NATIONAL CELLULAR, INCORPORATED
By: /s/ Anthony Tamer
------------------------------------
Title: Vice President
---------------------------------
-20-
<PAGE> 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).
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<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
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<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.
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<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
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<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
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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.
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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
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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.
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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> 1
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JULY 31, APRIL 30,
----------------------------- ---------------------
1994 1995 1996 1996 1997
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Primary 650,000 650,000 650,000 650,000 650,000
Average shares outstanding
Net effect of dilutive stock options
based on the treasury stock method 55,442 55,442 55,442 55,442 55,442
Assumed conversion of redeemable,
convertible preferred stock 118,182 118,182 170,635 118,182 650,000
-----------------------------------------------------
Total 823,624 823,624 876,077 823,624 1,355,442
Net income 89,629 8,139 65,998 66,507 304,801
Accretion of preferred stock to
redemption value -- -- (1,062) -- (9,555)
-----------------------------------------------------
$89,629 $8,139 $64,936 $66,507 $295,246
-----------------------------------------------------
Per share amount $.11 $.01 $.07 $.08 $.22
-----------------------------------------------------
Fully Diluted
Average shares outstanding 650,000 650,000 650,000 650,000 650,000
Net effect of dilutive stock options
based on the treasury stock method 55,442 55,442 55,442 55,442 55,442
Assumed conversion of redeemable,
convertible preferred stock 118,182 118,182 170,635 118,182 650,000
-----------------------------------------------------
Total 823,624 823,624 876,077 823,624 1,355,442
Net income 89,629 8,139 65,998 66,507 304,801
Accretion of preferred stock to
redemption value -- -- (1,062) -- (9,555)
-----------------------------------------------------
$89,629 $8,139 $64,936 $66,507 $295,246
-----------------------------------------------------
Per share amount $.11 $.01 $.07 $.08 $.22
-----------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 16.1
August 26, 1997
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments with respect to us under the caption
"Experts" in this Registration Statement on Form S-1 of Let's Talk Cellular &
Wireless, Inc.
Yours truly,
/s/ DELOITTE & TOUCHE
cc: Nicolas Molina, Chief Executive Officer
Let's Talk Cellular & Wireless, Inc.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY STATE OF INCORPORATION
- ----------------------------------------- --------------------------
Let's Talk Cellular of Bayside, Inc. Florida
LTC Kiosk Management Corporation Florida
National Cellular, Incorporated Texas
Telephone Warehouse, Inc. Delaware
<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 26, 1996, with respect to the financial statements and schedule of
Let's Talk Cellular & Wireless, Inc. as of July 31, 1996 and for the year then
ended, in the Registration Statement (Form S-1 - No. 33-00000) and related
Prospectus of Let's Talk Cellular & Wireless, Inc. for the registration of
000,000 shares of its Common Stock.
/s/ ERNST & YOUNG LLP
Miami, Florida
August 26, 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 the
Registration Statement (Form S-1 - No. 33-00000) and related Prospectus of Let's
Talk Cellular & Wireless, Inc. for the registration of 000,000 shares of its
Common Stock.
/s/ ERNST & YOUNG LLP
Dallas, Texas
August 26, 1997
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement 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 (except for the seventh paragraph of Note 2,
as to which the date is September 26, 1996), 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
August 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 1,357,172
<SECURITIES> 0
<RECEIVABLES> 686,159
<ALLOWANCES> 65,638
<INVENTORY> 1,210,159
<CURRENT-ASSETS> 3,278,761
<PP&E> 1,726,987
<DEPRECIATION> 402,135
<TOTAL-ASSETS> 6,645,587
<CURRENT-LIABILITIES> 2,499,931
<BONDS> 0
0
2,937,360
<COMMON> 650
<OTHER-SE> 692,183
<TOTAL-LIABILITY-AND-EQUITY> 6,645,587
<SALES> 13,593,282
<TOTAL-REVENUES> 13,593,282
<CGS> 6,509,282
<TOTAL-COSTS> 6,509,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,827
<INCOME-PRETAX> 104,937
<INCOME-TAX> 38,939
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,998
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> APR-30-1997
<CASH> 228,318
<SECURITIES> 0
<RECEIVABLES> 1,529,134
<ALLOWANCES> 131,607
<INVENTORY> 3,508,030
<CURRENT-ASSETS> 5,364,060
<PP&E> 4,167,267
<DEPRECIATION> 652,597
<TOTAL-ASSETS> 9,396,802
<CURRENT-LIABILITIES> 4,654,586
<BONDS> 0
0
2,946,915
<COMMON> 650
<OTHER-SE> 1,017,080
<TOTAL-LIABILITY-AND-EQUITY> 9,396,802
<SALES> 17,937,034
<TOTAL-REVENUES> 17,937,034
<CGS> 8,039,363
<TOTAL-COSTS> 8,039,363
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,604
<INCOME-PRETAX> 535,042
<INCOME-TAX> 230,241
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 304,801
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
