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UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-23351
LET'S TALK CELLULAR & WIRELESS, INC.
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(Exact Name of Registrant as Specified in its Charter)
FLORIDA 65-0292891
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
800 BRICKELL AVE., STE. 400
MIAMI, FL 33131 33131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 358-8255
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(Former name, former address and fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No []
The number of shares outstanding of the registrant's common stock is 8,749,762
(as of December 14, 1998).
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LET'S TALK CELLULAR & WIRELESS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets as of October 31, 1998 (Unaudited)
and July 31, 1998.......................................................................... 3
Condensed Consolidated Statements of Operations for the Three Months Ended
October 31, 1998 and October 31, 1997 (Unaudited)......................................... 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended
October 31, 1998 and October 31, 1997 (Unaudited).......................................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)........................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................................. 7
PART II - OTHER INFORMATION............................................................................. 12
</TABLE>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), Let's Talk Cellular and
Wireless, Inc. (together with its subsidiaries, the "Company") is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements made by or on behalf of the Company herein or which
are made orally, whether in presentations, in response to questions or
otherwise. Any statements that express, or involve discussions as to
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will result," "are expected to," "will continue," "is anticipated," "plans,"
"intends," "estimated," projection" and "outlook") are not historical facts and
accordingly, such statements involve estimates, assumptions, risks and
uncertainties which could cause actual results to differ materially from those
expressed in the forward-looking statements. Such uncertainties include, among
others, the following factors: risks associated with rapid growth, the Company's
ability to successfully compete, dependence on carriers, technological change
and inventory obsolescence, dependence on key personnel and other risk factors
that may emerge from time to time. It is not possible for management to predict
all of such factors or to assess the effect of each such factor on the Company's
business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking
statements.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1998 1998
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,151,639 $ 1,697,397
Accounts receivable, net 17,196,369 15,954,275
Inventories 20,120,282 16,532,961
Prepaid expenses 472,943 429,869
Deferred tax asset 836,806 836,806
------------ ------------
Total current assets 39,778,039 35,451,308
Property and equipment, net 12,886,078 12,170,193
Other assets, net 1,114,123 1,020,524
Intangible assets, net 37,166,114 37,848,638
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Total assets $ 90,944,354 $ 86,490,663
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 17,767,825 $ 13,116,458
Bank lines of credit 8,773,886 9,099,072
Accrued expenses 6,678,843 6,628,207
Current portion of bank term loans and obligations
under capital leases 2,742,831 1,947,361
Income taxes payable 95,505 273,255
Deferred revenues 1,364,671 855,729
Customer deposits 237,890 257,879
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Total current liabilities 37,661,451 32,177,961
Bank term loans, less current portion 18,500,000 19,250,000
Obligation under capital lease, less current portion 488,129 346,150
Other liabilities 198,465 372,395
Deferred tax liability 423,978 423,978
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $.01 par value, 50,000,000 shares
authorized, 8,749,762 shares issued and
outstanding 87,498 87,498
Additional paid-in capital 33,716,669 33,716,669
Retained earnings (accumulated deficit) (131,836) 116,012
------------ ------------
Total common shareholders' equity 33,672,331 33,920,179
------------ ------------
Total liabilities and shareholders' equity $ 90,944,354 $ 86,490,663
============ ============
</TABLE>
See accompanying notes.
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LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31,
------------------------------
1998 1997
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<S> <C> <C>
Net revenues:
Retail sales $ 12,264,618 $ 5,748,532
Activation commissions 14,089,902 5,650,684
Residual income 4,583,387 2,417,896
Wholesale sales 4,926,661 8,098,778
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Total net revenues 35,864,568 21,915,890
Cost of sales 18,491,407 13,819,040
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Gross profit 17,373,161 8,096,850
Operating expenses:
Selling, general and administrative 15,671,033 7,847,382
Depreciation and amortization 532,070 264,032
Amortization of intangible assets 682,524 616,726
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Total operating expenses 16,885,627 8,728,140
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Income (loss) from operations 487,534 (631,290)
Interest expense, net 735,381 498,713
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Loss before benefit for income taxes (247,847) (1,130,003)
Benefit for income taxes (60,617) (405,451)
------------ ------------
Net loss applicable to common shareholders $ (187,230) $ (724,552)
============ ============
EARNINGS PER SHARE
Basic and Diluted:
Net loss per share applicable to common shareholders $ (0.02) $ (0.12)
============ ============
Weighted average shares outstanding:
Basic and Diluted 8,749,762 6,093,168
============ ============
</TABLE>
See accompanying notes.
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LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31,
------------------------------
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (247,847) $ (724,552)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 532,070 264,032
Amortization of intangible assets 682,524 616,726
Amortization of deferred financing costs 26,916 48,046
Provision for activation adjustments and cancellation losses -- 60,735
Deferred income taxes -- (577,098)
Changes in operating assets and liabilities:
Accounts receivable (1,242,094) (1,603,718)
Inventories (3,587,321) (1,735,527)
Prepaid expenses (43,074) (9,323)
Other assets (120,515) (943,699)
Income tax receivable -- 65,558
Trade accounts payable 4,651,367 1,822,351
Accrued expenses 50,636 831,748
Other liabilities (173,931) --
Income taxes payable (177,750) --
Customer deposits (19,989) (37,998)
Deferred revenues 508,942 2,311
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Net cash provided by (used in) operating activities 839,934 (1,920,408)
INVESTING ACTIVITIES
Purchases of property and equipment (1,008,139) (1,508,344)
----------- -----------
Net cash used in investing activities (1,008,139) (1,508,344)
FINANCING ACTIVITIES
Net borrowings under bank lines of credit (325,186) 2,866,766
Payments on bank term loan and capital leases (52,367) (139,125)
----------- -----------
Net cash (used in) provided by financing activities (377,553) 2,727,641
----------- -----------
Net decrease in cash and cash equivalents (545,758) (701,111)
Cash and cash equivalents at beginning of period 1,697,397 1,080,014
----------- -----------
Cash and cash equivalents at end of period $ 1,151,639 $ 378,903
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 564,939 $ 443,125
=========== ===========
Cash paid for income taxes $ 177,750 $ 85,693
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Acquisition of property and equipment under capital leases $ 239,816 --
===========
</TABLE>
See accompanying notes.
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LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1998
(UNAUDITED)
1-SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements of Let's
Talk Cellular & Wireless, Inc. and subsidiaries (the "Company") have been
prepared in accordance with the instructions to Form 10-Q and, therefore, omit
or condense certain footnotes and other information normally included in
financial statements prepared in accordance with generally accepted accounting
principles. The accounting policies followed for interim financial reporting are
the same as those disclosed in Note 2 of the Notes to Consolidated Financial
Statements included in the Company's audited financial statements for the fiscal
year ended July 31, 1998 which are included in the Company's Annual Report on
Form 10-K for the year ended July 31, 1998. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of the financial information for the interim periods reported have
been made. Results of operations for the three months ended October 31, 1998 are
not necessarily indicative of the results to be expected for the entire fiscal
year ending July 31, 1999.
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.
Fiscal year references are to the respective fiscal year ended July 31.
2-NET LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS
Basic earnings per share is computed by dividing the Company's net income (loss)
by the weighted average number of shares outstanding during the period. Diluted
earnings per share is computed by dividing the Company's net income (loss) by
the weighted average number of shares outstanding and the dilutive impact of
common stock equivalents. The dilutive impact of common stock equivalents is
determined by applying the treasury stock method.
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 128 ("SFAS No. 128"), Earnings per Share. All earnings
per share amounts for all periods have been presented, and where necessary,
related to conform to the SFAS No. 128 requirements.
3-INITIAL PUBLIC OFFERING
On December 1, 1997, the Company completed an initial public offering of its
common stock. In the IPO, 2,337,245 shares of common stock were sold, of which
2,000.000 shares were sold by the Company and 337,245 shares were sold by
selling shareholders. The Company's net proceeds from the IPO of approximately
$20,014,000 were used to repay the then outstanding balance on bank term loans
totaling approximately $12,900,000, a portion of the line of credit amounting to
approximately $4,900,000, shareholders' loans totaling approximately $258,000,
and fund various acquisitions.
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4-SUBSEQUENT EVENTS
In November 1998, the Company hired David Eisenberg as Co-Chairman of the Board
of Directors and Chief Executive Officer. The terms of his employment agreement
have not yet been finalized, however, the terms of an agreement are expected to
be finalized in the second quarter of fiscal 1999.
The Company and one of its directors and officers and a former director and
officer are named as defendants in two class action lawsuits for alleged
violations of section 10(b) and 20(a) of the Securities Exchange Act and SEC
Rule 10b-5, Bryan, et al. v. Molina et al., and Cortesi, et al. v. Let's Talk
Cellular & Wireless, Inc., et al., which are pending in the U.S. District Court
for the Southern District of Florida. The Plaintiffs maintain the Company and
the individual defendants committed a fraud on the securities market by
artificially inflating the price of the Company's stock. Plaintiffs propose a
class period of March 11, 1998 through July 2, 1998 and November 25, 1997
through July 2, 1998, respectively, and seek an unspecified amount of damages.
The Company will vigorously defend these claims.
The Company is a defendant in various other suits, claims and investigations
which arise in the normal course of business. In the opinion of management, the
ultimate disposition of the matters described in this paragraph, will not have a
material adverse effect of the consolidated financial position, liquidity or
results of operations of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is the largest independent specialty retailer of cellular and
wireless products, services and accessories in the United States, with 261
stores located in 23 states, the District of Columbia and Puerto Rico as of
October 31, 1998. The Company's stores, located predominantly in regional
shopping malls and power strip centers, seek to offer one-stop shopping for
consumers to purchase cellular, personal communication systems ("PCS"), paging,
internet, satellite, and other wireless products and services and related
accessories. The Company is also a wholesaler of cellular and wireless products
and accessories to more than 500 accounts, consisting primarily of distributors,
carriers and small 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 presently plans to open a total of 40-50 new stores in Fiscal 1999.
To handle the existing store base as well as expansion, management has been
building the infrastructure necessary to support a growing chain of stores. In
November 1998, the Company hired David Eisenberg as Co-Chairman of the Board of
Directors and Chief Executive Officer. Mr. Eisenberg brings over 40 years of
retail experience, most recently with Chief Auto Parts, to the Company. In
addition, the Company has continued to strengthen its field structure with the
addition of regional managers. As the Company continues to expand through new
store openings, it expects to leverage these investments and improve margins
through economies of scale.
The Company's revenues are generated principally from four sources:
(i) RETAIL SALES. The Company sells cellular and wireless products,
such as phones, pagers and related accessories in the Company's retail
outlets.
(ii) ACTIVATION COMMISSIONS. The Company receives an activation
commission from the applicable cellular carrier when a customer
initially subscribes for the cellular carrier's service. The amount of
the activation commission paid by cellular carriers is based upon
various service plans offered by the carriers and is recognized by the
Company at the time of sale. New subscription activation commissions
are fully refundable if the subscriber cancels its subscription prior
to completion of a minimum period of continuous active service
(generally 180 days). Customers generally sign a service agreement with
the Company that requires a customer deposit that is forfeited in the
event of early cancellation. The Company then applies the customer's
deposit to reduce or offset its resulting deactivation loss owed to the
carrier. The Company accrues for estimated deactivation losses, net of
cancellation fees, by creating a reserve against carrier accounts
receivable. The reserve is reflective of the historical cancellation
experience.
(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 3-6%) 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
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airtime that the Company buys wholesale from paging carriers and then
resells to individuals and small businesses.
(iv) WHOLESALE SALES. The Company wholesales cellular and wireless
products and accessories to more than 500 accounts, consisting
primarily of distributors, carriers and small independent retailers.
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.
Comparable stores sales include only stores owned and operated by the
Company for at least 12 full months and are comprised of retail sales
and activation commissions, as residual income is not allocated among
stores.
Historically, retail sales have accounted for most of the Company's net
revenues. As sales of discounted and "free" cellular phones designed to attract
new subscribers have increased significantly, the number of activations has
increased and activation commissions have become increasingly significant to the
Company's net revenues. Activation commissions for the Company were $14.1
million and $5.7 million for the three months ended October 31, 1998 and 1997,
respectively. In fiscal 1997, the Company made a strategic decision to accept
increased activation commissions in connection with certain new carrier
agreements in lieu of monthly residual payments to optimize cash flow and to
facilitate the Company's growth strategy. As a result, management believes that
activation commissions may account for an increased share of the Company's
future net revenues relative to residual income.
To date, the cost of wireless products has gradually decreased over time. With
such lower costs, the Company typically has offered lower prices to attract more
subscribers, which has increased its total activation commissions and
contributed to gross profit improvements. Consequently, the Company believes
that as prices of wireless products decrease they become more affordable to
consumers, expanding the wireless communications market and creating an
opportunity to attract new subscribers and increase activation commissions.
On December 1, 1997, the Company completed an initial public offering (the
"IPO") of its Common Stock. On October 20, 1997, the Company effected a 3.289
for 1 stock split and immediately prior to the IPO, the Company issued 106,696
shares of its Common Stock upon exercise of warrants held by the Company's bank
lender. In the IPO, 2,337,245 shares of Common Stock were sold, of which
2,000,000 shares were sold by the Company and 337,245 shares were sold by
selling shareholders. The Company's net proceeds from the IPO were used to repay
the then outstanding balance on bank term loans totaling $12.9 million, a
portion of the line of credit amounting to $4.9 million and shareholder loans
totaling $258,100 and to fund various acquisitions. In connection with the
repayment of debt, the Company incurred a write-off of deferred financing costs
of approximately $391,000, net of tax, in connection with the repayment of bank
indebtedness as a result of the IPO and bank refinancing.
The Company acquired 85 stores in connection with corporate acquisitions during
fiscal year 1998. Acquisitions have a significant effect on the Company's
results of operations and financial position and cause substantial fluctuations
in the Company's quarterly and yearly operating results. The Company has
accounted for all of its acquisitions using the purchase method of accounting
and, as a result, does not include in its financial statements the results of
operations of the acquired company prior to the date it was acquired by the
Company. Any goodwill of an acquisition is amortized over a 30-year period while
the portion of the purchase price allocated to residual income is amortized on
an accelerated basis (typically 4-7 years) according to the anticipated timing
of acquired cash flows. Consequently, the accelerated amortization applied to
the value of the residual income acquired in connection with various
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acquisitions is expected to have a significantly negative effect on net income
for the next two fiscal years.
In most cases acquired companies were operated with different strategic and
financial objectives. Former management sought to maximize cash flow and
shareholder distributions, rather than reinvest earnings in new store growth. As
a result, certain of the acquired companies' net revenues and number of stores
did not grow significantly in recent years.
RESULTS OF OPERATIONS
QUARTER ENDED OCTOBER 31, 1998 COMPARED TO QUARTER ENDED OCTOBER 31, 1997
TOTAL NET REVENUES increased $13.9 million, or 63.6% to $35.9 million in the
first quarter of fiscal 1999 from $21.9 million in the first quarter of fiscal
1998. The increase in revenues is due to increases in retail sales, activation
commissions and residual income, and to the acquisitions of Cellular USA, Inc.
("USA") and Cellular Unlimited Corp. ("Unlimited") effective November 1, 1997,
and of Sosebee Enterprises, Inc. and Cellular Warehouse, Inc. (collectively,
"CWI") effective March 1, 1998 and the resulting inclusion of the acquired
entities' operations in the Company's consolidated revenues for the first
quarter of fiscal 1999. Retail sales increased $6.5 million, or 113.4% to $12.3
million from $5.7 million, activation commissions increased $8.4 million, or
149.3% to $14.1 million from $5.7 million and residual income increased $2.2
million, or 89.6% to $4.6 million from $2.4 million. Comparable store sales
decreased $210,000, or 1.9% to $11.0 million from $11.2 million. Sales relating
to 67 new stores opened, 85 stores acquired since October 31, 1997 and the 9
stores that were not yet open for 12 full months accounted for $15.2 million, or
109.1% of the increase in total net revenues. The comparable stores sales
decline was primarily attributable to two markets (26 of the 100 comparable
stores) which continued to have personnel issues at both the district and store
level. In addition, the Company received lower than anticipated commissions from
the cellular carriers as well as a decrease in the amount of carrier sponsored
promotions in these two markets verses the first quarter of fiscal year 1998.
The comparable store sales would have increased by 5.7% (in remaining 74
comparable stores) if the two markets described above were excluded from the
computation. Wholesale sales decreased $3.2 million, or 39.2% as a result of the
Company's shift in allocation of resources to the retail operations. The
increase in residual income was due to the inclusion of CWI's residual income
($2.0 million for the first quarter of fiscal 1999) and the increase in the
number of activations resulting from the various acquisitions and the Company's
store expansion. The Company had 261 stores open at October 31, 1998 as compared
to 111 at October 31, 1997.
GROSS PROFIT increased $9.3 million, or 114.6% to $17.4 million in the first
quarter of fiscal 1999 from $8.1 million for the first quarter of fiscal 1998.
As a percentage of total net revenues, gross profit increased to 48.4% from
36.9% primarily due to the wholesale operations making up a smaller percentage
of total revenue as compared to the first quarter of fiscal 1998. The Company's
wholesale operations have a significantly lower margin (6.3% for the first
quarter of fiscal 1999) than its retail operations.
SELLING, GENERAL AND ADMINISTRATIVE expenses increased $7.8 million, or 99.7% to
$15.7 million for the first quarter of fiscal 1999 from $7.8 million in the
first quarter of fiscal 1998 as a result of higher personnel, rent and related
costs associated with the net addition of 150 stores, either by internal growth
or acquisition from the first quarter of fiscal 1998. Included in the first
quarter of fiscal 1999 is a non-recurring pre-tax charge of $450,000 for
severance and related costs of a former Officer of the Company. In addition, the
Company has incurred additional expenses relating to infrastructure investments
to support the expansion program. As a percentage of total net revenues,
selling, general and administrative expenses increased to 43.7% during the first
quarter of fiscal 1999 from 35.8% in the first quarter of fiscal 1998.
AMORTIZATION OF INTANGIBLES consisted of (i) approximately $623,000 associated
with the amortization of goodwill and acquired residual income resulting from
the acquisition of TWI on June 30, 1997, the acquisition of USA and Unlimited on
November 1, 1997, and the acquisition of CWI on March 1, 1998,
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and (ii) $60,000 associated with the thirty month noncompete agreement entered
into in August 1996 in connection with the acquisition of Peachtree Mobility.
The Company expects the amortization of intangibles to increase in fiscal 1999
as a result of a full year of amortization relating to the USA, Unlimited and
CWI acquisitions.
INCOME FROM OPERATIONS increased $1.1 million, or 177.2% to $488,000 in the
first quarter of fiscal 1999 from a loss of $631,000 in the first quarter of
fiscal 1998 and increased as a percentage of total net revenues to 1.4% from
(2.9%).
INTEREST EXPENSE, NET increased $237,000, or 47.5% to $735,000 in the first
quarter of fiscal 1999 from $499,000 in the first quarter of fiscal 1998
primarily due to increased bank borrowings used to finance the Company's
expansion.
BENEFITS FOR INCOME TAX was $61,000 in the first quarter of fiscal 1999 as
compared to $405,000 in the first quarter of fiscal 1998.
NET LOSS was $187,000 in the first quarter of fiscal 1999 compared to $725,000
in the first quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements have been primarily to fund acquisitions,
support its increased inventory requirements and build-out costs for new store
expansion. The Company has financed its liquidity needs through a combination of
borrowings, capital contributions, stock issuance and cash provided by
operations.
The Company has a Loan and Security Agreement with The Chase Manhattan Bank,
establishing a revolving credit facility for up to $13.5 million and a term loan
of $21.5 million (the "Credit Facility"). The Credit Facility expires in January
2004 and is secured by substantially all of the Company's assets. The revolving
Credit Facility's availability is based on a formula of eligible receivables and
inventories, and as of October 31, 1998, the Company has an additional $4.6
million available for borrowing. Advances under the revolving credit line bear
interest at prime plus .75% and/or LIBOR plus 2.5% (a weighted average of 8.24%
at October 31, 1998). This facility was used to finance the acquisition of CWI,
refinance existing bank debt and for working capital. The Credit Facility was
amended effective July 31, 1998 to waive certain financial covenants for the
year ended July 31, 1998 and subsequent periods. The amendments to the Credit
Facility also increased the maximum eligible inventory used in determining
availability under the revolving line of credit from $6 million to $7 million
for the period beginning September 1, 1998 and ending on December 31, 1998. The
amendments also provided for a reduction period, whereby the Company is required
to reduce all outstanding advances under the revolving line of credit to not
more than $8 million for the period from February 15, 1999 through and including
April 15, 1999. The Company anticipates that borrowings under the Credit
Facility will be sufficient to meet currently foreseeable liquidity
requirements.
The Company's working capital decreased $1.2 million to $2.1 million at October
31, 1998 from $3.3 million at July 31, 1998. Accounts receivable and inventory
increased $4.8 million to $37.3 million at October 31, 1998 from $32.5 million
at July 31, 1998. This increase was partially offset by an increase in accounts
payable of $4.7 million to $17.8 million at October 31, 1998 from $13.1 million
at July 31, 1998.
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The Company's net cash provided by operating activities increased to $840,000
for the first quarter of fiscal 1999 compared to net cash used in operating
activities of $1.9 million for the first quarter of fiscal 1998. The increase 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 reflecting the growth in the Company's operations.
The Company's net cash used in investing activities decreased to $1.0 million
for the first quarter of fiscal 1999 from $1.5 million in the first quarter of
fiscal 1998. The decrease in cash used in investing activities was primarily
attributable to a reduction of capital expenditures for new stores. The Company
opened 13 new stores in the first quarter of fiscal 1999.
The Company's net cash used in financing activities decreased to $378,000 in the
first quarter of fiscal 1999 from net cash provided by financing activities of
$2.7 million in the first quarter of fiscal 1998 primarily as a result of
reduced borrowings on the bank lines of credit.
YEAR 2000
The Company has conducted a review of its computer systems to identify
the systems that could be affected by the "Year 2000" issue and has developed an
implementation plan to resolve the issue. The Year 2000 issue is the result of
the computer programs being written using two digits rather than four to define
the applicable year. Any of the Company's computer programs that have
time/date-sensitive software and hardware may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a major system failure
or miscalculation. The company presently believes that, with modification to
existing software and hardware and the purchase of new software, the Year 2000
issue will not pose significant operations problems for the Company's systems as
so modified and converted. The Company has already installed Year 2000 compliant
financial software and plans to complete the update of its purchase order system
by December 31, 1998. In addition, the Company has committed to purchase a Year
2000 compliant pager billing system which is scheduled to be installed in the
first calendar quarter of 1999. All of the software and computer systems used by
the Company are commercially available and therefore, the Company believes that
the cost of becoming Year 2000 compliant will not be material and is not
expected to exceed $250,000 in fiscal 1999.
The Year 2000 issue creates risk for the Company for unforeseen
problems in its own computer systems and from third parties on which the Company
relies. Accordingly, the Company is requesting assurances from all software
vendors from which it has purchased or from which it may purchase software that
the software sold to the Company will correctly process all date information at
all times. In addition, the Company is querying its customers and suppliers as
to their progress in identifying and addressing problems that their computer
systems will face in correctly processing date information as the year 2000
approaches and is reached. However, there are no assurances that the Company
will identify all date-handling problems in its business systems or that the
Company will be able to successfully remedy Year 2000 compliance issues that are
discovered. To the extent that the Company is unable to resolve its Year 2000
issues prior to January 1, 2000, operating results could be adversely affected.
In addition, the Company could be adversely affected if other entities (e.g.,
vendors or customers) not affiliated with the Company do not appropriately
address their own year 2000 compliance issues in advance of their occurrence.
IMPACT OF NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION ("SFAS
No. 131"). SFAS No. 131 establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. The Company is in
the process of evaluating the disclosure requirements. The adoption of SFAS No.
131 will have no impact on the Company's consolidated statement of operations,
financial condition or cash flows.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-11-
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 4 of the Notes to Condensed Consolidated Financial Statements.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits-
10.16 Settlement Agreement, dated October 9, 1998 by and between
the Company and Nick Molina.
27.1 Financial Data Schedule
(b) The Company did not file a form 8-K during the first quarter of
fiscal 1999.
-12-
<PAGE> 13
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LET'S TALK CELLULAR & WIRELESS, INC.
December 14, 1998 By: /s/ Brett Beveridge
----------------------------------
BRETT BEVERIDGE
President and Co-Chairman of the Board
December 14, 1998 By: /s/ Dan Cammarata
----------------------------------
DAN CAMMARATA
Chief Financial Officer
-13-
<PAGE> 1
EXHIBIT 10.16
SETTLEMENT AGREEMENT
--------------------
THIS SETTLEMENT AGREEMENT (the "Agreement"), dated October 9th, 1998,
is made by and between Nick Molina ("Molina") and Let's Talk Cellular and
Wireless, Inc., a Florida corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Molina and the Company have agreed that Molina's employment
as an officer and director of the Company shall cease as of October 9, 1998;
WHEREAS, Molina and the Company acknowledge this Agreement is
necessary to fully and completely define the parties' obligations to each other
going forward from October 9, 1998;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1. Molina hereby voluntarily resigns as officer, director, and in any
other capacity on behalf of the Company effective October 9, 1998 and
acknowledges that this voluntary resignation is not the result of a
constructive termination. Further, this Agreement supersedes and replaces that
certain Amended and Restated Employment Agreement dated June 27, 1997
(including its Amendment dated July 9, 1998).
2. The Company shall pay Molina a total of $450,000.00, pursuant to
the following terms: 1) $200,000.00 shall be paid upon execution of this
Agreement; and 2) $250,000.00 shall be paid on May 1, 1999. The Company agrees
it will pay Molina 15% interest
<PAGE> 2
on any late payment of the $250,000.00 May 1, 1999 payment referenced above. The
foregoing payments consist of consideration for the obligations of Molina
contained herein, including but not limited to consideration for Molina's
covenant not to compete contained in paragraph seven herein. Molina is also
entitled to be paid his normal salary, on a pro-rated basis for the days he has
worked in October, 1998 as well as nine of his accrued vacation days on the next
regularly-scheduled Company payday.
3. The Company will continue to provide Molina the following, and only
the following, enumerated benefits in substantially the same form and cost as
they are currently provided by the Company, until such time as the total
$450,000 referenced in Paragraph 2 of this Agreement is paid in its entirety:
auto lease (1 car), auto insurance, health insurance, life insurance,
disability insurance, and 401(K) plan. Nothing contained in this Agreement
shall in any way limit or diminish Molina's rights, if any, to convert any
insurance policies, or exercise his rights under that Federal statute commonly
referred to as COBRA. The Company shall provide Molina written notice of
specific payments it makes concerning the above-referenced auto lease, auto
insurance, and life insurance if such specific notice is requested by Molina.
Molina is also entitled to continue to receive the benefit of the country club,
the dues of which have already been paid for the club's current membership
year. When the current country club membership year ends Molina shall retain
the right to use the country club privileges in his own name at his own
expense. The Company shall pay no further monies whatsoever with regard to
country club membership
4. Molina may retain all current "demo equipment" in his possession
and may retain the use of pager services, and continue to utilize such "demo
equipment" and pager
- 2 -
<PAGE> 3
services, as long as such "demo equipment" and pager services result in no cost
or liability to the Company; provided, however, that Molina's right to use such
"demo equipment" and pager service shall expire on October 9, 2002. Further,
Molina may retain the use of two free promotional cellular lines (Nos.
305-904-3770 and 305-299-4750), as long as such free promotional cellular lines
results in no cost or liability to the Company; provided, however, that
Molina's right to use such free promotional cellular lines shall expire on
October 9, 2002. The Company shall not be obligated to pay any further monies
whatsoever with regard to the "demo equipment", pager service, and cellular
lines referenced in this paragraph.
5. The parties agree that the press release attached hereto as Exhibit
"A" shall be released on the date of this Agreement. Further, in the event the
Company cites by name the founders of the Company in any written communication
publicly released by the Company concerning the Company's history (including
media releases and prospectus), Molina shall be acknowledged as a co-founder of
the Company. Molina shall also be entitled to sign the annual letter to the
shareholders for the fiscal year ending July 31, 1998, and his picture shall
appear in the Company's annual report if, and only if, other founder's pictures
also appear therein.
6. Molina's 91,174 Company stock options (Option No. __) which are
already fully vested at the exercise price of approximately $20.04 shall remain
exercisable in accordance with their terms, which the parties acknowledge
expire on July 27, 2006. Also, one-third of Molina's 59,202 unvested Company
stock options, with a strike price of $12.00, shall fully vest to Molina upon
execution of this Agreement and the return of the original option agreement and
the issuance of a replacement option agreement for the 19,734 options. The
remaining unvested Company stock options shall terminate and expire upon the
execution of
- 3 -
<PAGE> 4
this Agreement. Additionally, the Company agrees to file an appropriate
registration statement, covering the issuance of the Company common stock upon
exercise of these stock options within 180 days following the date on which any
of the options "is in the money." The Company agrees to have outside counsel
deliver an opinion upon request by Molina or any of his agents or
representatives to assist Molina in the sale of his stock in compliance with
the safe harbor provided by Rule 144 under the Securities Act of 1933, as
amended, in order to facilitate any such transactions. On January 9, 1999, the
Company shall, and instruct its transfer agent to, remove any legends and stop
transfer orders with respect to the Company stock owned by Molina.
7. Molina agrees, for a period of two years from the date of execution
of this Agreement, not to directly or indirectly serve as a consultant to, or
be an employee, officer, agent, director, or owner of more than 3% of, any
corporation, partnership or other entity which engages in the primary business
of selling cellular or wireless communication services or products to consumers
on a retail basis in the Restricted Area (as defined herein). Molina also
agrees, for a period of two years from the date of execution of this Agreement,
not to directly or indirectly serve as a consultant to, or be an employee,
officer, agent, director, or owner of more than 3% of, any retailer for which
Molina will have any involvement in the sale or distribution of cellular or
wireless communication services or products to consumers on a retail basis in
the Restricted Area (as defined herein). The "Restricted Area" consists of any
metropolitan area or proposed metropolitan area (as reflected in the written
business plans of the Company in effect as of the date of this Agreement), in
which the Company is doing or will do business within six months of the date of
the execution of this Agreement. Molina further agrees that during the two year
non-competition period, he will not solicit for employment or endeavor to
entice away from
- 4 -
<PAGE> 5
employment with the Company or its affiliates any employee of the Company or
its affiliates who is an officer or manager of any department.
8. Except as may be required by legal process or the lawful order of a
court or agency of competent jurisdiction, Molina agrees to keep secret and
confidential, for a period of two years from the date of the execution of this
Agreement, all non-public information concerning the Company and/or its
affiliates which was acquired by or disclosed to Molina during the course of
his employment by the Company and/or its affiliates, including information
relating to customers (including, without limitation, credit history, repayment
history, financial information and financial statement), costs, 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 shall not apply to information which is in the
public domain or that was disclosed to Molina by independent third parties who
are not bound by an obligation of confidentiality. Molina further agrees that
he will not make any statement or disclosure which would be prohibited by
applicable federal or state laws. Further, Molina agrees not to make or state
publicly or privately any remark, comment, disclosure or communication that
would reflect negatively on the Company, its affiliates, officers, employees,
directors and/or shareholders. The Company agrees that its directors and
officers who have been involved in the negotiation, approval and execution of
this Agreement shall not make or state publicly or privately any remark,
comment, disclosure or communication that would reflect negatively on Molina.
The parties acknowledge that these covenants not to disparage in the future are
a material part of this Agreement, the breach of which may cause substantial
damages.
- 5 -
<PAGE> 6
9. The parties agree that any violation or breach of paragraphs seven
and/or eight of this Agreement will result in irreparable harm. The parties
further agree that in the event of a violation of paragraphs seven and/or eight
of his Agreement, the injured party is entitled, upon the proper showing to a
court of competent jurisdiction of a likelihood of success on the merits, to
injunctive relief enjoining the offending party from further violation of the
Agreement without the posting of a bond.
10. The Company agrees to make an additional payment to Molina, at the
time of the execution of this Agreement, in the amount of $11,300.00, as an
agreed-to reimbursement amount for legal fees incurred by Molina to date
relating solely to the negotiation and execution of this Agreement.
11. Molina agrees to deliver to the Company, concurrently with his
execution of this Agreement, a general release in the form attached hereto as
Exhibit "B", The Company agrees to deliver to Molina, concurrently with the
execution of this Agreement, a general release in the form attached hereto as
Exhibit "C". Nothing contained in this Agreement or in the General Releases
attached hereto as Exhibits "B" and "C" shall in any way restrict or prevent
the parties from bringing an action to enforce its rights under this Agreement.
12. The Indemnification Agreement between Molina and the Company,
dated November 24, 1997 and attached hereto as Exhibit "D", shall remain in
full force and effect.
13. In the event the Company is sold to a third party, or if the
Company conducts a stock buyback resulting in the Company becoming a privately
held company, then Molina shall have the right to participate in such
transaction(s) on the same terms and same basis as HIG Fund V or its affiliates.
in the event HIG acquires all of the stock of the Company, then
- 6 -
<PAGE> 7
Molina will be entitled to the same stock price and terms as given to Mr. Brett
Beveridge. In the event of the above transaction(s), the Company will provide
Molina at least thirty calendar days written notice of the transaction(s).
Molina shall have twenty calendar days from the date of the above notification
to notify the Company, in writing, of his intent to participate or not
participate in the transactions. Molina's failure to deliver a written response
within the requisite time period will be deemed waiver of Molina's right to
participate in the transactions. In the event Molina elects to participate in
the transactions, he agrees to deliver an enforceable proxy to the Company to
be exercised by the Company with regard to Molina's shares.
14. Waiver by any party of any breach of this Agreement shall not be
considered as or constitute a continued waiver or waiver of any other breach at
a future date or of any other provision of this Agreement.
15. Any dispute arising between the parties hereto regarding the
interpretation, application, and/or enforcement of this Agreement shall be
referred to arbitration in Miami Dade County, Florida under the Expedited
Employment Arbitration Rules of the American Arbitration Association. However,
the parties agree that only one arbitrator shall be selected. The party
requesting arbitration shall serve upon the other party hereto a written demand
for arbitration. Should the party upon whom the demand for arbitration is
served fail or refuse to participate in the arbitration, the arbitrator shall
have the right to decide the dispute alone, and his decision or award shall be
final and binding on the parties. Nothing contained in this paragraph shall in
any way limit the right of either party to this Agreement to obtain injunctive
relief under paragraph 9 of this Agreement.
- 7 -
<PAGE> 8
16. In the event any provision of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other part
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had not been contained in this Agreement.
This Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Florida. The parties agree that any
dispute concerning this Agreement shall have venue exclusively in Dade County,
Florida.
17. Neither this Agreement, nor any terms hereof, may be amended,
changed, waived, discharged, or terminated unless such amendment, change,
waiver, discharge, or termination is in writing and signed by the party against
whom enforcement is sought. In the event of any dispute concerning this
Agreement, neither party will be deemed to have drafted the Agreement such that
any presumptions of law or fact are construed against a particular party.
18. This Agreement, and new option agreement and indemnification
agreement referenced herein, constitute the entire agreement between the
parties, and the parties agree that there arc no other agreements, written or
oral between them.
19. The parties to this Agreement agree that the terms set forth
herein are confidential in that a) Molina will not disclose the terms of this
Agreement and/or the amounts paid to him under this Agreement to any person
with the exception of his attorneys, accountants, financial advisors and
immediate family members and b) the Company will not disclose the terms of this
Agreement and amounts to be paid to Molina beyond those directors, officers,
and managers who have a legitimate business need to know.
- 8 -
<PAGE> 9
20. This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors, affiliates and assigns of the
parties.
21. In the event of any litigation between the parties hereto
concerning this Agreement or any document or instrument referred to herein, the
prevailing party will be entitled to reimbursement and/or an award of
reasonable attorneys fees and costs, including attorney time, paralegal time,
pretrial, trial, appellate and post-judgment proceedings.
22. Any notice or communication required or permitted to be given
hereunder shall be addressed as follows: Nick Molina, 555 Arvida Parkway, Coral
Gables, FL 33156 and Let's Talk Cellular & Wireless, Inc., 800 Brickell Avenue,
Suite 400, Miami, FL 33131.
The parties duly execute and deliver this Agreement on the date first
above written.
LET'S TALK CELLULAR AND WIRELESS, INC.
By: /s/ Brett Beveridge
----------------------------------
Name: Brett Beveridge
Title: President
/s/ Nick Molina
----------------------------------
NICK MOLINA
- 9 -
<PAGE> 10
Let's Talk Cellular & Wireless
800 Brickell Avenue
Miami, FL 33131
Nasdaq: LTCW
<TABLE>
<CAPTION>
Let's Talk Cellular & Wireless The Finanical Relations Board
- ------------------------------ -----------------------------
<S> <C> <C> <C> <C>
Brett Beveridge Nick Molta Joe Calabrese Lynn Sawyer-Landau Claudine Cornelis
Chairman & President 305-905-3770 (general contact) (analyst contact) (media contact)
305-358-8255 [email protected] 212-661-8030 212-661-8030 212-661-8030
</TABLE>
FOR IMMEDIATE RELEASE
October xx, 1998
LET'S TALK CELLULAR & WIRELESS
CO-CHAIRMAN NICK MOLINA TO LEAVE COMPANY
Miami, FL (October xx. 1998) - Let's Talk Cellular & Wireless, Inc, (Nasdaq:
LTCW), announced today that Nick Molina, Co-Chairman and President of Business
Development, will be resigning his position effective October xx, 1998 to
pursue other entrepreneurial opportunities. The Company has no plans to fill
this position.
Brett Beveridge, President and Chairman of the Board said, "In the years since
Nick and I co-founded the Company in 1989, Mick's entrepreneurial skills and
expertise has helped build Let's Talk Cellular and Wireless into a leading
retailer of cellular and wireless products. Nick has made significant
contributions as a member of our management team in the areas of finance and
administration as well as in the expansion of our retail operations. On behalf
of the Company and the Board we wish him every success in his future
endeavors."
Nick Molina said, "When Brett and I started this business 10 years ago, we
had a dream of growing Let's Talk Cellular & Wireless into the largest
independent wireless retailer in the U.S. Today I leave the Company as just
that. It has been a wonderful journey and I will look to apply my experience on
new and exciting ideas. I wish the team of Let's Talk the very best."
Let's Talk Cellular & Wireless is the larger independent specialty retailer of
cellular and wireless products, services and accessories. Let's Talk Cellular &
Wireless owns and operates xx stores located predominently in regional shopping
malls and strip center locations throughout the United Slates and Puerto Rico.
This release contains forward-looking statements which are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
All forward-looking statements should be considered in light of associated
risks and uncertainties.
# # #
For more information on Let's Talk Cellular & Wireless via fax at no charge,
please dial 1-800-PRO-INFO and enter ticker symbol LTCW
<PAGE> 11
EXHIBIT A
GENERAL RELEASE
---------------
To all to Whom these Presents, shall come, or may concern, know that
Nick Molina, on behalf of himself and all those entitled to make or bring
claims by or through him, as RELEASOR, in consideration of the sum of Ten
Dollars and 00/ 100 ($ 10.00), and other good and valuable consideration, the
receipt and sufficiency whereof are hereby acknowledged, releases and forever
discharges Let's Talk Cellular & Wireless, Inc., its agents, affiliates,
sureties, parent companies, managers, underwriters, successors, officers,
directors, shareholders, employees, and trustees, as RELEASEE, from all
actions, causes of actions, suits, debts, dues, sums of money, accounts.
reckonings, bonds, bills, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, executions, rights, claims
and demands whatsoever, whether in law, IN REM, equity or otherwise, and
whether known or unknown, which RELEASOR or his respective successors or
assigns ever had, may have had, now have, or hereafter can, shall or may have
relating to any and all claims existing as of the date of this General Release,
including, without limitation, those claims which in any way relate to the
Amended and Restated Employment Agreement dated June 27, 1997 (including the
Amendment dated July 9, 1998) or which relate to Molina's business relationship
with RELEASEE; provided, however, that RELEASOR shall retain the right to
enforce that certain Settlement Agreement dated October 9, 1998 by and between
RELEASOR and RELEASEE. RELEASOR acknowledges this General Release has not been
procured under fraud or duress and has been reviewed by his counsel prior to
execution.
Nick Molina
By: /s/ Nick Molina
---------------
STATE OF FLORIDA )
) SS.:
COUNTY OF MIAMI-DADE)
BEFORE ME, the undersigned authority, personally appeared, Nick Molina,
who is personally known to me or who has produced __________________ as
identification, and who did/did not take an oath and acknowledged before me that
he executed the foregoing Release.
/s/ Maria Carmen Perez
My commission expires: -----------------------------
NOTARY PUBLIC, STATE OF
FLORIDA AT LARGE
Name: Maria Carmen Perez
OFFICIAL NOTARY SEAL
MARIA CARMEN PEREZ
NOTARY PUBLIC STATE OF FLORIDA
COMMISSION NO. CC637846
MY COMMISSION EXP. APR. 10, 2001
<PAGE> 12
EXHIBIT B
GENERAL RELEASE
---------------
To all to Whom these Presents, shall come, or may concern, know that
Let's Talk Cellular & Wireless, Inc., on behalf of itself and all those entitled
to make or bring claims by or through it, as RELEASOR, in consideration of the
sum of Ten Dollars and 00/100 ($ 10,00), and other good and valuable
consideration, the receipt and sufficiency whereof are hereby acknowledged,
releases and forever discharges Nick Molina, as RELEASEE, from all actions,
causes of actions, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, rights, claims and
demands whatsoever, whether in law, IN REM equity or otherwise, and whether
known or unknown, which RELEASOR or its respective successors or assigns ever
had, may have had, now have. or hereafter can, shall or may have relating to
any and all claims existing as of the date of this General Release, including,
without limitation, those claims which in any way relate to the Amended and
Restated Employment Agreement dated June 27, 1997 (including the Amendment
dated July 9. 1998) or which relate to Molina's business relationship with
RELEASOR, provided, however, that RELEASOR shall retain the right to enforce
that certain Settlement Agreement dated October 9, 1998 by and between RELEASOR
and RELEASEE.
Let's Talk Cellular & Wireless, Inc.
By: /s/ Brett Beveridge
-------------------------------
Name: Brett Beveridge
Title: President
STATE OF FLORIDA )
) SS.:
COUNTY OF MIAMI-DADE)
BEFORE ME, the undersigned authority, personally appeared Brett
Beveridge as the President of Let's Talk Cellular & Wireless, Inc, who is
personally known to me or who has produced as identification, and
who did/did not take an oath and acknowledged before me that he executed the
foregoing Release.
/s/ Maria Carmen Perez
My commission expires: -----------------------------
NOTARY PUBLIC, STATE OF
FLORIDA AT LARGE
Name: Maria Carmen Perez
OFFICIAL NOTARY SEAL
MARIA CARMEN PEREZ
NOTARY PUBLIC STATE OF FLORIDA
COMMISSION NO. CC637846
MY COMMISSION EXP. APR. 10, 2001
<PAGE> 13
EXHIBIT C
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the 24th day of November,
1997, between LET'S TALK CELLULAR & WIRELESS, INC., a Florida corporation (the
"Company"), and NICOLAS MOLINA (the "Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee as
Director of the Company.
B. As a condition to the Indemnitee's agreement to continue to serve
as Director 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> 14
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
1 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 council 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
-2-
<PAGE> 15
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 or 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 1, 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 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 thin $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
-3-
<PAGE> 16
panics 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 6070850(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
-4-
<PAGE> 17
(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 1, 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
-5-
<PAGE> 18
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
1, 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 3 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.
-6-
<PAGE> 19
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, (a) 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, of
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).
-7-
<PAGE> 20
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.
-8-
<PAGE> 21
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 or 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
-9-
<PAGE> 22
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: /s/ Brett Beveridge
------------------------------
BRETT BEVERIDGE President
THE INDEMNITEE:
/s/ Nicolas Molina
----------------------------------
NICOLAS MOLINA Director
Print address
800 Brickell Ave., Ste. 400
Miami. FL 33131
-10-
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<PERIOD-END> OCT-31-1998
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