UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) February 9, 1999
-----------------
(July 6, 1998)
--------------
COMTEC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
New Mexico 0-12116 75-2456757
---------- ------- ----------
(State or other (Commission (IRS Employer
Jurisdiction File Number) Identification No.)
Of Incorporation)
9350 East Arapahoe Road, Suite 340, Englewood, Co. 80112
- - -------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 662-8373
This Document consists of 64 pages
<PAGE>
Item 2:
Acquisition of Assets from Centennial Communications Corp. (Supplemental
Disclosure)
The acquisition of divisional segment assets from Centennial Communications
Corp. was reported in Item 2 of Form 8K's dated December 26, 1997, and
September 3, 1998, which filings are hereby amended to include the Financial
Statements, Pro Forma Supplementary Information and Exhibits required by Item
7 of Form 8K.
The Company and Centennial Communications Corp., a Delaware Corporation,
initially entered into a letter of intent dated as of October 8, 1997, and a
formal agreement was entered into on December 4, 1997, between American
Wireless Network, Inc., a Colorado Corporation, and Centennial Communications
Corp. (the "Agreement") whereby the American Wireless Network, Inc. acquired
management control on December 5, 1997 of all SMR assets and SMR licenses
owned by Centennial Communications Corp. together with all SMR related
business limited to and located in the following USA metropolitan trade
areas: Birmingham, Alabama; Knoxville, Memphis, and Nashville, Tennessee;
Oklahoma City and Tulsa, Oklahoma; and New Orleans, Louisiana. The assets
acquired by the agreement include SMR licenses issued by the Federal
Communications Commission ("FCC"), radio equipment and antennas, tower site
leases and the customer base of Centennial Communications Corp. in the seven
acquired markets. The transaction was closed and title to all assets
transferred to American Wireless Network, Inc. on July 6, 1998.
Item 7:
Pro Forma Information, Financial Statements and Exhibits
The following Financial Statements, Pro Forma Supplemental Information and
Exhibits are filed as a part of this Amended Report on Form 8K/A.
7(a) Financial statements of the divisional segment acquired, prepared
pursuant to Rule 3-05 of Regulation S-X and provided to ComTec International,
Inc. by Centennial Communications Corp.:
Audited Financial Statements of Birmingham, Knoxville, Memphis, Nashville, New
Orleans, Oklahoma City and Tulsa Major Trading Areas ( a division of
Centennial Communications Corporation dba SMR Direct)
PAGE 5. Report of Independent Auditors as of October 31, 1997
PAGE 6. Centennial Communication Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas - Balance Sheet (October 31, 1997)
PAGE 7. Centennial Communication Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas - Statement of Operations for the Ten
Months Ended (October 31, 1997)
PAGE 8. Centennial Communications Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City, and
Tulsa Major Trading Areas - Statement of Stockholder's Equity
for the Ten Months Ended (October 31, 1997)
PAGE 9. Centennial Communication Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas Statement of Cash Flows for the Ten
Months Ended (October 31, 1997)
2
<PAGE>
PAGE 10-17. Centennial Communication Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas - Notes to Financial Statements (October
31, 1997)
PAGE 18. Report of Independent Auditors as of December 31, 1996
PAGE 19. Centennial Communication Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas - Balance Sheet (December 31, 1996)
PAGE 20. Centennial Communication Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas - Statement of Operations for the Period
from Inception (August 21, 1996 to December 31, 1996)
PAGE 21. Centennial Communication Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas - Statement of Cash Flows for the Period
from Inception (August 21, 1996 to December 31, 1996)
PAGE 22-29. Centennial Communication Corp. (dba SMR Direct) Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas - Notes to Financial Statements
(December 31, 1996)
7(b) Pro Forma Supplemental Information required pursuant to Article 11 of
Regulation S-X:
ComTec International, Inc. and Subsidiaries and Divisional Segment of
Centennial Communications Corp. Management's Unaudited Pro Forma Supplemental
Information (June 30, 1997 and September 30, 1997)
PAGE 30. Management's Compilation Report - Unaudited Pro Forma Supplemental
Information (June 30 and September 30, 1997)
PAGE 31. ComTec International, Inc. and Subsidiaries and Divisional Segment
of Centennial Communications Corp. - Management's Consolidated
Proforma Balance Sheets (June 30, 1997)
PAGE 32. ComTec International, Inc. and Subsidiaries and Divisional Segment
of Centennial Communications Corp. - Management's Consolidated
Proforma Statements of Operations for years ended as indicated.
PAGE 33. ComTec International, Inc. and Subsidiaries and Divisional Segment
of Centennial Communications Corp. - Management's Consolidated
Proforma Balance Sheets (September 30, 1997)
PAGE 34. ComTec International, Inc. and Subsidiaries and Divisional Segment
of Centennial Communications Corp. - Management's Consolidated
Proforma Statements of Operations for three months ended as
indicated.
PAGE 35-36. ComTec International, Inc. and Subsidiaries and Divisional Segment
of Centennial Communications Corp. - Management's Notes to
Unaudited Proforma Statements of Operations (June 30 and September
30, 1997)
7( c) Exhibits pursuant to the provisions of Item 601 of Regulation S-K and
Items 2 and 7 of Form 8K
3
<PAGE>
ASSET PURCHASE AGREEMENT dated December 4, 1997, between American Wireless
Network, Inc. a subsidiary of ComTec International, Inc. (Buyers) and Centennial
Communications Corp. and SMR Direct, Inc. (Seller)
CLOSING CONDITION CERTIFICATE dated July 6, 1998 - SMR Direct, USA, Inc.
CLOSING CONDITION CERTIFICATE dated July 6, 1998 - American Wireless Network,
Inc.
BILL OF SALE dated July 6, 1998 - Centennial Communications Corp.
ASSIGNMENT AND ASSUMPTION OF SUBSCRIBER AGREEMENTS dated July 6, 1998
ASSIGNMENT AND ASSUMPTION OF STATIONS dated July 6, 1998
ASSIGNMENT AND ASSUMPTION OF SITE LICENSES dated July 6, 1998
SIGNATURES
ComTec International, Inc.
--------------------------
(Registrant)
Date: February 9, 1999
s/s Gordon Dihle
________________________________________
Gordon Dihle - Authorized Officer, CFO
and Treasurer.
4
<PAGE>
GRABAU & COMPANY
Certified Public Accountants
A PROFESSIONAL CORPORATION
303 East 17th Ave., Suite 700, Denver, CO 80203
(303) 861-0434
FAX (303) 863-1296
REPORT OF INDEPENDENT AUDITORS
Board of Directors
ComTec International, Inc.
Englewood, Colorado
We have audited the accompanying balance sheet of Birmingham, Knoxville,
Memphis, Nashville, New Orleans, Oklahoma City and Tulsa Major Trading Areas (a
division of Centennial Communications Corporation dba SMR Direct) as of October
31, 1997, and the related statement of operations, stockholder's equity and cash
flows for the ten months then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Birmingham, Knoxville, Memphis,
Nashville, New Orleans, Oklahoma City and Tulsa Major Trading Areas (a division
of Centennial Communications Corporation dba SMR Direct) as of October 31, 1997
and the results of its operations and its cash flows for the ten months then
ended, in conformity with generally accepted accounting principles.
Birmingham, Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and Tulsa
Major Trading Areas is an aggregation of seven divisions of Centennial
Communications Corporation dba SMR Direct. These divisions own a license within
the geographical areas described to deliver specialized mobile radio.
Centennial Communications Corporation dba SMR Direct provides certain
administrative charges to the Birmingham, Knoxville, Memphis, Nashville, New
Orleans, Oklahoma City and Tulsa Major Trading Areas. See Note 6 for further
description of related party transactions.
s/Grabau & Company, PC
Grabau & Company, PC
Denver, Colorado
July 14, 1998
G&C
Excellence in a timely manner
5
<PAGE>
<TABLE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
BALANCE SHEET
OCTOBER 31, 1997
ASSETS
------
<CAPTION>
October 31,
1997
-----------
<S> <C>
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $251,938 $ 1,944,386
SMR LICENSES, net of accumulated amortization of $42,553 1,502,168
-----------
Total assets $ 3,446,554
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accrued liabilities $ 27,113
Due to parent 3,348,205
Current portion of capital leases payable (Note 4) 133,991
-----------
Total current liabilities 3,509,309
CAPITAL LEASES PAYABLE (Note 4) 489,279
SPECTRUM LICENSE DEBT (Note 4) 1,390,706
-----------
Total Liabilities 5,389,294
STOCKHOLDERS' EQUITY (DEFICIT):
Accumulated deficit (1,942,740)
-----------
Total Stockholders' equity (deficit) (1,942,740)
-----------
Total liabilities and stockholders' equity (deficit) $ 3,446,554
===========
<FN>
The accompanying notes to the financial statements are an
integral part of this balance sheet.
</TABLE>
6
<PAGE>
<TABLE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED
OCTOBER 31, 1997
<CAPTION>
For the ten
months ended
October 31, 1997
----------------
<S> <C>
REVENUE:
Radio service revenue $ 207,037
Equipment sales 31,573
Activation and other 94,534
----------------
333,144
COSTS AND EXPENSES RELATED TO REVENUE:
Network and site expense 260,771
Cost of equipment sold 37,700
Maintenance and other 61,289
----------------
359,760
----------------
GROSS PROFIT (26,616)
OPERATING COSTS AND EXPENSES:
Allocated administrative expenses 1,103,978
Depreciation and amortization 233,360
----------------
1,337,338
----------------
OPERATING LOSS (1,363,954)
INTEREST EXPENSE (65,729)
----------------
NET LOSS $ (1,429,683)
================
<FN>
The accompanying notes to the financial statements are an
integral part of this statement of operations.
</TABLE>
7
<PAGE>
<TABLE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE TEN MONTHS ENDED
OCTOBER 31, 1997
<S> <C>
ACCUMULATED DEFICIT, JANUARY 1, 1997 $ (513,057)
NET LOSS (1,429,683)
--------------
ACCUMULATED DEFICIT, OCTOBER 31, 1997 $ (1,942,740)
==============
<FN>
The accompanying notes to the financial statements are an
integral part of this statement of stockholder's equity.
</TABLE>
8
<PAGE>
<TABLE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED
OCTOBER 31, 1997
For the ten
months ended
October 31, 1997
----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,429,683)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 233,362
Changes in operating assets and liabilities-
Increase(decrease) in accounts payable - parent 1,169,526
Increase(decrease) in accrued liabilities 26,795
----------------
Net cash provided by (used in) operating
Activities -
----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS -
CASH AND CASH EQUIVALENTS, beginning of period -
----------------
CASH AND CASH EQUIVALENTS, end of period $ -
================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Supplemental schedule of non-cash investing and financing
activities
Income taxes paid $ -
=================
Interest paid $ 65,729
=================
Equipment acquired through capital lease $ 151,848
=================
Equipment contributed by parent $ 675,236
=================
Principal payments on capital leases made by parent $ 99,490
=================
<FN>
The accompanying notes to the financial statements are an
integral part of this statement of cash flows.
9
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 1. ORGANIZATION AND OWNERSHIP
- - ------- --------------------------
Centennial Communications Corp. (dba SMR Direct) (the "Company") is a
Delaware corporation engaged in the acquisition, development and operation of
specialized mobile radio ("SMR") and other low-cost, wireless communications
networks, the sale of communications services using those networks, and the
sale and servicing of related accessories and equipment in the United States
and in certain countries of Latin America. The accompanying consolidated
financial statements include the operations of the Birmingham, Knoxville,
Memphis, Nashville, New Orleans, Oklahoma City and Tulsa major trading areas
("MTAs"). The Company has acquired SMR licenses through direct applications
to governments and through acquisitions of interest in other entities (all of
which are wholly owned) that have been granted or have applied for SMR
licenses.
Sale of U.S. Operations (Unaudited)
-----------------------------------
The Company commenced significant operations during 1996. The Company's
business model is subject to significant modification to address rapid change
in telecommunications technology and newly emerging marketplaces which the
Company believes offer significant opportunity. Reflecting such circumstances,
in August 1997, the Company's Board of Directors reached the conclusion that
the Company's wireless communications investment opportunities in Latin
America and other emerging markets were more attractive than its opportunities
in the United States SMR operations and related assets (the "U.S. Operations")
and focus the Company's ongoing efforts solely in Latin America and other
emerging markets (See Note 7).
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - ------- ------------------------------------------
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and Tulsa major
trading areas of Centennial Communications Corp.. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Maintenance and repair
expenditures are charged to expense as incurred and expenditures for
improvements which increase the expected useful lives of the assets are
capitalized. Depreciation expense is computed using the straight-line method
over the useful lives of the respective assets (See Note 3).
Direct costs associated with the construction of SMR networks are capitalized
and amortized over the system's expected useful life upon placing the system
in service. Such costs include amounts incurred in securing tower sites, site
preparation, procurement, and installation of infrastructure, and equipment
costs.
10
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- - ------- -----------------------------------------------------
Property and Equipment, continued
---------------------------------
Also included in property and equipment are radios owned by the Company which
are leased to the Company's subscribers under operating lease agreements. The
Company retains title to these radios as part of the subscriber agreement and
depreciates the radios over five years. Upon termination of service, the
subscribers are required to return the radios to the Company. Certain
subscribers desire to own their radios. The cost or depreciated net book
value of radios sold to such subscribers is recorded as a charge to cost of
goods sold at the time of sale.
Advertising
-----------
The Company expenses advertising costs as they are incurred and advertising
communication costs the first time the advertising takes place.
SMR Licenses
------------
The fair market value of licenses obtained are capitalized and amortized using
the straight-line method over 40 years upon commencement of service (See Note
4).
Income Taxes
------------
The Company has filed a consolidated income tax return with Centennial
Communications Corp. (dba SMR Direct). As such, the Company records income
tax assets, liabilities, benefits and expenses in accordance with direction
from Centennial Communications Corp. (dba SMR Direct). At December 31, 1996,
and for the period then ended, Centennial Communications Corp. (dba SMR
Direct) has not recorded any income tax assets, liabilities, benefits and
expenses on the books of the Company.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
11
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- - ------- -----------------------------------------------------
Long-lived Assets
-----------------
Effective January 1, 1996, the Company adopted the provisions of the Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed Of". Long-lived
assets and certain identifiable intangibles to be held and used by the
Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company continuously evaluates the recoverability of its
long-lived assets based on estimated future cash flows from and the estimated
liquidation value of such long-lived assets, and provides for impairment if
such undiscounted cash flows are insufficient to recover the carrying amount
of the long-lived asset.
New Accounting Standards
------------------------
In March 1997, the FASB issued Statement of Financial Accounting Standards No.
128 ("SFAS No. 128"), "Earnings per Share", which supersedes Accounting
Principles Board Opinion No. 15 ("APB No. 15"). SFAS No. 128 is effective for
annual and interim periods ending after December 15, 1997 and simplifies the
computation of earnings per share by replacing the presentation of primary
earnings per share with a presentation of basic earnings per share. SFAS No.
128 requires dual presentation of basic and diluted earnings per share by
entities with complex capital structures. Basic earnings per share includes
no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. The Company does not believe that its loss per
share calculations will be materially affected as a result of adopting SFAS
No. 128 in 1997.
In March 1997, the FASB issued Statement of Financial Accounting Standards No.
129 ("SFAS No. 129"), "Disclosure of Information about Capital Structure."
SFAS No. 129 is effective for interim and annual periods ending after December
15, 1997 and expands the number of companies subject to the capital structure
reporting requirements of APB No. 15. SFAS No. 129 requires only additional
disclosures and will not have any material effect on the Company's reported
consolidated financial position or results of operations.
12
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
Note 3. PROPERTY AND EQUIPMENT
- - ------- ----------------------
The composition of property and equipment follows:
Network infrastructure $ 1,553,072
Radios 643,252
---------------
2,196,324
Accumulated depreciation (251,938)
---------------
Property and equipment, net $ 1,944,386
===============
The Company leases network infrastructure equipment under capital leases. As
of December 31, 1996 the book value of such equipment was approximately $1.6
million, net of accumulated depreciation of approximately $145,000 (See
Notes 4 and 7).
The Company depreciates infrastructure over ten years and radios over five
years.
Depreciation expense was $203,679 for the period ended December 31, 1996.
In August 1997, the Company decided to sell certain property and equipment
related to the U.S. operations (See Note 7).
NOTE 4. SPECTRUM LICENSE DEBT AND CAPITAL LEASES PAYABLE
- - ------- ------------------------------------------------
In July through October 1996, the Company secured approximately $608,000 in
fixed equipment infrastructure financing from E.F. Johnson, a leading
equipment manufacturer, for use in constructing its Birmingham, Knoxville,
Memphis, Nashville, New Orleans, Oklahoma City and Tulsa MTAs. Total principal
outstanding on this vendor financing was approximately $571,000 at December
31, 1996. In addition, in February 1997, the Company secured an additional
$152,000 in fixed equipment infrastructure from E.F. Johnson to construct
network facilities at additional site locations in those major trading areas.
The terms of this financing required that the Company pay 30% of the cost of
the equipment at the time of purchase with the balance of the purchase price
payable monthly over a five year period and bearing interest at a rate of 12%
per annum. Purchases made under this financing arrangement were classified as
capital leases payable (See Note 7).
13
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 4. SPECTRUM LICENSE DEBT AND CAPITAL LEASES PAYABLE, continued
- - ------- -----------------------------------------------------------
In April 1996, the Company acquired a total of 430 channels through the
Federal Communications Commission's ("FCC") 900 MHz spectrum auction, of
which 160 channels related to the Birmingham, Knoxville, Memphis, Nashville,
New Orleans, Oklahoma City, and Tulsa MTAs. The purchase price for the
Birmingham, Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa MTAs totaled $1.5 million. In connection with such auction, the Company
qualified for "small business" status under the FCC's regulations which
allowed the Company to (i) make a 10% down payment; (ii) receive a 15%
bidding credit against its spectrum purchase price; and (iii) receive United
States government financing at 7% per annum on the balance of the purchase
price to be paid by the Company over a 10-year period. The contractual
principal amount on this debt totals approximately $1.4 million as of
December 31, 1996. The note provides for interest payments only in the first
five years and quarterly principal and interest payments thereafter.
Notes and capital leases payable consist of the following at October 31, 1997:
Capital lease, payable in monthly principal and interest
payments of $13,526, for 60 months beginning on
various dates from July 1, 1996 through March 31,
1997, effective interest rate of 12%, secured by
infrastructure equipment $ 623,270
Notes payable for purchase of SMR license, quarterly
payments of $24,337 are interest-only (at the
stated rate) for first five years after which
quarterly payments of $83,013 include principal
and interest for remaining five years, interest
rate of 7%, secured by related SMR licenses 1,390,706
-------------
2,013,976
Less-Current portion (133,991)
-------------
$ 1,879,985
=============
14
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 4. SPECTRUM LICENSE DEBT AND CAPITAL LEASES PAYABLE, continued
- - ------- -----------------------------------------------------------
Contractual maturities of debt outstanding and capital leases at October 31,
1997, are as follows for the years ended December 31:
Capital
Debt Leases
----------- ----------
1997 $ - $ 33,806
1998 - 202,836
1999 - 202,836
2000 - 202,836
2001 58,676 136,726
Thereafter 1,332,030 -
----------- ----------
1,390,706 779,040
Less imputed interest - (155,770)
----------- ----------
$ 1,390,706 $ 623,270
=========== ==========
Further, the terms of the Company 's debt with the FCC contain provisions
which require the Company to seek the FCC's permission to enter into certain
transactions, including those which would result in a change in the Company's
controlling stockholders.
NOTE 5. COMMITMENTS AND CONTINGENCIES
- - ------- -----------------------------
Recoverability of Licenses
--------------------------
The terms of the Company's SMR license agreements contain provisions whereby
the Company must achieve certain levels of subscriber load and network build
out. If such commitments are not met, the Company could be subject to the
revocation of the applicable licenses.
15
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 5. COMMITMENTS AND CONTINGENCIES, continued
- - ------- ----------------------------------------
Recoverability of Licenses, continued
-------------------------------------
Compliance with the terms of SMR and other wireless communications licenses
and certain regulatory requirements, such as construction deadlines and
minimum subscriber requirements, can be difficult to meet. In addition, there
can be no assurance that in the future all regulatory requirements will be met
or that the Company will not lose any applicable licenses as a result of its
failure to meet such requirements.
Further, the terms of the Company's debt with the FCC contain provisions which
require the Company to seek the FCC's permission to enter into certain
transactions, including those which would result in a change in the Company's
controlling stockholders.
Lease Commitments
-----------------
The Company leases certain office facilities and transmission sites under
operating leases. Lease terms for office facilities range from one to five
years. Lease terms for transmission sites on building range from one to five
years, with varying renewal terms. Future minimum rental payments for the
years ended December 31 for such office facilities and antenna site leases
are as follows as of October 31, 1997:
1997 $ 23,887
1998 143,322
1999 143,322
2000 143,322
2001 143,322
Thereafter -
------------
$ 597,175
============
Rent expense was $253,805 for the period ended October 31, 1997.
16
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE 6 RELATED PARTY TRANSACTIONS
- - ------ --------------------------
Centennial Communications Corporation dba SMR Direct provided all of the
administrative expenses to the Birmingham, Knoxville, Memphis, Nashville, New
Orleans, Oklahoma City and Tulsa Major Trading areas. The allocated
administrative expenses totaled $1,103,978 for the ten months ended October
31, 1997.
NOTE 7. SUBSEQUENT EVENTS (Unaudited)
- - ------- -----------------------------
In August 1997, the Company's Board of Directors made a strategic decision to
sell the U.S. Operations and instructed management to seek purchasers for
these operations, consisting of licenses and related assets and liabilities
in twenty major trading areas. As of December 10, 1997, the Company has
executed the sale of licenses and related assets and liabilities in twelve
maker trading areas and has entered into two letters of intent with potential
purchasers to sell substantially all of the remaining licenses and assets and
liabilities related to the U.S. operations, primarily the Company's SMR
licenses in each of the eight remaining United States major trading areas in
which it had U.S. operations. The executed sales contracts and letters of
intent generally provide that the consideration for the assets will consist
of some combination of cash, promissory notes, and the assumption of the FCC
debt(See Note 4). The proposed purchases are subject to significant
contingencies, primarily related to the approval by the FCC of such assumption
of debt, including the qualifications by the proposed purchaser as a small or
very small business, as defined by the FCC. If such purchasers do not so
qualify, some or all of the bidding credit received by the Company at the time
it was awarded the SMR licenses by the FCC, will be required to be repaid by
the purchaser or the Company to the FCC. Until the contingencies related to
the FCC can be resolved, the Company intends to transfer a majority of the
risks and rewards of the U.S. Operations to the purchasers by way of
management agreements. However, the transaction will not be recognized as a
sale until substantially all of the risks, rewards of ownership and full
control of such licenses and the related assets and liabilities are
transferred to the purchasers.
17
<PAGE>
GRABAU & COMPANY
Certified Public Accountants
A PROFESSIONAL CORPORATION
303 East 17th Ave., Suite 700, Denver, CO 80203
(303) 861-0434
FAX (303) 863-1296
REPORT OF INDEPENDENT AUDITORS
Board of Directors
ComTec International, Inc.
Englewood, Colorado
We have audited the accompanying balance sheet of Birmingham, Knoxville,
Memphis, Nashville, New Orleans, Oklahoma City and Tulsa Major Trading Areas
(a division of Centennial Communications Corporation dba SMR Direct) as of
December 31, 1996, and the related statement of operations and cash flows from
August 21, 1996 (inception) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Birmingham, Knoxville,
Memphis, Nashville, New Orleans, Oklahoma City and Tulsa Major Trading Areas
(a division of Centennial Communications Corporation dba SMR Direct) as of
December 31, 1996 and the results of its operations and its cash flows for the
period from August 21, 1996 (inception) to December 31, 1996, in conformity
with generally accepted accounting principles.
Birmingham, Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa Major Trading Areas is an aggregation of seven divisions of Centennial
Communications Corporation dba SMR Direct. These divisions own a license
within the geographical areas described to deliver specialized mobile radio.
Centennial Communications Corporation dba SMR Direct provides certain
administrative charges to the Birmingham, Knoxville, Memphis, Nashville, New
Orleans, Oklahoma City and Tulsa Major Trading Areas. See Note 6 for further
description of related party transactions.
s/Grabau & Company, PC
Grabau & Company, PC
Denver, Colorado
July 14, 1998
G&C
Excellence in a timely manner
18
<PAGE>
</TABLE>
<TABLE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
------
<CAPTION>
December 31,
1996
------------
<S> <C>
PROPERTY AND EQUIPMENT,
net of accumulated depreciation of $48,256 $ 1,320,984
SMR LICENSES, net of accumulated amortization of $12,872 1,531,848
------------
Total assets $ 2,852,832
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accrued liabilities $ 318
Due to parent 1,403,953
Current portion of capital leases payable (Note 4) 98,151
-------------
Total current liabilities 1,502,422
CAPITAL LEASES PAYABLE (Note 4) 472,761
SPECTRUM LICENSE DEBT (Note 4) 1,390,706
--------------
Total Liabilities 3,365,889
STOCKHOLDERS' EQUITY (DEFICIT):
Accumulated deficit (513,057)
--------------
Total Stockholders' equity (deficit) (513,057)
--------------
Total liabilities and stockholders' equity (deficit) $ 2,852,832
==============
<FN>
The accompanying notes to the financial statements are an
integral part of this balance sheet.
</TABLE>
19
<PAGE>
<TABLE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (AUGUST 21,1996)
TO DECEMBER 31, 1996
<CAPTION>
Inception
(August 21, 1996)
through
December 31,
1996
-----------------
<S> <C>
REVENUE:
Radio service revenue $ 3,548
Equipment sales 3,035
Activation and other 2,482
-----------------
9,065
COSTS AND EXPENSES RELATED TO REVENUE:
Network and site expense 81,255
Cost of equipment sold 2,193
Maintenance and other 7,616
-----------------
91,064
-----------------
GROSS PROFIT (81,999)
OPERATING COSTS AND EXPENSES:
Allocated administrative expenses 339,122
Depreciation and amortization 61,128
-----------------
400,250
-----------------
OPERATING LOSS (482,249)
INTEREST EXPENSE (30,808)
-----------------
NET LOSS $ (513,057)
=================
<FN>
The accompanying notes to the financial statements are an
integral part of this statement of operations.
</TABLE>
20
<PAGE>
<TABLE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (AUGUST 21,1996)
TO DECEMBER 31, 1996
<CAPTION>
Inception
(August 21, 1996)
through
December 31,
1996
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (513,057)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 61,128
Changes in operating assets and liabilities-
Increase(decrease) in accounts payable - parent 451,611
Increase(decrease) in accrued liabilities 318
-----------------
Net cash provided by (used in) operating
Activities -
-----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS -
CASH AND CASH EQUIVALENTS, beginning of period -
-----------------
CASH AND CASH EQUIVALENTS, end of period $ -
=================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Supplemental schedule of non-cash investing and financing
activities
Income taxes paid $ -
=================
Interest paid $ 30,808
=================
Equipment acquired through capital lease $ 608,045
=================
Equipment contributed by parent $ 761,195
=================
Acquisition of SMR licenses in exchange for debt $ 1,544,720
=================
Principal payments on capital leases made by parent $ 37,133
=================
<FN>
The accompanying notes to the financial statements are an
integral part of the statement of cash flows.
</TABLE>
21
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1. ORGANIZATION AND OWNERSHIP
- - ------- --------------------------
Centennial Communications Corp. (dba SMR Direct) (the "Company") is a Delaware
corporation engaged in the acquisition, development and operation of
specialized mobile radio ("SMR") and other low-cost, wireless communications
networks, the sale of communications services using those networks, and the
sale and servicing of related accessories and equipment in the United States
and in certain countries of Latin America. The accompanying consolidated
financial statements include the operations of the Birmingham, Knoxville,
Memphis, Nashville, New Orleans, Oklahoma City and Tulsa major trading areas
("MTAs"). The Company has acquired SMR licenses through direct applications
to governments and through acquisitions of interest in other entities (all of
which are wholly owned) that have been granted or have applied for SMR
licenses.
Sale of U.S. Operations (Unaudited)
-----------------------------------
The Company commenced significant operations during 1996. The Company's
business model is subject to significant modification to address rapid change
in telecommunications technology and newly emerging marketplaces which the
Company believes offer significant opportunity. Reflecting such circumstances,
in August 1997, the Company's Board of Directors reached the conclusion that
the Company's wireless communications investment opportunities in Latin
America and other emerging markets were more attractive than its opportunities
in the United States SMR operations and related assets (the "U.S. Operations")
and focus the Company's ongoing efforts solely in Latin America and other
emerging markets (See Note 7).
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - ------- ------------------------------------------
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the Birmingham,
Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and Tulsa major
trading areas of Centennial Communications Corp.. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Maintenance and repair
expenditures are charged to expense as incurred and expenditures for
improvements which increase the expected useful lives of the assets are
capitalized. Depreciation expense is computed using the straight-line method
over the useful lives of the respective assets (See Note 3).
Direct costs associated with the construction of SMR networks are capitalized
and amortized over the system's expected useful life upon placing the system
in service. Such costs include amounts incurred in securing tower sites, site
preparation, procurement, and installation of infrastructure, and equipment
costs.
22
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- - ------- -----------------------------------------------------
Property and Equipment, continued
---------------------------------
Also included in property and equipment are radios owned by the Company which
are leased to the Company's subscribers under operating lease agreements. The
Company retains title to these radios as part of the subscriber agreement and
depreciates the radios over five years. Upon termination of service, the
subscribers are required to return the radios to the Company. Certain
subscribers desire to own their radios. The cost or depreciated net book
value of radios sold to such subscribers is recorded as a charge to cost of
goods sold at the time of sale.
Advertising
-----------
The Company expenses advertising costs as they are incurred and advertising
communication costs the first time the advertising takes place.
SMR Licenses
------------
The fair market value of licenses obtained are capitalized and amortized using
the straight-line method over 40 years upon commencement of service (See Note
4).
Income Taxes
------------
The Company has filed a consolidated income tax return with Centennial
Communications Corp. (dba SMR Direct). As such, the Company records income
tax assets, liabilities, benefits and expenses in accordance with direction
from Centennial Communications Corp. (dba SMR Direct). At December 31, 1996,
and for the period then ended, Centennial Communications Corp. (dba SMR
Direct) has not recorded any income tax assets, liabilities, benefits and
expenses on the books of the Company.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
23
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
- - ------- -----------------------------------------------------
Long-lived Assets
-----------------
Effective January 1, 1996, the Company adopted the provisions of the Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed Of". Long-lived
assets and certain identifiable intangibles to be held and used by the
Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company continuously evaluates the recoverability of its
long-lived assets based on estimated future cash flows from and the estimated
liquidation value of such long-lived assets, and provides for impairment if
such undiscounted cash flows are insufficient to recover the carrying amount
of the long-lived asset.
New Accounting Standards
------------------------
In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 ("SFAS No. 128"), "Earnings per Share", which supersedes Accounting
Principles Board Opinion No. 15 ("APB No. 15"). SFAS No. 128 is effective for
annual and interim periods ending after December 15, 1997 and simplifies the
computation of earnings per share by replacing the presentation of primary
earnings per share with a presentation of basic earnings per share. SFAS No.
128 requires dual presentation of basic and diluted earnings per share by
entities with complex capital structures. Basic earnings per share includes
no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. The Company does not believe that its loss per
share calculations will be materially affected as a result of adopting SFAS
No. 128 in 1997.
In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 129 ("SFAS No. 129"), "Disclosure of Information about Capital Structure."
SFAS No. 129 is effective for interim and annual periods ending after December
15, 1997 and expands the number of companies subject to the capital structure
reporting requirements of APB No. 15. SFAS No. 129 requires only additional
disclosures and will not have any material effect on the Company's reported
consolidated financial position or results of operations.
24
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note 3. PROPERTY AND EQUIPMENT
- - ------- ----------------------
The composition of property and equipment follows:
Network infrastructure $ 1,256,285
Radios 112,955
---------------
1,369,240
Accumulated depreciation (48,256)
---------------
Property and equipment, net $ 1,320,984
===============
The Company leases network infrastructure equipment under capital leases. As
of December 31, 1996 the book value of such equipment was approximately $1.3
million, net of accumulated depreciation of approximately $39,000 (See Notes
4 and 7).
The Company depreciates infrastructure over ten years and radios over five
years.
Depreciation expense was $48,256 for the period ended December 31, 1996.
In August 1997, the Company decided to sell certain property and equipment
related to the U.S. operations (See Note 7).
NOTE 4. SPECTRUM LICENSE DEBT AND CAPITAL LEASES PAYABLE
- - ------- ------------------------------------------------
In July through October 1996, the Company secured approximately $608,000 in
fixed equipment infrastructure financing from E.F. Johnson, a leading
equipment manufacturer, for use in constructing its Birmingham, Knoxville,
Memphis, Nashville, New Orleans, Oklahoma City and Tulsa MTAs. Total principal
outstanding on this vendor financing was approximately $571,000 at December
31, 1996. In addition, in February 1997, the Company secured an additional
$152,000 in fixed equipment infrastructure from E.F. Johnson to construct
network facilities at additional site locations in those major trading areas.
The terms of this financing required that the Company pay 30% of the cost of
the equipment at the time of purchase with the balance of the purchase price
payable monthly over a five year period and bearing interest at a rate of 12%
per annum. Purchases made under this financing arrangement were classified as
capital leases payable (See Note 7).
25
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 4. SPECTRUM LICENSE DEBT AND CAPITAL LEASES PAYABLE, continued
- - ------- -----------------------------------------------------------
In April 1996, the Company acquired a total of 430 channels through the
Federal Communications Commission's ("FCC") 900 MHz spectrum auction, of
which 160 channels related to the Birmingham, Knoxville, Memphis, Nashville,
New Orleans, Oklahoma City, and Tulsa MTAs. The purchase price for the
Birmingham, Knoxville, Memphis, Nashville, New Orleans, Oklahoma City and
Tulsa MTAs totaled $1.5 million. In connection with such auction, the Company
qualified for "small business" status under the FCC's regulations which
allowed the Company to (i) make a 10% down payment; (ii) receive a 15%
bidding credit against its spectrum purchase price; and (iii) receive United
States government financing at 7% per annum on the balance of the purchase
price to be paid by the Company over a 10-year period. The contractual
principal amount on this debt totals approximately $1.4 million as of
December 31, 1996. The note provides for interest payments only in the first
five years and quarterly principal and interest payments thereafter.
Notes and capital leases payable consist of the following at December 31,
1996:
Capital lease, payable in monthly principal and interest
payments of $13,526, for 60 months beginning on
various dates from July 1, 1996 through September
30, 1996, effective interest rate of 12%, secured
by infrastructure equipment $ 570,912
Notes payable for purchase of SMR license, quarterly
payments of $24,337 are interest-only (at the
stated rate) for first five years after which
quarterly payments of $83,013 include principal
and interest for remaining five years, interest
rate of 7%, secured by related SMR licenses 1,390,706
-------------
1,961,618
Less-Current portion (98,151)
-------------
$ 1,863,467
==============
26
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 4. SPECTRUM LICENSE DEBT AND CAPITAL LEASES PAYABLE, continued
- - ------- -----------------------------------------------------------
Contractual maturities of debt outstanding and capital leases at December 31,
1996, are as follows:
Capital
Debt Leases
------------ -----------
1997 $ - $ 162,308
1998 - 162,308
1999 - 162,308
2000 - 162,308
2001 58,676 96,182
Thereafter 1,332,030 -
------------ -----------
1,390,706 745,414
Less imputed interest - (174,502)
------------ -----------
$ 1,390,706 $ 570,912
============ ===========
Further, the terms of the Company 's debt with the FCC contain provisions
which require the Company to seek the FCC's permission to enter into certain
transactions, including those which would result in a change in the Company's
controlling stockholders.
NOTE 5. COMMITMENTS AND CONTINGENCIES
- - ------- -----------------------------
Recoverability of Licenses
--------------------------
The terms of the Company's SMR license agreements contain provisions whereby
the Company must achieve certain levels of subscriber load and network build
out. If such commitments are not met, the Company could be subject to the
revocation of the applicable licenses.
27
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 5. COMMITMENTS AND CONTINGENCIES, continued
- - ------- ----------------------------------------
Recoverability of Licenses, continued
-------------------------------------
Compliance with the terms of SMR and other wireless communications licenses
and certain regulatory requirements, such as construction deadlines and
minimum subscriber requirements, can be difficult to meet. In addition, there
can be no assurance that in the future all regulatory requirements will be met
or that the Company will not lose any applicable licenses as a result of its
failure to meet such requirements.
Further, the terms of the Company's debt with the FCC contain provisions which
require the Company to seek the FCC's permission to enter into certain
transactions, including those which would result in a change in the Company's
controlling stockholders.
Lease Commitments
-----------------
The Company leases certain office facilities and transmission sites under
operating leases. Lease terms for office facilities range from one to five
years. Lease terms for transmission sites on building range from one to five
years, with varying renewal terms. Future minimum rental payments for such
office facilities and antenna site leases are as follows as of December 31,
1996:
1997 $ 130,608
1998 130,608
1999 130,608
2000 130,608
2001 130,608
Thereafter
-------------
$ 653,040
=============
Rent expense was $78,861 for the period ended December 31, 1996.
28
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT)
BIRMINGHAM KNOXVILLE, MEMPHIS, NASHVILLE, NEW ORLEANS,
OKLAHOMA CITY, AND TULSA MAJOR TRADING AREAS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6. RELATED PARTY TRANSACTIONS
- - ------- --------------------------
Centennial Communications Corporation dba SMR Direct provided all of the
administrative expenses to the Birmingham, Knoxville, Memphis, Nashville, New
Orleans, Oklahoma City and Tulsa Major Trading areas. The allocated
administrative expenses totaled $339,122 for the period from August 21, 1996
(inception) to December 31, 1996.
NOTE 7. SUBSEQUENT EVENTS (Unaudited)
- - ------- -----------------------------
In August 1997, the Company's Board of Directors made a strategic decision
to sell the U.S. Operations and instructed management to seek purchasers for
these operations, consisting of licenses and related assets and liabilities
in twenty major trading areas. As of December 10, 1997, the Company has
executed the sale of licenses and related assets and liabilities in twelve
maker trading areas and has entered into two letters of intent with potential
purchasers to sell substantially all of the remaining licenses and assets and
liabilities related to the U.S. operations, primarily the Company's SMR
licenses in each of the eight remaining United States major trading areas in
which it had U.S. operations. The executed sales contracts and letters of
intent generally provide that the consideration for the assets will consist of
some combination of cash, promissory notes, and the assumption of the FCC debt
(See Note 4). The proposed purchases are subject to significant contingencies,
primarily related to the approval by the FCC of such assumption of debt,
including the qualifications by the proposed purchaser as a small or very
small business, as defined by the FCC. If such purchasers do not so qualify,
some or all of the bidding credit received by the Company at the time it was
awarded the SMR licenses by the FCC, will be required to be repaid by the
purchaser or the Company to the FCC. Until the contingencies related to the
FCC can be resolved, the Company intends to transfer a majority of the risks
and rewards of the U.S. Operations to the purchasers by way of management
agreements. However, the transaction will not be recognized as a sale until
substantially all of the risks, rewards of ownership and full control of such
licenses and the related assets and liabilities are transferred to the
purchasers.
29
<PAGE>
ComTec International, Inc. - Form 8K/A
ComTec International, Inc. and Subsidiaries and
Divisional Segment of Centennial Communications Corporation
Managements Unaudited Pro Forma Supplemental Information
June 30, 1997 and September 30, 1997
MANAGEMENT'S COMPILATION REPORT
Unaudited Pro Forma Supplemental Information
Management has prepared the accompanying balance sheets of ComTec
International, Inc. and Subsidiaries and Divisional Segment of Centennial
Communications Corporation as of September 30, 1997, the related statements
of operations for the three months then ended, the balance sheet of
Divisional Segment of Centennial Communications Corporation as of June 30,
1997 and the related statement of operations of Divisional Segment of
Centennial Communications Corporation for the period August 21st, 1996
through June 30, 1997 without independent audit or review for purposes of
facilitating the preparation of pro forma supplemental information required
by Item 2 of Form 8K and Article 11 of Regulation S-X. These statements are
shown in the first two columns on pages two through five.
Management has elected to omit substantially all of the disclosures and the
statements of retained earnings and statements of cash flows required by
generally accepted accounting principles. If the omitted disclosures and
statements of retained earnings and statements of cash flows were included
in the financial statements, they might influence the user's conclusions about
the Company's financial position, results of operations, and cash flows.
Accordingly, these financial statements are not designed for those who are not
informed about such matters.
The information included in the accompanying pro forma supplemental
information, as shown in the third and fourth columns of pages two through
five, is presented as a part of this Form 8K/A in order to comply with Item
2 of Form 8K and the Securities and Exchange Commission's accounting rule,
Article 11 of Regulation S-X, and should not be used for any other purpose.
Such information has been prepared by management, without independent audit or
review.
February 8, 1999
30
<PAGE>
<TABLE>
ComTec International, Inc. and Subsidiaries and
Divisional Segment of Centennial Communications Corporation
Consolidated Proforma Balance Sheets June 30, 1997
(See Management's Compilation Report)
<CAPTION>
(Compiled Historical Balances) (Proforma Supplemental Information)
-------------------------------------- -----------------------------------
ComTec Centennial Combined
International, Inc. Communications Proforma
and Corporation Consolidation
Subsidiaries Divisional Segment Proforma Balance Sheet
30-Jun-97 30-Jun-97 Adjustments 30-Jun-97
----------- ----------- ---------- -----------
ASSETS
<S> <C> <C> <C> <C>
Current Assets
Cash in Banks 630,000 - 630,000
(including restricted
funds)
Accounts Receivable 127,100 - 127,100
(less allowance for
doubtful accounts)
Investment in Marketable
Securities 248,400 - (200,000) 48,400
----------- ----------- -----------
Total Current Assets 1,005,500 - (200,000) 805,500
----------- ----------- ----------- -----------
Property and Equipment 275,500 1,695,025 1,970,525
(net of depreciation)
SMR License Rights 1,514,040 1,514,040
(net of amortization)
Other Assets 40,000 - - 40,000
----------- ----------- ----------- -----------
Total Assets 1,321,000 3,209,065 (200,000) 4,330,065
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIENCY)
Current Liabilities
Current Portion of
Capital Leases Payable - 119,655 119,655
Convertible Debenture 1,000,000 1,000,000
Notes Payable 110,000 1,001,000 1,111,000
Accounts Payable 504,000 504,000
Accrued Liabilities 482,700 16,395 1,369,504 1,868,599
Due to Parent - 2,570,504 (2,570,504) -
----------- ----------- ----------- -----------
Total Current
Liabilities 2,096,700 2,706,554 (200,000) 4,603,254
----------- ----------- ----------- -----------
Capital Leases Payable - 482,672 482,672
Spectrum License Debt - 1,390,706 1,390,706
----------- ----------- -----------
Total Liabilities 2,096,700 4,579,932 (200,000) 6,476,632
----------- ----------- ----------- -----------
Common Stock, .001 par 13,200 13,200
value authorized,
100,000,000 issued
13,194,751
Capital in excess of par 7,910,100 7,910,100
Unrealized loss in
marketable securities (3,600) (3,600)
Deficit accumulated
during the development
stage (8,695,400) (1,370,867) - (10,066,267)
----------- ----------- ----------- -----------
Shareholders
(deficiency) (775,700) (1,370,867) - (2,146,567)
----------- ----------- ----------- -----------
Total Liabilities and
Shareholders (deficiency) 1,321,000 3,209,065 (200,000) 4,330,065
=========== =========== =========== ===========
</TABLE>
31
<PAGE>
<TABLE>
ComTec International, Inc. and Subsidiaries and
Divisional Segment of Centennial Communications Corporation
Consolidated Proforma Statements of Operation for years ended as indicated
(See Management's Compilation Report)
<CAPTION>
(Compiled Historical Balances) (Proforma Supplemental Information)
-------------------------------------- -----------------------------------
ComTec Centennial Combined
International, Inc. Communications Proforma
and Corporation Consolidated
Subsidiaries Divisional Segment Proforma Statement of Operations
30-Jun-97 8-21-96 to 6-30-97 Adjustments 30-Jun-97
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Radio Service Revenue - 127,770 - 127,770
Equipment Sales - 21,979 - 21,979
Activation and other - 59,202 - 59,202
----------- ----------- ---------- -----------
Total Revenues - 208,951 - 208,951
----------- ----------- ---------- -----------
Costs and Expenses
Related to Revenues
Network and site expense - 237,718 - 237,718
Cost of equipment sold - 24,813 - 24,813
Maintenance and other - 44,389 - 44,389
----------- ----------- ---------- -----------
- 306,920 - 306,920
----------- ----------- ---------- -----------
Gross Profit - (97,969) - (97,969)
----------- ----------- ---------- -----------
Expenses:
Selling, General and
Administrative 1,538,200 1,202,653 - 2,740,853
Compensation in the
form of common stock 1,095,900 - - 1,095,900
----------- ----------- ---------- -----------
Loss before other income
(expense) (2,634,100) (1,300,621) - (3,934,721)
----------- ----------- ---------- -----------
Other Income (Expense)
Interest and Dividends 6,300 - - 6,300
Interest Paid (96,600) (70,245) - (166,845)
Rental and Other 45,500 - - 45,500
Prepaid Calling Card
Services less revenue (514,800) - - (514,800)
Loss on investments,
foreclosures and (621,600) - - (621,600)
disposal of assets
Writedown of Intangible (1,300,000) - - (1,300,000)
----------- ----------- ---------- -----------
Total Other Income
(Expense) (2,481,200) (70,245) - (2,551,445)
----------- ----------- ---------- -----------
Net Loss (5,115,300) (1,370,867) - (6,486,167)
=========== =========== ========== ===========
Per Share Data Based on
Weighted Average Common
Shares Outstanding 8,857,079 N/A N/A 8,857,079
Loss per common share $ (0.58) N/A N/A $ (0.73)
32
<PAGE>
</TABLE>
<TABLE>
ComTec International, Inc. and Subsidiaries and
Divisional Segment of Centennial Communications Corporation
Consolidated Proforma Balance Sheets - September 30, 1997
(See Management's Compilation Report)
<CAPTION>
(Compiled Historical Balances) (Proforma Supplemental Information)
-------------------------------------- -----------------------------------
ComTec Centennial Combined
International, Inc. Communications Proforma
and Corporation Consolidation
Subsidiaries Divisional Segment Proforma Balance Sheet
30-Sep-97 30-Sep-97 Adjustments 30-Sep-97
----------- ----------- ---------- -----------
ASSETS
<S> <C> <C> <C> <C>
Current Assets
Cash in Banks (including
restricted funds) 144,750 - 144,750
Accounts Receivable 158,018 - 158,018
(less allowance for
doubtful accounts)
Other Current Assets 35,820 - 35,820
Investment in
Marketable Securities 248,400 - (200,000) 48,400
----------- ----------- ---------- -----------
Total Current Assets 586,988 - (200,000) 386,988
----------- ----------- ---------- -----------
Property and Equipment 264,612 1,944,386 2,208,998
(net of depreciation)
SMR License Rights 1,502,168 2,968 1,505,136
(net of amortization)
Other Assets 150,118 - - 150,118
----------- ----------- ---------- -----------
Total Assets 1,001,718 3,446,554 (197,032) 4,251,240
=========== =========== ========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIENCY)
Current Liabilities
Current Portion of
Capital Leases Payable - 133,991 133,991
Convertible Debenture 1,000,000 1,000,000
Notes Payable 70,000 1,001,000 1,071,000
Accounts Payable 516,964 516,964
Accrued Liabilities 449,056 27,113 1,985,485 2,461,654
Due to Parent - 3,205,237 (3,205,237) -
----------- ----------- ---------- -----------
Total Current
Liabilities 2,036,020 3,366,341 (218,752) 5,183,609
----------- ----------- ---------- -----------
Capital Leases Payable - 489,279 21,720 510,999
Spectrum License Debt - 1,390,706 - 1,390,706
----------- ----------- ---------- -----------
Total Liabilities 2,036,020 5,246,326 (197,032) 7,085,314
----------- ----------- ---------- -----------
Common Stock, .001 par 13,200 13,200
value authorized,
100,000,000 issued
13,194,751
Capital in excess of par 7,910,100 7,910,100
Deficit accumulated
during the development
stage (8,957,602) (1,799,772) - (10,757,374)
----------- ----------- ---------- -----------
Shareholders
(deficiency) (1,034,302) (1,799,772) - (2,834,074)
----------- ----------- ---------- -----------
Total Liabilities and
Shareholders (deficiency) 1,001,718 3,446,554 (197,032) 4,251,240
=========== =========== =========== ===========
</TABLE>
33
<PAGE>
<TABLE>
ComTec International, Inc. and Subsidiaries and
Divisional Segment of Centennial Communications Corporation
Consolidated Proforma Statements of Operation for three months ended as indicated
(See Management's Compilation Report)
<CAPTION>
(Compiled Historical Balances) (Proforma Supplemental Information)
-------------------------------------- -----------------------------------
ComTec Centennial Combined
International, Inc. Communications Proforma
and Corporation Consolidated
Subsidiaries Divisional Segment Proforma Statement of Operations
30-Sep-97 30-Sep-97 Adjustments 30-Sep-97
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Radio Service Revenue - 62,111 - 62,111
Equipment Sales - 9,472 - 9,472
Activation and other - 28,360 - 28,360
----------- ----------- ---------- -----------
Total Revenues - 99,943 - 99,943
----------- ----------- ---------- -----------
Costs and Expenses
Related to Revenues
Network and site expense - 78,231 - 78,231
Cost of equipment sold - 11,310 - 11,310
Maintenance and other - 18,387 - 18,387
----------- ----------- ---------- -----------
- 107,928 - 107,928
----------- ----------- ---------- -----------
Gross Profit - (7,985) - (7,985)
----------- ----------- ---------- -----------
Expenses:
Selling, General and
Administrative 285,527 401,201 - 686,728
----------- ----------- ---------- -----------
Loss before other
income (expense) (285,527) (409,186) - (694,713)
----------- ----------- ---------- -----------
Other Income (Expense)
Interest and Dividends (701) - - (701)
Interest Paid 6,500 (19,719) - (13,219)
Prepaid Calling Card
Services less revenues (5,905) - - (5,905)
Loss on investments,
foreclosures and
disposal of assets 23,471 - - 23,471
----------- ----------- ---------- -----------
Total Other Income
(Expense) 23,365 (19,719) - 3,646
----------- ----------- ---------- -----------
Net (Loss) (262,162) (428,905) - (691,067)
----------- ----------- ---------- -----------
Per Share Data Based on
Weighted Average
Common Shares Outstanding
9/30/97 8,857,079 N/A N/A 8,857,079
(Loss) per common share $ (0.03) N/A N/A $ (0.08)
</TABLE>
34
<PAGE>
Form 8K/A
ComTec International, Inc. and Subsidiaries and
Divisional Segment of Centennial Communications Corporation
Notes to Unaudited Pro Forma Supplemental Information
June 30, 1997 and September 30, 1997
Note 1. Summary of Subject Transaction for Pro Forma Information
As reported in the 8K filed December 26, 1998, through an agreement executed
on December 4, 1997, American Wireless Network, Inc., a wholly owned
subsidiary of ComTec International, Inc. (the "Company") acquired management
control of the Specialized Mobile Radio ("SMR") related assets and licenses
owned by Centennial Communications Corp. of Denver, Colorado in seven USA
metropolitan trade areas. On July 6, 1998 the final closing and transfer of
title to the acquired assets (subject to the FCC Notes assumed by American
Wireless Network, Inc.) occurred. The Company and Centennial Communications,
Inc., a Colorado Corporation, ("the Company") initially entered into a letter
of intent dated as of October 8th, 1997 and a formal agreement was entered
into on December 4, 1997 between American Wireless Network, Inc., a Colorado
Corporation and Centennial Communications Corp. (the "Agreement") whereby
American Wireless Network, Inc. acquired management control on December 5, 1997
of all SMR assets and SMR licenses owned by Centennial Communications Corp.
together with all SMR related business limited to and located in the
following USA metropolitan trade areas: Birmingham, Alabama; Knoxville,
Memphis, and Nashville, Tennessee; Oklahoma City and Tulsa, Oklahoma; and
New Orleans, Louisiana. The assets acquired by the agreement included SMR
licenses issued by the Federal Communications Commission ("FCC"), radio
equipment and antennas, tower site leases and the customer base of Centennial
Communications Corp. in the seven acquired markets. Transfer of title to the
assets and licenses occurred at a final closing which occurred on July 6,
1998. The total purchase price of the assets is $3,035,697, consisting of
cash deposit of $200,000 in October 1997, (which amount was obtained from
sale of marketable securities), payment $1,000,843 in cash on December 4,
1997, (which amount was obtained through a convertible debt financing
issuance), a promissory note from American Wireless Network, Inc. to
Centennial Communications Corp. in the amount of $444,147 (which note and all
accrued interest was paid at the July 6, 1998 closing through a short term
loan) and the assumption of FCC notes totaling $1,390,707 by American Wireless
Network, Inc. The pro forma supplemental information is provided to
illustrate the financial effect on the Company had the acquired assets and
operation been a part of the Company's operation from the inception of the
acquired divisional segment of Centennial Communications Corporation on August
21, 1996.
The information included in the accompanying pro forma supplemental
information is presented as a part of Form 8K/A in order to comply with Item
2 of Form 8K and the Securities and Exchange Commission's accounting rule,
Article 11 of Regulation S-X, and should not be used for any other purpose.
Such information has been prepared by management utilizing certain historical
data, estimates and assumptions without independent audit or review.
Note 2. Management's Assumptions
Management's Assumptions are based on the terms of the letter of intent and
asset purchase agreement as follows:
The total purchase price of the assets is $3,035,697, consisting of: 1) cash
deposit of $200,000 in October 1997, which amount was obtained by the Company
from sale of marketable securities; 2) Payoff of Vendor Debt (Capital Leases)
in the amount of $644,990; 3) Assumption of FCC Notes in the amount of
$1,390,707 and 4) an additional payment of $800,000, part of which was to be
paid
35
<PAGE>
in the initial closing and part in the final closing. Of the combined
cash payment requirements, approximately $1,001,000 was paid in the initial
closing and the balance at the final closing. The pro forma assumptions are
based on the assumption that the divisional segment operations, development
and growth of the startup operation would have occurred in the same manor as
historical financial data from the division segment indicate. Overlapping of
functions is not taken into consideration. Nonrecurring costs related to the
acquisition estimated at $20,000 are not considered.
Note 3. Statement of Operations Pro Forma Assumptions
The supplemental statements of Pro Forma Operations are based on the
assumption that since the divisional segment was a startup development stage
operation, the same revenues, costs, depreciation and amortization as was
historically incurred by the divisional segment of Centennial Communications
Corporation would have occurred had the assets and operation been under the
management of the Company.
Note 4. Pro Forma Balance Sheet Assumptions
The supplemental statements of Pro Forma Balance sheets are based on the
assumption that since the divisional segment was a startup development stage
operation, the same operating deficit would have been incurred by the Company
as was historically incurred by the divisional segment of Centennial
Communications Corporation. Capital leases are adjusted to the purchase
contract vendor payoff requirement. Operating Deficit and the balance
necessary to eliminate "Due to Parent" are credited to accrued liabilities
and notes payable. Notes Payable is adjusted to reflect the amount of cash
paid at the initial closing as a note. Marketable securities are adjusted by
the amount of the initial cash deposit paid in October 1997.
36
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of the
4th day of December, 1997, by and between American Wireless Network, Inc., a
Colorado corporation, a subsidiary of ComTec International, Inc., a publicly
traded New Mexico corporation ("Buyer"), and Centennial Communications Corp.,
a Delaware corporation ("Seller CCC"), and SMR Direct USA, Inc., a Delaware
corporation ("Seller SMR Direct") (collectively referred to herein as
"Sellers").
RECITALS
A. Seller SMR Direct is the owner of certain licenses which it
received from the Federal Communications Commission ("FCC") for the operation
and use of 900 MHz specialized mobile radio stations.
B. Seller CCC is the owner of certain assets related to the operation
of the 900 MHz specialized mobile radio stations owned by Seller SMR Direct.
C. Sellers desire to assign certain of the FCC licenses to Buyer and
to sell certain of their assets to Buyer as more particularly set forth below.
Buyer desires to accept assignment of such FCC licenses, and certain
liabilities in connection therewith, and to purchase such assets upon the
terms and conditions set forth below.
AGREEMENT
In consideration of the foregoing, the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Sellers agree as
follows:
ARTICLE I
SALE OF ASSETS
--------------
1.01 Assignment of Licenses. Subject to the terms and conditions set
forth herein, Seller SMR Direct shall assign and transfer to Buyer, and Buyer
shall accept assignment and transfer from Seller SMR Direct of all of Seller
SMR Direct's right, title and interest in the following 900 MHz Metropolitan
Trading Area ("MTA") licenses: twenty (20) channels in Birmingham; twenty
(20) channels in Knoxville; thirty (30) channels in Memphis; twenty (20)
channels in Nashville, twenty (20) channels in New Orleans; thirty (30)
channels in Oklahoma City; and twenty (20) channels in Tulsa (collectively,
the "Stations"), free and clear of all liens, leases, claims and encumbrances,
except for any lien held by the FCC securing the amount set forth in Section
1.03(a). The Stations are more particularly described on Schedule 1.01
attached hereto.
37
<PAGE>
1.02 Purchase and Sale of Assets. Subject to the terms and conditions
set forth herein, Seller CCC shall sell, assign, transfer and deliver to
Buyer, and Buyer shall purchase and accept delivery of all of Sellers' right,
title, and interest in the equipment (the "Equipment") used solely in
conjunction with the operation of the Stations, including, but not limited
to, all antennas, transmitters, and subscriber equipment in possession of the
end-user customers, free and clear of all liens, leases, claims and
encumbrances. The Equipment is more particularly described on Schedule 1.02
attached hereto.
1.03 Assumption of Liabilities. In conjunction with the transactions
contemplated by this Agreement, Buyer shall not assume any claim, debt,
liability, contract, commitment or obligation of Sellers, except as follows:
(a) Buyer shall assume, at the Final Closing, as that term is defined
in Article VIII of this Agreement, One Million Three Hundred
Ninety Thousand, Seven Hundred Eight Dollars ($1,390,708) in debt
owed by the Sellers to the FCC, as evidenced by certain
Promissory Notes dated August 21, 1996 in the total original
principal amounts of One Million Three Hundred Ninety Thousand,
Seven Hundred Eight Dollars ($1,390,708) (the "Notes"). Sellers
represent that as of the date of this Agreement, the principal
balance due on the Notes is One Million Three Hundred Ninety
Thousand, Seven Hundred Eight Dollars ($1,390,708)
(b) Buyer acknowledges that the amount of FCC debt to be assumed
under Section 1.03(a) is subject to increase pursuant to FCC
requirements, and Buyer agrees to assume such increase. In the
event Buyer does not qualify as a designated entity (a Small or
Very Small Business) under the rules and regulations of the FCC,
Buyer shall pay all amounts due to the FCC resulting from the
transfer of the Stations.
ARTICLE II
PAYMENT
-------
2.01 Purchase Price. In consideration of the assignment and transfer
of the Stations to Buyer and the sale, assignment, delivery and transfer of
the Equipment to Buyer, Buyer shall pay to the Sellers the sum of Three
Million Thirty-Five Thousand Six Hundred Ninety Seven Dollars ($3,035,697.00)
(the "Purchase Price").
2.02 Payment of Purchase Price. The Purchase Price shall be paid as
follows:
(a) At the Initial Closing, as defined in Article 8.01, below,
Buyer shall pay to Sellers the sum of One Million Two
Hundred Thousand Eight Hundred Forty-Three Dollars
($1,200,843.00) less Two Hundred Thousand Dollars
($200,000.00), which has been paid to Sellers in the form
of an earnest money deposit.
(b) Buyer shall assume Sellers' debt to the FCC pursuant to
Section 1.03(a) of this Agreement as part of the Final
Closing as that term is defined in Article VIII of this
Agreement; and
2
38
<PAGE>
(c) As part of the Final Closing Buyer shall pay to Sellers Four
Hundred Forty Four Thousand One Hundred Forty-Six Dollars
($444,146.00). This amount be paid under the terms of a
promissory note (the "Promissory Note") delivered to Seller
CCC by Buyer at the Initial Closing, in the form attached
hereto as Exhibit A.
ARTICLE III
ASSIGNMENT AND ASSUMPTION OF ANTENNA RIGHTS
-------------------------------------------
3.01 Assignment and Assumption of License Agreements. As a condition to
and as consideration for the Buyer entering into this Agreement, as of the
Final Closing Date, Seller CCC shall assign any and all leases and/or licenses
for, and any and all of its other rights, title and interest in and to, all
antenna sites used by Seller CCC in connection with its operation of the
Stations (collectively, the "Site Licenses"). A list of all Site Licenses is
attached hereto as Schedule 3.01.
3.02 Site License Payments. Seller CCC shall remain liable under the
Site Licenses for any and all obligations, financial or otherwise, which
accrue prior to the Initial Closing Date, subject to the conditions of the
Management Agreement attached hereto as Exhibit B.
ARTICLE IV
ASSIGNMENT OF SUBSCRIBER AGREEMENTS
-----------------------------------
4.01 Assignment of Subscriber Agreements. On the Final Closing Date,
Seller CCC shall assign and transfer to Buyer any and all subscriber
agreements and subscriber lists relating to the Stations (the "Subscriber
Agreements"), and Buyer shall assume the obligations thereunder from and
after such date. A list of all Subscriber Agreements, including the name,
address and phone number of the subscriber, is attached hereto as Schedule
4.01.
ARTICLE V
MANAGEMENT AGREEMENT
--------------------
5.01 Management Agreement. On the Initial Closing Date, the parties
shall execute and deliver a Management Agreement in the form of Exhibit B
attached hereto.
ARTICLE VI
TERMINATION OF TELEPHONE NUMBERS
--------------------------------
6.01 Termination of Telephone Numbers. On the Final Closing Date,
Seller CCC shall notify the appropriate telephone company to terminate all
local telephone numbers and circuits listed in its name for all the Stations
five (5) business days from the Final Closing Date, unless otherwise agreed to
by the parties. Buyer will obtain and provide Seller CCC prior to the Final
Closing Date, evidence that Buyer has requested telephone numbers for the
Stations.
3
39
<PAGE>
ARTICLE VII
ASSIGNMENT OF EQUIPMENT WARRANTIES
----------------------------------
7.01 Assignment of Equipment Warranties. On the Final Closing Date,
Seller CCC shall assign and transfer to Buyer any and all outstanding
warranties on the Equipment, to the extent such warranties are assignable
and transferable (the "Equipment Warranties"), whether given by the
manufacturer or otherwise, and Buyer shall accept assignment and transfer of
the Warranties. A list of all Warranties is attached hereto as Schedule 7.01.
ARTICLE VIII
PLACE AND DATE OF CLOSING
-------------------------
8.01 Initial Closing. The Initial Closing shall consist of the
following: (i) the execution of this Agreement; (ii) the execution of the
Management Agreement pursuant to Article V of this Agreement; (iii) Buyer's
payment of the portion of the Purchase Price described in Section 2.02(a) of
this Agreement; (iv) delivery of the Promissory Note to Seller CCC; and (v)
any and all other transactions contemplated by this Agreement other than the
matters to be undertaken at the Final Closing. The Initial Closing shall take
place on December 4, 1997, at 10:00 a.m. at the offices of the Sellers (the
"Initial Closing Date"), unless otherwise agreed to by the parties in writing.
8.02 Final Closing. Final Closing shall consist of the following: (i)
the assignment and transfer of the Stations pursuant to Section 1.0 1 of this
Agreement; (ii) the making of the Final Payment pursuant to Section 2.02(d) of
this Agreement, the Promissory Note, and the Notes; (iii) the assumption of
liabilities pursuant to Section 1.03 of this Agreement; (iv) the purchase of
the Equipment pursuant to Section 1.02 of this Agreement; (v) the assignment
and transfer of Subscriber Agreements pursuant to Section 4.01 of this
Agreement; (vi) the termination of the telephone numbers pursuant to Article
VII of this Agreement; and (vii) such other transactions contemplated by this
Agreement. The Final Closing shall take place on the later of (10) days
following FCC approval of the assignment and transfer of the Stations, or
March 15, 1998, at a time and place and on a date mutually agreed to by the
parties (the "Final Closing Date").
ARTICLE IX
INITIAL CLOSING DOCUMENTS
-------------------------
9.01 Assignment and Assumption of Site Licenses. At the Final Closing,
Seller CCC shall deliver good and sufficient instruments of transfer and
conveyance as Buyer's counsel may reasonably request demonstrating that Seller
CCC has assigned the Site Licenses pursuant to Article III of this Agreement
as of the Final Closing Date, and that Buyer has assumed all obligations
thereunder. Buyer shall take all necessary steps to assist Sellers in being
released from all obligations under the Site Licenses as of the Final Closing
Date.
9.02 Certificates. At the Initial Closing and Final Closing Date, each
party shall deliver certificates providing that all of such party's
representations and warranties contained herein are true and correct in all
material respects as of the Initial Closing Date (except to the
4
40
<PAGE>
extent that any such representation or warranty relates by its express terms
solely to the Final Closing Date).
9.03 Board Resolutions. At the Initial Closing and Final Closing Date,
each party shall delivery a certificate of the Secretary (or other authorized
person) of such party certifying resolutions duly adopted by such party
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereunder and certifying that such resolutions are
then in full force and effect.
9.04 Other Documents. At the Initial Closing and Final Closing Date,
each party shall deliver such other documents, assignments and certificates
of officers as reasonably may be required by the other party to consummate
this Agreement and the transactions contemplated herein.
9.05 Future Documents. Each of the parties shall, at any time and from
time to time after the Initial Closing and Final Closing upon request of the
other party, do, execute, acknowledge and deliver, or shall cause to be done,
executed, acknowledged and delivered, all such further acts, assignments,
transfers, conveyances, powers of attorney and assurances as may be reasonably
required by the other party to effect the transactions contemplated by this
Agreement.
ARTICLE X
FINAL CLOSING DOCUMENTS
-----------------------
10.01 Sale of Equipment. At the Final Closing, Seller CCC shall
deliver endorsements, assignments, bills of sale and other good and
sufficient instruments of transfer and conveyance as Buyers counsel may
reasonably request demonstrating that Seller CCC has assigned, transferred
and sold to Buyer the Equipment pursuant to Article I of this Agreement.
10.02 Assignment of Subscriber Agreements. At the Final Closing,
Seller CCC shall deliver endorsements, assignments, and other good and
sufficient instruments of transfer demonstrating that Seller CCC has assigned
and transferred to Buyer the Subscriber Agreements pursuant to Article IV of
this Agreement.
10.03 Assignment of Equipment Warranties. At the Final Closing, Seller
CCC shall deliver endorsements, assignments, and other good and sufficient
instruments of transfer and conveyance as Buyer's counsel may reasonably
request demonstrating that Seller CCC has assigned and transferred to Buyer
the Equipment Warranties to Article VII of this Agreement.
10.04 Termination of Telephone Numbers. At the Final Closing, Seller
CCC shall deliver sufficient instruments as Buyer's counsel may reasonable
request demonstrating that Seller CCC has terminated all local telephone
numbers and toll-free 800 exchange numbers effective five (5) business days
from the Final Closing Date, pursuant to Article VI of this Agreement.
10.05 Assignment and Transfer of Stations. At the Final Closing,
Sellers shall deliver endorsements, assignments and other good and sufficient
instruments of transfer and
5
41
<PAGE>
conveyance as Buyer's counsel may reasonably request for the purpose of
effecting Sellers' assignment and transfer of the Stations to Buyer pursuant
to Article I of this Agreement.
10.06 Other Documents. At the Final Closing, Sellers shall deliver
such other documents, assignments, bills of sale, instruments of conveyance,
and certificates of offers as reasonably may be required by Buyer to
consummate this Agreement and the transactions contemplated herein.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
------------------------------
AND AFFIRMATIVE COVENANTS OF SELLER
-----------------------------------
Each Seller, for itself and to the extent of its ownership of the Assets
being transferred in this transaction, hereby makes the following
representations and warranties, all of which shall be true and correct as of
the date hereof and as of the Final Closing Date and at all times in between,
as the case may be, with the same effect as though such representations and
warranties had been given as of the Final Closing Date, and shall survive the
Final Closing for the earlier of the applicable statute of limitations or two
(2) years from the Final Closing.
11.01 Corporate. Seller CCC is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware. Seller
SMR Direct is a corporation duly organized and in good standing under the laws
of the State of Delaware.
11.02 Authority. Sellers have full power and authority to own the
Stations and Equipment. Sellers have the right and power to sell, assign,
transfer, convey and deliver the Stations to Buyer, subject to FCC approval.
Seller CC has the right and power to sell, assign, transfer, convey and deliver
the Equipment to Buyer. All legal action required to carry out all terms and
conditions of this Agreement can and will be promptly taken by Sellers no
later than the date hereof.
11.03 Status of Stations. The Stations were validly issued by the FCC
and are currently in full force and effect. Sellers have no knowledge of any
defaults or events which, with the passage of time, would constitute a
default under the Stations. The Stations are unimpaired by any acts or
omissions of Sellers or their respective agents or employees.
11.04 Rights to Stations. The Stations will be assigned and transferred
to Buyer on the Final Closing Date, free and clear, and exclusive of any and
all liabilities and obligations, liens, claims or encumbrances, whether
absolute, accrued, contingent or otherwise, except for restrictions imposed
by FCC regulation applicable to similar rights generally and except for the
FCC debt.
11.05 Compliance with Laws. Sellers are in material compliance with
all laws, rules and regulations concerning ownership and operation of the
Stations.
11.06 Title to Equipment. The Equipment is now owned by Seller CCC and
will be transferred and sold to Buyer on the Final Closing Date, free and
clear, and exclusive of any and
6
42
<PAGE>
all liabilities and obligations, liens, claims or encumbrances, whether
absolute, accrued, contingent or otherwise.
11.07 Condition of Equipment. The Equipment is now, and will be on the
Final Closing Date, in proper operating condition consistent with the
standards of good engineering practice and will permit the Stations to
continue to operate in accordance with FCC regulations.
11.08 Consent. No consent, approval or authorization of any person or
entity, including any governmental entity, is required to be obtained by Buyer
or Sellers in connection with the execution of any and all of the transactions
to be performed under this Agreement, with the exception of the FCC's
authorization to assign the Stations.
11.09 No Litigation or Adverse Events. There are no pending or
threatened judgments, suites, actions, or legal, administrative, arbitration
or other proceedings or governmental investigations affecting the Stations,
Equipment, Site Licenses or Subscription Agreements.
11.10 Authorization for Agreement. The execution and performance of
this Agreement has been authorized and approved by the Board of Directors of
each Seller.
11.11 Power to Perform. Sellers have full power, right and authority
to enter into this Agreement and to perform its obligations under this
Agreement, and this Agreement is legal, valid and binding on Sellers and is
enforceable against Sellers in accordance with its terms.
11.12 Insurance. Seller CCC currently has and will continue to have
until and including the Final Closing Date adequate policies of insurance
covering damage to the Equipment and any property damage or personal injury
associated therewith. Schedule 11.12 attached hereto lists all insurance
policies currently covering the Equipment.
11.13 Status of Site Equipment. As of the Final Closing Date, Seller
CCC will own, free and clear of any and all liens, leases, claims and
encumbrances, all of the Equipment located at the Site License sites.
11.14 FCC Violations. If, prior to the Final Closing Date, Sellers
receive an administrative or other order relating to any violation of FCC rules
or regulations concerning the Stations, Sellers will fully remedy all such
violations and be responsible for the costs of such remediation, including
the payment of any fines that may be assessed for any such violation.
11.15 Taxes, Fees. Sellers have paid all taxes, assessments, excises
and other levies due and payable on the Stations and Equipment as of the
Final Closing Date.
11.16 Other Agreements. Sellers' execution and performance of this
Agreement will not conflict with any term or condition of any other agreement
to which Sellers are a party.
11.17 FCC Approval. Sellers know of no reason why FCC would not approve
the assignment and transfer of the Stations or the sale of the Equipment.
11.18 Customer Obligations. The Subscriber Agreements constitute valid
and binding agreements in accordance with their terms. Sellers have no
knowledge of any defaults or
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events which, with the passage of time, would constitute a default under the
Subscription Agreements. The Subscription Agreements are unimpaired by any
acts or omissions of Sellers or their respective agents or employees.
11.19 Disclosure. No representations or warranty by Sellers in this
Agreement, nor any statement, certificate or schedule furnished or to be
furnished to Buyer on behalf of Sellers pursuant to this Agreement, nor any
document or certificate delivered to Buyer pursuant to this Agreement or in
connection with the actions contemplated herein, contains or will contain any
untrue statement of a material fact or omits or will omit a material fact
necessary to make the statements contained herein not misleading.
11.20 FCC Application. The Sellers shall cooperate with Buyer and
Buyer's FCC counsel in the preparation and submission of all documents and
applications necessary or required to effect FCC approval of the transfer of
the Stations to Buyer.
11.21 Proof of Billings. Attached hereto as Schedule 4.01 is a list of
those persons and entities, and their addresses, who have entered into
Subscriber Agreements with Seller CCC. Schedule 4.01 and the underlying
documentation are complete and accurate in all material respects as of the dates
hereof.
11.22 Notification to Subscribers. Sellers shall mail a letter to all
persons and entities who have entered into Subscription Agreements with Seller
CCC informing such persons or entities to direct all further payments due
under the Subscription Agreements to Buyer. Such letter shall be in the form
attached hereto as Exhibit C. Buyer shall pay the costs of postage for such
mailing.
11.23 No Misstatements or Omissions. None of the information or
documents furnished or to be furnished by or on behalf of Sellers to Buyer,
including all Exhibits and Schedules hereto, is or will be false or misleading
as to any material fact or omits or will omit to state a material fact
required to be stated therein or necessary in order to make any of the
statements made herein, in light of the circumstances under which they were
made, not misleading.
11.24 Access to Books and Records. After the Initial Closing, Buyer
shall have full access to the titles, contracts, books, and records and
affairs of Sellers dealing with the Equipment Stations or Subscription
Agreements for any purpose which is reasonably necessary and proper.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby makes the following representations and warranties, all of
which shall be true and correct as of the date hereof and as of the Final
Closing Date and at all times in between, as the case may be, with the same
effect as though such representations and warranties had been given as of
the Final Closing Date, and shall survive the Final Closing Date:
12.01 Corporate. Buyer is a Colorado corporation duly organized,
validly existing and in good standing under the laws of the State of
Colorado, and has the power to own its
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properties and the Stations and carry on its business in the manner in which
such business is to be conducted, now and upon consummation of this Agreement,
including but not limited to all certificates of authority to do business as
a foreign corporation in connection with the operation of the Stations and
tax licenses, as required.
12.02 Authorization for Agreement. The execution and delivery of this
Agreement, and all other documents to be executed and delivered in connection
herewith, by Buyer have been or will be duly authorized by appropriate company
action of Buyer.
12.03 Power to Perform. Buyer has full power, right and authority to
enter into this Agreement and to perform its obligations under this Agreement,
and this Agreement is legal, valid and binding on Buyer and is enforceable
against Buyer in accordance with its terms.
12.04 Disclosure. No representation or warranty by Buyer in this
Agreement, nor any statement, certificate or schedule furnished or to be
furnished to Seller on behalf of Buyer pursuant to this Agreement, nor any
document or certificate delivered to Seller pursuant to this Agreement or in
connection with the actions contemplated herein, contains or will contain any
untrue statement of a material fact or omits or will omit a material fact
necessary to make the statements contained herein not misleading.
12.05 Consent. No consent, approval or authorization of any person or
entity, including any governmental entity, is required to be obtained by Buyer
or Sellers in connection with the execution of any and all of the transactions
to be performed under this Agreement, with the exception of the FCC's
authorization to assign the Stations.
12.06 Authorization for Agreement. The execution and performance of
this Agreement has been authorized and approved by the board of directors of
Buyer.
12.07 Power to Perform. Buyer has full power, right and authority to
enter into this Agreement and to perform its obligations under this Agreement,
and this Agreement is legal, valid and binding on Buyer and is enforceable
against Buyer in accordance with its terms.
12.08 Insurance. Buyer will reimburse Seller for Seller's costs to
continue to have until and including the Final Closing Date adequate policies
of insurance covering damage to the Equipment and any property damage or
personal injury associated therewith.
12.09 FCC Approval. Buyer knows of no reason why FCC would not approve
the assignment and transfer of the Stations or the sale of the Equipment.
12.10 Qualifications. Buyer is legally and financially qualified to
carry out its obligations under this Agreement.
12.11 FCC Application. The Buyer shall cooperate with Sellers and
Sellers' FCC counsel in the preparation and submission of all documents and
applications necessary or required to effect FCC approval of the transfer of
the Stations to Buyer.
12.12 Notification to Subscribers. Buyer shall assist Sellers in the
preparation or mailing of a letter to all persons and entities who have
entered into Subscription Agreements informing such persons or entities to
direct all further payments due under the Subscription
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Agreements to Buyer under the terms of the management Agreement. Buyer shall
pay the costs of postage for the mailing of such letter.
12.13 No Misstatements or Omissions. None of the information or
documents furnished or to be furnished by or on behalf of Buyer to Sellers,
including all Exhibits and Schedules hereto, is or will be false or
misleading as to any material fact or omits or will omit to state a material
fact required to be stated therein or necessary in order to make any of the
statements made therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE XIII
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
All obligations of Buyer under this Agreement (including the obligation
to consummate this Agreement) will be subject to the following express
conditions precedent (any of which may be waived, in whole or in part, by
Buyer):
13.01 Representations and Warranties True to the Final Closing Date.
The representations, warranties and covenants made by the Sellers in this
Agreement will be true, complete and accurate in all respects at all times
from and including both the Initial Closing Date and the Final Closing Date,
with the same effect as though such representations, warranties and covenants
had been made or given as of such dates.
13.02 Certificate of Fulfillment of Conditions. Sellers will have
delivered to Buyer the certificates of the President and Treasurer of Sellers
to the effect that the conditions set forth in Section 13.01 have been
satisfied.
13.03 Compliance with Agreement. Sellers will have performed and
complied with all agreements and obligations required by this Agreement to
be performed or complied with by them prior to or on the Final Closing Date.
13.04 Proceedings and Instruments Satisfactory. All documents in
connection with the transactions contemplated by this Agreement have been
timely delivered to Buyer, and Sellers will have made available to Buyer for
examination the originals or true and correct copies of all records and
documents which Buyer may reasonably request in connection with said
transactions.
13.05 Waivers. Sellers will have obtained all such written consents or
waivers from all third parties as Buyer reasonably deems to be required, to
permit consummation of the transactions provided for hereunder.
13.06 Due Diligence. Buyer will not have learned of any fact or
condition with respect to the Stations or Equipment which materially or
adversely varies with one or more of the warranties or representations or
covenants as set forth herein.
13.07 Injunction. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or
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prohibition (an "Injunction") preventing the consummation of this Agreement
or the transactions contemplated hereunder shall be in effect nor shall any
proceeding by any regulatory authority or other person or entity seeking an
Injunction be pending. There shall not be any action taken, or any statute,
rule, regulation or order enacted, enforced or deemed applicable to this
Agreement or the transactions contemplated hereunder which makes this
Agreement or the transactions contemplated hereunder illegal.
13.08 FCC Approval. Prior to the Final Closing Date, the FCC shall have
approved the assignment and transfer of the Stations from Sellers to Buyer.
ARTICLE XIV
CONDITIONS TO SELLERS' OBLIGATIONS
----------------------------------
All obligations of Sellers under this Agreement (including the obligation
to consummate this Agreement) will be subject to the following express
conditions precedent (any of which may be waived, in whole or in part, by
Sellers):
14.01 Representations and Warranties True at the Final Closing Date.
The representations, warranties and covenants made by Buyer in this Agreement
will be true, complete and accurate in all respects on and as of the Final
Closing Date, with the same effect as though such representations, warranties
and covenants had been made or given on the Final Closing Date.
14.02 Certificate of Fulfillment of Conditions. Buyer will have
delivered to Sellers the certificates of the member or members of Buyer to
the effect that the conditions set forth in Section 14.01 have been satisfied.
14.03 Compliance with Agreement. Buyer will have performed and complied
with all agreements and obligations required by this Agreement to be performed
and complied with by it prior to or on the Initial Closing Date and the Final
Closing Date.
14.04 Injunction. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of this Agreement or the transactions
contemplated hereunder shall be in effect nor shall any proceeding by any
regulatory authority or other person or entity seeking an Injunction be
pending. There shall not be any action taken, or any statute, rule,
regulation or order enacted, enforced or deemed applicable to this Agreement
or the transactions contemplated hereunder which makes this Agreement or the
transactions contemplated hereunder illegal.
14.05 FCC Approval. Prior to the Final Closing Date, the FCC shall have
approved the assignment and transfer of the Stations from Sellers to Buyer.
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ARTICLE XV
INDEMNIFICATION
---------------
15.01 Indemnification by Sellers. Sellers shall unconditionally,
irrevocably and absolutely indemnify and hold Buyer and their affiliates and
each of their respective past, present and future managers, directors,
officers, members, employees and agents, and their heirs, personal
representatives, successors and assigns (collectively, the "Buyer
Indemnitees") harmless from and against any and all losses, claims,
liabilities, damages, and expenses of any kind (including, without
limitation, reasonable attorney's fees and accounting fees resulting from (a)
any material misrepresentation, inaccuracy or breach of any representation,
warranty or covenant herein contained or contained in any certificate,
document, list, schedule, or instrument delivered to Buyer by or on behalf of
Sellers in connection with this Agreement; (b) any claim or obligation of
Sellers to any party not being assumed by Buyer which is asserted against
Buyer; (c) any material error or omission in any statement, report, exhibit
or schedule delivered to Buyer by or on behalf of Sellers; (d) any material
act of omission of Sellers, their respective agents, servants or employees
occurring through the close of business on the Final Closing Date in
connection with the Stations or Equipment; (e) any liens for taxes,
assessments, charges and other similar claims affecting the Stations or
Equipment.
15.02 Indemnification of Buyer. Buyer shall unconditionally,
irrevocably and absolutely indemnify and hold Sellers and their affiliates
and each of their respective past, present and future managers, directors,
officers, members, employees and agents, and their heirs, personal
representatives, successors and assigns (collectively, the "Seller
Indemnitees") harmless from and against any and all losses, claims,
liabilities, damages, and expenses of any kind (including, without
limitation, reasonable attorney's fees resulting from (a) any material
misrepresentation, inaccuracy or breach of any representation, warranty
or covenant herein contained; (b) Buyer's operation of the Stations or
Equipment from and after the close of business on the Final Closing Date; (c)
any claim or obligation of Buyer to any party arising prior to the Final
Closing Date; (c) any material error or omission in any statement, report,
exhibit or schedule delivered to Seller by or on behalf of Buyer; (d) any
material act or omission of Buyer, its respective agents, servants or
employees occurring after the close of business on the Final Closing Date
in connection with the Stations or Equipment; (e) any liens for taxes,
assessments, charges and other similar claims affecting the Stations or
Equipment arising after the close of business on the Final Closing Date.
15.3 Claims. In no event shall the Buyer or the Sellers be liable for
any damages under this Agreement in an aggregate amount that exceeds the
Purchase Price. Notwithstanding anything to the contrary herein, the
provisions for indemnity shall be effective only when the aggregate amount of
all claims for which the Buyer or the Sellers are liable hereunder exceeds
Five Thousand Dollars ($5,000).
15.04 Notice and Cure. In the event either the Buyer, the Buyer
Indemnitees or the Sellers of the Seller Indemnitees (the "Indemnitee") shall
seek indemnification pursuant to this Article XV, the Indemnitee shall give
not less than ten (10) days' prior written notice of such fact to the other
party (the "Indemnitor") before exercising any right of offset or other right
which the Indemnitee may have. The Indemnitor shall have ten (10) days after
receipt of such notice within which to cure the breach or violation giving
rise to the right of indemnification (to the extent such breach or violation
can be cured). If the Indemnitor does not cure such breach or
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violation within such time period (or such breach or violation is incapable
of being cured), the Indemnitee may exercise any right or remedy it may
possess, provided, however, that in the event that the Indemnitor disputes
such claim for indemnity, the parties agree that such issue shall be submitted
to arbitration before a qualified arbitrator in accordance with the rules of
the American Arbitration Association.
ARTICLE XVI
TERMINATION
-----------
16.01 Mutual Agreement. This Agreement may be terminated by the mutual
agreement of the Buyer and the Sellers at any time prior to the Final Closing
Date.
16.02 Breach of Agreements. In the event that there is a material
breach in any of the representations and warranties or agreements of the
Buyer or the Sellers, which breach is not cured within thirty (30) days after
notice to cure such breach is given by the non-breaching party, then the
non-breaching party may terminate and cancel this Agreement by providing
written notice of such action to the other party hereto. The unilateral
request to the FCC by a party to this Agreement that the pending application
for assignment of licenses from Sellers to Buyer be dismissed shall constitute
a breach unless done in response to the other party's breach. In the event
Buyer breaches this Agreement and fails to meet its obligations at Final
Closing, Sellers shall be entitled to compensatory damages including, but not
limited to, Seller's operations expenses from October 8, 1997 until FCC
approval of the transfer of the Stations to another Buyer and the difference
between the total purchase price received by another buyer of the Stations
and the amounts due hereunder.
16.03 Failure of Conditions. In the event any of the conditions to the
obligations of either party are not satisfied or waived on or prior to the
Final Closing Date, and if any applicable cure period provided in Section
16.02 hereof has elapsed, then such party may terminate and cancel this
Agreement by delivery of written notice of such action to the other party on
such date.
16.04 Delay in FCC Approval. In the event the FCC has not approved the
assignment and transfer of the Stations from Sellers to Buyer within
twenty-four (24) months after the submission of the FCC application
referenced in Section 11.20 herein, then either party may terminate and
cancel this Agreement in accordance with Section 16.03 above as long as the
terminating party is not in breach of this Agreement.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
------------------------
17.01 Cooperation. Sellers and Buyer shall cooperate in any reasonable
manner requested by the other party in order to assist Buyer in taking
ownership and assignment of the Site Licenses, the Equipment, the Stations,
the Subscription Agreements and all other transactions contemplated under
this Agreement.
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17.02 FCC Application. Within five (5) business days from the date
hereof, the parties will have filed an application with the FCC requesting
its written consent to the formal assignment of the Stations from Sellers to
Buyer.
17.03 Expenses; Finder's Fees. Buyer and Sellers will each be
responsible for all of its own costs and expenses (including attorney's and
accounting fees) incident to the negotiation, preparation and execution of
this Agreement. Each party represents that no broker is involved and agrees
to indemnify and hold the other party harmless from and against all claims
for finder's fees and commissions made by any person allegedly arising from
acts of such indemnifying party.
17.04 Entire Agreement. It is expressly agreed by and between the
parties hereto that there are and were no verbal or written representations,
understandings, stipulations, agreements or promises pertaining to the subject
matter of this Agreement not incorporated in writing herein; and it is
likewise agreed that neither this Agreement not any of the terms, provisions,
conditions, representations or covenants herein contained can be modified,
changed, terminated, amended, superseded, waived or extended except by an
appropriate written instrument duly executed by the parties hereto.
17.05 Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by each party and its successors and assigns.
17.06 Law to Govern; Venue. This Agreement is being made and shall be
construed and enforced in accordance with the laws of the State of Colorado,
without regard to conflicts of laws principles. In the event that any
provision herein is held to be invalid, void, or illegal by any court of
competent jurisdiction, the remaining provision of this Agreement shall remain
in full force and effect and this Agreement shall be construed reasonably to
preserve the original intent of the parties hereto insofar as practical.
17.07 Notices. All communications and notices shall be in writing,
shall be mailed by certified mail return receipt requested, or by reputable
overnight courier, at the following addresses:
if to Sellers:
Centennial Communications Corp. and
SMR Direct USA, Inc.
1610 Wynkoop, Suite 300
Denver, CO 80202
Attn: Chief Executive Officer
with a copy to:
Elizabeth Sachs, Esq.
Lukas, McGowen, Nace & Guitierrez, Chartered
1111 19th Street, NW, 12th Floor
Washington, D.C. 20036
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and if to Buyer:
Gordon Dihle
American Wireless Network, Inc.
9350 E. Arapahoe Road, Suite 340
Englewood, CO 80122
or such other address as either party may designate in writing.
17.08 Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and will not
control or affect the meaning or construction or any of the provisions hereof.
17.09 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which will be deemed an original, but all
of which taken together will constitute one and the same instrument.
17.10 List of Exhibits and Schedules. As mentioned in this Agreement,
there are attached hereto or delivered pursuant hereto, the following Exhibits
and Schedules:
EXHIBITS
--------
A. Promissory Note
B. Management Agreement
C. Notification to Subscribers
SCHEDULES
---------
1.01 Stations
1.02 Equipment
3.01 Site Licenses
4.01 Subscriber Agreements
7.01 Warranties
11.12 Sellers' Insurance
12.08 Buyer's Insurance
17.12 Amendment and Modification. No amendment, modification,
supplement, termination, consent or waiver of any provision of this Agreement,
nor consent to any departure therefrom, will in any event be effective unless
the same is in writing and is signed by the party against whom enforcement of
the same is sought. Any waiver of any provision of this Agreement is to be
effective only in the specific instance and for the specific purpose for which
given.
17.13 Further Assurances. The parties will execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purpose of this Agreement.
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17.14 Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction is, as to
such jurisdiction, ineffective to the extent of any such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof, or affecting the validity, enforceability or legality of
such provision in any other jurisdiction, unless the ineffectiveness of such
provision would result in such a material change as to cause completion of
the transaction contemplated hereby to be unreasonable.
17.15 Assignments. No party may assign or transfer any of its rights
or obligations under this Agreement to any other person or entity without the
prior written consent of the other party.
17.16 Compliance with Laws. None of the terms or provisions of this
Agreement require any of the parties to take any action prohibited by, or
contrary to, applicable law.
17.17 Guaranteed Obligations. ComTec International, Inc. ("Guarantor")
hereby irrevocably and unconditionally guarantees, as primary obligor and not
merely as surety, to and for the benefit of each of the Sellers, the timely
payment in full when due and performance of the Guaranteed Obligations in each
case strictly in accordance with their terms. The Guarantor hereby further
agrees that if Buyer shall fail to pay in full when due all or any part of the
Guaranteed Obligations, the Guarantor will immediately pay the same, without
any demand or notice whatsoever, and that in the case of any extension of time
of payment or renewal of all or any part of the Guaranteed Obligations, the
same will be timely paid in full when due in accordance with the terms of such
extension or renewal. This Guaranty is irrevocable and unconditional in
nature and is made with respect to any Guaranteed Obligations now existing or
in the future arising. The Guarantor's liability under this Guaranty shall
continue until full satisfaction of all Guaranteed Obligations. This
Guaranty is a guarantee of due and punctual payment and performance and is
not merely a guarantee of collection.
As used in the preceding paragraph, the term "Guaranteed
Obligations" shall mean any and all obligations of the Buyer for the payment
of all amounts, liabilities and indebtedness (whether for amounts in respect
of payments due under this Agreement (including, but not limited to, the
Promissory Note and the Management Agreement), interest, fees, charges,
indemnification or otherwise) now or in the future owed by the Buyer to the
Sellers (or either of them), and for the performance by the Buyer of its
agreements, covenants and undertakings, under or in respect of this Agreement
and any renewals, extension or modifications of this Agreement.
17.18 Counterpart Facsimile Execution. For purposes of this Agreement,
a document (or signature page thereto) signed and transmitted by facsimile
machine or telecopier is to be treated as an original document. The
signature of any party thereon, for purposes hereof, is to be considered as
an original signature, and the document transmitted is to be considered to
have the same binding effect as an original signature on an original
document. At the request of any party, and facsimile or telecopy document is
to be re-executed in original form by the
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parties who executed the facsimile or telecopy document. No party may raise
the use of a facsimile machine or telecopier machine as a defense to the
enforcement of the Agreement or any amendment or other document executed in
compliance with this Section.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
SELLERS:
CENTENNIAL COMMUNICATIONS CORP. SMR DIRECT USA, INC.
By: s/ Michael S. Simkin By: s/Michael S. Simkin
------------------------------ ---------------------------------
Name: Michael S. Simkin Name: Michael S. Simkin
Title: CEO Title: CEO
BUYER: GUARANTOR:
AMERICAN WIRELESS NETWORK, INC. COMTEC INTERNATIONAL, INC.
By: s/Gordon Dihle By: s/Gordon Dihle
------------------------------ ----------------------------------
Name: Gordon Dihle Name: Gordon Dihle
Title: CFO Title: CFO
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CLOSING CONDITION CERTIFICATE
This Closing Condition Certificate is given by the undersigned in his
capacity as President of SMR Direct USA, Inc., a Delaware corporation (the
"Company"), and not in his individual capacity, as required by Section
9.07 of that certain Asset Purchase Agreement dated as of even date
herewith, between ComTec International, Inc., Centennial Communications
Corp., and the Company (the "Agreement").
The undersigned hereby certifies that:
(a) the representations and warranties of the Company contained in
Article XI of the Agreement are true and correct in all respects on and as
of the date hereof as though made on and as of the date hereof; and
(b) all of the conditions precedent to the Company's obligations in
Article XIII of the Agreement that have not been waived by the Company
have been satisfied.
Dated: July 6, 1998.
SMR DIRECT USA, INC.
BY: s/Bernard Dvorak
----------------------------
Name: Bernard Dvorak
Title: President
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CLOSING CONDITION CERTIFICATE
This Closing Condition Certificate is given by the undersigned in his
capacity as Pres. of American Wireless Network, Inc., a Colorado
corporation, a subsidiary of ComTec International, Inc., a publicly traded
New Mexico corporation (the "Company"), and not in his individual
capacity, as required by Section 9.02 of that certain Asset Purchase
Agreement dated as of even date herewith, between Centennial
Communications, Inc., SMR Direct USA, Inc., and the Company (the
"Agreement").
The undersigned hereby certifies that:
(a) the representations and warranties of the Company contained in
Article XII of the Agreement are true and correct in all respects on and
as of the date hereof as though made on and as of the date hereof; and
(b) all of the conditions precedent to the Company's obligations in
Article XIV of the Agreement that have not been waived by the Company have
been satisfied.
Dated: July 6 , 1998.
AMERICAN WIRELESS NETWORK, INC.
By: s/James J. Krejca
-----------------------------
Name: James J. Krejca
Title: Pres/CEO
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BILL OF SALE
For and in consideration of the sum of One Dollar ($1.00) and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned ("Seller") hereby sells, assigns,
transfers and conveys to American Wireless Network, Inc., a Colorado
corporation, a subsidiary of ComTec International, Inc., a publicly traded
New Mexico corporation ("Purchaser") all of Seller's right, title and
interest in and to all equipment used in conjunction with the operation of
the Stations, excluding downloading equipment but including, without
limitation, all antennas, transmitters, spare boards and parts located at
the Sites, and the subscriber equipment in possession of customers (the
"Property"). Certain items of the Property are more specifically described
on Exhibit A attached hereto. This Bill of Sale is given pursuant to that
Certain Asset Purchase Agreement among Seller, SMR Direct USA, Inc., and
Purchaser of even date herewith (the "Purchase Agreement"), and all
representations and warranties of Seller in the Purchase Agreement are
incorporated herein by reference. Terms used not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
Seller hereby warrants and represents that it has the right and
authority to sell the Property and that it has good and marketable title
to the same, free and clear of all liens, claims, encumbrances and charges
of every kind and description.
Dated this 6 day of July , 1998.
CENTENNIAL COMMUNICATIONS CORP.
By s/Bernard G. Dvorak
------------------------------
Name: Bernard G. Dvorak
Title: Pres. & CEO
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ASSIGNMENT AND ASSUMPTION OF SUBSCRIBER AGREEMENTS
This Assignment and Assumption Agreement ("Agreement") is made this
6th day of July, 1998 between Centennial Communications Corp., a Delaware
corporation ("Assignor"), and American Wireless Network, Inc., a Colorado
corporation, a subsidiary of ComTec International, Inc., a publicly traded
New Mexico corporation ("Assignee").
RECITALS
A. Assignee and Assignor are parties to that Asset Purchase Agreement
dated as of the 4th day of December 1997 (the "Purchase Agreement";
capitalized terms used but not defined herein have the meanings ascribed
to them in the Purchase Agreement).
B. Assignor is a party to certain subscriber agreements relating to the
Stations (the "Subscriber Agreements").
C. Pursuant to the terms of the Purchase Agreement, Assignor wishes to
assign the Subscriber Agreements to Assignee, and Assignee wishes to
assume certain obligations and liabilities under the Subscriber
Agreements, all on the terms set forth herein.
AGREEMENT
In consideration of the foregoing, the mutual covenants herein
contained and other good and valuable consideration (the receipt, adequacy
and sufficiency of which are hereby acknowledged by the parties by their
execution hereof), the parties agree as follows:
1. Assignment of Subscriber Agreements. Subject to the terms and
conditions hereof, Assignor hereby assigns, transfers, grants, bargains,
delivers and conveys to Assignee all of Assignor's right, title and
interest in and to the Subscriber Agreements described on Exhibit A
attached hereto and incorporated herein by this reference, free from any
encumbrance whatsoever.
2. Assumption of Liability. Assignee hereby accepts the assignment of the
Subscriber Agreements and assumes the liabilities and each and every
obligation of Assignor with respect thereto accruing from and after the
date hereof. Assignor shall remain responsible and liable to perform each
and every obligation and liability under the Subscriber Agreements
accruing prior to the date hereof.
3. Amendment and Modification. No amendment, modification, supplement,
termination, consent or waiver of any provision of this Agreement, nor
consent to any departure herefrom, will in any event be effective unless
the same is in writing and is signed by the party against whom enforcement
of the same is sought. Any waiver of any provision of this Agreement and
any consent to any departure from the terms of any provision of this
Agreement is to be effective only in the specific instance and for the
specific purpose for which given.
57
<PAGE>
4. Captions. Captions contained in this Agreement have been inserted
herein only as a matter of convenience and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision
hereof.
5. Counterparts. This Agreement may be executed by the parties hereto on
any number of separate counterparts, and all such counterparts so executed
constitute one agreement binding on all parties notwithstanding that all
the parties are not signatories to the same counterpart.
6. Governing Law. This Agreement and the rights and obligations of the
parties hereunder are to be governed by and construed and interpreted in
accordance with the laws of the State of Colorado applicable to contracts
made and to be performed wholly within Colorado, without regard to choice
or conflict of laws rules.
7. Successors and Assigns. All provisions of this Agreement are binding
upon, inure to the benefit of, and are enforceable by or against, the
parties and their respective heirs, executors, administrators or other
legal representatives and permitted successors and assigns.
8. Third-Party Beneficiary. This Agreement is solely for the benefit of
the parties and their respective successors and permitted assigns, and no
other person has any right, benefit, priority or interest under, or
because of the existence of, this Agreement.
CENTENNIAL COMMUNICATIONS CORP.
By: s/Bernard G. Dvorak
-----------------------------
Name: Bernard G. Dvorak
Title: Pres. & CEO
AMERICAN WIRELESS NETWORK, INC.
By: s/James J. Krejca
-----------------------------
Name: James J. Krejca
Title: Pres/CEO
58
<PAGE>
ASSIGNMENT AND ASSUMPTION OF STATIONS
This Assignment and Assumption Agreement ("Agreement") is made this
6th day of July, 1998 between SMR Direct USA, Inc., a Delaware corporation
("Assignor"), and American Wireless Network, a Colorado corporation, a
subsidiary of ComTec International, Inc., a publicly traded New Mexico
corporation ("Assignee").
RECITALS
A. Assignee and Assignor are parties to that Asset Purchase Agreement
dated as of the 4th day of December 1997 (the "Purchase Agreement";
capitalized terms used but not defined herein have the meanings ascribed
to them in the Purchase Agreement).
B. Assignor is a party to certain 900 MHz Metropolitan Area ("MTA")
licenses with the FCC (the "Stations").
C. Pursuant to the terms of the Purchase Agreement, Assignor wishes to
assign the Stations to Assignee, and Assignee wishes to assume certain
obligations and liabilities under the Stations, on the terms set forth
under the Station licenses, the Purchase Agreement and herein.
AGREEMENT
In consideration of the foregoing, the mutual covenants herein
contained and other good and valuable consideration (the receipt, adequacy
and sufficiency of which are hereby acknowledged by the parties by their
execution hereof), the parties agree as follows:
1. Assignment of Site Licenses. Subject to the terms and conditions
hereof, Assignor hereby assigns, transfers, grants, bargains, delivers and
conveys to Assignee all of Assignor's right, title and interest in and to
the Stations described on Exhibit A attached hereto and incorporated
herein by this reference, free from any encumbrance whatsoever.
2. Assumption of Liability. Assignee hereby accepts the assignment of
the Stations and assumes the liabilities and each and every obligation of
Assignor with respect thereto accruing from and after the date hereof
3. Amendment and Modification. No amendment, modification, supplement,
termination, consent or waiver of any provision of this Agreement, nor
consent to any departure herefrom, will in any event be effective unless
the same is in writing and is signed by the party against whom enforcement
of the same is sought. Any waiver of any provision of this Agreement and
any consent to any departure from the terms of any provision of this
Agreement is to be effective only in the specific instance and for the
specific purpose for which given.
59
<PAGE>
4. Captions. Captions contained in this Agreement have been inserted
herein only as a matter of convenience and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision
hereof.
5. Counterparts. This Agreement may be executed by the parties hereto on
any number of separate counterparts, and all such counterparts so executed
constitute one agreement binding on all parties notwithstanding that all
the parties are not signatories to the same counterpart.
6. Governing Law. This Agreement and the rights and obligations of the
parties hereunder are to be governed by and construed and interpreted in
accordance with the laws of the State of Colorado applicable to contracts
made and to be performed wholly within Colorado, without regard to choice
or conflict of laws rules.
7. Successors and Assigns. All provisions of this Agreement are binding
upon, inure to the benefit of, and are enforceable by or against, the
parties and their respective heirs, executors, administrators or other
legal representatives and permitted successors and assigns.
8. Third-Party Beneficiary. This Agreement is solely for the benefit of
the parties and their respective successors and permitted assigns, and no
other person has any right, benefit, priority or interest under, or
because of the existence of, this Agreement.
CENTENNIAL COMMUNICATIONS CORP.
By: s/Bernard G. Dvorak
-----------------------------
Name: Bernard G. Dvorak
Title: Pres. & CEO
AMERICAN WIRELESS NETWORK, INC.
By: s/James J. Krejca
-----------------------------
Name: James J. Krejca
Title: Pres/CEO
60
<PAGE>
ASSIGNMENT AND ASSUMPTION OF SITE LICENSES
This Assignment and Assumption Agreement ("Agreement") is made this
4th day of December, 1997 between Centennial Communications Corp., a
Delaware corporation ("Assignor"), and American Wireless Network, Inc., a
Colorado corporation , a subsidiary of ComTec International, Inc., a
publicly traded New Mexico corporation ("Assignee").
RECITALS
A. Assignee and Assignor are parties to that Asset Purchase Agreement
dated as of the 4th day of December 1997 (the "Purchase Agreement";
capitalized terms used but not defined herein have the meanings ascribed
to them in the Purchase Agreement).
B. Assignor is a party to certain leases and/or licenses for antenna
sites used by Assignor in connection with its operation of the Stations
(the "Site Licenses").
C. Pursuant to the terms of the Purchase Agreement, Assignor wishes to
assign the Site Licenses to Assignee, and Assignee wishes to assume
certain obligations and liabilities under the Site Licenses, on the terms
set forth herein.
AGREEMENT
In consideration of the foregoing, the mutual covenants herein
contained and other good and valuable consideration (the receipt, adequacy
and sufficiency of which are hereby acknowledged by the parties by their
execution hereof), the parties agree as follows:
1. Assignment of Site Licenses. Subject to the terms and conditions
hereof, Assignor hereby assigns, transfers, grants, bargains, delivers and
conveys to Assignee all of Assignor's right, title and interest in and to
the Site Licenses described on Exhibit A attached hereto and incorporated
herein by this reference, free from any encumbrance whatsoever.
2. Assumption of Liability. Assignee hereby accepts the assignment of
the Site Licenses and assumes the liabilities and each and every
obligation of Assignor with respect thereto accruing from and after the
date hereof. Assignor shall remain responsible and liable to perform each
and every obligation and liability under the Site Licenses accruing prior
to the date hereof.
3. Amendment and Modification. No amendment, modification, supplement,
termination, consent or waiver of any provision of this Agreement, nor
consent to any departure herefrom, will in any event be effective unless
the same is in writing and is signed by the party against whom enforcement
of the same is sought. Any waiver of any provision of this Agreement and
any consent to any departure from the terms of any provision of this
Agreement is to be effective only in the specific instance and for the
specific purpose for which given.
61
<PAGE>
4. Captions. Captions contained in this Agreement have been inserted
herein only as a matter of convenience and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision
hereof.
5. Counterparts. This Agreement may be executed by the parties hereto on
any number of separate counterparts, and all such counterparts so executed
constitute one agreement binding on all parties notwithstanding that all
the parties are not signatories to the same counterpart.
6. Governing Law. This Agreement and the rights and obligations of the
parties hereunder are to be governed by and construed and interpreted in
accordance with the laws of the State of Colorado applicable to contracts
made and to be performed wholly within Colorado, without regard to choice
or conflict of laws rules.
7. Successors and Assigns. All provisions of this Agreement are binding
upon, inure to the benefit of, and are enforceable by or against, the
parties and their respective heirs, executors, administrators or other
legal representatives and permitted successors and assigns.
8. Third-Party Beneficiary. This Agreement is solely for the benefit of
the parties and their respective successors and permitted assigns, and no
other person has any right, benefit, priority or interest under, or
because of the existence of, this Agreement.
SMR DIRECT USA, INC.
By: s/Bernard G. Dvorak
---------------------------
Name: Bernard G. Dvorak
Title: Pres. & CEO
AMERICAN WIRELESS NETWORK, INC.
By: s/James J. Krejca
---------------------------
Name: James J. Krejca
Title: Pres/CEO
62
<PAGE>
EXHIBIT A
---------
SCHEDULE 3.01
SITE LICENSES
SITE LOCATION MTA LESSOR/LICENSOR
------------- --- ---------------
RUFFNER MOUNTAIN BIRMINGHAM SBA LEASING, INC.
WMJJ RADIO BIRMINGHAM SBA LEASING, INC.
OAK MOUNTAIN BIRMINGHAM SBA LEASING, INC.
WlMZ KNOXVILLE SBA LEASING, INC.
CLARK TOWER MEMPHIS SBA LEASING, INC.
CORDOVATOWER MEMPHIS SBA LEASING, INC.
KNIGHT ROAD NASHVILLE SBA LEASING, INC.
TRINITY NASHVILLE SBA LEASING, INC.
SLIDELL NEW ORLEANS SBA LEASING, INC.
PLAZA TOWER NEW ORLEANS SBA LEASING, INC.
LA PLACE NEW ORLEANS PINNACLE TOWERS, INC.
LIBERTY TOWER OKLAHOMA CITY SBA LEASING, INC.
BANK IV TULSA SBA LEASING, INC.
63
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 AND THE TEN
MONTH PERIOD ENDED OCTOBER 31, 1997, FOR THE DIVISIONAL SEGMENT ACQUIRED, AND IS
QUALFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 10-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 OCT-31-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 1,369,240 2,196,324
<DEPRECIATION> 48,256 251,938
<TOTAL-ASSETS> 2,852,832 3,446,554
<CURRENT-LIABILITIES> 1,502,422 3,509,309
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (513,057) (1,942,740)
<TOTAL-LIABILITY-AND-EQUITY> 2,852,832 3,446,554
<SALES> 9,065 333,144
<TOTAL-REVENUES> 9,065 333,144
<CGS> 91,064 359,760
<TOTAL-COSTS> 91,064 359,760
<OTHER-EXPENSES> 400,250 1,337,338
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30,808 65,729
<INCOME-PRETAX> (513,057) (1,429,683)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (513,057) (1,429,683)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (513,057) (1,429,683)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
