UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File Number 0-22282.
USCI, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3702647
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6115-A Jimmy Carter Blvd., Norcross, Georgia 30071
(Address of principal executive offices) (Zip Code)
(770) 840-8888
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part IV of this Form 10-K or any amendment to this
Form 10-K. [X]
Based on the closing sale price on March 25, 1997, the aggregate
market value of the voting stock held by non-affiliates of the
Registrant was approximately $40,806,238.
At March 25, 1997, 10,225,746 shares of the Registrant's Common
Stock were outstanding.<PAGE>
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PART I
In addition to historical information, this Annual Report
contains forward-looking statements made in good faith by the
Company pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 including, but not
limited to, those statements regarding the anticipated opening of
additional activation centers in 1997, the Company's intention to
continue to seek additional distribution channels, and the
proposed expansion of the Company's reseller operations. The
forward-looking statements contained herein are subject to
certain risks and uncertainties that could cause actual results
to differ materially from those reflected in the forward-looking
statements. Factors that might cause such a difference include,
but are not limited to , those discussed in the section entitled
"Risk Factors that May Affect Future Results" at the end of this
Item 1. and in Management's Discussion and Analysis of Financial
Condition and Results of Operations. Readers are cautioned not
to place undue reliance on these forward-looking statements,
which reflect management's analysis as of the date hereof. The
Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances
that arise after the date hereof.
ITEM 1. BUSINESS
On May 15, 1995 U.S. Communications, Inc., a privately held
Delaware corporation, completed a merger (the "Merger") with
Trinity Six Inc., a publicly owned Delaware corporation
("Trinity"). Prior to the Merger, Trinity had not conducted any
business activities other than seeking to effect a merger,
exchange of capital stock, asset acquisition or other similar
business combination with an operating business. Upon
consummation of the Merger, U.S. Communications, Inc. became a
wholly-owned subsidiary of Trinity, which contemporaneously
changed its name to USCI, Inc. As used herein, all references to
the "Company" shall be deemed to include U.S. Communications,
Inc. prior to the Merger and USCI, Inc. and its subsidiaries
subsequent to the Merger unless the context indicates to the
contrary.
GENERAL
The Company has developed proprietary software applications
to support centralized computer-based information and activation
processing for wireless communication services, including
cellular telephone, paging, and personal communications service
("PCS"), for use by retail mass merchandisers and direct response
marketing companies on a regional and national basis. Activation
is the process by which a wireless communication device, such as
a cellular telephone or pager, is placed on line to the wireless
service carrier. This process encompasses the carrier's
evaluation and approval of the customer's credit status (for
certain types of service), the customer's entry into a service
agreement with the carrier and the carrier's subsequent
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activation of the customer's telephone or pager affording it
access to the carrier's operating network.
The Company's activation and information services, provided
through the Company's Activation Service Network ("ASN"), a
proprietary computer - based automated electronic robot work flow
software platform, give immediate access to a prospective
customer of the cost of a variety of wireless communications
products and service plans available for purchase at a specific
retail location. ASN provides information to the telephone or
paging carrier regarding the customer, including a credit review
for cellular and PCS customers, the customer's completed service
agreement, the mobile or cap code number and the service plan
purchased. The ASN system both expedites and simplifies the
complex administrative functions necessary to initiate, complete
and support activations of wireless telephones and pagers from
multiple locations in the continental U.S., Alaska, Hawaii and
Puerto Rico.
The Company, through its wholly owned subsidiary U.S.
Communications, Inc., presently provides cellular telephone
activation services for customers of Kmart Corporation ("Kmart"),
OfficeMax ("OfficeMax"), Service Merchandise Company, Inc.
("Service Merchandise"), Meijer, Inc. ("Meijer"), Target Stores
("Target Stores"), Metrocall, Inc. ("Metrocall"), Montgomery Ward
& Co. ("Montgomery Ward"), Lechmere, Inc. ("Lechmere") and, on a
pilot basis, Wal-Mart Stores, Inc. ("Wal-Mart"). As of March 24,
1997 these services were offered by the Company at activation
centers located in approximately 3,000 retail stores operated by
these chains utilizing the Company's remote activation process
("RAP") system. U.S. Communications, Inc. has entered into
contractual relationships with approximately 50 cellular carriers
and their affiliates, including Airtouch Cellular (formerly
Pactel), Ameritech Mobile Communications, Inc. ("Ameritech"), LA
Cellular, 360 Communications Company (formerly Sprint),
AT&T Wireless Services, Bell Atlantic NYNEX Mobile
Communications, Alltel, U.S. Cellular, Western Wireless,
Vanguard, Comcast and SouthWest Bell, enabling the Company to
provide cellular telephone activation services in substantially
all of the Metropolitan Statistical Areas ("MSAs") and a majority
of the Rural Statistical Areas ("RSAs") designated by the Federal
Communications Commission, which, collectively, cover an
aggregate population of approximately 200,000,000 persons.
Through its wholly owned subsidiary, U.S. Paging Services,
Inc. ("USPSI"), the Company, as a non-exclusive paging service
agent for the GTE operating telephone companies, provides paging
activation services for Kmart, OfficeMax, Montgomery Ward, Meijer
and the Osco Drug and Sav-On Drug divisions of American Drug
Stores, Inc. ("Osco Drug"). As of March 24, 1997, the Company
offered paging activation services in approximately 3,200 retail
stores operated by these chains. In November 1996, the Company
began operating as a reseller of Metrocall paging services and
products in a pilot program with Staples, Inc. ("Staples").
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During the fourth quarter of 1996, the Company, through its
wholly owned subsidiary, Ameritel Communications, Inc., entered
into agreements with GTE Mobilenet Service Corp. ("GTE") and
Airtouch Cellular pursuant to the terms of which the Company was
authorized to resell cellular telephone service provided by these
carriers. The Company commenced its cellular reseller operations
in Montgomery Ward, Kmart, Service Merchandise, Meijer and
OfficeMax stores in certain markets in Alabama, Tennessee,
Kentucky, Indiana and New Mexico in November 1996 and expanded
coverage to markets in Arizona and Nebraska by year end.
In October 1995, the Company commenced processing the
activation of cellular telephones marketed by QVC, the country's
largest home shopping television network, pursuant to a written
agreement and in the third quarter of 1996 entered into an
agreement with QVC to provide pagers and paging activation
services to QVC customers on a non-exclusive basis. The Company
also markets its paging services through Fingerhut Corporation, a
direct marketing company.
The following table sets forth certain statistical
information regarding the Company's business.
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Cellular & Paging Activations 50,266 14,200 5,000
Revenue from Activations $4,991,461 $4,305,217 $1,496,274
Reseller Subscribers 600 - -
Revenue from Subscribers $29,656 - -
</TABLE>
The total number of activations increased significantly in 1996,
due primarily to an increase in paging activations which result
in commissions lower than those earned for cellular activations.
U.S. COMMUNICATIONS, INC.
The Company, through U.S. Communications, Inc. ("USCI"), has
entered into agreements with Kmart, OfficeMax, Service
Merchandise, Meijer, Target Stores, Montgomery Ward and Lechmere
and, on a pilot basis, Wal-Mart, pursuant to which USCI furnishes
such companies with cellular information services and telephone
activation processing at specified locations. For the year ended
December 31, 1996, activations of cellular telephones purchased
at OfficeMax, Service Merchandise and Kmart stores accounted for
approximately 38%, 31% and 15%, respectively, of all cellular
activations processed by USCI.
USCI's agreements with retail mass merchandisers and direct
response channels, which in the aggregate are material to the
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continued production of revenue for the Company, require USCI to
provide the following services, generally, to each retail
location at which the Company processes activation of cellular
telephones:
* Interactive displays, supported by collateral material
and a dedicated toll-free telephone access to the
Company's 24-hour automated information system, which
describe cellular telephones available for purchase,
carrier activation service requirements, coverage and
rate plan information, and provide access to the
Company customer service representatives during center
hours.
* Off-site activation for customers.
* Cellular carrier credit review for prospective
customers of cellular telephone service.
* Electronic robot work flow to support the completion of
all cellular carrier service agreements.
* Assignment of mobile telephone numbers to credit
approved customers who purchase cellular telephones and
transfer of information for the activation of the
cellular service through the Company's automated
activation system to the appropriate cellular carrier.
* Support for the retail location to participate in
cooperative-advertising and market development funds
provided by USCI's cellular carrier, the manufacturer
and USCI.
* Merchandising and field support to assist in the
training of client sales personnel.
Cellular telephones are frequently sold to customers at
prices below their direct cost to a retail mass merchandiser. The
difference between the direct cost of the cellular telephone to
the retail mass merchandiser (plus a profit margin to the
retailer) and the price to the retail customer is customarily
offset by a part of the activation commission payments received
by USCI from the cellular service carrier providing the cellular
service to the retail customer.
Generally in the month following the month in which USCI
receives a service activation payment or commission from a
carrier USCI is obligated under its written agreements with the
retail mass merchants to remit the merchant's share of the
cellular commission payment (generally 70% to 75% of the payment)
either directly to the merchant or to a product supplier
designated by the merchant. This obligation is recorded by USCI
at the time of activation. USCI also provides the retail mass
merchandiser with monthly computer generated reports (by retail
location, customer name, cellular telephone number, and
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electronic serial number) in hard copy or electronic format. In
addition, a detailed report which includes information with
respect to activations at each retail location less applicable
carrier chargebacks, is provided to the retail clients when the
monthly commission payment is made. Carrier chargebacks may be
taken against USCI for customers who have failed to maintain or
pay for cellular service on the telephone purchased for the
minimum vesting period required under USCI's contract with the
carrier (normally three to six months). In an effort to offset
the effect of any such chargebacks upon USCI, each customer must
enter into a USCI minimum service agreement which provides for a
$250 penalty for premature service deactivation, implemented
through the customer's authorization of a credit card debit in
such amount.
In general, USCI has contracted to provide exclusive
cellular telephone activation services at such locations as
designated by the mass merchandiser. The retail mass
merchandiser may designate the number of such locations except in
certain agreements where it has committed to use USCI's services
at all locations. The following table sets forth the majority of
USCI cellular activation centers in operation at its customers'
store locations as of December 31, 1996.
No. of Stores
with Operating
Customer Activation Centers
Kmart 1,824
OfficeMax 520
Montgomery Ward 265
Service Merchandise 174
Target 139
Meijer 103
In June 1995, USCI entered into an agreement with QVC, Inc.,
the largest direct response television network in the United
States, pursuant to which USCI provides telephone activation
processing for all cellular telephones sold on the QVC cable TV
retail network. QVC has conducted promotions marketing
cellular telephones in October 1995 and February 1996.
The Company intends to continue to seek additional retail
mass merchandiser and direct marketing distribution channels in
1997.
Cellular Carriers
USCI has entered into written agreements with approximately
50 cellular carriers and their affiliates, including Airtouch
Cellular, Ameritech, LA Cellular, 360 Communications Company
(formerly Sprint), AT&T Wireless Services, Bell Atlantic NYNEX
Mobile Communications, Alltel, U.S. Cellular, Western Wireless,
Vanguard, Comcast and SouthWest Bell. These agreements enable
USCI to provide processing of cellular telephone activations on
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a national basis in substantially all of the MSAs and a majority
of the RSAs designated by the FCC, encompassing an aggregate
population of approximately 200,000,000 persons.
USCI's agreements with cellular carriers, in the aggregate,
are material to USCI's continued ability to provide national
activation services on an agency basis. USCI functions as a non-
exclusive agent of the carrier at each retail location where it
provides activation services to solicit and sell cellular
telephone service. During the contract term, the Company may not
solicit existing customers of the cellular carrier and may not
act as a representative or agent for any other carrier or
reseller or otherwise offer competing cellular, and in some
instances other wireless services, in those areas where USCI acts
as the Carrier's agent. Upon expiration or termination of an
agreement, USCI may pursue an agency agreement with another
carrier or reseller or seek to resell wireless services in
competition with its former carrier. At present, each geographic
area is serviced by two facilities based cellular carriers.
Under the terms of the cellular services agency contracts
with the carriers, USCI receives a one-time commission for each
activation it processes from the cellular carrier. These
contracts, which typically range in duration from one to five
years, generally afford the carrier with the right to
unilaterally restructure or revise activation commissions and any
other amounts payable to USCI and certain carriers have exercised
such right from time-to-time. USCI generally has the right to
receive notice of any change in compensation and, in some
instances, to terminate the agreement if the change is not
acceptable or exceeds certain maximum reductions. The carrier
contracts typically contain automatic renewal provisions, which
extend their duration for additional one-year periods in the
absence of notice to the contrary given prior to contract
expiration. Both the carrier and USCI may terminate the
agreement, with cause, upon prior notice to the other. Typically,
USCI's right to be paid commissions and other amounts ceases upon
termination of an agency contract, other than to the extent owed
but unpaid on the termination date.
For the year ended December 31, 1996, three carriers,
Airtouch of Ohio/Michigan ("Airtouch"), Bell Atlantic NYNEX and
Ameritech, accounted for approximately 12%, 9% and 7%,
respectively, of the Company's operating revenues. For the year
ended December 31, 1995, three carriers - Airtouch, Celulares
Telefonica, and Ameritech - accounted for approximately 24%, 22%
and 12%, respectively, of the Company's operating revenues. Two
carriers, Airtouch and Contel Cellular, accounted for 36% and
21%, respectively, of the Company's revenues for the year ended
December 31, 1994.
U.S. PAGING SERVICES, INC.
In June 1995, the Company, through its wholly owned
subsidiary, U.S. Paging Services, Inc. ("USPSI"), entered into
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an agency agreement with the GTE operating telephone companies for
the national marketing of pagers and GTE paging services. The
agreement extends through December 1998 and is automatically
renewable for successive one-year terms unless notice of election
not to renew is given prior to the expiration of the then current
term. The Company has been designated as a non-exclusive paging
activation service agent for GTE. It receives a one-time
activation fee (of which approximately 10% is passed through to
the mass merchant), co-op advertising funds for each pager
activated, a bonus for customers who prepay for annual service,
and a monthly residual fee for as long as the customer remains a
paging subscriber and the agreement is in effect. In September
1995, the Company commenced offering pagers and GTE services
through a pilot program at the Meijer retail chain and in 1996
expanded its GTE paging activation processing services to Kmart,
OfficeMax, Osco Drug and Montgomery Ward. For the year ended
December 31, 1996, GTE accounted for approximately 10% of the
Company's operating revenues. The following table sets forth the
number of store locations at which USPSI's paging activation
services were available under the GTE agreement as of
December 31, 1996.
No. of Stores
Customer Offering Services
Kmart 1,824
Osco Drug 780
Montgomery Ward 265
Meijer 103
OfficeMax 55
In June 1996, USPSI entered an agreement with QVC, Inc. to
provide paging activation services, on a non-exclusive basis, to
customers purchasing pagers on the QVC Network. USPSI
participated in its initial QVC paging products services
promotion in October 1996. USPSI also has an agreement with
Fingerhut Corporation for the exclusive use of the Company's
services for the activation of pagers sold in individual direct
response sales programs.
In November 1996 the Company began operating, under a letter
of intent with Metrocall, as a reseller of paging services in a
pilot program with Staples and, as of March 1997, was offering
paging products and services in 42 Staples store locations.
Metrocall also provides reseller paging support services,
including billing and customer service, to the Company.
AMERITEL COMMUNICATIONS, INC.
The Company has organized a wholly owned subsidiary,
Ameritel Communications, Inc. ("Ameritel") , to act as a non-
facilities based service provider, or reseller, of cellular and
PCS telephone service initially in areas in which it does not
have agency agreements with wireless carriers.
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In the fourth quarter of 1996, Ameritel entered into
agreements with GTE Mobilnet and Airtouch authorizing Ameritel to
resell cellular telephone service provided by these carriers.
Ameritel commenced cellular reseller operations through certain
Service Merchandise, Kmart, Montgomery Ward, Meijer and OfficeMax
stores and as of December 31, 1996 had established coverage in a
total of 46 metropolitan markets in Alabama, Arizona, Indiana,
Kentucky, Nebraska, New Mexico and Tennessee. As of March 23,
1997, Ameritel had 864 subscribers to its cellular service.
The Company intends to expand the scope and coverage of its
reseller operations in 1997 and is negotiating reseller
agreements with several cellular and PCS carriers. The Company
is also investigating potential acquisitions of cellular
resellers. The Company's ability to expand its reseller
operations as planned is not assured and is subject to certain
risks and uncertainties as described in the subsection entitled
"Risk Factors That May Affect Future Results" appearing in
pages 14 through 18 of this Annual Report.
WIRELESS COMMUNICATION CENTERS, INC.
In the fourth quarter of 1996 the Company, through its
wholly owned subsidiary Wireless Communication Centers Inc.
("WCCI"), introduced its "store within a store" concept for the
marketing of wireless communications products. Under an
agreement with Service Merchandise, WCCI has installed and is
operating self-contained kiosks within selected Service
Merchandise stores as a pilot program for this concept. The
kiosks, which are staffed by WCCI employees, offer cellular, and
in some instances may offer PCS, telephone, and voice and data,
products and services. In the "store within a store" program
WCCI, rather than the mass merchant, is responsible for
purchasing the wireless equipment and reselling it to
subscribers, and the commission pass through to the merchant is
substantially lower. The agreement with Service Merchandise
provides for installation of kiosks in 120 stores, subject to the
termination of any existing third party wireless service
agreements, and for the opening of kiosks in such additional
store locations as Service Merchandise may direct. As of
December 31, 1996, kiosks were operational in 21 Service
Merchandise stores.
ACTIVATION SERVICES NETWORK ("ASN") SYSTEM: DEVELOPMENT AND
OPERATION
The Company's off-site remote activation process (RAP)
permits the customer to call a toll-free 800 number to select a
rate plan, obtain credit approval and complete the cellular
service agreement so that the telephone may be activated from a
customer's home or office. Use of the ASN System allows retailers
to activate cellular telephones purchased within the Company's
retail store coverage area in the United States, Puerto Rico and
Guam under a single contract with the Company.
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The ASN system consists of a series of proprietary and
integrated off-the-shelf software developed by the Company,
supported by a recognized data base specific to the cellular
carrier and the retail client. These software programs are
utilized in conjunction with computer hardware built to the
Company's specifications to run the ASN System. The equipment,
located at the Company's office in Norcross, Georgia, currently
includes a complex Local Area Network (LAN), using client-server
technology, supported by multiple hybrid personal computer
systems (robots) and complex telephone switching equipment
integrated with the network.
Phase one of the ASN System, designed with the retail
customer in mind, was initially tested in OfficeMax locations
beginning in mid-1993. The initial processing method by which the
customer interacted with the Company and initiated the activation
of a cellular telephone, the OnLine Application ("OLA"), requires
the customer to provide certain information to a Company customer
care representative over the Company's Auto Dial system "800"
telephone line and processes the customer's credit application
while the customer is still in the store. The OLA system is
utilized only by business customers, or those customers not
possessing a credit card or activating multiple telephone numbers
and thus not eligible to use the Company's RAP system, which is
now available in substantially all of the Company's retail
locations.
The RAP process enables customers to activate a cellular
telephone from the convenience of home or office and, if so
desired by the customer, reduces the need to interact with store
personnel. At a kiosk or processing center located in a retail
store, the customer examines the cellular products and interacts
with the Company's Auto Dial to review coverage, rates and
product information.
The customer completes a RAP agreement which is furnished to
store personnel. The sales associate verifies the customer's
identification, retrieves the desired telephone from stock,
records the mobile telephone number and electronic serial number
("ESN") onto the RAP agreement and gives a copy of the agreement
to the customer. The customer pays for the telephone and leaves
with a preprogrammed phone.
Immediately after the customer leaves, the sales associate
dials into the RAP Processing Service, enters the required
information via the telephone dial pad and faxes certain
documents to initiate the activation process. In a process that
generally takes 10 to 20 minutes to complete, the customer then
telephones the Company from an outside location for automated
validation and to obtain credit approval and complete the
cellular subscriber agreement, at which time the carrier is
electronically notified to activate the phone. Activation of the
telephone by the carrier generally occurs within two hours
thereafter. The customer is charged a $250 fee unless the entire
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RAP process is completed, or the telephone returned by the
customer, within seven days from the date of purchase.
The activation process for pagers is available on an
automated or operator-assisted basis. The customer purchases a
pager and then, utilizing a toll-free 800 number, calls the
Company from an outside location to access the Company's Remote
Paging Process (RPP) system. The customer is prompted to enter
the required information (name, social security number, etc.) via
the telephone dial pad, and the RPP system collects and transmits
the information to the paging carrier. Activation of the pager
generally occurs within two hours thereafter.
The Company introduced on a pilot basis, in the fourth
quarter of 1996, enhancements to its RAP system, which will
further reduce the interaction required by a customer with store
personnel prior to purchasing a cellular telephone, and will also
reduce the information and documents required to be processed at
a retail location prior to cellular activation. These
enhancements, when fully operational, will provide a means of
electronic communication between the customer and the Company's
centralized computer facility, affording the customer access to
continuously updated marketing information and permitting such
customer to process and activate a cellular telephone in a
completely automated manner similar to an automated inquiry for
credit card information, 24 hours a day, seven days a week. The
enhancement, known as the Voice Activation Response System
(VARS), will allow the customer to interact with the RAP system
through voice prompts using an interactive voice response
program. These enhancements transmit activation information
through the ASN system directly to the cellular carrier, without
participation of a Company employee.
The Company believes that its ASN system will facilitate
development of the larger and more efficient distribution and
service channels necessary to accommodate the projected growth in
both cellular and paging communications. The Company also
believes that the ASN platform can be used to process the
activation of other wireless forms of communications, including
personal communications systems (PCS) and specialized mobile
radio (SMR) networks.
MARKETING
The Company markets its wireless communications activation
processing services to national and regional based retail mass
merchandisers. The Company's sales efforts are directed to both
existing customers to increase the number of locations at which
the Company provides services, as well as to potential customers.
Sales efforts are primarily performed by the Company's chief
executive officer, an in-house account management group and
marketing and field personnel supported by three independent
sales representative organizations. The sales organizations are
paid commissions based upon the number of telephone or paging
activations processed by the retail clients which they introduce
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to the Company. An important element of the Company's marketing
strategy is to provide comprehensive service and support for its
services. The Company currently provides a 24-hour automated
inbound information system of all of its services via telephone
consulting with potential customers and store personnel through
its customer service support staff which, as of March 7, 1997,
consisted of approximately 80 employees located at the Company's
headquarters. The Company's customer service personnel provide
information regarding cellular, PCS and paging products, coverage
information, carrier rate plans and general cellular, PCS and
paging operations. They process credit approvals and cellular and
paging service agreement activations, assign mobile numbers and
provide post-activation customer service. During 1996, the
Company increased the size of its facility to accommodate
substantial increases in its Voice Center and computer
capabilities. The Company also interacts with the carriers'
support personnel.
The Company has developed an off-the-shelf cellular
telephone package bundled with an entry level rate plan, called
"Cellular on the Go," for certain coverage areas. The product has
been developed to further simplify the sale of cellular
telephones for retail mass merchandisers. The customer simply
purchases the product, completes and submits the attached RAP
form at the store and then activates the telephone from home or
office utilizing the Company's RAP system.
The Company has also developed the "Family Link" paging
concept, which targets family communications and consists of an
off-the-shelf pager bundled with a low flat fee month-to-month
service contract. The customer purchases the pager, has no forms
to complete at the store, and completes the activation process
from home or office through the Company's RPP system.
RESEARCH AND SOFTWARE DEVELOPMENT
The Company's research and software development efforts
emphasize both the continuous enhancement of its present systems
and the development of additional related systems. Research and
development efforts are designed to support retailer and carrier
needs and maintain the efficiency of the Company's ASN system. In
addition to its in-house staff, the Company utilizes outside
contractors on a project-by-project basis.
Research and development expenses for the years ended
December 31, 1996, 1995 and 1994 aggregated $110,222, $87,062 and
$39,761, respectively. In addition, the Company incurred capital
costs of $752,506, $472,693 and $192,202 in the years ended
December 31, 1996, 1995 and 1994, respectively, for purchased and
developed software. Management anticipates the need for
substantial on-going research and development expenditures by the
Company with an emphasis on the internal growth of its Management
Information System ("MIS") department.
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INTELLECTUAL PROPERTY
The Company does not own any patents and has not filed any
patent applications covering its software. The Company currently
relies on unpatented proprietary technology, which may be
duplicated. The Company employs various methods, including
confidentiality agreements with employees and consultants, to
protect its proprietary technology. Such methods, however, may
not afford complete protection and there can be no assurance that
others will not independently develop such technology or
otherwise obtain access to it, which could have a material
adverse effect on the Company's competitive business position.
The Company has filed trademark applications for "RAP,"
"Cellular on the Go" and "Family Link."
COMPETITION
The wireless communications industry is highly competitive
and is characterized by rapidly changing technologies. In the
cellular industry, the Company's principal competitors are
cellular and PCS carriers and resellers who market their services
directly to the public and on a local and regional basis through
non-exclusive agents such as the Company. Most of the carriers
and some of the resellers have substantially greater financial,
marketing and technological resources than the Company and, with
respect to cellular services, have been marketing their services
for a substantially longer period of time than the Company in
those geographic locations in which the Company offers its
activation services. The Company believes, however, that it can
effectively compete with these companies based upon the strength
of its national distribution network comprised of the retail mass
merchandisers under contract with the Company. The establishment
of these channels of national distribution has made possible
nationwide advertising of wireless products and services, which,
the Company believes, is a critical factor in the increasingly
competitive marketplace. The Company also believes that the
nationwide scope of its information and activation services, the
uniqueness of its ASN System and the breadth of the informational
services it can offer to prospective retail purchasers of
wireless products, as well as the detailed statistical data which
it can generate in diverse formats as may be requested by retail
mass merchandisers and direct response marketing companies, will
enable it to develop additional regional and national
distribution channels.
The Company competes with a large number of paging carriers
that provide regional and national service and who market their
services primarily through direct sales and reseller
arrangements. Many of these carriers have substantially greater
financial, marketing and technological resources than the Company
and have been marketing their paging services for substantial
periods of time. The Company believes, however, that since most
paging carriers do not have strong brand name recognition and,
for the most part, have utilized a standard marketing approach
13<PAGE>
<PAGE>
and have limited retail marketing experience, the Company's
national distribution network together with its ability to
provide a broad range of services will enable it to effectively
compete in the paging industry.
Continuing technological advances in telecommunications such
as the development of enhanced specialized mobile radio systems
and increasing use of satellite-assisted transmissions make it
impossible to predict the extent of future competition. However,
as each of these and other similar emerging technologies require
activation prior to initial use, the Company's systems have been
developed with a view towards compatibility with all such
technologies. The Company believes that such technologies will
be increasingly offered to end-users through retail mass
merchandisers and direct marketing response companies and,
accordingly, believes that it will be able to effectively compete
in its market niche. There can be no assurance, however, that the
Company will be an effective competitor in the face of these and
other technological advances. In addition, the Company is unable
to predict the effect, if any, on the Company's business of the
recently enacted Federal Telecommunications Act of 1996.
EMPLOYEES
As of March 12, 1997 the Company employed a total of 258
persons, including its three executive officers, a chief
technical officer, manager for paging services, director of
carrier relations, information systems personnel, customer
service and support personnel, clerical and administrative
workers and account representatives. The Company also utilizes
three independent sales representative organizations and, on an
as-needed basis, other independent contractors. The success of
the Company will depend in large part on its continued ability to
attract and retain highly skilled and qualified personnel.
Although competition for qualified employees is intense in the
cellular communications and software industries, the Company has
to date successfully recruited a number of trained computer
programmers (internal staff and outside contractors) and
experienced cellular and paging sales and marketing personnel.
None of the Company's employees is represented by a labor union
or is subject to a collective bargaining agreement. The Company
believes that its relations with its employees are good.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
History of Losses; Uncertain Future Profitability
The Company, which has never operated at a profit, has
experienced increasing losses since its inception in 1991. Such
losses aggregated $1,721,628, $4,120,554 and $7,783,713 for the
years ended December 31, 1994, 1995, and 1996, respectively, and
are continuing. There can be no assurance that the Company will
ever achieve profitability. At December 31, 1996 the Company had
an accumulated deficit of $14,335,976. The Company expects to
continue to incur losses in future periods, principally
14<PAGE>
<PAGE>
attributable to projected start-up expenses associated with the
provision of wireless communication activation services at new or
additional retail locations and the Company's intended expansion
of its wireless communication reseller operations. There can be
no assurance that the Company's existing retail mass merchandiser
customers will expand their use of the Company's services, that
the Company will obtain additional customers, that the Company
will successfully develop as a reseller of wireless
communications services, or that the Company will achieve
profitability in the future.
Uncertain Management of Growth
The Company has only recently made the transition from being
a development stage company, whose services were utilized by a
single customer at approximately 150 retail locations on a trial
basis as of December 31, 1993, to an operating company whose
services at December 31, 1996 were utilized by eight principal
customers at approximately 4,000 retail locations. The Company's
ability to manage this growth, including a projected expansion in
1997 in the number of retail locations at which it provides
wireless activation services and the further development of its
reseller operations, will require it to implement and continually
expand its operational and financial systems, recruit additional
employees and train and manage both current and new employees.
Growth may place a significant strain on the Company's
operational resources and systems and failure to effectively
manage this projected growth would have a material adverse effect
on the Company's business.
Development of Wireless Reseller Operations
A crucial component of the Company's strategy is its
development as a non-facilities based wireless services provider,
or reseller. As of December 1996, the Company was operating as a
reseller of the cellular services of two carriers in certain
markets and is continuing to negotiate agreements with other
carriers. The Company is also actively investigating potential
acquisitions of, or mergers with, other non-facilities based
wireless carriers. The success of the Company's reseller
expansion plan is subject to a number of risks including its
ability to negotiate additional reseller agreements on
commercially reasonable terms, the availability of suitable
merger and/or acquisition candidates and the difficulties
inherent in integrating any acquired operations into the Company,
the increasingly competitive nature of the wireless
telecommunications industry, including the effect of the
development and introduction of new technologies, the ability to
attract additional management personnel and the overall effects
of the trend towards deregulation of the telecommunications
industry, including the possible eventual elimination of the
obligation of wireless carriers to make their services available
for resale. In addition,the Company will require substantial
financing to accomplish any significant acquisition or merger
transaction and for working capital to operate its proposed
15<PAGE>
<PAGE>
expanded reseller operations for a significant period of time
until profitability is achieved, if ever. The Company has no
commitments or arrangements for such financing and, accordingly,
the availability of such financing on terms acceptable to the
Company is not assured. Accordingly, there can be no assurance
that the Company's planned expansion of its reseller operations
will be successful.
Dependence on Wireless Carriers
The Company's current business is dependent upon its
relationships with certain cellular and paging carriers as it
cannot operate at the retail level without agency agreements with
such companies. The Company currently has non-exclusive agency
agreements with approximately 50 cellular carriers and their
affiliates, from which the Company has historically derived
substantially all of its revenues. For the year ended
December 31, 1996, four carriers, Airtouch, GTE (paging), Bell
Atlantic NYNEX, and Ameritech, accounted for approximately 12%,
10%, 9% and 7% of the Company's operating revenues. For the year
ended December 31, 1995, three carriers, Airtouch, Celulares
Telefonica, and Ameritech accounted for approximately 24%, 22% and
12%, respectively, of the Company's operating revenues. Two
carriers, Airtouch and Contel Cellular, accounted for 36% and
21%, respectively, of the Company's revenues for the year ended
December 31, 1994. Pursuant to the Company's cellular carrier
agreements, cellular carriers have the right to unilaterally
restructure or revise the Company's activation commissions
subject, in some instances, to the Company's right to terminate
the agreement if the compensation is decreased by more than a
specified amount. These agreements, which generally have terms
ranging from one to five years with automatic renewal for one or
more additional one-year terms absent 60 days advance notice of
termination, do not preclude the carriers from offering cellular
telephone activation services that are competitive with those
offered by the Company. Many of these carriers presently compete
with the Company in these regards on a local or regional basis.
There can be no assurance that significant numbers of such
agreements will not be terminated by the cellular carriers at
their respective maturity dates. The cancellation or loss of a
significant number of the Company's cellular carrier agreements
could materially adversely affect the Company's business.
Historical Dependence on Principal Customers
Activations of cellular telephones and pagers sold by three
customers, OfficeMax, Service Merchandise and Kmart, accounted
for approximately 22%, 20% and 9%, respectively, of the Company's
operating revenues for the year ended December 31, 1996. Kmart,
OfficeMax and Service Merchandise accounted for approximately
32%, 27% and 15%, respectively, of the Company's operating
revenues for the year ended December 31, 1995. The Company's
contract with OfficeMax expires on December 31, 1997. The
Company's cellular and paging contracts with Kmart are on a
month-to-month basis. The Company's two agreements with Service
16<PAGE>
<PAGE>
Merchandise expire, respectively, in January 1998 (kiosk
agreement), subject to automatic extension for successive one-
year terms absent 60 days advance notice of termination, and
September 30, 1997 (cellular service agreement), and perpetual
thereafter subject to termination on 60 days notice. There can
be no assurance that the Company's customer contracts will remain
in effect or be renewed. The Company's business will be
materially and adversely affected if either OfficeMax, Kmart or
Service Merchandise elects not to continue or renew its contract
in effect or elects to reduce the number of retail locations at
which the Company provides its activation services.
Dependence on National Advertising Programs
The substantial increase in the fourth quarter of 1996 in
the Company's revenues from activation commissions resulted, in
large part, from the initiation of nationwide advertising by the
Company's principal customers, Kmart, OfficeMax and Service
Merchandise. These advertising campaigns were made possible by
the Company's completion, also in the fourth quarter, of the
installation of activation centers or kiosks in substantially all
of the store locations in these retail chains. Future increases
in activation commission revenues will be substantially dependent
upon the willingness of these and other mass merchandisers to
engage in additional advertising for wireless services and
products on a national basis and continued consumer demand for
wireless communication devices at retail stores. Accordingly,
there can be no assurance that the Company's customers will
continue these advertising programs or that any such programs
will be successful.
Dependence on Key Personnel
The Company's future success will depend in significant part
upon the continued service of certain key personnel (principally
Bruce A. Hahn, the Company's Chairman and Chief Executive
Officer), and the Company's ability to attract and retain highly
qualified managerial and sales and marketing personnel in the
field of cellular communications. Competition for such personnel
is intense, and there can be no assurance that the Company can
retain its existing key managerial, technical or other personnel
or that it can attract and retain such employees in the future.
The loss of key personnel or the inability to hire or retain
qualified personnel in the future could have a material adverse
effect upon the Company's results of operations. The Company has
an employment agreement with Mr. Hahn expiring in December 1997
but does not maintain key man life insurance on Mr. Hahn's life.
Potential Adverse Effect of Competition
The wireless communications industry is highly competitive
and rapidly changing. The Company's principal competitors are the
cellular, PCS and paging service providers (both facilities and
non-facilities based) who market their services directly to the
public and on a local and regional basis through non-exclusive
17<PAGE>
<PAGE>
agents such as the Company. Most of the wireless providers,
particularly the facilities based carriers, have substantially
greater financial, marketing and technological resources than the
Company and have been marketing their services for a substantial
period of time in the geographical areas in which the Company
provides its activation services.
Competition in the wireless communications industry is
expected to continue to intensify. Due to the rapid introduction
of PCS and the growth in the number of non-facilities based
carriers, many areas of the country which previously were covered
by two licensed cellular carriers are now, or will be shortly,
served by five or six wireless providers. In addition, the trend
towards consolidation within the telecommunications industry,
accelerated by deregulation at the federal level, can be expected
to exert increased competitive pressures on companies that remain
independent. Further, the continuing downward price trend for
wireless products and services will depress margins further,
requiring industry participants to operate more efficiently or
lose market share. Accordingly, there can be no assurance that
the Company can operate successfully in the increasingly
competitive wireless telecommunications market.
Lack of Proprietary Protection
The Company relies solely on trade secret protection and
non-disclosure agreements to establish and protect its
proprietary rights. The Company does not utilize patents or
copyrights. Despite the Company's efforts to safeguard and
maintain its proprietary rights, there can be no assurance that
it will be successful in doing so, or that its competitors will
not independently develop or patent computer software and
hardware that is substantially equivalent or superior to the
Company's ASN system.
Equipment Failure; Natural Disaster
The Company provides its centralized computer-based cellular
activation services from one site in Norcross, Georgia. Major
equipment or software failure or a natural disaster affecting the
Company's Norcross site could have a significant, adverse effect
on the Company's operations.
Possible Volatility of Stock Price
In recent years, the stock market in general, and the market
for shares of small capitalization companies (such as the
Company) in particular, have experienced extreme price
fluctuations which have been unrelated to changes in the
operating performance of the affected companies. Such
fluctuations could adversely affect the market price of the
Company's Common Stock.
18<PAGE>
<PAGE>
ITEM 2. PROPERTIES
The Company's executive offices and other facilities are
located in Norcross, Georgia, a suburb of Atlanta. The premises,
comprising approximately 22,300 square feet, are occupied
pursuant to a lease that expires on January 31, 1999 and requires
current monthly rent payments of approximately $12,000 increasing
to approximately $12,400 in December 1997 and approximately
$12,770 in December 1998. In addition to its offices, the
facility houses the Company's Voice Center, and software
development and computer facilities. The Company is seeking to
lease additional space in the Atlanta, Georgia area to
accommodate its expanding operations and believes that adequate
facilities are available at commercially reasonable rentals.
ITEM 3. LEGAL PROCEEDINGS
(a) The Company is not a party to any material pending legal
proceedings.
(b) The Company was not a party to any material legal proceeding
that was terminated during the fourth quarter of the fiscal year
ended December 31, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's
security holders during the fourth quarter of the fiscal year
ended December 31, 1996.
19<PAGE>
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is quoted on the Nasdaq National
Market ("NNM") under the symbol "USCM." Prior to January 10,
1996, the Common Stock was quoted on the OTC Bulletin Board. The
following table sets forth the range of high and low bid
quotations on the OTC Bulletin Board for the periods indicated
through January 9, 1996, and the high and low sales prices on the
NNM for the periods indicated during 1996.
<TABLE>
<CAPTION>
BID PRICE SALE PRICE
------------ --------------
HIGH LOW HIGH LOW
------ ----- ------ -----
THREE MONTHS ENDED
- -------------------
<S> <C> <C> <C> <C>
March 31, 1995 5 1/4 4 3/8
June 30, 1995 5 3/4 3 7/16
September 30, 1995 8 1/2 4 7/8
December 31, 1995 12 1/8 6
(through January 9, 1996)
March 31, 1996 (January 10, 1996 10 3/4 6 5/8
through March 31, 1996)
June 30, 1996 9 5/8 6 3/8
September 30, 1996 7 5/8 4 1/2
December 31, 1996 7 3/4 4 1/4
</TABLE>
The above bid price quotations through January 9, 1996
reflect inter-dealer prices, without mark-up, markdown or
commission and may not necessarily represent actual transactions.
As of March 25, 1997, there were 98 holders of record of the
Company's Common Stock. The Company believes there were in
excess of 3,000 beneficial holders of the Common Stock as of such
date.
The Company has not declared any cash dividends on its
Common Stock and does not intend to pay cash dividends on its
Common Stock for the foreseeable future.
20<PAGE>
<PAGE>
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
The following selected financial data have been derived from
the Company's consolidated financial statements which have been
audited by Arthur Andersen LLP, independent public accountants.
The following data should be read in conjunction with the
Company's consolidated financial statements and related notes
appearing elsewhere in this Report on Form 10-K.
<TABLE>
<CAPTION>
Statement of Operations Data:
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total revenues $ 7,073,167 $ 4,757,149 $ 1,606,961 $ 441,341 $ 117,861
Operating Expenses
Commissions pass-through
and other direct costs 3,530,756 3,111,946 1,175,918 281,073 68,622
Selling, general and
administrative 12,311,293 4,947,429 1,981,171 519,547 304,633
Operating loss (8,768,882) (3,302,226) (1,550,128) (359,279) (273,954)
Loss before extraordinary item (7,783,713) (3,441,376) (1,721,628) (360,069) (271,765)
Extraordinary item ( -0- ) (679,178) 0 0 0
Net loss $(7,783,713) $(4,120,554) $(1,721,628) $(360,069) $(271,765)
Net loss per
common share $(0.76) $(0.74) $(0.57) $(0.16) $(0.10)
Weighted average common
shares outstanding 10,187,909 5,557,120 3,004,131 2,184,174 2,056,634
<CAPTION>
Balance Sheet Data
At December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Working capital (deficit) $13,177,931 $24,131,288 $ 1,053,715 $ 150,820 $(106,421)
Total assets 26,394,982 30,083,295 3,990,238 979,773 83,668
Subordinated debentures, net
of original issue discounts - - 2,531,619 - -
Accumulated deficit (14,335,976) (6,552,263) (2,431,709) (710,081) (350,012)
Total stockholders'
equity (deficit) $19,312,420 $18,049,456 $ (299,539) $414,061 $ (76,812)
</TABLE>
21<PAGE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Trinity Six Inc. ("Trinity"), the Company's predecessor, was
organized in September 1992 for the purpose of raising funds to
effect a merger, exchange of capital stock, asset acquisition or
other similar business combination with an operating business.
In September 1993, Trinity completed an initial public offering
of equity securities pursuant to which it received net proceeds
of approximately $9,981,000. On May 15, 1995, Trinity completed
a merger (the "Merger") with U.S. Communications, Inc. pursuant
to which U.S. Communications, Inc. became a wholly owned
subsidiary of Trinity, and Trinity changed its name to USCI, Inc.
(the "Company").
U.S. Communications, Inc. was organized in 1991 and did not
commence operations of its cellular activation and processing
systems with its first retail mass merchandiser, OfficeMax, until
mid-1993. Prior to that time, U.S. Communications was
principally engaged in organizational activities, raising capital
and in the development of its activation and processing systems.
As stated in Item 1 of Part I of this Report, unless the context
indicates otherwise, all references below to the "Company" are
deemed to include U.S. Communications, Inc. prior to completion
of the Merger and USCI, Inc. and its subsidiaries subsequent to
the Merger.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO
YEAR ENDED DECEMBER 31, 1995.
Total revenues for the year ended December 31, 1996
("1996"), consisting primarily of commissions paid to the Company
as a non-exclusive customer service and activation agent for
cellular and paging carriers, were $7,073,167 as compared to
$4,757,149 for the year ended December 31, 1995 ("1995").
The 48.7% increase in revenues between 1995 and 1996 is
attributable to several factors. The Company opened
approximately 3,000 new activation centers at retail mass
merchandiser locations, including OfficeMax, Kmart, Service
Merchandise, Meijer, Target Stores, and Montgomery Ward in 1996.
During the fourth quarter, the Company completed installation of
its activation centers in over 85% of Kmart locations, over 90%
of OfficeMax locations, 70% of Montgomery Ward locations and 100%
of Meijer and Osco Drug locations, which permitted these channels
of distribution, for the first time, to engage in chain-wide
advertising of cellular products and services on a national
basis. In addition, the 1996 holiday retail sales season was
considerably stronger than in 1995. As a result, Company
cellular telephone activations increased to approximately 15,530
in 1996 (of which 45% occurred in the fourth quarter) from
22<PAGE>
<PAGE>
approximately 13,500 in 1995. Paging activations, which were
initiated in a pilot program in the third quarter of 1995,
increased to 34,736 in 1996 (of which 78% occurred in the fourth
quarter) from 700 in 1995. Other operating revenue, consisting
primarily of market development funds, increased to $2,052,050
for 1996 from $451,932 for 1995. Market development funds
consist of payments or obligations from carriers and
manufacturers for promotional expenditures, and increased
primarily due to increased activity at existing activation
centers, the opening of new retail centers and a significant
increase in promotional advertising activity.
Operating expenses, consisting primarily of commission pass-
throughs to retail mass merchandisers, and selling, general and
administrative expenses, increased to $15,842,049 for 1996 from
$8,059,375 for 1995. The increase was directly related to the
expansion of the Company's operations and the opening of
substantial numbers of new cellular and paging centers.
Commission pass-throughs to retail merchandisers, which
average between 70% and 75% of the activation fees paid by
cellular carriers to the Company under agency agreements and
approximately 10% of the activation fees paid by the paging
carrier, aggregated $3,530,756 for 1996 as compared to $3,111,946
for 1995. The 13.5% increase reflects the increase in the number
of cellular telephone and pager activations.
Selling, general and administrative expenses for 1996
aggregated $12,311,293 as compared to $4,947,429 for 1995
reflecting the Company's growth. Salaries and related employee
benefits increased significantly, reflecting the Company's
expanded hiring of executive, managerial, customer service and
information systems personnel to support its growth. Increases
in the scope and volume of operations resulted in substantial
increases in business travel expenses, telephone service costs,
office expenses and advertising related costs. Business
insurance and franchise taxes increased primarily due to the
increase in the scope of the Company's operations and its change
in status to that of a publicly held company. Legal and
accounting fees increased significantly from 1995 to 1996 due
primarily to negotiation of contractual relationships with retail
mass merchandisers, direct marketing response companies and
additional cellular carriers. Fixed assets depreciation and
amortization increased substantially from 1995 to 1996 primarily
due to an increase in capital spending for promotional displays,
communications devices, computers, computer peripherals and
software placed into service during 1996.
Interest income, net of interest expense , aggregated
$983,856 for 1996 compared to interest expense of $139,150 for
1995, due to the substantial increase in the Company's cash
reserves resulting from the exercise of its outstanding warrants
in November 1995, and the repayment in full in May 1995 of
outstanding debentures in the principal amount of $3,450,000. As
23<PAGE>
<PAGE>
a result of the acceleration of the repayment of this debt, the
remaining unamortized discount and other unamortized debenture
related costs of $679,178 were charged against income as an
extraordinary item for 1995.
The Company incurred net losses of $7,783,713 and $4,120,554
for 1996 and 1995, respectively.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO
YEAR ENDED DECEMBER 31, 1994.
Total revenues for the year ended December 31, 1995
("1995"), consisting primarily of commissions paid to the Company
as a non-exclusive customer service and activation agent for
cellular and paging carriers, were $4,757,149 as compared to
$1,606,961 for the year ended December 31, 1994 ("1994").
The 196% increase in revenues between 1994 and 1995 was
primarily attributable to significant increases in activations in
1995 resulting from the opening of substantial numbers of new
activation centers at retail mass merchandiser locations during
the year. These included OfficeMax, Kmart, Service Merchandise,
Lowe's, Meijer, Target Stores, and Montgomery Ward. Cellular
telephone activations approximated 13,500 and 5,000 during 1995
and 1994, respectively. Paging activations, which were initiated
in a pilot program in the third quarter of 1995, constituted
approximately 5% of total activations for 1995. Other operating
revenue, consisting primarily of market development funds,
increased to $451,932 for 1995 from $110,687 for 1994.
Operating expenses, primarily consisting of commission pass-
throughs to retail mass merchandisers, and selling, general and
administrative expenses, increased to $8,059,375 for 1995 from
$3,157,089 for 1994. The increase was directly related to the
expansion of the Company's operations and the opening of
substantial numbers of new cellular centers.
Commission pass-throughs to retail mass merchandisers, which
average between 70% and 75% of the activation fees paid by
cellular carriers to the Company and approximately 10% of the
activation fees paid by the paging carrier, aggregated $3,111,946
for 1995 as compared to $1,175,918 for 1994. The 165% increase
relates to the increase in the number of cellular telephone
activations.
Selling, general and administrative expenses for 1995
aggregated $4,947,429 as compared to $1,981,171 for 1994
reflecting the Company's growth. Salaries and related employee
benefits increased significantly reflecting the Company's
expanded hiring of executive, managerial, customer service and
information systems personnel to support its growth. Increases
in the scope and volume of operations resulted in substantial
increases in business travel expenses, telephone service costs,
office expenses and advertising related costs. Business
insurance and franchise taxes increased primarily due to the
increase in the scope of the Company's operations and its change
24<PAGE>
<PAGE>
in status to that of a publicly-held company. Legal and
accounting fees increased significantly from 1994 to 1995 due
primarily to negotiation of contractual relationships with retail
mass merchandisers, direct marketing response companies and
additional cellular carriers, and costs related to the Merger.
Fixed assets depreciation and amortization increased
substantially from 1994 to 1995 primarily due to an increase in
capital spending for promotional displays, communications
devices, computers, computer peripherals and software placed into
service during 1995.
Interest expense, net of interest income, including
amortization of original issue discounts for 1995, aggregated
$139,150 for 1995 compared to $167,750 for 1994. The reduction
was due to a substantial increase in interest income earned on
the Company's cash reserves.
In 1995, the Company utilized a portion of the proceeds of
the Merger to repay in full outstanding debentures in the
principal amount of $3,450,000. As a result of the acceleration
of the repayment of this debt, the remaining unamortized discount
and other unamortized debenture related costs of $679,178 have
been charged against income as an extraordinary item for 1995.
The Company incurred net losses of $4,120,554 and $1,721,628
for 1995 and 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of
$13,177,931, cash and marketable securities of $15,581,244, and a
total stockholders equity of $19,312,420.
As a consequence of the completion of the Merger with
Trinity in May 1995, the Company received cash and cash
equivalents of approximately $9,750,000, of which $3,450,000 was
used to repay debt. In October 1995, the Company issued a notice
of redemption for all of its outstanding Class A and Class B
Common Stock Purchase Warrants (the "Warrants"). Upon expiration
of the warrant exercise period, the Company had received net
proceeds of approximately $21,850,000 from the exercise of the
Warrants.
The Company believes that its existing capital resources,
together with anticipated revenues from operations, will provide
the Company with sufficient funds to finance its current level of
business operations for at least the next 12 months. However,
the Company plans to significantly expand and further develop its
non-facilities based reselling operations through acquisition of,
or mergers with, other non-facilities based wireless carriers and
the negotiation of additional reseller agreements with wireless
carriers. The Company also anticipates expending approximately
$1,000,000 through the end of 1997 on continued development and
refinement of its software programs and systems in order to
efficiently accommodate increased levels of business and to
25<PAGE>
<PAGE>
maintain the Company's competitive position. This planned
expansion and development will require substantial financing.
The Company currently has no commitments or arrangements for such
financing and there can be no assurance that any such financing
will be available on satisfactory terms, if at all.
Unlike the agency business which generates an immediate
activation commission, the resale of wireless services requires
immediate investment in subscriber acquisition costs as well as
on-going costs generated from the purchase of air time from
carriers and for administrative support. These costs are
recoverable from the long-term revenue stream created by the
continuation of subscribers' services. The Company's ability to
capture such revenue streams may be adversely affected by service
cancellations before subscriber acquisition costs are recovered
and by losses caused by the fraudulent use of service which, by
law, are not recoverable from subscribers.
INFLATION
To date, inflation has not had any significant impact on the
Company's business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to pages F-1 to F-19 comprising a portion
of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
26<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as
follows:
Name Age Position
Bruce A. Hahn 47 Chairman of the Board; President;
Chief Executive Officer
Robert J. Kostrinsky 38 Executive Vice President;
Treasurer; Chief Financial Officer
Basil H. Ford 52 Vice President - Corporate Development
and Investor Relations; Secretary
Edgar Puthuff 61 Director
Jerome S. Baron 70 Director
Lawrence Burstein 54 Director
Salvatore T. DiMascio 56 Director
Bruce A. Hahn has been a director of U.S. Communications,
Inc. since its inception in January 1991, its Chairman since
November 1991 and Chief Executive Officer since December 1992.
He has held the same positions with the Company since the
completion of the Merger with Trinity (the "Effective Time").
From June 1985 to February 1992, Mr. Hahn was the Chief Executive
Officer, Chairman of the Board, and, from June 1985 to October
1989, and July 1990 to February 1992, President of International
Consumer Brands, Inc., a company engaged in the manufacture and
sale of consumer products. International Consumer Brands filed a
petition for reorganization under Chapter 11 of the federal
bankruptcy laws in April 1992, which is still pending. From April
1984 to June 1985, Mr. Hahn was Executive Vice President and
General Manager of Cosmo Communications Corp., a manufacturer of
consumer communications and electronics products. From April 1980
to March 1984, Mr. Hahn was employed by Conair Corporation, a
leading manufacturer of personal care appliances and residential
telephone products, first as new products marketing manager and
subsequently as Vice President and General Manager, Conair
Appliance and Electronics Division.
Robert J. Kostrinsky has been Secretary-Treasurer of U.S.
Communications, Inc. since November 1991 and Executive Vice
President since November 1994. He has been Executive Vice
President and Treasurer of the Company since the Effective Time,
was Secretary of the Company from the Effective Time until July
1996, and became Chief Financial Officer in April 1996. From
April 1987 to July 1992, Mr. Kostrinsky was Secretary-Treasurer
of International Consumer Brands, Inc., which filed a petition
for reorganization under Chapter 11 of the Federal Bankruptcy
Laws in April 1992. Mr. Kostrinsky, a certified public
27<PAGE>
<PAGE>
accountant, was employed from 1981 to April 1987 by the
accounting firm of Grant Thornton. At the time he joined
International Consumer Brands, Inc., he was an audit manager for
Grant Thornton.
Basil H. Ford joined the Company as Vice President -
Corporate Development and Investor Relations in June 1996 and
became Secretary of the Company in July 1996. From 1993 to 1996,
Mr. Ford was employed by Sonoco Products Company, a publicly held
multi-national packaging company, serving from 1994 to 1996 as
Vice President of Investor Relations. From 1982 until its
acquisition by Sonoco Products in 1993, Mr. Ford was employed by
Engraph Inc., a publicly held packaging company, most recently
(1988 to 1993) as Vice President - Investor Relations/Corporate
Development/Strategic Planning.
Edgar Puthuff has been a director of U.S.Communications,
Inc. since June 1992 and a director of the Company since the
Effective Time. Mr. Puthuff has been Chairman of Puthuff
Littleton & Smith, Inc. (formerly Miller Puthuff Associates,
Inc.), a sales/marketing representative for major accounts such
as Kmart Corporation, for more than 20 years. Mr. Puthuff is also
currently a director of General Energy Corp., and served briefly
as director of International Consumer Brands, Inc.
Jerome S. Baron has been a director of U.S. Communications,
Inc. since December 1993 and a director of the Company since the
Effective Time. Mr. Baron is President of Brean Murray, Foster
Securities, Inc., a New York Stock Exchange and American Stock
Exchange member firm. Mr. Baron is also a director of CAS
Medical Systems, Inc., a public company engaged in the
manufacture and marketing of blood pressure monitors and other
medical products principally for the neonatal care market.
Lawrence Burstein has been a director of U.S.
Communications, Inc. since December 1993, President, Treasurer
and a director of Trinity since its inception in September 1992
and a director of the Company since the Effective Time. Since
October 1982, Mr. Burstein has been Chairman of the Board and a
principal shareholder of Trinity Capital Corp., which is engaged
principally in making investments in privately-held companies.
Mr. Burstein is a director of four other public companies, being,
respectively, CAS Medical Systems, Inc., engaged in the
manufacture and marketing of blood pressure monitors and other
medical products principally for the neonatal market, The MNI
Group Inc., engaged in the marketing of specially formulated
medical foods, T.HQ, Inc., a Nintendo game and children's toy
company, and Trinity Americas Inc., a "blind pool" company. Mr.
Burstein received an LL.B. from Columbia Law School.
Salvatore T. DiMascio became a director of the Company in
July 1996. Since June 1994, Mr. DiMascio has been Executive Vice
President and Chief Financial Officer of Anchor Gaming, a
publicly held diversified gaming company. Prior to joining
Anchor Gaming, Mr. DiMascio served as President of DiMascio
28<PAGE>
<PAGE>
Venture Management, Inc., a management and investment firm, for
over eight years. From 1978 to 1986 Mr. DiMascio was Senior Vice
President and Chief Financial Officer of Conair Corporation. Mr.
DiMascio is a certified public accountant.
Each director is elected at the Company's Annual Meeting of
Stockholders and serves until his or her successor is duly
elected and qualified. Officers are elected annually by and
serve at the discretion of Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table sets forth
information concerning compensation for services in all
capacities awarded to, earned by or paid to the Chief Executive
Officer of the Company and the one other executive officer whose
compensation exceeded $100,000 ("named executive officers")
during the fiscal year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
------------------------------------ ------------------------- -------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Salary Bonus Compensation Awards Options/SARs Payouts Compen-
Position Year ($) ($) ($) ($) (#) ($) sation
- ------------------ ---- -------- ---------- ------------- ----------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bruce A. Hahn (1), 1996 200,266 - 18,000 - - - -
Chairman, President 1995 158,000 - 18,000 - 118,437 - -
Chief Executive Officer 1994 101,500 16,500 - - - - -
Robert J. Kostrinsky 1996 100,266 - 15,000 - - - -
Executive Vice 1995 75,000 - 12,000 - 59,217 - -
President, Chief 1994 60,000 3,750 - - - - -
Financial Officer
<FN>
(1) Salary payments include commissions paid pursuant to Mr. Hahn's employment agreement. Such commissions totaled $266, $0 and
$10,500 for the years ended December 31, 1996, 1995 and 1994, respectively. Mr. Hahn has been Chairman, President and Chief
Executive Officer of U.S. Communications, Inc since its inception and assumed those positions with the Company upon completion of
the Merger with Trinity on May 15, 1995.
(2) Salary payments include commissions paid pursuant to Mr. Kostrinsky's employment agreement. Such commissions totalled $10,266,
$0 and $0 for the years ended December 31, 1996, 1995 and 1994, respectively.
</FN>
</TABLE>
The Company made no grants of stock options or stock
appreciation rights to any named executive officer during the
fiscal year ended December 31, 1996.
The following table sets forth information concerning option
exercises and option holdings for the fiscal year ended
December 31, 1996 with respect to the named executive officers.
29<PAGE>
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value
Realized
(Market
price at Value of Unexercised in-
exercise the-money options at FY-
Shares less Number of Securities End (Market price of
acquired on exercise Underlying Unexercised shares at FY-End ($5.375)
exercise(#) price ($) Options at FY-End (1) less exercise price) (1)
----------- ---------- -------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Hahn - - 78,958 39,479 $124,359 $62,179
Robert J. Kostrinsky 39,478 19,739 $ 62,178 $31,089
</TABLE>
The Company made no Long-Term Incentive Plan Awards during
the fiscal year ended December 31, 1996.
The Company has no defined benefit or actuarial plan.
The Company did not, during the fiscal year ended
December 31, 1996, adjust or amend the exercise price of options
previously awarded to the named executive officers.
Compensation Committee Interlocks and Insider Participation
Lawrence Burstein, a member of the Company's Stock Option
Committee, was an officer of Trinity Six Inc. until the Merger in
May 1995.
Compensation of Directors
Non-employee directors currently are entitled to receive a fee
of $500, plus reimbursement of out-of-pocket expenses, for attendance
at each meeting of the Company's Board and any committee meeting
thereof not held in conjunction with a Board Meeting. Each non-employee
director also receives an annual grant of non-qualified stock options to
acquire shares of the Company's Common Stock in an amount to be determined
each year by the entire Board of Directors. In 1996, each non-employee
director received nonqualified five-year options to purchase 25,000
shares of Common Stock at exercise prices ranging from $5.00 to $8.25
per share.
Employment Contracts
As a condition to the Merger with Trinity Six Inc., Bruce A.
Hahn entered into a three-year employment agreement with the
Company, effective retroactively to January 1, 1995, and
subsequently amended in January 1996, which provides for an
annual base salary of $150,000 in 1995, increasing to $200,000
for 1996 and 1997. As additional compensation, Mr. Hahn is
entitled to receive a commission for the calendar year ended
December 31, 1996 of $1.00 per net wireless activation (as
defined in the agreement ("NWA")) for NWAs in excess of the first
50,000 and $2.00 per NWA for each NWA in excess of 100,000, not
to exceed $500,000 in that year. Mr. Hahn's additional
compensation for the calendar year ending December 31, 1997 shall
be computed in the same manner as that of calendar 1996, but with
no limitation as to the aggregate amount of commissions payable
to Mr. Hahn for that calendar year. Mr. Hahn receives a monthly
30<PAGE>
<PAGE>
car allowance of $1,500 and reimbursement of business expenses,
and is eligible to participate in any Company sponsored benefit
plans. Mr. Hahn also received five-year options, exercisable at
$3.80 per share, to purchase an aggregate of 118,437 shares of
the Company's Common Stock, vesting to the extent of 39,479 of
such options on December 31, 1995, 1996 and 1997, respectively.
Robert Kostrinsky's employment agreement with the Company
provides for an annual base salary of $75,000 in 1995, increasing
to $90,000 for 1996 and 1997. As additional compensation, Mr.
Kostrinsky is entitled to receive a commission for the year
ended December 31, 1996 of $1.00 per NWA for NWAs in excess of
the first 40,000 and $1.50 per NWA for each NWA in excess of
100,000 not to exceed $200,000 in that year. Mr. Kostrinsky's
additional compensation for the calendar year ending December 31,
1997 shall be computed in the same manner as that of calendar
1996, but the aggregate amount of commissions payable to Mr.
Kostrinsky for that calendar year shall not exceed $250,000. Mr.
Kostrinsky receives a monthly car allowance of $750 and
reimbursement of business expenses, and is eligible to
participate in any Company sponsored benefit plans. Mr.
Kostrinsky also received five-year options, exercisable at $3.80
per share, to purchase an aggregate of 59,217 shares of the
Company's Common Stock, vesting to the extent of 19,739 of such
options on December 31, 1995, 1996 and 1997, respectively.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of March 25,
1997, based on information obtained from the persons named below,
with respect to the beneficial ownership of shares of the
Company's Common Stock held by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares
of the Company's Common Stock, (ii) each director, (iii) each
named executive officer, and (iv) all executive officers and
directors as a group:
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage
of Beneficial Owner Beneficially Owned (1) of Class
- ----------------------------------------------------------------------------
<S> <C> <C>
Bruce A. Hahn
6115A Jimmy Carter Blvd.
Norcross GA 1,172,763 (2) 11.4%
Edgar Puthuff 181,256 (3) 1.8%
Jerome S. Baron 88,385 (4) *
Lawrence Burstein 316,350 (5) 3.1%
Salvatore T. DiMascio 2,000 *
Robert J. Kostrinsky 203,978 (6) 2.0%
All directors and
executive officers as
a group (seven persons) 1,981,832 (7) 18.9%
- ---------------
* Less than 1%.
</TABLE>
31<PAGE>
<PAGE>
(1) As used herein, beneficial ownership means the sole or shared power to
vote, or direct the voting of, a security, or the sole or shared power
to invest or dispose, or direct the investment or disposition, of a
security. Except as otherwise indicated, all persons named herein have
(i) sole voting power and investment power with respect to their shares
of the Company's Common Stock, except to the extent that authority is
shared by spouses under applicable law and (ii) record and beneficial
ownership with respect to their shares of the Company's Common Stock.
(2) Includes 78,958 shares issuable upon the exercise of currently
exercisable options at $3.80 per share and 90,000 shares held by members
of Mr. Hahn's immediate family.
(3) Includes 64,479 shares issuable upon the exercise of currently
exercisable options, at $4.43 (39,479 shares) and $8.25 (25,000 shares)
per share; also includes 54,138 shares held by the Puthuff Littleton &
Smith, Inc. Pension and Profit Sharing Plan, of which Mr. Puthuff is the
trustee, and 10,000 shares issuable upon the exercise of currently
exercisable options at $5.75 per share held by Puthuff Littleton &
Smith, Inc., of which Mr. Puthuff is a principal.
(4) Includes 64,479 shares issuable upon the exercise of currently
exercisable options, at $4.43 (39,479 shares) and $8.25 (25,000 shares)
per share.
(5) Includes 8,667 shares of the Company's Common Stock owned by Trinity
Capital Corp. over which shares Mr. Burstein has shared voting and
investment power; 8,334 shares owned by members of Mr. Burstein's
family; and 50,000 shares issuable upon the exercise of currently
exercisable warrants at $6.00 per share and 39,479 shares issuable upon
the exercise of currently exercisable options, at $5.75 per share.
(6) Includes 39,478 shares issuable upon the exercise of currently
exercisable options at $3.80 per share.
(7) Includes the shares described in footnotes (2) through (6) above, and
17,100 shares held by an executive officer.
VOTING AGREEMENT
Simultaneously with the consummation of the Merger, the
Company's directors and executive officers and certain other
stockholders entered into a voting agreement (the "Voting
Agreement") which provides that, for a three-year period, each of
the parties will use all reasonable efforts to cause management
of the Company to nominate as directors of the Company one
designee of the parties who were previously affiliates of Trinity
and up to six designees of the other parties to the Voting
Agreement and to vote their shares in favor of the election as
directors of such designated nominees.
Prior to the Merger, Trinity's directors were Lawrence
Burstein, Barry Goldin, John Cattier and Barry Ridings. Bruce
Hahn, Lawrence Burstein, Edgar Puthuff and Jerome Baron comprised
the directors of U.S. Communications, Inc. As a result of the
Merger and pursuant to the Voting Agreement, Messrs. Goldin,
Cattier and Ridings resigned as directors of Trinity and the
directors of U.S. Communications, Inc. were elected directors of
the Company.
32<PAGE>
<PAGE>
There are no arrangements known to the Company the operation
of which may at a subsequent date result in a change in control
of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a)(1) FINANCIAL STATEMENTS
USCI, Inc.
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Stockholder's Equity
(Deficit) for the years ended December 31, 1996, 1995 and
1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(a)(2) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules are omitted because the
conditions requiring their filing do not exist or the information
required thereby is included in the financial statements filed,
including the notes thereto.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the
fourth quarter of the fiscal year ended December 31, 1996.
(c) EXHIBITS
NUMBER DESCRIPTION OF EXHIBIT
3.1 Certificate of Incorporation of Registrant (1)
3.2 Certificate of Amendment of Certificate of
Incorporation of Trinity Six Inc. (4)
3.3 By-Laws of Registrant (1).
4.1 Form of Certificate evidencing shares of Common
Stock (5).
33<PAGE>
<PAGE>
4.4 Form of Representative's Warrant between the Registrant
and Gaines, Berland, Inc. (1)
10.1 Amended and Restated 1992 Stock Option Plan (6).
10.2 Employment Agreement, dated as of January 1, 1995,
between U.S. Communications, Inc. and
Bruce A. Hahn (3).
10.2A Amendment No. 1 to Employment Agreement, dated as of
January 1, 1996, between U.S. Communications, Inc. and
Bruce A. Hahn (7).
10.3 Employment Agreement, dated as of January 1, 1995,
between U.S. Communications, Inc. and Robert J.
Kostrinsky (3)
10.3A Amendment No. 1 to Employment Agreement, dated as of
January 1, 1996, between U.S. Communications, Inc. and
Robert J. Kostrinsky (7).
10.5 Lease for premises at 6140-C Northbelt Parkway,
Norcross, Georgia 30017, as amended (3)
10.5A Amendment No. 5 to Lease for premises at 6140 Northbelt
Pkwy., Suites B, C & F and 6115 Jimmy Carter Blvd.,
Suite A, Norcross, Georgia 30071 (7)
10.6 Agreement dated January 26, 1993 between U.S.
Communications, Inc. and OfficeMax, Inc., as
amended (3).
10.7 Agreement dated October 5, 1993 between U.S.
Communications, Inc. and Kmart Corporation (3)
10.8 Agreement dated May 26, 1993 between U.S.
Communications, Inc. and Sims Communications, Inc.
(3).
10.9 Agreement dated April 25, 1994 between U.S.
Communications, Inc. and Service Merchandise
Company, Inc. (3).
10.10 Agreement dated July 1994 between U.S. Communications,
Inc. and Standard Brands of America, Inc. (3).
10.11 Agreement dated November 2, 1994 between U.S.
Communications, Inc. and Spiegel, Inc. (3).
10.12 Joint Venture Agreement dated November 17,
1992 between Ameritel Communications, Inc.
and Computer Telephone Corp. (3).
10.13 Employment Agreement dated June 10, 1996
between U.S. Communications, Inc. and
Basil H. Ford (7)
10.14 Agreement dated March 10, 1995 between U.S.
Communications, Inc. and Roy Thomas, Inc. (5)
10.15 Agreement dated May 18, 1995 between U.S.
Communications, Inc. and Target Stores (5).
10.16 Agreement dated June 30, 1995 between U.S.
Communications, Inc. and QVC, Inc. (5)
10.17 Agreement dated September 13, 1995 between
U.S. Communications, Inc. and Montgomery Ward
& Co., Inc. (5).
10.19 Agreement dated June 22, 1995 between U.S.
Communications, Inc. and Meijer, Inc. (5).
10.20 Agreement dated October 18, 1995 between U.S. Paging
Services, Inc. and Fingerhut Corporation (5).
34<PAGE>
<PAGE>
10.21 Fourth Amendment to Lease for premises at 6140-C
Northbelt Parkway, Norcross, Georgia 30017 (5)
10.22 Agreement dated June 19, 1995 between U.S.
Communications, Inc. and GTE (7)
10.23 Agreement dated October 10, 1996 between Wireless
Communication Centers, Inc. and Service Merchandise,
Inc. (7).
10.24 Amendments (No. 3 dated June 11, 1996 and No. 1 dated
October 10, 1996) to Cellular Communications Service
Agreement between U.S. Communications, Inc. and Service
Merchandise Company, Inc. (7)
10.25 Agreement dated July 2, 1996 between U.S. Paging
Services, Inc. and OfficeMax, Inc. (7)
10.26 Agreement dated August 1, 1996 among U.S. Paging
Services, Inc., Montgomery Ward & Co., Inc. and
Lechmere, Inc. (7)
10.27 Agreement dated February 1996 between U.S. Paging
Services, Inc. and American Drug Stores, Inc. (7)
10.28 Agreement dated October 1996 between Ameritel
Communications, Inc. and GTE Mobilnet Service Corp. (7)
11 Computation of Earnings per Share (7)
21.1 Subsidiaries of Registrant (7)
23.1 Consent of Arthur Andersen LLP (7)
- ----------------------------
(1) Incorporated by reference to an Exhibit filed as part of
Trinity's Registration Statement on Form S-1 (File No. 33-64489).
(2) Incorporated by reference to Exhibit C of Trinity's Proxy
Statement dated April 17, 1995.
(3) Incorporated by reference to an Exhibit filed as part of the
Registrant's Registration Statement on Form S-1 on Form S-4 (File
No. 33-88828).
(4) Incorporated by reference to an Exhibit to the Registrant's
Transition Report on Form 10-K for the Transition Period from
October 1, 1994 to May 14, 1995.
(5) Incorporated by reference to an Exhibit filed as part of
Post-Effective Amendment No. 1 on Form S-3 to the Registrant's
Registration Statement on Form S-1 on Form S-4 (File
No. 33-88828).
(6) Incorporated by reference to an Exhibit filed as part of the
Registrant's Registration Statement on Form S-8 (File No. 333-
16291).
(7) Filed herewith.
35<PAGE>
<PAGE>
USCI, Inc. and Subsidiaries
Consolidated Financial Statements
as of December 31, 1996, 1995 and 1994
Together With
Auditors' Report
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
USCI, Inc.:
We have audited the accompanying consolidated balance sheets of
USCI, INC. (formerly Trinity Six Inc.)(a Delaware corporation)
AND SUBSIDIARIES as of December 31, 1996 and 1995 and the related
consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of USCI, Inc. and subsidiaries as of December 31, 1996 and 1995
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 28, 1997
F-2
<PAGE>
<PAGE>
USCI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $15,581,244 $24,928,189
Accounts receivable--trade, net of allowances of
$437,000 and $220,000 in 1996 and
1995, respectively 2,581,251 1,507,771
Accounts receivable--other 1,680,112 595,171
Inventory 351,652 0
Prepaid expenses 66,234 47,667
------------ ------------
Total current assets 20,260,493 27,078,798
------------ ------------
PROPERTY AND EQUIPMENT:
Equipment 2,880,169 1,480,707
Furniture and fixtures 187,424 48,562
Promotional displays 2,945,199 1,103,109
Leasehold improvements 693,524 243,203
Other 0 81,322
------------ ------------
6,706,316 2,956,903
Less accumulated depreciation (1,876,695) (588,292)
------------ ------------
Property and equipment, net 4,829,621 2,368,611
------------ ------------
OTHER ASSETS 1,304,868 635,886
------------ ------------
$26,394,982 $30,083,295
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Commissions payable $ 1,779,733 $ 1,252,787
Accounts payable 2,886,772 757,714
Accrued expenses 732,389 431,284
Consumer deposits 283,194 221,125
Promotional deposits 1,400,474 284,600
------------ ------------
Total current liabilities 7,082,562 2,947,510
------------ ------------
COMMON STOCK SUBJECT TO RESCISSION (Note 7) 0 9,086,329
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000 shares
authorized, no shares issued or outstanding
in 1996 and 1995 0 0
Common stock, $.0001 par value; 100,000,000 shares
authorized; 10,225,746 and 7,464,496 shares issued
and outstanding in 1996 and 1995, respectively 1,023 746
Additional paid-in capital 33,675,423 24,629,023
Accumulated deficit (14,335,976) (6,552,263)
Treasury stock, at cost; 5,000 shares in 1996 and 1995 (28,050) (28,050)
------------ ------------
Total stockholders' equity 19,312,420 18,049,456
------------ ------------
$26,394,982 $30,083,295
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
F-3<PAGE>
<PAGE>
USCI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
REVENUES:
<S> <C> <C> <C>
Activation commissions $ 4,991,461 $ 4,305,217 $ 1,496,274
Subscriber sales 29,656 0 0
Other operating revenue 2,052,050 451,932 110,687
------------ ------------ ------------
Total revenues 7,073,167 4,757,149 1,606,961
------------ ------------ ------------
OPERATING EXPENSES:
Commissions pass-through and
other direct costs 3,530,756 3,111,946 1,175,918
Selling, general and administrative 12,311,293 4,947,429 1,981,171
------------ ------------ ------------
Total operating expenses 15,842,049 8,059,375 3,157,089
------------ ------------ ------------
OPERATING LOSS (8,768,882) (3,302,226) (1,550,128)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 1,001,337 276,770 14,447
Interest expense and amortization
of debt discounts (17,481) (415,920) (182,197)
Other 1,313 0 (3,750)
------------ ------------ ------------
Total other income (expense) 985,169 (139,150) (171,500)
------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME
TAXES AND EXTRAORDINARY ITEM (7,783,713) (3,441,376) (1,721,628)
PROVISION FOR INCOME TAXES 0 0 0
------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (7,783,713) (3,441,376) (1,721,628)
EXTRAORDINARY ITEM, loss on early
extinguishment of subordinated
debentures 0 (679,178) 0
------------ ------------ ------------
NET LOSS $(7,783,713) $(4,120,554) $(1,721,628)
============ ============ ============
LOSS BEFORE EXTRAORDINARY ITEM
PER COMMON SHARE $(0.76) $(0.62) $(0.57)
EXTRAORDINARY LOSS PER COMMON SHARE 0.00 (0.12) 0.00
------------ ------------ ------------
NET LOSS PER COMMON SHARE $(0.76) $(0.74) $(0.57)
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 10,187,909 5,577,120 3,004,131
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
<PAGE>
USCI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
----------------- ----------------- Paid-In Accumulated Treasury
Shares Amount Shares Amount Capital Deficit Stock Total
------ ------ --------- ------ ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 0 $0 2,960,662 $ 297 $1,123,845 $ (710,081) $ 0 $ 414,061
Issuance of common stock and warrants
in connection with issuance of
subordinated debentures 0 0 188,613 19 863,009 0 0 863,028
Issuance of common stock for
services performed 0 0 94,800 9 144,991 0 0 145,000
Net loss 0 0 0 0 0 (1,721,628) 0 (1,721,628)
--- --- ---------- ------ ------------ ------------ --------- ------------
BALANCE, December 31, 1994 0 0 3,244,075 325 2,131,845 (2,431,709) 0 (299,539)
Issuance of common stock and warrants
in connection with issuance of
subordinated debentures 0 0 5,925 6 28,744 0 0 28,750
Merger of Trinity Six Inc. and U.S.
Communications, Inc. 0 0 3,030,278 297 9,377,495 0 0 9,377,792
Reclassification of common stock
subject to rescission 0 0 (3,250,000) (325) (10,829,159) 0 0 (10,829,484)
Sale of shares subject to rescission 0 0 528,229 53 1,758,950 0 0 1,759,003
Purchase of treasury stock 0 0 0 0 0 0 (28,050) (28,050)
Issuance of common stock upon
exercise of warrants 0 0 87,525 8 311,318 0 0 311,326
Issuance of common stock from call of
Class A and Class B warrants 0 0 3,818,464 382 21,849,830 0 0 21,850,212
Net loss 0 0 0 0 0 (4,120,554) 0 (4,120,554)
--- --- ---------- ------ ------------ ------------ --------- ------------
BALANCE, December 31, 1995 0 0 7,464,496 746 24,629,023 (6,552,263) (28,050) 18,049,456
Exercise of stock options 0 0 39,479 4 37,311 0 0 37,315
Expiration of rescission rights 0 0 2,721,771 273 9,086,056 0 0 9,086,329
Costs associated with prior year
stock offering 0 0 0 0 (76,967) 0 0 (76,967)
Net loss 0 0 0 0 0 (7,783,713) 0 (7,783,713)
--- --- ---------- ------- ------------ ------------ --------- ------------
BALANCE, December 31, 1996 0 $0 10,225,746 $1,023 $33,675,423 $(14,335,976) $(28,050) $19,312,420
=== === ========== ======= ============ ============= ========= ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
<PAGE>
USCI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $(7,783,713) $(4,120,554) $(1,721,628)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,555,807 844,839 342,059
Loss on disposal of fixed assets 74,150 0 0
Write-off of investment in subsidiary 0 0 3,750
Extraordinary item - loss on early
extinguishment of debentures 0 679,178 0
Changes in operating assets and liabilities:
Accounts receivable:
Trade (1,073,480) (959,120) (305,428)
Other (1,084,941) (459,507) (117,014)
Inventory (351,652) 0 0
Prepaids and other current assets (687,549) 97,663 (145,330)
Commissions payable 526,946 337,364 634,794
Accounts payable 2,129,058 484,375 142,015
Accrued expenses 301,105 165,615 148,644
Consumer and promotional deposits 1,115,874 201,998 275,527
------------ ------------ ------------
Total adjustments 2,505,318 1,392,405 979,017
------------ ------------ ------------
Net cash used in operating activities (5,278,395) (2,728,149) (742,611)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,028,898) (2,512,170) (969,232)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to affiliated companies, net 0 0 (9,684)
Proceeds realized through merger with
Trinity Six Inc., net of costs 0 9,377,792 62,375
Proceeds from offering of debentures and equity,
net of costs 0 100,000 3,247,946
Repayment of subordinated debentures 0 (3,450,000) 0
Exercise of stock options 37,315 0 0
Issuance of stock upon exercise of warrants 0 22,161,538 0
Purchase of treasury stock 0 (28,050) 0
Cost associated with prior year stock offering (76,967) 0 0
------------ ------------ ------------
Net cash (used in) provided by financing activities (39,652) 28,161,280 3,300,637
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH (9,346,945) 22,920,961 1,588,794
CASH AND CASH EQUIVALENTS, beginning of year 24,928,189 2,007,228 418,434
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year $15,581,244 $24,928,189 $ 2,007,228
============ ============ ============
SUPPLEMENTAL INFORMATION:
Interest paid $ 0 $ 276,770 $ 32,910
============ ============ ============
Financing activities:
Reclassification of 2,721,771 shares of common
stock that were previously subject to
rescission
$ 9,086,329 $ 0 $ 0
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
<PAGE>
USCI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. NATURE OF BUSINESS
Trinity Six Inc. ("Trinity") was incorporated in the state of Delaware on
September 16, 1992 to serve as a vehicle to effect a merger, exchange of
capital stock, asset acquisition or other similar business combination with an
operating business. All activity of Trinity Six Inc. since incorporation
related to its formation, fund-raising and search to effect a business
combination. In 1993, Trinity received net proceeds of $9,981,000 (after
deduction of underwriting and offering expenses) from an offering of 1,916,667
units each of which consisted of one share of Trinity's common stock and two
redeemable warrants.
On May 15, 1995, Trinity completed a merger (the "Merger") with U.S.
Communications, Inc., a privately-held Delaware company incorporated in 1991.
Under the terms of the Merger each outstanding share of U.S. Communications,
Inc. stock was exchanged for approximately .79 share of Trinity stock. In
connection therewith, Trinity issued 3,250,000 shares of its common stock in
exchange for all of the issued and outstanding shares of U.S. Communications,
Inc. As a result of the Merger, U.S. Communications, Inc. became a wholly
owned subsidiary of Trinity and Trinity's certificate of incorporation was
amended as of the effective date of the Merger to change Trinity's name to
USCI, Inc. All references to the "Company" shall be deemed to include U.S.
Communications, Inc. and its subsidiaries prior to the Merger and USCI, Inc.
and its subsidiaries subsequent to the Merger. The Merger has been accounted
for as a recapitalization of U.S. Communications, Inc.
The Company is a nationwide agent for companies providing cellular and paging
communication services. The Company offers the services of a particular
carrier at client customers throughout the United States and Puerto Rico. The
Company's contracted retail clients serve to solicit orders for cellular
telephone and pager activations at client store locations and provide credit
approvals if necessary. The Company provides the order processing and credit
approval services for the carriers generally under agreements with terms
ranging from one to three years with automatic renewals.
Beginning in the fourth quarter of 1996, the Company also began reselling
cellular and paging services to subscribers via reselling agreements with
carriers. The subscribers are obtained through existing retail channels and
through new "store within a store" kiosks that stock and sell products to the
consumer.
During 1996, approximately 85% of the Company's cellular and paging activation
services occurred at the retail locations of three mass merchandisers' chains.
F-7
<PAGE>
<PAGE>
The success of the Company is dependent upon the successful operations of these
merchandisers and other merchandisers for whom the Company will provide
activation services in the future.
During 1996, approximately 38% of the Company's revenues were generated through
activation services provided by the Company from four cellular and paging
carriers. The success of the Company is dependent upon the successful
operation of these and other cellular and paging carriers with which the
Company will contract in the future.
The Company, which has never operated at a profit, has experienced increasing
losses since its inception in 1991. Such losses aggregated approximately $7.8
million, $4.1 million, and $1.7 million for the years ending December 31, 1996,
1995, and 1994, respectively, and are continuing. There can be no assurance
that the Company will ever achieve profitability. The Company had an
accumulated deficit of approximately $14.3 million. The Company expects to
continue to incur losses in future periods, principally attributable to the
Company's intended expansion of its wireless communication reseller operations
and projected start-up expenses associated with the provision of wireless
communication activation services at new or additional retail locations. There
can be no assurance that the Company's existing retail mass merchandiser
customers will expand their use of the Company's services, that the Company
will obtain additional customers, that the Company will successfully develop as
a reseller of wireless communications services, or that the Company will
achieve profitability in the future.
The Company has only recently made the transition from being a development
stage company, whose services were utilized by a single customer at
approximately 150 retail locations on a trial basis as of December 31, 1993, to
an operating company whose services at December 31, 1996 were utilized by eight
principal customers at approximately 4,000 retail locations. The Company's
ability to manage this growth, including a projected expansion in 1997 in the
number of retail locations at which it provides wireless activation services
and the further development of its reseller operations, will require it to
implement and continually expand its operational and financial systems, recruit
additional employees, and train and manage both current and new employees.
Growth may place a significant strain on the Company's operational resources
and systems and failure to effectively manage this projected growth would have
a material adverse effect on the Company's business.
A crucial component of the Company's strategy is its development as a
nonfacilities-based wireless services provider or reseller. As of December
1996, the Company was operating as a reseller of the cellular services of two
carriers and is continuing to negotiate agreements with other carriers. The
Company is also actively investigating potential acquisitions of, or mergers
with, other nonfacilities-based wireless carriers. The success of the
Company's reseller expansion plan is subject to a number of risks including its
ability to negotiate additional reseller agreements on commercially reasonable
terms, the availability of suitable merger and/or acquisition candidates and
the difficulties inherent in integrating any acquired operations into the
Company, the increasingly competitive nature of the wireless telecommunications
industry, including the effect of the development and introduction of new
technologies, and the overall effects of the trend toward deregulation of the
telecommunications industry, including the possible eventual elimination of the
obligation of wireless carriers to make their services available for resale.
In addition, the Company will require substantial financing to accomplish any
F-8
<PAGE>
<PAGE>
significant acquisition or merger transaction and for working capital to
operate its proposed expanded reseller operations for a significant period of
time until profitability is achieved, if ever. The Company has no commitments
or arrangements for such financing and, accordingly, the availability of such
financing on terms acceptable to the Company is not assured.
The following unaudited pro forma information has been prepared as if the
Merger had occurred on January 1, 1994. The information is based on historical
results of the separate companies and may not necessarily be indicative of the
results that could have been achieved or the results that may occur in the
future. The pro forma information includes the elimination of U.S.
Communications, Inc.'s interest expense and Trinity's interest income assuming
the proceeds made available through the Merger were used to retire USCI, Inc.'s
debt. The pro forma information also includes the additional costs of
employment contracts entered into at the time of the Merger over the historical
compensation costs of those individuals (Note 7).
1995 1994
------------ ------------
Revenues $ 4,757,149 $ 1,606,961
Operating loss (3,454,337) (2,055,408)
Net loss (3,153,356) (1,744,538)
Net loss per share $(0.58) $(0.58)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
The Merger has been treated for accounting purposes as a capital transaction,
equivalent to the issuance of common stock by U.S. Communications, Inc. for the
net monetary assets of Trinity, accompanied by a recapitalization of U.S.
Communications, Inc. All share and per share amounts have been restated to
reflect the Merger. The statement of operations for the year ended December
31, 1995 includes the operations of U.S. Communications, Inc. only through the
effective date of the Merger and the operations of USCI, Inc. for the period
from the date of the Merger to December 31, 1995.
All costs incurred in connection with the Merger in 1995 were charged to equity
as a reduction of additional paid-in capital. Such costs amounted to $596,290.
REVENUE RECOGNITION
The Company recognizes an activation commission pursuant to the activation of
cellular and paging devices with a contracted carrier at a contracted amount
per activation. The Company simultaneously recognizes a related commission
pass-through expense at a contracted amount per activation. The Company
reserves a portion of these commission revenues for estimated chargebacks to
F-9
<PAGE>
<PAGE>
the Company arising from deactivations of cellular and paging devices by
customers during specified contract periods. This reserve is reflected as a
reduction of accounts receivable in the accompanying consolidated balance
sheets.
Revenues from subscriber sales are recorded for charges to customers for
monthly access, cellular and paging airtime, roaming charges and long-distance
charges, as such services are rendered. Unbilled revenues result from the
provision of cellular and paging services from the billing cycle date to the
end of each month.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company includes all
investments with original maturities of three months or less to be cash
equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are depreciated using the straight-line basis over the
estimated useful lives of the assets. The estimated useful lives are five
years for equipment and furniture and fixtures and the shorter of the useful
life or lease term for leasehold improvements. Promotional displays consist of
freestanding structures at retail locations that house an automatic dial phone,
cellular and paging information which aids in attracting and assisting
customers selecting cellular and paging service, and fax machines at selected
locations. The Company retains ownership of the promotional displays and
capitalizes the displays at cost. The displays are depreciated using the
straight-line basis over three years. The Company capitalized $1,842,090 and
$731,265 for promotional displays in the years ended December 31, 1996 and
1995, respectively, and depreciation expense on the promotional displays was
$728,105 and $151,959 in 1996 and 1995, respectively.
OTHER ASSETS
Other assets at December 31, 1996 and 1995 consisted of the following:
1996 1995
---------- ---------
Systems development costs and
purchased software, net $1,135,810 $602,058
Deferred consulting fees 130,000 0
Deferred contract costs (Note 5) 0 11,660
Other 39,058 22,168
---------- ---------
$1,304,868 $635,886
========== =========
Systems development costs include capitalized costs of internally generated
software relating to the Company's cellular activation system network projects.
The capitalized amounts consist of costs incurred after the design phases of
the software projects are complete and technological feasibility has been
determined based upon a detailed system design. Systems development costs and
purchased software are amortized on a straight-line basis over the estimated
remaining economic life of the software of five years. Amortization expense
F-10
<PAGE>
<PAGE>
was $218,354 and $91,824 in 1996 and 1995, respectively. As of December 31,
1996 and 1995, accumulated amortization was $363,989 and $202,277,
respectively.
ACCRUED EXPENSES
Accrued expenses of the Company consist of the following:
1996 1995
---------- ---------
Accrued compensation $269,687 $113,469
Subscriptions repayable 20,000 20,000
Other accruals 442,702 297,815
-------- ---------
$732,389 $431,284
========= =========
PROMOTIONAL DEPOSITS
Promotional deposits consist of obligations to various retailers to
provide partial reimbursement of advertising costs. Such obligations
generally require the retailer to seek USCI, Inc. approval of the
advertisement prior to placement. Promotional deposits totaled
$1,400,474 and $284,600 at December 31, 1996 and 1995, respectively.
RESEARCH AND DEVELOPMENT
Costs incurred on research and development activities related to internally
developed software before technological feasibility has been determined are
expensed as incurred. Research and development expense was $110,222, $87,062
and $39,761 for the years ended December 31, 1996, 1995 and 1994, respectively.
NET LOSS PER COMMON SHARE
Net loss per share after the Merger is calculated using the weighted average
number of shares outstanding after the effective date of the Merger for 1995.
This average comprises both the number of shares subject to rescission (Note 7)
and those shares without any attached rescission rights. During 1996, all
rescission rights have expired and all shares have been combined and included
in the calculation of the weighted average shares outstanding. Common stock
equivalents have not been included in the weighted average number of shares of
USCI, Inc. as the effect is antidilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions.
These 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 as well as reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-11
<PAGE>
<PAGE>
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with current year
presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be
held and used, as well as for long-lived assets and certain identifiable
intangibles to be disposed of. The Company adopted the new standard on January
1, 1996. The impact of adopting this standard was not material. Management
periodically evaluates the carrying values of its long-lived assets, based upon
future cash flows and operating income generated by the underlying assets in
determining the carrying value.
The Company accounts for its stock-based compensation plans under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Effective in 1996, the Company adopted the disclosure option of
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 requires
that companies which do not choose to account for stock-based compensation as
prescribed by this statement shall disclose the pro forma effects on net income
and per share data as if SFAS No. 123 had been adopted. Additionally, certain
other disclosures are required with respect to stock compensation and the
assumptions used to determine the pro forma effects of SFAS No. 123 (Note 4).
3. EXTRAORDINARY ITEM
Of the net proceeds made available through the Merger, $3,450,000 was used to
repay in full the outstanding subordinated debentures of USCI, Inc. (Note 5).
As a result of the acceleration of the repayment of this debt, the remaining
unamortized discount and other unamortized bond related costs of $679,178 have
been charged against income as an extraordinary item during the year ended
December 31, 1995.
4. STOCK OPTIONS
STOCK INCENTIVE PLAN
The Company's 1992 Stock Option Plan (the "Option Plan"), was amended by the
Company's Board of Directors on April 23, 1996 and by a majority in interest of
the Company's stockholders on July 10, 1996. The Option Plan provides for the
granting of options which are intended to qualify as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986 or as options which are not intended to meet the
requirements of such section ("Nonqualified Stock Options").
F-12
<PAGE>
<PAGE>
The total number of shares of the Company's Common Stock reserved for issuance
under the Option Plan is 750,000. Options to purchase shares may be granted
under the Option Plan to persons who, in the case of Incentive Stock Options,
are employees (including officers) of the Company, or, in the case of
Nonqualified Stock Options, are employees (including officers) or nonemployee
directors of the Company. The exercise price of all Incentive Stock Options
granted under the Option Plan must be at least equal to the fair market value
of such shares on the date of the grant or, in the case of Incentive Stock
Options granted to the holder of ten percent or more of the Company's Common
Stock, at least 110% of the fair market value of such shares on the date of
grant. The maximum exercise period for which Incentive Stock Options may be
granted is ten years from the date of grant (five years in the case of an
individual owning more than 10% of the Company's common stock).
Additionally, the Company grants options to nonemployee directors, employees,
and consultants outside of the 1992 Option Plan.
In November 1996, the Company granted five year options to purchase 25,000
shares of common stock to a director at an exercise price of $5.00 per share,
which was greater than the fair market value at the date of the grant. These
options vest in full in July 1997.
In July 1996, the Company granted five-year options to purchase 25,000 shares
of common stock to a director at an exercise price of $6.75 per share, which
was the fair market value at the date of grant. These options vest in full in
July 1997.
In April 1996, the Company granted five-year options to purchase 25,000 shares
of common stock to two directors at an exercise price of $8.25 per share, which
was the fair market value at the date of grant. These options vest in full in
April 1997.
In June 1995, the Company granted options to purchase 150,000 shares of common
stock at $5.75 to two persons. The options become exercisable in five annual
installments commencing in June 1996, provided that on each such exercise date,
the Company has in effect contracts with certain specified retailers. If the
Company has fewer than the specified number of such contracts in effect on each
such exercise date, the number of options exercisable is reduced
proportionately, and if none of the specified contracts are in effect on an
exercise date, then no shares shall become purchasable under that installment.
Notwithstanding the foregoing, the options shall become exercisable for all
150,000 shares in June 2000.
In November 1994, the Company granted five-year option agreements to two
directors to purchase 78,958 shares of common stock at an exercise price of
$4.43 per share, which was the fair market value at the date of the grant.
These options expire in November 1999. As of December 31, 1996, all options
were outstanding and exercisable.
In February 1994, the Company granted a three-year option agreement to an
employee to purchase 19,739 shares of common stock at an exercise price of
$1.58 per share, which was the fair market value at the date of the grant, as
determined by the board of directors. These options vested 33% during each of
the years ended December 31, 1994 and 1995, and the remaining 34% vested during
the year ended December 31, 1996. As of December 31, 1996, all options were
outstanding and exercisable.
F-13
<PAGE>
<PAGE>
A summary of the changes in outstanding stock options is as follows:
Price
Shares Range
--------- ------------
Options outstanding at December 31, 1993 39,479 $0.95
Granted 185,551 1.58-4.43
=========
Options outstanding at December 31, 1994 225,030 0.95-4.43
STOCK-BASED COMPENSATION
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
which defined a fair value based method of accounting for an employee stock
option or similar equity instrument. However, it also allows an entity to
continue to measure compensation cost for those plans using the method of
accounting prescribed by APB No. 25. Entities electing to remain with the
accounting in APB No. 25 must make pro forma disclosures of net income and
earnings per share, as if the fair value based method of accounting defined in
this statement had been applied.
The Company has elected to account for its stock-based compensation plans under
APB No. 25; however, the Company has computed for pro forma disclosure purposes
the value of all options granted during 1996 and 1995 using the Black-Scholes
option-pricing model as prescribed by SFAS No. 123 using the following weighted
average assumptions for grants in 1996 and 1995:
Risk-free interest rate 5.28%-7.85%
Expected dividend yield 0%
Expected lives Three-ten years
Expected volatility 50%
The total value of options granted during the years ended 1996 and 1995 was
computed as approximately $1,301,262 and $516,523, respectively, which would be
amortized on a pro forma basis over the vesting period of the options. If the
Company had accounted for these plans in accordance with SFAS No. 123, the
Company's reported pro forma loss and pro forma loss per share for the years
ended December 31, 1996 and 1995 would have been as follows:
1996 1995
------------ ------------
Net loss:
As reported $(7,783,713) $(4,120,554)
Pro forma (8,224,953) (4,321,674)
Primary EPS:
As reported $(0.76) $(0.74)
Pro forma (0.81) (0.77)
Because the SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that expected in future years.
F-14
<PAGE>
<PAGE>
A summary of the status of the Company's stock option plans at December 31,
1996 and 1995 and for the years then ended is as follows:
Weighted
Average
Exercise
Shares Price
-------- ----------
Options outstanding at December 31, 1994 225,030 $4.31
Granted 586,873 5.29
-------- ----------
Options outstanding at December 31, 1995 811,903 4.68
Granted 380,000 7.12
Forfeited (89,219) 5.68
Exercised (39,479) 0.95
---------- ----------
Options outstanding at December 31, 1996 963,205 $5.58
==========
The following table summarizes information about fixed price stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- -----------------------------
Number Weighted- Number
Actual Outstanding at Average Weighted- Exercisable at Weighted-
Range of December 31, Remaining Average December 31, Average
Exercise Prices 1996 Contractual Life Exercise Price 1996 Exercise Price
- ------------------ ------------ ----------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.95-$ 0.95 39,479 0.0 $0.95 39,479 $0.95
$3.50-$ 4.63 329,247 1.4 4.09 194,497 4.02
$5.00-$ 6.75 359,479 3.5 5.82 65,896 5.74
$7.50-$ 8.25 220,000 5.7 8.02 0 0.00
$9.50-$10.13 15,000 2.6 9.92 10,000 10.13
------- -------
$0.95-$10.13 963,205 3.1 5.60 309,872 4.19
======= =======
</TABLE>
At December 31, 1996 and 1995, employees, directors and consultants
of the Company held outstanding options for a total of 963,205 shares
and 811,903 shares, respectively, with a weighted average price per
share of $5.60 and $4.68, respectively, and option prices ranging from
$0.95 to $10.125 per share in 1996 and 1995. Total shares exercisable
at December 31, 1996 and 1995 were 309,871 and 131,065, respectively,
with a weighted average price per share of $4.19 and $3.86, respectively.
5. STOCKHOLDERS' EQUITY
PRIVATE PLACEMENT DEBT AND EQUITY OFFERINGS
On March 16, 1994, the Company authorized a private placement of
20 units, each consisting of one $100,000, 10% subordinated
debenture (the "Debentures") and 3,950 shares of common stock.
On November 14, 1994 the Company authorized an additional private
placement of up to 25 units, each unit to consist of one $100,000
debenture, 5,925 shares of common stock and warrants to purchase
F-15
<PAGE>
<PAGE>
3,950 shares of common stock at any time during the two-year
period commencing November 15, 1994 at a price of $3.80.
During 1994, the Company received gross proceeds of $3,350,000 in
three tranches from the sale of 33.5 units of the Debentures. On
January 6, 1995, the Company received gross proceeds of $100,000
from the sale of the remaining unit of the placement authorized
by the Company on November 14, 1994. Pertinent details relating
to the sale of these units are as follows:
<TABLE>
<CAPTION>
Month of sale April 1994 August 1994 December 1994 January 1995
<S> <C> <C> <C> <C>
Number of units sold 5 4.5 24 1
Face value of debentures sold $500,000 $450,000 $2,400,000 $100,000
Number of shares of common stock
issued 19,750 26,663* 142,200 5,925
Number of warrants issued to purchase
one share of common stock 0 17,775* 94,800 3,950
Exercise price per share of warrants
issued N/A $3.80* $3.80 $3.80
Allocation of proceeds:
Debentures, net of discount $387,500 $348,750 $1,710,000 $ 71,250
Common stock 112,500 101,250 630,000 26,250
Warrants 0 0 60,000 2,500
----------- ------------- -------------- -------------
$500,000 $450,000 $2,400,000 $100,000
=========== ============= ============== =============
<FN>
*In December 1994, the Company issued an aggregate of 26,663 shares of common stock and 17,775 $3.80
warrants to the investors who purchased Debentures in August 1994 in exchange for 35,550 $5.70 warrants
originally issued to those investors.
</FN>
</TABLE>
The Company recorded the fair value of the equity components of
the Debentures as original issue discounts which are amortized
over the life of the related debt component of the Debenture
using the effective interest rate method. The Company amortized
$254,985 of these original issue discounts as interest expense
during 1995 prior to repaying the debt from proceeds available
through the Merger.
Costs of $177,054 incurred in connection with the sale of the
Debentures were allocated to the debt and equity components of
the Debentures based on their relative values. Costs relating to
the debt component of the Debentures were amortized over the life
of the debt. The Company amortized $36,049 of costs relating to
the debt component of the Debentures as interest loss during 1995
prior to repaying the debt from proceeds available through the
Merger.
On May 15, 1995, the Company repaid the amount outstanding on the
Debentures of $3,450,000 with the proceeds made available through
the Merger. The remaining unamortized original issue discount
and unamortized deferred debt financing costs of $679,178 have
been recorded as an extraordinary loss in the accompanying
financial statements.
In November 1995, the Company issued 3,818,464 shares of common
stock upon the exercise of redeemable warrants held by Trinity
stockholders. These redeemable warrants were offered and sold to
the public in August 1993 as part of Trinity's initial public
offering. The warrants exercised consisted of 1,906,967 Class A
F-16<PAGE>
<PAGE>
redeemable common stock purchase warrants and 1,911,497 Class B
redeemable common stock purchase warrants, exercisable at $5.50
and $6, respectively. The Company received proceeds of
$21,850,212, net of related expenses.
6. RELATED-PARTY TRANSACTIONS
In June 1995, the Company granted a five-year option to acquire
50,000 shares of the Company's common stock at an exercise price
of $5.75 per share to one of the Company's sales organizations
whose chairman also serves as a director of the Company (Note 4).
7. COMMITMENTS AND CONTINGENCIES
Upon consummation of the Merger and issuance of Trinity's common
stock to the U.S. Communications, Inc. stockholders, such
issuance by Trinity, when viewed in the context of the manner in
which the U.S. Communications, Inc. stockholders approved the
Merger transaction, may have constituted a violation of the
registration requirements of Section 5 of the Securities Act of
1933, as amended.
Assuming the occurrence of such violation, each U.S.
Communications, Inc. stockholder would have a statutory right of
rescission, exercisable for a period of one year from when the
violation was, or reasonably should have been, discovered, but in
no event longer than three years after the common stock was bona
fide offered. The exercise of such rescission right by a
stockholder may require the Company upon tender of the Company's
common stock acquired by the stockholder as a consequence of the
Merger, to return the tendering stockholder's U.S.
Communications, Inc. common stock or, alternatively, to pay such
stockholder a cash sum equal to the consideration paid by such
stockholder for the Company's common stock with interest thereon,
less the amount of any income received thereon (the "Contingent
Liability"). Accordingly, on December 31, 1995, the Company
recorded this stockholders' contingent liability as a liability
until the rescission period expired during 1996, at which time
the Contingent Liability was reclassified to equity.
The valuation of the temporary equity for 1995 was based on
management's estimate of U.S. Communications, Inc.'s fair market
value as of the date of the Merger which was determined to be
$10,829,484. This amount was determined by dividing Trinity's
pre-Merger equity of $9,996,447 by 48% (Trinity's ownership
percentage after the Merger) and applying 52% (U.S. Communications,
Inc.'s ownership percentage after the Merger) to that amount. As of
December 31, 1996, 528,229 shares of common stock of the Company
with rights of rescission attached have been sold by stockholders
at prices above the rescission value of $3.33 per share. As the
right of the rescission terminated upon such sale of stock, these
shares have been recorded as equity as of December 31, 1996.
The right of rescission for the remainder of shares of common
stock subject to rescission expired in May 1996 and have been
recorded as paid-in capital in the accompanying financial
statements.
F-17
<PAGE>
<PAGE>
OPERATING LEASE COMMITMENTS
The Company leases certain office space, telecommunications and
office equipment, and space under noncancelable operating leases.
At December 31, 1996, future minimum lease payments under
noncancelable operating leases are as follows:
1997 $267,612
1998 277,392
1999 262,130
2000 5,316
----------
$812,450
==========
The expenses for operating leases were $144,456, $80,862 and
$32,626 for the three years ended December 31, 1996, 1995 and
1994, respectively.
EXECUTIVE COMPENSATION
As a condition to the Merger discussed in Note 1, the president
and executive vice president of the Company entered into new
employment agreements, effective retroactively as of January 1,
1995, which provided the executives with annual base salaries of
$150,000, increasing to $200,000, and $75,000, increasing to
$90,000, respectively, and additional commissions based on net
wireless activations and stock options (Note 4).
EMPLOYEE BENEFITS
The Company does not provide postretirement or postemployment
benefits to its employees, nor does the Company offer Company
sponsored savings or pension plans.
8. INCOME TAXES
The Company and its subsidiaries file a consolidated income tax
return. At December 31, 1996 and 1995, the Company had net
operating loss carryforwards totaling approximately $12,655,000
and $5,976,000, respectively, which expire at various times
beginning in 2006. Due to the operating losses since inception,
a valuation allowance has been provided against the entire amount
of its net operating loss carryforwards and other net deferred
tax assets. The net operating loss carryforwards are subject to
substantial limitation due to the change of control of the
Company (Note 1).
F-18
<PAGE>
<PAGE>
The components of the net deferred tax asset as of December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Accrued expenses $ 357,000 $ 86,000
Accounts receivable allowance 170,000 86,000
Capitalized software costs 93,000 37,000
Net operating loss carryforwards 4,936,000 2,331,000
Stock award 0 (5,000)
------------ ------------
Total deferred tax asset 5,556,000 2,535,000
Valuation allowance (5,556,000) (2,535,000)
------------ ------------
$ 0 $ 0
============ ============
</TABLE>
A reconciliation of income tax benefit at the statutory federal
income tax rate to the Company's tax benefit as reported in the
accompanying consolidated statements of operations is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ----------
<S> <C> <C> <C>
Benefit at federal statutory rate $(2,724,000) $(1,442,000) $(603,000)
State income tax benefit, net (311,000) (165,000) (69,000)
Entertainment expenses 14,000 9,000 12,000
------------ ------------ ----------
(3,021,000) (1,598,000) (660,000)
Valuation allowance 3,021,000 1,598,000 660,000
------------ ------------ ----------
Provision for income tax $ 0 $ 0 $ 0
============ ============ ==========
</TABLE>
9. SIGNIFICANT CUSTOMERS
Certain customers made up greater than 10% of the Company's total
revenues during 1996, 1995, and 1994. During 1996, OfficeMax and
Service Merchandise accounted for approximately 22% and 20% of
total revenues, respectively. During 1995, KMart, OfficeMax, and
Service Merchandise accounted for approximately 32%, 27%, and 15%
of total revenues, respectively. During 1994, OfficeMax made up
approximately 63% of the Company's total revenues.
F-19<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on behalf by the undersigned thereunto
duly authorized.
USCI, INC.
By: /s/ Bruce A. Hahn
Bruce A. Hahn, Chairman,
President, Chief Executive Officer
By: /s/ Robert J. Kostrinsky
Robert J. Kostrinsky,
Chief Financial Officer
March 27, 1997
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the date indicated.
By: /s/ Bruce A. Hahn
Bruce A. Hahn, Chairman
President, Chief Executive Officer
By: /s/ Jerome S. Baron
Jerome S. Baron, Director
By: /s/ Lawrence Burstein
Lawrence Burstein, Director
By: /s/ Edgar Puthuff
Edgar Puthuff, Director
By: /s/ Salvatore T. DiMascio
Salvatore T. DiMascio, Director
March 27, 1997
EXHIBIT 10.2A
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
Amendment No. 1 to Employment Agreement made as of the 1st
day of January 1996 between U.S. Communications, Inc. (the
"Corporation") and Bruce A. Hahn (the "Employee").
WHEREAS, the parties executed and entered into an employment
agreement dated as of January 1, 1995 (the "Employment
Agreement") under the terms of which the Corporation is employing
the services of the Employee on a full-time basis in the
executive capacity of Chairman of the Board of the Corporation;
and
WHEREAS, the parties wish to amend the Employment Agreement.
NOW THEREFORE, it is agreed as follows:
1. The definition of "Net Telephone Activations" in Section
3(b) of the Employment Agreement shall be revised to read as
follows:
"(the term "Net Telephone Activations" shall mean all
payments by carriers for activations of ALL WIRELESS
COMMUNICATIONS DEVICES purchased by subscribers from
the Corporation's customers which are paid to the
Corporation by the applicable carrier less all
deductions for de-activated customers)."
2. Except as specifically provided herein, all of the terms and
provisions of the Employment Agreement dated as of January 1,
1995 shall remain in full force and effect.
IN WITNESS WHEREOF, the parties herewith have caused this
Amendment No. 1 to Employment Agreement to be signed as of the
day and year first above written.
U.S. COMMUNICATIONS, INC.
By: /s/ Robert J. Kostrinsky
------------------------
Robert J. Kostrinsky,
Executive Vice President
EMPLOYEE
/s/ Bruce A. Hahn
-------------------
Bruce A. Hahn
EXHIBIT 10.3A
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
Amendment No. 1 to Employment Agreement made as of the 1st
day of January 1996 between U.S. Communications, Inc. (the
"Corporation") and Robert Kostrinsky (the "Employee").
WHEREAS, the parties executed and entered into an employment
agreement dated as of January 1, 1995 (the "Employment
Agreement") under the terms of which the Corporation is employing
the services of the Employee on a full-time basis in the capacity
of Executive Vice President and Secretary-Treasurer of the
Corporation; and
WHEREAS, the parties wish to amend the Employment Agreement.
NOW THEREFORE, it is agreed as follows:
1. The definition of "Net Telephone Activations" in Section
3(b) of the Employment Agreement shall be revised to read as
follows:
"(the term "Net Telephone Activations" shall mean
all payments by carriers for activations of ALL
WIRELESS COMMUNICATIONS DEVICES purchased by
subscribers from the Corporation's customers which
are paid to the Corporation by the applicable
carrier less all deductions for de-activated
customers)."
2. Except as specifically provided herein, all of the terms and
provisions of the Employment Agreement dated as of January 1,
1995 shall remain in full force and effect.
IN WITNESS WHEREOF, the parties herewith have caused this
Amendment No. 1 to Employment Agreement to be signed as of the
day and year first above written.
U.S. COMMUNICATIONS, INC.
By: /s/ Bruce A. Hahn
Bruce A. Hahn, Chairman
EMPLOYEE
/s/ Robert J. Kostrinsky
Robert J. Kostrinsky
EXHIBIT 10.5A
FIFTH AMENDMENT TO LEASE
THIS FIFTH AMENDMENT TO LEASE is made and entered into on the 3rd
day of June 1996, by and between Metropolitan Life Insurance
Company (hereinafter called "Landlord") and U.S. Communications,
Inc. (hereinafter called "Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant entered into a Lease Agreement on
December 17, 1992, and as amended February 14, 1994; November 1,
1994; December 31, 1994 and June 21, 1995 hereinafter called
"Lease" for the lease and rental by Tenant from Landlord of
approximately 14,400 square feet located at 6140 Northbelt
Parkway, Suite B, C & F Norcross, GA 30071, hereinafter called
"Premises".
WHEREAS, Landlord and Tenant desire to amend said Lease by
extending the lease term and incorporating an additional 7,900
square feet known as 6115-A Jimmy Carter Blvd.
NOW THEREFORE, in consideration of the mutual rights and
obligations of the parties as recited in the Lease and herein,
Landlord and Tenant agree to amend the Lease as follows:
1. Effective June 1, 1996, the Premises per paragraph 1.02 of
the Lease Agreement, which originally consisted of 14,400
square feet ("Original Premises") shall be expanded by 7,900
square feet ("Expansion Premises"). The Premises shall
consist of both the Original Premises plus the Expansion
Premises for a total of 23,300 square feet. The Original
Premises and Expansion Premises are shown on the attached
Exhibit "A" to this Amendment and more particularly
described as:
6140 Northbelt Parkway Suites B, C, & F
and
6115 Jimmy Carter Blvd. Suite A
Norcross, Georgia 30071
2. The Expiration Date of the Lease per paragraph 1.03, shall
be amended and the lease shall now expire January 31, 1999.
<PAGE>
<PAGE>
3. Paragraph 1.04, Rental and Special Stipulation #6 of the
Lease shall be amended as follows:
<TABLE>
<CAPTION>
Monthly Base
Period Rental Rate
<S> <C>
06/01/96 - 07/31/96 $ 7,540.00
08/01/96 - 11/30/96 $11,670.00
12/01/96 - 11/30/97 $12,023.00
12/01/97 - 11/30/98 $12,395.00
12/01/98 - 01/31/99 $12,767.00
</TABLE>
4. Tenant agrees to accept possession of the Expansion Premises
in "as is" condition, except the Landlord shall provide all
mechanical systems in good working condition. Landlord agrees to
inspect and repair, at Landlord's expense all mechanical systems
including HVAC, prior to Tenant's acceptance of the Premises.
Landlord shall not be required to make any other improvements to
the Premises or Expansion Premises. Landlord shall not be
responsible for any other repairs other than those per paragraph
5.01 of the Lease Agreement.
Provided Tenant has maintained the regularly scheduled
preventative maintenance/service contract per Paragraph 5.05 of
the Lease Agreement, if during the initial six months of Tenant's
occupancy of the Expansion Premises, repairs and/or replacement
of the hot water, hearing and air conditioning systems in the
Expansion Premises are required due to the failure of the
equipment, such repairs and/or replacement shall be made and
performed by the Landlord at no cost to the Tenant.
5. All other terms and conditions of the Lease Agreement remain
as previously agreed.
All other terms and conditions of the Lease, any Amendments,
Modifications and Ratifications thereof, shall remain in full
force and effect. This Amendment to Lease is attached to and
incorporated by reference into the Lease Agreement as though
fully rewritten therein.
LANDLORD: TENANT:
Metropolitan Life Insurance Company U.S. Communications, Inc.
By: /s/ J. Samuel O'Briant By: /s/ Robert J. Kostrinsky
Equity Investment Manager
Date: 6/6/96 Date: 6/3/96
EXHIBIT "A"
[Drawing of Premises covered by Lease].
EXHIBIT 10.13
EMPLOYMENT AND NON-COMPETE AGREEMENT
THIS EMPLOYMENT AND NON-COMPETE AGREEMENT ("Agreement") is
made as of the 10th day of June, 1996, by and between U.S.
COMMUNICATIONS, INC. ("USCI"), a Delaware corporation, with its
principal office at 6140-C Northbelt Parkway, Norcross, Georgia
30071 and BASIL H. FORD ("Employee").
RECITALS
WHEREAS, USCI desires to employ Employee, and Employee
desires to serve as an employee of USCI, on the terms and
conditions hereinafter provided;
NOW, THEREFORE, in consideration of the promises and mutual
covenants contained herein (including, without limitation, USCI's
employment of Employee and the advantages and benefits thereby
inuring to Employee) and for other good and valuable
consideration, the receipt, adequacy, and sufficiency of which
are hereby acknowledged by each party hereto, the parties hereby
agree as follows:
1. Employment. USCI agrees to employ Employee, and
Employee agrees to be employed by USCI, pursuant to the terms and
conditions of this Agreement. USCI's agreement to employ
Employee is expressly conditioned on its understanding that (i)
Employee is free to enter into the contemplated employment with
USCI and (ii) only USCI is entitled to the benefit of Employee's
work. USCI expressly disavows any interest in using any other
Person's patents, copyrights, trade secrets, or trademarks in an
unlawful manner and instructs Employee not to misuse proprietary
rights belonging to any other Person.
2. Term. The term of this Agreement shall commence on June
10th, 1996 (the "Commencement Date") and shall continue for a
period of one (1) year (the "Initial Term"), unless sooner
terminated as hereinafter set forth. In the event that USCI does
not wish to renew Employee's employment at the close of the
Initial Term, USCI shall give Employee notice no later than
ninety (90) days prior to the end of the Initial Term. After the
Initial Term, this Agreement will be renewed automatically,
without notice, for consecutive periods of one (1) year each (the
"Second Term," etc.), provided, however, that either party may
terminate the Agreement for any reason during the Second Term or
a subsequent term by giving the other party ninety (90) days'
prior written notice of the party's intention to terminate this
Agreement.
3. Duties. Employee shall serve in the capacity of Vice
President of Corporate Development and Investor Relations.
Further, Employee shall perform such additional other duties as
<PAGE>
<PAGE>
are customarily performed by a Person acting as a Vice President
of a corporation similar to USCI. Employee shall report to the
Chief Executive Officer of USCI. Employee shall be employed by
USCI on a full-time basis; shall devote his full business time,
attention, skill, and effort exclusively to the performance of
the duties assigned to him by USCI; and shall not during the term
of this Agreement (including any renewal terms) be engaged in any
other business activity or render any service of a business,
commercial, or professional nature, whether or not for
compensation, that impedes or detracts from Employee's
performance of services for USCI hereunder.
4. Compensation.
a. Base Salary. During the Initial Term of this
Agreement, Employee shall be paid an annual base salary of
$70.000.00. Such base salary shall be payable in accordance with
the normal payroll practices of USCI and shall be subject to
usual and customary withholdings. Should this Agreement be
renewed for a Second Term and/or any subsequent term. Employee's
base salary for such renewal term(s) shall be established by
USCI's President in his sole discretion, but in no event in an
amount less than the base salary for the immediately preceding
term.
b. Performance Bonus. Employee shall be paid a
Performance Bonus based upon Net Telephone Activations ("NTAs")
processed by USCI on or after the first day of the Initial Term.
Whenever used herein, "Net Telephone Activations" or "NTAs" shall
mean all payments by carriers for activations of cellular
telephones purchased by subscribers from USCI's customers which
are paid to USCI by the applicable carrier, less all deductions
for de-activated customers. The Performance Bonus shall be
payable within ninety (90) days of the end of the Initial Term or
the Second Term or any subsequent term, if the Agreement is
renewed for such periods. Provided, if employee's employment
with USCI is terminated prior to the end of any term other than
for Cause, as defined in Section 11 below or voluntary
resignation, then USCI shall pay the Performance Bonus as
determined through the effective date of termination for the
partial term. Such Performance Bonus, if any, shall be
determined as provided immediately below and shall be payable
within ninety (90) days of the effective date of termination.
(1) Employee's Performance Bonus shall be equal to
$0.50 per NTA after the first 25,000 NTAs and $1.00 per NTA after
the first 100,000 NTAs in the Initial Term of this Agreement, up
to a maximum Performance Bonus of $40,000.00 for the Initial
Term.
2<PAGE>
<PAGE>
(2) If this Agreement is renewed for the Second
Term, Employee's Performance Bonus shall be equal to $0.50 per
NTA after the first 25,000 NTAs and $1.00 per NTA after the first
100,000 NTAs in the Second Term, up to a maximum Performance
Bonus of $75,000.00 for the Second Term.
(3) If this Agreement is renewed for any
subsequent year-long term, Employee's Performance Bonus shall be
equal to $0.50 per NTA after the first 25,000 NTAs and $1.00 per
NTA after the first 100,000 NTAs in that term, up to a maximum
Performance Bonus of $110,000 for any subsequent term.
(4) In the event that the condition precedent of
at least 25,000 NTAs in the Initial Term is not satisfied or the
Performance Bonus for the Initial Term is less than $2,500.00
USCI's Board of Directors may nevertheless elect to pay Employee
a bonus in such amount as the Board, in its sole discretion,
deems appropriate (the "Discretionary Bonus"), provided, however,
that the Discretionary Bonus combined with Performance Bonus will
in no event be less than $2,500.00 or more than $10,000.00. The
Discretionary Bonus, if any, shall be payable within ninety (90)
days of the end of the Initial Term, provided that Employee has
not been terminated for Cause or voluntary resignation prior to
the end of the Initial Term.
5. Signing Bonus. Employee shall be paid a signing bonus
of $2.500.00 payable on December 10, 1996 unless Employee's
employment with USCI terminates, as a result of either his
voluntary resignation or termination for Cause pursuant to
Section 11 of this Agreement, prior to his completion of this six
(6) month period, in which event Employee shall not receive any
portion of this signing bonus.
6. Car Allowance. USCI shall pay Employee a car allowance
of $500.00 per month.
7. Out-of-Pocket Expenses. USCI shall promptly reimburse
Employee, in accordance with USCI's standard reimbursement
policy, for reasonable expenses actually incurred by him in the
performance of his duties hereunder, including reasonable travel
and entertainment expenses. Employee shall properly account
therefor in accordance with Company policy.
8. Participation in Benefit and Insurance Plans; Vacations.
Employee shall be entitled to participate in or receive benefits
under any retirement, medical, dental, accident, life, or other
employee benefit plan or program made available by USCI to all of
its employees or otherwise made available to other executive
officers of USCI. Employee and his spouse and dependents shall
3<PAGE>
<PAGE>
become eligible for coverage under USCI's medical insurance plan
once he has completed sixty (60) days of employment with USCI.
Employee shall be eligible for paid vacation as follows:
a. one (1) week during the Initial Term, to be taken
only after Employee has been employed six (6) months;
b. two (2) weeks during the Second Term of the
Agreement, if any; and
c. three (3) weeks during any subsequent term of the
Agreement, if any.
9. Key-Man Insurance. USCI shall be entitled to purchase
and maintain "key-man" or other life insurance on the life of
Employee for the sole benefit of USCI, and Employee shall
cooperate with USCI in securing such insurance.
10. Incentive Stock Options.
Employee shall receive options ("Options") to purchase
100,000 shares of USCI, Inc.'s authorized but unissued Common
Stock, par value $0.0001 per share, at the closing price as
quoted on NASD National Market System on such date pursuant to
the terms of the USCI, Inc. Amended and Restated 1992 Stock
Option Plan (the "Plan") and the Incentive Stock Option Agreement
(the "Option Agreement") attached hereto as Exhibit A. These
options are intended to be qualified as Incentive Stock Options
as that term is defined in the Internal Revenue Code of 1986, as
amended. USCI intends to seek shareholder approval for an
amendment to the Plan increasing the number of shares that may be
issued under the Plan, including the shares issuable under the
Options.
All Options may be exercised by Employee, as provided by the
Plan. Additional options may be granted by USCI's Board of
Directors, in its sole discretion.
11. Termination Upon Death or Disability or for Cause.
a. Employee's employment hereunder (i) shall be
terminated by his death or Total Disability (as hereinafter
defined) and (ii) may be terminated by USCI at any time for Cause
(as hereinafter defined). In the event of any such termination
of employment, Employee shall be paid his base salary through the
date of death, Total Disability, or termination for Cause, as the
case may be, and shall not be entitled to receive any further
compensation or benefits and, in particular, shall not receive
any severance pay. Employee's employment may be terminated for
Cause, effective immediately, upon the giving of written notice
to Employee by USCI's President or Board of Directors.
4<PAGE>
<PAGE>
b. Whenever used herein:
(1) "Total Disability" shall mean the failure or
inability of Employee to perform substantially all of his duties
of employment as required hereunder for a total of ninety (90)
consecutive days due to any physical or mental disorder.
(2) "Cause" shall mean: (A) any willful or
material breach or violation of any of Employee's covenants,
duties, or obligations under this Agreement (including Employee's
resignation), or any willful or material neglect of or failure or
refusal to perform any of such covenants, duties, or obligations;
(B) any willful or material misconduct, including, without
limitation, misconduct involving fraud or dishonesty in the
performance of such covenants, duties, or obligations, or conduct
which is reasonably deemed to be injurious to USCI; (C) Employee
having or suffering from any drug, alcohol, or other substance
abuse problem; (D) the commission by Employee of a crime
involving moral turpitude; or (E) any willful violation or
refusal to obey the lawful directives or reasonable instructions
of USCI's President or Board of Directors.
12. Termination Without Cause. Anything to the contrary in
this Agreement notwithstanding, the Board of Directors of USCI
may, at any time, terminate Employee's employment hereunder
without Cause and without any warning or prior notice. In the
event that Employee's employment is terminated without Cause at
any time during the Initial Term, Employee shall receive his base
salary, car allowance, paid vacation and any other compensation
and benefits for the remainder of the Initial Term but shall
receive no other payments or benefits from USCI. In the event
that Employee's employment is terminated without Cause during the
Second Term or any subsequent term, if any, Employee shall not
receive any severance pay or other payments or benefits from
USCI, provided, however, that if Employee is terminated without
Cause during the Second Term or any subsequent term, if any, with
less than the ninety (90) days' notice provided in Section 2 of
this Agreement, Employee shall receive his base salary and any
other compensation and benefits for such ninety (90) day notice
period.
13. Duties Upon Termination. Upon Employee's termination
of emploYment hereunder for any reason, Employee shall promptly
return to USCI any and all records, files, notes, memoranda,
reports, tape recordings, computer programs, disks, cassettes,
copies, and other physical representations of any information
relating to USCI or its subsidiaries or affiliates whether or not
constituting Confidential Information (as hereinafter defined).
Employee hereby acknowledges that any and all such items are and
shall remain at all times the sole property of USCI.
5<PAGE>
<PAGE>
14. Inventions and Discoveries. Any and all articles and
processes invented or discovered by or with the participation of
Employee (whether or not patented or patentable), trademarks,
patents, designs, and theories of production, management,
operations, and marketing, and, in general, anything of value
received or created by Employee relating to USCI or any of its
subsidiaries or affiliates during Employee's employment by USCI
and all rights of every kind and nature whatsoever thereunder
shall be considered work made for hire by Employee and are and
shall immediately be and become the property of USCI and not of
Employee. Employee shall promptly notify the President of USCI
of all such items and shall assign, transfer, and deliver to
USCI all patents, copyrights, royalties, designs, and theories
and any and all rights and interests whatsoever thereto and
thereunder, without further compensation, immediately upon the
request of the President or the Board of Directors.
15. Employee's Covenants.
a. Employee acknowledges that (i) the knowledge and
experience that he will acquire while an employee of USCI and his
services to be rendered to USCI are of special, unique, and
extraordinary character and that his position with USCI will
place him in a position of confidence and trust with the
customers, Prospective Customers (as hereinafter defined), and
other employees of USCI and allow him access to Confidential
Information (as hereinafter defined); (ii) the nature and periods
of the restrictions imposed by the covenants contained in this
Section 15 are fair, reasonable, and necessary to protect and
preserve for USCI the benefits of Employee's employment
hereunder and that such restrictions will not prevent Employee
from earning a livelihood; (iii) USCI would sustain great and
irreparable loss and damage if Employee were in any manner to
breach any of such covenants; (iv) USCI conducts its business
actively in and throughout the entire Territory (as hereinafter
defined) and other Persons are engaged in like and similar
business in the Territory; (v) the Territory is reasonably sized
because the Business of USCI (as hereinafter defined) is of a
limited and unusual nature, is scattered over a wide geographical
area, and requires the entire Territory for profitable
operations; and (vi) Employee's duties hereunder will include
servicing, production, operations, selling, marketing, and/or
managerial activities throughout the entire Territory on behalf
of USCI.
b. Having acknowledged the foregoing, Employee
covenants and agrees with USCI that while in USCI's employ and
through the period ending two (2) years after the date of
termination of Employee's employment with USCI for any reason:
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(1) Employee will not, directly or indirectly,
provide, within the Territory, Services (as hereinafter defined)
to any Person which is at the time, directly or indirectly,
in competition with the Business of USCI (as hereinafter defined)
or any subsidiary or affiliate thereof engaged in similar
business, whether as an officer, director, shareholder, partner,
proprietor, employee, agent, consultant, or independent
contractor.
(2) Employee will not, directly or indirectly, on
Employee's own behalf or on behalf of any other Person, solicit
or call upon any customer or Prospective Customer of USCI with a
view to selling or providing to such customer or Prospective
Customer any product or service, competitive or potentially
competitive with any product or services sold or provided or
under development by USCI during the two (2) year period
immediately preceding Employee's termination of employment with
USCI; provided, however, that the restrictions set forth in this
subsection (2) shall apply only to customers or Prospective
Customers of USCI with whom Employee had Material Contact (as
hereinafter defined) during such two year period.
(3) Employee will not, directly or indirectly,
solicit, recruit, or hire, directly or by assisting others, or
attempt to solicit, recruit, or hire to any competing Person, any
employee of USCI or its affiliates.
(4) Employee will not, directly or indirectly,
disclose to any Person or use or otherwise exploit for Employee's
own benefit or for the benefit of any other Person any
Confidential Information which was disclosed to Employee or came
within Employee's knowledge while an employee of USCI; provided,
however, that this subsection (4) shall not limit in any manner
the protection of USCI's trade secrets otherwise afforded by law;
and provided further, that this subsection (4) shall not limit in
any manner the protection afforded to USCI by the Georgia
Computer Systems Protection Act, as amended.
c. For purposes of this Agreement:
(1) "Business of USCI" shall mean the business of
activation and/ or sale of wireless communication devices and
reselling of wireless communication services, including but not
limited to cellular, paging, and PCS.
(2) "Confidential Information" shall mean
information (in any form or media) regarding USCI's customers,
Prospective Customers (including lists of customers and
Prospective Customers), methods of operation, billing rates,
billing procedures, suppliers, business methods, finances,
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management, or any other business information relating to USCI
(whether constituting a trade secret or proprietary or otherwise)
which has value to USCI and is treated by USCI as being
confidential; provided, however, that Confidential Information
shall not include any information that has been voluntarily
disclosed to the public by USCI (except where such public
disclosure has been made by Employee without authorization) or
that has been independently developed and disclosed by others, or
that otherwise enters the public domain through lawful means.
(3) "Material Contact" shall mean contact between
Employee and each customer or Prospective Customer (A) with whom
Employee dealt; (B) whose dealings with USCI were coordinated or
supervised by Employee; (C) about whom Employee obtained
Confidential Information in the ordinary course of business as a
result of Employee's association with USCI; or (D) who receives
products or services authorized by USCI, the sale or provision of
which results or resulted in compensation, commissions, bonuses,
or earnings for Employee.
(4) "Person" shall mean and include any
individual, partnership, association, corporation, trust,
unincorporated organization, or any other business entity or
enterprise.
(5) "Prospective Customer" shall mean any Person
to whom USCI has sent or delivered a written sales or servicing
proposal or contract in connection with the Business of USCI.
(6) "Services" shall mean services substantially
similar to those services contemplated herein to be provided by
Employee to USCI and those services actually provided by Employee
to USCI within one (1) year prior to the termination of
Employee's employment with USCI.
(7) "Territory" shall mean that geographical area
consisting of the United States of America.
d. Employee acknowledges that his breach of any
covenant contained in this Section 15 will result in irreparable
injury to USCI and that USCI's remedy at law for such a breach
will be inadequate. Accordingly, Employee agrees and consents
that USCI, in addition to all other remedies available at law and
in equity, shall be entitled to both preliminary and permanent
injunctions to prevent and/or halt a breach or threatened breach
by Employee of any covenant contained herein.
e. Each covenant contained in this Section 15 shall be
construed as separate and independent of any other covenant or
provision of this Agreement, and the existence or assertion of
any claim, demand, action, or cause of action against USCI,
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whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by USCI of any of the
covenants contained in this Section 15. In the event that the
provisions of this Section 15 should ever be deemed to exceed the
time, scope, or geographic limitations permitted by applicable
law, then such provisions shall be reformed to the maximum time,
scope, and geographic limitations permitted by such law.
f. In the event the enforceability of any of the
covenants in this Section 15 shall be challenged by Employee in
court (either as plaintiff or as defendant in an action brought
by USCI) and Employee is not enjoined from breaching any of such
covenants, then if a court of competent jurisdiction finds that
the challenged covenant is enforceable, the time period in
subsection (b) applicable to such covenant shall be deemed tolled
upon the filing of such suit and until the dispute is finally
resolved and all periods of appeal have expired.
16. General Provisions.
a. Assignment. Employee acknowledges that the
services to be rendered by him hereunder are unique and personal.
Accordingly, Employee shall not assign any of his rights or
delegate any of his duties or obligations under this Agreement.
The rights and obligations of USCI under this Agreement may be
assigned or delegated by USCI to any subsidiary, affiliate, or
successor of USCI, and in such event, shall inure to the benefit
of and be enforceable by any such assignee or delegate.
b. Entire Agreement; Amendment. This Agreement
contains the entire agreement of the parties hereto relating to
the subject matter hereof, and there are no written or oral terms
or representations made by either party other than those
described herein. No amendment or modification of this Agreement
shall be valid or binding unless made in writing and duly
executed by each of the parties hereto. Employee acknowledges
that he has read and understood this Agreement and that he has
been given a copy hereof for his personal use and records.
c. Notices. All notices which may or are required to
be given pursuant to this Agreement shall be (i) either delivered
in person or sent via certified or registered mail, return
receipt requested, and (ii) addressed to the party to whom sent
or given at the address set forth on the first page hereof or to
such other address as any party hereto may have given to the
other party hereto in such manner. If delivered, such notice
shall be deemed given when received; if mailed, such notice shall
be deemed made or given five (5) days after such notice has been
mailed as provided above.
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d. Arbitration and Choice of Forum. No civil action
concerning any dispute arising hereunder shall be instituted
before any court and all such disputes shall be submitted to
final and binding arbitration under the Georgia Code, the Federal
Arbitration Act, 9 U.S.C. Section 1 et. seq. and the auspices of
the American Arbitration Association. Such arbitration shall be
conducted in accordance with the rules of said Acts and
Association before a panel of three (3) arbitrators, one who
shall be selected by the Employee, one who shall be selected by
U.S.C.I, and the third, who shall be chairman, shall be selected
by the other two arbitrators, in Atlanta, Georgia. All costs and
expenses of the arbitration, including actual attorneys' fees,
shall be allocated among the parties according to the
arbitrators' discretion. The arbitrators' award resulting
therefrom may be confirmed and entered as a final judgment in any
court of competent jurisdiction and enforced accordingly.
e. Miscellaneous. This Agreement and the rights and
obligations of the parties hereunder shall be governed by the
laws of the State of Georgia. No delay or failure by USCI in
exercising any of its rights, remedies, powers, or privileges
hereunder, at law or in equity, and no course of dealing between
USCI and Employee or any other Person shall be deemed to be a
waiver by USCI of any such rights, remedies, powers, or
privileges, even if such delay or failure is continuous or
repeated, nor shall any single or partial exercise of any right,
remedy, power, or privilege preclude any other or further
exercise thereof by USCI or the exercise of any other right,
remedy, power, or privilege by USCI. In the event that USCI is
required to enforce any of its rights hereunder, USCI shall be
entitled to recover from Employee its attorneys' fees, court
costs, and other expenses in connection therewith. Every portion
of this Agreement is intended to be severable. Whenever
possible, each such provision shall be interpreted in such manner
as to be valid and enforceable under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid
under such law, such provision shall be deemed severed herefrom
and shall be unenforceable to the extent of such prohibition or
invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
BASIL H. FORD: U.S. COMMUNICATIONS, INC.:
/s/ Basil H. Ford By: /s/ Robert J. Kostrinsky
Robert J. Kostrinsky,
Executive Vice President
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EXHIBIT A
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Agreement"),
entered into as of the ____ day of June, 1996, between USCI,
INC., a Delaware corporation, located at 6140-C Northbelt
Parkway, Norcross, Georgia 30091-1645 (the "Corporation") and
Basil H. Ford, 1680 Branch Valley Drive, Roswell, Georgia 30076
(the "Employee").
WHEREAS, the Board of Directors of the Corporation has
determined to grant an incentive stock option to the Employee,
pursuant to the Corporation's Amended and Restated 1992 Stock
Option Plan, to purchase shares of the Corporation's Common
Stock, par value $.0001 per share (the "Common Stock"), upon the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual promises set
forth herein, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties, intending
to be legally bound, agree as follows:
1. Grant of Option. The Corporation hereby grants to the
Employee an incentive stock option (the "Option") to purchase
100,000 shares of Common Stock (the "Shares") at a price of
$_____ per Share. Unless otherwise provided herein, this Option
shall become exercisable in installments as follows: to the
extent of 10,000 Shares commencing at any time on or after each
of the first, second, third, fourth and fifth anniversaries of
the date hereof; to the extent of 5,000 Shares commencing at any
time on or after each of the second, third, fourth, fifth and
sixth anniversaries of the date hereof; to the extent of 5,000
Shares commencing at any time on or after each of the third,
fourth, fifth, sixth and seventh anniversaries of the date
hereof; and such installments shall be cumulative. The Employer
shall have authority in its discretion to prescribe in that this
option may be exercised in different installments during the term
of the option. An option may be exercised at any time or from
time to time during the term of the option as to any or all full
shares which have become purchasable under the provisions of the
option, but not at any time as to less than 25 shares unless the
remaining shares which have become so purchasable are less than
25 shares. The purchase price of the shares shall be paid in
full upon the exercise of the option, and the Company shall not
be required to deliver certificates for such shares until such
payment has been made.
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2. Method of Exercise. The Employee shall exercise the
Option, whether in whole or in part, by written notice (the
"Notice of Exercise") directed to the Secretary of the
Corporation, specifying the number of Shares to be purchased and
the purchase price being paid. The Notice of Exercise shall be
accompanied by a certified or bank check payable to the order of
the Corporation in payment of the purchase price for the number
of Shares specified therein. Subject to section 7(a) herein, upon
the Corporation's receipt of the Notice of Exercise and payment
of the purchase price of the Shares covered thereby, the
Corporation shall cause a certificate representing such Shares to
be issued to the Employee.
3. Termination of Option.
(a) Except as otherwise provided herein, the Option
shall terminate immediately upon any of the following events,
whichever occurs first:
(i) The expiration of three months from the date on
which the Employee's employment by the Corporation or, if
applicable, a parent or subsidiary thereof, or, if applicable, a
corporation, or a parent or subsidiary thereof, issuing or
assuming the Option in a transaction to which Section 425(a) of
the Code applies (a "Section 425(a) Company') is terminated for
any reason other than the Employee's permanent and total
disability, as defined in Section 22(e)(3) of the Code
("Disability"), or death;
(ii) The expiration of one year from the date on which
the Employee's employment by the Corporation, or, if applicable,
a parent or subsidiary thereof, or, if applicable, a Section
425(a) Company, is terminated by reason of the Employee's death
or Disability; or
(iii) A finding by the Corporation, after full
consideration of the facts presented on behalf of both the
Corporation and the Employee, that the Employee has breached his
employment or service contract with the Corporation or an
affiliate thereof, or has been engaged in disloyalty to the
Corporation or an affiliate thereof, including, without
limitation, fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his employment or service, or
has disclosed trade secrets or confidential information of the
Corporation or an affiliate thereof. In such event, in addition
to immediate termination of the Option, the Optionee shall
automatically forfeit all Shares for which the Company has not
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yet delivered the share certificates upon refund by the
Corporation of the Option price. Notwithstanding anything herein
to the contrary, the Corporation may withhold delivery of share
certificates pending the resolution of any inquiry that could
lead to a finding resulting in a forfeiture; or
(iv) The date, if any, set by the Board of Directors as
an accelerated expiration date in the event of the liquidation or
dissolution of the Corporation; or
(v) The expiration of the ten-year term of the Option
on the tenth anniversary of the date of this Agreement.
(b) For purposes of this Section, an employment
relationship will be treated as continuing intact while the
Employee is on military duty, sick leave, or other bona fide
leave of absence, including temporary employment by the
Government, if the period of such leave does not exceed 90 days,
or, if longer, so long as a statute or contract guarantees the
Employee's right to reemployment by the Corporation, or, if
applicable, a parent or subsidiary thereof, or, if applicable a
Section 425(a) Company. When the period of leave exceeds 90 days
and the Employee's right to re-employment is not guaranteed
either by statute or contract, the employment relationship will
be deemed to have terminated on the 91st day of such leave.
4. Right to Exercise. During the employee's lifetime the
Option is exercisable only by the Employee, and is not assignable
or transferable by the Employee, whether voluntarily, by
operation of law, or otherwise, and no other person or entity
shall acquire any rights thereof. In the event of the
termination of the employment of the Employee due to the
Employee's death or Disability, the Option may be exercised to
the extent exercisable on the date of such termination, in
accordance with Section 1 hereof, by the Employee or, if
applicable, the Employee's estate, duly appointed executor,
Administrator, or legal representative, or by or on behalf of
such person or persons to whom the Employee's rights under the
Option pass by will or by the laws of descent and distribution.
5. Certain Changes. Subject to the provisions of Section
422A of the Code, the number, kind, and purchase price of the
Shares shall be proportionately adjusted by the Board of
Directors of the Corporation for any increase, decrease, or
change in the outstanding Common Stock by reason of a stock
dividend, recapitalization, merger consolidation, split-up,
combination, exchange of shares, or similar transaction (but not
by reason of the issuance or purchase of Common Stock by the
Corporation in consideration for money, services, or property).
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(b) If, at any time, the Board of Directors determines, in
its discretion, that the listing, registration or qualification
of the Shares upon any securities exchange, or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the issuance or purchase thereof, the Option
may not be exercised unless and until, such listing,
registration, qualification, consent, or approval shall have been
effected or obtained and is free, of any conditions, which the
Board of Directors, in its sole discretion, deems unacceptable.
7. Conditions of Exercise.
(a) Unless the Shares are covered by a then current and
effective registration statement or qualified Offering Statement
under Regulation A under the securities Act of 1933, as amended
(the "Act")), any exercise of this Option by the Employee shall
be deemed to be an acknowledgement, representation and agreement
by the Employee that (i) such Shares are being purchased for
investment and are being acquired by the Employee for investment
only and not with a view to distribute or resale (other than a
distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the
registration provisions of the Act), (ii) the Employee has ben
advised and understands that (1) the Shares have not been
registered under the Act and are "restricted securities" within
the meaning of Rule 144 under the Act and are subject to
restrictions on transfer and (2) the Company is under no
obligation to register the Shares under the Act or to take any
action which would make available to the Employee any exemption
from such registration, (iii) such shares may not be transferred
without compliance with all applicable federal and state
securities laws, and (iv) an appropriate legend referring to the
foregoing restrictions on transfer and any other restrictions
imposed herein may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that
issuance of the Shares should be delayed pending (A) registration
under federal or state securities laws, (B) the receipt of an
opinion of counsel satisfactory to the Company that an
appropriate exemption from such registration is available (C) the
listing or inclusion of the Shares on any securities exchange or
an automated quotation system or (D) the consent or approval of
any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Shares, the
Company may defer exercise of this Option until any of the events
described in this sentence has occurred.
(b) In addition to the satisfaction of the requirements of
Section 7(a) hereof, no disposition, within the meaning of
Section 425(c) of the Code, of any Shares issued hereunder shall
be made by the Employee within one year after the transfer of
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such Shares to the Employee, provided that the foregoing holding
periods shall not apply to the disposition of Shares issued
hereunder after the death of the Employee by the estate of the
Employee, or by a person who acquired the right to exercise the
Option by bequest or inheritance, or by reason of the death of
the Employee. For purposes of the preceding sentence, in the
case of a transfer of any Shares issued by the corporation
hereunder by an insolvent Employee to a trustee, receiver, or
other similar fiduciary in any proceeding under Title II of the
United States Code, or any other similar insolvency proceeding,
neither the transfer, nor any other transfer of such Shares for
the benefit of the Employee's creditors in such proceeding, shall
constitute a "disposition." During the five-year period
commencing five years from the date hereof, the Employee shall
notify the Corporation immediately upon and disposition of any
Shares issued hereunder.
8. Stock Option Plan/Construction of Agreement. This
Option is subject to, and the Corporation and the Employee agree
to be bound by, all of the terms and conditions of the
Corporation's Amended and Restated 1992 Stock Option Plan (the
"Plan") under which this Option was granted, as the same may have
been amended from time to time in accordance with its terms.
Pursuant to the Plan, the Board of Directors of the Corporation
or its Committee established for such purposes is vested with
conclusive authority to interpret and construe the Plan and this
Option, and is authorized to adopt rules and regulations for
carrying out the Plan. A copy of the Plan in its present form is
available for inspection during business hours by the Employee or
other persons entitled to exercise this Option at the
Corporation's principal office. Should there be any
inconsistency or discrepancy between the provisions of this
Option and the terms and conditions of the Plan, the provisions
in the Plan shall govern and prevail.
9. Status of Employee.
(a) Nothing in the Plan or in this Agreement shall confer
upon the Employee any right to continue in the employ of the
Corporation, or, if applicable, any parent or subsidiary thereof,
or, if applicable, a Section 425(a) Company, or shall interfere
in any way with the right of such entities to terminate the
Employee's employment at any time without their incurring any
liability therefor.
(b) The Employee shall have no rights as a stockholder of
the Corporation with respect to the Shares until their issuance
in accordance with Section 2 hereof.
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10. Reservation of Shares. The Board of Directors of the
Corporation shall be under no obligation to reserve shares of
Common Stock to fill the Option. Neither the Option, nor any
reservation of Common Stock thereunder, shall constitute the
establishment of a trust, and no particular shares of Common
Stock shall be identified as being optioned or reserved for the
Employee.
11. Notices. All notices permitted or required hereunder
shall be in writing and shall be sent by certified mail, return
receipt requested, postage prepaid, to the respective addresses
of the parties set forth above, or to such other address as the
party to receive the notice designates by notice to the other
party. Any such notice shall be deemed effective on delivery.
12. Entire Agreement. This Agreement is the entire
agreement, and supersedes and terminates all prior agreements
between the parties with respect to the subject matter contained
herein.
13. Amendment or Termination. Except as otherwise provided
herein, this Agreement may be modified, amended, or terminated
only by written instrument executed by both parties.
14. Waiver. No waiver of any of the provisions of this
Agreement shall be effective unless in writing and signed by the
party to be charged with such waiver, and such waiver shall be
strictly limited to the terms of such writing.
15. Binding Effect. Except as otherwise provided in
Section 4 hereof, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, and their heirs,
devisees, executors, administrators, legal representatives,
successors, and assigns.
16. Law. This Agreement shall be governed by the laws of
the State of Georgia. The parties hereby consent to the
jurisdiction of the State of Georgia as a forum for litigating
any disputes arising hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Stock Option Agreement to be executed as of the date first above
written.
EMPLOYEE USCI, INC.
_____________________ By:_________________________
Basil H. Ford Name:_______________________
(Please Print)
Title:______________________
A-6
EXHIBIT 10.22
AGREEMENT
THIS AGREEMENT ("Agreement") is made this 19th day of June,
1995, by and between U.S. Communications, Inc. ("USCI") and the
telephone operating companies consisting of GTE Alaska
Incorporated, GTE Arkansas Incorporated, GTE California
Incorporated, GTE Florida Incorporated, GTE Hawaiian Telephone
Company Incorporated, GTE South Incorporated, GTE Southwest
Incorporated, GTE West Coast Incorporated, Contel of California,
Inc., Contel of Kentucky, Inc., d/b/a GTE Kentucky, Contel of
Maine, inc., d/b/a GTE Maine, Contel of Minnesota, Inc. d/b/a
GTE Minnesota, Contel of New Hampshire, Inc., d/b/a GTE New
Hampshire, Contel of New York, Inc., d/b/a GTE New York, Contel
of North Carolina, Inc., d/b/a GTE North Carolina, Contel of
South Carolina, Inc., d/b/a/ GTE South Carolina, Contel of Texas,
Inc., d/b/a GTE Texas, Contel of the South, Inc., d/b/a GTE
Systems of the South, Contel of the West, Inc., d/b/a GTE West,
Contel of Vermont, Inc.; d/b/a GTE Vermont, and Contel of
Virginia, Inc., d/b/a GTE Virginia (collectively and individually
"GTE") (USCI and GTE are collectively referred to as the
"Parties").
RECITALS
A. USCI and GTE desire to enter into an arrangement under
which USCI will market GTE's paging products and services through
USCl's sub-agent/authorized retailer.
B. This Agreement is intended to define the terms and
conditions under which USCl's marketing of GTE's paging products
and service shall be implemented.
IN CONSIDERATION of the above Recitals, the terms and
provisions set forth herein, the mutual benefits to be gained by
the performance thereof, and for the good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:
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ARTICLE I
DESCRIPTION AND SCOPE
1.1 Pursuant to this Agreement, USCI shall act as a
Marketing/Processing Agent for GTE.
1.2 As a Marketing/Processing Agent on behalf of GTE, USCl's
responsibilities shall include displaying GTE's paging product
line, selling pagers furnished by GTE, selling the paging network
offered by GTE to purchaser(s) ("Customer") and processing all
information for activation. USCI will furnish, display and sell
GTE pagers on an exclusive basis.
1.3 GTE shall provide a line of paging products; procure
paging network services; and provide training, marketing
assistance, and product management expertise.
1.4 Notwithstanding USCl's commitment in Section 1.2 above
to furnish, display and sell GTE pagers on an exclusive basis,
GTE expressly reserves all its rights including, without
limitation, the right to utilize others to render services of a
type contemplated by this Agreement and the unrestricted right of
GTE to perform similar services by itself.
ARTICLE II
TERM AND TERMINATION
2.1 The initial term of this Agreement shall become
effective upon the execution of this Agreement by both Parties
and shall end on December 31, 1998, unless earlier terminated in
accordance with other provisions of this Agreement. The term of
this Agreement shall automatically be extended for successive
one-year periods following the expiration of the initial term
unless either of the Parties notifies the other Party in writing
of its election not to renew this Agreement at least ninety (90)
days prior to the end of the then current term.
2.2 Notwithstanding anything stated or implied to the
contrary herein, this Agreement may be terminated under the
provisions of this Agreement entitled Default and Insolvency
during the first twelve (12) months that the Agreement is in
effect. From month thirteen (13) until the end of the Agreement,
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termination of the Agreement may occur also by furnishing the
other Party with ninety (90) days' prior written notification of
termination. In the event of termination by GTE, USCI shall be
entitled to compensation for all services satisfactorily
performed prior to the effective date of termination and the
residual income on USCl's active subscribers for a period of one
(1) year after termination. In the event of termination by USCI,
USCI will be entitled to compensation for all services
satisfactorily performed prior to the effective date of
termination and the residual income on USCl's active subscribers
will terminate on the effective date of termination.
2.3 Performance Expectations. GTE expects USCI to:
2.3.1 Add units in service in Year 1 5,000 units
Add units in service in Year 2 25,000 units
Add units in service in Year 3 50,000 units
2.3.2 Maintain a churn rate of 5 % overall by month.
2.3.3 Average billing revenue per month to equal
eight dollars and forty-five cents ($8.45).
2.3.4 GTE will consult with USCI on various marketing
and sales approaches to meet these performance objectives during
the initial twelve (12) months. During the initial twelve (12)
months USCI shall be compensated in accordance with the
provisions of Attachment A of this Agreement. If, however, by
month 13 of this Agreement, USCI is not meeting all of the
foregoing objectives, GTE, at its option and its sole discretion,
may elect to reduce USCl's total compensation under Attachment A
in the following manner: thirteen to eighteen months, 10%;
nineteen to twenty-three months, 15%; twenty-four to twenty-nine
months, 20%; thirty to thirty-six months, 25%.
2.4 In the event that this contract is terminated, for the
period of one year from the date of termination, GTE Telephone
Operations agrees not to pursue paging agreements with companies
that USCI has under paging contracts. This agreement is only
exclusive to GTE Telephone Operating companies and does not
pertain to any GTE affiliated companies.
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2.5 In the event that this contract is terminated, for the
period of six months from the date of termination, GTE Telephone
Operations agrees not to pursue paging agreements with companies
that USCI is currently negotiating paging contracts with as
specified in Attachment G. This agreement is only exclusive to
GTE Telephone Operating companies and does not pertain to any GTE
affiliated companies.
ARTICLE III
IMPLEMENTATION ACTIONS
3.1 Upon execution of this Agreement, the Parties shall
complete the Implementation Actions described herein to establish
the marketing arrangement for paging services:
3.1.1 GTE will provide product management of the pager
and paging network services lines. Product management functions
will include product selection, pricing analysis and
recommendations for retail pricing, promotional strategy,
collateral and retail merchandising recommendations, inventory
management, network procurement and management, market research
and product portfolio management.
3.1.2 GTE will assist in providing training on product
and paging network services, procedures, sales techniques,
coverage and pager usage to USCI personnel. GTE will provide
training on Customer care procedures and historical Customer call
categories. USCI and GTE will mutually agree upon a training
schedule, location and specific curriculum.
3.1.3 GTE will assist USCI in establishing activation
processes, procedures and identification of necessary activation
hardware/software.
3.1.4 USCI will establish a Customer service 800 number
and operating hours. USCI will provide an initial point of
Customer service for the paging Customers; USCI and GTE will
establish mutually agreeable procedures for secondary points of
Customer service, for Customer problems (such as network
troubles, miscellaneous troubleshooting, etc.) that cannot be
resolved by the initial Customer service point of contact within
USCI.
4
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ARTICLE IV
CHARGES AND COMPENSATION
4.1 USCI or its sub-agent/authorized retailer will be
compensated as outlined in Attachment A. Compensation of USCI by
GTE is subject to customer payment in full for all products and
services.
4.2 Air-Time Fee. GTE will bill the paging Customer for
paging network service.
4.2.1 Customer will be billed the retail prices
appearing on Attachment B for network services by GTE.
4.3 Co-op Fee. GTE will pay USCI a co-op fee of $2.00 per
pager activated and sold. This is a onetime fee and will apply
to each and every new pager activated and sold through USCI or
its sub-agent/authorized retailer. The co-op fee will be used to
promote GTE's paging products and services through print media,
television, radio, etc. The fee will not be applied to pager
changes or phone number changes. GTE will pay the advertising
co-op each month with the commission payment to USCI. In return,
USCI will manage the fund and provide proof of performance to GTE
monthly.
4.4 Promotions. GTE agrees to the promotions as outlined in
Attachment D. These promotions will be reviewed annually and
adjustments made at the discretion of GTE.
4.5 Pager Product Charges.
4.5.1 GTE will provide a recommended array of pager
products to sell by USCI or its sub-agent/authorized retailer.
The pagers for sale are included in Attachment C.
4.5.2 USCI will recommend the retail price of these
products at its discretion.
4.5.3 GTE will ship pagers to USCI or its sub-
agent/authorized retailer to a mutually agreed upon location or
locations. USCI or its sub-agent/authorized retailer will remit
payment to GTE for the pagers at the costs stated in Attachment
C. Payment will be due upon shipment for USCI or its sub-
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agent/authorized retailer, unless credit has been established.
GTE agrees to accept the return of any pager inventory that USCI
or its sub-agent/authorized retailer does not sell between sixty
(60) to ninety (90) days as long as the pagers are in new
condition. GTE, at its discretion, may take back product after
90 days.
4.5.4 Product will be billed net of activation or
including activation at the option of USCI. If the activation
fee of fifteen ($15) dollars is not billed with the product, USCI
will owe GTE fifteen ($15) dollars at the time of activation, or
at 90 days after the pagers have been invoiced but not activated.
GTE will be paid by USCI via a reduction of the commission due to
USCI on the 10th of each month.
ARTICLE V
COLLATERAL/MERCHANDISING
5.1 GTE will provide USCI and its sub-agent/authorized
retailer an on-going supply of necessary collateral (i.e.
post-sale fulfillment brochures).
5.2 Any advertising, collateral, merchandising, etc.
development that will be funded or partially funded by GTE must
be submitted to GTE for review and approval
prior to completion.
ARTICLE VI
PAGING SUPPORT
6.1 GTE will provide initial and follow-up training for USCI
or its sub-agent/authorized retailer sales personnel, Customer
service and support staff. USCI and GTE will mutually agree to a
training and implementation time line.
6.2 GTE will assign the services of an Agent Channel Manager
and an Account Specialist to assist USCI in the implementation of
paging services by USCI and in ongoing sales activities.
6.3 GTE will assist USCI in establishing a USCI real-time
activation process and
procedure.
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6.4 GTE will provide monthly reports reflecting activations
and payments of subscriber accounts owned by USCI.
ARTICLE VII
UNIT SALES OBJECTIVE
7.1 USCI agrees to provide an assigned GTE Account
Specialist with a six (6) month forecast of sales objectives on a
per-store basis. The forecast will be provided to GTE by USCI on
the first workday of each quarter. Forecasts will be product
specific and stated in terms of pagers to be sold. The forecast
will be used as a platform by GTE creating no liability or
contractual issues to USCI.
ARTICLE VIII
WARRANTY
8.1 USCI and its sub-agent/authorized retailer will offer
GTE's Standard Pager Warranty program. GTE will allow paging
Customers to return their pager within ten (10) days of purchase
for a full refund of their money, "no questions asked." Any
activation commissions paid by USCI or its sub-agents should be
refunded to USCI for those pagers returned under this section.
8.2 USCI .and its sub-agent/authorized retailer will return
all malfunctioning pagers to GTE's designated repair location.
All malfunctioning returned pagers that are within the
manufacturer's warranty will be credited to USCI or its sub-
agent/authorized retailer account. If USCI or its sub-
agent/authorized retailer return pagers that exceed
manufacturer's warranty and requests refurbishment, USCI or its
sub-agent/authorized retailer will then be responsible for all
refurbishment costs.
ARTICLE IX
PAGER SUPPLY
9.1 USCI or its sub-agent/authorized retailer shall order
pagers from GTE via a Purchase Order. The Purchase Order will
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include the GTE material code(s), quantity(s) requested,
applicable price(s), required delivery date(s), requested
shipping location(s) and applicable billing and reseller
information. The method of Purchase Order transmittal will be
mutually agreed upon.
ARTICLE X
SALES PROCESS REQUIREMENTS
10.1 USCI or its sub-agent/authorized retailer will tell
Customers that paging service is provided by GTE.
10.2 USCI or its sub-agent/authorized retailer will inform
Customer of paging network coverage area and explain all coverage
options.
10.3 USCI or its sub-agent/authorized retailer will explain
to Customers features, benefits and the unique advantages (such
as flexibility and upgradability) of the GTE Paging program.
10.4 USCI or its sub-agent/authorized retailer will explain
the use of the pager to Customer.
10.5 USCI or its sub-agent/authorized retailer will explain
the ongoing network charges.
10.6 USCI or its sub-agent/authorized retailer will provide
a 1-800 Customer service number to Customer.
10.7 USCI will transfer via facsimile the information on
Attachment E for prompt activation.
ARTICLE XI
NETWORK COVERAGE
11.1 GTE agrees to pursue expansion of network coverage in
accordance with the needs of USCI or its sub-agent/authorized
retailer and in consideration of the costs benefits of such
expansion. GTE agrees to represent their current coverage as
consistent with that shown on Attachment F. Coverage is subject
to overall expansion every quarter.
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ARTICLE XII
DISPUTE RESOLUTION PROCEDURES
12.1 The Parties desire to resolve disputes arising out of
this Agreement without litigation. Accordingly, except for
action seeking a temporary restraining order or injunction
related to the purposes of this Agreement or suit to compel
compliance with this dispute resolution process, the Parties
agree to use the following alternative dispute resolution
procedure as their sole remedy with respect to any controversy or
claim arising out of or relating to this Agreement or its breach.
12.2 At the written request of a Party, each Party will
appoint a knowledgeable, responsible representative to meet and
negotiate in good faith to resolve any dispute arising under this
Agreement. The Parties intend that these negotiations be
conducted by nonlawyer, business representatives. The location,
format, frequency, duration and conclusion of these discussions
shall be left to the discretion of the representatives. Upon
agreement, the representatives may utilize other alternative
dispute resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the
representatives for purposes of these negotiations shall be
treated as confidential information developed for purposes of
settlement, exempt from discovery and production, which shall not
be admissible in the arbitration described below or in any
lawsuit without the concurrence of all Parties. Documents
identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not so exempted
and may, if otherwise admissible, be admitted in evidence in the
arbitration or lawsuit.
12.3 If the negotiations do not resolve the dispute within
sixty (60) days of the initial written request, the dispute shall
be submitted to binding arbitration by a single arbitrator
pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. A Party may demand such arbitration in
accordance with the procedures set out in those rules. Discovery
shall be controlled by the arbitrator and shall be permitted to
the extent set out in this section. Each Party may submit in
writing to a Party, and that Party shall so respond, to a maximum
9
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<PAGE>
of any combination of thirty-five (35) (none of which may have
subparts) of the following: interrogatories, demands to produce
documents, and requests for admission. Each Party is also
entitled to take the oral deposition of one individual of another
party. Additional discovery may be permitted upon mutual
agreement of the Parties. The arbitration hearing shall be
commenced within sixty (60) days of the demand for arbitration.
The arbitration shall be held in the city where this Agreement
was accepted by GTE. The arbitrator shall control the scheduling
so as to process the matter expeditiously. The Parties may
submit written briefs. The arbitrator shall rule on the dispute
by issuing a written opinion within thirty (30) days after the
close of hearings. The times specified in this section may be
extended upon mutual agreement of the Parties or by the
arbitrator upon a showing of good cause. Judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction.
12.4 Each Party shall bear its own costs of these
procedures. A Party seeking discovery shall reimburse the
responding Party the costs of production of documents (to include
search time and reproduction costs). The Parties shall equally
split the fees of the arbitration and the arbitrator.
ARTICLE XIII
MISCELLANEOUS
13.1 Amendments Modifications and Supplements. Amendments,
modifications and supplements to this Agreement are allowed and
will be binding on the Parties after the effective date, provided
such amendments, modifications and supplements (1) are in
writing, signed by an authorized representative of both Parties,
and (2) by reference incorporate this Agreement and identify the
specific sections or clauses contained herein which are amended,
modified or supplemented or indicate that the material is new.
The term "this Agreement" shall be deemed to include any future
amendments, modifications and supplements. For purposes of this
Agreement, GTE's authorized representative is GTE's Vice
President-Sales or other designated representative .
13.2 Assignment. Neither Party may assign or delegate its
obligations under this Agreement without the prior written
consent of the other.
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13.3 Attorneys' Fees. Except as set forth in Article XII,
in the event any Party to this Agreement shall be required to
initiate legal proceedings (i) to interpret or to enforce
performance of any term or condition of this Agreement; (ii) to
enjoin any action prohibited hereunder; or (iii) to gain any
other form of relief whatsoever, the prevailing Party shall be
entitled to recover such sums, in addition to any other damages
or compensation received, as will reimburse the prevailing Party
for reasonable attorneys' fees and court costs incurred on
account thereof notwithstanding the nature of the claim or cause
of action asserted by the prevailing Party.
13.4 Audit. USCI will be given the right to audit
subscriber accounts belonging to USCI at their free will.
13.5 Compliance with Laws and Regulations. The Parties
shall comply with all federal, state and local laws and
regulations applicable to their performance as described in this
Agreement.
13.6 Confidentiality. Considering the possible exchange of
proprietary information between GTE and USCI and the desire of
both GTE and USCI to maintain the confidentiality of these
opportunities, GTE and USCI will execute confidentiality
agreements with respect to any and all discussions, negotiations,
and/or communications relating to USCI being a
Marketing/Processing Agent on behalf of GTE. Both partners will
exercise a reciprocal confidentiality and non-disclosure clause
pertaining to this contract.
13.7 Consent. Where consent, approval or mutual agreement
is required of a Party, it shall not be unreasonably withheld or
delayed.
13.8 Default. If either Party refuses or fails in any
material respect properly to perform its obligations under this
Agreement, or violates any of the material terms or conditions of
this Agreement, such refusal, failure or violation shall
constitute a default. In such event, the nondefaulting Party may
so notify the other Party in writing of the default and allow
that Party a period of thirty (30) calendar days to cure such
default. If the defaulting Party does not cure such default
within said thirty (30) calendar days, the nondefaulting Party
shall have the right to terminate this Agreement upon written
notice to the other Party.
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13.9 Force Majeure. In the event performance of this Agreement,
or any obligation hereunder, is prevented, restricted or
interfered with by reason of acts of God, wars, revolution, civil
commotion, acts of public enemy, embargo, acts of the Government
in its sovereign capacity, labor difficulties, including without
limitation, strikes, slowdowns, picketing or boycotts,
unavailability of equipment from vendor, or any other
circumstances beyond the reasonable control and without the fault
or negligence of the Party affected, the Party affected, upon
giving prompt notice to the other Party, shall be excused from
such performance on a day-to-day basis to the extent of such
prevention, restriction, or interference (and the other Party
shall likewise be excused from performance of its obligations on
a day-to-day basis until the delay, restriction or interference
has ceased), provided, however, that the Party so affected shall
use its best reasonable efforts to avoid or remove such causes of
nonperformance and both Parties shall proceed whenever such
causes are removed or cease. If performance is prevented,
restricted or interfered with for a period of thirty (30) or more
continuous days, the Party affected may terminate this Agreement
upon written notice to the other.
13.10 Governing Law. This Agreement shall be governed by
and interpreted or construed in accordance with the domestic laws
of the state of Georgia and shall be subject to the exclusive
jurisdiction of the courts therein.
13.11 Headings. The headings in this Agreement are inserted
for convenience and identification only and are in no way
intended to define or limit the scope, extent or intent of this
Agreement or any of the provisions hereof.
13.12 Independent Contractor Relationship. The persons
provided by each Party shall be solely that Party's employees and
shall be under the sole and exclusive direction and control of
that Party. They shall not be considered employees of the other
Party for any purpose. Each Party shall remain an independent
contractor with respect to the other and shall be responsible for
compliance with all laws, rules and regulations involving, but
not limited to, employment of labor, hours of labor, health and
safety, working conditions and payment of wages. Each Party
12
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shall also be responsible for payment of taxes, including
federal, state and municipal taxes, chargeable or assessed with
respect to its employees, such as, Social Security, unemployment,
Workers' Compensation, disability insurance, and federal and
state withholding. Each Party shall indemnify the other for any
loss, damage, liability, claim, demand or penalty that may be
sustained by reason of its failure to comply with this provision.
The Party seeking indemnification under this provision shall be
the "Indemnified Party" and the Party against whom
indemnification is sought under this provision shall be the
"Indemnifying Party." The Indemnifying Party shall defend, with
counsel of its choosing, any action or suit brought against the
Indemnified Party for any loss, cost, claim, liability, damage,
expense or demand asserted by or on behalf of any person, firm,
corporation, or governmental authority by reason of the failure
of the Indemnifying Party, its directors, officers, employees,
agents, or contractors to comply with this provision. The
Indemnified Party shall notify the Indemnifying Party promptly,
in writing, of any claims, lawsuits, or demands for which the
Indemnified Party alleges that the indemnifying Party is
responsible under this section. The Indemnifying Party shall be
relieved of liability hereunder to the extent it is prejudiced by
the indemnified Party's failure to give prompt notice. The
Indemnifying Party shall also be relieved of liability hereunder
for settlement by the Indemnified Party of any claim, demand, or
lawsuit, unless the Indemnifying Party has approved the
settlement in advance or unless the defense of the claim, demand,
or lawsuit has been tendered to the Indemnifying Party in writing
and the Indemnifying Party has failed promptly to undertake the
defense.
13.13 Insolvency. Either Party may terminate this Agreement
by notice, in writing, if the other Party admits insolvency,
makes an assignment for the benefit of creditors, or has a
trustee or receiver appointed over all or any substantial part of
its assets.
13.14 Notices. Any notice to any of the parties required or
permitted under this Agreement shall be deemed to have been
received on the date of service if served personally on the party
to whom notice is to b e given, on the date receipt is
acknowledged in writing by the recipient if delivered by regular
mail, or on the date stated on the receipt if delivered by
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certified or registered mail or by a courier service which
obtains a written receipt. Any notice shall be delivered using
one of the alternatives mentioned in this section.
For the purposes of this Agreement, notices and
communications to the Parties hereunder shall be directed to the
addresses indicated below and such addresses shall be deemed to
be the most recent address of the addressee and shall remain so
until written notice of a change of address is provided to the
other Party by the party whose address has changed.
If to GTE GTE Telephone Operations
General Manager-Public Communications
600 Hidden Ridge
Irving, TX 75015-2092
If to USCI US Communications, Inc.
Chairman
6140-C Northbelt Pkwy.
Norcross, GA 30071
13.15 Severability. If any term, provision, covenant, or
condition of this Agreement is held by a court or regulatory body
of competent jurisdiction to be invalid, void, or unenforceable,
the rest of the Agreement shall remain in full force and effect
and shall in no way be affected, impaired, or invalidated unless
removal of that provision results in a material change to the
Agreement. In such a case, the parties will negotiate in good
faith for replacement language. If unsuccessful in this, either
party may terminate the Agreement.
13.16 Trademarks and Trade Names. Except as specifically
set out in this Agreement, nothing in this Agreement shall grant,
suggest or imply any authority for one Party to use the name,
trademarks, service marks or trade names of the other for any
purpose whatsoever.
13.17 Waiver. Any waiver of the terms and conditions of
this Agreement may be made by either Party with oral notice to
the other. However, for any waiver to be binding, it must be
reduced to writing and signed by both Parties within ten (10)
business days of oral notice. No waiver of the terms of this
Agreement or failure by either Party to this Agreement to
exercise any option, right or privilege on any occasion or
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through the course of dealing, shall be construed to be a waiver
of any subsequent breach or of any option, right or privilege on
any subsequent occasion.
13.18 Entire Agreement. Except for written amendments,
supplements or modifications made after the execution of this
Agreement, this Agreement represents the entire agreement between
the Parties hereto with respect to the subject matter of this
Agreement and supersedes all prior negotiations, representations
and agreements, either oral or written.
IN WITNESS WHEREOF, the Parties have executed this Agreement
on the date or dates indicated below to be effective on the date
first written above.
By: GTE By: U.S. COMMUNICATIONS, INC.
By: /s/ Clarence F. Bercher By: /s/ Bruce A. Hahn
Name: Clarence F. Bercher Name: Bruce A. Hahn
Title: President-Consumer Markets Title: CEO
Date: 6/20/95 Date: 6/21/95
APPROVED AS TO FORM:
/s/ James A. Davis
Attorney, GTE Telephone Operation
Date: 6/20/95
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ATTACHMENT A
1) $20.00 activation commission per pager activated for which
full payment is received by GTE from customer.
2) $1.00 per month residual per pager, upon full customer
payment for the life of the subscriber unless this contract
is terminated (see 2.2). This amount will be paid on the
10th of each month for all subscribers billed during the
prior month, with a report of all active pager subscribers
and a separate year to date summary of deactivated
subscribers with the start and termination date.
3) $2.00 Coop/MDF per pager sold to be paid with the activation
commission.
4) $10.00 bonus per pager still in service after one year, and
an additional $10.00 bonus per pager still in service after
the second year. If the customer selects the annual payment
option, payment to USCI will be made upon receipt of payment
from the customer by the 10th of the month following the
annual advance payment or on the 10th of the month of the
13th and 25th month following the final annual payment from
the subscriber for the first and second year.
5) Quantity bonus based on customers in service during one
fiscal year. Amount to be paid on the 10th of the following
month. The first fiscal year begins on the signing of this
contract.
<TABLE>
<CAPTION>
BONUS PER
UNITS PAGER
<S> <C>
100,000 $0.50
200,000 $1.00
300,000 $1.50
400,000 $2.00
500,000 $2.50
/TABLE
<PAGE>
<PAGE>
ATTACHMENT B
USCI agrees to sell GTE paging services at the monthly rates
below with prepayment of network in advance:
<TABLE>
<CAPTION>
QUARTERLY YEARLY
<S> <C> <C>
Local $ 8.95 $ 6.95
State $14.95 $12.95
Regional $24.95 $21.95
National $37.95 $34.95
Voice Mail
Small Talk $ 4.95 $ 4.95
Standard $ 6.95 $ 6.95
Executive $ 9.95 $ 9.95
Personal 800# $10.00 $10.00
Page Recall $ 2.00 $ 2.00
Custom Greeting $ 2.00 $ 2.00
Personal Pager Protection $ 2.00 $ 2.00
/TABLE
<PAGE>
<PAGE>
ATTACHMENT C
<TABLE>
<CAPTION>
Total
Part Equipment Activation Retail Suggested
Description Number Cost Fee Cost Cost Price
<S> <C> <C> <C> <C> <C>
Bravo Plus (Black) 381597 $ 55.00 $15.00 $ 70.00 $109.95
Lifestyle Plus (Smoke) 384789
Lifestyle Plus (Ice) 384280
Lifestyle Plus (Ultra Violet) 384291
Lifestyle Plus (Totally Teal) 384292
Lifestyle Plus (Bimini Blue) 385775
Advisor Will be provided $140.00 $15.00 $155.00
Bravo Express $ 60.00 $ 75.00
Encore S 68.00 $ 83.00
Memo Express $100.00 $115.00
Renegade $ 45.00 $ 60.00 $ 89.95
Ultra Express $ 65.00 $ 80.00
Uniden XLT (Black) 387140 $ 55.00 $15.00 $ 70.00 $ 99.95
Uniden XLT (Clear) 387141
Uniden XLT (Blue) 387142
Uniden LS (Black) 404372 $ 48.00 $15.00 $ 63.00 $ 84.95
/TABLE
<PAGE>
<PAGE>
ATTACHMENT D
1) For a minimum of six promotions (7 days each), GTE and USCI
agree to waive the customer's network fee for one month of
paging service if the customer prepays for a year of
service. USCI agrees to subsidize GTE $4.00 every time the
network fee is waived. The $4.00 will be deducted from
USCI's commission.
2) GTE agrees to do a two-month network waiver as a test (one
promotion of seven days). That is, GTE and USCI agree to
waive the customer's network fee for two months of paging
service if the customer prepays for a year of service. USCI
agrees to subsidize GTE $4.00 each for the first and second
months which will be deducted from USCI's commission.
3) GTE and USCI will discuss and come to agreement on six other
network promotions to be determined (7 days each).
<PAGE>
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ATTACHMENT E
Following is the information required to activate and bill for
paging service.
CUSTOMER INFORMATION
Name
Billing Address
Billing Telephone Number
SSN or Drivers License Number
(Used for customer verification)
FOR ACTIVATION
Cap Code
Service required (Coverage/VMX/PPP/800#/etc.)
Coverage area (Local - DFW, State - TX, etc.)
Billing Interval (Quarterly or Annual)
<PAGE>
<PAGE>
ATTACHMENT F
(National/Regional Coverage Map)<PAGE>
<PAGE>
ATTACHMENT G
USCI ACCOUNTS
Best Products
CompUSA
Kmart
Lowe's
Media Play
Meijer's Inc.
Office Max
OSCO
QVC
Service Merchandise
Target
Walgreen's
EXHIBIT 10.23
KIOSK PROGRAM AGREEMENT
THIS KIOSK PROGRAM AGREEMENT (the "Agreement") is entered
into this 10th day of October, 1996, between WIRELESS
COMMUNICATIONS CENTERS, INC. ("WCCI"), a Delaware corporation
with its principal place of business at 6140-C Northbelt Parkway,
Norcross, Georgia 30071, and SERVICE MERCHANDISE COMPANY, INC., a
Tennessee corporation with its principal place of business at
7100 Service Merchandise Drive, Brentwood, Tennessee 37027
("Retailer").
RECITALS
WCCI provides certain wireless telecommunications (PCS,
voice and data, but excluding paging services) services
("Service") within the areas set forth in Exhibit A ("Area").
WCCI also sells cellular telephones, mobile end stations,
wireless modems, and related equipment to enable use of the
Service ("Equipment"), when available, to potential subscribers
to Service in the Area. WCCI desires to sell Service and
Equipment to Retailer's customers who become subscribers to
Service ("Subscribers") and to obtain an exclusive right to offer
such Equipment (subject to the exceptions stated in paragraph
3.b.) and Service to Subscribers from portable kiosks owned and
maintained by WCCI ("Kiosks") and located in Retailer's retail
locations listed in Exhibit B attached hereto ("Locations")
subject to WCCI and/or Retailer being able to terminate any
existing Cellular Service Agreement for each Location. Retailer
desires to permit the use of Kiosks within its locations.
1. Kiosks
a. Placement. Retailer hereby grants to WCCI an
exclusive right to install and occupy Kiosks and to offer and
obtain orders for Equipment and Service from Kiosks within its
Locations, in accordance with the terms of this Agreement.
Retailer agrees that it will allocate visible and accessible
space, reasonably acceptable to WCCI and no smaller than six feet
by eight feet (provided the particular Location has adequate room
as determined by Retailer), within each of the Locations for
purposes of placement of Kiosks, and will provide access to
available lighting, power, telephone lines and work space
surrounding the Kiosks for WCCI representatives ("Kiosk
Representatives") to demonstrate and conduct transactions
<PAGE>
<PAGE>
relating to the sale of Equipment and Service. Actual size of
Kiosks for Locations shall be mutually determined on a store by
store basis based on each store fixture planogram, before
construction is commenced. WCCI shall obtain and pay for any
additional telephone and power line installations required, and
shall pay for any necessary additional equipment and monthly
service charges for such power and telephone service. Any such
costs incurred by Retailer relating to the power and telephone
installments shall be reimbursed by WCCI within 30 days from date
of Retailer's invoice. Each Kiosk may be moved within each
Location no more than once in every calendar year, unless
otherwise agreed by the parties. Retailer shall permit WCCI to
install signs or banners at each Location of a type to be
mutually agreed by the parties at the expense of WCCI. The
Kiosks shall be a type which shall be approved in advance by
Retailer and occupy a space having dimensions not greater than
that noted for each store in Exhibit B. WCCI shall be
responsible for maintaining the Kiosks and for keeping the Kiosks
clean.
b. Kiosk Installation and Commencement of Operation
Schedule. Exhibit B to this Agreement contains dates for
completion of the Kiosk installation and commencement of
operation of the Kiosk for each of Retailer's stores listed.
The parties acknowledge and agree that such dates are projections
based on the best information available at the time of signing
this Agreement and are subject to change. Notwithstanding, WCCI
agrees to have at least the following number of Kiosks installed
and operational by the noted dates:
<TABLE>
<CAPTION>
Stores Installation Commencement of
With Kiosks Completion Date Operations Date
<S> <C> <C>
20 October 31, 1996 November 15, 1996
25 January 31, 1997 February 15, 1997
25 February 28, 1997 March 15, 1997
25 March 31, 1997 April 15, 1997
25 April 30, 1997 May 15, 1997
</TABLE>
No further Kiosks are to be installed unless approved in writing
by Retailer. Upon notification by Retailer of its intention to
terminate contract with a third party cellular carrier, in any
market (other than AT&T markets), WCCI shall advise Retailer in
writing of its acceptance of such market. Upon such acceptance,
Retailer shall give WCCI sixty (60) days notice prior to the
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effective date of such contract termination during which period
Retailer shall make available space for installation of Kiosks in
each retail location in such market, it being the intent of the
parties that there shall be no interruption in available carrier
service.
c. Inventory Receiving Procedures. Retailer shall
develop and provide procedures for Retailer store employees and
Kiosk representatives to follow when Equipment inventory is
received in a Retailer store.
d. Additional Retail Locations. In the event that
Retailer desires to offer Service and/or Equipment through kiosks
in any of Retailer's retail stores not included in this Agreement
(including any stores opened subsequent to the date hereof)
located in an area in which AT&T does not offer cellular services
at such time, then WCCI shall have the right to install and
occupy such Kiosks under the terms of this Agreement, subject to
Retailer's existing legal obligations to current carriers.
2. Kiosk Staffing
a. Hiring. WCCI will be responsible for staffing the
Kiosks with Kiosk Representatives during all regular business
hours of each Location, up to a maximum of eighty (80) hours per
week. For Retailer stores with kiosks having an area of 24
square feet or less (external dimensions), the minimum number of
hours per week that the kiosk must be staffed by WCCI shall be
reduced to sixty (60), ninety (90) days following initial
commencement of operation. However, all kiosks shall be staffed
eighty (80) hours per week during the period from November 15
through December 31 each year. WCCI will be responsible for
arranging, directly or through third-party employers, for all
screening, hiring, termination, compensation, workers'
compensation, disability and taxes applicable to persons staffing
the Kiosks. Kiosk Representatives shall wear clothing and name
tags which identify them as employees of WCCI and distinguish
them from Retailer employees, and shall not act or present
themselves as employees or agents of Retailer. Kiosk
Representatives shall adhere to the policies of Retailer
concerning security, dress (except as noted above) and deportment
and shall follow the directions of Retailer's managers regarding
these matters. Retailer shall have the opportunity to interview
all potential Kiosk Representatives after they have
satisfactorily completed WCCI's interview and selection process
(prior to hiring), and shall provide approval, not to be
unreasonably or untimely withheld, prior to conveyance of an
offer.
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b. Termination. In the event Retailer or WCCI becomes
dissatisfied with the conduct or performance of any Kiosk
Representative, then both Retailer and WCCI agree to cooperate in
good faith to review the relevant facts and issues in a timely
manner, and to mutually agree on the appropriate action to be
taken, which may include disciplinary action, switching of stores
or termination. Due consideration shall be given to the
recommendations of Retailer and Retailer's store management as to
the actions to be taken and the need to have competent,
professional Kiosk Representatives to serve the best interests of
Retailer and WCCI. Notwithstanding, after completion of the
above procedures, Retailer shall have the right, at its sole
discretion, on no less than one (1) business day's prior written
notice, to require WCCI to replace a particular Kiosk
Representative and not use this person at any other Location.
Retailer shall include in the notice described in the preceding
sentence the grounds for removal of such Kiosk Representative .
3. Fulfillment
a. Service. At Kiosks, WCCI representatives will: (i)
explain to customers the types of Service plans available; (ii)
explain and help customers complete the appropriate subscriber
agreement for the Service plan chosen; (iii) perform all
necessary credit checks; (iv) process all necessary deposits; and
(v) arrange for activation of Equipment; and (vi) provide
customer care service after activation of Subscribers. All
rates, terms and conditions of Service shall be set by WCCI's
approved carrier in its sole discretion. WCCI shall use its
best efforts to have all activations completed and tested at the
Kiosk, prior to completion of the transaction provided, however,
if the Subscriber desires off-site activation, WCCI shall have
the right to use its- "RAP" System for activation by the
Subscriber. Kiosk Representatives shall promote the availability
of on-site activation and only offer the "RAP" System in response
to a request to activate at a later time or due to the inability
of the local carrier to enable on-site activation. WCCI shall
make available from the Kiosk at each Location all service rate
plans which it or its carrier makes available in the Area for
such Location. WCCI agrees to accept returns of cellular
telephone equipment purchased from Retailer prior to the
effective date of this Agreement. Such returns shall be handled
by WCCI either refunding to the customer the amount of the
original purchase or providing replacement equipment, at the
customer's election, subject to the customer providing an
original sales receipt and that the request for refund or
exchange is not more than thirty (30) calendar days after the
original date of purchase. The parties shall mutually agree on
the procedure to follow for compensation and/or return between
each other, for such customer returns/exchanges on a product by
product basis.
4<PAGE>
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b. Equipment. (i) WCCI, through its Kiosk
Representatives, will offer to sell and sell Equipment from the
Kiosks. At all times prior to sale of the Equipment to a
Subscriber, all rights and title to the Equipment shall vest with
WCCI and WCCI shall have all rights and title to the proceeds of
the sale of Equipment. The retail price and models of Equipment
to be sold shall be determined by WCCI and WCCI shall use its
best efforts to offer competitive prices in the markets for each
Location. From the date of this Agreement through September 31,
1997, WCCI shall sell from the Kiosks all Equipment, if
available, advertised in Retailer's 1996-1997 merchandise catalog
to be sent to Retailer's customers in the summer of 1996. Upon
the request of Retailer, WCCI shall provide Retailer with
information regarding Equipment and Equipment retail prices so
that such information may be included in advertising mailers sent
by Retailer. Upon any renewal of this Agreement, the obligation
of WCCI to sell Equipment advertised by Retailer in its Annual
merchandise catalog shall continue and apply to WCCI for
corresponding times for each subsequent Annual Catalog. In the
event WCCI is unable to purchase Equipment advertised by
Retailer, or unable to purchase such Equipment at competitive
prices, Retailer, to the extent it has sufficient inventory,
shall sell such Equipment to WCCI in limited quantities at
Retailer's direct cost (including purchase price and other costs
directly relating to purchase, shipment and warehousing), on net
due 30 days terms. Retailer shall have the right to require
WCCI not to carry Equipment in Kiosks from a particular
manufacturer's supplier. WCCI shall comply with any such
request within ninety (90) days from receipt. Notwithstanding
anything in this Agreement to the contrary, Retailer shall have
the right to sell products related to cellular telephones, PCS,
mobile end stations, and wireless modems, such as, but not
limited to, accessories thereto, if such were offered by Retailer
at the time this Agreement was signed or if not carried by WCCI
for resale. Retailer agrees not to restock such products in any
Retailer Stores where Kiosks are operational if such products are
carried by WCCI in such stores.
(ii) WCCI also agrees to purchase Retailer's current
inventory in each location at the time its respective kiosk
operation commences. The purchase price shall be that indicated
in the list attached to this Agreement as Exhibit F. Payment
terms for such inventory purchased shall be 50% of purchase price
due thirty days from the date WCCI first commences operations of
the applicable KIOSK, and the remaining 50 percent due thirty
days thereafter.
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c. Subscriber Inquiries. Retailer shall refer all
inquiries from Subscribers or potential Subscribers regarding the
Service or Equipment, including, but not limited to, customer
care and Equipment return inquiries, to WCCI.
d. Sales Tax and Charge Card. WCCI shall be responsible
for receiving all payments from Subscribers for any required
security deposits and for Equipment sold by WCCI from the Kiosks
and for collecting and remitting any applicable sales taxes.
WCCI shall also accept the Service Merchandise charge card for
payment by Subscribers for Equipment and any required security
deposit. WCCI shall be liable for any chargebacks of the
purchase price for failure to obtain or retain the customer's
signature or to otherwise follow the required procedures of Bank
One in accepting the Service Merchandise Charge Card.
e. WCCI Contact Persons. WCCI hereby designates the
following persons for primary contact for communications on the
listed subjects:
Payment of fees to Retailer: Judanne Tyne
Personnel Issues: Linda Florenzie or Jim Dunnavant
WCCI shall notify Retailer in writing of any changes in the above
designations.
4. Term and Termination
a. Term. The initial term of this Agreement shall begin
on the date of this Agreement and extend through January 31,
1998, unless earlier terminated by either party in accordance
with this Agreement. This Agreement shall automatically renew
for additional one-year terms unless either party gives the other
party written notice of its intent not to renew at least sixty
(60) days prior to the end of the then current term. However,
after the initial term, either party may terminate this Agreement
at any time with or without cause by providing sixty (60) days'
prior written notice, except that termination by either party
pursuant to this provision shall not be effective during the
months of October, November and December of each year.
b. Termination. This Agreement may be terminated by
either party, immediately upon the sending of a written notice to
the other party for any of the following reasons: (i) a breach by
one party which the other party does not fully cure within thirty
(30) days after the non-breaching party sends the breaching party
a written notice of the breach, (ii) the commission of any
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illegal act or the filing of any criminal indictment or
information against either party of its officers or directors who
have any participation in matters relating to this Agreement, or
(c) the insolvency of either party, either party becoming the
subject of a petition in bankruptcy, the appointment of a
receiver for either party's business, or the entry by either
party into any arrangement with or assignment for the benefit of
creditors.
c. Kiosk Removal. Upon receipt of any notice of
termination or intent not to renew, the parties shall cooperate
in effecting a prompt and orderly removal of the Kiosks and
Equipment and related materials from all Locations immediately
after termination of the Agreement.
d. Equipment Returns. After termination of this
Agreement, if Retailer elects to accept returns of Equipment from
Subscribers, Retailer shall refund Subscribers the amount paid to
WCCI, and WCCI shall reimburse Retailer for the amount of such
refunds plus return shipping charges within fifteen (15) days
following receipt of an invoice from Retailer provided such
returns were received within thirty (30) days following date of
purchase by the subscriber. Retailer shall ship returned
Equipment to WCCI, freight prepaid, FOB origin, within fifteen
(15) days following receipt of payment from WCCI for the refunds.
5. Compensation, Letter of Credit, Audit Rights
a. Fees. As compensation for the rights granted in this
Agreement to sell Service from Kiosks, WCCI agrees to pay to
Retailer a Program Fee ("Program Fee") and other fees according
to the terms of Exhibit C attached to this Agreement. WCCI may
amend Exhibit C upon ninety (90) days' prior written notice to
Retailer. In the event the Program Fee is amended by WCCI so
that the reduction during the initial term or any renewal term is
ten percent (10%) or greater, Retailer may terminate this
Agreement upon thirty (30) days' prior written notice to WCCI
provided Retailer sends such notice no more than fifteen (15)
days after Retailer receives notice of the amendment to
Exhibit C, upon which such termination is based.
b. Letter of Credit. WCCI agrees to immediately obtain
and continue to maintain for the benefit of Retailer, an
irrevocable letter of credit in an amount equal to the amount
owed under this Agreement plus applicable late payment charges,
rounded up to the nearest $10,000, in the event WCCI becomes more
than ten (10) days past due for any amounts owed to Retailer
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under this Agreement. The terms of the letter of credit shall
permit Retailer to obtain payment from the issuing bank the
amount of Program Fees and other fees due to Retailer pursuant to
Exhibit C and any other amounts due by WCCI to retailer under
this Agreement, when WCCI is greater that ten (10) days past the
due dates specified in this Agreement. The letter of credit
shall conform to the terms of that attached hereto as Exhibit D,
or as otherwise agreed to by the parties in writing. In the
event Retailer draws on the letter of credit, WCCI shall pay to
the issuing bank the amount necessary to return the amount of the
letter of credit to its original amount, and provide any
additional documentation necessary to verify to Retailer that
such has occurred: After termination or expiration of this
Agreement, upon payment by WCCI of all amounts owed by WCCI to
Retailer under this Agreement, Retailer shall so notify the
issuing bank in writing that all such obligations have been
satisfied by WCCI and that the Letter of Credit may be canceled.
c. Late Payment Charges. Amounts owed by WCCI to
Retailer under this Agreement which remain unpaid in excess of
thirty days following the due date, shall automatically incur a
late payment charge equal to the prime rate for the Chase
Manhattan Bank as of the date invoiced, plus two (2) percentage
points, per month.
d. Reports. WCCI agrees to timely provide to Retailer,
the reports listed in Exhibit E, in accordance with the time
periods designated and to the attention of the persons designated
therein. Such reports shall list the full name, address, land
line telephone number and cellular telephone number for each
subscriber. WCCI shall also make available to Retailer by means
of electronic data interchange or other electronic means of
communication, data for all transactions which occur through each
Kiosk on a daily basis. Such data shall contain sufficient
detailed information to enable verification in an independent
audit by or on behalf of Retailer that all transactions have been
correctly recorded and Retailer has been paid the correct amounts
by WCCI.
e. Audits. Retailer may audit WCCI's records at any
KIOSK and at its corporate operations headquarters (as well as
any central location used by WCCI to maintain its records) to
confirm WCCI's compliance with this Agreement. Such an audit
(a) may occur no more than two (2) times in any calendar year,
(b) requires one week's prior written notice to WCCI, (c) may
include only such records as are reasonably necessary to confirm
WCCI's compliance with its obligations under this Agreement, and
(d) shall be made at Retailer's expense. In the event the
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results of any audit show that WCCI owes Retailer more than
$1,000 from transactions occurring more than 60 days prior to the
audit, exclusive of amounts in dispute which WCCI has previously
notified Retailer, then in addition to paying the amount owed,
WCCI shall pay Retailer for its cost of the audit. The
provisions of this Audit Paragraph shall survive termination of
this Agreement.
f. Record Retention. WCCI shall maintain, at its own
expense, a disaster recovery plan which includes off-site storage
of records, data and equipment necessary for it to perform under
this Agreement in the event of a disaster at its principal
operational location.
g. Financial Disclosures. (i) Within sixty (60) days
after the close of each quarterly accounting period in each
fiscal year of USCI, Inc. other than the last such quarter of
any fiscal year, WCCI shall furnish to Retailer the consolidated
balance sheet of USCI, Inc. as at the end of such quarterly
period and the related consolidated statements of income and
sources and uses of cash for such quarterly period and for the
elapsed portion of the fiscal year ended with the last day of
such quarterly period. In each case the comparative figures for
the related period in the prior fiscal year shall be set forth
and certified by the chief financial officer of USCI, Inc. as
being prepared to the best of his knowledge, in accordance with
GAAP consistently applied, subject to normal year-end audit
adjustments and provided that such statements may omit footnote
disclosures required by GAAP.
(ii) Within one hundred twenty (120) days after the
close of each fiscal year for USCI, Inc., WCCI shall furnish to
Retailer the consolidated and consolidating balance sheets of
USCI, Inc. through the end of such fiscal year and the related
consolidated and consolidating statements of income and retained
earnings and cash flows for such fiscal year. In each case
comparative figures for the preceding fiscal year shall be set
forth. The consolidated financial statements shall be certified
by independent certified public accountant of recognized regional
or national standing acceptable to Retailer, and include a report
by such accounting firm stating that the audit was conducted in
accordance with GAAP consistently applied. It shall also be
certified by the chief financial officer of USCI, Inc.
6. Representations and Warranties
Both parties agree that they will adhere strictly to the
highest standards of fair dealing and business conduct, that they
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will timely cooperate with the other party in implementation and
operating under the terms of this Agreement, and that both shall
refrain from any business practice, promotion, or advertising
which may be injurious to the business or goodwill of either.
7. Service Marks, Trademarks and Trade Names/Advertising
a. Marks. Neither party will use any of the service
marks, trademarks, or trade names (collectively the "Marks") of
the other party without such party's prior written consent and
only under the terms of any such consent; provided, however, that
WCCI may use, without Retailer's consent, Retailer's name and
address in promotional materials and advertising for the purpose
of informing potential subscribers of locations at which Service
may be purchased. Each party will comply with all rules and
procedures pertaining to the Marks prescribed by the owner of
such Marks as may be amended from time to time (collectively the
"Rules"). Any unauthorized use of the Marks will constitute a
material breach of this Agreement. Upon termination of this
Agreement, each party will immediately discontinue any use of the
other party's Marks.
b. Advertising. Any advertising by WCCI relating to the
offer of Service and for Equipment through KIOSKS shall include
specific Retailer store locations and shall first be approved in
writing by Retailers. Retailer agrees to use its best efforts
to review and provide notice of approval or disapproval by the
end of the second business day following receipt of each
advertisement from WCCI.
8. Exclusivity
a. Non-Compete. Retailer agrees that at all times during
the term of this Agreement, neither it nor its personnel shall
directly or indirectly offer Services or assist customers in
obtaining Services through any competitor of WCCI in the Area,
including, but not limited to, competitors of WCCI or WCCI's
affiliates providing cellular telephone service (either voice or
data), enhanced specialized mobile radio service, personal
communications service, or any other similar situated voice
radiotelephone or wireless data service ("Competitor").
Similarly, Retailer shall not permit any Competitor to directly
or indirectly solicit customers from any Location. To the
extent a court of competent jurisdiction determines provisions of
this paragraph to be unenforceable as written, Retailer and WCCI
authorize such court to construe and interpret this paragraph as
broadly as possible. The parties acknowledge and agree that the
exclusivity requirements in this Agreement shall not apply to
one-way messaging/paging or two-way messaging/paging services,
except where supported by a cellular network.
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b. Failure to Provide Service. Notwithstanding, in the
event WCCI fails to provide Service for one or more Locations for
a period of time extending beyond two or more calendar days, in
addition to any other remedies Retailer may have against WCCI,
Retailer shall have the right to unilaterally enter into an
agreement with a replacement Service provider for such
Location(s) and to delete such Location(s) from Exhibit B to this
Agreement by providing written notice to WCCI, provided however,
that WCCI shall not be obligated to process activations from such
Location(s) for any such replacement Service providers. In such
event, no exclusivity or non-compete provisions stated in this
Agreement shall be applicable to the Area(s) for the Location(s).
c. Other Services. If Retailer desires to offer or have
offered other wireless communications services (other than
paging) through its stores, which are not then being offered by
WCCI, WCCI shall have the right to match the terms offered to
Retailer by any other entity. If WCCI does match the terms,
WCCI shall receive the right to offer such additional service
through its kiosks in accordance with the terms of this Agreement
and the fee schedule agreed to at that time. If WCCI elects not
to match such terms, then Retailer may contract with such third
party and offer services of the third party through Retailer's
stores.
9. Non-Diversion of Subscribers
During the term of this Agreement and for a period of one
year after termination of this Agreement, Retailer shall not at
any time (i) specifically request any Subscriber of WCCI whom
Retailer knows to be a Subscriber of WCCI, to cancel or curtail
its business with WCCI, or (ii) otherwise solicit, divert or
attempt to divert any such Subscriber from doing business with
WCCI. Notwithstanding, Retailer's continuing to advertise by
mailing advertisements similar to those currently distributed, to
its mailing lists, shall not be considered in violation of this
paragraph.
10. Confidentiality
a. General. Each party (the "Receiving Party") covenants
and agrees that, both during the term of this Agreement and for
two years thereafter, it shall not use or disclose.to any person
or entity any Confidential Information of the other party (the
"Disclosing Party"), shall not in any other way publicly or
privately disseminate any Confidential Information, and shall not
help anyone else to do any of these things, unless required to do
so by law. "Confidential Information" shall mean all
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information disclosed by the Disclosing Party to the Receiving
Party, not generally known to the public, that relates to the
business or subscribers of either party, provided it is
identified as being "Confidential". All Confidential
Information shall be considered trade secrets of the Disclosing
Party and the Receiving Party shall treat such Confidential
Information as it would treat its own Confidential Information.
In the event of disclosure of Confidential Information by the
Receiving Party, the Receiving Party shall be liable for direct
damages and shall not be liable for any consequential damages.
b. Subscriber List. WCCI shall provide Retailer with the
names, addresses, and phone numbers of persons who purchase
Equipment within each Location. This information shall be
considered Confidential Information of WCCI and Retailer shall
also have the right to add this information to its customer
database and use it in the same manner as it uses other names and
addresses in this database, provided Retailer does not use such
information, either during the term of this Agreement or for one
year thereafter, to solicit Subscribers to wireless
communications services offered by any competitor of WCCI as set
forth in section 9 above.
11. Relationship of Parties
In all dealings within the scope of this Agreement, both parties
acknowledge and agree that the relationship created hereby is
that of independent contractors and is not and will not be deemed
to be of any other relationship, including, without limiting the
generality of the foregoing, that of joint ventures, joint
employers, principal and agent, or partnership. Nothing in this
Agreement shall be construed to confer any right on one party to
incur any legal obligation on behalf of the other party. WCCI
has not paid and will not be required to pay any franchise fees
or equivalent fee to sell the Equipment or Service from the
Kiosks, nor does this Agreement create any franchise between the
parties.
12. Miscellaneous
a. Governing Law. This Agreement shall be governed by
the laws of the State of Tennessee. The determination by any
court, agency or other governmental instrumentality that any
provision of this Agreement is invalid or unenforceable shall not
invalidate any other provision of this Agreement
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b. Waivers. The rights of the parties under this
Agreement are cumulative. No waiver of any covenant, condition
or limitation contained in this Agreement shall be valid unless
agreed to in writing and signed by an authorized representative
of each party.
c. Regulatory Matters. This Agreement shall at all times
be subject to (1) changes or modifications to comply with, and
(2) any necessary approvals of local, state and federal
regulatory agencies having jurisdiction over the offering or
provision of Service. Retailer shall take no action
inconsistent with any efforts by WCCI before regulatory
authorities. Retailer and WCCI shall comply with all FCC or
other governmental agency rules and regulations, all tariffs (if
applicable), and all state, federal, local laws, regulations,
rules and procedures which apply to this Agreement.
d. Force Majeure. Neither party shall be liable for loss
or damage or be deemed to be in breach of this Agreement if its
failure to perform its obligations results from (1) compliance
with any law, ruling, order, regulation, requirement, or
instruction of any federal, state or municipal government or any
department or agency thereof or any court of competent
jurisdiction, (2) acts of omissions of the other party in
violation of this Agreement, or (3) acts of God, fires, strikes,
embargoes, war, insurrection, riot, and other causes beyond the
reasonable control of the party.
e. Entire Agreement. This Agreement and the Exhibits
hereto represent the entire agreement of the parties and may only
be amended or superseded by written agreement executed by both
parties.
f. Assignability. Either party may assign this Agreement
upon thirty (30) days' written notice to the other party, to a
parent, subsidiary, or affiliated entity, or to an entity in
connection with any merger, consolidation or reorganization with,
or the sale of all of the party's assets to, such entity, so long
as the assignee is financially secure and the assigning party
remains secondarily liable for the obligations and liabilities
assumed by the assignee. Except to the extent set forth above,
neither party may assign this Agreement nor any of its
obligations hereunder without the other party's prior written
consent, which consent shall not be unreasonably withheld, and
any assignment made without such consent shall be deemed to be
null, void and to have no effect.
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g. Survivability. All terms, provisions,
representations, warranties, covenants and obligations of either
party set forth herein which by their terms or nature extend
beyond the termination or expiration, shall survive any
termination or expiration of this Agreement.
h. Indemnification. Retailer and WCCI hereby agree to
indemnify, defend, and hold the other party, and its directors,
officers, employees, agents and/or assignees, and their heirs and
legal representatives harmless against any liability for any
claims or demands made by third parties arising out of the
conduct of the indemnifying party's business or its breach or
violation of any of the terms of this Agreement or its violation
of any federal, state, or local law or regulation. The parties
agree that the obligations provided pursuant to this paragraph
shall not be limited to any applicable workers' compensation
statute.
i. Insurance. During the term of this Agreement, each
party shall maintain comprehensive and general liability
insurance policies in effect with limits of at least $3 million
per occurrence and shall cause the other party to be listed as an
additional insured party under such policies. WCCI shall also
obtain an endorsement listing Retailer and WCCI as named
additional insureds on the general liability and product
liability insurance policy for each manufacturer or supplier of
equipment. A certificate of insurance indicating compliance
with this paragraph shall be sent by each party to the other
party within thirty days following the execution of this
Agreement by both parties, to the attention of the Insurance
Department or Risk Management for each party, with a copy to the
person listed in Paragraph l below, and annually thereafter.
j. Other. Either party to this Agreement may take any
steps (including proceeding in law or in equity for injunctive
relief and specific performance) necessary to protect its rights
hereunder. Personnel employed by, or acting under the
authority-of, a party hereto shall not be deemed to be employees
or agents of the other party, and the first party assumes full
responsibility for their acts and shall have sole responsibility
for their supervision and control. Each party shall notify the
other party in writing within five (5) days of the commencement
of any action, suit or proceeding, or the issuance of any order,
writ, injunction, award or decree of any court, agency or other
governmental instrumentality, involving the subject matter of
this Agreement.
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k. Attorneys' fees. If a lawsuit is brought under this
Agreement by wither party, the prevailing party shall be entitled
to recover reasonable attorneys' fees from the non-prevailing
party.
l. Notices. All notices hereunder shall be in writing,
shall be effective upon receipt, and shall be sent either by
personal delivery, certified or registered mail, return receipt
requested, or by overnight courier service with proof of
delivery, to the following address:
Service Merchandise WCCI
Address: Address:
Service Merchandise Company Wireless Communications Centers
7100 Service Merchandise Dr. 6140-C Northbelt Parkway
Brentwood, TN 37027 Norcross, GA 30071
Attn: Barry Goodolf Attn: Bruce Hahn
EXECUTED as of the date first written above.
SERVICE MERCHANDISE COMPANY, INC. WIRELESS COMMUNICATIONS
CENTERS, INC.
By: /s/ E.J. McKeaney By: /s/ Bruce Hahn
Name: E.J. McKeaney Name: Bruce Hahn
Title: EVP Title: President
Date: 10/11/96 Date: 10/10/96
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EXHIBITS
List of Exhibits to Kiosk Program Agreement Between Service
Merchandise Company, Inc. and Wireless Communications Centers,
Inc.
A. Area Listing
B. Retail Store Location Listing
C. Program Fee Terms
D. Letter of Credit Sample
E. Reports to be Provided to Retailer
F. Price List for Equipment to by sold to WCCI
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EXHIBIT A
MARKETS
<TABLE>
<CAPTION>
PRIORITY CARRIER MARKET
<S> <C> <C>
1 AirTouch Atlanta
2 Ameritech Chicago
3 SW Bell Maryland
4 Frontier New York
5 ComCast New Jersey
6 Nynex New Hampshire
7 U.S. Cellular New Hampshire
8 Vanguard New Hampshire
Pennsylvania, Florida
9 Ameritel Tennessee, Kentucky,
Alabama
10 SNET Connecticut
11 SW Bell Missouri
12 Alltel N. Carolina
13 Sprint Virginia
</TABLE>
NOTE: WCCI shall have the right to change the carrier without
prior authorization of Retailer, but shall notify
Retailer at least thirty (30) calendar days before any
change in a carrier.
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EXHIBIT B
LOCATIONS
<TABLE>
<CAPTION>
PROJECTED
KIOSK INSTALLATION THIRD PARTY
MARKET STORE NO. SIZE DATE CARRIER*
<S> <C> <C> <C> <C>
Atlanta 20 B Airtouch
21 C Airtouch
25 A Airtouch
62 C Airtouch
63 C Airtouch
248 C Airtouch
249 A Airtouch
250 C Airtouch
251 A Airtouch
252 B Airtouch
278 B Airtouch
Chicago 50 C Ameritech/USCI
51 C Ameritech/USCI
55 B Ameritech/USCI
56 C Ameritech/USCI
58 C Ameritech/USCI
98 A Ameritech/USCI
130 B Ameritech/USCI
181 B Ameritech/USCI
191 C Ameritech/USCI
194 C Ameritech/USCI
265 B Ameritech/USCI
279 B Ameritech/USCI
286 A Ameritech/USCI
287 B Ameritech/USCI
291 A Ameritech/USCI
310 A Ameritech/USCI
311 A Ameritech/USCI
355 B Ameritech/USCI
394 C Ameritech/USCI
398 C Ameritech/USCI
402 C Ameritech/USCI
535 C Ameritech/USCI
548 C Ameritech/USCI
549 C Ameritech/USCI
558 A Ameritech/USCI
559 C Ameritech/USCI
Florida 428 - Vanguard
Indiana 73 A Contel/USCI
18
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT B - LOCATIONS continued
PROJECTED
KIOSK INSTALLATION THIRD PARTY
MARKET STORE NO. SIZE DATE CARRIER*
<S> <C> <C> <C> <C>
Maryland 225 A B.A./Nynex
231 C B.A./Nynex
319 B B.A./Nynex
349 A SW Bell
235 - B.A./Nynex
434 - B.A./Nynex
New York 69 A Frontier/USCI
80 C Frontier/USCI
206 A Frontier/USCI
275 B Frontier/USCI
167 - B.A./Nynex-USCI
NJ/PA/DE 122 C ComCast
354 C ComCast
397 B ComCast
722 A ComCast
396 C ComCast
473 A ComCast
202 - ComCast
232 - ComCast
351 - ComCast
New Hampshire 164 A Nynex/USCI
229 B Nynex/USCI
91 A Nynex/USCI
307 A Nynex/USCI
26 A STAR
Tennessee, 14 C Bell South
Kentucky,
Alabama, NC
15 C Bell South
16 A Bell South
18 A Bell South
23 A Bell South
67 A Bell South
78 C Bell South
94 A Bell South
101 Bell South
163 A Bell South
171 A Bell South
174 C US Cell./USCI
240 - Bell South
474 - Bell South
19
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT B - LOCATIONS continued
PROJECTED
KIOSK INSTALLATION THIRD PARTY
MARKET STORE NO. SIZE DATE CARRIER*
<S> <C> <C> <C> <C>
186 B Bell South
258 B Bell South
259 B US Cell./USCI
271 C Bell South
272 A Bell South
296 A Bell South
334 B Bell South
427 C Bell South
466 C Bell South
777 A Bell South
Conn. 40 - B.A./Nynex
184 C B.A./Nynex
221 - B.A./Nynex
316 - B.A./Nynex
340 - B.A./Nynex
820 - B.A./Nynex
826 - B.A./Nynex
829 - B.A./Nynex
Missouri 104 A SW Bell
142 C SW Bell
246 A SW Bell
293 A SW Bell
326 B SW Bell
N. Carolina 22 C Alltel/USCI
28 A Alltel/USCI
68 B Alltel/USCI
332 C Alltel/USCI
Penn. 82 - Vanguard
84 - Vanguard
198 - Vanguard
83 - Vanguard
129 - Vanguard
785 - Vanguard
Virginia 297 SW Bell
298 SW Bell
304 SW Bell
305 - GTE-Cellular 1
312 - SW Bell
315 SW Bell
318 - GTE-Cellular 1
20
<PAGE>
<PAGE>
<CAPTION>
EXHIBIT B - LOCATIONS continued
PROJECTED
KIOSK INSTALLATION THIRD PARTY
MARKET STORE NO. SIZE DATE CARRIER*
<S> <C> <C> <C> <C>
348 Bell South
360 - Bell South
373 SW Bell
391 - GTE-Cellular 1
Mass. 135 - B.A./Nynex-USCI
149 - B.A./Nynex-USCI
306 - S.N.E.T.
383 - B.A./Nynex-USCI
392 - B.A./Nynex-USCI
787 - B.A./Nynex-USCI
831 - B.A./Nynex-USCI
839 - B.A./Nynex-USCI
Vermont 834 - B.A./Nynex-USCI
</TABLE>
*NOTE: Any store noted to be associated with a third party
carrier (i.e., carrier other than USCI) shall not be
deemed to be part of this Agreement until Retailer
advises WCCI that it is legally able to switch such
store to WCCI coverage.
KEY for Kiosk size: A=6'x 8' B=6' x 8' low profile C=5'x 2'
21
<PAGE>
<PAGE>
EXHIBIT C
1. Program Fee for Cellular Voice Activations
a. Retailer shall be paid a Program Fee in the amount of
$25 for each activation of a Subscriber on a WCCI retail
rate plan ("Service Activations") obtained by WCCI in each
location, except as to Service Activation where the
Subscriber obtains a cellular telephone purchased pursuant
to paragraph 3.b.(ii) by WCCI from Retailer's inventory, in
which case the Program fee shall be $12.50.
b. For the purpose of this Schedule, an activation on a
WCCI retail rate plan shall be considered a Service
Activation when WCCI has obtained a subscription for
Service, WCCI has accepted the Subscriber and activated a
cellular telephone number on the Service for such
Subscriber, and the cellular telephone number has not been
deactivated on or before the end of the calendar month in
which Service was activated.
c. The following shall not be considered a Service
Activation for the purposes of determining the Program Fee:
i. Activations on a WCCI rate plan of existing
Subscribers who retain their respective cellular
telephone numbers ("ESN Changes").
ii. Activation with respect to a Subscriber who was,
at any time within the ninety-day period immediately
prior to the activation, a Subscriber to WCCI's
Service; provided that additional cellular telephone
numbers activated by such a Subscriber may qualify as a
Service Activation.
d. Retailer shall be paid an Accessory Fee in the amount
of fifty percent (50%) of the gross retail sales price
(excluding sales taxes) paid to WCCI of each Cellular
Accessory sold from the Kiosks in Retailer's Locations.
For the purposes of the Accessory Fee, "Cellular
Accessories" shall include Equipment other than cellular
telephones or wireless modems which are sold to a Subscriber
in a transaction separate from such Subscriber's activation
of Service with WCCI.
e. In the event that a WCCI affiliate in any other area
offers an Upgrade Program, under which a Subscriber who has
been active on Service for at least one year and who
purchases a new cellular telephone at a sales price in
22
<PAGE>
<PAGE>
return for an additional one-year commitment for Service,
and a Subscriber participates in such Upgrade Program at a
Kiosk within a Location, Retailer shall be paid a Program
Fee for such Subscriber's participation.
2. Program Fee for Cellular Data Activations
a. Retailer shall be paid a fee of $20 for each new or
existing Subscriber obtained by Wireless Communications
Centers, Inc. in each location who (a) registers for new
circuit-switched data service ("CDS Service") offered by
WCCI and (b) purchases a CDS Service Enabling Product or a
WCCI-offered value pack from WCCI at the Location.
b. Notwithstanding the foregoing, Retailer shall not
receive any fee for any Subscriber who was, at any time
within the ninety-day period immediately prior to
registration, a Subscriber to CDS Service, unless such
Subscriber is adding additional CDS Service.
c. "CDS Service Enabling Product" is defined as a cellular
modem cable or laptop computer that enables a laptop
computer to access and to operate over cellular networks.
3. Program Fee for PCS Activations
a. Retailer shall be paid a fee to be determined later for
each new or existing subscriber obtained by WCCI to activate
PCS service, which will later be mutually agreed to by the
parties, but which shall in no event be less than $35.00 per
PCS activation.
4. Payment Terms
a. Retailer shall be paid Program Fees, Accessory Fees and
any other fees due under this Exhibit C, on or before the
twentieth business day after the end of the calendar month
in which such Service Activation or accessory sale occurred.
23
<PAGE>
<PAGE>
EXHIBIT D
DRAFT
(DATE) ____________________
IRREVOCABLE DOMESTIC LETTER OF CREDIT NO. ________
BENEFICIARY: SERVICE MERCHANDISE COMPANY, INC.
7100 SERVICE MERCHANDISE DRIVE
BRENTWOOD, TN 37027
APPLICANT: WIRELESS COMMUNICATIONS CENTERS, INC.
6140-6 NORTHBELT PARKWAY
NORCROSS, GA 30071
Dear Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit No.
________ in Beneficiary's favor for the account of Applicant, up
to an aggregate amount of $ ________, expiring on February 28,
1998, at the counters of ________ Bank, Atlanta, Georgia,
available by payment against Beneficiary's draft(s) drawn on
________ Bank at sight, accompanied by:
1. A written statement signed by an officer of the Beneficiary
certifying that:
"I, the undersigned, an officer of Service Merchandise
hereby certify that (a) Wireless Communications Centers,
Inc. ("WCCI") has failed to pay fees and commissions and/or
other amounts ("Unpaid Commissions") due to Service
Merchandise Company Inc. ("SMC") under their Kiosk Program
Agreement dated ________ ("the Agreement") (b) said Unpaid
Commissions have remained payable for longer than ten (10)
calendar days after their due date, (c) said Unpaid
Commissions are now due and payable, (d) that the notice
required under Paragraph 3 herein has been duly given in
accordance with the notice procedures of Section 12,
paragraph L of the Agreement, and (e) a copy of the notice
is attached with proof of its delivery."
2. A copy of the applicable WCCI "Commission Pass-Through
Report(s)" or equivalent report which indicate(s) the amount
of Commissions payable to Service Merchandise by cellular
telephone number, or, in the event WCCI has failed to
24
<PAGE>
<PAGE>
provide the required Commission Pass Through Report(s), a
copy of the SMC Statement of Account for WCCI, which
indicates the amount of Unpaid Commissions; or other
applicable documentation.
3. A copy of the document that Service Merchandise sent to WCCI
giving at least forty eight (48) hours (excluding weekends
and holidays) prior written notice of its intention to draw
upon this Letter of Credit.
4. A copy of the proof of delivery of the Notice to WCCI
showing delivery at least forty eight (48) hours (excluding
weekends and holidays) prior to drawing upon this Letter of
Credit.
SPECIAL CONDITIONS
Partial drawings are permitted.
ANY DRAFT DRAWN UNDER THIS CREDIT MUST BE MARKED "DRAWN UNDER
IRREVOCABLE STANDBY LETTER OF CREDIT NO. ________ ISSUED BY
________ BANK, DATED ________."
EXCEPT AS OTHERWISE STATED HEREIN, THIS LETTER OF CREDIT IS
SUBJECT TO THE 1993 REVISION OF THE UNIFORM CUSTOMS AND PRACTICE
FOR DOCUMENTARY CREDITS OF THE INTERNATIONAL CHAMBER OF COMMERCE
(PUBLICATION NO. 500).
WE HEREBY ENGAGE WITH YOUR DRAWERS, ENDORSERS, AND BONA FIDE
HOLDERS THAT ANY DRAWING NEGOTIATED UNDER AND IN COMPLIANCE WITH
THE TERMS OF THIS LETTER OF CREDIT, WILL BE DULY HONORED ON
PRESENTATION TO ________ BANK, ATLANTA, GA ON OR BEFORE THE
EXPIRATION DATE.
________ BANK
By: ______________________
Name: ____________________
Title: ___________________
Date: ____________________
25
<PAGE>
<PAGE>
EXHIBIT E
REPORTS TO BE PROVIDED TO RETAILER:
Commission Pass-through Report
The above report shall include full name, address, land line
telephone number, and cellular telephone number for each
subscriber.
26
<PAGE>
<PAGE>
EXHIBIT F
<TABLE>
<CAPTION>
CATALOG NO. QTY. ON HAND* AVE. COST TOTAL $
<S> <C> <C> <C>
13202MLA 85 $ 227.27 $ 19,317.95
12354MLA 33 $ 204.73 $ 6,756.09
13222MLA 497 $ 195.78 $ 97,302.66
13205MLA 330 $ 214.10 $ 70,653.00
13214MLA 836 $ 161.65 $ 135,139.00
l2396MLA 263 $ 196.72 $ 51,737.36
800EGL 617 $ 219.36 $ 133,512.63
140EAB 1532 $ 227.49 $ 348,514.68
3625ABL 864 $ 210.68 $ 182,027.52
29983PPF 472 $ 303.79 $ 143,388.88
5000PPF 565 $ 277.75 $ 156,702.75
550PPF 2175 $ 198.50 $ 431,737.75
650PPF 938 $ 225.00 $ 211,050.00
MO2PPF 938 $ 271.50 $ 254,667.00
3815ABL 746 $ 146.02 $ 108,930.92
RD232BR 633 $ 267.50 $ 169,327.50
BN232BR 832 $ 267.50 $ 222,560.00
BL232BRG 976 $ 267.50 $ 261,080.00
1332
TOTAL $3,004,405.84
</TABLE>
*as of September 1, 1996
27
EXHIBIT 10.24
AMENDMENT NO. 3
TO
CELLULAR COMMUNICATIONS SERVICE AGREEMENT
U.S. Communications, Inc. "USCI") and Service Merchandise
Company, Inc. ("SERVICE") hereby agree to amend their Cellular
Communications Service Agreement dated April 25, 1994 (the
"Agreement") as follows:
1. Exhibit A, as revised by Amendment No. 1 to the Agreement,
is hereby amended to delete the following Service Merchandise
store locations as of the date indicated:
<TABLE>
<CAPTION>
District Store No. Date of service termination
-------- --------- ---------------------------
<S> <C> <C>
Texas 431-433-197- 7/1
210-263-270-
292-336-359-
380-381-440-
448-459-467-
469
LA 415-417-463 7/1
</TABLE>
2. This Amendment shall be effective as of May 1, 1996.
3. the parties acknowledge and agree that this Agreement is
currently in effect and that the terms of the Agreement shall
remain in effect until terminated in accordance with its terms as
herein modified.
IN WITNESS WHEREOF, the parties hereby indicate their
acceptance of the terms of this Amendment by the signatures of
their authorized representative.
SERVICE MERCHANDISE COMPANY, INC. U.S. COMMUNICATIONS, INC.
By: /s/ Jeffrey A. Smith By: /s/ Bruce A. Hahn
Name: Jeffrey A. Smith Name: Bruce A. Hahn
Title: AVP Title: CEO
Date: 6/5/96 Date: 6/11/96
<PAGE>
<PAGE>
AMENDMENT NO. I TO
CELLULAR COMMUNICATIONS SERVICE AGREEMENT
Effective October 10, 1996, U.S. Communications, Inc. ("USCI")
and Service Merchandise Company, Inc. ("SERVICE") hereby agree to
amend their Cellular Communications Service Agreement dated April
25, 1994 (the "Agreement") as set forth herein.
WHEREAS, the parties entered into a cellular communications
service agreement providing for the processing of cellular
activations and providing for cellular telephone services by USCI
for the cellular telephones purchased by SERVICE customers in
designated SERVICE stores,
WHEREAS, the parties have elected to add to the Agreement
additional SERVICE stores not initially covered by the Agreement
for the purpose of utilizing USCI to process cellular activations
and to provide the cellular telephone services for cellular
telephones purchased by SERVICE customers,
NOW, THEREFORE, it is agreed as follows:
1. Exhibit A to the Agreement is hereby deleted from the
Agreement. Any reference to "Exhibit A" in the Agreement shall be
revised to refer to Exhibit C-1.
2. Exhibit C-1 to the Agreement is hereby replaced with
Exhibit C-1, August 1, 1996 revision, a copy of which is attached
hereto. In accordance with the terms of the Agreement, USCI shall
process the cellular activations and provide the cellular telephone
services for the cellular telephones purchased at the SERVICE
stores set forth on Exhibit C-1, and USCI shall pay SERVICE a
commission for each net activation of a cellular telephone
purchased by a customer of SERVICE from a Service store listed on
Exhibit C-1, as revised, in accordance with the terms set forth on
Exhibit C and the commission rates specified on Exhibit C-1,
revision August 1, 1996 attached hereto. Each SERVICE store listed
in Exhibit C-1 and which is also slated to receive Kiosk cellular
sales booths pursuant to a separate agreement with Wireless
Communications Center, Inc. (a sister subsidiary to USCI), shall be
automatically deleted from Exhibit C-1 when Kiosk operation
commences in such store.
3. SERVICE hereby represents to USCI that SERVICE's offering
of cellular telephone service to be provided by USCI through the
additional SERVICE store locations of Exhibit A as revised, will
not constitute a breach of any existing agreements between SERVICE
and any other cellular carrier.
4. SERVICE agrees to use its best efforts to have one (1)
dedicated telephone line installed in the sight and sound
department at each SERVICE store subject to the Agreement, as
2<PAGE>
<PAGE>
amended from time to time. The parties acknowledge that there may
be certain SERVICE stores for which installation of a telephone
line may be cost prohibitive and in such event, SERVICE shall not
be required to install this additional telephone line, but USCI
agrees to install cellular telephone service for processing
activations ins such cases. USCI agrees to pay SERVICE the cost of
each completed SERVICE store telephone line installation up to a
maximum of $750 per store, within thirty (30) days of date of
invoice issued by SERVICE.
5. USCI agrees to provide to SERVICE, one (1) time per
month, USCI's "Commission Pass-Through Report", which shall include
names, addresses, and cellular telephone numbers for SERVICE
customers purchasing a cellular telephone and activating cellular
telephone service during the immediately preceding 30/31 day
period, on a market by market and store by store basis, as well as
the applicable carrier, commission, and cellular telephone number.
The Pass-Through reports shall be received by SERVICE no later than
fifteen (15) days following the end of each applicable period.
6. USCI agrees to immediately obtain and continue to
maintain for the benefit of SERVICE, an irrevocable letter of
credit in an amount equal to the amount owed under this Agreement,
rounded up to the nearest $10,000, in the event USCI becomes more
than ten (10) days past due for any amounts owed to SERVICE under
this Agreement. The terms of the letter of credit shall permit
SERVICE to obtain payment from the issuing bank the amount of
Commissions due when USCI is greater than ten (10) days past the
due dates specified in paragraph 3(a) of the Agreement. The letter
of credit shall conform to the terms of that attached to this
Amendment as Exhibit F, or as otherwise mutually agreed to in
writing. In the event SERVICE draws on the letter of credit, USCI
shall pay to the issuing bank the amount necessary to return the
amount of the letter of credit to its original amount, and provide
any additional documentation necessary to verify to SERVICE that
such has occurred. After termination or expiration of this
Agreement, upon payment by USCI of all amounts owed by USCI to
Retailer under this Agreement, Retailer shall so notify the issuing
bank in writing that all such obligations have been satisfied by
WCCI and that the Letter of Credit may be canceled.
7. The parties hereby acknowledge that the Agreement applies
only to cellular telephones and cellular telephone service and does
not apply to equipment commonly known as Personal Communication
Systems ("PCS") or service for PCS. In the event SERVICE desires
to offer PCS equipment through any of the store listed in Exhibit
A, then SERVICE shall offer USCI the right to quote terms for
SERVICE to offer PCS service from USCI.
3<PAGE>
<PAGE>
8. In the event USCI fails to provide cellular telephone
service through a carrier to one or more stores of SERVICE, for a
period of time extending beyond two or more calendar days, in
addition to any other remedies SERVICE may have against USCI,
excluding failure for force majeure reasons, SERVICE shall have the
right to unilaterally enter into an agreement with a replacement
cellular telephone carrier for such store(s) and to delete such
stores from Exhibit A to this Agreement by providing written notice
to USCI. In such event, USCI shall not be obligated to process
activations from such store(s) for any such carrier or carriers.
In such event, no exclusivity or non-compete provisions stated in
this Agreement, including, but not limited, to those in paragraphs
(4).(a), 4.(k) and 4.(l) shall be applicable to the market for such
stores.
9 "Section 5. Term" is hereby deleted from the Agreement
and replaced by the following section:
5. Term
This Agreement shall continue in full force and
effect through September 30, 1997 and thereafter the term
shall become perpetual. Either party shall have the
right to terminate this Agreement effective on a date
after September 30, 1997, in whole or as to any one or
more specific SERVICE store locations, upon at least
sixty (60) days prior written notice sent by certified or
registered mail, except that termination by USCI pursuant
to this provision shall not be effective during the
months of October, November, and December of each year.
20. Exhibit C-1 shall be amended to delete the following
Service Merchandise store locations on or about the date indicated:
<TABLE>
<CAPTION>
District Store No. Approx. date of service termination
-------- --------- -----------------------------------
<S> <C> <C>
Los Angeles, CA 178-236 1-15-97
179-238
199-317
208-325
218-361
222
</TABLE>
The parties acknowledge that the exact date for termination as
to these stores will depend on the ability to have the kiosk
operational in each store. Therefore, SERVICE agrees to keep
USCI advised of the timing for each store and USCI agrees to
cooperate and ensure cellular activation service is available
through each store until each kiosk operation commences.
4<PAGE>
<PAGE>
11. Except as specifically provided herein, all of the terms
and conditions of the Agreement dated April 25, 1994 between USCI
and SERVICE shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be signed as of the day and year first above written.
SERVICE MERCHANDISE COMPANY, INC. U.S. COMMUNICATIONS, INC.
By: /s/ E.J. McKeaney By: /s/ Bruce A. Hahn
Name: E.J. McKeaney Name: Bruce A. Hahn
Title: AVP Title: CEO
Date: 10/10/96 Date: 10/10/96
5
<PAGE>
<PAGE>
Exhibits to this Amendment 1
Exhibit C-1: List of Service Merchandise Stores, Commissions to
be Paid, and Each Carrier
Exhibit F: Letter of Credit
6<PAGE>
<PAGE>
Revision: 8/16/96
EXHIBIT "C-1"
SALES COMMISSIONS
<TABLE>
<CAPTION>
Activation Bonus
Carrier Service Store # Commission Coop Total
- ---------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
Ameritech $200.00 - 1yr. $20.00 $220.00
$200.00 - 2 yrs. $20.00 $220.00
50 Downers Grove, IL
51 Downers Grove, IL
52 Homewood, IL
54 Berwyn, IL
55 Oaklawn, IL
56 Niles, IL
58 Griffith, IN
98 Bloomingdale, IL
130 Chicago, IL
181 Naperville, IL
191 Burbank, IL
194 Deerfield, IL
265 Lansing, IL
279 Elgin, IL
286 Melrose Park, IL
287 Orland Park, IL
291 Joliet, IL
310 Crystal Lake, IL
311 Skokie, IL
355 Schaumberg, IL
394 Merrillville, IN
398 Chicago, IL
548 Waukegan, IL
549 Mundelin, IL
558 Arlington Hts, IL
559 Norridge, IL
Alltel $200.00 $20.00 $220.00
22 Charlotte, NC
28 Charlotte, NC
65 Jackson, MS
68 Gastonia, NC
121 Columbia, SC
153 Columbia, SC
224 Montgomery, AL
281 Gainesville, FL
332 Pineville, NC
342 Jackson, MS
414 Meridian, MS
421 Montgomery, AL
Cellular One (CCI) $195.00 - 1 yr. $20.00 $215.00
$200.00 - 2 yrs. $20.00 $220.00
$235.00 - 3 yrs. $20.00 $255.00
30 Southgate, MI
33 Springdale, MI
39 Cincinnati, OH
57 Cincinnati, OH
7<PAGE>
<PAGE>
<CAPTION>
Exhibit C-1 continued
Activation Bonus
Carrier Service Store # Commission Coop Total
- ---------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
75 Mansfield, OH
76 Springfield, OH
77 Lima, OH
79 Florence, KY
95 Holland, OH
103 Columbus, OH
112 Troy, MI
115 Columbus, OH
124 Columbus, OH
126 Roseville, MI
127 Southfield, MI
143 Ann Arbor, MI
147 Okemos, MI
189 Lansing, MI
211 Waterford, MI
216 Sandusky, OH
226 Columbus, OH
282 Cincinnati, OH
283 Toledo, OH
350 Livonia, MI
357 Fairlawn, OH
375 Flint, MI
376 Dearborn, MI
423 Cincinnati, OH
441 Mishawaka, IN
531 Sterling Hts., MI
532 Westland, MI
533 Novi, MI
WI/Com Cellular $200.00 - 2 yrs. $20.00 $220.00
$235.00 - 3 yrs. $20.00 $255.00
330 Youngstown, OH
Bell Atlantic/NYNEX $225.00 $20.00 $245.00
69 Binghamton, NY
70 Albany, NY
80 Syracuse, NY
81 Burlington, MA
88 Fishkill, NY
91 Nashua, NH
135 Cambridge, MA
148 Saratoga, NY
149 Tewksbury, MA
164 Plaistow, NY
167 Plattsburgh, NH
188 Swansea, MA
206 Rochester, NY
229 Salem, NH
275 Greece, NY
306 Pittsfield, MA
307 Manchester, NH
322 Poughkeepsie, NY
8
<PAGE>
<PAGE>
<CAPTION>
Exhibit C-1 continued
Activation Bonus
Carrier Service Store # Commission Coop Total
- ---------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
344 Amhurst, NY
345 Hamburg, NY
383 Saugus, MA
392 Leominster, MA
771 Dewitt, NY
787 Natick, MA
831 Auburn, MA
834 Shelburn, VT
839 Stoughton, MA
LA Cellular $200.00 $20.00 $220.00
178 Fullerton, CA
179 Los Angeles, CA
199 La Habra, CA
208 Palmdale, CA
218 Murrieta, CA
222 Victorville, CA
236 Buena Park, CA
238 Garden Grove, CA
317 Whittier, CA
325 Rancho Cucamonga, CA
361 Chino Hills, CA
</TABLE>
9
<PAGE>
<PAGE>
EXHIBIT F
DRAFT
(DATE)________________
IRREVOCABLE DOMESTIC LETTER OF CREDIT NO.________________
BENEFICIARY: SERVICE MERCHANDISE COMPANY, INC.
7100 SERVICE MERCHANDISE DRIVE.
BRENTWOOD, TN 37027
APPLICANT: U.S. COMMUNICATIONS, INC.
6140-C NORTHBELT PARKWAY
NORCROSS, GA 30071
Dear Gentlemen:
We hereby establish our Irrevocable Standby Letter of Credit
No. ________ in Beneficiary's favor for the account of Applicant,
up to an aggregate amount of $________, expiring on February 28,
1998, at the counters of ________ Bank, Atlanta, Georgia, available
by payment against Beneficiary's draft(s) drawn on ________ Bank at
sight, accompanied by:
1. A written statement signed by an officer of Beneficiary
certifying that:
"I, the undersigned, an officer of Service Merchandise hereby
certify that (a) U.S. Communications, Inc. has failed to pay
commissions or other amounts ("Unpaid Commissions") due to
Service Merchandise under their CELLULAR COMMUNICATIONS
SERVICE AGREEMENT dated April 25, 1994 (the "Agreement"), (b)
said Unpaid Commissions have remained payable for longer than
fifteen (15) calendar days after their due date, and (c) said
Unpaid Commissions are now due and payable, (d) that notice as
required under Paragraph 3 herein has been duly provided, and
(e) a copy of the notice is attached with proof of delivery."
2. A copy of the applicable U.s. Communications, Inc. "Commission
Pass-Through Report(s)" which indicate(s) the amount of
Commissions payable to Service Merchandise by cellular
telephone number, or, in the event U.s. Communications, inc.
has failed to provide the required Commission Pass-Through
Report(s), a copy of the Service Merchandise Statement of
Account for U.S. Communications, Inc., which indicates the
amount of unpaid commissions; or other appropriate
documentation.
10
<PAGE>
<PAGE>
3. A copy of a document that Service Merchandise sent to U.S.
Communications, Inc. giving at least forth eight (48) hours
(excluding weekends and holidays) prior written notice of its
intention to draw upon this Letter of Credit, including proof
of delivery to U.S. Communications, Inc.
4. A copy of the proof of delivery of the Notice showing delivery
at least forty-eight (48) hours prior to drawing upon this
Letter of Credit.
SPECIAL CONDITIONS
Partial drawings are permitted.
ANY DRAFT DRAWN UNDER THIS CREDIT MUST BE MARKED "DRAWN UNDER
IRREVOCABLE STANDBY LETTER OF CREDIT NO. ________ ISSUED BY
________ BANK, DATED ________________."
EXCEPT AS OTHERWISE STATED HEREIN, THIS LETTER OF CREDIT IS SUBJECT
TO THE 1993 REVISION OF THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS OF THE INTERNATIONAL CHAMBER OF COMMERCE
(PUBLICATION NO. 500).
WE HEREBY ENGAGE WITH YOUR DRAWERS, ENDORSERS, AND BONA FIDE
HOLDERS THAT ANY DRAWING NEGOTIATED UNDER AND IN COMPLIANCE WITH
THE TERMS OF THIS LETTER OF CREDIT, WILL BE DULY HONORED ON
PRESENTATION TO ________ BANK, ATLANTA, GA ON OR BEFORE THE
EXPIRATION DATE.
________ BANK
By:_________________
Name:_______________
Title:______________
Date:_______________
11
EXHIBIT 10.25
U.S. PAGING SERVICES, INC.
6140-C Northbelt Parkway
Norcross, Georgia 30071
July 2, 1996
OfficeMax, Inc.
3605 Warrensville Center Road
Shaker Heights, Ohio 44122-5203
Gentlemen:
This will confirm our understanding with respect to the
OfficeMax, Inc. ("OfficeMax") marketing program of pagers and
pager products using the services of U.S. Paging Services, Inc.
("USPS") on a mutually non-exclusive basis.
OfficeMax intends to use USPS as its non-exclusive pager
activation service for the purpose of providing access to paging
services for its customers who purchase pagers in its selected
retail stores.
OfficeMax has agreed to purchase the pagers directly from
GTE according to the price list attached hereto as Exhibit A and
GTE has agreed to be responsible for the payment of the shipping
costs which it incurs in shipping pagers directly to OfficeMax's
customers.
USPS will maintain a toll-free 800 number to permit
OfficeMax customers to order pager service activation and to make
inquiries regarding the operation of the pagers and service
rates.
USPS shall pay OfficeMax an advertising co-op amount of
$2.00 for each sale and activation of a pager provided that the
subscriber (1) prepays for the service in the amount of $25.00 at
the time of activation of the pager or within ten days thereafter
and (2) maintains active and current service for 90 consecutive
days. USPS shall pay OfficeMax a commission of $.50 per month
for each month in which the subscriber maintains active and
continuous service under either a Standard Numeric or Alpha
Numeric rate plan for the first twenty-four (24) months and $.25
per month thereafter. USPS shall pay OfficeMax a commission of
$.25 per month for each month in which the subscriber maintains
active and continuous service under the FamilyLink program.
Additional MDF to be provided by USPS on as needed basis to
promote the paging category.
<PAGE>
<PAGE>
All commissions will be paid on the 20th day of the month
following the month in which the 90 day period ends. USPS will
furnish a month-to-day and year-to-date report on the 15th day of
each month which will set forth activation dates and payment
terms for subscribers activated during the period covered.
It is understood that USPS shall not be required to offer
competitive paging products sold by OfficeMax or process pager
activations for carriers that are not under contract to USPS in
any USPS kiosk installed and operated by USPS or its affiliates
in any OfficeMax retail location.
It is our understanding that these are the terms under which
the OfficeMax pager sales program will proceed on a mutually non-
exclusive basis.
We look forward to working with you in achieving a
successful program.
Very truly yours,
U.S. PAGING SERVICES, INC.
By: /s/ Eric Arnold
Eric Arnold, General Manager
Approved:
OFFICEMAX, INC.
By: /s/ David Thompson
EXHIBIT 10.26
PAGING COMMUNICATIONS AGREEMENT
AGREEMENT made as of this 1st day of August, 1996 between
U.S. PAGING SERVICES, INC., 6140-C Northbelt Parkway, Norcross,
Georgia 30071 ("USPS"), MONTGOMERY WARD & CO., INCORPORATED.,
with a mailing address of 619 West Chicago Avenue, Chicago,
Illinois 60671 ("MONTGOMERY WARD") and LECHMERE, INC., with a
mailing address of 619 West Chicago Avenue, Chicago, Illinois
66071 ("LECHMERE").
WHEREAS, USPS is engaged in the business of processing and
marketing paging products and services throughout the United
States pursuant to agreements with carriers operating paging
networks (the "Carriers"), and
WHEREAS, MONTGOMERY WARD and LECHMERE desire to engage in
the sale of pagers in the retail stores operated by MONTGOMERY
WARD, LECHMERE, HOME IMAGE and ELECTRIC AVE. & MORE (the
"MONTGOMERY WARD RETAIL GROUP") requiring network activation, and
WHEREAS, MONTGOMERY WARD RETAIL GROUP intends to utilize
USPS to process pager activations and provide the pager network
service ("Service") for the pagers purchased by MONTGOMERY WARD
RETAIL GROUP customers (the "Subscribers") in the coverage areas
set forth on Exhibit A attached hereto (collectively the "Area"),
and
NOW THEREFORE, it is agreed as follows:
OBLIGATIONS OF USPS
1. Contracts with Carrier. During the term of this Agreement
and any renewals thereof, USPS shall maintain binding contracts
with the Carriers to provide service in each coverage area within
the Area.
2. Processing and Activation Services to be Performed by USPS.
(a) Processing of Information Required for Activation.
USPS will process the information received from Subscribers over
the 1-800 activation number described in Section 2(c) and who
(i) provide the information required in Exhibit B attached hereto
and (ii) select a rate plan in accordance with the published rate
plans and specified promotions set forth on Exhibit C attached
hereto. USPS will promptly transfer the required information to
the appropriate Carrier for activation.
<PAGE>
<PAGE>
(b) USPS Personnel and Systems Commitment. USPS shall
staff personnel, provide automated stations in sufficient
numbers, and maintain the necessary systems and procedures to
insure prompt and efficient handling of the activation process
and Subscriber inquiries concerning both the purchase and
operation of the pagers.
(c) USPS Telephone. USPS will maintain a toll-free 800
telephone number to permit Subscribers to order service
activations and to make inquiries regarding the operation of the
pagers and service rates.
(i) The toll free numbers shall be staffed by USPS
personnel eighteen (18) hours a day, seven (7) days a week.
(ii) The automated telephone information center shall
be in operation twenty-four (24) hours a day, seven (7) days a
week.
(iii) The automated order processing center shall be
in operation twenty-four (24) hours a day, seven (7) days a week.
3. Advertising and Commission Payments and Reports
(a) Payment of Commission. USPS will pay MONTGOMERY WARD
cooperative advertising allowance of Two ($2.00) Dollars for each
sale and activation of a pager in accordance with the activation
requirements of the Carrier providing the paging service.
Payment of the cooperative advertising allowance shall be made by
USPS to MONTGOMERY WARD within thirty days of receipt of proof of
publication of each advertisement.
(b) Additional Commission. During the term of this
agreement, USPS shall pay the following commission ("Commission")
to MONTGOMERY WARD for each Subscriber, provided that the
Subscriber has satisfied the conditions of subsection (a)(i) and
(ii) of this Section 3.
(i) For each active and current Subscriber, the sum of
Twenty-Five ($.25) Cents per month for the first twenty-four (24)
months of service.
(c) Reports.
(i) Month-to-Date and Year-to-Date Report. This
report shall be provided to MONTGOMERY WARD on or about the 15th
day of each month during the term of this Agreement, shall be
2
<PAGE>
<PAGE>
signed by the USPS Vice President of Finance and will set forth
activation dates and payment terms for Subscribers activated and
other relevant information during the prior monthly periods
covered.
(ii) Audit Procedure. MONTGOMERY WARD or its designee
may, from time to time but not more frequently than once each
calendar quarter, examine the USPS books and records relating to
USPS activations hereunder to confirm the accuracy and
completeness of the Cooperative Advertising Allowance and
Commissions paid to MONTGOMERY WARD for the preceding calendar
quarter. Such audits shall take place during normal business
hours and shall occur upon a minimum of five (5) days prior
written notice by MONTGOMERY WARD to USPS.
(d) Rates and Terms of Service. USPS agrees to make
available Service at the monthly rates and on the payment terms
set forth on Exhibit C attached, which rates and terms may be
changed upon ninety (90) days' prior written notice.
(e) Commission Reductions and Product Changes. The
Cooperative Advertising Allowance, Commission and paging products
may be changed from time to time upon one hundred twenty (120)
days prior written notice from USPS to MONTGOMERY WARD.
(f) Compliance with Laws Procedures and Good Business
Practices. USPS shall at all times conduct its business in a
fair, honest and ethical manner and in compliance with all
applicable laws and regulations.
2. Participation in Market Development Fund Program. USPS
shall provide Four Hundred Thousand ($400,000.00) Dollars for
participation by MONTGOMERY WARD in a market development fund
program to launch the expansion of the MONTGOMERY WARD RETAIL
GROUP in the marketing of paging products and services to be
earned as provided in subsection (a) below.
In addition, USPS shall provide an additional grant of
$100,000 of market development funds for LECHMERE participating
stores to be earned as provided in subsection (a) below.
(a) Between August 1, 1996 and December 31, 1997, (the "MDF
Period") MONTGOMERY WARD RETAIL GROUP shall engage in a corporate
advertising campaign to promote the sale of paging products and
services provided by USPS under the terms of this Agreement
consisting of not less than thirty-six (36) advertisements of a
minimum size of one-twelfth (1/12) of a tabloid page, or in the
alternative, a minimum of not less than twenty-four (24)
3
<PAGE>
<PAGE>
advertisements, which in the aggregate contains comparable space
and size, which advertisements shall be subject to approval of
USPS when possible prior to publication.
(b) In the event that MONTGOMERY WARD/ELECTRIC AVENUE &
MORE does not achieve a minimum of six thousand (6,000)
activations during each three (3) month period during the MDF
Period and LECHMERE/HOME IMAGE does not achieve 1500 activations
during any such three (3) month period, based upon reviews to be
conducted by USPS and Montgomery Ward, USPS shall have the right
to reevaluate and adjust the amount of MDF funds to be made
available to the MONTGOMERY WARD RETAIL GROUP and LECHMERE on a
pro-rated basis reflecting such short-fall for the next
succeeding three (3) month period or portion thereof in the MDF
Period.
(c) Receipt by USPS of proof of publication with tear
sheet, and a summary of the media, media size and date of
publication is required for payment of MDF Funds to Montgomery
Ward. Payment of MDF funds shall be made on or before forty-five
(45) days after receipt of the foregoing documentation.
OBLIGATIONS OF MONTGOMERY WARD
3. (a) Exclusivity. Subject to terms and conditions hereof,
MONTGOMERY WARD designates USPS as its exclusive pager activation
service for the purpose of providing access to Service for the
sale of pagers in the participating MONTGOMERY WARD RETAIL GROUP
stores Area. During the term of this Agreement, MONTGOMERY WARD
shall not market, sell, resell or otherwise offer Service in the
Area for participating MONTGOMERY WARD RETAIL GROUP stores in
competition with that provided by the USPS designated Carriers.
(b) Termination of Agreement.
(i) USPS or MONTGOMERY WARD may terminate this
Agreement in addition to their respective rights as provided in
Section 6 below immediately upon written notice to each other, if
either party does any of the following:
(A) makes a material misrepresentation or
omission to induce the other party to enter this
Agreement;
(B) is convicted of, or pleads no contest to,
any felony or other crime that is likely to adversely
affect the reputation or goodwill of such other party.
4
<PAGE>
<PAGE>
(C) becomes insolvent, commences any
liquidation or termination of its business, is
adjudicated bankrupt, effects an assignment for the
benefit of creditors, or invokes the provisions of
law for the relief of debtors.
(D) fails to cure any breach or default of
any of the terms and provisions of this Agreement within
thirty (30) days after delivery of notice thereof from
the other party.
(c) Survival of Obligations. All obligations of either
party which expressly or by their own nature survive the
expiration or termination of this Agreement shall continue in
full force and effect notwithstanding its expiration or
termination until they are satisfied in full or by their nature
expire.
(d) Severability and Substitution of Valid Provisions.
Each provision of this Agreement shall be considered severable
and if a provision is for any reason held to be invalid all
remaining provisions shall be enforceable. If any provision of
this Agreement is held to impose a restriction which is
unenforceable in scope which could be made enforceable by
limiting the scope, the parties agree to modify the scope of the
provisions to preserve enforceability.
6. Term. Subject to the termination provisions set forth
above, this Agreement shall commence on the date first set forth
above and shall continue in full force and effect until
December 31, 1997 (the "Initial Term"). Following the Initial
Term, this Agreement shall be automatically renewed for
successive one-year terms provided, however, that after the
Initial Term either party may terminate this Agreement at any
time, with or without cause, upon no less than ninety (90) days
prior notice.
7. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto in respect of the subject
matter contained herein.
8. Assignment. This Agreement and all the provisions herein
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. USPS may not
assign this Agreement without the prior written consent of
MONTGOMERY WARD.
9. Notices. All notices and other communications given
hereunder shall be in writing and shall be delivered by hand, by
5
<PAGE>
<PAGE>
certified mail-return receipt requested, with postage prepaid, or
by reputable overnight courier at the addresses set forth above
or to such other address as shall be designated in writing. Such
notice shall be deemed received on the date on which it is hand
delivered, on the third business day following the date on which
it is mailed or on the first business day following the date it
is delivered to a courier for overnight delivery.
10. Submission to Jurisdiction. Each party to this Agreement
agree that any legal suit, action or proceeding arising out of or
relating to this Agreement may be instituted in the state courts
of the State of Illinois and the United States District Courts of
Illinois; waives any objection which it may have now or hereafter
to the laying of the venue of any such suit, action or
proceeding; and irrevocably submits to the jurisdiction of any
such court in any such suit, action or proceeding.
11. Governing Law. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in
accordance with the laws of the State of Illinois without regard
to principles of conflicts of laws.
IN WITNESS WHEREOF, the parties herewith have caused the
agreement to be signed as of the day and year first above
written.
U.S. PAGING SERVICES, INC.
BY: /s/ (Authorized Officer)
MONTGOMERY WARD & CO., INCORPORATED
BY: /s/ (Authorized Officer)
LECHMERE, INC.
BY: /s/ (Authorized Officer)
6
<PAGE>
<PAGE>
EXHIBIT A
(7 pages)
Montgomery Ward - A-1 through A-3
Home Image - A-4
Lechmere - A-5
Electric Ave. & More - A-6
Paging services provided by USPS through GTE Operating Companies.<PAGE>
<PAGE>
EXHIBIT A-1
CoveredPM - Montgomery Ward 7/19/96
<TABLE>
<CAPTION>
STORE DISTRICT CITY ST ZIP FIELDREP
<S> <C> <C> <C> <C> <C>
1001 Chicago EVERGREEN IL 60642
1002 Chicago MT PROSPECT IL 60056
1009 Chicago CHICAGO IL 60622
1014 Chicago MUNSTER IN 46321
1019 Chicago INDIANAPOLIS IN 46162
1022 Chicago INDIANAPOLIS IN 46229
1037 Tampa GREENVILLE SC 29607
1047 Detroit BUTLER PA 16001
1055 Tampa CLEARWATER FL 34624
1071 Washington DC FALLS CHURCH VA 22044
1073 Washington DC GAITHERSBURG MD 20877
1075 Washington DC GLEN BURNIE MD 21061
1079 Washington DC HAGERSTOWN MD 21740
1085 Los Angeles OCEANSIDE CA 92054
1097 Washington DC HYATTSVILLE MD 20784
1102 Washington DC ST CHARLES MD 20603
1106 Chicago WAUKEGAN IL 60085
1112 Washington DC HARRISBURG PA 17112
1120 Tampa OCALA FL 34474
1124 Detroit PARKERSBURG WV 26101
1153 Washington DC TOWSON MD 21204
1163 Washington DC WHEATON MD 20902
1169 Washington DC CAMPHILL PA 17011
1182 Tampa ORLANDO FL 32809
1205 Detroit CUYAHOGA FALLS OH 44223
1208 Detroit DEARBORN MI 48126 Wanda
1235 Detroit GRAND RAPIDS MI 49509 Lisa
1255 Chicago NILES IL 60714
1260 Chicago CHICAGO IL 60609
1261 Denver TUCSON AZ 85705
1265 Detroit LIVONIA MI 48215 Wanda
1267 Texas CORPUS CHRISTI TX 78412
1270 Chicago SCHAUMBURG IL 60195
1289 Detroit MT CLEMENS MI 48035 Heather
1308 Detroit PONTIAC MI 48328 Heather
1313 Tampa PORTSMOUTH VA 23701
1314 Chicago VILLA PARK IL 60181
1315 Denver THORTON CO 80229
1316 Denver GLENDALE AZ 85301
1317 Kansas City GRANDVIEW MO 64030
1338 Detroit SOUTHGATE MI 48195 Wanda
1341 Washington DC BALTIMORE MD 21207
1353 Denver PHOENIX AZ 85018
1355 Detroit WARREN MI 48092 Heather
1365 Kansas City ST PAUL MN 55101
1371 Texas ABILENE TX 79605
1374 Denver ALBUQUERQUE NM 87110
1377 Oakland VICTORVILLE CA 92392
1380 Oakland SALINAS CA 93906 James
1381 Los Angeles RANCHO CUCAM CA 91730
1382 Texas AUSTIN TX 78723
1385 Texas BATON ROUGE LA 70806
1386 Tampa CHESAPEAKE VA 23320
1391 Washington DC SCRANTON PA 18503
1393 Tampa SAVANNAH GA 31420
1398 Detroit STERLING HTS MI 48313 Heather
1400 Kansas City CEDAR RAPIDS IA 52404
1406 Kansas City TOPEKA KS 66604
1410 Denver COLORADO CO 80901
1420 Chicago NAPERVILLE IL 60540
/TABLE
<PAGE>
<PAGE>
EXHIBIT A-2
CoveredPM - Montgomery Ward (continued) 7/19/96
<TABLE>
<CAPTION>
STORE DISTRICT CITY ST ZIP FIELDREP
<S> <C> <C> <C> <C> <C>
1425 Denver DENVER CO 80212
1426 Tampa JACKSONVILLE FL 32073
1428 Kansas City JACKSONVILLE FL 32225
1429 Tampa DES MOINES IA 50310
1437 Tampa LAKELAND FL 33809
1438 Washington DC FORT MYERS FL 33901
1439 Kansas City POUGHKEEPSIE NY 12601
1440 Tampa FAYETTEVILLE AR 72701
1446 Detroit TAMPA FL 33612
1447 Texas FLINT MI 48507 Heather
1464 Texas HOUSTON TX 77022
1466 Tampa HOUSTON TX 77036
1471 Oakland ROANOKE VA 24012
1473 Oakland BAKERSFIELD CA 93301
1475 Los Angeles CANOGA PARK CA 91303
1477 Oakland CHINO CA 95926
1483 Oakland EUREKA CA 95501
1492 Los Angeles ALMESA CA 91942
1501 Oakland MEDFORD OR 97501
1509 Los Angeles PANORAMA CITY CA 91402
1510 Denver DENVER CO 80030
1511 Denver PHOENIX AZ 85033
1515 Oakland PLEASANT HILL CA 94523 James
1520 Denver GLENDALE AZ 85308
1523 Denver PHOENIX AZ 85025
1524 Oakland RENO NV 89501
1525 Oakland RICHMOND CA 94805 James
1529 Oakland SALEM OR 97301
1530 Denver PHOENIX AZ 85033
1532 Los Angeles MISSION VALLEY CA 92108
1533 Oakland SAN JOSE CA 95133 James
1535 Los Angeles SANTA ANA CA 92706
1540 Oakland STOCKTON CA 95207
1541 Denver TUCSON AZ 85716
1549 Detroit HARPER WOODS MI 48225 Heather
1550 Detroit SOUTHFIELD MI 48075 Wanda
1554 Los Angeles FULLERTON CA 92632
1555 Los Angeles LAS VEGAS NV 89104
1556 Oakland MODESTO CA 95350
1557 Oakland NAPA CA 95401
1566 Kansas City MINNEAPOLIS MN 55402
1567 Chicago CHICAGO RIDGE IL 60515
1569 Washington DC READING PA 19605
1579 Los Angeles VENTURA CA 93003
1591 Kansas City KANSAS CITY MO 64133
1601 Kansas City LITTLE ROCK AR 72117
1613 Tampa GAINESVILLE FL 32608
1618 Texas DALLAS TX 75149
1640 Tampa PORT CHARLOTTE FL 33948
1647 Denver PUEBLO CO 81008
1651 Kansas City ST JOSEPH MO 64506
1654 Texas SAN ANTONIO TX 78223
1655 Texas SAN ANTONIO TX 78201
1715 Tampa ALTAMONTE SPRINGS FL 33701
1716 Tampa ORLANDO FL 32804
1748 Denver DENVER CO 80226
1785 Oakland FREMONT CA 94538 James
1794 Detroit GREENSBURG PA 15601
1810 Detroit LANSING MI 60438
1822 Kansas City JEFFERSON CITY MO 65101
/TABLE
<PAGE>
<PAGE>
EXHIBIT A-3
CoveredPM - Montgomery Ward (continued) 7/19/96
<TABLE>
<CAPTION>
STORE DISTRICT CITY ST ZIP FIELDREP
<S> <C> <C> <C> <C> <C>
1886 Washington DC TEMPLE HILLS MD 20748
1887 Los Angeles COVINA CA 91723
1888 Oakland MARYSVILLE CA 95901
1953 Washington DC YORK PA 17402
1959 Los Angeles HUNTINGTON BEACH CA 95647
1961 Kansas City LITTLE ROCK AR 72205
1962 Kansas City SPRINGFIELD MO 65308
1965 Los Angeles ROSEMEAD CA 91770
2005 Texas PASADENA TX 77504
2018 Detroit SOUTHFIELD MI 48034 Wanda
2024 Los Angeles ESCONDIDO CA 92025
2027 Chicago LOMBARD IL 60148
2071 Oakland DALY CITY CA 94015 James
2072 Detroit LANSING MI 48917 Lisa
2083 Washington DC LAUREL MD 20707
2101 Oakland SACRAMENTO CA 95823
2129 Texas PHARR TX 78577
2136 Kansas City JOPLIN MO 64801
2137 Kansas City KANSAS CITY MO 64133
2139 Denver SANTA FE NM 87501
2142 Washington DC MANASSAS VA 22110
2143 Washington DC FAIRFAX VA 22030
2145 Detroit GRAND RAPIDS MI 49505 Lisa
2147 Tampa NORFOLK VA 12502
2148 Tampa PENSACOLA FL 21504
2149 Kansas City ONALASKA WY 54650
2155 Oakland PORTLAND OR 97216
2156 Los Angeles LOS ANGELES CA 90035
2168 Texas ALEXANDRIA VA 71301
2170 Texas ARLINGTON TX 76010
2194 Texas BEAUMONT TX 77706
2195 Los Angeles TORRANCE CA 90503
2196 Denver AURORA CO 80012
2203 Detroit JACKSON MI 49201 Lisa
2211 Washington DC BEL AIR MD 21014
2212 Washington DC FREDERICK MD 21701
2213 Tampa TALLAHASSEE FL 32303
2215 Oakland FRESNO CA 93710
2219 Oakland SAN LEANDRO CA 94578 James
2220 Los Angeles SAN BERNARDINO CA 92410
2221 Los Angeles LOS ANGELES CA 90041
2233 Tampa SPRINGFIELD VA 22150
2233 Washington DC SPRINGFIELD VA 22150
2235 Los Angeles MONTCLAIR CA 91763
2237 Oakland PORTLAND OR 97217
2238 Los Angeles CITRUS HEIGHTS CA 95610
2238 Los Angeles CITRUS HEIGHTS CA 95610
2239 Oakland SAN JOSE CA 95123 James
2248 Washington DC ROSEDALE MD 21237
2253 Detroit TOLEDO OH 43614
2254 Texas HOUSTON TX 77024
2257 Kansas City BLAINE MN 55434
2260 Washington DC ANNAPOLIS MD 21401
2289 Texas EL PASO TX 79925
2292 Kansas City OKLAHOMA CITY OK 73149
2308 Los Angeles LAKEWOOD CA 90712
2323 Tampa MOBILE AL 36606
2336 Texas SAN ANTONIO TX 78218
2350 Kansas City ST CLOUD MN 92401
2366 Tampa GREENSBORO NC 27405
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A-4
CoveredPM - Home Image 7/19/96
<TABLE>
<CAPTION>
STORE ADDRESS CITY ST ZIP FIELDREP CARRIER CARRIER STATUS
<S> <C> <C> <C> <C> <C> <C> <C>
2345 4401 Eastern Blvd. Montgomery AL 36116 Alltel Approved
2347 3235 Tillabawassee Saginaw MI 48604 Sonja Perry Cellular One-CCI
2357 3804 Rib Mountain Wausau MI 55401 Scott Navin U.S. Cellular Approved
2791 1550 Boston Rd.So. Springfield MA 01129 John McDonnell SNET Linx N/A
2820 Holyoke Mall Holyoke MA 01041 SNET Linx N/A
2828 One Galleria Ave. Middletown NY 10941 John McDonnell Bell Atlantic Nynex
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A-5
CoveredPM - Lechmere 7/19/96
<TABLE>
<CAPTION>
STORE ADDRESS CITY ST ZIP PHONE CARRIER PAGING
<S> <C> <C> <C> <C> <C> <C>
2786 1440 Pleasant Valley Manchester CT 06040 SNET Linx
2788 70 Universal Dr. N. Haven CT 06473 SNET Linx
2789 1212 Boston Post Rd. Milford CT 06460 SNET Linx
2790 3105 Berlin Tpke. Newington CT 06111 203-666-4550 SNET Linx
2792 Rte 93 & S. Willow Manchester NH 03103 603-668-6000 Bell Atlantic-Nynex
2793 Rte 6 at Commerce Seekonk MA 02771 508-336-4800 Bell Atlantic-Nynex
2794 Baldhill Rd. Warwick RI 02888 401-828-6800 Bell Atlantic-Nynex
2795 1400 Central Ave. Albany NY 12205 508-459-1500 Bell Atlantic-Nynex
2797 Rte 9 Cotton Hill Poughkeepsie NY 12601 914-297-7400 Bell Atlantic-Nynex
2800 1225 Jefferson Rd. Rochester NY 14623 716-427-8180 Frontier
2802 330 W. Hiawatha Syracuse NY 13204 315-466-0044 Frontier
2803 Walden Galleria Buffalo NY 14225 716-685-7400 Frontier
2805 999 S. Washington N. Attleboro MA 02760 508-643-1122 Bell Atlantic-Nynex
2806 2 W. Stevens St. Taunton MA 02718 508-824-6664 Bell Atlantic-Nynex
2811 Maine Mall Rd. S. Portland ME 04106 SNET Linx
2812 2833 Ridge West Rd. Rochester NY 14626 716-723-0600 Frontier
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A-5
CoveredPM - Electric Ave & More 7/19/96
<TABLE>
<CAPTION>
PAGING
STORE ADDRESS CITY ST ZIP PHONE FAX CARRIER/STATUS MAP
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1613 Butler Plaza Gainesville FL 32608 904-374-2444 904-337-6525 Alltel/Approved JacksonvilleFL
2149 Pralle Ctr Onalaska WI 54650 608-781-6940 608-783-9525 U.S.Cellular/Approved La Crosse WI
2150 Towne Sq. N. Owensboro KY 42301 502-688-8899 502-926-5525 U.S.Cellular/Approved Evansville IN
2340 3223 Anderson Anderson SC 29625 803-225-0014 803-964-2525 360 N/C
2341 2601 McLeod B. Florence SC 29501 803-629-3090 803-629-5325 Alltel/Approved Columbia SC
2342 Crossroads Ctr Waterloo IA 50702 319-291-3080 319-291-7525 U.S.Cellular/N/A Des Moines IA
2343 1140 Seaboard Myrtle Beach SC 29577 803-444-4758 803-444-2525 Vanguard/On Hold (7/9) Columbia SC
2348 6260 E. State Rockford IL 61108 815-262-6261 815-227-5407 Ameritel/Approved Chicago IL
2349 346 N.Casaloma Grand Chute WI 54911 414-954-9735 414-954-9743 Cellulink/N/A Appleton/
Oshkosh
2354 Dixie Bee Rd. Terre Haute IN 47802 812-242-5000 812-235-3313 Ameritel/Approved N/C
2358 4070 Commnwlth Eau Claire WI 54701 715-838-9174 Cellulink/Approved La Crosse WI
/TABLE
<PAGE>
<PAGE> EXHIBIT B
INFORMATION REQUIRED FROM SUBSCRIBER
FOR AT HOME ACTIVATION
ORDER DATE
NAME (Last, First, M.I.)
ADDRESS
CITY
STATE
ZIP
AGE
HOME PHONE
RATE PLAN
PAYMENT TERMS
CAP CODE
CREDIT CARD TYPE, NUMBER
AND EXPIRATION DATE
EXHIBIT 10.27
PAGING COMMUNICATIONS AGREEMENT
AGREEMENT made this day of February, 1996 between U.S.
PAGING SERVICES, INC., with a mailing address of P.O. Box 1645,
Norcross, Georgia 30091-1645 ("USPS") and AMERICAN DRUG STORES,
INC. d/b/a OSCO DRUG and SAV-ON DRUG, 1818 Swift Drive, Oak
Brook, Illinois (collectively "ADS").
WHEREAS, USPS is engaged in the business of processing and
marketing paging products and services throughout the United
States pursuant to agreements with carriers operating paging
networks (the "Carriers"), and
WHEREAS, ADS desires to engage in the sale of pagers
requiring network activation, and
WHEREAS, ADS intends to exclusively (subject to the terms
and conditions stated herein) utilize USPS to process pager
activations and provide the cellular network service for the
pagers purchased by ADS customers (the "Subscribers") in
available coverage areas, and
NOW THEREFORE, it is agreed as follows:
OBLIGATIONS OF USPS
1. Contracts with Carrier. During the term of this Agreement
and any renewals thereof, USPS has and shall continue to have in
effect binding contracts with the Carriers to provide paging
network services in each coverage area set forth on Exhibit A
attached hereto. In the event that USPS is unable or unwilling
to provide pager activation services to ADS in a coverage area
requested by ADS, then and in that event ADS shall have the
option to obtain pager activation services in such coverage area
from a pager network service provider of its choice, it being
understood that USPS shall not be obligated to process
activations supplied by such providers.
2. Processing and Activation Services to be Performed by USPS.
(a) Processing of Information Required for Activation.
USPS will process the information received from Subscribers who
call the 1-800 activation number included with the pager
purchased by such Subscriber and provide the information required
in Exhibit B attached hereto in accordance with the published <PAGE>
<PAGE>
rate plans and specified promotions in Exhibit C, to either the
USPS automated operator or the USPS customer service
representative. USPS will promptly transfer the required
information to the network service provider for activation.
(b) Confidentiality. USPS shall electronically provide the
information necessary for the activation and fulfillment of the
pager purchased by the Subscriber to the Carrier contracted to
USPS.
(c) USPS Personnel and Systems Commitment. USPS shall
staff personnel and automated stations in sufficient numbers and
shall maintain the necessary systems and procedures to insure
prompt and efficient handling of Subscriber inquiries concerning
both the purchase and operation of the pagers and the activation
process.
(d) USPS Telephone. USPS will provide the Subscriber with
a toll free 800 telephone number to USPS which shall be available
to permit Subscribers to make inquiries including but not limited
to the operation of the pagers and service activation.
(i) The toll free number shall be staffed by USPS
personnel eighteen (18) hours a day, seven days a week.
(ii) The automated telephone information center shall
be in operation twenty-four (24) hours a day, seven days a week.
(iii) The automated order processing center shall be in
operation twenty-four (24) hours a day, seven days a week.
3. Commission Payments and Reports
(a) Payment of Commissions. For each Net Pager Activation,
USPS will pay ADS a commission ("Commission") on the 20th day of
the month following each Subscriber activation as follows:
(i) $2.00 per Net Activation (Advertising Funds).
(ii) $.50 per month for each Subscriber maintaining
continuous service up to twenty-four months and $.25 per month
during the remaining term of this Agreement. If the annual
contract is renewed for a second year, $5.00 payable if the
renewal is prepaid, upon renewal. If not prepaid, such
commission will be paid on the 20th day of the month following
payment. during the term of this agreement and any renewals
thereof.
2
<PAGE>
<PAGE>
(b) Definition of "Net Activations". The term "Net
Activations" shall mean the number of pagers purchased by
Subscribers which are activated by the Carrier for a period of
not less than 90 days and such service is prepaid for 90 days by
the Subscriber less the number of pagers returned by Subscribers
(including exchanges where the Subscriber is to receive a
different cap code) during such period, and Net Activations shall
not include Subscribers who do not accept delivery of the pager
purchased from ADS.
(c) Reports.
(i) Month-to-Date, Year-to-Date Report - This report
will provide the following status order information: orders
transferred to the product vendor; name and address of each
Subscriber; orders shipped to the Subscriber; pagers activated by
the Carrier; and orders refused or canceled by Subscribers.
(ii) Residual Report - This report will be submitted
thirty days after activation setting forth Subscriber name, date
of activation, number of months in service, accrued residuals,
both month-to-date and year-to-date.
(iii) Audit Procedure. ADS or its designee may, from
time to time, audit such USPS books and records as are necessary
to determine the number of Net Activations and the information
set forth in 3(c)(i) and (ii) above. Such audits shall take
place during normal business hours and shall occur upon a minimum
of five (5) days notice by ADS to USPS.
(d) USPS agrees to make available Carrier network paging
services at the monthly rates set forth on Exhibit C attached
subject to specified payment terms.
(e) Commission Reductions and Product Changes. Commissions
and paging products may be changed from time to time upon one
hundred twenty (120) days prior written notice from USPS to ADS.
(f) Compliance with Laws Procedures and Good Business
Practices. USPS shall at all times conduct its business in
compliance with all applicable laws and regulations of the
federal, state and municipal governments and ethical business
practices.
OBLIGATIONS OF ADS
4. (a) Exclusivity. Subject to terms and conditions hereof,
ADS designates USPS as its exclusive pager activation service for
the purpose of providing access to pager network service for the
3
<PAGE>
<PAGE>
sale of pagers in each of the coverage areas designated on
Exhibit A, attached hereto as such retail locations are released
to USPS by ADS management.
(b) Product Supplier. ADS shall purchase all paging
products from vendors designated by USPS pursuant to agreements
between ADS and such vendors on terms and conditions approved by
both ADS and USPS.
(c) Termination of Agreement.
(i) USPS and ADS may terminate this Agreement
immediately upon written notice to each other, if either party
does any of the following:
(A) makes a material misrepresentation or omission
to induce the other party to enter this Agreement;
(B) is convicted of, or pleads no contest to, any
felony or other crime that is likely to adversely
affect the reputation or goodwill of such other party.
(ii) USPS may terminate this Agreement upon thirty (30)
days prior written notice to ADS if ADS does any of the
following:
(A) repeatedly and regularly fails to comply with
any provision of the rates and charges published by
Carrier, which have been supplied to ADS by USPS;
(B) becomes a Reseller of paging network services
for any Carrier other than the Carrier designated by
USPS;
(C) ADS shall have thirty days after receipt of
written notice from USPS to cure any deficiencies set
forth in Sections 4(c)(i) and 4(c)(ii) above.
(iii) ADS may terminate this Agreement upon thirty (30)
days prior written notice to USPS in the event that
(A) USPS is unable or unwilling to perform its
respective obligations provided for in this Agreement
to the satisfaction of ADS;
(B) USPS violates any law, rule or regulation
which in ADS's discretion may adversely affect the
reputation and goodwill of ADS.
4
<PAGE>
<PAGE>
(C) ADS desires to discontinue the sale of pagers
and paging network services through the procedures
described herein.
(d) Survival of Obligations. All obligations of either
party which expressly or by their own nature survive the
expiration or termination of this Agreement shall continue in
full force and effect notwithstanding its expiration or
termination until they are satisfied in full or by their nature
expire.
(e) Severability and Substitution of Valid Provisions.
Each provision of this Agreement shall be considered severable
and if a provision is for any reason held to be invalid all
remaining provisions shall be enforceable. If any provision of
this Agreement is held to impose a restriction which is
unenforceable in scope which could be made enforceable by
limiting the scope, the parties agree to modify the scope of the
provisions to preserve enforceability.
5. Term. Subject to the termination provisions set forth
above, this agreement shall continue in full force and effect for
a term of one (1) year from the date hereof. Following such one
(1) year period, this Agreement shall automatically renew for
successive one year terms provided, however, that either party
may terminate this Agreement at any time upon ninety (90) days
prior written notice to the other party sent by certified or
registered mail or reputable overnight carrier.
6. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto in respect of the subject
matter contained herein. USPS may not assign this Agreement
without the prior written consent of ADS.
7. Assignment. This Agreement and all the provisions herein
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
8. Notices. All notices and other communications given
hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or mailed, certified-return
receipt requested, with postage prepaid at the addresses set
forth above or to such other address as shall be designated in
writing.
9. Submission to Jurisdiction. The parties to this Agreement
agree that any legal suit, action or proceeding arising out of or
relating to this Agreement may be instituted in the state courts
of the State of Illinos and the United States District Courts of
5
<PAGE>
<PAGE>
Illinois; waives any objection which it may have now or hereafter
to the laying of the venue of any such suit, action or
proceeding; and irrevocably submits to the jurisdiction of any
such court in any such suit, action or proceeding.
10. Governing Law. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in
accordance with the laws of the State of Illinois without regard
to principles of conflicts of laws.
IN WITNESS WHEREOF, the parties herewith have caused the
agreement to be signed as of the day and year first above
written.
U.S. PAGING SERVICES, INC.
BY:___________________________
AMERICAN DRUG STORES, INC.
d/b/a OSCO DRUG and SAV-ON DRUG
BY:___________________________
6
<PAGE>
<PAGE>
EXHIBIT A
(U.S. Map depicting National/Regional Coverage)<PAGE>
<PAGE>
EXHIBIT B
INFORMATION REQUIRED FROM SUBSCRIBER
FOR AT HOME ACTIVATION
ORDER DATE
NAME (Last, First, M.I.)
BILLING ADDRESS
CITY
STATE
ZIP
SOCIAL SECURITY #
DRIVER'S LICENSE NO.
BILLING PHONE
RATE PLAN
PAYMENT TERMS
CAP CODE
CREDIT CARD TYPE, NUMBER
AND EXPIRATION DATE
<PAGE>
<PAGE>
EXHIBIT C
<TABLE>
<CAPTION>
MONTHLY* YEARLY
<S> <C> <C>
Local $ 8.95 $ 6.95
State $14.95 $12.95
Regional $24.95 $21.95
National $29.95 $34.95
Voice Mail
Small Talk $ 4.95 $ 4.95
Standard $ 6.95 $ 6.95
Executive $ 9.95 $ 9.95
Alpha Numeric $12.95 $12.95
Personal 800# $10.00 $10.00
Page Recall $ 2.00 $ 2.00
Custom Greeting $ 2.00 $ 2.00
Personal Pager Protection $ 2.00 $ 2.00
</TABLE>
*Effective January 15, 1996 all subscribers must prepay 90 days
service upon activation.
SERVICE PROMOTION RATES
<TABLE>
<CAPTION>
YEARLY PAGER REBATE*
<S> <C> <C>
Local $ 6.95 $20.00
State $15.95 $20.00
Regional $24.95 $20.00
National $34.95 $20.00
Alpha Numeric $10.95 $20.00
<CAPTION>
SPECIAL PRODUCT/SERVICE PROMOTION RATE
SERVICE MONTHLY PRODUCT PAGER REBATE*
<S> <C> <S> <C>
Local $6.95* Uniden LS $20.00
Local $6.95* Intek Inkeeper $20.00
</TABLE>
*Three months prepaid. No annual contract.
EXHIBIT 10.28
RESELLER AGREEMENT
THIS AGREEMENT is made this [21] day of October, 1996 by and
between GTE Mobilnet Service Corp. and the GTE entities set
forth on Schedule 1 attached hereto (herein referred to as "GTE")
and Ameritel, Inc. (herein referred to as "Reseller").
WHEREAS, GTE and/or its Affiliates has the ability to
provide access to cellular telephone service within the
Territories as hereinafter defined and has the ability to provide
cellular telephone service through contractual roaming
arrangements with other cellular carriers; and
WHEREAS, Reseller desires to purchase and then sell cellular
telephone service through the use of GTE's cellular system within
the Territories, subject to the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein shall have the meanings
set forth below, and wherever from the context it appears
appropriate, each defined term stated in either the singular or
plural shall include the singular and plural:
1.1. "Affiliate" shall mean any person, subsidiary
association, co-partnership, corporation or joint stock company
or trust or other entity (hereinafter "person") that directly or
indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with another person.
1.2. "CTS" shall mean the cellular telephone service
provided by GTE to Reseller, including both the GTE CTS and
Roaming.
<PAGE>
<PAGE>
1.3. "Customer" shall mean a Person acquiring CTS from GTE,
Reseller or any other reseller of GTE CTS.
1.4. "Default" shall mean and include any of the following
under this Agreement:
(i) with respect to either party, the material breach,
nonperformance, noncompliance or other default by the party
obligated to perform or comply with any material provision,
condition or covenant in this Agreement;
(ii) with respect to either party, any assignment for
the benefit of creditors or the filing of a voluntary or
involuntary bankruptcy petition under the United States Code or
any similar state statutes or insolvency laws or if a trustee,
receiver or other administrator is appointed to operate or
administer Reseller's business;
(iii) with respect to Reseller, the violation, breach
or other conflict of, or with, any FCC rule or regulation in
connection with the resale of the CTS that may or will adversely
affect GTE;
(iv) with respect to Reseller, the violation, breach or
other conflict of or with any other judicial, regulatory, state,
federal or local law, rule, regulation, decree, order or other
requirement in connection with the resale of the CTS, the
violation of which materially adversely affects the reputation or
operation of GTE or any of its Affiliates;
(v) with respect to Reseller, any Unauthorized Usage by
Reseller (its agents, Affiliates or representatives) in
connection with the resale of the CTS;
(vi) with respect to Reseller, any unauthorized
assignment of this Agreement; or
(vii) with respect to Reseller, Reseller fails to make
any payment due hereunder.
1.5. "End User" shall mean the Person who purchases CTS
from Reseller.
<PAGE>
<PAGE>
1.6. "ESN" shall mean the electronic serial number assigned
to each cellular telephone.
1.7. "Facilities" shall include, but not be limited to, the
telecommunications switching equipment, cell site transceiver
equipment and other equipment maintained, expanded, modified or
replaced by GTE or the Roaming Carriers, to render CTS to
Reseller and Customers in the Territories.
1.8. "FCC" shall mean the Federal Communications
Commission.
1.9. "Unauthorized Usage" with respect to the use of CTS
shall include, but not be limited to, the following:
(i) accessing, altering or interfering (or attempting
or assisting another to access, alter or interfere) with the
communications equipment and/or information of any Customer by
rearranging, tampering or making any unauthorized connection with
any cellular telephone equipment or Facilities, or using any
scheme, false representation or false credit devices, or by or
through any other fraudulent means or devices whatsoever, whether
within or outside of the Territories (including, without
limitation, the alteration, modification or other change to
cellular telephone equipment which would be viewed by the
Facilities as the provision of CTS to two cellular telephones
through one Number);
(ii) using the CTS in such a manner so as to interfere
unreasonably with the use of CTS by one or more Customers;
(iii) using the CTS to convey information deemed to be,
in GTE's sole discretion, obscene, salacious, or prurient, or to
convey information of a nature or in such a manner that renders
such conveyance unlawful or to convey information deemed to be
foul or profane, or to impersonate another person with fraudulent
or malicious intent, or to call another person so frequently or
at such times of day or in such manner as to annoy, abuse,
threaten, or harass such other person, or for any purpose in
violation of the law, or in such manner as to interfere
unreasonably with the use of the CTS by any other Customer.
(iv) any unauthorized, wrongful or misappropriated use
of CTS on a number assigned to Reseller, whether such Number is
currently active and whether such use is by the Reseller or one
of its End Users.
<PAGE>
<PAGE>
1.10. "GTE CTS" shall mean the CTS provided by GTE in the
Territories set forth in Schedule 1, excluding Roaming, as that
term is defined in Section 1.15.
1.11. "MSA" shall mean the Metropolitan Statistical Area as
defined by the FCC.
1.12. "Number" shall mean the ten (10) digit telephone
number ("NPA/NXX") assigned to a telephone unit used to provide
access to the CTS.
1.13. "Other Services" shall mean services other than CTS
as set forth in Schedule 2.
1.14. "Person" shall mean any individual, corporation,
partnership, firm, joint venture, association, joint stock
company, trust, estate, unincorporated organization, governmental
or regulatory body or other entity.
1.15. "Roaming" shall mean the CTS provided to a Customer
in MSAs or RSAs outside of the Territory in which the Customer's
Number is registered, for which GTE or its Affiliates have
executed agreements for the provision of roaming.
1.16. "Roaming Carriers" shall mean Persons with whom GTE
or its Affiliates have entered into agreements for the provision
of Roaming to Customers.
1.17. "RSA" shall mean the Rural Service Area as defined by
the FCC.
1.18. "Territory" or "Territories" shall mean the
geographic area(s) defined in Schedule 1 attached hereto.
ARTICLE II
GENERAL OBLIGATIONS
2.1. Purchase and Sale. GTE agrees to sell, and Reseller
agrees to purchase, CTS within the Territory. The parties
acknowledge and agree that Reseller will resell the CTS to End
Users in the Territories and in accordance with the terms and
conditions of this Agreement. Reseller acknowledges and agrees
that Reseller is a non-exclusive purchaser and reseller of CTS in
the Territory.
<PAGE>
<PAGE>
2.2. Nature of the Relationship. The parties acknowledge
and agree that nothing in this Agreement shall be construed or
implied to create a relationship of partners, agency, joint
venturers, or employer and employee. Neither party hereto shall,
in any way, have the authority to bind the other party in any
manner whatsoever.
ARTICLE III
TERM OF AGREEMENT
Subject to the parties' respective rights of termination in
this Agreement, the term of this Agreement shall be for a limited
period of one (1) year ( the "Term") commencing on the date this
Agreement is fully executed by both parties. Reseller hereby
acknowledges and agrees that GTE is in the process of evaluating
and possibly adjusting the terms, conditions, and rates for GTE
CTS. GTE may change the terms, conditions and rates upon which
GTE CTS is provided with ninety (90) days prior written notice to
Reseller. Reseller acknowledges and agrees that it has no
expectation or right to renew the express terms of this Agreement
at the end of the Term; provided, however, that GTE, in
accordance with any regulatory or other legal requirements, shall
allow Reseller to continue to resell the CTS based on terms,
conditions and rates negotiated in any new agreement at the end
of the Term.
ARTICLE IV
REPRESENTATIONS BY RESELLER
4.1. Reseller is a corporation duly organized, validly
existing, and in good standing under the laws of the
jurisdiction of its incorporation. Reseller is duly qualified
to do business and is in good standing as a foreign corporation
in each jurisdiction where the conduct of its business or the
nature of its assets requires it to be so qualified.
4.2. Reseller has read and understands all terms and
conditions set forth in this Agreement and understands that the
regulated nature of the telecommunications industry necessitates
strict adherence to said terms and conditions.
4.3. Reseller certifies that all the information provided
by Reseller in connection with this Agreement is true and correct
in all material respects.
<PAGE>
<PAGE>
ARTICLE V
OBLIGATIONS OF THE RESELLER
5.1. Reseller Services. Subject to the terms and
conditions set forth herein, Reseller agrees to resell the CTS
only in the Territories covered by this Agreement. Reseller
acknowledges and agrees that this is a nonexclusive relationship
and GTE shall have other Resellers, agents, and other
representatives that sell the CTS and GTE shall directly compete
with Reseller. Reseller shall be solely responsible for all
risks, expenses and liabilities incurred in connection with the
sale of CTS or any other acts required of or taken by Reseller
pursuant to this Agreement. Further, Reseller shall be obligated
to provide to its End Users all customer service and any other
support services in connection with its provision of CTS.
5.2. Unauthorized Usage. Reseller shall not assist or
participate in any Unauthorized Usage in connection with the sale
of the CTS. Reseller shall be solely responsible for all risks,
expenses and liabilities incurred through the Unauthorized Usage
of Reseller, its End Users, or any other Person utilizing Numbers
assigned to Reseller. GTE reserves the right to modify this
Agreement to reflect modifications to GTE's reseller practices
and procedures which introduce or implement fraud reduction
activities, but is under no obligation to introduce or implement
any such fraud reduction activities.
5.3. Reseller's Conduct of Business. Reseller shall act in
all respects on its own account and shall be solely responsible
for all aspects of its business including, but not limited to,
any credit verification, deposits, billing, collection,
consolidation, rebilling, customer billing complaints, customer
services, toll calls and bad debts.
5.4. Equipment Compatibility. Reseller is responsible for
insuring that any equipment utilized by itself or its End Users
in connection with the CTS and each End User's use thereof shall
at all times meet industry standards for compatibility, FCC
requirements and any other the technical requirements necessary
to maintain compatibility with the CTS. Under no circumstances
shall GTE be responsible for or obligated to make any changes to
its equipment, operations or Facilities to accommodate Reseller.
<PAGE>
<PAGE>
5.5. Reseller Personnel. Personnel employed or contracted
by Reseller to perform services for Reseller are not employees of
GTE and Reseller assumes full responsibility for their acts.
daily direction and control. Reseller shall provide adequate
staff to receive, investigate and verify any complaints from its
End Users relating to the use of the CTS, and will report any
trouble with the CTS to GTE only upon reasonable verification
that any difficulties are not caused by elements or conditions
within the control of Reseller. GTE will reasonably cooperate
with Reseller and Reseller's personnel to resolve problems with
the GTE CTS which are reported to GTE as provided herein. All
personnel of Reseller shall be at the sole expense of Reseller
and Reseller shall be solely responsible for any and all
employment benefits and withholding issues including, but not
limited to, worker's compensation, disability benefits,
unemployment insurance or withholding income taxes and social
security for said personnel.
5.6. Authority and Representations. Reseller is not
authorized to act as an agent for, or legal representative of
GTE, and does not have authority to assume or create any
obligation on behalf of, in the name of, or that shall be binding
upon GTE. With respect to this Agreement, Reseller shall not
represent itself as anything other than a reseller of GTE as
provided for herein and all sales by Reseller shall be in its own
name and for its own account. No provision of this Agreement
shall be construed as vesting in Reseller any control whatsoever
in any Facilities or operations of GTE or its Affiliates or any
other cellular carrier. Reseller shall not represent itself as a
federal or state certified licensee for operation of CTS in the
Territories.
5.7. Standards of Conduct. Reseller shall be governed in
all dealings with the members of the public by the highest
standards of honesty, integrity and fair dealings.
5.8. Service Standards. Within thirty (30) days of the end
of each calendar quarter, Reseller shall prepare and submit to
GTE a quarterly report containing Reseller's six-month good
faith, non-binding forecast of anticipated new End Users by
market so that GTE can evaluate its capacity requirements and
ability to provide the CTS. GTE, however, has no liability for
its capacity limitations. At Reseller's option, Reseller may
also submit a summary of CTS related problems and complaints and
the disposition or status thereof, and any other information that
Reseller believes will assist GTE to enhance its CTS in the <PAGE>
<PAGE>
Territories. Information disclosed by Reseller pursuant to this
Section 5.8 shall be Confidential Information as defined in
Section 11.5.
5.9. Interference. The parties understand that on occasion
Reseller or one or more End Users may interfere, permit or cause
interference with the Facilities or the use of a Number assigned
to such End User may be causing interference in such a way as to
impair the quality of CTS provided by GTE to the Customers;
accordingly, upon discovery of any such abuse by an End User or
from a Number by either of the parties hereto, the party having
such knowledge shall promptly notify the other party, and
Reseller shall immediately order the End User to cease from
engaging in such act(s) of interference. GTE shall have the
right to discontinue CTS as to that End User or the Number
assigned thereto should such acts continue. Reseller shall
assist GTE in taking all actions necessary to prevent further
interference.
5.10. Compliance with Laws. Reseller represents and
warrants that it shall comply in all material respects with all
local, state and federal laws and any governmental rule,
regulation or ordinance including, but not limited to, all FCC
regulations and rules. To the extent Reseller fails to comply
with this provision and the FCC licenses or cellular operations
of GTE or any of its Affiliates are placed at any risk or are
adversely affected, Reseller agrees to fully indemnify and
reimburse GTE for any and all damages caused by Reseller's
violation, breach or wrongful action, subject to the limitation
of liability set forth in Section 9.3. GTE may modify this
Agreement to comply with any FCC opinion, order, directive, rule
or regulation adopted by the FCC related to resale practices.
5.11. Records of Reseller. Reseller shall create and
maintain at its principal office, and preserve for three (3)
years from their preparation, or three (3) years from the
expiration or termination of this Agreement, whichever is later,
full, complete and accurate records of its business conducted
pursuant to this Agreement.
5.12. Insurance. Reseller shall at all times during the
term hereof, at Reseller's sole expense, be insured under a
comprehensive liability insurance policy against claims for
bodily and personal injury, death and property damage caused by
or occurring in conjunction with the operation of Reseller's
business. Such insurance coverage shall be maintained under one
or more policies of insurance from a recognized insurance company
qualified to do business within the Territories, providing in the
<PAGE>
<PAGE>
aggregate a minimum liability protection of One Million Dollars
($1,000,000) per occurrence for bodily and personal injury and
death, and One Million Dollars ($1,000,000) per occurrence for
completed operations. Further, GTE shall be listed as an
additional insured on such policy. In addition, Reseller shall
require that Reseller and GTE be named as additional insureds on
the product liability insurance policies maintained by any and
all manufacturers from whom Reseller will obtain product for use
by its End Users, which policies shall provide a minimum
protection of One Million Dollars ($1,000,000) per occurrence for
product liability. Reseller shall furnish GTE with
certificate(s) of insurance, including certificates evidencing
GTE's status as an additional insured as set forth herein, on or
before execution of this Agreement, and upon reasonable demand
thereafter as GTE deems necessary.
5.13. Financial Protections. In order to protect GTE from
the consequences of Reseller's failure to perform its obligations
under this Agreement, including but not limited to Reseller's
obligation to pay GTE in accordance with Section 5.15 of this
Agreement, Reseller must, as of the date of execution of this
Agreement, provide GTE with either an irrevocable letter of
credit or a performance bond, each as more fully described in
this Section 5.13. Reseller acknowledges that the provision of
this Section 5.13 are reasonably required by GTE to secure the
performance of Reseller's obligations under this Agreement and to
protect GTE in the event Reseller breaches any such obligation.
The provisions of this Section 5.13 are independent of, and in
addition to, such rights and remedies as GTE may have at law or
in equity or otherwise for any misrepresentation or breach of
this Agreement by Reseller.
5.13.1. If Reseller elects to use a letter of credit,
the letter must be from a bank or other financial institution
that is acceptable to GTE and must be in the form attached to
this Agreement as Exhibit A. incorporated herein by this
reference. If Reseller elects to use a performance bond, it must
be from a surety that is acceptable to GTE and must be in the
form attached to this Agreement as Exhibit B, incorporated herein
by this reference.
5.13.2. GTE's failure to request that Reseller provide
a letter of credit or performance bond as described in this
Section 5.13 shall not operate as a waiver of the requirement
that Reseller provide same, and Reseller shall provide same to
GTE within fifteen (15) days of GTE notifying Reseller in
accordance with Section 11.6 of this Agreement.
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<PAGE>
5.13.3. The amount of the initial letter of credit or
performance bond will be Fifty Thousand Dollars ($50,000).
Thereafter, GTE shall have the right to request an increase in
the amount of the letter of credit or performance bond from
Reseller for every block of One Hundred (100) Numbers from GTE or
increase in exposure of Ten Thousand Dollars ($10,000) (e.g., 100
Numbers X $100 = $10,000). For any increase, the amount of the
letter of credit or the performance bond shall equal the product
of One Hundred Dollars ($100.00) and the quantity of Numbers that
Reseller orders from GTE and GTE assigns to Reseller. The
Reseller must request and order Numbers in sets as set forth in
Section A of Schedule 2, and the number of additional numbers
assigned to Reseller in sets no less than Twenty Five (25)
Numbers. In lieu of increasing the amount of the letter of
credit or the performance bond, however, GTE may require Reseller
to deposit a security deposit with GTE in the amount of One
Hundred Dollars ($100.00) for each additional Number that GTE
assigns to Reseller. Reseller must make such deposits within
fifteen (15) days of GTE notifying Reseller in accordance with
Section 11.6 of this Agreement. Reseller hereby acknowledges and
agrees that GTE shall not be required to maintain any such
security deposit in segregated, separate, or acknowledged
accounts and that GTE shall have a right of set off against such
deposits for any amounts that Reseller owes to GTE and fails to
timely pay. Upon the expiration or termination of this Agreement
or the relationship between the parties, GTE will have the right
to offset against any such security deposits any amounts owed to
GTE under this Agreement. GTE shall return any excess amounts to
Reseller within sixty (60) days of such expiration or
termination. Further, if all amounts owed to GTE by Reseller
have been fully paid and Reseller is not otherwise in default
under this Agreement, upon termination or expiration of this
Agreement GTE will reasonably cooperate with Reseller as
necessary to terminate any outstanding letter of credit or
performance bond.
5.14. Customer Service Agreement. Reseller shall, prior to
the commencement of marketing the CTS, provide its form of End
User contract, if any, to GTE for its review. GTE's review shall
be limited to ascertaining whether the proprietary and legal
interests of GTE are adequately protected in such contract and to
review the use of any protected GTE Mark. Reseller shall delete
price information and may delete proprietary information not
relating to GTE's interest from such contract prior to submitting
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<PAGE>
it for review. Reseller agrees that any End User contract will
contain language substantially similar to the following:
"[End User] shall acquire no proprietary interest
in numbers assigned by [Reseller] for its use."
"The liability of [Reseller] and/or any supplier
of CTS to [Reseller] for actual proven damages for any
cause whatsoever, including but not limited to, any
failure of or disruption of CTS provided hereunder,
regardless of the form of action, whether in contract
or in tort or otherwise, including negligence, shall be
limited to an amount equivalent to charges payable by
[End User] under this contract for services during the
period of any failure or disruption of CTS. In no
event shall [Reseller] and/or any supplier of CTS to
[Reseller] be liable for lost profits or for any
special, consequential, or punitive damages."
5.15. Payment Obligations. Reseller is solely responsible
for the payment of all fees, charges and other amounts as set
forth in this Agreement (including, but not limited to, all CTS
access, usage, toll calls, directory listings, custom calling
charges, network service, cellular network usage, Roaming service
charges, 900 calls and directory. assistance) with respect to
any CTS during the Term hereof, including any charges incurred or
losses sustained due to Unauthorized Usage in accordance with
Sections l.9 and 6.4. In connection with the rates for CTS,
Reseller has selected the rates set forth on Schedule 2 for the
Term of this Agreement.
5.16. Minimum Volume in Each Territory. Reseller
acknowledges and agrees that it shall be charged the Low Monthly
Volume Fee as set forth in Schedule 2 if Reseller does not meet
and maintain the minimum volumes each month in each Territory as
set forth in such Schedule.
ARTICLE VI
OBLIGATIONS OF GTE
6.1. Reseller Services. Subject to the terms, limitations
and conditions set forth herein, GTE shall provide CTS to
Reseller in the Territories. If GTE divests its interest in any
of the Territories or loses its FCC license to provide such CTS,
GTE shall provide Reseller notice of such divestiture or loss and
GTE's obligations hereunder shall cease with respect to each
affected Territory. GTE further agrees to provide to Reseller <PAGE>
<PAGE>
the Other Services provided for in this Agreement in conjunction
with the CTS. GTE acknowledges and agrees that this is not an
exclusive Agreement and Reseller may resell cellular telephone
service from other carriers whether within or outside of the
Territories. Nothing in this Agreement shall prevent GTE from
terminating, adjusting, modifying or grandfathering any and all
of its rate plans for GTE CTS; provided, however, that GTE will
permit Reseller to resell such rates for the ninety (90) day
period provided for in Article III.
6.2. Access to Numbers: Activations. Subject to the
provisions of this Agreement and any legal or other limitations,
on obtaining Numbers, GTE will assign Numbers to Reseller for use
with Reseller s sale of CTS hereunder. The charges and fees
associated with this provision are set forth on Schedule 2 of
this Agreement. Reseller must purchase an initial block of fifty
(50) numbers from GTE (the "Initial Block"). Subsequent to the
Initial Block, Reseller may order successive blocks of Numbers in
a minimum amount of twenty five (25) Numbers per block and a
maximum amount of One Hundred (100) Numbers in the aggregate by
market for each order; provided, however, that Reseller may only
order new blocks of Numbers if Reseller has already assigned or
used a sufficient amount of its existing Numbers as reasonably
determined by GTE. Each and every order for Numbers must be
provided by written notice to GTE, and GTE will fulfill such
order in a reasonably expedient manner consistent with its
current practices; provided, however, that GTE's obligation to
provide Numbers is subject to the availability of Numbers and the
capacity of the Facilities and GTE has no obligation to construct
additional Facilities or otherwise provide additional capacity.
Based on these limitations, GTE shall honor orders from all
Resellers in the order in which orders for additional Numbers are
received. Reseller acknowledges and agrees that each Number
represents a unit of access to the Facilities in a designated
Territory and that neither Reseller nor any End User shall
acquire any proprietary interest in any specific Number assigned
for their use. Thus, the parties understand and agree that
Reseller does not own the Numbers and that GTE reserves the
right, upon reasonable notice to Reseller, to assign, designate,
or change such Number in its reasonable discretion, or as
required by the applicable numbering authority or other
authority, agency, or entity with jurisdiction over such
Numbering assignments. GTE will, within two (2) weeks of
execution of this Agreement, notify Reseller regarding the
activation procedures for each of the Territories set forth in
Schedule l hereto, and will, within one (l) week after Reseller's
notice that it desires to enter any additional Territory(ies),<PAGE>
<PAGE>
provide Reseller with the activation procedure(s) for such
Territory(ies).
6.3. Roaming Service. Reseller hereby acknowledges and
agrees that GTE is not responsible for the billing practices,
service charges or ultimate availability of Roaming from Roaming
Carriers and GTE is not obligated to provide CTS in areas where
GTE does not have CTS, has not entered into a roaming agreement,
or loses its roaming agreement. GTE agrees, however, to make
Roaming available to Reseller in any MSAs or RSAs in which GTE
has a roaming agreement on the terms and conditions contained in
such agreement. On receipt of Reseller's initial order for
Numbers pursuant to Section 6.2, GTE shall provide Reseller with
a schedule of those Roaming Carriers with which it has entered
into roaming agreements within the markets in which Reseller has
ordered Numbers, including the fees charged to GTE for such
Roaming Services thereunder. Reseller will be obligated to pay
GTE the amounts charged to and paid by GTE to the Roaming
Carriers for Roaming charges incurred by Reseller, its End User
or any other Persons, including charges for Unauthorized Usage,
in that Territory for the use of Roaming.
6.4. Fraud Detection. Theft or Loss. GTE uses techniques
to detect Unauthorized Usage that may be occurring with a Number,
which techniques may include checking for call overlap, unusual
toll access, excessive call frequency as well as other deviations
from the normal usage of the End User assigned to the Number.
Although this procedure is effective in detecting certain kinds
of Unauthorized Usage, it is not foolproof. Screening and
educating End Users prior to the initiation of CTS and reviewing
their usage are also important. To the extent permitted by its
Facilities, GTE shall use its standard procedure to attempt to
detect Unauthorized Usage in connection with the Numbers;
provided, however, that GTE shall not be responsible for
screening or educating End Users prior to the initiation of CTS,
for reviewing their usage, or for otherwise undertaking efforts
to detect Unauthorized Usage. If through the use of its
aforementioned standard review procedures, GTE detects any
possible Unauthorized Usage in connection with a Number, GTE
shall notify Reseller within six (6) business hours of such
detection. Reseller shall be solely responsible for notifying
its End User of the reason for such disconnection and for
obtaining a new Number for said End User, if appropriate.
Further, Reseller shall be solely liable and shall defend,
indemnify and hold harmless GTE from any and all claims, losses,
actions or other expenses (including reasonable attorneys' fees)
caused by or resulting from GTE's disconnection of any Number.<PAGE>
<PAGE>
Reseller acknowledges and agrees that, notwithstanding GTE's
agreement to attempt to detect Unauthorized Usage and to
disconnect any Numbers suspected of Unauthorized Usage, Reseller
is responsible (in accordance with Section 5.15 of this
Agreement) for all fees, charges, and other amounts with respect
to the CTS provided during the Term of this Agreement.
6.4.1. If Reseller detects Unauthorized Usage in
connection with a Number, or is informed that the cellular
telephone to which a Number is assigned has been lost or stolen,
then Reseller shall notify GTE in writing, sent to GTE by
facsimile transmission to the facsimile number provided by GTE
for such purposes, followed by overnight courier to the address
set forth in Section 11.6 of this Agreement, and within six (6)
business hours thereafter, GTE shall disconnect the CTS for such
Number. Reseller's liability for all fees, charges and other
amounts chargeable to such Number shall terminate six (6)
business hours after Reseller's notice to GTE, as evidenced by
the time stamped upon the facsimile copy, or when GTE disconnects
the Number, whichever occurs first. Reseller shall be
responsible for notifying the affected End User and, if
appropriate, arranging for a new Number. If an End User's
cellular telephone is lost, stolen, or otherwise absent from the
End User's possession, Reseller shall, nevertheless, be
responsible (in accordance with Section 5.15 of this Agreement)
for all fees, charges, and other amounts with respect to the CTS
provided to the Number assigned to such cellular telephone.
6.4.2. Reseller acknowledges and agrees that GTE shall
provide no services relating to Unauthorized Usage on weekends or
holidays and all notice periods referred to in this Section 6.4
shall not include weekends or holidays.
6.5. Single Point of Contact. With respect to the notices
and actions detailed in Section 6.4, GTE and Reseller shall
provide in writing respective single points of contact (the
"Contact(s)"), and the facsimile numbers therefor, to expedite
these functions. Such Contacts may be changed at any time with
prior written notice to the other party.
6.6. Coverage Areas. GTE shall provide Reseller, at
Reseller's request, with information on the boundaries of
coverage for each Territory.
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6.7. Other Services/Call Restriction Services. In
accordance with the terms and conditions set forth herein and the
prices set forth in Schedule 2, GTE shall make available to
Reseller for the use of Reseller's End Users, the Other Services
set forth in Schedule 2 to the extent available in each of the
Territories. GTE shall assign call restriction services to a
particular Number at the request of Reseller for the rates set
forth on Schedule 2.
6.8. Disconnect. Reseller has the right to request GTE to
disconnect any Number assigned to an End User. Upon the request
by Reseller to disconnect a Number, GTE shall, as soon as
practicable, but not later than six (6) business hours after
GTE's receipt of the disconnect notice, disconnect such Number.
Reseller's liability for all fees, charges and other amounts
chargeable to such Number shall terminate six (6) business hours
after Reseller's notice to GTE, as evidenced by the time stamped
upon the facsimile copy, or when GTE disconnects the Number,
whichever occurs first.
6.9. GTE Proprietary and Patented Equipment. The CTS and
Other Services provided by GTE pursuant to this Agreement shall
in no event be deemed to include equipment which is proprietary
to, or patented by, GTE or any of its Affiliates, including
without limitation, equipment which is marketed in connection
with the "TeleGo" program.
ARTICLE VII
CTS RATES, CHARGES, FEES AND OTHER AMOUNTS
7.1. Schedule of CTS Rates, Charges, Fees and Other
Amounts. In consideration for the CTS and Other Services to be
provided hereunder and subject to GTE's right to modify or change
its CTS rates, Reseller shall be obligated to pay GTE the rates
for CTS and the charges and fees for Other Services set forth in
Schedule 2 of this Agreement.
7.2. Calculation for GTE CTS. Subject to GTE's right to
amend, modify, change or otherwise update the method(s) by which
it calculates usage and charges for GTE CTS by providing thirty
(30) days notice to Reseller, GTE shall charge Reseller for the
GTE CTS in accordance with the following practices. When
Reseller or its End User initiates a call, the charges for GTE
CTS shall commence upon the channel seizure and end upon <PAGE>
<PAGE>
disconnection by the End User or Reseller; when the Reseller or
its End User is receiving a call, the charges commence at the
time the cellular switch seeks the Reseller or End User and ends
upon disconnection of the call by the Reseller or End User. The
charges for cellular service are based on per minute usage and
any usage is rounded up to the next minute when fractional
minutes are used by the Reseller or End User. The per minute
rate charged in each Territory is set forth in Schedule 2 hereof.
Sections 5.15 and 6.3 of this Agreement govern the charges for
Roaming.
7.3. Tariffs, Taxes or Other Governmental Charges.
Except for taxes for which Reseller has provided GTE a reseller
exemption certificate in a form acceptable to the appropriate
taxing authority, GTE may add to any charges, fees or rates
hereunder an amount equal to any duty, levy, tax or withholding,
including but not limited to, sales, property, ad valorem and use
taxes, or any tax in lieu therefore or in addition thereto,
imposed by any local, state or federal government or governmental
agency with respect to the sale of the CTS under this Agreement.
Such items may include, but are not limited to, items flowed
through to other GTE Customers in the ordinary course of business
(e.g., 911 surcharges).
7.4. Billing Services. GTE shall provide Reseller with a
magnetic billing tape (the "Billing Tape") of Reseller's CTS
usage in a format used by GTE. In the event that GTE changes its
billing tape format, GTE shall provide Reseller thirty (30) days'
advance written notice thereof and shall provide a test tape
thereof. Within thirty (30) days of the end of each billing
cycle (a normal billing cycle is estimated to be thirty (30)
days) GTE will provide Reseller with the Billing Tape and a
summary invoice (the "Invoice") of charges, fees, deposits or
other amounts owed to GTE hereunder. GTE shall not be liable for
any inaccuracies in the Roaming charges to Reseller or other
inaccuracies over which GTE has no control. GTE shall reasonably
cooperate, at Reseller's expense, with Reseller's legitimate
efforts to correct any such inaccuracies which may occur in
Reseller's Roaming charges. Reseller expressly acknowledges that
some charges incurred in a billing cycle may not appear on the
Billing Tape or Invoice for such billing cycle and that such
charges will appear on subsequent Billing Tapes or Invoices.
Reseller is responsible for payment of any and all charges that
are delayed or appear on subsequent Billing Tapes or Invoices.
If any Invoice or Billing Tape is not received by Reseller within
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<PAGE>
five (5) days after the customary transmittal date established by
previous transmittal dates, Reseller shall notify GTE immediately
by facsimile or similar means of written communication. Payment
for any amounts due contained in an Invoice and/or Billing Tape
or otherwise owed to GTE hereunder shall be due in United States
Dollars within thirty (30) days after the later of the date of
transmittal of such Invoice or the date of transmittal of such
Billing Tape. Reseller shall notify GTE of any defects in the
Billing Tape within fifteen (15) days of receipt. GTE shall use
reasonable efforts to correct and/or replace, at GTE's cost, any
Billing Tape(s) containing an identified defect as soon as
practicable after notification thereof; provided, however, that
if the Billing Tape is unreadable the amounts under such Billing
Tape and/or the corresponding Invoice shall not be due until
thirty (30) days after GTE provides a new Billing Tape. Any
amount due GTE by Reseller which is not paid in full by the due
date thereof shall be subject to a late payment charge equal to
the maximum interest rate permitted by applicable law from the
due date thereof until paid. Any amounts required to be paid
hereunder will be deemed paid when received, subject to
collection, at the location designated by GTE on the invoice
being paid. Nothing herein shall affect GTE's right to amend,
modify, change or otherwise update its billing cycle or billing
systems with ninety (90) days prior written notice to Reseller.
7.5. Tariffs. Nothing herein shall require GTE to violate
or prevent GTE's compliance with any tariff or other rate
increase required by a government or regulatory agency or
commission or judicial decree, in which case Reseller's rates for
CTS rates may be subject to change in accordance with any such
tariff or regulation. In the event that any of the CTS provided
hereunder or the rates or other charges made therefor are
currently subject, or at any time become subject, to any federal,
state or local regulation, then the terms and conditions of this
Agreement, including the charges set forth in Schedule 2, shall
be deemed amended to conform to any conflicting terms and
conditions in effect under such regulation. All non-conflicting
terms and conditions of this Agreement shall remain valid and
effective. Nothing in this Agreement shall be deemed (i) to
require or preclude the use of tariff equivalent or tariff
related charges or (ii) to provide or imply that such charges are
or are not appropriate in the provision of CTS provided
hereunder.
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ARTICLE VIII
TRADE NAME AND TRADEMARK
8.1. GTE Marks. Reseller recognizes the right, title and
interest of GTE and its Affiliates in and to all service marks,
trademarks and trade names owned or licensed by GTE or its
Affiliates ("Marks") and agrees not to engage in any activities
or to commit any acts, directly or indirectly, which may contest,
dispute or otherwise impair such right, title and interest of GTE
or its Affiliates therein. Reseller agrees not to engage in any
publicity, including any press release(s), regarding this
Agreement, the terms and conditions hereof, or Reseller's resale
of CTS from GTE in any of the Territories, without GTE's prior
written approval. Reseller shall neither acquire, nor claim any
right, title or interest in or to the said Marks through
advertising and sale of the CTS or otherwise. Reseller
acknowledges and agrees that it has no right, title or interest
in any of the Marks. RESELLER IS PROHIBITED FROM THE USE OF ANY
GTE MARKS IN ANY MANNER WITHOUT THE EXPRESS WRITTEN CONSENT OF
GTE. Upon termination or expiration of this Agreement or this
relationship, Reseller shall have no right to continue any use of
a Mark, if consent had been previously granted. Reseller agrees
to indemnify and hold harmless GTE from any and all claims,
losses, damages or other expenses (including reasonable attorneys
fees) which arise or result from Reseller's use of a Mark;
provided, however, that this indemnification provision shall not
apply to any claims, losses, damages or expenses caused by or
resulting from allegations that the Marks violate the trademark
or other intellectual property rights of any third party(ies).
ARTICLE IX
WARRANTY AND LIMITATION OF LIABILITY
9.1. No Warranty. GTE AND ITS AFFILIATES MAKE NO
WARRANTIES, EITHER EXPRESSED OR IMPLIED, CONCERNING THE
FACILITIES OR THE CTS, INCLUDING, WITHOUT LIMITATION, WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE.
IT IS INTENDED BY THE PARTIES THAT THIS SECTION SHALL APPLY TO
RESELLER OR ANY OF RESELLER'S END USERS. Reseller expressly
acknowledges that GTE shall have no liability except as provided
in Section 11.7 of this Agreement for any failure, defects,
malfunctions or errors in the Facilities or for the provision of
CTS hereunder to Reseller or its End Users.
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<PAGE>
9.2. Indemnity.
9.2.1. GTE shall not be liable for, and Reseller
hereby indemnifies GTE and holds GTE harmless from, any and all
damages, claims, actions, losses, and other expenses (including
reasonable attorneys' fees) that may arise out of: (i) any action
brought by an End User, (ii) any libel, slander, or infringement
of copyright arising from the material transmitted over the
Facilities by Reseller or an End User, (iii) any infringement of
patents arising from combining or using apparatuses or systems of
Reseller or an End User with the Facilities, (iv) any breach or
violation of this Agreement by Reseller, (v) any breach of any of
the representations made by Reseller in this Agreement, (vi) any
inaccuracy or misrepresentation made by Reseller in connection
with this Agreement, and (vii) any act or omission of Reseller in
connection with Reseller's use or resale of CTS pursuant to this
Agreement; provided, however, that this indemnification shall not
apply where the damages, claims, actions, losses or other
expenses are caused wholly or in material part by the gross
negligence or willful misconduct of GTE, or GTE's agents or
employees. The rights of GTE under this Section 9.2 are
independent of, and in addition to, such rights and remedies as
GTE may have at law or in equity or otherwise, including the
right to seek specific performance, recession, or restitution.
9.2.2. GTE hereby indemnifies Reseller and holds
Reseller harmless from any and all damages, claims, actions,
losses, and other expenses (including reasonable attorneys' fees)
that may arise out of: (i) any breach or violation of this
Agreement by GTE, (ii) any breach of any of the representations
made by GTE in this Agreement, and (iii) any inaccuracy or
misrepresentation made by GTE in connection with this Agreement.
9.3. Limitation of Liability. NEITHER GTE NOR RESELLER
SHALL BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL,
EXEMPLARY OR PUNITIVE DAMAGES OF ANY NATURE WHATSOEVER ARISING
OUT OF OR RELATED TO ACTIONS OR OMISSIONS IN CONNECTION WITH THIS
AGREEMENT. Except as provided in Section 11.7, GTE shall have no
liability to Reseller or any End User for any loss or damages
arising out of (i) mistakes, omissions, interruptions, errors, or
defects in furnishing CTS, (ii) failures or defects in
Facilities, or (iii) GTE's failure to maintain proper standards
or maintenance and operation of the Facilities or to exercise
reasonable supervision with respect to the operations of the
Facilities.
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9.4. Facility Modifications. Reseller acknowledges that
CTS is a rapidly changing industry and technology and as such GTE
shall not be liable to Reseller or to the Reseller's End Users if
changes in any of the Facilities, operations, equipment,
procedures, or CTS: (a) render obsolete any equipment or software
provided by Reseller or End User in conjunction with use of the
CTS; (b) require modification or alteration of such equipment or
software; or (c) otherwise affect the performance of such
equipment or software. GTE will use reasonable efforts to give
thirty (30) days advance written notice to Reseller of changes
which GTE reasonably anticipates will result in the conditions
described in (a) and (c).
9.5. Privacy and Security of CTS. Reseller assumes sole
responsibility for the selection and use of any codes or
passwords as may be permitted or required for the use of the CTS
by its End Users. GTE hereby discloses that neither it, nor its
Affiliates, can guarantee the privacy or security of any
transmission, including conversations utilizing CTS, and data.
ARTICLE X
TERMINATION; EXPIRATION
10.1. Default. In the event of a Default by one of the
parties to this Agreement, the nondefaulting party may terminate
this Agreement upon thirty (30) days notice to the Defaulting
Party; provided, however, that such termination shall be
immediate if the Default is based on a violation of any FCC rule
or regulation that would adversely affect GTE's or its
Affiliates' license in any Territory, and shall be effective upon
three (3) days notice to the Defaulting Party if the financial
protection provided to GTE under Section 5.13 is noticed for
termination, is terminated, expires or in any manner becomes void
or unenforceable (a "Void Financial Protection"). For any
Default other than an FCC violation or a Void Financial
Protection, the Defaulting Party shall have the right to cure
such Default prior to the expiration of the thirty (30) day
period; provided, however, that GTE may draw on the Letter of
Credit provided by Reseller if Reseller has failed to pay any
amounts due hereunder within fifteen (15) days of the due date of
such amounts. For a Default premised upon a Void Financial
Protection, the Defaulting Party shall have the right to cure
such Default prior to the expiration of the three (3) day period.
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<PAGE>
10.2 Post Termination/Expiration Transition. Fifteen (15)
days after either termination or expiration of this Agreement has
occurred, GTE may notify End Users by telephone or telephone
intercept as to the method by which End Users may maintain CTS
after the termination of this Agreement, unless Reseller has
notified GTE of Reseller's intention to continue to provide
cellular telephone service to its End Users. To the extent
Reseller does not provide cellular telephone service to its End
Users within twenty (20) days of such Reseller notification, GTE
may contact such End Users to arrange for provision and
continuance of CTS in the Territories; provided, however, if
Reseller is in the process of transitioning its End Users. GTE
shall not have the right to directly contact any End Users.
During any transition period the obligations of the parties
hereunder shall survive for that limited transition period. Such
transition period shall not exceed sixty (60) days unless
mutually agreed to by the parties.
10.3. Post Termination/Expiration Obligations. Upon
termination or expiration, Reseller shall remain solely
responsible for its obligations to End Users existing immediately
prior to termination or any other charges incurred by Reseller or
its End Users for CTS hereunder. Termination or expiration of
this Agreement for any cause shall not release either party
hereto from any liability which has already accrued to the other
party hereto at the time of termination or expiration or which
thereafter may accrue with respect to any act or omission prior
to termination or expiration, or from any obligation which is
expressly stated herein to survive termination or expiration;
provided, however, that GTE may, without liability, cancel any
previously accepted orders for Numbers which have not been
connected prior to the giving or receiving of any notice of
termination hereunder. GTE and Reseller agree to cooperate to
enable all End Users to continue CTS with minimal disruption
after termination; provided, that GTE shall be under no
obligation to ensure that any End User is so able to continue to
utilize CTS or to arrange for any transfer of equipment owned or
leased by Reseller.
ARTICLE XI
MISCELLANEOUS
11.1. Applicable Law. The validity, construction and
performance of this Agreement shall be governed and interpreted
in accordance with the laws of the State of Georgia.
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11.2. Effects of Headings. Headings to articles and
paragraphs of this Agreement are to facilitate reference only, do
not form a part of this Agreement, and shall not in any way
affect the interpretation hereof.
11.3. Rights of Setoff. Reseller agrees that GTE may, in
its discretion, setoff any charges, fees or any other amounts
owed to GTE by Reseller hereunder from any deposits or other
Financial Protections given to GTE by Reseller.
11.4. Assignment. Neither this Agreement nor the rights
nor obligations hereunder shall be assigned or delegated, in
whole or in part, by Reseller to any other person, firm or
corporation without the prior written consent thereto by GTE in
its sole discretion; provided, however, that Reseller may assign
this Agreement without such consent to any entity which Reseller
controls, is controlled by, or is under common control with; or
which results from any merger or consolidation with Reseller,
provided that Reseller's assignee or successor assumes all of
Reseller's obligations hereunder.
11.5. Proprietary and Confidential Information. During the
Term of this Agreement, either party may, but shall not be
obligated to, disclose to the other information which is
considered and designated to be proprietary, whether oral or
written ("Confidential Information"). Except to the extent that
disclosure by Reseller is required by applicable law, this
Agreement and the Schedules attached hereto, are considered to be
part of the Confidential Information. Without the disclosing
party's express written consent, the other party may not disclose
such Confidential Information to a third party provided, however,
that if one of the parties receives or is served with any order,
subpoena, legal demand or other request from any governmental
agency, court or other legal forum to produce Confidential
Information ("Request for Production"), such party will provide
the other party with prompt notice of such Request for Production
so that that party, at its expense, may seek a protective order
or such other remedy to prevent production of the Confidential
Information. If the Confidential Information is ultimately
compelled, by a court or other legal forum which has authority,
the disclosing party will not be in violation of this Section.
Upon termination or expiration of this Agreement, each party
will, at the request of the other party, either erase the
Confidential Information from any files maintained by such party
or return the Confidential Information to the party. Each party
agrees to protect and safeguard the confidentiality of the <PAGE>
<PAGE>
respective Confidential Information to the same degree and extent
as such party protects and safeguards its own Confidential
Information. The term "Confidential Information" and the
obligations attendant thereto shall not apply to information that
(i) as shown by reasonably documented proof, was in a party's
possession prior to receipt thereof from the disclosing party;
(ii) as shown by reasonably documented proof, was received by one
party in good faith from a third party not subject to a
confidential obligation to the disclosing party; (iii) now is or
later becomes publicly known through no breach of confidential
obligation by the receiving party; (iv) is disclosed to a third
party by the disclosing party without a similar nondisclosure
restriction; (v) was developed by the receiving party without the
developing person having access to any of the Confidential
Information received from the other party; or (vi) is authorized
in writing by the disclosing party to be released or is
designated in writing by the disclosing party as no longer being
confidential or proprietary. This provision shall survive for
three (3) years after termination or expiration of this
Agreement.
11.6. Notices. Except as other vise provided in this
Agreement, all notices required or permitted to be given
hereunder shall be made by registered or certified mail, return
receipt requested, or by an overnight mail service having a
record of receipt and addressed as follows:
If to GTE:
GTE Mobile Communications Services Corporation
245 Perimeter Center Parkway
Atlanta, Georgia 30346
Attn.: Vice President - Marketing
If to Reseller:
Ameritel Communications, Inc.
6115 Jimmy Carter Blvd., Suite A
Norcross, Georgia 30071
Attn: President
Either party hereto may change its address by providing
notice of such address change to the other party in the manner
set forth above. Notices given as herein provided shall be
considered to have been received five (5) days after mailing
thereof, or when actually received, whichever occurs first.
<PAGE>
<PAGE>
11.7 CTS Outages. Subject to the terms set forth herein, a
credit allowance will be made, at the Reseller's request, in the
form of a pro rata adjustment of the recurring charges billed by
GTE for a period of total CTS outage that exceeds twenty four
(24) consecutive hours. Such credit allowance shall be
Reseller's sole remedy and compensation for any such outage. For
other than a total outage, a credit allowance, at rates for
monthly access outlined in Schedule 2, will only be given to the
Reseller for time actually credited to End Users by Reseller who
are unable to place or receive calls due to a service-affecting
interruption in excess of 24 hours. In the event the Reseller or
an End User is affected by such interruption for a period of less
than 24 continuous hours, no such adjustment shall be made. No
adjustments shall be allowed for accumulating periods of
uncontinuous interruption. Reseller's request for credit must be
received by GTE in a form reasonably specified by GTE, within ten
( 10) business days following the end of the period of
interruption. The credit allowance for CTS outage will be
computed by dividing the duration of the service affecting
interruption (measured in days from the time the interruption is
reported to and confirmed by GTE) by 30 and multiplying the
result by GTE's monthly recurring charges, for each interrupted
Number. In no case shall the credit exceed the recurring charges
for that period. No other liability shall attach to GTE as a
result of such interruption to service. No credit allowance will
be given for interruptions caused by the negligence or willful
act of the Reseller or its End Users, power outages or other
occurrences considered force majeure, or for interruptions caused
by failure of equipment or service not provided by GTE.
11.8. Force Majeure. The parties' performance under this
Agreement shall be excused if such non-performance is due to
labor difficulties, governmental orders, inability or delay in
securing equipment, civil commotions, acts of nature, weather
disturbances or adverse weather conditions, and other
circumstances beyond the parties' reasonable control.
11.9. Capacity Limitation. The parties recognize that
unusual concentrations of usage may occur in certain locations.
GTE shall incur no liability for its inability to provide
adequate CTS hereunder if such liability is due to a lack of
network capacity which results from the aforesaid usage
concentration and nothing herein shall require GTE to expend any
capital to insure capacity for Reseller's use of CTS.
<PAGE>
<PAGE>
11.10. Severability. Any provision of this Agreement which
is prohibited, unenforceable or is declared or found to be
illegal, unenforceable or void, in any jurisdiction shall, as to
such jurisdiction. be ineffective only to the extent of such
prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions of this
Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
11.11. Waiver. The failure of either party to enforce, in
any one or more instances, performance of any of the terms,
covenants or conditions of this Agreement shall not be construed
as a waiver or a relinquishment of any right or claim granted or
arising hereunder or of the future performance of any such term,
covenant, or condition, and such failure shall in no way affect
the validity of this Agreement or the rights and obligations of
the parties hereto. The parties acknowledge that a waiver of any
term or provision hereof may only be given by a written
instrument executed by each party intended to be benefitted by
the same.
11.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the
same instrument notwithstanding that all parties are not
signatories to each counterpart.
11.13. Amendments. This Agreement may not be modified,
amended or supplemented except by an agreement in writing signed
by all of the parties hereto.
11.14. Arbitration Required. Any dispute arising out of or
related to this Agreement which cannot be resolved by negotiation
shall be settled by binding arbitration in accordance with the
J.A.M.S./ENDISPUTE Arbitration Rules and Procedures ("Endispute
Rules"), as amended by this Agreement. The parties agree that
any such arbitration shall be held in Atlanta, Georgia. The
costs of arbitration, including the fees and expenses of the
arbitrator, shall be shared equally by the parties unless the
arbitration award provides otherwise. Each party shall bear the
cost of preparing and presenting its case. The parties agree
that this provision and the Arbitrator's authority to grant
relief shall be subject to the United States Arbitration Act, 9
U.S.C. 1-16 et seq. ("USAA"), the provisions of this Agreement
and the ABA-AAA Code of Ethics for Arbitrators in Commercial <PAGE>
<PAGE>
Disputes. The parties agree that the arbitrator shall have no
power or authority to make awards or issue orders of any kind
except as expressly permitted by this Agreement, and in no event
shall the arbitrator have the authority to make an award that
provides for punitive or exemplary damages or any type of
penalty. The Arbitrator's decision shall be final and binding.
The award may be confirmed and enforced in any court of competent
jurisdiction. All post-award proceedings shall be governed by
the USAA.
11.15. Third Parties. Except as expressly provided herein,
nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any Person other than the
parties hereto and their successors or permitted assigns, any
rights, benefits or remedies of any kind or character whatsoever
under or by reason of this Agreement.
11.16. Entire Agreement. This Agreement, together with all
Schedules and any other exhibits attached hereto and expressly
made a part of this Agreement, shall constitute the entire
agreement between the parties hereto provided and shall supersede
all prior proposals, negotiations, understandings and agreements,
whether oral or written.
11.17. Survival. The obligations of either party set forth
in Sections 5.15, 6.3, 7.4, 10.2, 10.3 and 11.3 shall survive
termination or expiration of this Agreement in accordance with
the terms of such Sections and for a period required to settle
and resolve any outstanding charges or amounts owed under the
Agreement. The obligations of either party set forth in Sections
9.1, 9.2, 9.3, 11.5 and 11.14 shall survive termination or
expiration of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the day and year first above written.
GTE MOBILNET SERVICE CORP. AMERITEL, INC.
By: /s/ [Authorized Officer] By: /s/ [Authorized Officer]
Title: Title:
Date: 10/21/96 Date: 10/21/96
<PAGE>
<PAGE>
SCHEDULE 1
TERRITORY
<TABLE>
<CAPTION>
GTE Entity Territory
<S> <C>
Chattanooga Cellular Telephone Company Chattanooga, TN
Managing G.P. - GTE Mobilnet of
Chattanooga II Incorporated
GTE Mobilnet of Birmingham Incorporated Birmingham, AL
GTE Mobilnet of Nashville Incorporated Nashville, TN
Memphis Cellular Telephone Company Memphis, TN
Managing G.P. - GTE Mobilnet of
Memphis Incorporated
GTE Mobilnet of Kentucky Incorporated Lexington, KY
GTE Mobilnet of Huntsville Incorporated Huntsville, AL
GTE Mobilnet of Hawaii Incorporated Hawaii
GTE Mobilnet of the South Incorporated Mobile, AL
GTE Mobilnet of Indiana Limited Indianapolis, IN
Partnership G.P. - GTE Mobilnet
of Indianapolis Incorporated
</TABLE>
Subject to the parties agreeing upon rate plans and any other
necessary terms or conditions required for other GTE Territories,
the parties may add Territories under this Agreement.
<PAGE>
<PAGE>
SCHEDULE 2
RATES, CHARGES AND FEES
A. FEES FOR ORDERS OF NUMBERS
Reseller shall pay One Dollar ($1.00) for each Number
provided by GTE. The initial set of Numbers must be no less than
fifty (50) Numbers and each subsequent set must be no less than
twenty (25) Numbers.
B. ADMINISTRATIVE SERVICE FEES
1. Number Status Changes. Reseller shall be obligated to
pay a service fee of Fifteen Dollars ($15.00) for each and every
activation, restoration, change, modification, deactivation or
requested special call restriction (if such special call
restriction is requested after the activation of a Number and not
simultaneously with activation) (the "Activation Requests") for a
Number. The Reseller must fax the form to the local market for
any activation, restoration charge, modification deactivation,
request for special call restoration, charge or modification of
an ESN to a designated local market representative or in order to
expedite and verify the Activation Requests, Reseller may use a
terminal compatible with the computer system of GTE to transmit
notices to GTE for Number status changes and to employ persons
proficient in operating such terminal in conjunction with the
required computer system and GTE has the right to change or
modify its system. Subsequent to an Activation, if for any
reason Reseller requests a change or modification of an ESN in
connection with, or for, a prior activation or a currently active
Number, Reseller will be charged Two Dollars ($2.00) for such
change or modification.
2. Billing Tape. Reseller shall pay GTE an amount equal to
One Hundred Dollars ($100) for each Billing Tape provided to
Reseller.
3. Fee for Low Monthly Volume. To the extent Reseller does
not meet and maintain the minimum cumulative level volume of
active Numbers for the Territory(ies) to be measured at the end
of each month, Reseller shall be required to pay the monthly fee
set forth below. Reseller shall have six (6) months from the
date of the first End User activation before GTE shall enforce
this fee.
<TABLE>
<CAPTION>
One Territory Two Territories Three or More Territories
Number Monthly Fee Number Monthly Fee Number Monthly Fee
<S> <C> <S> <C> <S> <C>
000-099 $2,500 000-139 $3,500 000-159 54,000
100- 199 $2,000 140-279 $2,800 160-319 $3,200
200-299 $1,500 280-419 $2,100 320-479 $2,400
300-399 $1,000 420-559 $1,400 480-639 $1,600
400-499 $500 560-699 $700 640-799 $800
>500 $0 >700 $0 >800 $0
/TABLE
<PAGE>
<PAGE>
C. ACCESS, PER MINUTE CHARGE FOR CTS AS SELECTED BY RESELLER*
Reseller shall pay GTE for usage of CTS per Number in the
Territories pursuant to the attached Rate Schedules. Such
charges include access to the wireline telephone network. Any
monthly charges shall be prorated based on the date of activation
and calculated on a thirty day month in accordance with GTE's
billing cycle.
D. OTHER SERVICES*
Reseller shall pay GTE the following monthly amounts for
Other Services purchased by Reseller or its End Users. Such
charges are per Number, per month. Charges for CTS used with
such Other Services remain as provided for in this Schedule.
a. No-Answer Transfer $ Varies by Territory
Allows an End User to redirect calls to another
telephone number when the Cellular Telephone fails
to acknowledge a call or remains unanswered.
b. Busy Transfer $ Varies by Territory
Allows an End User to redirect calls to another
telephone number when their cellular telephone is
busy.
c. Call Forwarding $ Varies by Territory
Allows an End User to redirect calls intended for
their Cellular Telephone to another telephone
number.
d. Call Waiting $ Varies by Territory
Allows an individual End User currently engaged in
a call to be alerted that another incoming call
has been received.
e. Three-Way Calling $ Varies by Territory
Allows an End User to add a third party to an
existing call.
f. Voice Mail Basic $ Varies by Territory
Allows End User to have a voice mail system.
g. Voice Mail Enhanced $ Varies by Territory
Allows End User to have an enhanced voice mail system.
<PAGE>
<PAGE>
E. Call Restriction Services*
To the extent call restrictions are made at time of
activation, no charge will be assessed for this service; however,
if the request is made subsequent to activation, a Fifteen
Dollars ($15.00) service charge will be owed to GTE by Reseller.
a. International Call Denial
No 001+ or 01+ access allowed.
b. Operator Assisted Denial
No 0+ access allowed.
c. Toll Denial
No 1+ access allowed.
d. Local Service Area Only
Calling within the Territory only.
e. Local NPA (Area Code)
No 1+ calls may be completed outside the local area
code.
f. Incoming Only
No outgoing calls will be completed.
g. Outgoing only
No incoming calls will be completed.
* For any regulated Territory, Reseller may only sell from the
tariffed rates filed with the appropriate authority,
including but not limited to, the Other Services and Call
Restriction Services.*<PAGE>
<PAGE>
Schedule 2(c)
OTHER SERVICES WHOLESALE PRICING (AS OF 10/11/96)
<TABLE>
<CAPTION>
Nashville Memphis Chattanooga Louisville Lexington
<S> <C> <C> <C> <C> <C>
No Answer Transfer $1.00 $1.00 $1.00 $1.00 $1.00
Busy Transfer $1.00 $1.00 $1.00 $1.00 $1.00
Call Forwarding $1.00 $1.00 $1.00 $1.00 $1.00
Call Waiting $1.00 $1.00 $1.00 $1.00 $1.00
3-Way Calling $1.00 $1.00 $1.00 $1.00 $1.00
Basic Voice Mail $3.95 $3.95 $3.95 $3.95 $3.95
Basic+ Voice Mail $6.95 $6.95 $6.95 $6.95 $6.95
Enhanced Voice Mail $9.95 $9.95 $9.95 $9.95 $9.95
<CAPTION>
Birmingham Mobile Huntsville Indianapolis Hawaii
<S> <C> <C> <C> <C> <C>
No Answer Transfer $1.50 $0.50 $1.50 $0.50 $0.50
Busy Transfer Not Avail. Not Avail. Not Avail. $0.50 $0.50
Call Forwarding $1.50 $0.50 $1.50 $0.50 $0.50
Call Waiting $1.50 $0.50 $1.50 $0.50 $0.50
3-Way Calling $1.50 $0.50 $1.50 $0.50 $0.50
Basic Voice Mail $2.95 $2.95 $2.95 $4.95 $2.00
Basic+ Voice Mail $4.95 $4.95 $4.95
Enhanced Voice Mail $7.95 $7.95 $7.95 $6.95 $5.00
</TABLE>
<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL
<TABLE> 10/14/96
<CAPTION>
CHATTANOOGA, TN MARKET
Component Component
One Two
<S> <C> <C> <C>
Access $11.00 $13.45 Monthly
Peak $0.215 $0.170 per Minute
Off-Peak $0.100 $0.085 per Minute
Weekend $0.100 $0.085 per Minute
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0700 Off-Peak
0700 1900 Peak
1900 2400 Off-Peak
Weekends 1900 0700 Weekend
Friday Monday
Holidays 0000 2400 Weekend
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet CONFIDENTIAL
Volume Discount Schedule 8/27/96
East Tennessee Market
Monthly MOUs Discount
20,000 1%
70,000 2%
210,000 3%
490,000 4%
770,000 5%
PLAN GUIDELINES:
Reseller must have an executed and valid resellers agreement/
contract with GTE Mobilnet.
Reseller must achieve monthly requirement for two consecutive
quarters. The first quarter is a qualifying quarter. Rebate
begins second consecutive quarter of achieving monthly monthly
requirement. (Quarters and months are based on billing months,
not calendar quarters.)
Discount is from monthly reoccurring charges (access) and airtime
charges.
The program involves a rebate. A check will be mailed to the
reseller 45 - 60 days after the end of the billing quarter. This
rebate will not be paid if the reseller has a balance greater
than 60 days, instead the rebate will be applied toward the
outstanding balance.<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL
10/14/96
BIRMINGHAM MARKET
<TABLE>
<CAPTION>
Component Component Component
One Two Three
<S> <C> <C> <C> <C>
Access $11.05 $16.15 $19.13 Monthly
Peak $0.298 $0.196 $0.170 per Minute
Off-Peak $0.298 $0.196 $0.170 per Minute
<CAPTION>
Start End Applicable Rate*
<S> <C> <C> <C>
Weekdays 0000 0700 Off-Peak
0700 2000 Peak
2000 2400 Off-Peak
Weekends 2000 0700 Off-Peak
Friday Monday
Holidays 0000 2400 Off-Peak
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet CONFIDENTIAL
Volume Discount Schedule 8/27/96
Birmingham Market
Monthly MOUs Discount
12,000 1%
40,000 2%
125,000 3%
290,000 4%
450,000 5%
PLAN GUIDELINES:
Reseller must have an executed and valid resellers agreement/
contract with GTE Mobilnet. Reseller must achieve monthly
requirement for two consecutive quarters. The first quarter is a
qualifying quarter. Rebate begins second consecutive quarter of
achieving monthly monthly requirement. (Quarters and months are
based on billing months, not calendar quarters.) Discount is from
monthly reoccurring charges (access) and airtime charges.
The program involves a rebate. A check will be mailed to the
reseller 45 - 60 days after the end of the billing quarter. This
rebate will not be paid if the reseller has a balance greater
than 60 days, instead the rebate will be applied toward the
outstanding balance.
<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL
10/14/96
NASHVILLE, TN MARKET
<TABLE>
<CAPTION>
Component Component
One Two
<S> <C> <C> <C>
Access $10.70 $13.02 Monthly
Peak $0.205 $0.177 per Minute
Off-Peak $0.093 $0.070 per Minute
Weekend $0.093 $0.070 per Minute
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0700 Off-Peak
0700 1900 Peak
1900 2400 Off-Peak
Weekends 1900 0700 Weekend
Friday Monday
Holidays 0000 2400 Weekend
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet CONFIDENTIAL
Volume Discount Schedule 8/27/96
Central Tennessee Market
Monthly MOUs Discount
32,000 1%
110,000 2%
330,000 3%
760,000 4%
1,200,000 5%
PLAN GUIDELINES:
Reseller must have an executed and valid resellers agreement/
contract with GTE Mobilnet. Reseller must achieve monthly
requirement for two consecutive quarters. The first quarter is a
qualifying quarter. Rebate begins second consecutive quarter of
achieving monthly monthly requirement. (Quarters and months are
based on billing months, not calendar quarters.) Discount is from
monthly reoccurring charges (access) and airtime charges. The
program involves a rebate. A check will be mailed to the
reseller 45 - 60 days after the end of the billing quarter. This
rebate will not be paid if the reseller has a balance greater
than 60 days, instead the rebate will be applied toward the
outstanding balance.<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL
10/14/96
MEMPHIS, TN MARKET
<TABLE>
<CAPTION>
Component Component
One Two
<S> <C> <C> <C>
Access $11.00 $13.25 Monthly
Peak $0.240 $0.220 per Minute
Off-Peak $0.100 $0.090 per Minute
Weekend $0.100 $0.090 per Minute
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0700 Off-Peak
0700 1900 Peak
1900 2400 Off-Peak
Weekends 1900 0700 Weekend
Friday Monday
Holidays 0000 2400 Weekend
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet CONFIDENTIAL
Volume Discount Schedule 8/27/96
West Tennessee Market
Monthly MOUs Discount
16,000 1%
55,000 2%
160,000 3%
370,000 4%
590,000 5%
PLAN GUIDELINES:
Reseller must have an executed and valid resellers agreement/
contract with GTE Mobilnet. Reseller must achieve monthly
requirement for two consecutive quarters. The first quarter is a
qualifying quarter. Rebate begins second consecutive quarter of
achieving monthly monthly requirement. (Quarters and months are
based on billing months, not calendar quarters.) Discount is from
monthly reoccurring charges (access) and airtime charges. The
program involves a rebate. A check will be mailed to the
reseller 45 - 60 days after the end of the billing quarter. This
rebate will not be paid if the reseller has a balance greater
than 60 days, instead the rebate will be applied toward the
outstanding balance.
<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL-10/14/96
LEXINGTON MARKET
<TABLE>
<CAPTION>
Component Component
One Two
<S> <C> <C> <C>
Access $12.00 $14.25 Monthly
Peak $0.205 $0.170 per Minute
Off-Peak $0.095 $0.080 per Minute
Weekend $0.095 $0.080 per Minute
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0700 Off-Peak
0700 1900 Peak
1900 2400 Off-Peak
Weekends 1900 0700 Weekend
Friday Monday
Holidays 0000 2400 Weekend
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL-10/14/96
LOUISVILLE MARKET
<TABLE>
<CAPTION>
Component Component
One Two
<S> <C> <C> <C>
Access $12.00 $14.25 Monthly
Peak $0.205 $0.170 per Minute
Off-Peak $0.095 $0.080 per Minute
Weekend $0.095 $0.080 per Minute
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0700 Off-Peak
0700 1900 Peak
1900 2400 Off-Peak
Weekends 1900 0700 Weekend
Friday Monday
Holidays 0000 2400 Weekend
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet CONFIDENTIAL
Volume Discount Schedule 8/27/96
Kentucky Market
Monthly MOUs Discount
14,000 1%
45,000 2%
140,000 3%
320,000 4%
500,000 5%
PLAN GUIDELINES:
Reseller must have an executed and valid resellers agreement/
contract with GTE Mobilnet. Reseller must achieve monthly
requirement for two consecutive quarters. The first quarter is a
qualifying quarter. Rebate begins second consecutive quarter of
achieving monthly monthly requirement. (Quarters and months are
based on billing months, not calendar quarters.) Discount is from
monthly reoccurring charges (access) and airtime charges. The
program involves a rebate. A check will be mailed to the
reseller 45 - 60 days after the end of the billing quarter. This
rebate will not be paid if the reseller has a balance greater
than 60 days, instead the rebate will be applied toward the
outstanding balance.
<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL-10/15/96
HUNTSVILLE MARKET
<TABLE>
<CAPTION>
Component Component Component
One Two Three
<S> <C> <C> <C> <C>
Access $12.50 $18.00 $22.00 Monthly
Peak $0.330 $0.230 $0.190 per Minute
Off-Peak $0.330 $0.230 $0.190 per Minute
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0700 Off-Peak
0700 2000 Peak
2000 2400 Off-Peak
Weekends 2000 0700 Off-Peak
Friday Monday
Holidays 0000 2400 Off-Peak
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet CONFIDENTIAL
Volume Discount Schedule 8/27/96
Huntsville Market
Monthly MOUs Discount
6,500 1%
20,000 2%
65,000 3%
150,000 4%
240,000 5%
PLAN GUIDELINES:
Reseller must have an executed and valid resellers agreement/
contract with GTE Mobilnet. Reseller must achieve monthly
requirement for two consecutive quarters. The first quarter is a
qualifying quarter. Rebate begins second consecutive quarter of
achieving monthly monthly requirement. (Quarters and months are
based on billing months, not calendar quarters.) Discount is from
monthly reoccurring charges (access) and airtime charges. The
program involves a rebate. A check will be mailed to the
reseller 45 - 60 days after the end of the billing quarter. This
rebate will not be paid if the reseller has a balance greater
than 60 days, instead the rebate will be applied toward the
outstanding balance.
<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL Jul-96
HAWAII MARKET
<TABLE>
<CAPTION>
Component One
<S> <C> <C>
Access $10.00 Monthly
Peak $0.170 per Minute
Off-Peak $0.170 per Minute
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0700 Off-Peak
0700 1900 Peak
1900 2400 Off-Peak
Weekends 0000 2400 Off-Peak
Friday Monday
Holidays 0000 2400 Off-Peak
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet CONFIDENTIAL
Volume Discount Schedule 8/27/96
Hawaii Market
Monthly MOUs Discount
4,750 1%
16,000 2%
47,500 3%
110,000 4%
175,000 5%
245,000 6%
350,000 7%
460,000 8%
650,000 9%
800,000 10%
PLAN GUIDELINES:
Reseller must have an executed and valid resellers agreement/
contract with GTE Mobilnet. Reseller must achieve monthly
requirement for two consecutive quarters. The first quarter is a
qualifying quarter. Rebate begins second consecutive quarter of
achieving monthly monthly requirement. (Quarters and months are
based on billing months, not calendar quarters.) Discount is
from monthly reoccurring charges (access) and airtime charges.
The program involves a rebate. A check will be mailed to the
reseller 45 - 60 days after the end of the billing quarter. This
rebate will not be paid if the reseller has a balance greater
than 60 days, instead the rebate will be applied toward the
outstanding balance.<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL-10/14/96
MOBILE MARKET
<TABLE>
<CAPTION>
Component Component
One Two
<S> <C> <C> <C>
Access $11.00 $13.45 Monthly
Peak $0.210 $0.175 per Minute
Off-Peak $0.095 $0.085 per Minute
Weekend $0.095 $0.085 per Minute
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0600 Off-Peak
0600 2000 Peak
2000 2400 Off-Peak
Weekends 2000 0600 Off-Peak
Friday Monday
Holidays 0000 2400 Off-Peak
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet CONFIDENTIAL
Volume Discount Schedule 8/27/96
Mobile Market
Monthly MOUs Discount
6,000 1%
20,000 2%
60,000 3%
140,000 4%
225,000 5%
PLAN GUIDELINES:
Reseller must have an executed and valid resellers agreement/
contract with GTE Mobilnet. Reseller must achieve monthly
requirement for two consecutive quarters. The first quarter is a
qualifying quarter. Rebate begins second consecutive quarter of
achieving monthly monthly requirement. (Quarters and months are
based on billing months, not calendar quarters.) Discount is from
monthly reoccurring charges (access) and airtime charges. The
program involves a rebate. A check will be mailed to the
reseller 45 - 60 days after the end of the billing quarter. This
rebate will not be paid if the reseller has a balance greater
than 60 days, instead the rebate will be applied toward the
outstanding balance.
<PAGE>
<PAGE>
Schedule 2(c)
ACCESS AND AIRTIME USAGE RATE SCHEDULE CONFIDENTIAL Sep-96
INDIANAPOLIS MARKET (includes Bloomington, Anderson, Muncie,
Lafayette & Kokomo MSAs)
<TABLE>
<CAPTION>
Component Component Component
One Two Three
<S> <C> <C> <C>
Access $10.340 $13.160 $17.860 Monthly
Peak $0.494 $0.268 $0.183 per Minute
Off-Peak $0.494 $0.160 $0.141 per Minute
Nights & Weekend $0.494 $0.094 $0.094
<CAPTION>
Start End Applicable Rate *
<S> <C> <C> <C>
Weekdays 0000 0600 Nights & Weekends
0600 0700 Off-Peak
0700 1900 Peak
1900 2100 Off-Peak
2100 2400 Nights & Weekends
Weekends 0000 2400 Nights & Weekends
Holidays 0000 2400 Nights & Weekends
</TABLE>
* The hours designated for the applicable rates above represent
GTE's current business practice and may be modified to the extent
they are modified in the ordinary course of GTE's business.
GTE Mobilnet-Volume Discount Schedule CONFIDENTIAL
Indianapolis Market 8/27/96
Monthly MOUs Discount
28,000 1%
93,000 2%
278,000 3%
649,000 4%
1,019,000 5%
1,529,000 6%
2,294,000 7%
3,211,000 8%
PLAN GUIDELINES: Reseller must have an executed and valid
resellers agreement/ contract with GTE Mobilnet. Reseller must
achieve monthly requirement for two consecutive quarters. The
first quarter is a qualifying quarter. Rebate begins second
consecutive quarter of achieving monthly monthly requirement.
(Quarters and months are based on billing months, not calendar
quarters.) Discount is from monthly reoccurring charges (access)
and airtime charges. The program involves a rebate. A check will
be mailed to the reseller 45 - 60 days after the end of the
billing quarter. This rebate will not be paid if the reseller
has a balance greater than 60 days, instead the rebate will be
applied toward the outstanding balance.<PAGE>
<PAGE>
Exhibit A
[Form of Draft] STANDBY LETTER OF CREDIT
__________, 199_
Reference No.:
Place of Expiration: [Name and address of Issuer]
Date of Expiration:
Applicant: [Name and address of Reseller]
Beneficiary: GTE Mobilnet Service Corp.
245 Perimeter Center Parkway
Atlanta, Georgia 30346
Attn: Vice President - Marketing
Ladies and Gentlemen:
1. The undersigned hereby establishes its irrevocable Letter of
Credit in your favor for United States $[enter amount set forth
in Section 5.13 of the Reseller Agreement] available by presentation
of your drafts at sight drawn on [Name and address of Issuer], which
drafts shall be in the form attached hereto as Exhibit A.
2. Drafts must indicate the number and date of this Letter of
Credit and must be accompanied by the following documents:
(i) affidavit, executed by the Vice President-Marketing
of GTE Mobilnet Service Corp., stating that [Reseller] is in
default of payments due under that certain Reseller Agreement,
dated __________, 199_, by and between [Reseller] and GTE
Mobilnet Service Corp., and the GTE entities set forth on
Schedule 1 attached to said Reseller Agreement.
(ii) a photocopy of the Reseller Agreement, and
(iii) this original Letter of Credit.
3. The undersigned hereby engages with you that all drafts drawn
under, and in compliance with, the terms of this Letter of
Credit, will be duly honored if drawn and presented for payment
at the address set forth above on or before the expiration date
of this Letter of Credit.
4. The undersigned has caused this Letter of Credit to be duly
executed on behalf of the undersigned by its duly authorized
representative, as of the date first written above.
Sincerely,
[Name of Issuer]
By: _____________________________
Name: ___________________________
Title:___________________________
<PAGE>
<PAGE>
Atlanta, Georgia
__________, 199_
Pay to GTE Mobilnet Service Corp. ____________________ Dollars
($________).
GTE Mobilnet Service Corp.
By: __________________________________
Name: ________________________________
Title: _______________________________
Letter of Credit Reference No. ___________
Date of Letter of Credit: __________, 199_
<PAGE>
<PAGE>
Exhibit B
FORM OF SURETY BOND
Bond Number - __________
KNOW ALL MEN BY THESE PRESENTS:
THAT WE, (Reseller) as Principal (the
"Principal"), and XYZ Company, Corporation duly organized under
the law of the State of ________ and duly authorized to conduce
and carry on a surety business in the State of ________ as surety
(the "Surety"), acknowledge ourselves to be indebted and firmly
bound unto GTE Mobilnet Service Corp., a Delaware corporation
("GTE"), and the GTE entities set forth on Schedule 1 attached
hereto and incorporated herein by this reference, as obligees
(the "Obligees"), in the penal sum of [amount referenced in
Section 5.13 of the Reseller Agreement] Dollars ($________), for
the payment of which sum, well and truly to be made, the
Principal and the Surety, do hereby bind ourselves, our heirs,
executors, administrators, successors, and assigns, jointly and
severally, firmly by these presents.
THE CONDITION OF THE ABOVE OBLIGATION IS SUCH;
WHEREAS, the Principal by written agreement, dated ________,
199_, entered into a Reseller Agreement (the "Reseller
Agreement") with the Obligees whereby Principal agreed to market
and sell cellular telephone service within the Territories (as
defined in the Reseller Agreement) through the use of the
cellular system owned by GTE and/or its Affiliates (as defined in
the Reseller Agreement);
WHEREAS, pursuant to the Reseller Agreement, Principal
agreed to pay promptly therefor each bill presented to Principal
by GTE, in accordance with the terms of the Reseller Agreement,
and to otherwise abide by the terms and conditions as set forth
in the Reseller Agreement; and
WHEREAS, by this reference the Reseller Agreement is made a
part of this Surety Bond, and all capitalized terms not otherwise
defined herein shall have the meanings set forth in the Reseller
Agreement,
NOW, THEREFORE, if Principal promptly and faithfully
performs all of its obligations in the Reseller Agreement, and <PAGE>
<PAGE>
any renewals or extensions thereof, and pays all invoices for any
fees, charges, and other amounts as set forth in the Reseller
Agreement (including, but not limited to, all CTS access, usage,
toll calls, directory listings, custom calling charges, network
services, cellular network usage, Roaming service charges, 900
call and directory assistance) with respect to any CTS during the
term of the Reseller Agreement, including any charges incurred or
losses sustained due to Fraudulent Activities, then this Surety
Bond shall be null and void; otherwise, it shall remain in full
force and effect. No right of action shall accrue under this
bond to or for the use of any person other than said Obligee.
THE SURETY may cancel this Surety Bond at any time by filing
ninety (90) days written notice of its desire to be relieved of
liability, said notice to be filed at the following address.
GTE Mobilnet Service Corp.
245 Perimeter Center Parkway
Atlanta, Georgia 30346
Attn.: Vice-President - Marketing
The Surety shall not be discharged from any liability already
accrued under this Surety Bond, or which shall accrue under this
Surety Bond before the expiration of said ninety (90) day period.
The Surety hereby waives notice of any alteration or extension of
the term of the Reseller Agreement.
IN WITNESS HEREOF, the parties have caused their respective
authorized representatives to execute and seal this Surety Bond,
this __day of ________, 199_.
PRINCIPAL SURETY
[Name of Reseller] XYZ Insurance Company
By: _________________ By: _________________
Name: _______________ Name: _______________
Title: ______________ Title: ______________
Mailing Address of Surety Co.
____________________
____________________
____________________
EXHIBIT 11
COMPUTATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Loss from continuing operations (7,783,713) (4,120,554) (1,721,628)
Loss from discontinued operations 0 0 0
----------- ----------- -----------
Net Loss (7,783,713) (4,120,554) (1,721,628)
=========== =========== ===========
Weighted Shares Outstanding 10,187,909 5,577,120 3,004,131
Net Loss per common share:
Loss from continued operations (0.76) (0.74) (0.57)
Loss from discontinued operations 0.00 0.00 0.00
----------- ----------- -----------
Net Loss (0.76) (0.74) (0.57)
=========== =========== ===========
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
<S> <C>
Ameritel Communications, Inc. Delaware
Blue Chip Marketing, Inc. Delaware
Interactive Display Technologies, Inc. Delaware
International Cellular Communications Ltd. Delaware
Tele-Com Services, Inc. Delaware
U.S. Communications, Inc. Delaware
U.S. Communications of Puerto Rico, Inc. Puerto Rico
U.S. Paging Services, Inc. Delaware
U.S. Personal Communications, Inc. Delaware
Wireless Communication Centers, Inc. Delaware
</TABLE>
EXHIBIT 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K into
the Company's previously filed Registration Statement on
Form S-3, File No. 33-88828 and on Registration Statement
Form S-8, File No. 333-16291.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 15,581,244
<SECURITIES> 0
<RECEIVABLES> 3,018,251
<ALLOWANCES> 437,000
<INVENTORY> 351,652
<CURRENT-ASSETS> 20,260,493
<PP&E> 6,706,316
<DEPRECIATION> 1,876,695
<TOTAL-ASSETS> 26,394,982
<CURRENT-LIABILITIES> 7,082,562
<BONDS> 0
0
0
<COMMON> 1,023
<OTHER-SE> 19,311,397
<TOTAL-LIABILITY-AND-EQUITY> 26,394,982
<SALES> 0
<TOTAL-REVENUES> 7,073,167
<CGS> 0
<TOTAL-COSTS> 3,530,756
<OTHER-EXPENSES> 12,058,264
<LOSS-PROVISION> 253,029
<INTEREST-EXPENSE> 17,481
<INCOME-PRETAX> (7,783,713)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,783,713)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,783,713)
<EPS-PRIMARY> (0.76)
<EPS-DILUTED> (0.76)
</TABLE>
