<PAGE> 1
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 APRIL 30, 1999
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.
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 65-0292891
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
800 BRICKELL AVE., STE. 400
MIAMI, FL 33131 33131
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 358-8255
-----------------------------
- --------------------------------------------------------------------------------
(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 June 14, 1999.
<PAGE> 2
LET'S TALK CELLULAR & WIRELESS, INC.
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Consolidated Balance Sheets as of April 30, 1999 (Unaudited)
and July 31, 1998................................................................................... 3
Condensed Consolidated Statements of Operations for the Three Months Ended
April 30, 1999 and April 30, 1998 (Unaudited)..................................................... 4
Condensed Consolidated Statements of Operations for the Nine Months Ended
April 30, 1999 and April 30, 1998 (Unaudited)..................................................... 5
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended April 30, 1999 and April 30, 1998 (Unaudited)................................................ 6
Notes to Condensed Consolidated Financial Statements (Unaudited)................................... 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................................... 9
PART II - OTHER INFORMATION..................................................................................... 15
</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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<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,780,414 $ 1,697,397
Accounts receivable, net 18,572,100 15,954,275
Inventories 18,449,844 12,853,459
Prepaid expenses 647,004 429,869
Deferred tax asset 836,806 836,806
Net assets of discontinued wholesale operations -- 3,679,502
----------- -----------
Total current assets 40,286,168 35,451,308
Property and equipment, net 12,823,998 12,170,193
Other assets, net 1,140,658 1,020,524
Intangible assets, net 35,585,499 37,848,638
----------- -----------
Total assets $89,836,323 $86,490,663
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $15,915,587 $13,116,458
Bank lines of credit 8,636,818 9,099,072
Accrued expenses 5,976,640 6,628,207
Current portion of bank term loan and obligations under capital leases 3,126,148 1,947,361
Income taxes payable 44,301 273,255
Deferred revenues 907,677 855,729
Customer deposits 215,404 257,879
----------- -----------
Total current liabilities 34,822,575 32,177,961
Bank term loan, less current portion 17,000,000 19,250,000
Obligation under capital leases, less current portion 420,965 346,150
Other liabilities 584,916 372,395
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 2,779,722 116,012
----------- -----------
Total shareholders' equity 36,583,889 33,920,179
----------- -----------
Total liabilities and shareholders' equity $89,836,323 $86,490,663
=========== ===========
</TABLE>
See accompanying notes.
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<PAGE> 4
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
----------------------------
1999 1998
----------- --------------
<S> <C> <C>
Net revenues:
Retail sales $12,579,955 $11,421,499
Activation commissions 15,780,698 11,320,666
Residual income 4,994,226 4,128,118
----------- -----------
Total net revenues 33,354,879 26,870,283
Cost of sales 14,288,357 11,479,748
----------- -----------
Gross profit 19,066,522 15,390,535
Operating expenses:
Selling, general and administrative 15,545,733 12,291,002
Depreciation and amortization 708,754 414,671
Amortization of intangible assets 588,654 478,394
----------- -----------
Total operating expenses 16,843,141 13,184,067
----------- -----------
Income from continuing operations 2,223,381 2,206,468
Interest expense, net 663,796 307,833
----------- -----------
Income from continuing operations before provision for
income taxes, discontinued operations and extraordinary charge 1,559,585 1,898,635
Provision for income taxes 623,834 797,913
----------- -----------
Income from continuing operations before discontinued
operations and extraordinary charge 935,751 1,100,722
Discontinued operations (Note 4):
Loss from operations of discontinued wholesale division
(net of taxes) 83,967 351,794
Loss on disposal of wholesale division (net of taxes) 27,203 --
----------- -----------
Net income before extraordinary item 824,581 748,928
Extraordinary charge on debt retirement (net of taxes) -- 240,226
----------- -----------
Net income $ 824,581 $ 508,702
=========== ===========
EARNINGS PER SHARE
Basic:
Income per share from continuing operations before
discontinued operations and extraordinary charge $ 0.10 $ 0.13
Loss per share from operations of discontinued wholesale
division 0.01 0.04
Loss per share on disposal of wholesale division -- --
Extraordinary charge per share -- 0.03
----------- -----------
Net income per share $ 0.09 $ 0.06
=========== ===========
Diluted:
Income per share from continuing operations before
discontinued operations and extraordinary charge $ 0.10 $ 0.13
Loss per share from operations of discontinued wholesale
division 0.01 0.04
Loss per share on disposal of wholesale division -- --
Extraordinary charge per share -- 0.03
----------- -----------
Net income per share $ 0.09 $ 0.06
=========== ===========
Weighted average shares outstanding:
Basic 8,749,762 8,576,728
=========== ===========
Diluted 8,749,762 8,604,501
=========== ===========
</TABLE>
See accompanying notes.
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<PAGE> 5
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30,
-------------------------------
1999 1998
------------ -----------
<S> <C> <C>
Net revenues:
Retail sales $ 41,479,298 $27,882,650
Activation commissions 52,056,664 28,804,420
Residual income 13,910,534 8,966,889
------------ -----------
Total net revenues 107,446,496 65,653,959
Cost of sales 47,687,220 29,656,104
------------ -----------
Gross profit 59,759,276 35,997,855
Operating expenses:
Selling, general and administrative 48,549,973 29,571,880
Depreciation and amortization 1,976,533 985,150
Amortization of intangible 1,908,376 1,438,938
------------ -----------
Total operating expenses 52,434,882 31,995,968
------------ -----------
Income from continuing operations 7,324,394 4,001,887
Interest expense, 2,123,037 1,052,799
------------ -----------
Income from continuing operations before provision for income
taxes, discontinued operations and extraordinary charge 5,201,357 2,949,088
Provision for income taxes 2,119,064 1,303,207
------------ -----------
Income from continuing operations before discontinued operations
and extraordinary item 3,082,293 1,645,881
Discontinued operations (Note 4):
Loss from operations of discontinued wholesale division
(net of taxes) 391,380 725,255
Loss on disposal of wholesale division (net of taxes) 27,203 --
------------ -----------
Net income before extraordinary charge 2,663,710 920,626
Extraordinary charge on debt retirement (net of taxes) -- 631,584
------------ -----------
Net income $ 2,663,710 $ 289,042
============ ===========
EARNINGS PER SHARE
Basic:
Income per share from continuing operations before discontinued operations $ 0.35 $ 0.22
and extraordinary charge
Loss per share from operations of discontinued wholesale division 0.05 0.10
Loss per share on disposal of wholesale division -- --
Extraordinary charge per share -- 0.08
------------ -----------
Net income per share $ 0.30 $ 0.04
============ ===========
Diluted:
Income per share from continuing operations before discontinued operations $ 0.35 $ 0.22
and extraordinary charge
Loss per share from operations of discontinued wholesale division 0.05 0.10
Loss per share on disposal of wholesale division -- --
Extraordinary charge per share -- 0.08
------------ -----------
Net income per share $ 0.30 $ 0.04
============ ===========
Weighted average shares outstanding:
Basic 8,749,762 7,381,246
============ ===========
Diluted 8,749,762 7,390,505
============ ===========
</TABLE>
See accompanying notes.
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<PAGE> 6
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30,
----------------------------------
1999 1998
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,663,710 $ 289,042
----------- ------------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Loss from operations of discontinued wholesale division 391,379 725,255
Loss on disposal of wholesale division 27,203 --
Depreciation and amortization 1,976,533 985,152
Amortization of intangible assets 1,908,376 1,438,938
Amortization of deferred financing costs 94,958 1,056,999
Provision for activation adjustments and cancellation losses -- 191,158
Deferred income taxes -- (285,246)
Loss on disposal of property and equipment 38,212 --
Changes in operating assets and liabilities:
Accounts receivable (2,617,825) (6,483,362)
Inventories (5,596,385) (5,283,049)
Prepaid expenses (217,135) (2,200,499)
Other assets (215,092) (180,092)
Income tax receivable -- 291,099
Trade accounts payable 2,799,129 (635,205)
Accrued expenses (484,138) 1,630,893
Other liabilities 212,521 565,038
Income taxes payable 50,102 1,334,603
Customer deposits (42,475) (507,259)
Deferred revenues 51,948 (712,504)
----------- ------------
Net cash provided by (used in) continuing operations 1,041,021 (7,779,039)
Net cash provided by (used in) discontinued operations 1,619,637 (2,305,521)
----------- ------------
Total net cash provided by (used in) operations 2,660,658 (10,084,560)
INVESTING ACTIVITIES
Acquisition of Cellular Warehouse, net of cash acquired -- (15,462,797)
Acquisition of Cellular Unlimited, net of cash acquired -- (1,862,212)
Acquisition of Cellular USA, net of cash acquired -- (1,395,701)
Proceeds from sale of NCI 1,549,560 --
Purchases of property and equipment (2,428,733) (4,984,688)
----------- ------------
Net cash used in investing activities (879,173) (23,705,398)
FINANCING ACTIVITIES
Proceeds from sale of common stock, net of underwriting costs -- 22,320,000
Proceeds from bank term loans -- 21,500,000
Net proceeds on borrowings under bank lines of credit (462,254) 2,576,715
Payments on loans payable to shareholder and officers -- (258,100)
Payments on bank term loan and capital leases (1,236,214) (13,061,244)
----------- ------------
Net cash (used in) provided by financing activities (1,698,468) 33,077,371
----------- ------------
Net increase (decrease) in cash and cash equivalents 83,017 (712,587)
Cash and cash equivalents at beginning of period 1,697,397 1,080,014
----------- ------------
Cash and cash equivalents at end of period $ 1,780,414 $ 367,427
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 1,991,830 $ 870,495
=========== ============
Cash paid for income taxes $ 1,771,035 $ 58,795
=========== ============
Common stock issued to acquire Cellular Warehouse -- $ 7,562,500
============
Net assets acquired in the acquisition of Cellular Warehouse -- $ 5,374,787
============
Goodwill as a result of the stock issuance to acquire Cellular Warehouse -- $ 2,217,713
============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Acquisition of property and equipment under capital leases $ 239,816 --
=========== ============
</TABLE>
See accompanying notes.
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<PAGE> 7
LET'S TALK CELLULAR & WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999
(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 nine months ended April 30, 1999 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.
Certain amounts in the prior years financial statements have been reclassified
to conform to the current year's presentation for discontinued operations of the
wholesale division.
2-NET INCOME PER SHARE
Basic earnings per share is computed by dividing the Company's net income by the
weighted average number of shares outstanding during the period. Diluted
earnings per share is computed by dividing the Company's net income 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,
restated 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 (the "IPO"). 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 $20.0 million were used to repay the then outstanding balance on
bank term loans totaling approximately $12.9 million, a portion of the line of
credit amounting to approximately $4.9 million, shareholders' loans totaling
approximately $258,000, and fund various acquisitions. As a result of the
repayment of the bank term loans during the second quarter of fiscal 1998, the
Company incurred an
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<PAGE> 8
extraordinary charge to earnings of approximately $391,000, net of income taxes
of approximately $261,000.
4-DISCONTINUED OPERATIONS
On March 9, 1999, the Company made a strategic decision to sell its wholesale
operations. This business has been accounted for as a discontinued operation and
the results of operations have been excluded from continuing operations in the
consolidated statements of operations from all periods presented.
On March 22, 1999, the Company completed the sale of substantially all of the
assets of National Cellular, Incorporated, "NCI", a wholly owned subsidiary,
together with all the goodwill associated with the business and the right to use
the names "NCI" and "National Cellular". The assets included the sale of the
inventory of wireless products, records and documents pertaining to its business
operations including customer and vendor files, and standard forms used in
connection with the operations of the business.
The purchase price of $1,550,000 was received in cash. In computing the loss on
the sale, the inventory sold had a carrying value of $1,408,000 on March 22,
1999. The unamortized portion of goodwill in the amount of $187,000 was charged
against the disposal and the result, net of an income tax benefit for $18,000
resulted in a loss of $27,000. The cash proceeds were used to paydown the
Company's revolving credit line.
Information relating to the discontinued wholesale operations are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues........................... $2,556,430 $5,171,814 $13,686,030 $21,050,515
Cost of sales.......................... 2,321,110 4,957,384 12,696,761 20,017,811
Gross profit........................... 235,320 214,430 989,269 1,032,704
Selling general and administrative..... 375,265 800,754 1,641,568 2,241,462
---------- ---------- ----------- -----------
Loss before income taxes............... 139,945 586,324 652,299 1,208,758
Less income tax benefit................ 55,978 234,530 260,920 483,503
---------- ---------- ----------- -----------
Net loss............................. $ 83,967 $ 351,794 $ 391,380 $ 725,255
========== ========== =========== ===========
</TABLE>
The net assets of the discontinued operations were $0 as of April 30, 1999, and
$3,680,000 as of July 31, 1998.
5-CONTINGENCIES
The Company and one of its directors and officers and a former director and
officer are named as defendants in several class action lawsuits for alleged
violations of section 10(b) and 20(a) of the Securities and Exchange Act and SEC
Rule 10b-5 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 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 on the consolidated financial position, liquidity or
results of operations of the Company.
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<PAGE> 9
6-SUBSEQUENT EVENTS
On June 7, 1999, the Company entered into an Agreement to Assign Accounts
Receivable, on a recourse basis, to H.I.G. Capital LLC (a Related Party). The
agreement provides that the Company can sell up to $2,000,000 of accounts
receivable at 98% of the invoice amount. The 98% of the invoice amount,
$1,960,000, was paid to the Company on June 7, 1999.
On June 7, 1999, the Company entered into an amendment of its Loan and
Security Agreement with the Chase Manhattan Bank which deferred the required
reduction period, whereby the Company is required to reduce all outstanding
advances under the revolving line of credit to not more than $9 million for the
period from March 1, 2000 through and including April 15, 2000. In addition, the
cap on eligible inventories used in computing the availability under the
revolving credit facility was temporarily increased on a scale beginning on
April 30, 1999 and ending on December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is a leading specialty retailer of cellular and wireless products,
services and accessories in the United States, with 266 stores located in 23
states, the District of Columbia and Puerto Rico as of April 30, 1999. 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'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 30-35 new stores in Fiscal 1999,
as of the close of the third quarter, 26 new stores were opened. 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. Further, the
Company has continued to strengthen its senior executive team with the addition
of several new and well-seasoned executives in key areas, including Purchasing
and Distribution, Operations, Information Systems, and Human Resources as well
as strengthening 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 three sources:
(i) RETAIL SALES. The Company sells cellular and wireless products,
such as phones, pagers and related accessories in the Company's retail
outlets.
(ii) ACTIVATION COMMISSIONS. The Company receives an activation
commission from the applicable cellular carrier when a customer
initially subscribes for the cellular carrier's service. The amount of
the activation commission paid by cellular carriers is based upon
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.
-9-
<PAGE> 10
(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.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.
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 $52.1
million and $28.8 million for the nine months ended April 30, 1999 and 1998,
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.
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
acquisitions is expected to have a significantly negative effect on net income
for the next two fiscal years.
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<PAGE> 11
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 CONTINUING OPERATIONS
QUARTER ENDED APRIL 30, 1999 COMPARED TO QUARTER ENDED APRIL 30, 1998
TOTAL NET REVENUES increased $6.5 million, or 24.1% to $33.4 million in the
third quarter of fiscal 1999 from $26.9 million in the third quarter of fiscal
1998. The increase in revenues is due to the increases in the number of retail
locations , and to the acquisition of Sosebee Enterprises, Inc. and Cellular
Warehouse, Inc. (collectively "CWI") effective March 1, 1998 and the resulting
inclusion of a full three months of CWI's operations in the Company's
consolidated revenues for the third quarter of fiscal 1999. Retail sales
increased $1.2 million, or 10.1% to $12.6 million from $11.4 million, activation
commissions increased $4.5 million, or 39.4% to $15.8 million from $11.3 million
and residual income increased $.9 million, or 21% to $5.0 million from $4.1
million. Comparable store sales increased 348,000, or 1.7% to $20.8 million from
$20.4 million. The Company had 266 stores open at April 30, 1999 as compared to
230 at 31 April 30, 1998.
GROSS PROFIT increased $3.7 million, or 23.9% to $19.1 million in the third
quarter of fiscal 1999 from $15.4 million for the third quarter of fiscal 1998.
As a percentage of total net revenues, gross profit was 57.2% and 57.3% for
third quarter of fiscal 1999 and 1998, respectively.
SELLING, GENERAL AND ADMINISTRATIVE expenses increased $3.3 million, or 26.5% to
$15.5 million for the third quarter of fiscal 1999 from $12.3 million in the
third quarter of fiscal 1998. As a percentage of total net revenues, selling,
general and administrative expenses increased to 46.6% during the third quarter
of fiscal 1999 from 45.7% in the third quarter of fiscal 1998. The Company has
incurred additional expenses relating to the hiring of additional senior
personnel to support the operations of the Company as well as future growth.
AMORTIZATION OF INTANGIBLE ASSETS increased $111,000, or 23% to $589,000 in the
third quarter of fiscal 1999 from $478,000 in the third quarter of fiscal 1998.
The increase in amortization of intangible assets is a result of a full three
months of amortization relating to the acquisition of CWI for the third quarter
of Fiscal 1999. The CWI acquisition had an effective date of March 1, 1998.
INCOME FROM CONTINUING OPERATIONS increased $17,000, or .8% to $2.2 million in
the third quarter of fiscal 1999 from $2.2 million in the third quarter of
fiscal 1998 and decreased as a percentage of total net revenues to 6.7% from
8.2%.
INTEREST EXPENSE, NET increased $356,000, or 115.6% to $664,000 in the third
quarter of fiscal 1999 from $308,000 in the third quarter of fiscal 1998
primarily due to increased bank borrowings used to finance the Company's
expansion.
PROVISION FOR INCOME TAX was $624,000 in the third quarter of fiscal 1999 as
compared to $798,000 in the third quarter of fiscal 1998.
NET INCOME was $825,000 in the third quarter of fiscal 1999 compared to $509,000
in the third quarter of fiscal 1998.
-11-
<PAGE> 12
NINE MONTHS ENDED APRIL 30, 1999 COMPARED TO NINE MONTHS ENDED APRIL 30, 1998
TOTAL NET REVENUES increased $41.7 million, or 63.7% to $107.4 million in the
nine months ended April 30, 1999 from $65.7 million in the nine months ended
April 30, 1998. The increase in revenues is due to the increase in the number of
retail locations, and to the acquisitions of USA and Unlimited, effective
November 1, 1997, and of CWI effective March 1, 1998 and the resulting inclusion
of the acquired entities' operations in the Company's consolidated revenues for
the nine months ended April 30, 1999. Retail sales increased $13.6 million, or
48.8% to $41.5 million from $27.9 million, activation commissions increased
$23.3 million, or 80.7% to $52.1 million from $28.8 million and residual income
increased $4.9 million, or 55.1% to $13.9 million from $9.0 million. Comparable
store sales decreased $1.0 million, or 1.9% to $52.3 million from $53.4 million.
The increase in residual income was due to the inclusion of CWI's residual
income ($4.3 million for the nine months ended April 30, 1999) and the increase
in the number of activations resulting from the various acquisitions and the
Company's store expansion.
GROSS PROFIT increased $23.8 million, or 66% to $59.8 million in the nine months
ended April 30, 1999 from $36.0 million for the nine months ended April 30,
1998. As a percentage of total net revenues, gross profit increased to 55.6%
from 54.8%.
SELLING, GENERAL AND ADMINISTRATIVE expenses increased $18.9 million, or 64.2%
to $48.5 million for the nine months ended April 30, 1999 from $29.6 million in
the nine months ended April 30, 1998. As a percentage of total net revenues,
selling, general and administrative expenses increased to 45.2% during the nine
months ended April 30, 1999 from 45.0% in the nine months ended April 30,
1998. Included in the nine months ended April 30,1999 is a $450,000 charge in
connection with the settlement agreement with a former officer of the Company.
In addition, general and administrative expenses have increased due to the
expansion of the infrastructure.
AMORTIZATION OF INTANGIBLE ASSETS increased $469,000, or 32.6% to $1.9 million
in the nine months ended April 30, 1999 from $1.4 million in the nine months
ended April 30, 1998. The increase in amortization of intangible assets is a
result of a full year of amortization relating to the USA, Unlimited and CWI
acquisitions.
INCOME FROM CONTINUING OPERATIONS increased $3.3 million, or 83.0% to $7.3
million in the nine months ended April 30, 1999 from $4.0 million in the nine
months ended April 30, 1998 and increased as a percentage of total net revenues
to 6.8% from 6.1%.
INTEREST EXPENSE, NET increased $1.0 million, or 101.7% to $2.1 million in the
nine months ended April 30, 1999 from $1.1 million in the nine months ended
April 30, 1998 primarily due to increased bank borrowings used to finance the
Company's expansion.
PROVISION FOR INCOME TAX was $2.1 million in the nine months ended April 30,
1999 as compared to $1.3 million in the nine months ended April 30, 1998.
NET INCOME was $2.7 million in the nine months ended April 30, 1999 as compared
to $289,000 in the nine months ended April 30, 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 issuances and cash provided by
operations.
-12-
<PAGE> 13
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 April 30, 1999, the Company has an additional $2.0
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 8.01%
at April 30, 1999). This facility was used to finance the acquisition of CWI,
refinance existing bank debt and for working capital. The Credit Facility was
amended effective June 7, 1999 to defer the required reduction period, whereby
the Company is required to reduce all outstanding advances under the revolving
line of credit to not more than $9 million for the period from March 1, 2000
through and including April 15, 2000. In addition, the cap on eligible
inventories used in computing the availability under the revolving credit
facility was temporarily increased on a scale beginning on April 30, 1999 and
ending on December 31, 1999.
The Company's working capital increased $2.2 million to $5.5 million at April
30, 1999 from $3.3 million at July 31, 1998. Accounts receivable and inventory
increased $8.2 million to $37.0 million at April 30, 1999 from $28.8 million at
July 31, 1998. This increase was partially offset by an increase in accounts
payable of $2.8 million to $15.9 million at April 30, 1999 from $13.1 million at
July 31, 1998.
On June 7, 1999, in order to meet its liquidity needs, the Company entered into
an Agreement to Assign Accounts Receivable, on a recourse basis, to H.I.G.
Capital LLC (a Related Party). The agreement provides that the Company can sell
up to $2,000,000 of accounts receivable at 98% of the invoice amount. The 98% of
the invoice amount, $1,960,000, was paid to the Company on June 7, 1999. The
Company anticipates that borrowings under the Credit Facility will be sufficient
to meet currently foreseeable liquidity requirements.
The Company's net cash provided by continuing operating activities increased to
$1.0 million for the nine months ended April 30, 1999 compared to net cash used
in operating activities of ($7.8 million) for the nine months ended April 30,
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 provided by discontinued operations
increased to $1.0 million for the nine months ended April 30, 1999 compared
to net cash used in discontinued operations of ($2.3 million) for the nine
months ended April 30, 1998.
The Company's net cash used in investing activities decreased to $879,000 for
the nine months ended April 30, 1999 from $23.7 million in the nine months ended
April 30, 1998. The decrease in cash used in investing activities was primarily
attributable to a reduction of capital expenditures for new stores, and the
acquisition of Cellular Warehouse in the prior year.
The Company's net cash (used in) provided by financing activities decreased to
($1.7) million in the nine months ended April 30, 1999 from net cash provided by
financing activities of $33.1 million in the nine months ended April 30, 1998
primarily as a result of the Company's IPO.
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 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 modifications 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 complaint
financial software, pager billing system, and plans to complete the update of
its purchase order and point-of-sale systems by October 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 $100,000 in fiscal 1999.
-13-
<PAGE> 14
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.
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<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 5 to the Condensed Consolidated Financial Statements for
the Quarter Ended April 30, 1999.
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-
10.18 Amendment No. 4 to the Loan and Security Agreement,
dated June 7, 1999, by and among the Company and
certain of its subsidiaries, certain lenders and The
Chase Manhattan Bank, as Agent.
10.19 Agreement to sell accounts receivable, entered into as
of June 7, 1999, by and among Let's Talk Cellular &
Wireless, Inc., a Florida corporation ("LTC"), H.I.G
Capital LLC ("HIG"), and The Chase Manhattan Bank as
agent for the Lenders ("Agent").
10.20 Assignment of Accounts Receivable, dated June 7, 1999,
between Let's Talk Cellular & Wireless, Inc., and
H.I.G. Capital LLC.
10.21 Asset Purchase Agreement, entered into effective as of
March 12, 1999, is by and between National Cellular,
Incorporated, a Texas corporation ("Seller"), and
National Cellular Investors, L.P., a Texas limited
partnership ("Buyer").
10.22 Letter Agreement dated March 20, 1999, amending the
Amended and Restated Employment Agreement between,
dated April 30, 1998 between the Company and Ronald
Koonsman.
27.1 Financial Data Schedule
(b) The Company filed a form 8-K on march 15, 1999, providing a
consolidated balance sheet as of February 28, 1999, at the
request of the Nasdaq National Market.
-15-
<PAGE> 16
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.
June 14, 1999 By: /s/ David H. Eisenberg
--------------------------
DAVID H. EISENBERG
Chief Executive Officer and Co-Chairman of
the Board
June 14, 199 9 By: /s/ Brett Beveridge
--------------------------
BRETT BEVERIDGE
President and Co-Chairman of the Board
June 14, 1999 By: /s/ Daniel Cammarata
-----------------------------
DANIEL CAMMARATA
Chief Financial Officer
-16-
<PAGE> 1
EXHIBIT 10.18
CONSENT AND AMENDMENT NO. 4
TO
LOAN AND SECURITY AGREEMENT
THIS CONSENT AND AMENDMENT NO. 4 ("Amendment") is entered into as of
June 7, 1999, by and among Let's Talk Cellular & Wireless, Inc., a corporation
organized under the laws of the State of Florida ("LTC"), Telephone Warehouse,
Inc., a corporation organized under the laws of the State of Delaware ("TWI"),
Cellular Warehouse Inc., a corporation organized under the laws of the State of
Georgia ("CWI"), Cellular USA, a corporation organized under the laws of the
State of Nevada ("USA") and Sosebee Enterprises, Inc., a corporation organized
under the laws of the State of Georgia ("SEI") (LTC, TWI, CWI, USA, SEI and
NCI, each a "Borrower" and jointly and severally, the "Borrowers"), the
undersigned financial institutions (each, a "Lender" and collectively, the
"Lenders") and The Chase Manhattan Bank, a corporation organized under the laws
of the State of New York ("Chase") as agent for Lenders (Chase in such
capacity, the "Agent").
BACKGROUND
Borrowers, Agent and Lenders are parties to a Loan and Security
Agreement dated as of April 2, 1998 (as amended, restated, supplemented or
otherwise modified from time to time, the "Loan Agreement"), pursuant to which
Agent and Lenders provide Borrowers with certain financial accommodations.
Borrowers have requested that Agent and Lenders amend certain
provisions of the Loan Agreement and consent to Borrowers' use of certain
proceeds to purchase additional Inventory and Agent and Lenders are willing to
do so on the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by Agent
and Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. CONSENT. Agent and Lenders hereby consent to the use by Borrowers
of the proceeds of (1) the sale by National Cellular Incorporated ("NCI") of
certain of its inventory and other assets to National Cellular Investors, L.P.
on or about March 22, 1999 and (ii) the sale by LTC of certain of its store
leases, furniture, improvements, fixtures and other assets at such store
locations for the purchase of additional Inventory.
3. AMENDMENTS TO LOAN AGREEMENT. Subject to satisfaction of the
conditions precedent set forth in Section 4 below, the Loan Agreement is hereby
amended as follows:
<PAGE> 2
(a) The following defined terms are added to Section 1.2 of
the Loan Agreement in their appropriate alphabetical order:
"AMENDMENT NO. 4" shall mean Amendment No. 4 to this
Agreement dated as of June , 1999.
"AMENDMENT NO. 4 EFFECTIVE DATE" shall mean the date on which
all of the conditions precedent contained in Section 4 of Amendment
No. 4 shall have been satisfied.
(b) Section 2.1 (y)(ii)(B) of the Loan Agreement is hereby
amended in its entirety to provide as follows:
"(B) (a) $6,500,000 for the period beginning on
April 30, 1999 and ending on June 29, 1999, (b) $6,750,000 for the
period beginning June 30, 1999 and ending on July 30, 1999, (c)
$7,000,000 for the period beginning July 31, 1999 and ending on August
30, 1999, (d) $7,500,00 for the period beginning August 31, 1999 and
ending on December 30, 1999 and (e) $6,000,000 from and after December
31, 1999."
(c) Section 2.2(h) of the Loan Agreement is amended in its
entirety to provide as follows:
"2.2(h) REDUCTION PERIOD. Borrowers shall reduce all
outstanding Revolving Advances to not more than $9,000,000 and not
permit outstanding Revolving Advances to be more than $9,000,000 for
the period of March 1, 2000 through and including April 15, 2000."
(d) The second sentence of Section 9.2 of the Loan Agreement
is hereby amended by adding the following at the end thereof:
"including, without limitation, a reconciliation of all sums
remitted to H.I.G. Capital LLC ("HIGLLC") with respect to Receivables
sold or transferred by LTC to HIGLLC pursuant to an Assignment of
Account Receivables dated this date between LTC and HIGLLC
("Assignment Agreement")."
4. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
upon satisfaction of the following conditions precedent: Agent shall have
received (1) four (4) copies of this Amendment executed by each Borrower and
each Lender, (ii) a non-refundable waiver and amendment fee in the amount of
$50,000 and all legal fees, (iii) a duly executed copy of each of the
Assignment Agreement in form and substance satisfactory to Agent and the
Agreement dated this date among Agent, Lenders, LTC and HIGLLC in form and
substance satisfactory to Agent, Lenders and their counsel and (iv) such other
certificates, instruments, documents, agreements and opinions of counsel as may
be required by Agent, Lenders or their
2
<PAGE> 3
counsel, each of which shall be in form and substance satisfactory to Agent,
Lenders and their counsel.
5. CONSULTANTS. Borrowers agree to pay Agent for all costs incurred by
Agent in arranging for a consultant to meet with management of Borrowers and
all costs incurred by consultant in connection with assessing and reviewing
Borrowers' operating budget for fiscal 2000.
6. REPRESENTATIONS AND WARRANTIES. Borrowers hereby represent and
warrant as follows:
(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrowers and are
enforceable against Borrowers in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, Borrowers
hereby reaffirm all covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and agree that all such
covenants, representations and warranties shall be deemed to have been remade
as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this Amendment.
(d) Borrowers have no defense, counterclaim or offset with
respect to the Loan Agreement.
7. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference
in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements executed and/or
delivered in connection therewith, shall remain in full force and effect, and
are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of
Lender, nor constitute a waiver of any provision of the Loan Agreement, or any
other documents, instruments or agreements executed and/or delivered under or
in connection therewith.
8. GOVERNING LAW. This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of New York.
3
<PAGE> 4
9. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
10. COUNTERPARTS. This Amendment may be executed by the parties hereto
in one or more counterparts, each of which shall be deemed an original and all
of which when taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
day and year first written above.
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ Daniel Cammarata
---------------------------------
Name: DANIEL CAMMARATA
Title: Chief Financial Officer
TELEPHONE WAREHOUSE, INC.
By: /s/ Daniel Cammarata
---------------------------------
Name: DANIEL CAMMARATA
Title: Chief Financial Officer
CELLULAR WAREHOUSE, INC.
By: /s/ Daniel Cammarata
---------------------------------
Name: DANIEL CAMMARATA
Title: Chief Financial Officer
CELLULAR USA
By: /s/ Daniel Cammarata
---------------------------------
Name: DANIEL CAMMARATA
Title: Chief Financial Officer
4
<PAGE> 5
SOSEBEE ENTERPRISES, INC.
By: /s/ Daniel Cammarata
---------------------------------
Name: Daniel Cammarata
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK, as Agent and a
Lender
By: /s/ Paula C. Cummings
---------------------------------
Name: Paula C. Cummings
Title: Vice President
Commitment Percentage: 25%
NATIONSBANK, N.A., Lender
By: /s/ Oscar A. Bruni, Jr.
---------------------------------
Name: Oscar A. Bruni, Jr.
Title: Vice President
Commitment Percentage: 25%
IBJ WHITEHALL BANK & TRUST COMPANY,
Lender
By: /s/ Patricia G. McCormack
---------------------------------
Name: Patricia G. McCormack
Title: Director
Commitment Percentage: 25%
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES, Lender
By: /s/ Hugh E. Johnson
---------------------------------
Name: Hugh E. Johnson
Title: Vice President
Commitment Percentage: 25%
5
<PAGE> 1
EXHIBIT 10.19
AGREEMENT
This Agreement is entered into as of the 7 day of June 1999 by and
among Let's Talk Cellular & Wireless, Inc., a Florida corporation ("LTC"),
H.I.G Capital LLC ("H.I.G."), the Lenders who are signatories hereto, and The
Chase Manhattan Bank as agent for the Lenders ("Agent").
WHEREAS, LTC wishes to sell $2,000,582.00 face amount of accounts
receivable as more fully described on Schedule A hereto (the "Receivables") to
H.I.G. pursuant to the provisions of the Assignment of Accounts Receivable, a
copy of which is attached to this Agreement as Exhibit A (the "Assignment");
and
WHEREAS, the sale of the Receivables is prohibited under the terms of
the Loan and Security Agreement dated as of April 2, 1998 between LTC, its
Subsidiaries, Agent and Lenders named therein (as same has been amended from
time to time, the "Credit Agreement") and the Other Documents, as defined in
the Credit Agreement (collectively, the "Credit Documents"); and
WHEREAS, LTC has requested Agent and Lenders consent to the sale of
the Receivables to H.I.G. pursuant to the Assignment and Agent and Lenders are
willing to give such consent on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Capitalized terms used but not defined in this Agreement shall
have the meanings attributable to them in the Credit Documents.
2. Subject to the satisfaction of the conditions set forth herein, the
Lenders hereby consent to LTC's sale of the Receivables to H.I.G. pursuant to
the provisions of the Assignment, notwithstanding any provisions of the Credit
Documents that would otherwise prohibit such sale and agrees that such sale
shall not constitute a "Default" or "Event of Default" as such terms are
defined in the Credit Documents.
3. LTC hereby directs H.I.G. to remit payment of the purchase price of
the Receivables due pursuant to the Assignment to Agent by wire transfer to
Agent at ABA No. 021000021, Account No. 801900468, Ref: Let's Talk Cellular and
authorizes Agent to accept such purchase price on its behalf and,
notwithstanding the provisions of Section 2.10 of the Credit Agreement,
immediately reduce the outstanding Revolving Advances under the Credit
Documents to the extent of such payment without reduction to the Maximum
Revolving Advance Amount, subject to Borrowers' (as defined in the Credit
Agreement) ability to reborrow Revolving, Advances in accordance with the terms
of the Credit Agreement. Upon receiving such payment, Agent shall be deemed to
have released its Lien in the Receivables. Promptly following such receipt,
Agent shall execute and deliver to H.I.G. a UCC-3 financing statement
evidencing such release of Lien. Notwithstanding the foregoing, if at any time
in the future H.I.G. shall voluntarily or involuntarily, pursuant to order of a
Bankruptcy Court or otherwise, transfer the Receivables or part thereof back to
LTC, Agent's Lien in such Receivables shall automatically reinstate as a first
priority Lien therein, as if such Lien had not been released hereunder, and LTC
shall, immediately upon being requested to do so by Agent, execute and
<PAGE> 2
deliver all such UCC-1 financing statements as Agent shall request to properly
perfect Agent's reinstated Lien therein.
4. Agent agrees that until it has received written notice that H.I.G.
is no longer the owner of the Receivables, any collections of the Receivables
which are paid into a Blocked Account under the Credit Agreement and remitted
to Agent from such Blocked Account bank shall be promptly paid over to H.I.G.
by wire transfer to Account No. 0798007295237 at Suntrust Miami, N.A. in the
amounts and at the times Agent is directed to do so by LTC in writing.
5. By entering into this Agreement, neither Agent nor Lenders (i)
waive any Defaults or Events of Default that may now or hereafter exist under
the Credit Documents and reserve all of their rights in respect thereof or (li)
agree to any amendment or modification of the Credit Documents except as
specifically stated in this Agreement.
6. To induce Agent and Lenders to enter into this Agreement, each of
LTC and H.I.G. (each a "Representor") hereby severally represents and warrants
to Agent and Lenders, which representations and warranties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, as follows:
(a) This Agreement and the Assignment have been duly
authorized by all necessary action of the Board of Directors of each
Representor;
(b) This Agreement and the Assignment have been duly executed
and delivered by each Representor and constitute the valid and binding
obligations of each Representor, enforceable against the Representor in
accordance with their respective terms;
(c) Neither the execution and delivery of this Agreement or
the Assignment by the Representor, nor the performance by the Representor of
its obligations thereunder, constitutes, or will constitute with the passage of
time or the giving of notice or both, a default under or violation of (i) the
articles of incorporation or bylaws of Representor, (ii) any law, order, writ,
injunction or decree of any court or governmental authority, or (iii) any
agreement or instrument to which the Representor is a party or is bound; and
(d) H.I.G. is paying fair equivalent value to LTC for the
purchase of the Receivables pursuant to the Assignment.
7. This Agreement is governed by the internal laws of the State of New
York.
8. This Agreement may be executed by each of the parties hereto in
separate counterparts, with all such counterparts together constituting one and
the same agreement of the parties hereto,
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
LET'S TALK CELLULAR & WIRELESS, INC.,
a Florida corporation
By: /s/ Daniel Cammarata
---------------------------------
H.I.G. CAPITAL LLC
By: /s/ Anthony Tamer
---------------------------------
THE CHASE MANHATTAN BANK, as Agent and a
Lender
By: /s/ Paula C. Cummings
---------------------------------
Paula C. Cummings
Vice President
NATIONSBANK, N.A., as a Lender
By: /s/ Oscar A. Bruni, Jr.
---------------------------------
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Patricia G. McCormack
---------------------------------
MERRILL LYNCH BUSINESS FINANCIAL SERVICES
By: /s/ Hugh E. Johnson
---------------------------------
-3-
<PAGE> 1
EXHIBIT 10.20
ASSIGNMENT OF ACCOUNTS RECEIVABLE
The undersigned, Let's Talk Cellular & Wireless, Inc., a Florida
corporation ("Assignor"), in consideration of the sum of $1,960,571.00 from
H.I.G. Capital LLC ("Assignee"), the receipt and sufficiency of which are
hereby acknowledged, hereby sells, assigns, transfers and conveys absolutely
and not as collateral to Assignee all of its right, title and interest, in and
to the accounts receivable owed to the Assignor by the account debtors listed
on SCHEDULE A (each, a "Debtor"), which are particularly described on the
schedule attached hereto as SCHEDULE "A" (the "Receivables"). Notwithstanding
anything to the contrary set forth in the prior sentence, the Receivable does
not include amounts owing from the Debtor other than as speci ically described
on the Schedule attached hereto as SCHEDULE "A."
Assignor represents that (1) the Receivables have an outstanding
balance of $2,000,582.00 that Assignor is owed by the Debtor, (ii) all
amounts received by Assignor with respect to the Receivables hereby assigned
have been credited and deducted in determining the amount of the Receivables,
and (iii) Assignee shall have all rights Assignor has with respect to the
Receivables including without limitation, the right to enforce, collect,
compromise or settle the Receivables, and the right to put the Debtor on notice
of the assignment of the Receivables.
Assignor hereby unconditionally guarantees payment of the amount of
the Receivables to Assignee in accordance with the terms set forth on Exhibit
"A." Assignor further agrees to indemnify Assignee for any amounts which
Assignee may be required to pay relating to the Receivables, including but not
limited to any amounts which Assignee may be required to disgorge pursuant to
Section 544(a) or 547(a) of the Bankruptcy Code, or otherwise. For the purposes
hereof, any payment required to be made by Assignor to Assignee pursuant to the
two (2) foregoing sentences shall be referred to herein as a "Distribution".
Assignor agrees that Assignee shall have no liability for any counterreceivable
or right of setoff, recoupment the
<PAGE> 2
like. Assignee agrees that any Distribution required to be paid is and shall be
expressly junior and subordinated in right of payment to all amounts due and
owing upon all Senior Indebtedness (as hereafter defined) outstanding from time
to time. "Senior Indebtedness" shall mean all Obligations of any kind owed by
Assignor or its subsidiaries to The Chase Manhattan Bank, as agent ("Agent"),
and the lenders ("Lenders") who are parties to, the Loan and Security Agreement
dated as of April 2, 1998 between Assignor, its subsidiaries, Agent and the
Lenders (as same has been amended from time to time, the "Credit Agreement")
under or pursuant to the Credit Agreement including, without limitation, all
principal, interest (including all interest accruing after commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of Assignor or its subsidiaries) accruing thereon, charges,
expenses, fees and other sums chargeable to Assignor or its subsidiaries by
Agent or Lenders and reimbursement, indemnity or other obligations due and
payable Agent or Lenders. Senior Indebtedness shall continue to constitute
Senior Indebtedness, notwithstanding the fact that such Senior Indebtedness or
any claim for such Senior Indebtedness is subordinated, avoided or disallowed
under the federal Bankruptcy Code or other applicable law. Specifically, but
not by way of limitation:
(a) PAYMENT. Assignor shall make no Distribution until such
time as the Senior Indebtedness shall have been paid in full in cash and the
Credit Agreement shall have been irrevocably terminated; PROVIDED, HOWEVER, so
long as (i) no Default or Event of Default shall have occurred under the Credit
Agreement and (ii) Borrowers shall have Undrawn Availability of at least
$1,000,000 after giving effect to the payment of such Distribution, Assignor
may pay and Assignee may receive Distributions.
Following the occurrence of a Default or an Event of Default under the
Credit Agreement or, if Undrawn Availability would be less than $1,000,000
after giving effect
-2-
<PAGE> 3
to any Distribution, (i) Assignor shall make no Distribution and (ii) Assignee
shall not be entitled to receive or retain any such Distribution, PROVIDED,
FURTHER, that notwithstanding the foregoing restriction, Assignor may pay and
Assignee shall be entitled to receive and retain any Distribution which shall
have become due and payable on the earliest to occur of (x) the date on which
(i) all such Defaults and/or Events of Default shall have been cured or waived
and (ii) Undrawn Availability shall equal or exceed $1,000,000 after giving
effect to such Distribution or (y) payment in full in cash of all Senior
Indebtedness and the irrevocable termination of the Credit Agreement.
(b) LIMITATION ON ACCELERATION. During any period described
above in which a Distribution is not permitted to be made (any such period, a
"Non-Payment Period"), Assignee shall not be entitled to exercise any remedies
or commence any action or proceeding to recover any amounts due or to become
due with respect to any Distribution, PROVIDED, HOWEVER, the foregoing
limitation on acceleration or exercise of any remedies shall not be applicable
following (x) the occurrence of an Event as defined below or (y) following the
maturity or acceleration of all Senior Indebtedness.
(c) PRIOR PAYMENT OF SENIOR INDEBTEDNESS IN BANKRUPTCY, ETC.
In the event of any insolvency or bankruptcy proceedings relative to Assignor,
its subsidiaries or their property, or any receivership, liquidation,
reorganization or other similar proceedings in connection therewith, or, in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of Assignor or its subsidiaries or distribution or marshalling of
their assets or any composition with creditors of Assignor or its subsidiaries,
whether or not involving insolvency or bankruptcy, or if Assignor or its
subsidiaries shall cease their operations, call a meeting of their creditors or
no longer do business as a going concern (each individually or collectively, an
"Event") then all Senior Indebtedness shall be paid in full and satisfied in
cash and the Credit
-3-
<PAGE> 4
Agreement irrevocably terminated before any Distribution shall be made. Any
such Distribution which would, but for the provisions hereof, be payable or
deliverable, shall be paid or delivered directly to the Agent or its
representatives, in the proportions in which they hold the same, until amounts
owing upon Senior Indebtedness shall have been paid in full in cash and the
Credit Agreement has been irrevocably terminated.
(d) ACCELERATION. In the event of any Senior Indebtedness
becoming due and payable, whether by acceleration, maturity or otherwise, no
Distribution shall thereafter be made until all Senior Indebtedness shall be
paid in full in cash and the Credit Agreement irrevocably terminated.
(e) PAYMENTS HELD IN TRUST. Should any Distribution be
collected or received by Assignee or any Affiliate (as such term is defined in
rule 405 of Regulation C adopted by the Securities and Exchange Commission
pursuant to the Securities Act of 1933) of Assignee at a time when the
Assignee is not permitted to receive any such Distribution or proceeds thereof
including if same is collected or received when there is or would be after
giving effect to such payment a Default or an Event of Default under the Credit
Agreement, then the Assignee will forthwith deliver, or cause to be delivered,
the same to the Agent in precisely the form held by the Assignee (except for
any necessary endorsement) and until so delivered, the same shall be held in
trust by the Assignee, or any such Affiliate, as the property of the Agent and
shall not be commingled with other property of the Assignee or any such
Affiliate.
Notwithstanding the foregoing, in the event that Assignee shall not
receive payment of all or any part of the Receivables within ninety (90) days
of the date of this Agreement or the Assignee shall have reasonably determined
that the Receivable will not be paid by the account debtor due to the financial
inability of the account debtor to pay such Receivable (any such sum, the
"Unpaid Amount"), Assignee shall have the right to acquire additional
Receivables from
-4-
<PAGE> 5
Assignor with the same representations and warranties contained in paragraph 2
hereof in an amount equal to such Unpaid Amount up to an aggregate sum of
$300,000; provided, the additional Receivables transferred to Assignee (x) are
due and unpaid more than ninety (90) days past the original invoice date
therefor and (y) do not have an aggregate outstanding balance in excess of the
lesser of (x) $300,000 or (y) the Unpaid Amount.
Assignor shall provide assistance as follows in connection with the
assignment of the Receivables:
A. Reasonable documentation to support the Receivables;
B. Knowledgeable witnesses to offer testimony on the validity of the
Receivables, including without limitation, testimony as to the basis for the
Receivables, if necessary.
C. Such other information and help as Assignee reasonably requests.
D. Provision of written notice to Debtor of assignment of the
Receivables to Assignee.
This Assignment shall be governed by the laws of the State of
New York.
June __, 1999
Assignor
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ Daniel Cammarata
---------------------------------
Name: Daniel Cammarata
Title: Chief Financial Officer
Assignee
H.I.G. CAPITAL LLC
By: /s/ Douglas Berman
---------------------------------
Name: Douglas Berman
Title: Managing Director
-5-
<PAGE> 6
SCHEDULE A
Lets Talk Cellular & Wireless
Detail of Receivables
As of 4/30/99
<TABLE>
<CAPTION>
Detail of
Receivables for
System Vendor Code Carrier ll/l/98 - 01/30/99
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prism AIRTROUCH Airtouch 104,584.05
Prism ATTCO AT&T Colorado 56,645.02
Prism ATT-LA AT&T Calif. 50,395.01
Prism ATTPCS AT&T DC 87,360.01
Prism ATTPCSNATL AT&T PCS National (11,585.09)
Prism BAPHILLY Bell Atlantic - Philly 80,720.03
Prism BS Bell South - So Fla. 68,798.08
Prism BS03 Bell South - Orlando 10,365.66
Prism CELLONENY Cellular One - New York 27,073.78
Prism COMCAST Comcast Cellular Communication 12,504.00
Prism GTESANFRAN GTE San Francisco 392,782.31
Prism LACELLULAR AT&T (AKA L.A. Cellular) 83,209.96
Prism LVATT AT&T Las Vegas 69,805.01
Prism OMNIPOINT Omnipoint Communications 39,989.00
Prism SNET SNET of Connecticut 129,974.96
Prism SPRINT Sprint Spectrum LP 2,939.51
Prism TAMPAGTE GTE Mobilenet - Tampa 9,128.98
GERS 1 AIRDETROIT Airtouch Cellular DT 30,060.00
GERS 2 T-ATTl AT&T Wireless Activations 343,295.00
GERS 2 T-CEL1 Cellular One Kansas Activations 36,700.00
GERS 2 V-ATTAUSTI AT&T Wireless Austin 15,765.00
GERS 1 V-ATTPCNAT AT&T PCS National 19,650.00
GERS 1 V-CELL1 BUF Cellular One Buffalo 39,062.75
GERS I V-CELL1 CH Cellular One Chicago 273,950.00
GERS 1 V-CELL1 ROC Cellular One Rochester (111,742.04)
GERS 1 V-CELL1 SYR Cellular One Syracuse 72,058.00
GERS 1 V-GTEINDIA GTE Indianapolis 67,094.00
---------------------------------------------------------------------------------------------------
Grand Totals 2,000,582.99
</TABLE>
LET'S TALK CELLULAR CONFIDENTIAL Page 1
<PAGE> 1
EXHIBIT 10.21
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, entered into effective as of March 12, 1999, is by and
between National Cellular, Incorporated, a Texas corporation and National
Cellular Investors, L.P., a Texas limited partnership ("Buyer"). Let's Talk
Cellular & Wireless, Inc., a Florida corporation and the corporate parent of
Seller ("Parent"), joins in this Agreement for the purposes expressed herein.
RECITALS:
A. Seller is engaged in the business of wholesale sales of wireless
products (the "BUSINESS").
B. Buyer desires to purchase from Seller, and Seller desires to sell,
assign and transfer to Buyer, certain assets held in connection with the
Business, upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
agreements and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
SECTION 1. PURCHASE AND SALE OF THE PURCHASED ASSETS.
1.1 TRANSFER OF ASSETS. Subject to the terms and conditions set forth
in this Agreement, Seller hereby sells, conveys, transfers, assigns and
delivers to Buyer, and Buyer hereby purchases and accepts from Seller, all the
assets, rights and properties of Seller listed in SCHEDULE 1.1 to this
Agreement, together with all goodwill associated with the Business and the
right to use the names "NCI" and "National Cellular" and any and all variations
thereof (collectively, the "PURCHASED ASSETS"), free and clear of any lien,
security interest, charge, pledge, condition, reservation, restriction,
covenant or other encumbrance whatsoever (collectively, "LIENS").
1.2 EXCLUDED ASSETS. All assets, rights and properties of Seller not
listed in SCHEDULE 1.1 to this Agreement or otherwise specifically listed
above are not being transferred to Buyer, but are being retained by Seller.
1.3 NO ASSUMPTION OF LIABILITIES. Buyer is not assuming any
liabilities of Seller whatsoever, whether associated with the Business, the
Purchased Assets or otherwise.
SECTION 2. CONSIDERATION.
2.1 PURCHASE PRICE. The aggregate purchase price (the "PURCHASE
PRICE") being paid for the Purchased Assets is Two Hundred Sixty Eight Thousand
Dollars ($268,000.00), plus an amount equal to the Agreed Value of Seller's
Inventory of Wireless Products. As used herein, the term "Agreed Value of
Seller's Inventory of Wireless Products" shall mean the cost of Seller's
inventory of wireless products, based upon and determined from an actual,
physical
<PAGE> 2
inventory of such wireless products conducted by representatives of Seller and
Buyer on the (lay prior to the Closing Date, multiplied by (a) IN THE CASE OF
PRODUCTS IN SKU'S N08609, N08600, N08612, N08610, N08023 AND N08022,
EIGHTY-THREE PERCENT (83%); AND (b) IN ALL OTHER CASES, ONE HUNDRED PERCENT
(100%).
2.2 PAYMENT OF THE PURCHASE PRICE. Payment of the Purchase Price shall
be made by wire transfer of immediately available funds to such bank account as
may be designated by Seller and shall be made at the Closing or, if the Closing
does not occur on a business day, on the next business day following the
Closing.
2.3 ALLOCATION OF THE PURCHASE PRICE. For purposes of (i) determining
Seller's gain or loss for federal income tax purposes, (ii) determining Buyer's
basis in the Purchased Assets for federal income tax purposes, and (iii)
satisfying Seller's and Buyer's reporting requirements under Section 1060 of
the Internal Revenue Code of 1986, as amended, each of Seller and Buyer agrees
to allocate the Purchase Price among the Purchased Assets in the manner set
forth in SCHEDULE 2.3 to this Agreement. Each of Seller and Buyer agrees to
report the allocations set forth in SCHEDULE 2.3 to the Internal Revenue
Service on Form 8594 in accordance with the instructions to Form 8594 and the
provisions of Treas. Reg. Section 1.1060-IT(h) (or any successor thereto).
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT. Seller
and Parent, jointly and severally, hereby represent and warrant to Buyer as
follows:
3.1 EXISTENCE; AUTHORITY; BINDING OBLIGATION; NO DEFAULT. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Each of
Seller and Parent has full power and authority to execute, deliver, and
consummate this Agreement. This Agreement has been duly and validly executed
and delivered by each of Seller and Parent and constitutes the legal, valid,
and binding obligation of each of Seller and Parent enforceable against it in
accordance with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights generally and to general equitable principles, No approval or
consent of, or filing with, any third party or governmental authority is
required for the execution or delivery of this Agreement by either Seller or
Parent or for the performance of their obligations hereunder. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, result in a breach or violation of any material
provisions of, or constitute a default under, or an event which, with notice.
or the passage of time would constitute a default under, any agreement or any
law, regulation, order, decree, or restriction to which either Seller or Parent
is a party or by which property used in the Business is bound.
3.2 TITLE. CONDITION OF PURCHASED ASSETS; INVENTORY. Seller has good
and marketable title to all the Purchased Assets and, upon consummation of the
transactions contemplated by this Agreement, Buyer will acquire good and
marketable title to all the Purchased Assets, free and clear of any and all
Liens. The Purchased Assets are in good repair and operating condition
(subject to normal wear and tear) and there are no facts or conditions
2
<PAGE> 3
affecting the Purchased Assets which could, individually or in the aggregate,
interfere with the use or operation thereof as currently used or operated,
SCHEDULE 3.2 contains a complete list of Seller's inventory as of the day
preceding the date of this Agreement.
3.3 EMPLOYMENT MATTERS. SCHEDULE 3.3 contains a list of certain
employees of the Business whom Buyer intends to hire after the Closing, and
sets forth, with respect to each such employee, (i) a description of his or her
compensation arrangement; (ii) his or her current wages; and (iii) the benefits
provided by Seller to him or her. Seller has paid in full to, or accrued as a
current liability which will be paid by Seller within two weeks after the
Closing, all employees of the Business all wages, salaries, commissions on
jobs finished, bonuses and other direct compensation for all services performed
(including accrued vacation) by them prior to the Closing and all amounts
required to be reimbursed to the employees. Buyer will not, by reason of this
Agreement or the sale of the Business and/or the Purchased Assets provided for
herein or anything done on or prior to the Closing, be liable to any employee
of Seller for "severance pay" or any other payment. To the best knowledge of
Seller and Parent, Seller is in compliance with all federal, state, local and
foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours.
3.4 COMPLIANCE WITH LAWS. To the best knowledge of Seller and Parent,
Seller has complied with and is in compliance with all laws, regulations,
licensing requirements, rules, ordinances, and orders of governmental
authorities, including without limitation all environmental laws, regulative
rules, ordinances and orders of governmental authorities, except for any
non-compliance which has no material adverse effect on the Business or the
Purchased Assets. Seller has not received any notices of non-compliance from
any governmental agency.
3.5 CUSTOMERS. SCHEDULE 3.5 and the customer files and other
information previously delivered to Buyer by Seller lists the names and
addresses of all of Seller's customers and sets forth, to the extent available
to Seller and/or Parent, (i) monthly billing information related to each such
customer; (ii) the individual names of Seller's contact or contacts at each
such customer's office; and (iii) the credit and purchasing history of each
such customer. To the best knowledge of Seller and Parent, none of Seller's
customers intends to terminate or change significantly its relationship with
the Business as presently existing.
3.6 CONTRACTS. SCHEDULE 3.6 sets forth a true and complete list of all
of Seller's material contracts, agreements and other instruments and
arrangements (whether written or oral) (i) by which any of the Purchased Assets
are bound or affected, or (a) to which Seller is a party or by which Seller is
bound, in connection with the Purchased Assets (the "CONTRACTS"). All of the
Contracts are in full force and effect and are valid, binding and enforceable
against the parties thereto in accordance with their terms. Seller has
delivered to Buyer true and complete originals or copies of all the Contracts,
if any.
3.7 RECEIVABLES. SCHEDULE 3.7 sets forth as of a date which is within
five (5) days of the date hereof all accounts receivable of Seller, including
the amount owing and the aging of such receivable, the name and last known
address of the party from whom such receivable is owing, and any security in
favor of it for the repayment of such receivable.
3
<PAGE> 4
3.8 NO BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller and/or Parent.
3.9 EMPLOYEE BENEFITS. Other than health insurance coverage and a
401(k) Plan, Seller does not currently sponsor or contribute to, or have any
contract or other obligation to contribute to (nor has Seller in the preceding
60 calendar months sponsored or contributed to, or contracted to or was
otherwise obligated to contribute to) any employee benefit, insurance or
pension plan.
3.10 ENVIRONMENTAL. To the best knowledge of Seller and Parent, all
licenses and permits required under all Environmental Laws have been obtained
and maintained in effect for the Business and the Purchased Assets. Seller, the
Business and the Purchased Assets are in compliance with all Environmental Laws
and with all such licenses and permits. Seller has not performed or suffered
any act which could give rise to, or otherwise incurred, liability to any
person under any Environmental Law. As used herein, "ENVIRONMENTAL LAWS" means
all laws, regulations and other requirements of any governmental or regulatory
authority, domestic or foreign, and any judicial or administrative
interpretation thereof, any duties under the common law, any orders, decrees,
judgments, agreements or recorded covenants, conditions, restrictions or
easements in any way relating to the protection of the environment, human
health, public safety or welfare, or natural resources.
3.11 NO LITIGATION. There are no claims, actions, suits, proceedings
or investigations pending or threatened before any federal, state or local
court or governmental or regulatory authority, domestic or foreign, or before
any arbitrator of any nature, brought by or against Seller or Parent or any of
their respective officers, directors, employees, agents or affiliates
involving, affecting or relating to any of the Purchased Assets, the Business
or the transactions contemplated by this Agreement, nor does there exist any
fact which might reasonably be expected to give rise to any such suit,
proceeding, dispute or investigation.
3.12 COMPLETENESS OF INFORMATION. Neither Seller nor Parent, to the
best knowledge of Seller and Parent, has made any untrue statement of material
fact or omitted to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading, nor has either Seller or Parent omitted to disclose any material
fact known to it to Buyer regarding the Purchased Assets or the Business.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to Seller as follows:
4.1 EXISTENCE; AUTHORITY; BINDING OBLIGATION; NO DEFAULT. Buyer is a
limited partnership duly organized and validly existing under the laws of the
State of Texas. Buyer has full power and authority to execute, deliver, and
consummate this Agreement. This Agreement has been duly and validly executed
and delivered by Buyer and constitutes the legal, valid, and binding obligation
of Buyer enforceable against it in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights generally and to
general equitable principles. No
4
<PAGE> 5
approval or consent of, or filing with, any third party or governmental
authority is required for the execution or delivery of this Agreement by Buyer
or for the performance of its obligations hereunder. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, result in a breach or violation of any material
provisions of, or constitute a default under, or an event which, with notice
or the passage of time would constitute a default under, any agreement or any
law, regulation, order, decree, or restriction to which Buyer is a party.
4.2 NO BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer.
4.3 NO LITIGATION. There are no claims, actions, suits, proceedings
or investigations pending or threatened before any federal, state or local
court or governmental or regulatory authority, domestic or foreign, or before
any arbitrator of any nature, brought by or against Buyer or any of its
partners, employees, agents or affiliates involving, affecting or relating to
the transactions contemplated by this Agreement, nor does there exist any fact
which might reasonably be expected to give rise to any such suit, proceeding,
dispute or investigation.
4.4 BUYER'S RELIANCE. Buyer understands that the books and records of
Seller will be available upon reasonable notice for inspection during
reasonable business hours at Seller's place of business. Buyer will rely
solely on its own independent investigations and inspections and the
representations and warranties of Seller and Parent expressly set forth in the
Agreement and will not rely on any representations or warranties of Seller or
Parent which are not expressly set forth in this Agreement.
SECTION 5. CLOSING DELIVERIES BY BUYER. At the Closing, Buyer shall
deliver to Seller:
(a) a certificate of Buyer, signed by a duly authorized officer of
Buyer's general partner, certifying (i) resolutions adopted by the Board of
Directors of Buyer's general partner authorizing and approving this Agreement,
the purchase of the Purchased Assets hereunder, and all other transactions
contemplated hereby; and (ii) that all representations and warranties of Buyer
contained in this Agreement are true and correct at and as of the Closing Date
and that all agreements and covenants and all conditions that were to be
performed or satisfied on the part of Seller and Parent have been performed or
satisfied by the Closing Date pursuant to the terms hereof;
(b) the Purchase Price, in the manner set forth in Section 2.2 above.
SECTION 6. CLOSING DELIVERIES BY SELLER AND PARENT. At the Closing,
Seller and Parent shall deliver to Buyer:
(a) a certificate of each of Seller and Parent, signed by its duly
authorized officer, certifying (i) resolutions adopted by the Board of
Directors of each of Seller and Parent, and, if appropriate, by the
stockholders of Seller, authorizing and approving this Agreement, the sale of
the Purchased Assets hereunder, and all other transactions contemplated
hereby; and (ii) that
5
<PAGE> 6
all representations and warranties of each of Seller and Parent contained in
this Agreement are true and correct at and as of the Closing Date and that all
agreements and covenants and all conditions that were to be performed or
satisfied on the part of Seller and Parent have been performed or satisfied by
the Closing Date pursuant to the terms hereof;
(b) Seller's bill of sale, together with all other documents and
instruments necessary or appropriate to validly transfer the Purchased Assets
to Buyer free and clear of any and all Liens; and
(c) a Certificate of the Secretary of State of Seller's and Parent's
respective jurisdiction of incorporation certifying as of a date reasonably
close to the Closing Date that Seller or Parent, as the case may be, has filed
all required reports, paid all required fees and taxes, and is, as of such
date, in good standing and authorized to transact business as a domestic
corporation.
SECTION 7. CERTAIN POST-CLOSING MATTERS. Buyer, Seller and Parent
hereby covenant and agree that:
7.1 TAXES. From and after the Closing, upon written notice by Buyer,
Seller shall pay to Buyer or at Seller's option, to the Internal Revenue
Service and/or federal, state or local taxing authorities as appropriate, and
shall otherwise indemnify, save and hold Buyer harmless from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses asserted against, resulting to, imposed upon or
incurred by Buyer with respect to the Purchased Assets which directly or
indirectly relate to or arise out of any tax years prior to the Closing with
respect to any deficiencies assessed by the Internal Revenue Service and other
federal, state and local taxing authorities based on federal income tax returns
filed under the Internal Revenue Code of 1986, as amended, for any period up to
and including the Closing or any federal, state, or local income, sales, ad
valorem or other tax liability arising against Seller prior to the Closing.
Seller shall also be obligated under this section for any such assessment
caused by any act or failure to act on the part of Seller after the date of
this Agreement. Seller and Buyer hereby agree that all ad valorem taxes
relating to the Purchased Assets shall be prorated to take into account the
period of time such assets were owned by Seller and Buyer, based upon the tax
rates in effect for the last full year prior to the date hereof as to which
such taxes have been assessed. Nothing contained herein shall affect Seller's
right to contest any tax liability in the manner set forth in the applicable
statute.
7.2 RESTRICTIVE COVENANTS OF SELLER AND PARENT. (a) Each of Seller
and Parent agrees that, without the prior written consent of Buyer, for a
period of two (2) years after the Closing Date, neither it nor any affiliate of
it, shall, directly or indirectly, (whether as a stockholder, partner, joint
venturer, financing source, or consultant or in any other capacity whatsoever),
engage in, or facilitate in any manner (including, without limitation, by the
sale or transfer of any assets) own, manage, operate, advise, be employed by,
be retained as a consultant by, or participate in any manner in the ownership,
operation, revenues, profits, management or control of any business, company or
other entity engaged in the business of wholesale sales of wireless products
anywhere within the United States of America (the "TERRITORY"). Notwithstanding
anything to the contrary in this Agreement, Seller, any affiliate
6
<PAGE> 7
or Parent may engage in its retail business carried out in stores and retail
sales electronically over the Internet.
(b) For a period of two (2) years after the Closing Date, each of
Seller and Parent agrees that neither it nor any affiliate of it shall call
upon or solicit any customer who is or was serviced in whole or in part by
Seller or Buyer with the intent of selling or attempting to sell wireless
products at wholesale within the Territory. Furthermore, neither Seller, Parent
nor any affiliate of either of them shall request or advise any client,
customer or contractor of Seller or Buyer to withdraw, curtail, reduce or
cancel its business with Buyer. Each of Seller and Parent further agrees that,
for a period of two (2) years from the Closing Date, it shall not intentionally
divert, solicit or take away any consultant, sales representative or employee
of Buyer, or otherwise interfere with or disturb the relationship existing
between Buyer and any of its consultants, sales representatives or employees,
directly or indirectly. Notwithstanding anything to the contrary in this
Agreement, Seller, any affiliate or Parent may engage in its retail business
carried out in stores and retail sales electronically over the Internet.
Additionally, retail sales to the general public and general retail advertising
shall not be deemed a violation of this Agreement.
(c) Each of Seller and Parent agrees that it shall not use or employ
in any manner, whether directly or indirectly, any of the names "NCI",
"National Cellular, Incorporated", "National Cellular" or any variants thereof,
and neither Seller nor Parent shall license or grant to any person the right,
or permit any person to use any of such names or any variants thereof.
(d) Each of Seller and Parent specifically acknowledges and agrees
that the value to Buyer of the transactions contemplated by this agreement
would be substantially diminished if it was not to comply in all respects with
this Section 7.2, and each of Seller and Parent has agreed to the covenants set
forth in this Section 7.2 as an inducement to Buyer to enter into this
Agreement. Each of Seller and Parent specifically acknowledges and agrees that
the covenants set forth in this Section 7.2 are commercially reasonable and
necessary to protect the interests Buyer intends to acquire hereunder. Each of
Seller and Parent agrees that a monetary remedy for breach of the covenants set
forth in this Section 7.2 will be inadequate and impracticable and further
agrees that such breach would cause Buyer irreparable harm, and that Buyer
shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damages. In the event of such a breach, each of
Seller and Parent agrees that Buyer shall be entitled to such injunctive
relief, including temporary restraining orders, preliminary injunctions and
permanent injunctions, as a court shall determine.
If any provision of this Section 7.2 is invalid in part, it shall be
curtailed, both as to time and location, to the minimum extent required for its
validity under applicable laws and shall be binding and enforceable with
respect to each of Seller and Parent as so curtailed.
7.3 RESTRICTIVE COVENANTS OF BUYER. (a) Buyer agrees that, without the
prior written consent of Seller or Parent, for a period of two (2) years after
the Closing Date, neither it nor any affiliate of it, shall, directly or
indirectly, (whether as a stockholder, partner, joint venturer, financing
source, or consultant or in any other capacity whatsoever), engage in, or
facilitate in any manner (including, without limitation, by the sale or
transfer of any assets) own, manage, operate, advise, be employed by, be
retained as a consultant by, or participate in any manner
7
<PAGE> 8
in the ownership, operation, revenues, profits, management or control of any
business, company or other entity engaged in the business of retail sales
(including retail sales over the Internet and retail sales by way of telephone
solicitations) of wireless products and the sale at retail, wholesale or as a
reseller, agent or subagent of another provider of "commercial mobile radio
services" as that term is defined by the Federal Communications Commission (the
"Competitive Business") anywhere within the Territory. Notwithstanding anything
to the contrary in this Agreement, Buyer and its affiliates may engage in the
wholesale sale of wireless products.
(b) For a period of two (2) years after the Closing Date, Buyer agrees
that neither it nor any affiliate of it shall call upon or solicit any retail
customer who is or was serviced in whole or in part by Buyer, Seller, Parent or
any affiliates of Seller or Parent with the intent of selling or attempting to
sell services that are competitive with the types of services included in the
Competitive Business within the Territory. Except as otherwise specifically
provided in this Agreement, Buyer further agrees that, for a period of two (2)
years from the Closing Date, it shall not intentionally divert, solicit or take
away any consultant, sales representative or employee of Seller, its affiliates
or Parent or otherwise interfere with or disturb the relationship existing
between Seller, Parent or any of their affiliates and any of their consultants,
sales representatives or employees, directly or indirectly. Notwithstanding
anything to the contrary in this Agreement, Buyer and its affiliates may engage
in the wholesale sale of wireless products. Additionally, general wholesale
advertising shall not be deemed a violation of this Agreement.
(c) Buyer agrees that it shall not use or employ in any manner,
whether directly or indirectly, any of the names "Let's Talk Cellular &
Wireless" or "Telephone Warehouse" or any variants thereof, and Buyer shall not
license or grant to any person the right, or permit any person to use any of
such names or any variants thereof.
(d) Buyer specifically acknowledges and agrees that the value to
Seller and Parent of the transactions contemplated by this Agreement would be
substantially diminished if Buyer was not to comply in all respects with this
Section 7.3, and Buyer has agreed to the covenants set forth in this Section
7.3 as an inducement to Seller and Parent to enter into this Agreement. Buyer
specifically acknowledges and agrees that the covenants set forth in this
Section 7.3 are commercially reasonable and necessary to protect the interests
of Seller and Parent. Buyer agrees that a monetary remedy for breach of the
covenants set forth in this Section 7.3 will be inadequate and impracticable
and further agrees that such breach would cause Seller and Parent irreparable
harm, and that Seller shall be entitled to temporary and permanent injunctive
relief without the necessity of proving actual damages. In the event of such a
breach, Buyer agrees that Seller and Parent shall be entitled to such
injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, as a court shall determine.
If any provision of this Section 7.3 is invalid in part, it shall be
curtailed, both as to time and location, to the minimum extent required for its
validity under applicable laws and shall be binding and enforceable with
respect to Buyer as so curtailed.
7.4 EMPLOYEES OF SELLER. Seller is terminating, effective as of the
Closing Date, certain employees of Seller whom Buyer has agreed to hire. Buyer
is offering employment to those employees of Seller who are listed on Schedule
3.3 attached hereto, contingent only on the
8
<PAGE> 9
consummation of the Closing; PROVIDED, HOWEVER, that no employee shall have a
right to be retained in the employ of Buyer after the Closing Date nor shall
any such offer interfere with Buyer's right to discharge any such employee at
any time.
7.5 USE OF SPACE AND TELEPHONES. For a period of up to sixty days
following the Closing Date, Seller shall allow Buyer to (i) occupy and use that
portion of Seller's current warehouse and office located at 2590 114th Street,
Suite 200, Grand Prairie, Texas 75050 that is currently utilized in connection
with the operation of the Business (the "Premises") at no cost to Buyer; and
(ii) use Seller's and Parent's telephones and lines and the related telephone
numbers that are currently used in connection with the operation of the
Business; provided that Buyer shall pay Seller for its use of such telephones
and lines on a monthly basis in an amount which reflects Buyer's usage of such
telephone equipment and lines. Buyer shall remit such funds to Seller within 10
days from the date of any invoice for such costs. Buyer acknowledges that the
Premises are substantially occupied by affiliates of Seller. In this regard,
Buyer and Seller and its affiliates will cooperate in the use and occupancy of
the Premises. Buyer shall be given access to the Premises during normal
business hours. Buyer's occupancy of the Premises shall not unreasonably
interfere with Seller and its affiliates' business conducted at the Premises.
Buyer shall establish its own shipping and vender accounts prior to the Closing
Date.
7.6 FURTHER ASSURANCES. Each of the parties hereto shall use
reasonable commercial efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable laws, and execute and deliver such documents and other papers, as
reasonably may be required to carry out the provisions of this Agreement and
consummate and make effective the transactions contemplated by this Agreement.
7.7 ORDINARY COURSE. Subsequent to the date of this Agreement and
prior to the Closing Date, Seller will (i) conduct its business in the ordinary
and regular course of business consistent with past practice; (ii) maintain its
properties, carry on its business practices, and keep its books of account,
records and files in substantially the same manner as at present; (iii) use its
best efforts to preserve intact its business organization and goodwill; and
(iv) use its best efforts to maintain satisfactory relationships with
suppliers, distributors, licensors, licensees, customers, employees and others
having business relationships with it.
7.8 ACCESS TO PROPERTIES AND RECORDS OF SELLER. After execution of
this Agreement and prior to the Closing or termination of this Agreement,
Seller shall give the officers, attorneys, accountants and other authorized
representatives of Buyer, free and full access during usual business hours to
the properties, books and records of Seller in order that the Buyer may have
full opportunity to make such investigation as it shall desire of the affairs
and prospects of Seller provided that such investigation shall not unreasonably
interfere with the operations of Seller. Duly authorized representatives of the
Buyer shall also be entitled to discuss with officers of Seller, its counsel,
employees and independent public accountants all books, records and other
corporate documents, contracts, and all matters relating to the pricing and
service policies, commitments or future prospects of Seller. Buyer's
accountants and other agents shall be permitted to make extracts from and
copies of the accounts, books, records, agreements, commitments and other
documents of Seller in connection with Buyer's business review. If for any
reason Buyer's purchase of the Business as contemplated by this Agreement shall
not be
9
<PAGE> 10
consummated, all such extracts and copies shall be returned to Seller promptly,
and Buyer shall treat all of the same as confidential.
SECTION 8. CLOSING. The transfer of the Purchased Assets to Buyer (the
"CLOSING") shall take place on March 20, 1999 (the "CLOSING DATE") at Seller's
place of business in Grand Prairie, Texas or at such other place and time as
may be mutually agreed upon by Buyer and Seller.
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller contained in Section 3.2 shall survive
the Closing and shall not expire. All other representations and warranties
contained herein shall survive the Closing for a period of eighteen (18)
months. No representation or warranty contained herein shall be affected by any
investigation of any party prior to the Closing.
SECTION 10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY SELLER AND PARENT. Seller and Parent, jointly
and severally, shall indemnify, defend, and hold harmless Buyer from and
against any and all claims, suits, losses, judgments, damages, and liabilities,
including but not limited to any investigation, legal, and other expenses
incurred in connection with, and any amount paid in settlement of any claim,
action, suit or proceeding (collectively, "Losses"), to which Buyer may become
subject, if such Losses arise out of or result from (a) any misrepresentation
or the breach of any representation, warranty, covenant or agreement made by
either Seller or Parent in this Agreement or (b) any liability or obligation of
any kind or nature, past, present or future, fixed or contingent, known or
unknown, proximate or remote, relating in any way to Seller, the operation of
the Business prior to the Closing Date, the Purchased Assets (except to the
extent arising after the Closing Date) or the transactions contemplated herein.
This right to indemnification is in addition to any other right available to
Buyer, including the right to sue Seller or Parent for a misrepresentation,
breach of warranty, or breach of covenant under this Agreement. Seller and
Parent shall not be obligated to pay to Buyer pursuant to this Section 10
amounts aggregating more than $100,000 or to the extent such Losses arise from
events which occurred prior to the close of business on December 31, 1996;
PROVIDED, HOWEVER, that such $100,000 limitation shall not apply (i) in the
case of fraud; (ii) with regard to a breach of one or more of the
representations and warranties of Seller and Parent contained in Sections 3.1,
3.2 OR 3.8 above; (iii) with regard to a breach by Seller or Parent of its
agreements contained in Section 7.2 above; or (iv) with regard to those matters
addressed in Section 7.1 above (except that Seller and Parent shall have no
liability to Buyer under Section 7.1 to the extent obligations thereunder arise
from any tax year ending on or prior to December 31, 1996).
10.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend and hold
harmless Seller from and against any and all Losses (as defined above) to which
Seller may become subject if such Losses arise out of or result from (a) any
misrepresentation or the breach of any representation, warranty, covenant or
agreement made by Buyer in this Agreement or (b) any liability or obligation of
any kind or nature, past, present or future, fixed or contingent, known or
unknown, proximate or remote, relating in any way to Buyer, the operation of
its business after the Closing Date, the Purchased Assets (except to the extent
arising prior to the Closing Date) or the transactions contemplated herein.
This right to indemnification is in addition to any
10
<PAGE> 11
other right available to Seller, including the right to sue Buyer for a
misrepresentation, breach of warranty, or breach of covenant under this
Agreement.
10.3 NOTIFICATION AND DEFENSE OF CLAIMS OR ACTIONS. When either party
proposes to assert the right to be indemnified under this Article 10 with
respect to third-party claims, actions, suits, or proceedings, such party (the
"INDEMNIFIED PARTY") shall, within 30 days after the receipt of notice of the
commencement of the claim, action, suit, or proceedings, notify the other party
(the "INDEMNIFYING PARTY") in writing, enclosing a copy of all papers served or
received. On receipt of the notice, the Indemnifying Party shall have the right
to direct the defense of the matter, but the Indemnified Party shall be
entitled to participate in the defense and, to the extent that the Indemnified
Party desires, to jointly direct the defense with Indemnifying Party with
counsel mutually satisfactory to the Indemnified Party and the Indemnifying
Party, at the Indemnifying Party's expense. The Indemnified Party shall also
have the right to employ its own separate counsel in any such action. The fees
and expenses of the Indemnified Party's counsel shall be paid by the
Indemnified Party unless: (a) the employment of the counsel has been authorized
by the Indemnifying Party; (b) the Indemnifying Party's counsel in such
litigation has reasonably concluded that there may be a conflict of interest
between action; or (c) the Indemnifying Party has not, in fact, employed
counsel satisfactory to the Indemnified Party to assume the defense of the
action. In each of these cases, the fees and expenses of the Indemnified
Party's counsel shall be paid by the Indemnifying Party. Neither the
Indemnifying Party nor the Indemnified Party shall be liable for any settlement
of any action or claim described in this Article 10 that is effected without
its consent.
SECTION 11. MISCELLANEOUS.
11.1 COSTS. The parties shall pay their respective expenses
(including, without limitation, the fees, disbursements and expenses of their
attorneys and accountants) in connection with the negotiation and preparation
of this Agreement and consummation of the transactions contemplated hereby.
11.2 ENTIRE AGREEMENT. This Agreement, together with all schedules
hereto, embodies the entire Agreement and understanding between the parties
hereto relating to the subject matter hereof and supersedes any prior
agreements and understandings relating to the subject matter hereof.
11.3 PUBLIC ANNOUNCEMENTS. No party to this Agreement shall make, or
cause to be made, any press release or public announcement in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without the prior written consent of the other parties, and the
parties shall cooperate as to the timing and contents of any such press release
or public announcement.
11.4 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify
11
<PAGE> 12
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.
11.5 NO THIRD PARTY BENEFICIARIES. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their heirs,
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person, including, without
limitation, any employee of Seller, any legal or equitable right, benefit or
remedy of any nature whatsoever, including, without limitation, any rights of
employment for any specified period, under or by reason of this Agreement.
11.6 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity, without the necessity of demonstrating the inadequacy
of money damages.
11.7 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is to be given, (ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, (iii) on the day after
delivery to an overnight courier service, or (iv) on the fifth day after
mailing, if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid and properly addressed, to the
party as follows:
If to Seller or Parent:
Let's Talk Cellular & Wireless, Inc.
National Cellular, Incorporated
800 Brickell Avenue, Suite 400
Miami, Florida 33131
Attention: Lazarus Rothstein, General Counsel
Telecopy: (305) 358-0926
If to Buyer:
National Cellular Investors, L.P.
1303 Rocky Canyon Road
Arlington, Texas 76012
Attention: Ronald L. Koonsman
Telecopy: 817/277-5377
Any party may change its address for the purpose of this Section by
giving the other party written notice of its new address in the manner set
forth above.
11.8 MODIFICATION OR WAIVER. This Agreement may be amended, modified
or superseded, and any of the terms, covenants, representations, warranties or
conditions hereof
12
<PAGE> 13
may be waived, but only by a written instrument executed by the parties hereto.
No waiver of any nature, in any one or more instances, shall be deemed to be or
construed as a further or continued waiver of any condition or any breach of
any other term, covenant, representation, or warranty in this Agreement.
11.9 BINDING EFFECT AND ASSIGNMENT. Neither Buyer, Seller nor Parent
may assign any rights or delegate any duties hereunder.
11.10 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
11.11 SECTION HEADINGS. The section headings contained in this
Agreement are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
11.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same instrument representing this
Agreement between the parties hereto, and it shall not be necessary for the
proof of this Agreement that any party produce or account for more than one
such counterpart.
11.13 ATTORNEYS' FEES. In any suit or proceeding (including
arbitration, bankruptcy, administrative and regulatory proceedings) arising in
connection with this Agreement, the prevailing party shall have the right to
receive an award of reasonable attorneys' fees incurred by it in connection
therewith.
11.14 EVENTS OF DEFAULT. If any one or more of the following events
occurs due to the action or inaction of any party to this Agreement as of or
prior to the Closing Date then, subject to the expiration of any specified
grace period and the giving of any prior notice required, as hereinafter
described, such event shall constitute an event of default ("Event of
Default"):
(a) CONDITIONS. Any party fails or neglects to perform, keep or
observe any term, provision, condition, or covenant contained in this
Agreement, which is required to be performed, kept or observed.
(b) UNTRUE STATEMENTS. Any party makes or delivers any statement,
report, financial statement, or certificate hereunder and included as an
exhibit or schedule or otherwise referred to in this Agreement which is not
true, complete and correct in any material respect.
(c) FAILURE TO CLOSE. Any party fails or refuses to consummate the
transactions provided for in accordance with the terms of this Agreement on the
Closing Date or is unwilling or unable to deliver the documents or other
materials required to be delivered by it at or prior to Closing.
11.16 RIGHTS AND REMEDIES ON DEFAULT. Upon and after an Event of
Default, the non-defaulting party shall have the following rights and remedies:
13
<PAGE> 14
(a) ENFORCEMENT. The right to enforce by appropriate proceedings, and
taking advantage of a party's waivers under this Agreement, any of the
non-defaulting party's rights under this Agreement.
(b) OTHER ACTION. The right to take any other action which the
non-defaulting party deems necessary or desirable to protect their rights under
this Agreement. In the event of Buyer's default, Seller shall be entitled to a
payment (the "FEE") in the aggregate sum of $200,000 by Buyer and Ronald L.
Koonsman, jointly and severally, as Seller's liquidated damages, which the
parties hereto agree are a fair and reasonable estimate of the Seller's damages
in the event the transaction contemplated by this Agreement is not completed;
PROVIDED, HOWEVER, that notwithstanding anything contained herein to the
contrary, the Fee shall not be payable if: (i) either Seller or Parent is in
breach of any representation, warranty, covenant or agreement contained herein
in any material respect as of the Closing Date or will be, or is, unable or
unwilling to deliver the documents to be delivered by it at Closing or is
otherwise unwilling or unable to perform or satisfy, in any material respect,
any covenant or agreement or condition that is to be performed or satisfied by
it prior to Closing; (ii) Buyer, in connection with its due diligence
examination, discovers fraud in connection with the Purchased Assets or the
operation of the Business; or (iii) the inventory, both in terms of dollar
amount or the composition thereof, varies, at the Closing, by more than ten
percent (10%) from that set forth on Schedule 3.2 attached hereto (i.e., in the
case of composition, if the aggregate cost of SKU's N08609, N08600, N08612,
N08610, N08023 and N08022 exceeds 70% of the aggregate cost of Seller's entire
inventory).
(c) NATURE OF REMEDIES CUMULATIVE. All rights and remedies granted a
non-defaulting party in this Agreement shall be deemed concurrent and
cumulative and not alternative or exclusive remedies, to the full extent
permitted by law and this Agreement, and such party may proceed with any number
of remedies at the same time. The exercise of any one right or remedy shall not
be deemed a waiver or release of any other right or remedy, and such party,
upon the occurrence of an Event of Default under this Agreement, may proceed
against the defaulting party at any time, under any agreement, in any order and
with any available remedy.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
<PAGE> 15
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above stated.
NATIONAL CELLULAR, INCORPORATED
By: /s/ David H. Eisenberg
--------------------------------
Name: David H. Eisenberg
------------------------------
Title: CEO
-----------------------------
LET'S TALK CELLULAR & WIRELESS, INC.
By: /s/ David H. Eisenberg
--------------------------------
Name: David H. Eisenberg
------------------------------
Title: CEO
-----------------------------
NATIONAL CELLULAR INVESTORS, L.P.
By: Barco Properties, Inc., its general partner
By: /s/ Ronald L. Koonsman
--------------------------------
Ronald L. Koonsman
WITH RESPECT TO SECTION 11.16(b) ONLY AND
FOR NO OTHER PURPOSE WHATSOEVER:
By: /s/ Ronald L. Koonsman
--------------------------------
Ronald L. Koonsman
15
<PAGE> 16
SCHEDULE 1.1
PURCHASED ASSETS
1. Seller's records and documents pertaining to its operation of the
Business, including, but not limited to, its customer and vendor files (old and
current), personnel files and personnel policy manual(s), if any.
2. All of Seller's standard forms used in connection with the
operation of the Business, including, but not limited to, credit applications,
R/A's, P.O.'s, Invoices and Internal Control Documents (e.g., Inventory Count
Sheets).
3. All of Seller's inventory of wireless products.
4. Exclusive right to use (800) 669-8070 telephone number.
5. The UNIX computer system server and 0 terminals and Seller's
license to use the Real World software used by Seller prior to its conversion
to GERS.
16
<PAGE> 1
March 20, 1999
Ronald L. Koonsman
1303 Rocky Canyon Road
Arlington, Texas 76012
Re: Amended and Restated Employment Agreement between Telephone
Warehouse, Inc. ("TWI") and Ronald L. Koonsman ("Koonsman")
dated as of June 27, 1997, as amended on April 30, 1998 (the
"Agreement")
Dear Ron:
This letter will confirm and acknowledge that certain disputes and
disagreements have arisen between you and TWI with regard to the Agreement
referred to above. In order to settle and resolve all such disputes and
disagreements between us, you and TWI agree to amend the Agreement as follows:
TWI agrees to amend paragraph 6 of the Agreement to exclude from the
definition of businesses in direct or indirect competition with TWI or its
affiliates, the sale of wireless communication products at wholesale only.
You agree to waive your right to the payment of the sum of $652,000.00
under paragraph 3(b) of the Agreement reflecting the final payment of
compensation under the Agreement. TWI and you confirm and agree that no further
amounts are owed to you by TWI under the Agreement and that there are no other
agreements between you, TWI or its affiliates or parent.
It is agreed and acknowledged that all other terms and conditions of
the Agreement shall remain in full force and effect.
If this letter reflects your understanding of the agreement, please
sign below where indicated.
Very truly yours,
TELEPHONE WAREHOUSE, INC.
By:
--------------------------------
David H. Eisenberg, CEO
Confirmed and agreed to this 20th day of March, 1999
/s/ Ronald L. Koonsman
--------------------------------
Ronald L. Koonsman
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LET'S TALK CELLULAR AND WIRELESS INC FOR THE NINE MONTHS
ENDED APRIL 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1999
<CASH> 1,780,414
<SECURITIES> 0
<RECEIVABLES> 19,182,903
<ALLOWANCES> 610,803
<INVENTORY> 18,449,844
<CURRENT-ASSETS> 40,286,168
<PP&E> 17,753,592
<DEPRECIATION> 4,929,998
<TOTAL-ASSETS> 89,836,323
<CURRENT-LIABILITIES> 34,822,575
<BONDS> 0
0
0
<COMMON> 87,498
<OTHER-SE> 36,496,391
<TOTAL-LIABILITY-AND-EQUITY> 89,836,323
<SALES> 33,354,879
<TOTAL-REVENUES> 33,354,879
<CGS> 14,288,357
<TOTAL-COSTS> 15,545,733
<OTHER-EXPENSES> 1,297,408
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 663,796
<INCOME-PRETAX> 1,559,585
<INCOME-TAX> 623,834
<INCOME-CONTINUING> 935,751
<DISCONTINUED> 83,967
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 824,581
<EPS-BASIC> 0.09
<EPS-DILUTED> 0.09
</TABLE>
